As filed with the Securities and Exchange Commission on February 4, 2005
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IHS INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
7370
(Primary Standard Industrial Classification Code Number) |
13-3769440
(I.R.S. Employer Identification Number) |
15 Inverness Way East
Englewood, CO 80112
(303) 790-0600
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
STEPHEN GREEN
Senior Vice President and General Counsel
IHS Inc.
15 Inverness Way East
Englewood, CO 80112
(303) 790-0600
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
Copies to: | ||
RICHARD J. SANDLER
LUCIANA FATO Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 (212) 450-4000 |
ROBERT S. RISOLEO
Sullivan & Cromwell LLP 1701 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 956-7500 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) 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. o
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. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. o
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o
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Title of Each Class
of Securities To Be Registered |
Proposed Maximum Aggregate Offering Price(1)(2)
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Amount of
Registration Fee |
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Class A common stock, par value $0.01 per share | $350,000,000 | $41,195 | ||
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Series A junior participating preferred stock purchase rights(3) | | | ||
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated , 2005.
Shares
IHS Inc.
Class A Common Stock
This is an initial public offering of shares of Class A common stock of IHS Inc.
IHS is offering of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an additional shares. IHS will not receive any of the proceeds from the sale of the shares by the selling stockholders.
Prior to this offering, there has been no public market for the Class A common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . IHS intends to list the Class A common stock on the New York Stock Exchange under the symbol "IHS."
IHS has two classes of common stock outstanding, Class A common stock and Class B common stock. The rights of the Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock at the option of the holder or automatically upon the occurrence of specified events.
See "Risk Factors" beginning on page to read about factors you should consider before buying shares of the Class A common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial public offering price | $ | $ | ||||
Underwriting discount | $ | $ | ||||
Proceeds, before expenses, to IHS | $ | $ | ||||
Proceeds, before expenses, to the selling stockholders | $ | $ |
To the extent that the underwriters sell more than shares of Class A common stock, the underwriters have the option to purchase up to an additional shares from the selling stockholders at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on , 2005.
Goldman, Sachs & Co. | Citigroup | |
Morgan Stanley |
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UBS Investment Bank |
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KeyBanc Capital Markets |
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Piper Jaffray |
Prospectus dated , 2005.
[Artwork to come]
This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, especially the risks of investing in our Class A common stock discussed under "Risk Factors" beginning on page . Except as otherwise noted, we present all financial and operating data on a fiscal year and fiscal quarter basis. Our fiscal years end on November 30 of each year.
We are one of the leading global providers of critical technical information, decision-support tools, and related services to customers in the energy, defense, aerospace, construction, electronics, and automotive industries. We have developed a comprehensive collection of technical information that is highly relevant to the industries we serve. Our decision-support tools enable our customers to quickly and easily search and analyze this information and integrate it into their work flows. Our operational, research, and strategic advisory services combine this information and these tools with our extensive industry expertise to meet the needs of our customers. Our customers rely on these offerings to facilitate decision making, support key processes, and improve productivity.
Our customers range from governments and large multinational corporations (including a majority of the Fortune 500 companies) to smaller companies and technical professionals in more than 100 countries. We sell our offerings primarily through subscriptions and have historically experienced high renewal rates. As a result of our subscription-based business model and historically high renewal rates, we generate recurring revenue and cash flow. In 2004, we generated revenue of $395 million, net income of $61 million, and operating cash flows of $67 million.
IHS has been in business for more than 45 years and employs more than 2,300 people around the world.
We manage our business through our Energy and Engineering operating segments:
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We believe we are a leader in the markets we serve as a result of the following competitive strengths.
Comprehensive collection of critical information. We have developed a comprehensive collection of current and historical technical information that is highly relevant to the industries we serve. We believe that this collection would be very difficult to replicate because it has been developed and maintained over several decades. We gather the information primarily through longstanding relationships with thousands of public and private sources and combine it with our proprietary content, our extensive industry insight, and our analysis to create what we believe is the largest collection of this type of information in the world.
Deep expertise. We develop and utilize sophisticated processes and technologies for gathering, updating, indexing, and delivering our critical information. Our hundreds of information services experts analyze, integrate, and maintain this information. We also employ specialized professionals with extensive experience in our target industries to better understand the needs of our customers and to design tools and related services that address their needs.
Trusted business partner. The combination of our critical information and industry expertise has resulted in our becoming a longstanding and trusted business partner, providing accurate and timely technical information to our customers. Many of our customers rely on us as a single-source provider of this information that, together with our decision-support tools and related services, supports their key operations and processes, facilitates strategy and decision making, and drives growth and productivity.
Diversified and global customer base. We serve some of the world's largest corporations across multiple industries in more than 100 countries, as well as governments and other organizations. We generated approximately 50% of our total revenue outside the United States in 2004. In addition, in 2004 our largest customer generated less than 4% of our total revenue. We believe that our diversified and global customer base reduces the impact on our operating results of industry downturns and localized economic conditions.
Subscription-based model with high renewal rates. We sell our offerings primarily through subscriptions. As a result of this model and our historically high renewal rates, we generate recurring revenue and cash flows. We believe that our high renewal rates demonstrate that our customers rely on us for high-quality solutions that they consider critical to their business.
Experienced management team. Our management team includes information services veterans and experienced industry executives. We benefit from their thorough understanding of the information services business, deep knowledge of our target industries, and extensive relationships with content providers and existing and potential customers.
We intend to build on our position as one of the leading providers of critical technical information, decision-support tools and related services to customers in the industries we target by executing the following strategies.
Enhance our critical information. We will continue to augment our comprehensive collection of critical information by enhancing our data aggregation tools and processes and by further strengthening our relationships and alliances with content providers. We also plan to continue to selectively acquire databases and information services organizations in our target industries.
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Further embed our offerings in customer processes. We intend to continue to work closely with our customers to more deeply embed our offerings into their workflows and business processes. We believe we can achieve this by developing new tools and services and by selectively acquiring complementary technologies and businesses that enhance our offerings. We intend to use these enhanced offerings to appeal to new customers and further penetrate our existing global customer base.
Further penetrate targeted industries. We believe we have a unique ability to develop decision- support tools and related services based on our critical information in the industries we target. We intend to further penetrate selected information-intensive industries where we already have significant presence, such as defense, aerospace, construction, and electronics, through internal growth and selective acquisitions.
Expand geographic reach. We are expanding our sales and marketing efforts in emerging markets, particularly in Asia. China, Russia and India represent significant opportunities for us as the information-intensive industries we serve have grown rapidly in these countries over the past few years. We intend to broaden our reach in these markets by tailoring our offerings with specialized local content and deploying knowledgeable sales representatives and dealers.
Leverage operating model. We derive most of our revenue from annual subscription fees, while a large portion of our costs are fixed. As a result, we believe we can improve our operating margins by generating additional revenue as we further penetrate our existing customer base and add new customers.
You should carefully consider the information under the heading "Risk Factors" and all other information in this prospectus before investing in our Class A common stock.
We were incorporated in the state of Delaware in 1994. Our principal executive offices are located at 15 Inverness Way East, Englewood, Colorado 80112 and our telephone number is (303) 790-0600. We also maintain an Internet site at www.ihs.com. Our website and the information contained therein shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.
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Class A common stock offered: | |||
By IHS |
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shares |
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By the selling stockholders |
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shares ( shares if the underwriters exercise in full their option to purchase additional shares) |
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Total Class A common stock offered |
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shares ( shares if the underwriters exercise in full their option to purchase additional shares) |
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Class A common stock to be outstanding after this offering |
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shares |
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Class B common stock to be outstanding after this offering |
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shares |
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Total common stock to be outstanding after this offering |
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shares |
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Voting rights: |
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Class A common stock |
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One vote per share |
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Class B common stock |
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Ten votes per share |
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Conversion |
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Each share of our Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically, without any action by the holder, upon the earlier of the occurrence of specified events or four years from the date of this offering. See "Description of Capital StockCommon StockConversion." |
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Use of proceeds |
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We estimate that our net proceeds from this offering will be approximately $ million, assuming an initial public offering price of $ per share of Class A common stock, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses. We intend to use our net proceeds for general corporate purposes, including potential acquisitions. We will not receive any proceeds from the sale of shares by the selling stockholders. |
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Proposed New York Stock Exchange symbol |
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"IHS" |
The outstanding share information appearing above is based on the number of shares that were issued and outstanding as of November 30, 2004. Unless we specifically state otherwise, the information in this prospectus does not reflect:
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"ManagementEquity Compensation PlansOffer to Exchange Options and Shares Held by Our Senior Executives" and "Equity Compensation PlansOffer to Exchange Options and Shares Held by Directors and Certain Employees");
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Summary Consolidated Financial Data
The following summary consolidated financial data should be read in conjunction with, and are qualified by reference to, the information set forth in "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and notes thereto included in this prospectus.
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Years Ended November 30,
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2002(1)
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2003
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2004
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(In thousands)
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Statement of Operations Data: | ||||||||||||
Revenue | $ | 338,911 | $ | 345,840 | $ | 394,551 | ||||||
Operating expenses: | ||||||||||||
Cost of revenue | 165,168 | 160,949 | 182,206 | |||||||||
Selling, general and administrative | 117,837 | 119,986 | 137,821 | |||||||||
Depreciation and amortization | 9,352 | 8,943 | 10,142 | |||||||||
Compensation expense related to equity awards(2) | | | 21,805 | |||||||||
Gain on sales of assets, net | (2,660 | ) | (245 | ) | (5,532 | ) | ||||||
Impairment of assets | 8,556 | 567 | 1,972 | |||||||||
Recovery of investment | (1,598 | ) | | | ||||||||
Net periodic pension and post-retirement benefits | (10,866 | ) | (8,558 | ) | (5,791 | ) | ||||||
Earnings in unconsolidated subsidiaries | (2,934 | ) | (3,196 | ) | (437 | ) | ||||||
Other expense (income), net | (1,062 | ) | 1,105 | 2,672 | ||||||||
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Total operating expenses | 281,793 | 279,551 | 344,858 | |||||||||
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Operating income | 57,118 | 66,289 | 49,693 | |||||||||
Impairment of investment in affiliate | (7,900 | ) | | | ||||||||
Gain on sale of investment in affiliate | | | 26,601 | |||||||||
Interest income | 1,043 | 1,359 | 1,140 | |||||||||
Interest expense | (3,535 | ) | (1,104 | ) | (450 | ) | ||||||
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Non-operating income (expense), net | (10,392 | ) | 255 | 27,291 | ||||||||
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Income before income taxes and minority interests | 46,726 | 66,544 | 76,984 | |||||||||
Provision for income taxes | (16,775 | ) | (23,935 | ) | (15,395 | ) | ||||||
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Income before minority interests | 29,951 | 42,609 | 61,589 | |||||||||
Minority interests | (23 | ) | (46 | ) | (275 | ) | ||||||
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Net income | $ | 29,928 | $ | 42,563 | $ | 61,314 | ||||||
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Balance Sheet Data (as of period end): |
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Cash and cash equivalents | $ | 11,941 | $ | 24,051 | $ | 124,452 | ||||||
Total assets | 581,291 | 620,113 | 752,644 | |||||||||
Total long-term debt and capital leases | 44,081 | 725 | 607 | |||||||||
Total stockholders' equity | 304,565 | 360,765 | 432,723 | |||||||||
Cash Flow and Other Financial Data: |
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Net cash provided by (used in): | ||||||||||||
Operating activities | $ | 74,735 | $ | 60,145 | $ | 66,980 | ||||||
Investing activities | (2,659 | ) | (4,935 | ) | 34,603 | |||||||
Financing activities | (71,265 | ) | (44,153 | ) | (2,000 | ) | ||||||
EBITDA(3) | 58,547 | 75,186 | 86,161 | |||||||||
Adjusted EBITDA(3) | 59,879 | 66,950 | 72,014 |
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Years Ended November 30,
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2002
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2003
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2004
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(In thousands)
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Revenue | $ | 8,047 | $ | | $ | | ||||
Cost of revenue | 5,558 | | | |||||||
Selling, general and administrative | 5,195 | | | |||||||
Depreciation and amortization | 126 | | | |||||||
Other expense (income), net | (47 | ) | | | ||||||
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Operating loss | $ | (2,785 | ) | $ | | $ | | |||
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Our non-operating income (expense), net, during the periods presented was also impacted by these divestments. See footnotes 7 and 8 to the "Selected Historical Consolidated Financial Data."
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Years Ended November 30,
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2002
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2003
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2004
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Net income | $ | 29,928 | $ | 42,563 | $ | 61,314 | |||||
Interest income | (1,043 | ) | (1,359 | ) | (1,140 | ) | |||||
Interest expense | 3,535 | 1,104 | 450 | ||||||||
Provision for income taxes | 16,775 | 23,935 | 15,395 | ||||||||
Depreciation and amortization | 9,352 | 8,943 | 10,142 | ||||||||
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EBITDA | 58,547 | 75,186 | 86,161 | ||||||||
Compensation expense related to equity awards |
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21,805 |
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Gain on sales of assets, net | (2,660 | ) | (245 | ) | (5,532 | ) | |||||
Impairment of assets | 8,556 | 567 | 1,972 | ||||||||
Recovery of investment | (1,598 | ) | | | |||||||
Net periodic pension and post-retirement benefits | (10,866 | ) | (8,558 | ) | (5,791 | ) | |||||
Impairment of investment in affiliate | 7,900 | | | ||||||||
Gain on sale of investment in affiliate | | | (26,601 | ) | |||||||
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Adjusted EBITDA | $ | 59,879 | $ | 66,950 | $ | 72,014 | |||||
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You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our Class A common stock. If any of the events or developments described below actually occurs, our business, financial condition, and results of operations may suffer. In that case, the trading price of our Class A common stock may decline and you could lose all or part of your investment.
Risks Related to Our Business
We depend on content obtained through agreements with third parties, including SDOs, and the failure to maintain these agreements on commercially reasonable terms could prove harmful to our business.
A significant amount of the content that we use in our offerings is either purchased or licensed from third parties, including Standards Development Organizations (SDOs). Although we obtain data from over 370 SDOs, the majority of the revenue generated by our Engineering segment is derived from offerings that include data we license from 25 SDOs. Our license agreements with these third parties are generally nonexclusive and many are terminable on less than one year's notice. In addition, many of these third parties compete with one another and us. As a result, we may not be able to maintain or renew these agreements at cost-effective prices and these third parties might restrict or withdraw their content from us for competitive or other reasons. Over the last few years, some third parties, including some SDOs, have increased the royalty payments we pay them for the use of their information and may continue to do so in the future. If we are unable to maintain or renew a significant number of these agreements, particularly those we have with SDOs, or if we renew a significant number of these agreements on terms that are less favorable to us, the quality of our offerings and our business, operating results, and financial condition may be adversely affected.
If we are unable to consistently renew subscriptions for our offerings, our results could weaken.
In 2004, we derived more than 75% of our revenues from subscriptions to our offerings. These subscriptions are generally for a term of one year. Our results depend on our ability to achieve and sustain high annual renewal rates on existing subscriptions and to enter into new subscription arrangements on commercially acceptable terms. Our failure to achieve high annual renewal rates on commercially acceptable terms would have a material adverse effect on our business, financial condition, and operating results.
Our growth strategy may prove unsuccessful.
Our growth strategy involves enhancing our offerings to meet our customers' needs. Our success in meeting these needs depends in large part upon our ability to deliver consistent, high-quality, and timely offerings covering issues, developments and trends that our customers view as important. In addition, we plan to grow by attracting new customers and expanding into new geographic markets. We also expect to grow by enhancing our services business, which historically has not been a part of our core business. It may take a considerable amount of time and expense to execute our growth strategy and, if we are unable to do so, our ability to generate additional revenues on a profitable basis may be adversely affected.
If we are unable to successfully identify or effectively integrate acquisitions, our financial results may be adversely affected.
We intend to continue to selectively pursue acquisitions to complement our internal growth. There can be no assurance that we will be able to identify suitable candidates for successful acquisitions at acceptable prices. In addition, our ability to achieve the expected returns and
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synergies from our past and future acquisitions and alliances depends in part upon our ability to integrate the offerings, technology, administrative functions, and personnel of these businesses into our business in an efficient and effective manner. We cannot assure you that we will be successful in integrating acquired businesses or that our acquired businesses will perform at the levels we anticipate. In addition, our past and future acquisitions may subject us to unanticipated risks or liabilities or disrupt our operations and divert management's attention from our day-to-day operations.
Our international operations are subject to exchange rate fluctuations and other risks relating to non-U.S. operations.
In 2004, we generated approximately 50% of our revenues from sales outside the United States and we expect to increase our international presence over time. Our primary operations outside the United States are in the United Kingdom, Canada, and Switzerland. Our operating profit outside the United States has historically exceeded our domestic operating profit. There are numerous risks inherent in doing business in international markets, including:
See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
We may not be able to protect intellectual property rights.
We rely on copyright laws and nondisclosure, license, and confidentiality arrangements to protect our proprietary rights as well as the intellectual property rights of third parties whose content we license. However, it is not possible to prevent all unauthorized uses of these rights. We cannot assure you that the steps we have taken to protect our intellectual property rights, and the rights of those from whom we license intellectual property, are adequate to deter misappropriation or that we will be able to detect unauthorized uses and take timely and effective steps to remedy this unauthorized conduct. In particular, a significant portion of our revenues are derived internationally where protecting intellectual property rights is even more challenging. To prevent or respond to unauthorized uses of our intellectual property, we might be required to engage in costly and time-consuming litigation and we may not ultimately prevail. In addition, our offerings could be less differentiated from those of our competitors, which could adversely affect the fees we are able to charge.
We rely on a network of independent contractors and dealers whose actions could have an adverse effect on our business.
We obtain some of our critical information, particularly in our Energy segment, from independent contractors. In addition, we rely on a network of dealers to sell our offerings in
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locations where we do not maintain a sales office or sales teams. These independent contractors and dealers are not employees of our company. As a result, we are limited in our ability to monitor and direct their activities. If any actions or business practices of these individuals or entities were found to violate our policies or procedures or were otherwise found to be inappropriate, we could be subject to litigation, regulatory sanctions, or reputational damage, any of which could adversely affect our business.
We are affected by conditions and trends in our targeted industries, which may inhibit our ability to grow or otherwise adversely affect our business.
We derive substantially all of our revenue from customers primarily in the energy, defense, aerospace, construction, electronics, and automotive industries. As a result, our business, financial condition, and results of operations depend upon conditions and trends affecting these industries generally. For example, many of our energy offerings are priced based on a customer's oil and gas production and a decline in production for any reason could reduce our revenues. Our ability to grow will depend in part upon the growth of these industries as well as our ability to increase sales of our offerings to customers in these industries. Additionally, the trend toward consolidation, particularly among oil and gas companies, could reduce the number of our current and potential customers and could have a material adverse effect on our business. Moreover, the larger organizations resulting from consolidation could have greater bargaining power, which could adversely affect the pricing of our offerings. Factors that adversely affect revenues and cash flows in these industries, including operating results, capital requirements, regulation, and litigation, could reduce the funds available to purchase our offerings. Our failure to maintain our revenues or margins could have a material adverse effect on our business, financial condition, and operating results.
We have experienced recent changes in our senior management.
Charles A. Picasso, formerly the President and Chief Operating Officer of our Engineering segment, was recently promoted to President and Chief Executive Officer of our company. As a result, in December 2004 we hired an industry veteran, Jeffrey Tarr, as President and Chief Operating Officer of our Engineering segment. In addition, Ron Mobed was appointed President and Chief Operating Officer of our Energy segment in April 2004. Three of our other executive officers also joined the company in 2004 and 2005. This senior management team has not been working together for an extensive period of time and we cannot assure you that these or any other personnel changes will not cause disruptions in our operations or communications with investors, analysts, regulators, and others.
The loss of key personnel could impair our future success.
Our future success depends in part on the continued service of our executive officers and other key management, sales, marketing, product development, and operations personnel and on our ability to continue to attract, motivate, and retain additional highly qualified employees. The loss of the services of one or more of our key personnel or our inability to recruit replacements for such personnel or to otherwise attract, motivate, or retain qualified personnel could have an adverse effect on our business, operating results, and financial condition.
Our investments in technology may not be sufficient and may not result in an increase in our revenue or decreases in our operating costs.
As the technological landscape continues to evolve, it may become increasingly difficult for us to make timely, cost-effective changes to our offerings in a manner that adequately differentiates them from those of our competitors. We cannot assure you that our investments have been or will be sufficient to maintain or improve our competitive position or that the development of new or
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improved technologies and products by our competitors will not have a material adverse effect on our businesses.
We operate in competitive markets, which may adversely affect our market share and financial results.
Some of our competitors focus on sub-markets within our targeted industries while others have significant financial and information-gathering resources, recognized brands, technological expertise, and market experience. Our competitors are continuously enhancing their products and services, developing new products and services, and investing in technology to better serve the needs of their existing customers and to attract new customers.
We face competition in specific industries and with respect to specific offerings. For example, our U.S. well and production data offerings compete with offerings from P2 Energy Solutions, Inc., and DrillingInfo, Inc., in addition to smaller companies. Certain of our Energy segment's other offerings compete with products from Wood Mackenzie Ltd., Divestco Inc., and Geologic Data Systems, Inc., in addition to other specialized companies. Our Energy segment's advisory services compete with Global Decisions Group LLC and NV KEMA, in addition to other smaller consulting companies. Our Engineering segment competes against a fragmented set of companies. In our specifications and standards business, we compete with some of the SDOs, Thomson's Techstreet, United Business Media plc, and ILI Infodisk, Inc. Our Engineering segment's operational services compete with i2 Technologies, Inc.
We may also face competition from organizations and businesses that have not traditionally competed with us but that could adapt their products and services to meet the demands of our customers. Increased competition may require us to reduce the prices of our offerings or make additional capital investments which would adversely affect our margins. If we are unable or unwilling to do so, we may lose market share in our target markets and our financial results may be adversely affected.
Most of our license agreements with SDOs are nonexclusive, which allow the SDOs to distribute their standards themselves or license them to other third parties for distribution. In addition, some of the critical information we use in our offerings is publicly available in raw form at little or no cost, and the Internet and other electronic media have simplified the process of locating, gathering and disseminating information. If users choose to obtain the critical information they need from our competitors, SDOs, or public sources, our business, financial condition, and results of operations could be adversely affected.
We could experience property damage, system failures, or capacity constraints, which could interrupt the delivery of our offerings to customers and ultimately cause us to lose customers.
Our ability to protect our data centers against damage from fire, power loss, telecommunications failure, or other disasters is critical. Any delays or failures in our systems or errors in the technology that we use to store and deliver our content to customers would harm our business. The growth of our customer base may also strain our systems in the future. In addition, our products could be affected by failures of third-party technology used in our products and we could have no control over remedying these failures. Any failures or problems with our systems or decision-support tools could force us to incur significant costs to remedy the failures or problems, decrease customer demand for our products, tarnish our reputation, and harm our business.
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We may be exposed to litigation related to content we make available to customers, and we may face legal liability or damage to our reputation if our customers are not satisfied with our offerings.
As a provider of critical information, decision-support tools, and related services and as a user of third-party content, we face potential liability for, among other things, breach of contract, negligence, and copyright and trademark infringement. Our professional reputation is an important factor in attracting and retaining our customers and in building relationships with the third parties that supply much of the critical information we use in our offerings. If customers were to become dissatisfied with the quality of our offerings, our reputation could be damaged and our business could be materially adversely affected. In addition, if the information in our offerings is incorrect for any reason, we could be subject to reputational damage or litigation.
Our offerings could infringe on the intellectual property rights of others, which may require us to engage in costly litigation and could disrupt our business.
Third parties may assert infringement or other intellectual property claims against us based on their intellectual property rights. If such claims are successful, we may have to pay substantial damages, possibly including treble damages, for past infringement. We might also be prohibited from selling our offerings or providing certain information without first obtaining a license from the third party, which, if available at all, may require us to pay additional royalties. Even if infringement claims against us are without merit, defending a lawsuit takes significant time, may be expensive, and may divert our management's attention from other business concerns.
Risks Related to the Offering
We are controlled by an entity whose interests may differ from your interests.
Our Class B common stock is entitled to ten votes per share and our Class A common stock, which is the stock we and the selling stockholders are selling in this offering, is entitled to one vote per share. We anticipate that upon the completion of this offering, the selling stockholders, Urpasis Investments Limited and Urvanos Investments Limited (which are Cyprus limited liability companies), will own all of our Class B common stock and % of our Class A common stock, representing approximately % of the voting power of our outstanding capital stock in the aggregate (compared to % of the overall economic interest). The Class B common stock will automatically be converted into Class A common stock upon the earlier of the occurrence of specified events or four years from the date of this offering. See "Description of Capital StockCommon StockConversion."
Voting and investment decisions with respect to the shares of our company have historically been made by TBG Holdings NV (TBG), a Netherlands-Antilles company that is the indirect sole owner of the selling stockholders. As a result, TBG controls all matters requiring stockholder approval, including amendments to our certificate of incorporation, the election of directors, and significant corporate transactions, such as potential mergers or other sales of our company or our assets. In addition, TBG could also influence our dividend policy. TBG may have interests that conflict with yours and actions may be taken that you do not view as beneficial. Jerre L. Stead, the chairman of our board of directors, is a member of the board of directors of TBG. Michael v. Staudt, an executive vice president of TBG, is a member of our board of directors. In addition, C. Michael Armstrong, Roger Holtback, and Michael Klein, all members of our board of directors, are members of an advisory committee of TBG.
TBG is wholly-owned indirectly by The Thyssen-Bornemisza Continuity Trust (Trust), a Bermuda trust, which was created for the benefit of certain members of the Thyssen-Bornemisza family. The trustee of the Trust is Thybo Trustees Limited (Thybo), a Bermuda company. As trustee of the indirect sole stockholder of TBG, Thybo has the power to exercise significant influence over the management and affairs of TBG, including by electing or replacing TBG's board of directors. In
13
addition, in certain circumstances, Thybo may be required to act with respect to TBG at the direction of Tornabuoni Limited (Tornabuoni), a Guernsey company, which is an oversight entity that was established at the time the Trust was created. The board of directors of Tornabuoni may only act by unanimous vote and one of its members is Georg Heinrich Thyssen-Bornemisza (a beneficiary of the Trust). Although Thybo has the power to exert influence over TBG, it has not done so in the past and is not required to do so, except in the case of fraud or as directed by Tornabuoni. In addition, while Tornabuoni has the power to direct Thybo to act with respect to TBG, Tornabuoni has not done so in the past. We have been advised by the current directors of each of Tornabuoni and Thybo that they have no intention at this time to exercise any power they may have to exert such influence with respect to TBG.
In addition, there are ongoing discussions among Thybo and the beneficiaries of the Trust with a view to reorganizing the Trust at some point after the completion of this offering. It is contemplated that if such a reorganization were to take place, separate trusts for the beneficiaries would be created, with the trust created for the benefit of Georg Heinrich Thyssen-Bornemisza and his immediate family becoming the sole indirect owner of TBG, which in turn would remain the sole indirect owner of Urvanos Investments Limited, which holds shares of our Class A common stock and all of our Class B common stock. The trusts created for the benefit of the other beneficiaries and their immediate families would become owners, directly or indirectly, of the shares of Class A common stock then held by Urpasis Investments Limited.
Should this reorganization occur, TBG would continue to have the power to exercise significant influence over our management and affairs and over all matters requiring stockholder approval in the same manner as it currently does. In addition, Georg Heinrich Thyssen-Bornemisza (who is the chairman of the board of directors of TBG), along with the trustees of a new trust for his benefit, would have the power to exert significant influence over the management and affairs of TBG, including through electing or replacing members of the TBG board of directors. Georg Heinrich Thyssen-Bornemisza and these trustees may have interests that conflict with yours.
No public market for our Class A common stock existed before this offering and an active public market for our Class A common stock may not develop.
There has been no public market for our Class A common stock prior to this offering. Therefore, the initial price of our Class A common stock to be sold in the offering will be determined through negotiations among us, the selling stockholders, and the representatives of the underwriters and may not be indicative of the prices that will prevail in the trading market. See "Underwriting" for a description of the factors considered in determining the initial public offering price of our Class A common stock. An active public market for our Class A common stock may not develop or be sustained after the offering, which could affect your ability to sell your shares and depress the market price of your shares.
Shares eligible for future sale could depress the price of our shares.
Sales of substantial amounts of the Class A common stock in the public market following the offering, or the perception that such sales could occur, could adversely affect the market price of the shares. Immediately after the offering, we will have outstanding shares of Class A common stock and shares of Class B common stock. The selling stockholders will continue to hold shares of Class A common stock and all of the shares of Class B common stock and will be entitled to require us to register such shares under the Securities Act in some cases, subject to the lock-up agreements described below. See "Shares Eligible for Future SaleRegistration Rights." The sale by the selling stockholders of additional shares of Class A common stock in the public market or the perception that such sales might occur could have a material adverse effect on the price of our shares.
14
The selling stockholders have agreed with us not to sell or otherwise dispose of any of their shares of common stock for a period of one year following this offering. In addition, we, holders of substantially all of our outstanding common stock, and our directors and executive officers have agreed with the underwriters not to sell or otherwise dispose of any shares of common stock without the prior written consent of Goldman, Sachs & Co. and Citigroup Global Markets Inc. for a period of 180 days after the date of this prospectus (or such longer period as described under "Shares Eligible for Future SaleLock-up Agreements"). However, upon the expiration of the lock-up periods, a significant number of shares of our common stock could become freely tradable which could depress the market price of the shares.
The price of our Class A common stock may be volatile and may be affected by market conditions beyond our control.
Our share price is likely to fluctuate in the future because of the volatility of the stock market in general and a variety of factors, many of which are beyond our control, including:
Market fluctuations could result in volatility in the price of shares of our Class A common stock, which could cause a decline in the value of your investment. In addition, if our operating results fail to meet the expectations of stock analysts or investors, we may experience an immediate and significant decline in the trading price of our Class A common stock.
New investors will experience immediate and substantial dilution.
The initial public offering price or our Class A common stock will be substantially higher than the pro forma net tangible book value per share. Pro forma net tangible book value represents the amount of our tangible assets on a pro forma basis, less our pro forma total liabilities. As a result, we currently expect that you will incur immediate dilution of $ per share based upon an assumed initial public offering price of $ per share. See "Dilution."
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Certain provisions in our governing documents could make a merger, tender offer, or proxy contest involving us difficult, even if such events would be beneficial to the interests of our stockholders. These provisions include our dual class structure, our classified board, our supermajority voting requirements, and our adoption of a rights plan, commonly known as a "poison pill." In addition, we are subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Accordingly, our board of directors could rely upon these or other provisions in our governing documents and upon Delaware law to prevent or delay an acquisition of us. See "Description of Capital Stock."
15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business" and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue," the negative of these terms, and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties, and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied by the forward-looking statements. In particular, you should consider the risks outlined under "Risk Factors."
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.
16
We estimate that the net proceeds we receive from this offering will be approximately $ million, assuming we sell shares of our Class A common stock at an initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses. We intend to use our net proceeds for general corporate purposes, including potential acquisitions. We will not receive any proceeds from the sale of shares by the selling stockholders.
We currently anticipate that we will retain all available funds for use in the operation and expansion of our business, and we do not anticipate paying any dividends in the foreseeable future. In October 2004, we distributed a $6.1 million dividend to a subsidiary of TBG. The dividend consisted of a preferred stock investment with a fair market value of approximately $4.3 million and $1.8 million in cash. See "Certain Relationships and Related TransactionsInvestments in Related Parties."
17
The following table sets forth our cash and cash equivalents and our capitalization as of November 30, 2004:
This table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included in this prospectus.
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As of November 30, 2004
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Actual
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As Adjusted
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(In millions, except share data)
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Cash and cash equivalents | $ | 124.5 | $ | |||||
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|||||||
Long-term debt and capital leases(1) | $ | 0.6 | $ | |||||
Stockholders' equity: | ||||||||
Class A common stock, $0.01 par value per share, 80,000,000 shares authorized, 41,250,000 shares issued and outstanding (actual); shares issued and outstanding (as adjusted) | 0.4 | |||||||
Class B common stock, $0.01 par value per share, 13,750,000 shares authorized, issued and outstanding (actual and as adjusted) | 0.1 | |||||||
Class C common stock, $1.00 par value per share, 1,000 shares authorized, issued and held in treasury (actual and as adjusted) | | |||||||
Preferred stock, $ par value per share, no shares authorized (actual) ; shares authorized, no shares issued or outstanding (as adjusted) | | |||||||
Additional paid-in capital | 134.0 | |||||||
Retained earnings | 301.9 | |||||||
Accumulated other comprehensive loss | (3.7 | ) | ||||||
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Total stockholders' equity | 432.7 | |||||||
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Total capitalization | $ | 433.3 | $ | |||||
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We also had other long-term obligations of $45.9 million and current liabilities of $272.2 million as of November 30, 2004.
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Our net tangible book value as of November 30, 2004 was $ million or $ per share of common stock. Net tangible book value per share is determined by dividing our tangible net worth (total assets less total liabilities) by the aggregate number of shares of common stock outstanding. After giving effect to our sale of shares of Class A common stock in this offering, at an assumed initial public offering price of $ per share, the midpoint of the range set forth on the cover page of this prospectus, and the receipt of the net proceeds, as described in "Use of Proceeds," our pro forma net tangible book value at November 30, 2004 would have been $ million or $ per share. This represents an immediate increase in pro forma net tangible book value to existing stockholders of $ per share of common stock and an immediate dilution to new investors of $ per share of Class A common stock. Dilution per share to new investors is determined by subtracting pro forma net tangible book value per share after the offering from the assumed initial public offering price per share. The following table illustrates this per share dilution:
Assumed initial public offering price per share | $ | ||||||
Net tangible book value per share of common stock as of November 30, 2004 | $ | ||||||
Increase in net tangible book value per share of Class A common stock attributable to new investors | |||||||
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Pro forma net tangible book value per share of Class A common stock after the offering | |||||||
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Dilution per share of Class A common stock to new investors | $ | ||||||
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The following table sets forth, on a pro forma basis, as of November 30, 2004, the number and percentage of shares of common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by the new investors, at an assumed initial public offering price of $ per share of Class A common stock, the midpoint of the range set forth on the cover page of this prospectus:
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Shares Purchased(1)
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Total Consideration
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Average
Price Per Share |
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Number
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Percent
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Amount
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Percent
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Existing stockholders | % | $ | % | $ | |||||||||
New investors | |||||||||||||
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Total | % | $ | % | $ | |||||||||
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Sales by the selling stockholders in this offering will reduce the number of shares of Class A common stock held by existing stockholders to or approximately % of the total number of shares of Class A common stock outstanding after this offering and will increase the number of shares of common stock held by new investors to or approximately % of the total number of shares of Class A common stock outstanding after this offering.
19
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with, and are qualified by reference to, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto included in this prospectus. The consolidated statement of operations data for the years ended November 30, 2002, 2003, and 2004, and the consolidated balance sheet data as of November 30, 2003, and 2004, are derived from the audited consolidated financial statements included in this prospectus and should be read in conjunction with those consolidated financial statements and notes thereto. The consolidated statement of operations data for the year ended November 30, 2001, and the balance sheet data as of November 30, 2001, and 2002, are derived from audited consolidated financial statements that are not included in this prospectus. The consolidated statement of operations data for the year ended November 30, 2000, and the balance sheet data as of November 30, 2000, are derived from unaudited consolidated financial statements that are not included in this prospectus.
From 2000 to 2002, we disposed of several non-core businesses. The combined results of these divested businesses impacted our operating income from 2000 through 2002 as set forth in footnote 1 below. Our non-operating income (expense), net, during the periods presented was also impacted by these divestments. See footnotes 7 and 8 below.
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Years Ended November 30,
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2000(1)
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2001(1)
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2002(1)
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2003
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2004
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(In thousands, except per share amounts)
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Statement of Operations Data: | |||||||||||||||||
Revenue | $ | 531,121 | $ | 434,155 | $ | 338,911 | $ | 345,840 | $ | 394,551 | |||||||
Operating expenses: | |||||||||||||||||
Cost of revenue | 328,680 | 258,795 | 165,168 | 160,949 | 182,206 | ||||||||||||
Selling, general and administrative | 146,770 | 124,623 | 117,837 | 119,986 | 137,821 | ||||||||||||
Depreciation and amortization(2) | 29,097 | 30,742 | 9,352 | 8,943 | 10,142 | ||||||||||||
Compensation expense related to equity awards | | | | | 21,805 | (3) | |||||||||||
Gain on sales of assets, net | (21,123 | ) | (20,575 | ) | (2,660 | ) | (245 | ) | (5,532 | ) | |||||||
Impairment of assets(4) | 9,176 | 4,818 | 8,556 | 567 | 1,972 | ||||||||||||
Impairment (recovery) of investment(5) | 28,042 | 37,841 | (1,598 | ) | | | |||||||||||
Net periodic pension and post-retirement benefits(6) | (10,075 | ) | (12,342 | ) | (10,866 | ) | (8,558 | ) | (5,791 | ) | |||||||
Loss (earnings) in unconsolidated subsidiaries | 7,704 | (3,686 | ) | (2,934 | ) | (3,196 | ) | (437 | ) | ||||||||
Other expense (income), net | 1,183 | 1,385 | (1,062 | ) | 1,105 | 2,672 | |||||||||||
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Total operating expenses | 519,454 | 421,601 | 281,793 | 279,551 | 344,858 | ||||||||||||
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Operating income | 11,667 | 12,554 | 57,118 | 66,289 | 49,693 | ||||||||||||
Impairment of investment in affiliate | | | (7,900) | (7) | | | |||||||||||
Gain on sale of investment in affiliate | | | | | 26,601 | (8) | |||||||||||
Interest income | 6,906 | 4,533 | 1,043 | 1,359 | 1,140 | ||||||||||||
Interest expense | (18,144 | ) | (14,082 | ) | (3,535 | ) | (1,104 | ) | (450 | ) | |||||||
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Non-operating income (expense), net | (11,238 | ) | (9,549 | ) | (10,392 | ) | 255 | 27,291 | |||||||||
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Income before income taxes and minority interests | 429 | 3,005 | 46,726 | 66,544 | 76,984 | ||||||||||||
Provision for income taxes | (10,749 | ) | (443 | ) | (16,775 | ) | (23,935 | ) | (15,395 | ) | |||||||
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Income (loss) before minority interests | (10,320 | ) | 2,562 | 29,951 | 42,609 | 61,589 | |||||||||||
Minority interests | (56 | ) | (50 | ) | (23 | ) | (46 | ) | (275 | ) | |||||||
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Net income (loss) | $ | (10,376 | ) | $ | 2,512 | $ | 29,928 | $ | 42,563 | $ | 61,314 | ||||||
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Earnings (loss) per share:(9) |
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Basic and diluted | $ | (10,376 | ) | $ | 2,512 | $ | 29,928 | $ | 42,563 | $ | 34 | ||||||
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Weighted average shares outstanding:(9) | |||||||||||||||||
Basic and diluted | 1 | 1 | 1 | 1 | 1,806 | ||||||||||||
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Balance Sheet Data (as of period end): |
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Cash and cash equivalents | $ | 22,891 | $ | 10,452 | $ | 11,941 | $ | 24,051 | $ | 124,452 | |||||||
Total assets | 707,653 | 600,853 | 581,291 | 620,113 | 752,644 | ||||||||||||
Total long-term debt and capital leases | 173,000 | | (10) | 44,081 | 725 | 607 | |||||||||||
Total stockholders' equity | 272,429 | 272,321 | 304,565 | 360,765 | 432,723 |
20
For the five years ended November 30, 2004, the combined results of TriPoint, Pyramid, Extruded, and the other non-core businesses impacted our operating income (loss) as set forth below:
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Years Ended November 30,
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2000
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2001
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2002
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2003
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2004
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(In thousands)
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Revenue | $ | 218,487 | $ | 107,832 | $ | 8,047 | $ | | $ | | ||||||
Cost of revenue | 173,926 | 96,352 | 5,558 | | | |||||||||||
Selling, general and administrative | 25,236 | 10,746 | 5,195 | | | |||||||||||
Depreciation and amortization | 4,400 | 3,133 | 126 | | | |||||||||||
Other expense (income), net | 243 | (317 | ) | (47 | ) | | | |||||||||
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Operating income (loss) | $ | 14,682 | $ | (2,082 | ) | $ | (2,785 | ) | $ | | $ | | ||||
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Our non-operating income (expense), net, during the periods presented was also impacted by these divestments. See footnotes 7 and 8 below.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and operating results should be read in conjunction with "Selected Historical Consolidated Financial Data" and our consolidated financial statements and accompanying notes included in this prospectus.
IHS is one of the leading global providers of critical technical information, decision-support tools, and related services to customers in the energy, defense, aerospace, construction, electronics, and automotive industries. We have developed a comprehensive collection of technical information that is highly relevant to the industries we serve. Our decision-support tools enable our customers to quickly and easily search and analyze this information as well as integrate it into their work flows. Our operational, research, and strategic advisory services combine this information and these tools with our extensive industry expertise to meet the needs of our customers. Our customers rely on these offerings to facilitate decision making, support key processes, and improve productivity. We manage our business through our Energy and Engineering operating segments.
Our Energy segment develops and delivers critical oil and gas industry data on exploration, development, production, and transportation activities to major global energy producers and national and independent oil companies. This segment also provides decision-support tools and operational, research, and strategic advisory services to these customers, as well as to utilities and transportation, petrochemical, coal, and power companies. Our Engineering segment provides solutions incorporating technical specifications and standards, regulations, parts data, design guides, and other information to customers in its targeted industries. This segment serves some of the largest engineering-intensive companies around the world in the defense, aerospace, construction, electronics, and automotive industries.
Executive Summary
Subscription-based business model
More than 75% of our 2004 revenue was derived from subscriptions to our offerings. Our subscription-based business model and historically high renewal rates generate recurring revenue and cash flows. We generally recognize revenue from subscriptions (which are usually for one-year periods) ratably over the term of the subscription.
Less than 10% of our 2004 subscription-based revenue was recognized at the time of sale. In these instances, we have no continuing responsibility to maintain and update the underlying information. Since sales of these non-deferred subscriptions occur most frequently in the fourth quarter, we generally recognize a greater percentage of our revenue and income from these sales in that quarter.
Subscriptions are generally paid in full within one to two months after the subscription period commences. As a result, the timing of our cash flows generally precedes our recognition of revenue and income. In addition, since a greater percentage of our annual subscription sales are made in the fourth quarter, our cash flow from operations tends to be higher in the first quarter as we receive subscription payments.
Revenue by offerings
Our revenue by type of offering for the three years ended November 30, 2002, 2003 and 2004 was:
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2002
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2003
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2004
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(In thousands)
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Critical information | $ | 268,508 | $ | 275,097 | $ | 308,484 | ||||
Decision-support tools | 37,705 | 38,292 | 44,810 | |||||||
Services | 32,698 | 32,451 | 41,257 | |||||||
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Total revenue | $ | 338,911 | $ | 345,840 | $ | 394,551 | ||||
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22
As a result of our acquisitions of Cambridge Energy Research Associates (CERA), USA Information Systems, Inc. (USA), and Intermat, Inc. in the fourth quarter of 2004, each of which is discussed in "Acquisitions" below, we expect revenues for services and decision-support tools to increase at a faster rate than revenue from critical information in 2005.
Acquisitions
As part of our growth strategy, we intend to continue to augment our offerings by selectively acquiring information services organizations. In particular, we intend to further penetrate selected information-intensive industries in which we already have a significant presence, such as defense, aerospace, construction, and electronics, through internal growth and selective acquisitions. During 2004, we made the following acquisitions:
Our consolidated financial statements include the results of operations and cash flows for these acquisitions beginning on their respective dates of acquisition. See note 2 to our consolidated financial statements. The combined effect of these acquisitions on our operating income for the year ended November 30, 2004 is set forth below.
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(In thousands)
|
|||
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Revenue | $ | 17,165 | ||
Cost of revenue | 7,884 | |||
Selling, general and administrative | 5,687 | |||
Depreciation and amortization | 1,710 | |||
Other expense (income), net | 220 | |||
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Operating income | $ | 1,664 | ||
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We did not make any significant acquisitions in 2002 or 2003.
Global operations
We serve some of the world's largest corporations across multiple industries, as well as governments and other organizations, in more than 100 countries. We generated revenue of $197.9 million outside the United States in 2004, which represented approximately 50% of our total revenue. Our primary operations outside the United States are in the United Kingdom, Canada, and Switzerland. Our operating profit outside the United States has historically exceeded our domestic operating profit. Set forth below for the years ended November 30 is our revenue indicated by
23
country based on the location of our subsidiary generating the revenue (which differs in some cases from the location of the customer):
|
2002
|
2003
|
2004
|
|||||||
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(In thousands)
|
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United States | $ | 185,332 | $ | 180,307 | $ | 196,672 | ||||
United Kingdom | 68,039 | 68,541 | 84,407 | |||||||
Canada | 29,366 | 32,798 | 41,747 | |||||||
Switzerland | 30,840 | 30,757 | 33,644 | |||||||
Rest of world | 25,334 | 33,437 | 38,081 | |||||||
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Total revenue | $ | 338,911 | $ | 345,840 | $ | 394,551 | ||||
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Our international operations expose us to foreign currency risk. Fluctuations in foreign currency rates increased (decreased) our revenues by $(0.8) million, $11.7 million, and $13.2 million for the years ended November 30, 2002, 2003, and 2004, respectively, and increased (decreased) our operating income by $2.3 million, $(2.7) million, and $(1.4) million for the same respective periods. See "Qualitative and Quantitative Disclosures About Market RiskForeign Currency Risk."
Operating expenses and other items
Cost of operating our business. We incur our cost of revenue primarily to acquire, manage, and deliver our critical information. These costs include royalty payments to third-party information providers, as well as personnel, information technology, and occupancy costs related to these activities. Royalty payments generally vary based on subscription sales in our Engineering segment. Our cost of revenue for our services offerings is primarily comprised of personnel costs. Our selling, general, and administrative expenses primarily include wages and other personnel costs, commissions, corporate occupancy costs, and marketing costs.
A large portion of our operating expenses are fixed costs, particularly in our Energy segment which does not generally pay royalties for critical information. As a result, an increase in revenue, particularly in our Energy segment, should result in increased operating margins. We believe we can improve our operating margins as we further penetrate our existing customer base and add new customers.
Costs of being a public company. Beginning in 2004, our selling, general, and administrative costs increased as we prepared for this initial public offering. Following the offering, we will continue to incur additional selling, general, and administrative expenses related to operating as a public company, such as increased legal and accounting expenses, the cost of an investor relations function, costs related to Section 404 of the Sarbanes-Oxley Act, and increased director and officer insurance premiums.
We have also incurred costs to modify our long-term incentive plans to reflect more customary public company compensatory arrangements. In November 2004, we conducted an offer to purchase the outstanding options and shares of capital stock that had been issued pursuant to stock option plans maintained by one of our subsidiaries. Compensation expense related to equity awards includes: (i) a $9.9 million one-time cash charge to settle options under IHS Group Inc.'s 1998 and 2002 non-qualified stock option plans and to repurchase IHS Group Inc. shares previously issued upon the exercise of the options and (ii) an $11.9 million non-cash charge relating to the vested restricted stock units issued under IHS Inc.'s 2004 Long-term Incentive Plan. We also issued restricted stock that will vest over a three-year period for which we will record the cost ratably over the vesting period. We expect to record a charge of approximately $10 million, $5 million, and $2 million in 2005, 2006, and 2007, respectively, related to this issuance of restricted
24
stock and the issuance of restricted stock to certain newly hired and other employees. See "ManagementEquity Compensation Plans."
Pension and post-retirement benefits. Net periodic pension and post-retirement benefits is primarily comprised of pension income and expense and post-retirement benefit expense, shown on a net basis. During 2002, 2003, and 2004, we recognized periodic pension benefit income of $14.8 million, $12.9 million, and $10.5 million, respectively, primarily as a result of our overfunded U.S. pension plan. This income was reduced by other post-employment benefits expense of $3.9 million, $4.3 million, and $4.7 million for 2002, 2003, and 2004, respectively, resulting in net periodic pension and post-retirement benefits income, as reflected in our statement of operations, of $10.9 million, $8.6 million, and $5.8 million for the same respective periods. The net amount of income has been declining over the last three years primarily due to the amortization of actuarial losses resulting from lower than expected asset returns from 2000 through 2002. We expect that the net amount of this income will continue to decline for the foreseeable future.
Provision for income taxes. Our effective tax rate was 35.9%, 36.0%, and 20.0% in 2002, 2003, and 2004, respectively. The lower effective tax rate in 2004 was principally due to recognition of the tax benefit of a dividends-received deduction on dividends from a preferred stock investment and the tax benefit from a release of substantially all of the valuation allowance on foreign tax credits as a result of the extension of the credit carryforward period included in the American Jobs Creation Act of 2004. We expect our effective tax rate in 2005 to approximate our 2002 and 2003 rates.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or GAAP. To apply GAAP, we must make significant estimates that affect our reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. In many instances, we could reasonably have used different accounting estimates. In addition, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates, which are discussed further below.
Revenue Recognition
Revenue is recognized when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable.
Sales of critical information and decision-support tools
The majority of our revenue is derived from the sale of subscriptions to our critical information, which is recognized ratably as delivered over the subscription period. Incremental costs that are directly related to the subscription revenue are generally deferred and amortized to cost of revenue over the subscription period.
We do not defer revenue for the limited number of sales of subscriptions in which we have no continuing responsibility to maintain and update the underlying database. We recognize this revenue upon the sale of these subscriptions. For a limited number of our offerings, we serve as a sales agent for third parties. We recognize revenue from these sales net of related royalties.
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Revenue is recognized upon delivery for non-subscription-based sales.
Multiple-element arrangements
In our business, multiple-element arrangements refer to contracts with separate fees for decision-support tools, maintenance, and related services. If the four criteria of revenue recognition are met, license fees are recognized ratably over the license period as long as there is an associated licensing period or a future obligation. Otherwise, revenue is recognized upon delivery. Certain contracts specify separate fees for decision-support tools and ongoing fees for maintenance and other support. If sufficient vendor-specific objective evidence of the fair value of each element of the arrangement exists, the elements of the contract are unbundled and the revenue for each element is recognized as appropriate.
Services
Revenue related to services performed under time- and material-based contracts is recognized in the period performed at the rate specified in the contract. Revenue associated with fixed price contracts is recognized upon completion of each specified performance obligation under the terms of the contract. If the contract includes acceptance contingencies, revenue is recognized in the period in which we receive documentation of acceptance from the customer.
Identifiable Intangible Assets and Goodwill
We account for our business acquisitions using the purchase method of accounting. We allocate the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, we identify and attribute values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions, including those with respect to future cash flows, discount rates, and asset lives and therefore require considerable judgment. These determinations will affect the amount of amortization expense recognized in future periods.
We review the carrying values of identifiable intangible assets with indefinite lives and goodwill at least annually to assess impairment because these assets are not amortized. Additionally, we review the carrying value of any intangible asset or goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. Examples of such events or changes in circumstances include significant negative industry or economic trends, significant changes in the manner of our use of the acquired assets or our strategy, a significant decrease in the market value of the asset, and a significant change in legal factors or in the business climate that could affect the value of the asset. We assess impairment by comparing the fair value of an identifiable intangible asset or goodwill with its carrying value. The determination of fair value involves significant management judgment. Impairments are expensed when incurred. Specifically, we test for impairment as follows:
Identifiable intangible assets
We compare the expected undiscounted future operating cash flows associated with finite-lived assets to their respective carrying values to determine if the asset is fully recoverable. If the expected future operating cash flows are not sufficient to recover the carrying value, we estimate the fair value of the asset. Impairment is recognized when the carrying amount of the asset is not recoverable and when the carrying value exceeds fair value.
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Goodwill
We test goodwill for impairment on a "reporting unit" level. A reporting unit is a group of businesses (i) for which discrete financial information is available and (ii) that have similar economic characteristics. We test goodwill for impairment using the following two-step approach:
We determine the fair value of our reporting units based on a combination of various techniques, including the present value of future cash flows and comparisons of the earnings multiples of peer companies.
Since the valuation of identifiable intangible assets and goodwill requires significant estimates and judgment about future performance and fair values, our future results could be affected if our current estimates of future performance and fair values change.
Income Taxes
We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. Significant judgment is required in determining our provision for income taxes, current tax assets and liabilities, deferred tax assets and liabilities, and our future taxable income for purposes of assessing our ability to realize future benefit from our deferred tax assets. A valuation allowance is established to reduce our deferred tax assets to the amount that is considered more likely than not to be realized through the generation of future taxable income and other tax planning opportunities. To the extent that a determination is made to establish or adjust a valuation allowance, the expense or benefit is recorded in the period in which the determination is made.
Our accounting for income taxes requires us to exercise judgment for known issues under discussion with tax authorities and transactions yet to be settled. As a result, we maintain a tax liability for contingencies and regularly assess the adequacy of this tax liability. We record liabilities for known tax contingencies in the period when it is probable that a liability has been incurred, and adjust our tax contingencies in the period in which it is probable that the actual results will differ from our estimates.
If actual results differ from estimates we have used, or if we adjust these estimates in future periods, our operating results and financial position could be materially affected.
Employee Benefits
The determination of the cost and obligations associated with our employee benefits requires the use of various assumptions. We must select assumptions such as the expected return on assets available to fund pension obligations, the discount rate to measure obligations, the projected age of employees upon retirement, the expected rate of future compensation, and the expected healthcare cost trend rate. These assumptions are re-evaluated each year and variations between the actual results and the results based on our assumptions for any period will affect reported amounts in future periods. We retain an independent actuarial expert to prepare the calculations and to advise on the selection of assumptions.
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Results of Operations
Set forth below is our results of operations for the years ended November 30 expressed as a percentage of revenue.
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2002
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2003
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2004
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Revenue | 100 | % | 100 | % | 100 | % | |||
Operating expenses: | |||||||||
Cost of revenue | 49 | 47 | 46 | ||||||
Selling, general and administrative | 35 | 35 | 35 | ||||||
Depreciation and amortization | 3 | 3 | 3 | ||||||
Compensation expense related to equity awards | | | 6 | ||||||
Gain on sales of assets, net | (1 | ) | | (1 | ) | ||||
Impairment of assets | 3 | | | ||||||
Recovery of investment | | | | ||||||
Net periodic pension and post-retirement benefits | (3 | ) | (2 | ) | (1 | ) | |||
Earnings in unconsolidated subsidiaries | 1 | 1 | | ||||||
Other expense (income), net | | | 1 | ||||||
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Total operating expenses | 83 | 81 | 87 | ||||||
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Operating income | 17 | 19 | 13 | ||||||
Impairment of investment in affiliate | (2 | ) | | | |||||
Gain on sale of investment in affiliate | | | 7 | ||||||
Interest income | | | | ||||||
Interest expense | (1 | ) | | | |||||
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Non-operating income (expense), net | (3 | ) | | 7 | |||||
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Income before income taxes and minority interests | 14 | 19 | 20 | ||||||
Provision for income taxes | (5 | ) | (7 | ) | (4 | ) | |||
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Income before minority interests | 9 | 12 | 16 | ||||||
Minority interests | | | | ||||||
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Net income | 9 | % | 12 | % | 16 | % | |||
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Set forth below is our revenue and operating income for our Energy and Engineering segments for the years ended November 30. Certain corporate transactions are not allocated to our operating segments. Unallocated amounts include compensation expense related to equity awards, net periodic pension and post-retirement benefits income, corporate-level impairments, and gains on sales of corporate assets.
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2002
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2003
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2004
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(In thousands)
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Energy revenue | $ | 147,291 | $ | 156,151 | $ | 186,374 | |||||
Engineering revenue | 191,620 | 189,689 | 208,177 | ||||||||
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Consolidated revenue | $ | 338,911 | $ | 345,840 | $ | 394,551 | |||||
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Energy operating income(1) |
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$ |
30,520 |
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$ |
29,541 |
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$ |
32,311 |
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Engineering operating income(2) | 22,344 | 28,190 | 32,983 | ||||||||
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Total segment operating income | 52,864 | 57,731 | 65,294 | ||||||||
Adjustments(3) | 4,254 | 8,558 | (15,601 | ) | |||||||
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Consolidated operating income | $ | 57,118 | $ | 66,289 | $ | 49,693 | |||||
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2002
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2003
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2004
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(In thousands)
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Impairment of assets | $ | (6,612 | ) | $ | | $ | | |||
Net periodic pension and post-retirement benefits | 10,866 | 8,558 | 5,791 | |||||||
Compensation expense related to equity awards | | | (21,805 | ) | ||||||
Gain on sales of corporate assets, net | | | 413 | |||||||
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$ | 4,254 | $ | 8,558 | $ | (15,601 | ) | ||||
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Year Ended November 30, 2004 Compared to the Year Ended November 30, 2003
Revenue. Revenue was $394.6 million for the year ended November 30, 2004 compared to $345.8 million for the year ended November 30, 2003, representing an increase of $48.8 million or 14%. The increase was primarily attributable to internal growth, which contributed approximately $17.8 million; 2004 acquisitions, which increased revenue by $17.2 million; and favorable foreign currency movements, which increased revenue by $13.2 million. Internal growth was driven by increased sales of critical information and decision-support tools in both our Energy and Engineering operating segments, as well as by modest price increases.
Revenue for our Energy segment was $186.4 million for the year ended November 30, 2004 compared to $156.2 million for the year ended November 30, 2003, representing an increase of $30.2 million or 19%. The 2004 revenue increase within our Energy segment included increases in revenue of $14.3 million, $4.2 million, and $11.7 million from our critical information, decision-support tools, and services, respectively.
Revenue for our Engineering segment was $208.2 million for the year ended November 30, 2004 compared to $189.7 million for the year ended November 30, 2003, representing an increase of $18.5 million or 10%. The 2004 revenue increase within our Engineering segment included increases in revenue of $19.0 million and $2.3 million from our critical information and decision-support tools offerings, respectively, which was partially offset by a $2.8 million reduction in services revenue. The reduction in services revenue mainly reflects management's decision to exit certain less profitable non-core service offerings.
Cost of Revenue. Cost of revenue was $182.2 million for the year ended November 30, 2004 compared to $160.9 million for the year ended November 30, 2003, representing an increase of $21.3 million or 13%. As a percentage of revenue, cost of revenue declined slightly: 46% in 2004 compared to 47% in 2003. The decrease in cost of revenue as a percent of revenue reflects our ability to leverage the fixed cost component of our cost structure. This decrease was partially offset by the foreign exchange effects on some of our expenses, lower margins in companies we acquired in 2004, and a continued increase in the effective rate of royalty expense.
Selling, General and Administrative Expenses. Selling, general, and administrative expenses were $137.8 million for the year ended November 30, 2004 compared to $120.0 million for the year ended November 30, 2003, representing an increase of $17.8 million or 15%. The increase was due in part to an increase in corporate costs of $6.8 million primarily associated with our proposed initial public offering, including costs related to Section 404 of the Sarbanes-Oxley Act. It also reflected an increase in expenses of $5.8 million from our 2004 acquisitions, as well as foreign currency movements of $4.4 million. Despite these increased costs, selling, general, and administrative expenses remained constant as a percentage of revenue as a result of our ability to leverage these costs as we increased revenue and also because the selling, general, and administrative expenses of the companies we acquired in 2004 were less as a percentage of revenue than ours.
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Depreciation and Amortization Expenses. Depreciation and amortization expenses were $10.1 million for the year ended November 30, 2004 compared to $8.9 million for the year ended November 30, 2003, representing an increase of $1.2 million or 13%. The increase was primarily attributable to assets acquired as part of our 2004 acquisitions, partially offset by a reduced depreciable asset base which resulted in part from asset impairments.
Compensation Expense Related to Equity Awards. Compensation expense related to equity awards was $21.8 million for the year ended November 30, 2004, reflecting the costs of our offer to purchase outstanding options and shares of capital stock issued pursuant to stock option plans maintained by one of our subsidiaries. We had no compensation expense related to equity awards for the year ended November 30, 2003.
Net Gain on Sales of Assets. Net gain on sales of assets was $5.5 million for the year ended November 30, 2004 compared to $0.2 million for the year ended November 30, 2003, representing an increase of $5.3 million. The gain in 2004 resulted from the sale of some corporate assets, the dissolution of a joint venture, and the settlement of a revenue-based earn-out arrangement. The gain in 2003 was related to the revenue-based earn-out which was settled in 2004.
Impairment of Assets. Impairment of assets was $2.0 million for the year ended November 30, 2004 compared to $0.6 million for the year ended November 30, 2003, representing an increase of $1.4 million. In 2004, we wrote off the value of a decision-support tool that was being developed by our Energy segment. During 2003, we wrote down this decision-support tool.
Net Periodic Pension and Post-retirement Benefits. Net periodic pension and post-retirement benefits income was $5.8 million for the year ended November 30, 2004 compared to $8.6 million for the year ended November 30, 2003, representing a decrease of $2.8 million or 32%. The decrease was primarily due to the increased amortization of actuarial losses resulting from lower than expected asset returns from 2000 to 2002.
Earnings in Unconsolidated Subsidiaries. Earnings in unconsolidated subsidiaries were $0.4 million for the year ended November 30, 2004 compared to $3.2 million for the year ended November 30, 2003, representing a decrease of $2.8 million or 86%. The decrease was principally attributable to the dissolution of a joint venture during early 2004. Prior to its dissolution, the joint venture was accounted for using the equity method.
Net Other Expense (Income). Net other expense was $2.7 million for the year ended November 30, 2004 compared to $1.1 million for the year ended November 30, 2003, representing an increase of $1.6 million. The increase was principally attributable to foreign currency movements and integration costs relating to acquisitions.
Operating Income. Operating income was $49.7 million for the year ended November 30, 2004 compared to $66.3 million for the year ended November 30, 2003, representing a decrease of $16.6 million or 25%. The decrease was primarily attributable to a $21.8 million charge for compensation expense related to equity awards in 2004 and decreases from unfavorable foreign currency movements and acquisitions, as well as a decline in net periodic pension and post-retirement benefits income. These declines were partially offset by $5.5 million gain on net sales of assets, as well as increases in internal growth.
Operating income for our Energy segment was $32.3 million for the year ended November 30, 2004 compared to $29.5 million for the year ended November 30, 2003, representing an increase of $2.8 million or 9%. The increase was attributable to increased sales and acquisitions in 2004 that were partially offset by a $2.0 million asset impairment and higher corporate costs that were allocated to the segment.
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Operating income for our Engineering segment was $33.0 million for the year ended November 30, 2004 compared to $28.2 million for the year ended November 30, 2003, representing an increase of $4.8 million or 17%. The increase is primarily comprised of a $5.1 million net gain on sales of assets, as well as an increase in sales. These increases were partially offset by higher corporate costs that were allocated to the segment.
Interest Income. Interest income was $1.1 million for the year ended November 30, 2004 compared to $1.4 million for the year ended November 30, 2003, representing a decrease of $0.3 million or 16%. The decrease was attributable to lower average interest rates.
Interest Expense. Interest expense was $0.5 million for the year ended November 30, 2004 compared to $1.1 million for the year ended November 30, 2003, representing a decrease of $0.6 million or 59%. The decrease was attributable to the fact that we substantially repaid all of our long-term debt during 2003 and had reduced levels of borrowings during 2004.
Provision for Income Taxes. Our effective tax rate was 20.0% and 36.0% in 2004 and 2003, respectively. The decrease in effective tax rate in 2004 was principally due to the recognition of the tax benefit of a dividends-received deduction on dividends from a preferred stock investment. The decrease also reflected the tax benefit resulting from the release of substantially all of the valuation allowance on foreign tax credits primarily related to the extension of the credit carryforward period included in the American Jobs Creation Act of 2004.
Year Ended November 30, 2003 Compared to the Year Ended November 30, 2002
Revenue. Revenue was $345.8 million for the year ended November 30, 2003 compared to $338.9 million for the year ended November 30, 2002, representing an increase of $6.9 million or 2%. The increase was primarily attributable to internal growth, which contributed approximately $3.2 million, and favorable foreign currency movements, which increased revenue by approximately $11.7 million. These increases were partially offset by the loss of revenue related to the 2002 divestiture of certain non-core businesses which had generated revenue of $8.0 million in 2002. The results of these businesses were accounted for within our Engineering segment. See footnote 1 to "Selected Historical Consolidated Financial Data."
Revenue for our Energy segment was $156.2 million for the year ended November 30, 2003 compared to $147.3 million for the year ended November 30, 2002, representing an increase of $8.9 million or 6%. The increase in revenue in 2003 within our Energy segment reflected increases in revenue of $7.2 million, $0.3 million, and $1.4 million from our critical information, decision-support tools, and services offerings, respectively.
Revenue for our Engineering segment was $189.7 million for the year ended November 30, 2003 compared to $191.6 million for the year ended November 30, 2002, representing a decrease of $1.9 million or 1%. The 2003 decline in revenue within our Engineering segment was attributable to reductions in revenue of $0.6 million and $1.6 million from our critical information and services offerings, respectively. These declines were partially offset by an increase of $0.3 million in revenue from our decision-support tools. These amounts were impacted by the loss of revenue related to the divestitures of the non-core businesses during 2002.
Cost of Revenue. Cost of revenue was $160.9 million for the year ended November 30, 2003 compared to $165.2 million for the year ended November 30, 2002, representing a decrease of $4.3 million or 3%. As a percentage of revenue, cost of revenue decreased from 49% in 2002 to 47% in 2003. This decrease reflects our cost reduction initiatives, which primarily related to headcount reductions, and our ability to leverage the fixed cost component of our cost structure. The decrease was partially offset by the foreign exchange effect on some of our expenses.
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $120.0 million for the year ended November 30, 2003 compared to $117.8 million for the year ended November 30, 2002, representing an increase of $2.2 million or 2%. The
31
increase was primarily due to increased expenses resulting from the corresponding increase in revenue, as well as unfavorable foreign currency movements of $5.1 million.
Depreciation and Amortization Expenses. Depreciation and amortization expenses were $8.9 million for the year ended November 30, 2003 compared to $9.4 million for the year ended November 30, 2002, representing a decrease of $0.5 million or 4%. The decrease primarily related to a reduced depreciable asset base. We also decreased our capital expenditure spending in 2003 by expanding our reliance on leasing arrangements.
Net Gain on Sales of Assets. Net gain on sales of assets for the year ended November 30, 2003 was $0.2 million compared to $2.7 million for the year ended November 30, 2002. The gain in 2003 was related to the receipt of a revenue-based earn-out payment. The gain in 2002 related to the sale of non-core businesses.
Impairment of Assets. Impairment of assets was $0.6 million for the year ended November 30, 2003 compared to $8.6 million for the year ended November 30, 2002, representing a decrease of $8.0 million. During 2003, we impaired certain decision-support tools within our Energy segment. During 2002, we impaired buildings held for sale ($4.6 million); miscellaneous balances within our Engineering segment ($1.5 million); decision-support tools within our Energy segment ($0.5 million); and a note receivable relating to a previously divested business ($2.0 million).
Recovery of Investment. There was no recovery of investment for the year ended November 30, 2003 compared to $1.6 million for the year ended November 30, 2002. Our investment in the affiliate was written off in 2001. We sold the investment in 2002 for $1.6 million, which was recorded as a recovery of our investment.
Net Periodic Pension and Post-retirement Benefits. Net periodic pension and post-retirement benefits was $8.6 million during the year ended November 30, 2003 compared to $10.9 million for the year ended November 30, 2002, representing a decrease of $2.3 million or 21%. The decrease was primarily due to the increased amortization of actuarial losses resulting from lower than expected asset returns from 2000 through 2002.
Earnings in Unconsolidated Subsidiaries. Earnings in unconsolidated subsidiaries were $3.2 million for the year ended November 30, 2003 compared to $2.9 million for the year ended November 30, 2002, representing an increase of $0.3 million or 9%. The increase was primarily due to the increased sales and profitability of a joint venture accounted for under the equity method.
Net Other Expense (Income). Net other expense (income) was $1.1 million for the year ended November 2003 compared to $(1.1) million for the year ended November 30, 2002, representing an increase of $2.2 million.
Operating Income. Operating income was $66.3 million for the year ended November 30, 2003 compared to $57.1 million for the year ended November 30, 2002, representing an increase of $9.2 million or 16%. This increase was primarily attributable to revenue growth and a decrease in cost of revenue as a percentage of revenue, which was partially offset by higher selling, general, and administrative expenses.
Operating income for our Energy segment was $29.5 million for the year ended November 30, 2003 compared to $30.5 million for the year ended November 30, 2002, representing a decrease of $1.0 million or 3%. The increase in revenue in this segment was more than offset by corresponding operating expense increases, which were driven by unfavorable foreign currency movements.
Operating income for our Engineering segment was $28.2 million for the year ended November 30, 2003 compared to $22.3 million for the year ended November 30, 2002, representing an increase of $5.9 million or 26%. The increase was primarily attributable to our cost reduction initiatives.
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Interest Income. Interest income was $1.4 million for the year ended November 30, 2003 compared to $1.0 million for the year ended November 30, 2002, representing an increase of $0.4 million. The increase was primarily attributable to higher average cash balances.
Interest Expense. Interest expense was $1.1 million for the year ended November 30, 2003 compared to $3.5 million for the year ended November 30, 2002, representing a decrease of $2.4 million. This decrease was primarily attributable to the fact that we paid off substantially all of our long-term debt during 2003.
Provision for Income Taxes. Our effective tax rate was 36.0% and 35.9% in 2003 and 2002, respectively. The modest increase in the effective rate was principally due to the impact of a reduction in foreign tax rate benefits resulting from an increase in repatriation of profits previously permanently reinvested This was partially offset by the recognition of the tax benefit from basis differences on a disposed business.
Quarterly Results of Operations
The following table presents our unaudited quarterly results of operations for the four quarters ended November 30, 2003, and 2004, respectively. You should read the following table in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited information on the same basis as our audited consolidated financial statements. This table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair presentation of our financial position and operating results for the quarters presented. Operating results for any quarter are not necessarily indicative of result for any future quarters or for a full year.
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2003
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2004
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February 28
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May 31
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August 31
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November 30
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February 29
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May 31
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August 31
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November 30
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Revenue | $ | 83,811 | $ | 85,313 | $ | 82,587 | $ | 94,129 | $ | 91,372 | $ | 90,275 | $ | 94,274 | $ | 118,630 | |||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Cost of revenue | 40,236 | 40,848 | 39,150 | 40,715 | 42,424 | 42,293 | 43,013 | 54,476 | |||||||||||||||||||
Selling, general and administrative | 30,312 | 30,617 | 28,829 | 30,228 | 30,993 | 32,060 | 34,661 | 40,107 | |||||||||||||||||||
Depreciation and amortization | 2,154 | 2,032 | 2,705 | 2,052 | 3,027 | 2,456 | 2,164 | 2,495 | |||||||||||||||||||
Compensation expense related to equity awards | | | | | | | | 21,805 | |||||||||||||||||||
Gain on sales of assets, net | (36 | ) | (83 | ) | (63 | ) | (63 | ) | (4,458 | ) | (495 | ) | (82 | ) | (497 | ) | |||||||||||
Impairment of assets | | | | 567 | | | | 1,972 | |||||||||||||||||||
Net periodic pension and post- retirement benefits | (2,139 | ) | (2,139 | ) | (2,140 | ) | (2,140 | ) | (1,448 | ) | (1,448 | ) | (1,448 | ) | (1,447 | ) | |||||||||||
Loss (earnings) in unconsolidated subsidiaries | 155 | (1,222 | ) | (153 | ) | (1,976 | ) | (367 | ) | (12 | ) | (15 | ) | (43 | ) | ||||||||||||
Other expense (income), net | 318 | 92 | 346 | 349 | 2,372 | (660 | ) | (495 | ) | 1,455 | |||||||||||||||||
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Total operating expenses | 71,000 | 70,145 | 68,674 | 69,732 | 72,543 | 74,194 | 77,798 | 120,323 | |||||||||||||||||||
Operating income | 12,811 | 15,168 | 13,913 | 24,397 | 18,829 | 16,081 | 16,476 | (1,693 | ) | ||||||||||||||||||
Gain (loss) on sale of investment in affiliate | | | | | (51 | ) | 404 | (18 | ) | 26,266 | |||||||||||||||||
Interest income | 56 | 441 | 84 | 778 | 79 | 234 | 273 | 554 | |||||||||||||||||||
Interest expense | (307 | ) | (232 | ) | (263 | ) | (302 | ) | (4 | ) | (133 | ) | (117 | ) | (196 | ) | |||||||||||
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Non-operating income (expense), net | (251 | ) | 209 | (179 | ) | 476 | 24 | 505 | 138 | 26,624 | |||||||||||||||||
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Income before income taxes and minority interests | 12,560 | 15,377 | 13,734 | 24,873 | 18,853 | 16,586 | 16,614 | 24,931 | |||||||||||||||||||
Provision for income taxes | (4,739 | ) | (5,802 | ) | (4,009 | ) | (9,385 | ) | (6,354 | ) | (4,840 | ) | (5,719 | ) | 1,518 | ||||||||||||
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Income before minority interests | 7,821 | 9,575 | 9,725 | 15,488 | 12,499 | 11,746 | 10,895 | 26,449 | |||||||||||||||||||
Minority interests | 10 | 2 | (28 | ) | (30 | ) | (4 | ) | (40 | ) | (10 | ) | (221 | ) | |||||||||||||
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Net income | $ | 7,831 | $ | 9,577 | $ | 9,697 | $ | 15,458 | $ | 12,495 | $ | 11,706 | $ | 10,885 | $ | 26,228 | |||||||||||
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Since sales of non-deferred subscriptions occur most frequently in the fourth quarter, we generally recognize a greater percentage of our revenue and income in that quarter.
Fourth quarter 2004 revenue of $118.6 million was also higher than the first three quarters of 2004 as a result of the acquisitions that were completed during the fourth quarter of 2004 (CERA, USA and Intermat). In particular, these acquisitions contributed $11.6 million of revenue in the fourth quarter of 2004. These acquisitions contributed $6.7 million to cost of revenue and $5.2 to selling, general and administrative expense in the fourth quarter of 2004.
Liquidity and Capital Resources
As of November 30, 2004, we had cash and cash equivalents of $124.5 million. The $124.5 million balance as of November 30, 2004 included $94.2 million from the September 2004 sale of an investment in an affiliate. We have also historically generated significant cash flows from operations. As a result of these factors, as well as the cash we receive from this offering and the availability of funds under our credit facility, we believe we will have sufficient cash to meet our working capital and capital expenditure needs.
Our future capital requirements will depend on many factors, including our level of revenue, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products, increased administrative costs of being a public company, changing technology, and the continued market acceptance of our offerings. We could be required, or could elect, to seek additional funding through public or private equity or debt financing for any possible future acquisitions. Additional funds may not be available on terms acceptable to us or at all. We expect our capital expenditures, excluding potential acquisitions, to be less than $8 million in 2005.
Cash Flow
Net cash provided by operating activities was $67.0 million in 2004, $60.1 million in 2003 and $74.7 million in 2002. The increase from 2003 to 2004 was primarily attributable to higher levels of operating income in 2004 and higher levels of cash flow resulting from changes in working capital. The decrease from 2002 to 2003 was principally due to cash flow changes in working capital and higher levels of tax payments made in 2003.
Net cash provided by investing activities was $34.6 million in 2004. This amount resulted from $104.9 million of proceeds from sales of assets and investment in affiliate and was partially offset by $70.3 million of cash outflows related to our 2004 acquisitions. Net cash used in investing activities was $4.9 million in 2003 and related principally to $4.1 million of capital expenditures. Cash used in investing activities was $2.7 million in 2002 and related to $6.8 million of capital expenditures offset by $4.7 million of proceeds from sales of assets and an investment in an affiliate.
Net cash used in financing activities was $2.0 million in 2004, $44.2 million in 2003 and $71.3 million in 2002. The 2004 uses of cash relates principally to a $1.8 million cash dividend, while substantially all of the amounts used in 2003 and 2002 were used to repay debt.
Credit Facility
On January 7, 2005, we entered into a $125 million unsecured revolving credit agreement, which has a feature allowing us to expand the facility to a maximum of $225 million based on our leverage at the time of the borrowings. We expect origination fees and debt costs to be approximately $0.5 million, which will be amortized over the life of the agreement.
The credit agreement includes various financial and operating covenants and expires in January 2010, at which time any outstanding principal becomes due and payable. As of January 31, 2005, we were in compliance with all of the covenants in the agreement and had no borrowings outstanding under the agreement. Borrowing capacity under the agreement is limited by outstanding letters of credit, of which we had $1.7 million as of January 31, 2005, which we use to
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support insurance coverage, leases and certain customer contracts. See note 8 to our consolidated financial statements.
Interest under the agreement is payable periodically and ranges from LIBOR plus 75 basis points to LIBOR plus 160 basis points. The facility fee is payable periodically and ranges from 15 basis points to 25 basis points.
Off-Balance Sheet Transactions
We have no off-balance sheet transactions.
Contractual Obligations and Commercial Commitments
We have various contractual obligations and commercial commitments which are recorded as liabilities in our consolidated financial statements. Other items, such as certain purchase commitments and other executory contracts, are not recognized as liabilities in our consolidated financial statements but are required to be disclosed. The following table summarizes our contractual obligations and commercial commitments at November 30, 2004, and the future periods in which such obligations are expected to be settled in cash:
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Operating leases | $ | 49.4 | $ | 13.9 | $ | 19.3 | $ | 14.8 | $ | 1.4 | ||||||
Post-retirement medical-benefit plan contributions | 12.6 | 0.9 | 2.1 | 2.4 | 7.2 | |||||||||||
Unconditional purchase obligations | 6.4 | 1.5 | 3.8 | 1.1 | | |||||||||||
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Total | $ | 68.4 | $ | 16.3 | $ | 25.2 | $ | 18.3 | $ | 8.6 | ||||||
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In addition, we guaranteed minimum royalty payments totaling $5.9 million as of November 30, 2004, substantially all of which expire in 2005. We have not historically had to make payments under these guarantees because royalties paid on sales have exceeded minimum guarantees. Based on the guarantees outstanding as of November 30, 2004, we do not expect to have to make payments under the guarantees during 2005.
We do not expect to contribute to our U.S. pension plan in 2005 since it is currently overfunded. We expect to contribute $0.9 million in 2005 to our U.K. pension plan, which is currently underfunded. See notes 12 and 13 to our consolidated financial statements.
Recent Accounting Pronouncement
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123(R), Share-Based Payment , which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation . Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees , and amends FASB Statement No. 95, Statement of Cash Flows . Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.
Statement 123(R) permits public companies to adopt its requirements using one of two methods:
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amounts previously recognized under Statement 123 for purposes of pro forma disclosures for either (a) all prior periods presented or (b) prior interim periods of the year of adoption.
We are currently reviewing Statement 123(R) and have not yet decided which alternative we plan to use when we adopt Statement 123(R), for our quarter ending August 31, 2005. As permitted by Statement 123(R), we currently account for share-based payments to employees using APB Opinion 25's intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Subsequent to November 30, 2004, we cancelled all of our outstanding options. Consequently, the adoption of Statement 123(R) will impact our results of operations if we grant share-based payments in the future. Had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact under Statement 123(R) as described in the disclosure of pro forma net income and earnings per share in note 1 to our consolidated financial statements.
Qualitative and Quantitative Disclosures about Market Risk
Interest Rate Risk
We may be exposed from time to time to changes in interest rates that may adversely affect our results of operations and financial position. We were not exposed to this interest rate risk at November 30, 2004, since we had no outstanding debt as of that date.
Foreign Currency Risk
Our consolidated financial statements are expressed in U.S. dollars, but a portion of our business is conducted in currencies other than U.S. dollars. Changes in the exchange rates for such currencies into U.S. dollars can affect our revenues, earnings, and the carrying values of our assets and liabilities in our consolidated balance sheet, either positively or negatively. Fluctuations in foreign currency rates increased (decreased) our revenues by $(0.8) million, $11.7 million, and $13.2 million for the years ended November 30, 2002, 2003, and 2004, respectively, and increased (decreased) our operating income by $2.3 million, $(2.7) million, and $(1.4) million for the same respective periods. The translation effects of changes in exchange rates in our consolidated balance sheet are recorded within the cumulative translation adjustment component of our stockholders' equity. In 2004, we recorded cumulative translation gains of $13.2 million, reflecting changes in exchange rates of various currencies compared to the U.S. dollar.
Beginning in January 2005, we implemented a foreign-currency hedging program to reduce our foreign currency exposures. In particular, we have entered into forward contracts for our Energy segment's Swiss-based subsidiary to effectively convert a portion of its accounts receivable denominated in a foreign currency (other than the Swiss franc) to the subsidiary's functional currency. Additionally, we also have entered into forward contracts to effectively convert a portion of its operating income, which are denominated in foreign currencies (other than the Swiss franc), into the subsidiary's functional currency. All of the forward contracts are entered into only with a counterparty that is an investment grade financial institution. At November 30, 2004, we had no such forward contracts in place. We do not utilize financial derivatives for trading or other speculative purposes.
An immediate 10% change in the currencies that we are primarily exposed to would have impacted our 2004 revenue and operating income by $12.0 million and $(2.1) million, respectively, excluding any possible hedges.
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Overview
IHS is one of the leading global providers of critical technical information, decision-support tools, and related services to customers in the energy, defense, aerospace, construction, electronics, and automotive industries. We have developed a comprehensive collection of technical information that is highly relevant to the industries we serve. Our decision-support tools enable our customers to quickly and easily search and analyze this information and integrate it into their work flows. Our operational, research, and strategic advisory services combine this information and these tools with our extensive industry expertise to meet the needs of our customers. Our customers rely on these offerings to facilitate decision making, support key processes, and improve productivity.
Our customers range from governments and large multinational corporations (including a majority of the Fortune 500 companies) to smaller companies and technical professionals in more than 100 countries. We sell our offerings primarily through subscriptions. As a result of our subscription-based business model and historically high renewal rates, we generate recurring revenue and cash flow. In 2004, we generated revenue of $395 million, net income of $61 million, and operating cash flows of $67 million. IHS has been in business for more than 45 years and employs more than 2,300 people around the world. We manage our business through our Energy and Engineering operating segments.
Our Energy segment develops and delivers critical oil and gas industry data on exploration, development, production, and transportation activities to major global energy producers and oil companies. We also provide decision-support tools and operational, research, and strategic advisory services to these customers, as well as to utilities and transportation, petrochemical, coal, and power companies. For example, major global oil companies use our offerings to support a broad range of decision-making processes that identify attractive exploration investments, assess the likelihood of successful oil production projects, and develop detailed planning scenarios. In 2004, our Energy segment generated revenue of $186 million.
Our Engineering segment provides solutions incorporating technical specifications and standards, regulations, parts data, design guides, and other information to customers in its targeted industries. We serve some of the largest engineering-intensive companies around the world in the defense, aerospace, construction, electronics, and automotive industries. For example, we provide one of the world's largest aerospace companies with desktop access to industry specifications and standards; parts, logistics, and procurement data; engineering methods; and related analytical tools. In 2004, our Engineering segment generated revenue of $208 million.
Our History
IHS has been a trusted name in the business of managing technical information since 1959. Over the years, we have expanded our offerings from a catalog database for aerospace engineers to become one of the leading providers of critical technical information, decision-support tools, and related services in the energy, defense, aerospace, construction, electronics, and automotive industries. In the late 1990s, we acquired several established energy information providers that we organized into our Energy segment. The businesses that now comprise this operating segment have accumulated and developed well production and geological information from industry and government sources dating back to the 1800s. With the evolution of new technologies, we transitioned our delivery methods from microfilm to the Internet and other electronic media. As our offerings have developed over the years, we have remained committed to providing our customers with solutions that facilitate decision making, support key processes, and improve productivity.
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Our Competitive Strengths
We believe we are a leader in the markets we serve as a result of the following competitive strengths.
Comprehensive collection of critical information. We have developed a comprehensive collection of current and historical technical information that is highly relevant to the industries we serve. We believe that this collection would be very difficult to replicate because it has been developed and maintained over several decades. We gather the information primarily through longstanding relationships with a variety of global sources including hundreds of Standards Development Organizations (SDOs) and government agencies and thousands of manufacturers and combine it with our proprietary content, our extensive industry insight, and our analysis to create what we believe is the largest collection of this type of information in the world.
Deep expertise. We develop and utilize sophisticated processes and technologies for gathering, updating, indexing and delivering our critical information. Our hundreds of information services experts analyze, integrate, and maintain this information. We also employ specialized professionals with extensive experience in our target industries to better understand the needs of our customers and to design tools and related services that address their needs.
Trusted business partner. The combination of our critical information and industry expertise has resulted in our becoming a longstanding and trusted business partner to our customers. Our brands maintain a strong reputation globally for providing accurate and timely technical information. Many of our customers rely on us as a single source provider of this information which, together with our decision-support tools and related services, supports their key operations and processes, facilitates strategy and decision making, and drives growth and productivity.
Diversified and global customer base. We serve some of the world's largest corporations across multiple industries in more than 100 countries, as well as governments and other organizations. We generated revenue of $197.6 million outside the United States in 2004, which represented approximately 50% of our total revenue. In addition, in 2004 our largest customer generated less than 4% of our total revenue, and no other customer generated more than 2% of our total revenue. We believe that our diversified and global customer base reduces the impact on our operating results of industry downturns and localized economic conditions.
Subscription-based model with high renewal rates. We sell our offerings primarily through subscriptions. As a result of our subscription-based model and historically high renewal rates, we generate recurring revenue and cash flows. We believe that our high renewal rates demonstrate that our customers rely on us for high-quality solutions that they consider critical to their business.
Experienced management team. Our management team includes information services veterans and experienced industry executives. We benefit from their thorough understanding of the information services business and deep knowledge of our target industries. In addition, our management team has extensive relationships with content providers and existing and potential customers.
Our Growth Strategy
We intend to build on our position as one of the leading providers of critical technical information, decision-support tools and related services to customers in the industries we target by executing the following strategies.
Enhance our critical information. We intend to continue to augment our comprehensive collection of critical information by enhancing our data aggregation tools and processes and by further strengthening our relationships and alliances with content providers. We also plan to
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continue to selectively acquire databases and information services organizations in our target industries.
Further embed our offerings in customer processes. We will continue to work closely with our customers to more deeply embed our offerings into their workflows and business processes. We believe we can achieve this by developing new tools and services and by selectively acquiring complementary technologies and businesses that enhance our offerings. We intend to use these enhanced offerings to appeal to new customers and further penetrate our existing global customer base.
Further penetrate targeted industries. We believe we have a unique ability to develop decision- support tools and related services based on our critical information in the industries we target. This ability is demonstrated by our deep penetration of, and comprehensive offerings for, the oil and gas industry. We intend to further penetrate selected information-intensive industries where we already have significant presence, such as defense, aerospace, construction, and electronics, through internal growth and selective acquisitions.
Expand geographic reach. We are expanding our sales and marketing efforts in emerging markets, particularly in Asia. China, Russia, and India represent significant opportunities for us as the information-intensive industries we serve have grown rapidly in these countries over the past few years. We intend to broaden our reach in these markets by tailoring our offerings with specialized local content and deploying knowledgeable sales representatives and dealers.
Leverage operating model. We derive most of our revenue from annual subscription fees, while a large portion of our costs are fixed. As a result, we believe we can improve our operating margins as we further penetrate our existing customer base and add new customers. We intend to capitalize on this model by optimizing our operational efficiencies with more standardized processes and by leveraging our infrastructure and technologies across our business.
Our Energy Segment
Our Energy segment is one of the leading global providers of critical technical information, decision-support tools, and related services for the energy industry. We develop and deliver critical oil and gas industry data on exploration, development, production, and transportation activities to major global energy producers, national and independent oil companies, and financial institutions. We also provide operational, research, and strategic advisory services to these customers and to utilities and transportation, petrochemical, coal, and power companies.
For more than four decades, we have provided comprehensive decision-critical information to energy organizations around the world. We complement this information with economic, political, fiscal, and regulatory analysis, as well as operational, research, and strategic advisory services. By integrating essential information, decision-support tools, and analytical services worldwide, we help energy organizations analyze their operations so they can effectively evaluate investment opportunities, reduce operating costs, and increase productivity.
We monitor exploration and production activity in more than 180 countries through our global network of industry sources. These sources provide us with detailed technical and economic information on oil and gas producing assets, countries, and regions. As a result, our information offerings are enhanced with informed assessments about operating and economic matters around the world. We combine these global information-gathering activities with our industry expertise to provide the following offerings.
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Energy Segment Offerings
Critical Information
We provide comprehensive global exploration, development, and production data, industry activity, fiscal, legal, infrastructure, leasehold, and reservoir information, and related news, reports, and maps. We gather this information from government agencies, energy producers, and other industry sources and process it rigorously by testing its accuracy, cross-referencing it against numerous sources, verifying surface and subsurface attributes, and standardizing and creating common industry codes.
We offer this information in a timely and user-friendly manner through online and other electronic subscriptions, including via CD-ROM. Customers can access the information through software platforms and underlying database structures that allow quick local or online access to our information. Our primary information categories are described below.
Energy activity data. Our energy activity data includes comprehensive and timely information, organized by country, on current and future seismic, drilling, and development activities. This data also includes detailed reports on contractual activity and changes in legislation, regulation, petroleum rights, and fiscal matters. Our customers use this data daily to track global energy activities, actively assess and mitigate potential risks to energy assets and operations, react to competitive industry pressures, and capitalize on developing opportunities. This data includes continually updated online information on energy activities in more than 180 countries and 335 hydrocarbon-producing regions around the world; daily breaking energy news alerts; and country and region maps detailing wells, fields, licenses, pipelines, facilities, and other pertinent geological data.
Production data. Our production data tracks information on more than 90% of the world's oil and gas production, including monthly production volumes for wells and fields in more than 100 countries. This data includes cumulative statistics on monthly oil and gas production volumes for more than two million oil assets and more than 70,000 producing fields globally. It is used by reservoir engineers and commercial analysts to assess the productivity and longevity of energy producing assets, determine the current and future value of these assets, and develop and assess investment and operating plans.
Oil and gas well data. Our oil and gas well data includes as many as 20,000 elements, narrative comments, and other information from as far back as the mid-1800s on over four million wells around the world. This data includes comprehensive geological information on current and historic wells, including lease, operator, field, reservoir, fluid, linking well, permit, drilling activity, completion record, and other data, as well as digital geologic and reservoir images representing billions of feet of subsurface measurements. Geoscientists, petrophysicists, and reservoir engineers use this data to evaluate the production potential and economic value of current and future exploration and production wells.
Reservoir data. Our reservoir data includes reservoir pressure and geological formation data for assets in key energy producing regions of the world. Geoscientists and engineers use this data to analyze reservoir potential and identify geological pressure hazards to optimize drilling activities by maximizing yields and reducing downtime.
Basin data. Our basin data includes information on more than 30,000 hydrocarbon basins around the world. It also includes location, development, contractual, and ownership information, as well as comprehensive geological data on each basin. This data is developed and maintained by industry experts and used by exploration geologists to evaluate hydrocarbon potential, analyze production opportunities, and assess the feasibility of drilling opportunities.
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Infrastructure data. Our infrastructure data provides location, capacity, and ownership information on oil and gas wells and facilities. It also includes transportation and refining infrastructure data on pipelines, ports, refineries, capacity specifications, and tariffs and rates, including information on major industrial plants and key retail consumers. Customers use this data to evaluate transportation options and to analyze oil field and infrastructure projects.
Upstream data. Our upstream data contains legal, regulatory, economic, contractual, political, and risk information relating to upstream energy exploration and production activities in more than 100 countries. It is used by commercial analysts, economists, corporate planners, and lawyers to better understand investment environments and assess risk.
Decision-Support Tools
We integrate critical energy information with technology and applications to meet the needs of a range of users across the energy industry. These tools enable our customers to integrate our information and their proprietary information within their workflows and business processes. Our decision-support tools range from easy-to-use "browse and search" applications to sophisticated engineering, cost analysis, and economics tools that estimate drilling costs, assess project economics, optimize exploration and production activities, and improve production yields. Our primary decision-support tools are described below.
Exploration analysis. We integrate production, well, and reservoir information to enable geoscientists to search for and analyze oil and gas opportunities around the world. These tools provide surface and subsurface information, analysis, and graphical interfaces to facilitate geoscience workflows.
Production engineering. We integrate current and historical production information with performance analysis software. Energy engineers use these tools to optimize their well and field production systems by monitoring oil and gas production, modeling well performance, and performing production gradient and flow assurance calculations.
Cost analysis. We produce detailed capital and operating cost estimates for planning activities and project optimization. Our customers use these tools to analyze the economic feasibility of competing projects, significantly reduce cycle times in engineering work flows, and ultimately reduce costs.
Economics. We evaluate the after-tax economics of projects, fields, licenses, and country and company portfolios based on more than 200 pre-modeled fiscal regimes and our other critical information. Investors, commercial analysts, corporate planners, and engineers use these tools to evaluate a variety of economic factors, such as reservoir and reserve performance, estimated ultimate recovery, and projected cash flows to make rapid and informed acquisition, divestiture, and operations decisions.
Services
Our operational, research, and strategic advisory services combine our critical information and decision-support tools with our extensive industry expertise to meet the needs of our customers.
Operational Services. We offer our customers access to our expertise in subsurface analysis, engineering, economics, fiscal, and regulatory matters and asset optimization through several services, including the following:
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Research. Through our research offerings, we provide customers with insight and analysis into challenges facing the energy industry, including economic, geopolitical, financial, technological, regulatory, environmental, and managerial matters. Our research helps customers anticipate trends in the industry in order to make informed strategic, investment, and market decisions. For example, financial institutions use CERA research and analysis to make informed decisions about energy investments and markets. We syndicate our research through our well known and respected CERA brand and offer more than 30 syndicated research services, each focusing on different combinations of segments and regions in the energy industry. Recent research offerings include Global LNG: The New Wave ; Petroleum Products Markets to 2020 ; and Global Scenarios for the Future of the World Oil Industry .
We also develop and organize executive research summits where high level industry, financial, and governmental decision makers interact with our senior research experts and discuss energy industry trends and market dynamics. These events provide a significant opportunity for our experts and customers to exchange knowledge and ideas. We conduct more than 75 events each year, including our premier event, CERAWEEK. CERAWEEK is an annual executive conference that has been addressing challenges facing international energy markets and companies for nearly 25 years. By attracting more than 1,600 of the energy industry's leading executives and companies annually, it is widely considered to be the most important meeting of its kind.
Strategic Advisory Services. We assist customers in assessing their strategic options by providing the critical information and analytical insights required for sound decision making. Our services focus on a range of key issues, such as global oil and gas planning, exploration and production issues, alternative business line assessments, scenario planning and facilitation, market analysis, and corporate facilitation. For example, we recently completed a country-wide gas planning project in China and an oil and gas regulation project in Kuwait. We provide these services primarily through our CERA brand.
CERA is led by its chairman and co-founder, Dr. Daniel Yergin, who is a member of the U.S. Secretary of Energy's Advisory Board and the National Petroleum Council, a member of the Board of Trustees of the Brookings Institution, and a director of the United States Energy Association. Dr. Yergin is also author of the Pulitzer Prize-winning book entitled The Prize: The Epic Quest for Oil, Money and Power .
Our Engineering Segment
Our Engineering segment is one of the leading global providers of critical technical information, decision-support tools, and related services to the information-intensive industries we target. We have developed and deliver comprehensive collections of decision-critical information to major organizations primarily in the defense, aerospace, construction, electronics, automotive, and petrochemicals industries.
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We work with our customers to identify their critical information requirements for a wide range of engineering processes including: research and development; design, testing and validation; procurement; manufacturing; maintenance and repair; overhaul; and disposition. We provide the critical information required to support these processes, including technical specifications and standards, regulations, design guidelines, and parts and manufacturer information. We also have expertise in developing decision-support tools that enhance the accessibility and usability of this information. We offer targeted advisory services that are designed to maximize the utilization and integration of our information within our customers' business processes. Through these integrated offerings we have become a critical business partner to our customers, assisting them in maintaining technical compliance, reducing operating costs, and improving productivity.
Engineering Segment Offerings
Critical Information
We provide a comprehensive collection of current and historical technical information that is highly relevant to customers in the industries we serve. We continually augment, organize, and refine this information for breadth, depth, usability, and accuracy in order to deliver it according to industry requirements and customer needs. This information is gathered from various sources, including through our longstanding relationships with government agencies, more than 15,000 manufacturers, and more than 370 SDOs around the world.
Our SDO relationships are critical to our business. SDOs generally consist of manufacturer, service provider, and laboratory representatives who establish compliance guidelines, or specifications and standards, for an industry. Nearly all engineering work is governed by a wide array of specifications and standards that are designed to ensure that products and component parts conform to generally accepted design practices, performance criteria, and quality, safety and reliability standards. We enter into licensing agreements with SDOs, including the SDOs that publish the most commonly used specifications and standards, to distribute this information to customers.
We supplement this SDO information with complementary content, including government and military specifications and standards; regulations; manufacturer and parts data; and logistics and procurement data. We use a number of methods, including proprietary technologies, to gather, update, organize, and index the information. These processes, along with our research and industry expertise, allow us to create unique packages of content to meet the specific business needs of our customers.
We offer this information in a timely and user-friendly manner through online and other electronic subscriptions, including via CD-ROM. Customers can access the information through software platforms and underlying database structures that allow quick local or online access to our information. Our primary information offerings are described below.
Specifications and standards data. Engineering teams may need to reference anywhere from a half dozen to several hundred applicable standards and specifications, depending on the complexity of a project. We provide engineering organizations worldwide with single-source access to these specifications and standards so they can control costs, improve decision speed and effectiveness, and reduce design times. Our largest information offering, Specs & Standards, provides searchable documents and scanned document images containing commonly used and hard to find specifications and standards. Our online database contains over a million documents and images covering national, international, corporate, military, and other specifications and standards that we organize into more than 700 discrete data sets. For example, our military specifications and standards data set contains what we believe is the world's largest collection of unclassified U.S. military specifications and standards, with over 82,000 active and 387,000 historical military documents. We also offer customers access to our Standards Store where they can search for and purchase individual documents from our database.
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Regulations data. Numerous regulations around the world impact engineering processes, product design and quality, resource deployment, and compliance matters. We provide access to critical regulations for our targeted industries, such as aviation, construction, and petrochemicals. For example, our AV-DATA® database contains over a million pages of essential aviation regulations and related documents relating to the airworthiness, regulatory compliance, and safety of aircraft. This internet-based database provides a wide range of information from U.S. and international aviation regulatory agencies. We also track regulations that affect multiple industries, such as occupational health and safety regulations. Our regulations data can be integrated with Specs & Standards to provide customers with a broader range of compliance information.
Parts data. We have developed a comprehensive database of parts data from a broad range of industry and government sources. This database includes: descriptive data, which specifies part dimensions, materials, performance criteria, and configuration features; manufacturer data, which identifies suppliers of parts and materials; and logistics data, which includes parts availability, location, pricing, use, and alternate source information.
Manufacturers' product data. We collect and maintain a broad set of manufacturers' catalogs. These online documents include manufacturers' product information, such as brand names and model numbers. This data can be cross-referenced against other information offerings.
Engineering methods data. We have developed a comprehensive proprietary database of engineering processes, principles, and related equations. The database covers more than 250 specific structural and mechanical topics, including noise and vibration, stress and fatigue, metals and composites, structure, and dynamics.
Decision-Support Tools
We integrate our technical information into proprietary technology and applications to meet the needs of our customers. These decision-support tools enable our customers to embed our information offerings within their engineering workflows and business processes. These tools vary from easy-to-use "browse and search" applications to sophisticated logistics and procurement, design, maintenance, and repair tools, all of which improve the efficiency and cost effectiveness of our customers' operations. These tools include:
Procurement, maintenance, and logistics. HAYSTACK® is our industry-leading procurement, maintenance, and logistics tool which is primarily used by government agencies and contractors. This proprietary decision-support tool leverages our comprehensive parts databases to facilitate logistics, procurement, maintenance, and obsolescence decisions to assist customers reduce downtime and costs. For example, the U.S. Department of Defense relies on HAYSTACK® to quickly and efficiently procure new and replacement parts for aircraft and other equipment used in military operations. Aerospace companies use HAYSTACK® throughout their design, production, and maintenance processes to optimize parts utilization, avoid obsolescence, and ultimately minimize logistics costs. Aerospace companies also use this data to ensure that they receive competitive prices for their parts.
Parts cleansing. Our proprietary parts cleansing tool is STRUXURE®, which assists customers in "cleansing" their parts inventories by eliminating redundancies, standardizing terminology, and efficiently organizing their information. Clean inventory information enables customers to make better inventory management and facility utilization decisions. This tool uses a proprietary parts taxonomy and is particularly useful in facility-intensive manufacturing industries, such as aerospace and aviation, automotive, and electronics.
Engineering methods. ESDU® is our proprietary collection of decision-support tools that leverage our engineering methods database. ESDU® helps customers reduce their research and development cycles by integrating proven mathematical formulae, engineering equations, and
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analyses into their existing applications and processes. For example, aviation companies are able to substantially reduce design times for component parts by using ESDU® to apply fundamental engineering principles, such as aerodynamics, metallurgy, and structural integrity principles.
Services
Our services are based upon and utilize our expertise in managing information and developing information-based solutions. We primarily focus on improving the productivity of maintenance, repair, and operations (MRO) and supply chain processes, primarily in the defense, aerospace, automotive, petrochemical and utilities, and electronics industries. Customers use our services to assist them with a number of critical issues, including:
We believe our services help customers achieve additional significant benefits, including faster decision making across the enterprise, increased productivity, and reduced time to market. In many cases, our services customers already rely upon our information offerings to perform critical functions within their organizations. Our primary services offerings include the following:
Parts Management. A growing and long-term challenge for many of our customers is managing parts databases and processes for design, part selection, inventory control, and managing and predicting obsolescence. To address these issues, we integrate our extensive parts databases with other relevant data and offer parts services. These services optimize selecting of parts for an engineering task, stocking the appropriate parts to support maintenance and repair, improving lifecycle management, creating the appropriate bill of materials in support of job planning, managing parts for re-use, and predicting obsolescence. Parts projects are typically focused on selection and obsolescence.
Content Systems Enhancement. We build and enhance information systems such as portals and intranets that enable the seamless integration of our information with customer and third-party information. To accomplish this we employ a variety of technologies, mostly web-based interfaces (known as "application program interfaces" or "APIs") that allow customer systems to directly communicate with and make use of our content. We also provide more complex services that build customized systems for our customers. These services help customers maximize the accuracy,
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accessibility, and usage of technical content as well as improve the overall efficiency of their operational systems and organizations.
Product Development and Technology
Our product development efforts and use of technology focus on the collection, management, and delivery of critical information to our customers through our offerings. We manage our comprehensive collection of critical technical information through what we refer to as our "metabase." The critical information itself is stored in a network of information repositories, many of which are linked directly to our metabase. The development, management, and expansion of our metabase and information repositories are central to our product development efforts. We continuously update and enhance our metabase and repositories through proprietary methods and the use of technology encompassing the following steps:
Our metabase and other information management tools allow content to be identified by a variety of search and cross-reference methods. We use proprietary and non-proprietary technologies that index critical information in a variety of ways, such as broad field categories, document type, document title, and industry segment. We employ robust, redundant storage technology to ensure that our critical information is highly available. Our processes allow for updating as soon as new and relevant information becomes available.
Our product development teams create customer solutions by integrating our critical information with proprietary and widely used decision-support technology. These teams also develop the user interfaces and search capabilities that our customers employ when using our offerings. Our offerings are designed and developed by cross-functional teams that include sales and marketing, product development, and customer support personnel as well as, in some cases, the customers themselves. Customer feedback is shared with these teams so that decision-support tools can be enhanced to address changing customer requirements.
Our product development teams have also created proprietary web services and application interfaces that enhance access to our critical information. These services enable our customers to integrate our critical information with other data, business processes, and applications ( e.g. , computer-aided design, enterprise resource planning, supply chain management, and product data/lifecycle management).
We use a series of digital rights management ("DRM") methods and technologies to preserve our intellectual property rights and the intellectual property rights of third-party licensors. These methods and technologies (for certain of which we have patent applications pending) involve applying and tracking the license rights granted to a given customer, while simultaneously assuring
46
that critical information outside of a customer's licensed rights is not accessible. They also permit customers to download files or produce hard copies that are "watermarked" with license information and security codes designed to discourage unauthorized distribution of the content.
Our metabase is driven by industry standard relational database technologies such as Oracle. In addition, we have standardized hardware, decision-support tools, and application platforms from companies including Sun Microsystems, Inc., Microsoft Corporation, Endeca Technologies Inc., and Hewlett-Packard Company. We also have proprietary technology to support our metabase, information repositories, and offerings.
As a global company, we seek cost-efficient and technologically advanced locations for our data centers, data entry, quality assurance, and development functions. These functions are currently performed at various locations including Colorado, Texas, Switzerland, and Malaysia. We expect to add locations in India later in 2005.
Customers
We have a diverse customer base that includes many of the largest companies in the industries we serve. Our customers range from governments and large multinational corporations (including a majority of the Fortune 500 companies) to smaller companies and technical professionals. In 2004, our largest customer generated less than 4% of our total revenue and no other customer generated more than 2% of our total revenue. In addition, in 2004, we had 50 customers who generated $1 million or more of revenue.
Sales and Marketing
We have approximately 200 employees who focus on our sales and marketing efforts, approximately half of which comprise our direct sales force. We maintain sales offices in 17 countries and serve customers in more than 100 countries.
Our sales force is organized in teams focused on particular industry verticals. Each team is comprised of one or more relationship managers and product experts. The relationship managers serve as the primary sales interface with the customer. As part of the annual renewal process, they are responsible for reviewing offerings purchased by existing customers, as well as seeking opportunities to expand the offerings purchased by these customers. To expand customer penetration, the relationship manager utilizes all the expert resources resident within our organization. For smaller customers, we use a telesales team that is responsible for selling and renewal efforts. We compensate our sales teams primarily based on revenue generation and renewal rates.
New customer acquisition is largely conducted by our dedicated new business team. This team systematically identifies potential new customer opportunities and a sales approach for larger new business opportunities. Our telesales team also pursues smaller new customer opportunities.
We use an extensive dealer network to reach customers in locations where it is not cost-effective to use our sales teams or maintain a sales office. We supplement all of our sales efforts with our web store, which enables customers to purchase offerings online.
We review, on an annual basis, our go-to-market sales strategy. We do this to optimize the allocation of our sales resources across our customer segments, to capture the most attractive new business opportunities, and to further penetrate our existing customer base.
Our marketing teams are primarily responsible for ensuring that our offerings are meeting the needs of our customers. These teams conduct ongoing market research to understand changing needs within our targeted industries. They analyze industry investment patterns and work with our product development teams to ensure that we are aggregating critical information and creating decision-support tools that are relevant to our customers. These teams also study industries we do not currently target to determine if there are potential users that could benefit from our offerings.
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Our marketing teams are also responsible for analyzing the offerings of our competitors to ensure that we remain competitive. Our marketing teams support our sales teams by creating advertising programs, conducting seminars (including online seminars) and developing campaigns promoting our offerings.
Customer Support
Our customer support program includes customer service and customer training:
Our customer service and customer training teams work with each other and with the sales teams representing our customers. This enables our customers to work with the same team of IHS employees for all their needs, which we believe results in greater customer satisfaction and stronger customer relationships.
We are proactive in managing ongoing customer needs by maintaining a key issues database that identifies patterns of customer service and support needs. This database is shared with product managers who, where appropriate, implement product improvements.
We employ annual customer satisfaction surveys to refine and enhance the quality and responsiveness of our service. We believe that the continuous contact between sales people and our customers through sales visits, consultations, briefings, and conferences also provides valuable feedback that is critical to developing and improving our offerings.
Competition
We believe the principal competitive factors in our business include the depth, breadth, timeliness, and accuracy of information provided, quality of decision-support tools and services, ease of use, customer support, and price. We believe that we compete favorably on each of these factors. Although we do not believe that we have a direct competitor across all of the offerings we provide, we do face competition in specific industries and with respect to specific offerings.
In our Energy segment, our U.S. well and production data offerings compete with offerings from P2 Energy Solutions, Inc., and DrillingInfo, Inc., in addition to smaller companies. Certain of our Energy segment's other offerings compete with products from Wood Mackenzie Ltd., Divestco Inc. and Geologic Data Systems, Inc., in addition to other specialized companies. Our Energy segment's advisory services compete with Global Decisions Group LLC and NV KEMA, in addition to other smaller consulting companies.
Our Engineering segment competes against a fragmented set of companies. In our specifications and standards business, we compete with some of the SDOs, Thomson's Techstreet, United Business Media plc, and ILI Infodisk, Inc. Our Engineering segment's operational services compete with i2 Technologies, Inc.
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Intellectual Property
We rely heavily on intellectual property, including the intellectual property we own and license. We regard our trademarks, copyrights, licenses, and other intellectual property as valuable assets and use intellectual property laws, as well as license and confidentiality agreements with our employees, dealers, and others, to protect our rights. In addition, we exercise reasonable measures to protect our intellectual property rights and enforce these rights when we become aware of any potential or actual violation or misuse.
Intellectual property licensed from third parties, including SDOs, is a vital component of our offerings and, in many cases, cannot be independently replaced or recreated by us or others. We have longstanding relationships with the SDOs, government agencies, and manufacturers from whom we license information. Almost all of the licenses that we rely upon are nonexclusive and expire within one to two years unless renewed.
In addition, we have applied for patents relating to digital rights management, remote access printing, and print on demand.
Employees
As of January 31, 2005, we had more than 2,300 employees, of which approximately 1,300 are located in the United States and 1,000 are located abroad. None of our employees are represented by a collective bargaining agreement and we consider our employee relations to be good.
Facilities
We own two office buildings in Englewood, Colorado, which comprise our headquarters, and other office buildings in London and Tetbury, England, Geneva, Switzerland and Johannesburg, South Africa. We lease space for a total of offices in countries, including offices in Cambridge, Massachusetts; Houston, Texas; Oklahoma City, Oklahoma; Calgary, Alberta; Geneva, Switzerland; Virginia Beach, Virginia; Paris, France; New York, New York; Beijing, China; and two locations in the United Kingdom. We believe that our properties, taken as a whole, are in good operating condition and are suitable and adequate for our current business operations, and that additional or alternative space will be available on commercially reasonable terms for future use and expansion.
Our ownership and operation of real property and our operation of our business is subject to various foreign, federal, state, and local environmental protection and health and safety laws and regulations. Some environmental laws hold current and previous owners and operators of businesses and real property liable for contamination on owned or operated property and on properties at which they disposed of hazardous waste, even if they did not know of and were not responsible for the contamination, and for claims for property damage or personal injury associated with the exposure to or the release of hazardous or toxic substances. We have not incurred and do not currently anticipate incurring any material liabilities in connection with such environmental laws.
Legal Proceedings
We are not party to any material litigation and are not aware of any pending or threatened litigation that could have a material adverse effect upon our business, operating results, or financial condition.
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Executive Officers and Directors
Set forth below is information concerning our executive officers and directors as of February 1, 2005.
Name
|
Age
|
Position
|
||
---|---|---|---|---|
Charles A. Picasso | 63 | President and Chief Executive Officer, Director | ||
Jerre L. Stead |
|
62 |
|
Chairman of the Board |
Michael J. Sullivan |
|
40 |
|
Senior Vice President and Chief Financial Officer |
Jeffrey Tarr |
|
41 |
|
President and Chief Operating Officer, Engineering |
Ron Mobed |
|
45 |
|
President and Chief Operating Officer, Energy |
Stephen Green |
|
52 |
|
Senior Vice President and General Counsel |
H. John Oechsle |
|
42 |
|
Senior Vice President and Chief Information Officer |
Jeffrey Sisson |
|
48 |
|
Senior Vice President, Global Human Resources |
Matt Levin |
|
31 |
|
Senior Vice President, Corporate Development and Strategic Planning |
Jane Okun |
|
42 |
|
Senior Vice President, Investor Relations and Corporate Communications |
C. Michael Armstrong |
|
66 |
|
Director |
Roger Holtback |
|
59 |
|
Director |
Balakrishnan S. Iyer |
|
48 |
|
Director |
Michael Klein |
|
41 |
|
Director |
Richard W. Roedel |
|
55 |
|
Director |
Michael v. Staudt |
|
56 |
|
Director |
Executive officers are appointed by our board of directors. A brief biography of each executive officer and director follows.
Executive officers
Charles A. Picasso has served as President and Chief Executive Officer and a member of our board of directors since October 2004. Prior to his appointment as President and CEO of IHS, Mr. Picasso served as President and Chief Operating Officer of our Engineering segment, since September 2003. Prior to that, from December 2002 to September 2003, Mr. Picasso served as Executive Vice President of Worldwide Sales and Marketing for our Engineering segment. Before joining IHS, Mr. Picasso was Chief Operating Officer with Digital Island Inc. from August 2000 to December 2002. From 1999 to 2000 he was President of CDI Corporation. Prior to that, from 1996 to 1999, he was Senior Vice President of Worldwide Professional Services Business Unit with NCR Corporation (formerly AT&T Global Information Solutions). From January 1994 to 1996, he was President and Chief Executive Officer of AT&T-Istel Europe. Mr. Picasso holds a bachelor of science degree in Computer Science from the University of Sciences in Montpelier, France.
Jerre L. Stead has served as Chairman of our board of directors since December 1, 2000. From August 1996 until June 2000, Mr. Stead served as Chairman of the board of directors and
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Chief Executive Officer of Ingram Micro Inc. Prior to that, he served as Chief Executive Officer and Chairman of the board of directors at Legent Corporation, from January 1995 to August 1995. From May 1993 to December 1994 he was Executive Vice President of AT&T and Chairman and Chief Executive Officer of AT&T Corp. Global Information Solutions (NCR Corporation) and from September 1991 to April 1993 he was President and Chief Executive Officer of AT&T Corp. Global Business Communication Systems. Mr. Stead also serves on the board of directors of TBG, Armstrong World Industries, Inc., Brightpoint, Inc., Conexant Systems, Inc., Mindspeed Technologies, Inc., and Mobility Electronics, Inc.
Michael J. Sullivan joined IHS in October 1999 as Senior Vice President and Chief Financial Officer. Prior to that, Mr. Sullivan was director of corporate accounting from April 1997 to February 1998, and director of financial planning and analysis from February 1998 to October 1999, for Coors Brewings Company. Prior to joining Coors, he spent 10 years with Price Waterhouse in audit services and the transaction support group. Mr. Sullivan holds a bachelor's degree in Business Administration and Accounting from the University of Iowa.
Jeffrey Tarr has served as President and Chief Operating Officer of our Engineering segment since December 2004. From May 2001 to November 2004 he led Hoover's, Inc. Mr. Tarr served as Chief Executive Officer and President from May 2001, as a director from June 2001, and as Chairman from March 2002 until March 2003 when the business was acquired by Dun & Bradstreet Corporation. From the date of the acquisition until November 2004, Mr. Tarr served as President and as a director of the Hoover's subsidiary of Dun & Bradstreet. From January 2000 through March 2001 he served as Chief Executive, President and a director of All.com, Inc. From June 1994 until January 2000 he held a number of positions at U.S. West and served as a Vice President from April 1998. Earlier in his career he was a consultant with Bain & Company. Mr. Tarr holds an undergraduate degree in Public and International Affairs from Princeton University and an MBA from Stanford University.
Ron Mobed has served as President and Chief Operating Officer of our Energy segment since April 2004. Prior to that, Mr. Mobed served in multiple leadership roles at Schlumberger Limited, since September 1980. Mr. Mobed received his bachelor's degree in Engineering from Trinity College at the University of Cambridge in 1980, and was awarded his master's in Petroleum Engineering with distinction from Imperial College at the University of London in 1987.
Stephen Green has served as General Counsel of IHS since 1996. He was Vice President and General Counsel of IHS from 1996 to 2003 and was appointed Senior Vice President and General Counsel in December 2003. Mr. Green joined the legal department of TBG in 1981. Mr. Green holds a bachelor's degree from Yale University and a law degree from Columbia Law School.
H. John Oechsle joined IHS in July 2003 as Senior Vice President and Chief Information Officer. From June 2000 to July 2003, Mr. Oechsle was Chief Information Officer, Vice President Information Management Worldwide, for Ortho-Clinical Diagnostics, a Johnson & Johnson company. From August 1997 to June 2000, Mr. Oechsle was the General Manager, Executive Director Latin America for Networking & Computer Services, a Johnson & Johnson company. Mr. Oechsle holds a bachelor of science degree in Computer Science from Rutgers University and is a graduate of the Tuck Executive Program at Dartmouth College's Amos Tuck School of Business Administration.
Jeffrey Sisson has served as Senior Vice President of Global Human Resources of IHS since January 2005. From September 2002 to January 2005, Mr. Sisson was a Principal in Executive Partners, a private human resources consulting firm. From July 2001 to August 2002, Mr. Sisson was Senior Vice President, Human Resources for EaglePicher, Inc. From March 2000 to July 2001, he was Senior Director, Human Resources for Snap-on Incorporated. From February 1998 to February 2000, he was Director, Human Resources for Whirlpool Corporation. Mr. Sisson holds a bachelor's degree and a master's degree in Labor & Industrial Relations from Michigan State University.
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Matt Levin has served as Senior Vice President, Corporate Development and Strategic Planning since November 2004. Prior to that, Mr. Levin was Vice President, Global Operations Officer of Hudson Highland Group's Solutions Business, since September 2003. From August 2000 to September 2003 he was an independent consultant in the professional services, financial services, and media industries. Prior to working in consulting, Mr. Levin worked in financial services as a First Scholar at First Chicago NBD. Mr. Levin holds an undergraduate degree from Northwestern University and an MBA from the University of Chicago.
Jane Okun has served as Senior Vice President, Investor Relations and Corporate Communications since November 2004. From 2002 to 2004, Ms. Okun was a partner with Genesis, Inc., a strategic marketing firm also specializing in investor relations. Prior to that, she was Vice President, Investor Relations and Corporate Communications of Velocom, Inc., from 2000 to 2001, and Executive Director, Investor Relations of Media One Group from 1998 to 2000. Prior to joining Media One, Ms. Okun headed Investor Relations at Northwest Airlines, where she also held multiple corporate finance positions. Ms. Okun holds a bachelor's degree and an MBA from the University of Michigan.
Directors
C. Michael Armstrong has served as a member of our board of directors since December 2003. Mr. Armstrong served as Chairman of Comcast Corporation from 2002 until May 2004. He was Chairman and Chief Executive Officer of AT&T Corp. from 1997 to 2002, Chairman and Chief Executive Officer of Hughes Electronic Corporation from 1992 to 1997, and retired from IBM in 1991 as Chairman of IBM World Trade after a 31-year career. Mr. Armstrong is on the board of directors of Citigroup Inc., HCA Inc., Parsons Corporation and the Telluride Foundation, and is on the board of trustees of Johns Hopkins University. Mr. Armstrong also serves as a member of an advisory committee of TBG, and from December 1988 to December 2003 he served on the board of directors of TBG. Mr. Armstrong is a Visiting Professor of the Sloan School at the Massachusetts Institute of Technology.
Roger Holtback has served as a member of our board of directors since December 2003. Since 2001 Mr. Holtback has served as Chairman and CEO of Holtback Holding AB. From 1993 to 2001 he served as President and CEO of the Bure Equity AB. From 1991 to 1993 he served as a member of the Group Executive Committee of SEB and Coordinating Chairman of SEB Sweden. From 1984 to 1990 he served as President and CEO of Volvo Corporation and Executive Vice President of the AB Volvo. Mr. Holtback is currently Chairman of the board of directors of Capio AB and Gunnebo AB, two companies listed on the Swedish Stock Exchange, as well as of SATS Holding AB and The Swedish Exhibition Centre. He serves as a member of the Stena Sphere Advisory Board and as Chairman of the Nordic Capital Investment Review Committee. Mr. Holtback also serves as a member of an advisory committee of TBG, and from September 1988 to December 2003 he served on the board of directors of TBG.
Balakrishnan S. Iyer has served as a member of our board of directors since December 2003. From October 1998 to June 2003 Mr. Iyer served as Senior Vice President and Chief Financial Officer of Conexant Systems Inc. From 1997 to 1998 he was Senior Vice President and Chief Financial Officer of VLSI Technology Inc. and from 1993 to 1997 he was Vice President, Corporate Controller of VLSI Technology Inc. Mr. Iyer serves on the board of directors of Invitrogen Corporation, Skyworks Solutions, Conexant Systems, Inc., Power Integrations, Inc., and QLogic Corporation.
Michael Klein has served as a member of our board of directors since December 1, 2003. Since February 2004, Mr. Klein has been Chief Executive Officer of Global Banking of Citigroup Inc. He also serves as the Vice Chairman of Citigroup International PLC. From 2003 to 2004, he was CEO of Citigroup Inc. Global Corporate and Investment Bank for Europe, the Middle East and Africa. From 2000 to 2003, he held the position of Co-Head of Global Investment Banking for
52
Salomon Smith Barney, a member of Citigroup Inc. Mr. Klein also serves as a member of an advisory committee of TBG, and from December 2001 to December 2003 he served on the board of directors of TBG.
Richard W. Roedel has served as a member of our board of directors since November 2004. Since June 2004 he has been Chairman of Take-Two Interactive Software, Inc., where he also served as Chief Executive Officer from June 2004 through January 2005. Mr. Roedel was an audit partner in BDO Seidman, LLC from 1985 to 2000 and Chairman and Chief Executive Officer of BDO Seidman from 1999 to 2000. He also serves on the board of directors of Brightpoint, Inc., Dade Behring Holdings, Inc., and of the Association of Audit Committee Members Inc.
Michael v. Staudt has served as a member of our board of directors since January 2005. Since March 1997, Mr. v. Staudt has served as Executive Vice President of TBG, overseeing finance, human resources, and corporate affairs. Before joining TBG in 1997, Mr. v. Staudt was a member of the Executive Committee of Bayerische Vereinsbank Group in charge of corporate banking.
Classified Board
Our board of directors is made up of eight directors, of which five are independent. Our board is divided into three classes. The members of each class serve for a three-year term. and serve in the class with a term expiring in 2006, and serve in the class with a term expiring in 2007, and and serve in the class with a term expiring in 2008. At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring.
Board Committees
Our board of directors has an Audit Committee, a Human Resources Committee, and a Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below.
The Audit Committee is comprised of three independent directors. The members of the Audit Committee are Balakrishnan S. Iyer (Chairman), Roger Holtback, and Richard Roedel. The Audit Committee assists our board of directors in its oversight of (i) the integrity of our financial statements, (ii) our independent auditors' qualifications, independence, and performance, (iii) the performance of our internal audit function, and (iv) our compliance with legal and regulatory requirements. In addition to any other responsibilities that our board may assign from time to time, the Audit Committee prepares the audit committee report that the SEC rules require to be included in our annual proxy statement or annual report on Form 10-K.
The Human Resources Committee is comprised of three independent directors. The members of the Human Resources Committee are C. Michael Armstrong (Chairman), Michael Klein, and Richard Roedel. The Human Resources Committee has been created by our board of directors to (i) oversee our compensation and benefits policies generally, (ii) evaluate executive officer performance and review our management succession plan, (iii) oversee and set compensation for our executive officers, and (iv) prepare the report on executive officer compensation that the SEC rules require to be included in our annual proxy statement or annual report on Form 10-K.
The Nominating and Corporate Governance Committee is comprised of four independent directors. The members of this committee are C. Michael Armstrong (Chairman), Roger Holtback, Michael Klein, and Balakrishnan S. Iyer. The Nominating and Corporate Governance Committee has been created by our board of directors to (i) identify individuals qualified to become board members and recommend director nominees to the board, (ii) recommend directors for appointment to board committees, (iii) make recommendations to the board as to determinations of director independence, (iv) oversee the evaluation of the board, (v) make recommendations to the board as to compensation for our directors, and (vi) develop and recommend to the board our
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corporate governance guidelines and code of business conduct and ethics and oversee compliance with such guidelines and code.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers, and directors. This Code is available on our website at www.ihs.com and copies will be mailed to stockholders, free of charge, upon written request made to the Corporate Secretary, IHS Inc., 15 Inverness Way East, Englewood, CO 80112. We intend to disclose any amendment to, or waiver from, a provision of this code on our website.
Compensation Committee Interlocks and Insider Participation
Our Human Resources Committee performs functions equivalent to a compensation committee. Messrs. Armstrong, Klein, and Roedel are members of this committee. During the last ten years, none of them has been an officer or employee of IHS.
None of our executive officers currently serves, or in the past has served, on the board of directors or compensation committee (or committee performing equivalent functions) of any other company that has or had one or more executive officers serving on our board of directors or Human Resources Committee.
Director Compensation
Our nonemployee directors (other than Michael v. Staudt) receive compensation for their board service. That compensation is comprised of an annual cash retainer of $40,000 (which may be converted into deferred stock units or deferred under our directors stock plan, as described in "Equity Compensation PlansIHS Inc. 2004 Directors Stock Plan") and a fee of $1,500 per board and committee meeting attended, plus reimbursement for all reasonably incurred expenses related to the meeting. Additionally, there are annual retainers as follows:
Under our directors stock plan, on each December 1, commencing with December 1, 2005, each nonemployee director (other than Mr. v. Straudt):
On December 29, 2004, each nonemployee director (other than Mr. v. Straudt):
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Executive Compensation
The following summary compensation table sets forth information concerning total compensation earned by or paid to (i) each individual who served as our Chief Executive Officer during the year ended November 30, 2004, (ii) our four other most highly compensated executive officers who served in such capacities as of November 30, 2004, and (iii) one additional executive officer of ours who would have been included under clause (ii) above, but for the fact that he was no longer employed by us as of November 30, 2004, in each case for services rendered to us during the year ended November 30, 2004. We refer to these individuals as our named executive officers.
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|
|
|
|
|
Long-Term Compensation
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Annual Compensation
|
Awards
|
|
|||||||||||||||
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Other
Annual Compensation(1) |
Restricted
Stock Awards($)(2) |
Securities
Underlying Options(#) |
All Other
Compensation |
|||||||||||
Charles A. Picasso
President and Chief Executive Officer(3) |
2004 | $ | 374,903 | $ | 240,000 | | | 150,000 | | |||||||||
Jerre L. Stead
Chairman of the Board |
2004 | 400,000 | 400,000 | | | | | |||||||||||
Stephen Green
Senior Vice President and General Counsel |
2004 | 272,058 | 203,206 | (4) | | | 60,000 | $ | 6,500 | (5) | ||||||||
Michael J. Sullivan
Senior Vice President and Chief Financial Officer |
2004 | 270,673 | 157,006 | | | 70,000 | 6,500 | (5) | ||||||||||
H. John Oechsle
Senior Vice President and Chief Information Officer |
2004 | 244,923 | 115,152 | | | 50,000 | 6,500 | (5) | ||||||||||
Robert R. Carpenter
Senior Advisor (former President and Chief Executive Officer of Information Handling Services Group Inc.)(6) |
2004 | 514,400 | 390,853 | | | 250,000 | 1,506,500 | (7) | ||||||||||
Randolph A. Weil
Former Executive Vice President of Information Handling Services Group Inc.(8) |
2004 | 307,727 | | | | 70,000 | 1,545,188 | (9) |
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Stock Option/SAR Grants in Last Year
Since December 29, 2004, we have not had any options outstanding. The following table sets forth information concerning grants of stock options made to our named executive officers during the year ended November 30, 2004, but which are no longer outstanding. All such grants were stock options to purchase the Class A non-voting common stock of one of our subsidiaries and were granted under the subsidiary's Non-Qualified Stock Option Plan (effective December 1, 1998) and the 2002 Non-Qualified Stock Plan as applicable to our senior executives. All such options, other than for Robert R. Carpenter, had an exercise price equal to the fair market value of the underlying shares on the date of grant and vested over one year from such date. No stock appreciation rights were granted in the year ended November 30, 2004.
OPTION GRANTS IN LAST YEAR (2004)
|
Individual Grant
|
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(1)
|
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of
Securities Underlying Options Granted (#) |
Percent of
Total Options Granted to Employees |
Exercise
Price ($/Sh) |
Expiration
Date |
5%($)
|
10%($)
|
|||||||||
Charles A. Picasso(2) | 150,000 | 8.4 | % | $ | 9.00 | 12/1/2010 | $ | 459,000 | $ | 1,041,000 | |||||
Jerre L. Stead(2) | | | | | | | |||||||||
Stephen Green(2) | 60,000 | 3.4 | 9.00 | 12/1/2010 | 183,600 | 416,400 | |||||||||
Michael J. Sullivan(2) | 70,000 | 3.9 | 9.00 | 12/1/2010 | 214,200 | 485,800 | |||||||||
H. John Oechsle(2) | 50,000 | 2.8 | 9.00 | 12/1/2010 | 153,000 | 347,000 | |||||||||
Robert R. Carpenter(2) | 250,000 | 14.1 | 12.00 | 12/1/2010 | 1,020,000 | 2,315,000 | |||||||||
Randolph A. Weil(3) | 70,000 | 3.9 | 9.00 | 12/1/2010 | 214,200 | 485,800 |
Aggregated Option and SAR Exercises in Last Year and Year-End Option Values
The following table sets forth information concerning option exercises by our named executive officers during the year ended November 30, 2004. All such exercises were for the purchase of the Class A non-voting common stock of one of our subsidiaries. No stock appreciation rights were exercised during the year ended November 30, 2004.
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AGGREGATED OPTION EXERCISES IN LAST YEAR (2004) AND YEAR-END OPTION VALUES
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|
|
Number of Securities Underlying Unexercised Options At Year End(#)
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Value of Unexercised In-the-Money Options At Year End($)(1)
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Name
|
Shares Acquired
on Exercise(#) |
Value
Realized($) |
||||||||||||
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
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|||||||||||
Charles A. Picasso(2) | | | | 475,000 | | $ | 443,250 | |||||||
Jerre L. Stead(2) | | | | 750,000 | | 877,500 | ||||||||
Stephen Green(2) | 35,000 | 126,700 | 55,000 | 155,000 | | 215,349 | ||||||||
Michael J. Sullivan(2) | 100,000 | 362,000 | 30,000 | 210,000 | | 318,151 | ||||||||
H. John Oechsle(2) | | | | 100,000 | | 79,500 | ||||||||
Robert R. Carpenter(2) | | | 1,000,000 | 750,000 | $ | 1,040,000 | | |||||||
Randolph A. Weil(3) | | | | | | |
2004 Long-Term Incentive Plan
We adopted our 2004 Long-Term Incentive Plan on November 30, 2004, but did not grant any awards under that plan on that date.
Pension Plans
The following table sets forth the total estimated retirement benefits for representative years of service and average final compensation payable under the IHS Retirement Income Plan and IHS Supplemental Income Plan as in effect during the plan year 2004. Under the Internal Revenue Code, the maximum permissible benefit from the retirement income plan, which is a qualified pension plan, for retirement in 2004 was $165,000, and annual compensation exceeding $205,000 in 2004 could not be considered in computing the maximum permissible benefit under the retirement income plan. The supplemental income plan, which is a non-qualified pension plan, pays benefits in excess of Internal Revenue Code maximums to all participants of the retirement income plan.
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The benefit amounts shown in the following table do not reflect the reduction based on a portion of the recipient's Social Security benefit in calculating benefits payable under our plans.
The following table provides information, as of November 30, 2004, on the number of full years of service under the plans and compensation for purposes of determining retirement benefits, consisting of regular salary plus commissions and overtime. The plan provides retirement benefits based on a percentage of the highest five years' average compensation in the last ten years of employment. Mr. Weil is no longer a participant in these plans.
Name
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Full Years of Credited Service (#)
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Compensation for Purposes of Determining Benefits ($)
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Charles A. Picasso | 2 | (1) | $ | 349,904 | |
Jerre L. Stead | 4 | (2) | 400,000 | ||
Stephen Green | 23 | 252,212 | |||
Michael J. Sullivan | 5 | 251,443 | |||
H. John Oechsle | 1 | 226,846 | |||
Robert R. Carpenter | 4 | 476,754 |
Participants are 100% vested in their benefit at the time they are credited with five or more years of vesting service or the date when they reach age 65. Vesting may be accelerated in years in which we make a transfer of surplus plan assets to the retiree medical accounts under the plan to provide for retiree medical coverage.
Normal retirement age under the plan is 65 but a participant who terminates employment with at least ten years of vesting service may retire as early as age 55. Participants who terminate employment after age 55 with ten years of vesting service will receive a reduction of benefit equal to 0.5% for each month that benefit commencement precedes age 62. Participants who terminate employment before age 55 with ten years of vesting service will receive a reduction of benefit equal to 0.5% for each month that benefit commencement precedes age 65.
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Employment Contracts, Termination of Employment and Change In Control Arrangements
All of our executive officers, other than Jerre L. Stead, have employment agreements with us. The following are descriptions of:
These descriptions are intended to be summaries and do not describe all provisions of the agreements. In addition, the agreements for individuals who are currently our executive officers, but who are not our named executive officers, may contain provisions that are different than those described in the following descriptions.
Charles A. Picasso. We have entered into an employment agreement with Charles A. Picasso, our president and chief executive officer. The following is a description of the material terms of this agreement.
Term. The term of Mr. Picasso's employment under the agreement commenced on October 15, 2004 for an initial term of one year, and it renews automatically on each anniversary of that date for an additional one-year period, unless either Mr. Picasso's employment is terminated earlier in accordance with the agreement or we notify, or Mr. Picasso notifies, the other party in writing at least 30 days prior to the applicable anniversary of the commencement date.
Base salary, bonus and benefits. The agreement provides for an initial base salary of $550,000, to be increased by the human resources committee of our board of directors in its sole discretion. During the year ended November 30, 2005, Mr. Picasso's base salary will remain at this level.
Under the agreement, Mr. Picasso is eligible for an annual bonus pursuant to our then current annual incentive plan. Commencing with the year beginning December 1, 2004, and for each subsequent year during the term of Mr. Picasso's employment, he will be eligible to receive a bonus in an amount equal to 80% of his base salary in effect at the beginning of such year at target performance and in an amount equal to 120% at maximum performance. The performance objectives for Mr. Picasso's annual bonus will be determined by our board. Mr. Picasso's annual bonus will be prorated for achievement of objectives between 80% and 100% of target performance and between target performance and maximum performance. No annual bonus will be payable in any year for performance at or below 80% of target performance.
Mr. Picasso is also entitled to participate in the employee benefits plans, programs and arrangements as are customarily accorded to our executives.
Termination of employment. If there is no "change in control" (as defined in the agreement), the agreement provides that Mr. Picasso's employment may terminate upon his resignation for "good reason" (as defined in the agreement) or by us without "cause" (as defined in the agreement). In either of these situations, Mr. Picasso is entitled to a lump-sum cash payment equal to the sum of the following:
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following termination and will pay him an amount equal to one year of his then base salary; and
In addition to the foregoing lump-sum payment, Mr. Picasso is entitled to:
Additionally, if Mr. Picasso is employed by us through his 65th birthday or if we terminate his employment prior to his 65th birthday other than for cause, he terminates his employment prior to such date for good reason, his employment terminates prior to such date by reason of death or disability or he terminates his employment prior to such date following a change in control, he will be credited with ten additional years for purposes of service requirements under the pension plan in which he participates on such date. This credit will be added to any two-year service credit to which he may otherwise be entitled.
For these purposes, the "relevant period" means, if Mr. Picasso is terminated prior to his 65 th birthday, the period of two years following termination of Mr. Picasso's employment, and, if Mr. Picasso is terminated on or after his 65th birthday and is engaged to provide consulting services, the period of one year following the termination of his employment.
In addition to the payments and benefits above, if there is change in control, and within one year of such change in control Mr. Picasso terminates employment for a "CIC good reason" (as defined in the agreement) or is terminated by us without cause, the agreement provides that all unvested stock options, restricted stock and other equity awards held by Mr. Picasso will fully vest and become exercisable as of the effective date of such termination.
Under the agreement, if Mr. Picasso terminates his employment other than for good reason or if his employment is terminated by us for cause, Mr. Picasso will receive no further payments, compensation or benefits, except as accrued or owing prior to the effectiveness of Mr. Picasso's termination, and such compensation or benefits that have been earned and will become payable without regard to future services.
The agreement provides that if Mr. Picasso's employment terminates by reason of death, disability or retirement, he or his beneficiaries will receive a lump-sum cash payment equal to the sum of:
If employment terminates by reason of Mr. Picasso's retirement, Mr. Picasso may be entitled to additional benefits as determined in accordance with our otherwise applicable employee benefit and retirement plans and programs.
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Under the agreement, if Mr. Picasso's employment terminates other than by reason of death or disability, any payments Mr. Picasso is eligible for are contingent on Mr. Picasso's execution of a release.
Tax indemnity. Under the agreement, if any amounts or benefits received under the agreements or otherwise are subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, an additional payment will be made to restore Mr. Picasso to the after-tax position that he would have been in, if the excise tax had not been imposed.
Covenants. Under the agreement, Mr. Picasso has agreed to maintain the confidentiality of certain of our information at all times during his employment and thereafter unless he obtains the prior written consent of our board of directors. Mr. Picasso has also agreed not to compete with us during his employment and for a restricted period, as described below, after any termination of his employment. Additionally, Mr. Picasso has agreed not to solicit, hire or cause to be hired any of our employees or employees of any of our subsidiaries for or on behalf of any competitor during that restricted period.
For these purposes, the "restricted period" means the two-year period following termination of Mr. Picasso's employment.
Jerre L. Stead. Mr. Stead does not have an employment agreement. At our board of directors meeting on December 9, 2004, our board set his base salary at $400,000 for the year ending November 30, 2005, which is the same base salary received by Mr. Stead for the year ending November 30, 2004. Mr. Stead's annual compensation is determined by our board of directors, based on his performance and contributions.
Stephen Green, Michael J. Sullivan, and H. John Oechsle. We have entered into an employment agreement with each of Stephen Green, our general counsel; Michael J. Sullivan, our chief financial officer; and H. John Oechsle, our senior vice president and chief information officer. The following is a description of the material terms of their agreements.
Term. The term of employment for Messrs. Green, Sullivan, and Oechsle under their agreements commenced on November 1, 2004, for an initial term of one year, and it renews automatically on each anniversary of that date for an additional one-year period, unless their employment is terminated earlier in accordance with their agreements or we notify, or Messrs. Green, Sullivan, or Oechsle notifies, the other party in writing at least 30 days prior to the applicable anniversary of the commencement date.
Base salary, bonus and benefits. The agreements of Messrs. Green, Sullivan, and Oechsle provide for an initial base salary of $275,000, $275,000, and $247,000, respectively, to be increased by the human resources committee of our board of directors in its sole discretion. At its meeting on December 9, 2004, the human resources committee established base salaries for the year ending November 30, 2005, for Messrs. Green, Sullivan, and Oechsle at $297,000, $300,000, and $262,000, respectively.
Under their agreements, Messrs. Green, Sullivan and Oechsle are eligible for an annual bonus pursuant to our then current annual incentive plan. For the year ending November 30, 2005, each of Messrs. Green, Sullivan and Oechsle will be eligible to receive a bonus in an amount equal to 50% of his base salary in effect at the beginning of such year at target performance. Performance objectives for their annual bonuses will be determined by our chief executive officer.
Messrs. Green, Sullivan, and Oechsle are also entitled to participate in the employee benefits plans, programs, and arrangements as are customarily accorded to our executives.
In accordance with Mr. Oechsle's agreement, he was granted 17,000 restricted shares of our Class A common stock on December 23, 2004. See "Equity Compensation PlansIHS Inc. 2004 Long-Term Incentive PlanRestricted stock and restricted stock units."
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Termination of employment. If there is no "change in control" (as defined in their agreements), their agreements provide that the employment of Messrs. Green, Sullivan, and Oechsle may terminate upon their resignation for "good reason" (as defined in their agreements) or by us without "cause" (as defined in their agreements). In either of these situations, Messrs. Green, Sullivan, and Oechsle are entitled to a lump-sum cash payment equal to the sum of the following:
In addition to the foregoing lump-sum payment, Messrs. Green, Sullivan, and Oechsle are entitled to the same rights as Mr. Picasso to benefit plan participation, equity award treatment, outplacement services, and two-year crediting under retirement related employee benefit plans.
For these purposes, the "relevant period" means the period following termination of the employment of Messrs. Green, Sullivan, and Oechsle equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of two years. Credit for the year in which termination occurs will be given for the purposes of calculating payments if he has completed 6 months or more of service beyond the prior anniversary date of his employment.
In addition to the payments and benefits above, if there is change in control, and within one year of such change in control Messrs. Green, Sullivan, or Oechsle terminates employment for a "CIC good reason" (as defined in their agreements) or is terminated by us without cause, rights with respect to their equity awards will be the same as those of Mr. Picasso.
Under their agreements, if Messrs. Green, Sullivan, or Oechsle terminates his employment other than for good reason or if his employment is terminated by us for cause, his rights will be the same as those of Mr. Picasso.
Their agreements provide that if the employment of Messrs. Green, Sullivan or Oechsle terminates by reason of death, disability, or retirement, he, or his beneficiaries, will have the same rights as Mr. Picasso.
Under their agreements, if the employment of Messrs. Green, Sullivan or Oechsle terminates other than by reason of death or disability, any payments he is eligible for are contingent on Messrs. Green, Sullivan, or Oechsle's execution of a release.
Tax indemnity. Under their agreements, Messrs. Green, Sullivan, or Oechsle have the same right to a tax indemnity as Mr. Picasso.
Covenants. Under their agreements, Messrs. Green, Sullivan, and Oechsle have agreed to the same confidentiality, non-competition, and non-solicitation provisions as Mr. Picasso. However, for their purposes, the "restricted period" means the longer of the one-year period following termination of employment of Messrs. Green, Sullivan, or Oechsle, or in the event he receives payments as a result of his resignation for good reason, termination without cause, or following a change in control, in an amount greater than one year of his then base salary, the period following his termination of employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of two years.
Robert R. Carpenter. On August 4, 2004, our predecessor company entered into a termination agreement with Robert R. Carpenter pursuant to which he resigned from his employment with us and our affiliates, effective November 30, 2005. The agreement was amended
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as of November 29, 2004. From the date Mr. Carpenter ceased to serve as our president and chief executive officer on October 6, 2004 until November 30, 2005, he will be employed as our senior advisor. As such, he will report to our chairman and perform duties of an executive nature for us and our affiliates, as mutually agreed by our chairman and Mr. Carpenter. As of the date Mr. Carpenter ceased to be our president and chief executive officer, he also ceased to be an officer or director of any of our affiliates.
Base salary, bonus and employee plan participation. Under the agreement, Mr. Carpenter continued to receive his then current base salary through November 30, 2004. He is entitled to annual bonus payment for the year ended November 30, 2004, in accordance with our annual incentive plan.
For the period of December 1, 2004 through November 30, 2005, Mr. Carpenter will receive salary at the rate of $250,000 per year. Mr. Carpenter will not participate in any annual bonus or incentive plans for such period, but will continue to participate in our then current health and welfare related benefit plans, 401(k) plan and retirement plan offered to our U.S.-based employees generally. Additionally, he will be vested in our retirement plan with the equivalent of 5 years of service.
Equity compensation. On December 1, 2003, we paid Mr. Carpenter $1,500,000 as partial consideration for canceling his options to purchase 1.5 million shares of the Class A non-voting common stock of IHS Group Inc. The balance of the cash consideration for such cancellation was paid on December 1, 2004, and equaled $250,000. Additionally, we paid Mr. Carpenter $500,000 on December 1, 2004 and will pay him $250,000 on December 1, 2005, in full satisfaction of the cancellation of a prior entitlement to receive a stock option to purchase 250,000 of the Class A non-voting common stock of IHS Group Inc.
In connection with the cancellation of Mr. Carpenter's options to purchase 1.5 million shares of the Class A non-voting common stock of IHS Group Inc., Mr. Carpenter also received stock options to purchase 1,750,000 shares of the Class A non-voting common stock of IHS Group Inc. under the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., pursuant to stock option agreements dated March 1, 2003 and March 1, 2004, respectively. Pursuant to the amendment to his termination agreement, Mr. Carpenter tendered these options to IHS Group Inc. for $1,040,000 in cash and 583,333 deferred stock units, each representing the right to receive one share of our Class A common stock. The shares underlying the deferred stock units will be delivered to Mr. Carpenter on June 1, 2006. In the event we have not had an initial public offering or change in control (as defined in the amendment) on or prior to June 1, 2006, Mr. Carpenter may authorize us to retain that number of shares of our stock necessary to satisfy the tax withholding obligation arising in connection with the delivery of the shares described above.
Indemnification and release. To the fullest extent permitted by the law, our predecessor company agreed to indemnify Mr. Carpenter and hold him harmless for all claims, lawsuits, losses, damages, assessments, penalties, expenses, costs or liabilities which he may sustain as a result of, or in connection with, any suit or other proceeding brought by a third party in connection with any of his acts or omissions by reason of the fact that he was employed by us or served as our officer or director, other than in connection with his gross negligence or willful misconduct.
Mr. Carpenter released and discharged us and any of our successors from all claims, demands and actions of any nature that he may have against us.
Confidentiality. Mr. Carpenter agreed that he will not communicate or disclose any information or materials regarding our operations, business practices, operating processes or personal practices without our prior written consent.
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Non-competition. From August 4, 2004 through November 30, 2005 and for the one-year period following that date, Mr. Carpenter will be bound by the non-competition agreement contained in the stock option agreement dated March 1, 2004.
Randolph A. Weil. On November 5, 2004, our predecessor company entered into a termination agreement and general release and waiver of claims with Randolph A. Weil, effective immediately.
Severance benefits. Pursuant to the agreement, we paid Mr. Weil $315,000 as severance pay and an additional $126,000, representing the amount that would be payable to him as his annual bonus for 2004 at target performance. Additionally, we agreed to relocate Mr. Weil to a location within the United States during the one-year period after his termination date.
Under the agreement, Mr. Weil's medical, dental and vision coverages will continue through November 30, 2005. His premiums from such period will be deducted from his severance pay. If insurance premiums increase during the period through November 30, 2005, Mr. Weil is required to reimburse us for the additional amount.
Additionally, Mr. Weil's stock options to purchase shares of the Class A non-voting common stock of IHS Group Inc. were cancelled. In consideration of such cancellation, Mr. Weil received $1,099,400 in cash.
Release. Mr. Weil released and discharged us and any of our successors from all claims, demands and actions of any nature that he may have against us.
Confidentiality. Mr. Weil agreed that he will not communicate or disclose any information or materials regarding our operations, business practices, operating processes or personal practices without our prior written consent.
Non-competition. For a period of twelve months from the termination date, Mr. Weil agreed that he will not:
Notwithstanding the foregoing, Mr. Weil will not be prohibited from:
Indemnification for breaches. Under the agreement, generally, the parties will indemnify one another for any costs, losses, damages or expenses, including attorney's fees, which arise from the breach of the agreement.
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Equity Compensation Plans
IHS Inc. 2004 Long-Term Incentive Plan. Our 2004 Long-Term Incentive Plan has been in effect as of November 30, 2004. The following description of the plan is intended to be a summary and does not describe all provisions of the plan.
Purpose of the plan. The purpose of the plan is to advance the interests of us and our stockholders by:
Type of awards. The plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares, cash-based awards, other stock-based awards and covered employee annual incentive awards.
Duration. Generally, the plan will terminate ten years from the effective date of the plan. After the plan is terminated, no awards may be granted, but any award previously granted will remain outstanding in accordance with the plan.
Administration. The plan is administered by the human resources committee of our board of directors or any other committee designated by our board to administer the plan. Committee members will be appointed from time to time by, and will serve at the discretion of, our board. The committee has full power and authority to interpret the terms and intent of the plan or any agreement or document in connection with the plan, determine eligibility for awards and adopt such rules, regulations, forms, instruments and guidelines for administering the plan. The committee may delegate its duties or powers.
Number of authorized shares. We have authorized a maximum of 7,000,000 shares, minus the number of shares relating to any award granted and outstanding as of, or subsequent to, the effective date under any other of our equity compensation plans. As of January 31, 2005, the number of such shares granted under such other equity compensation plans is 1,286,667. Subject to the plan, the maximum number of shares that may be available for grant pursuant to incentive stock options will be 4,000,000.
Annual award limits. Except as provided in the plan, no individual participant may receive awards in any plan year that relate to more than 500,000 shares. In the case of an award which is not valued in a way in which the foregoing limitation would effectively operate, any individual participant may not be granted awards authorizing the earning during any plan year of an amount that exceeds such participant's annual limit. For this purpose, a participant's annual limit will be equal to $5,000,000 plus the amount of such participant's unused annual limit as of the close of the previous plan year.
Eligibility and participation. All of our employees, directors and service providers are eligible to participate in the plan. The committee may select from all eligible individuals those individuals to whom awards will be granted and will determine the nature of any and all terms permissible by law and the amount of each award.
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Stock options. The committee may grant options to participants in such number, upon such terms and at any time as it determines, provided that incentive stock options may be granted only to eligible employees. Each option grant will be evidenced by an award document that will specify the exercise price, the maximum duration of the option, the number of shares to which the option pertains, conditions upon which the option will become vested and exercisable and such other provisions which are not inconsistent with the plan. The award document will also specify whether the option is intended to be an incentive stock option or a non-qualified stock option.
The exercise price for each option will be:
Other than with respect to a substitute award, which is an award granted to a holder of an option, stock appreciation right or other award granted by a company that is acquired by us or with which we combine, in lieu of such outstanding award previously granted by such company, the exercise price on the date of grant must be at least equal to 100% of the fair market value of the shares on the date of grant.
Each option will expire at such time as the committee determines at the time of its grant; however, no option will be exercisable later than the 10 th anniversary of its grant date. Notwithstanding the foregoing, for options granted to participants outside the United States, the committee can set options that have terms greater than ten years.
Options will be exercisable at such times and be subject to such terms and conditions as the committee approves. A condition of the delivery of shares as to which an option will be exercised will be the payment of the exercise price. Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment, we will deliver to the participant evidence of book-entry shares or, upon his or her request, share certificates in an appropriate amount based on the number of shares purchased under the option(s). The committee may impose such restrictions on any shares acquired pursuant to the exercise of an option as it may deem advisable.
Each participant's award document will set forth the extent to which he will have the right to exercise the option following termination of his or her employment or services.
Only in the event that we are not accounting for equity compensation under APB Opinion No. 25, the committee has the ability to substitute, without receiving each participant's permission, stock appreciation rights paid only in shares for outstanding options. The terms of the substituted stock appreciation rights must be the same as the terms for the options, and the aggregate difference between the fair market value of the underlying shares and the grant price of the stock appreciation rights must be equivalent to the aggregate difference between the fair market value of the underlying shares and the exercise price of the options. If, in the opinion of our auditors, this would create adverse accounting consequences for us, it will be considered null and void.
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We have not yet granted any stock options under the plan.
Stock appreciation rights. The committee may grant freestanding stock appreciation rights, tandem stock appreciation rights, or any combination of these forms of stock appreciation rights. Also subject to the provisions of the plan, the committee will have complete discretion in determining the number of stock appreciation rights granted to each participant and the terms and conditions pertaining to such stock appreciation rights.
Each stock appreciation right will be evidenced by an award document that will specify the grant price, the term of the stock appreciation right and such other provisions as the committee determines.
The grant price for each freestanding stock appreciation right will be the same as exercise prices for our stock options. Other than with respect to substitute awards, the grant price of freestanding stock appreciation rights must be at least equal to 100% of the fair market value of the shares on the date of grant. The grant price of tandem stock appreciation rights will be equal to the exercise price of the related option.
The term of a stock appreciation right will be determined by the committee. Generally, no stock appreciation right will be exercisable later than the tenth anniversary date of its grant. Notwithstanding the foregoing, for stock appreciation rights granted to participants outside the United States, the committee can set terms greater than ten years.
Freestanding stock appreciation rights may be exercised upon whatever terms and conditions the committee imposes. Tandem stock appreciation rights may be exercised for all or part of the shares subject to the related option upon the surrender of the right to exercise the equivalent portion of the related option.
A tandem stock appreciation right may be exercised only with respect to the shares for which its related option is then exercisable. The plan contains additional provisions for tandem stock appreciation rights granted with incentive stock options.
Upon the exercise of a stock appreciation right, a participant will be entitled to receive payment in an amount determined by multiplying the excess of the fair market value of a share on the date of exercise over the grant price by the number of shares with respect to which the stock appreciation right is exercised. The payment upon exercise may be in cash, shares, or any combination thereof, or in any other manner approved by the committee. The form of settlement will be set forth in the award document. The committee may impose such other conditions and/or restrictions on any shares received upon exercise of a stock appreciation right as it may deem advisable or desirable. These restrictions may include a requirement that the participant hold the shares received upon exercise of a stock appreciation right for a specified period of time.
Each award document will set forth the extent to which the participant will have the right to exercise the stock appreciation right following his or her termination of employment or services.
We have not granted any stock appreciation rights under the plan.
Restricted stock and restricted stock units. The committee may grant shares of restricted stock and/or restricted stock units to participants. Restricted stock units will be similar to restricted stock, except that no shares are actually awarded to the participant on the date of grant.
Each grant will be evidenced by an award document that will specify the period(s) of restriction, the number of shares of restricted stock, or the number of restricted stock units granted and such other provisions as the committee determines.
Generally, shares of restricted stock will become freely transferable after all conditions and restrictions applicable to such shares have been satisfied or lapse and restricted stock units will be paid in cash, shares, or a combination, as determined by the committee.
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The committee may impose such other conditions or restrictions on any shares of restricted stock or restricted stock units as it may deem advisable, including a requirement that participants pay a stipulated purchase price for each share of restricted stock or each restricted stock unit, restrictions based upon the achievement of specific performance goals and time-based restrictions on vesting.
Generally, participants holding shares of restricted stock may be granted the right to exercise full voting rights with respect to those shares during the period of restriction (as defined in the plan). A participant will have no voting rights with respect to any restricted stock units.
Each award document will set forth the extent to which the participant will have the right to retain restricted stock and/or restricted stock units following termination of his or her employment or services.
The committee may provide that an award of restricted stock is conditioned upon the participant making or refraining from making an election with respect to the award under Section 83(b) of the Code.
Restricted stock awards were granted on December 23, 2004, to certain of our senior executives, including Charles A. Picasso, Jerre L. Stead, and H. John Oechsle. As permitted by the plan, their awards contain the following more specific or additional provisions:
Performance units and performance shares. The committee may grant performance units and/or performance shares to participants in such amounts and upon such terms as the committee determines.
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Each performance unit will have an initial value that is established by the committee at the time of grant. Each performance share will have an initial value equal to the fair market value of a share on the date of grant. The committee will set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of performance units or shares that will be paid out to the participant.
After the applicable performance period has ended, the participant will be entitled to receive payout on the value and number of performance units or shares earned by him or her over the performance period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
Payment of earned performance units or shares will be as determined by the committee and as evidenced in the award document. The committee may pay earned performance units or shares in the form of cash, shares, or a combination. Any shares may be granted subject to any appropriate restrictions. The form of payout will be set forth in the award document.
Each award document will set forth the extent to which the participant will have the right to retain performance units or shares following termination of his or her employment or services.
We have not granted any performance units or shares under the plan.
Cash-based awards and other stock-based awards. The committee may grant cash-based awards to participants in such amounts and upon such terms, including the achievement of specific performance goals, as the committee determines.
The committee may grant other types of equity-based or equity-related awards not otherwise described by the provisions of the plan, including the grant or offer for sale of unrestricted shares, in such amounts and subject to such terms and conditions as the committee determines. Such awards may involve the transfer of actual shares to participants or payment in cash or otherwise of amounts based on the value of shares, and may include awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
Each cash-based award will specify a payment amount or range. Each other stock-based award will be expressed in terms of shares or units based on shares. The committee may establish performance goals in its discretion, in which case, the number and/or value of awards that will be paid out to the participant will depend on the extent to which the performance goals are met. Payment, if any, will be made in accordance with the terms of the award, in cash or shares as the committee determines.
The committee will determine the extent to which the participant will have the right to receive cash-based awards or other stock-based awards following termination of his or her employment or services.
We have not granted any cash-based or other stock-based awards under the plan.
Covered employee annual incentive awards. The committee may designate covered employees (as defined in Section 162(m) of the Code) who are eligible to receive a monetary payment in any plan year based on a percentage of an incentive pool equal to the greater of:
The committee will allocate an incentive pool percentage to each designated covered employee for each plan year. In no event may any covered employee receive more than $1,200,000 from the incentive pool and the sum of the incentive pool percentages for all covered employees cannot exceed 100% of the total pool.
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As soon as possible after the determination of the incentive pool for a plan year, the committee will calculate each covered employee's allocated portion of the incentive pool based upon the percentage established at the beginning of such plan year. Each covered employee's incentive award will then be determined by the committee based on his or her allocated portion of the incentive pool, subject to adjustment. In no event may the portion of the incentive pool allocated to a covered employee be increased in any way, including as a result of the reduction of any other covered employee's allocated portion. The committee shall retain the discretion to adjust such awards downward.
We have not granted any covered employee annual incentive awards under the plan.
Nonemployee director awards. All awards to our nonemployee directors will be determined by the board or the committee. Currently, such awards are granted under our directors stock plan, which is a sub-plan under our 2004 Long-Term Incentive Plan. See "IHS Inc. 2004 Directors Stock Plan."
Dividend equivalents. Any participant selected by the committee may be granted dividend equivalents based on the dividends declared on shares that are subject to any award, to be credited as of dividend payment dates, during the period between the date the award is granted and the date the award is exercised, vests, or expires, as determined by the committee. Dividend equivalents will be converted to cash or additional shares by such formula and at such time and subject to such limitations as determined by the committee.
Performance objectives. Unless and until the committee proposes for stockholder vote and the stockholders approve a change in the general performance measures below, the performance goals upon which the payment or vesting of an award to a covered employee (except as otherwise provided in the plan) that is intended to qualify as performance-based compensation will be limited to the following performance measures:
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Transferability of awards. Generally, awards cannot be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. However, with respect to our non-qualified stock options, our board or the committee may permit further transferability and impose conditions and limitations on any permitted transferability.
Change in control. Notwithstanding any other provision of the plan to the contrary, in the event of a "change in control" (as defined in the plan), provisions specified in the plan will apply, unless otherwise determined by the committee in connection with the grant of an award.
Upon a change in control, all then-outstanding stock options and stock appreciation rights will become fully vested and exercisable, and all other then-outstanding awards that vest on the basis of continuous service will vest in full and be free of restrictions, except to the extent that another award meeting the requirements of a "replacement award" (as defined in the plan) is provided to the participant pursuant to the plan to replace such award. The treatment of any other awards will be as determined by the committee in connection with their grant.
Upon a termination of employment or directorship of a participant occurring in connection with or during the period of one year after such change in control, other than for cause,
Adjustments in authorized shares. In the event of any of the corporate events or transactions described in the plan, to avoid any unintended enlargement or dilution of benefits, the committee has the sole discretion to substitute or adjust the number and kind of shares that can be issued or otherwise delivered.
Forfeiture events. The committee may specify in an award document that the participant's rights, payments and benefits with respect to an award will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an award.
If we are required to prepare an accounting restatement due to our material noncompliance, as a result of misconduct, with any financial reporting requirement under the security laws, then if the participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant will reimburse us the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement.
Amendment and termination. Subject to, and except as, provided in the plan, the committee has the sole discretion to alter, amend, modify, suspend, or terminate the plan and any award document in whole or in part. However, without the prior approval of our stockholders, and except
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as provided in an award document, stock options or stock appreciation rights will not be repriced, replaced or regranted through cancellation or by lowering the exercise or grant price, and no amendment of the plan will be made without stockholder approval if stockholder approval is required by law, regulation or stock exchange rule.
IHS Inc. 2004 Directors Stock Plan. Our 2004 Directors Stock Plan has been in effect as of December 1, 2004. The following description of the plan is intended to be a summary and does not describe all provisions of the plan.
Purpose of the plan. This plan is a sub-plan under our 2004 Long-Term Incentive Plan. Awards under this plan will be granted in accordance with the 2004 Long-Term Incentive Plan and will constitute "nonemployee director awards" (as defined in that plan).
Duration. Generally, the plan will terminate ten years from the effective date of the plan. After the plan is terminated, no awards may be granted, but any award previously granted will remain outstanding in accordance with the plan.
Eligibility. Only nonemployee directors will be eligible to participate in the plan. However, Mr. v. Staudt will not participate in this plan.
Types of awards. On each December 1, commencing with December 1, 2005, each nonemployee director (other than Mr. v. Staudt):
On December 29, 2004, each nonemployee director (other than Mr. v. Staudt):
Any nonemployee director who is elected to fill a vacancy or a newly created directorship in the interim will receive, effective as of the date of such election, a prorated award, under the plan, based on the number of full months he or she has served, or will serve, as a director between the month in which he or she was elected and the next December 1.
Each grant of restricted stock or restricted stock unit granted under the plan will be evidenced by an award document.
Restricted stock. Shares of restricted stock granted to our nonemployee directors on December 29, 2004, will be unvested and forfeitable until ten days after the earlier of the date the participant either attains age 55 and completes at least five years of service as a director or the date the participant resigns from our board or ceases to be a director, in either case, by reason of the antitrust laws, compliance with our conflict of interest policies, death, or disability (as defined in the plan), at which time, such shares will be considered vested and non-forfeitable. If a participant terminates his or her service as a director without satisfying the above conditions, other than in
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connection with an event described above, then his or her restricted stock will be forfeited without any payment therefor and those shares will again be available for issuance under our 2004 Long-Term Incentive Plan.
Shares of restricted stock will carry full voting and dividend rights. However, any cash dividends with respect to any such restricted shares will be reinvested in shares called dividend shares. Any such dividend shares, and any stock dividends with respect to any shares of restricted stock, will be subject to the same restrictions as the underlying shares of restricted stock.
Generally, a participant will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate his or her shares of restricted stock. However, those shares will be transferable either by will or by the laws of descent and distribution, or to a member of a participant's immediate family or specified estate planning vehicles established by the participant.
As a condition to a participant's receiving an award of restricted stock, he or she will be required to execute and deliver an irrevocable proxy in the form provided by us, appointing Urvanos Investments Limited to vote the shares that he or she receives in connection with his or her award and any other shares that he or she owns as of the date of the proxy or may acquire until the expiration date of the proxy. The proxy will automatically expire on the earlier of the closing date of our initial public offering or the lapse of all restrictions with respect to the shares covered by the proxy.
Restricted stock units. Each restricted stock unit granted on each December 1, commencing with December 1, 2005, will represent a participant's right to receive one share, which right will be unvested and forfeitable until the first anniversary of the date of grant. If a participant terminates his or her service as a director prior to the vesting date of the restricted stock units, then his or her restricted stock units will be forfeited without any payment therefor and the shares underlying such restricted stock units will again be available for reissuance under our 2004 Long-Term Incentive Plan.
Following the restricted stock unit vesting date, the shares underlying a participant's restricted stock units will be delivered to him or her on the 10 th day following his or her termination of service as a director for any reason.
Restricted stock units will carry no voting rights. Restricted stock units will be credited with dividend equivalents, which will have the same unvested or vested status as the underlying restricted stock units. Dividend equivalents will be paid out in the form of shares (or such other cash, securities or other property that may be or become the consideration for such shares in the event we, or one of our successors, are acquired) at the same time that the shares underlying the restricted stock units are delivered. A participant may not sell, transfer, pledge, alienate or otherwise hypothecate restricted stock units and the shares underlying them until the restricted stock unit delivery date.
Deferred stock units. A participant may elect to convert his or her annual retainer award converted into deferred stock units whose underlying shares will have, on the date of grant, a fair market value equal to $40,000. Such election must be made before the close of the calendar year preceding the fiscal year in respect of which the annual retainer award is made. Each deferred stock unit will represent such participant's right to receive one share, which right will be fully vested and non-forfeitable.
The shares underlying a participant's deferred stock units will be delivered to him or her on the 10th day following his or her termination of service as a director for any reason.
Deferred stock units will carry no voting rights. Deferred stock units will be credited with dividend equivalents, which will also be fully vested and non-forfeitable. Dividend equivalents will be paid out in the same way as dividend equivalents related to restricted stock units. A participant may not sell, transfer, pledge, alienate or otherwise hypothecate deferred stock units and the shares underlying them until the deferred stock unit delivery date.
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Deferral of annual retainer award. A participant may elect to defer payment of his or her annual retainer award. Such election must be made before the close of the calendar year preceding the fiscal year in respect of which the annual retainer award is made. Such award will be paid to such participant in accordance with his or her deferral election, which date of payment will be:
"Put," "call" and "drag-along" rights. If no listing event (as defined in the plan) occurs on or prior to the "relevant date" (as described below), then each participant will have the one-time right and option to sell to us, and to cause us to purchase, all of the shares held by him or her (including, for these purposes, any shares underlying restricted stock units or deferred stock units) as of such date.
For these purposes, the "relevant date" means, with respect to a participant for purposes of shares of restricted stock, such participant's restricted stock vesting date, and for purposes of restricted stock units and deferred stock units, the date that is the 10th day following such participant's termination of service as a director for any reason.
If no listing event occurs on or prior to the relevant date, then we will have the exclusive one-time right and option to purchase from each participant, and to cause each participant to sell, all or a portion of the shares held by him or her (including, for these purposes, any shares underlying restricted stock units or deferred stock units) as of such date.
Subject to the paragraph below, in the event of a change in control, all shares of restricted stock will vest in full and be free of restrictions (and, in the case of restricted stock units and deferred stock units, a participant's right to receive the shares underlying such stock units will be accelerated such that he or she will receive such shares immediately prior to the closing of the acquisition transactions, at which time such units will automatically be cancelled), and the participant will participate in the acquisition to the extent of, and in the same manner as, all of our other stockholders. If a change in control occurs prior to a listing event, then we will have the exclusive right and option to require each participant to sell or otherwise transfer to the acquiring party(ies) effecting such change in control all or a portion of such shares held (including, for these purposes, any shares underlying restricted stock units or deferred stock units) as of the effective date of such change in control, in each case for the same consideration per share and on the same terms and conditions as all of our other stockholders.
The delivery date of any shares underlying restricted stock units and deferred stock units will accelerate only if such acceleration is permitted by regulations promulgated in connection with recently enacted legislation relating to deferred compensation. If the acceleration is not permitted thereunder, then on the 10th day following the participant's termination of service as a director of us (or our successor) for any reason, for each share underlying restricted stock units or deferred stock units he or she will receive the same per share consideration received by our other stockholders for each share in the acquisition. At that time such restricted stock units and/or deferred stock units will automatically be cancelled.
Offer to Exchange Options and Shares Held by Our Senior Executives. The following is intended to be a summary of the IHS Group Inc. Offer Under the Non-Qualified Stock Option Plan
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(Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., as applicable to our senior executives, and does not describe all provisions of the offer.
Offer. On November 22, 2004, IHS Group Inc. offered to exchange all outstanding stock options to purchase shares of its Class A non-voting common stock that were granted to senior executives under IHS Group Inc.'s 1998 and 2002 non-qualified stock option plans and IHS Group Inc. shares previously acquired upon the exercise of such options. Our senior executives who were offered this opportunity include our named executive officers Charles A. Picasso, Jerre L. Stead, Stephen Green, Michael J. Sullivan and H. John Oechsle. The senior executives who accepted this offer received:
An accepting senior executive was required to tender all of his or her outstanding options for the full number of IHS Group Inc. shares subject to those options and if he or she held any IHS Group Inc. shares previously acquired upon the exercise of an option, all of those IHS Group Inc. shares, on or before the expiration of the offer, which was December 23, 2004. A senior executive who accepted IHS Group Inc.'s offer was not required to be our employee or director to receive his or her cash. As a result of the offer, $4,765,830 in cash was paid out and 1,286,667 restricted shares of our Class A common stock were granted to 32 people. Accepting senior executives received their restricted shares and, if applicable, cash, following the expiration of the offer.
Purpose of offer. The purpose of the offer was to more closely align our programs with the incentive programs of public companies and to provide senior executives the opportunity to obtain an equity stake in us.
Vesting of our restricted shares. The restricted shares will vest in accordance with the following schedule:
If the senior executive's employment terminates for any reason other than as a result of his or her death or "disability" (as defined in the plan), before all of his or her restricted shares vest, then
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unless our board of directors determines otherwise, he or she will forfeit his or her remaining unvested restricted shares. If the senior executive's employment terminates as a result of his or her death or disability before the vesting of any of his or her restricted shares, all of his or her restricted shares will vest as of the first day any of his or her restricted shares would have vested but for the termination of his or her employment. If the senior executive's employment with us terminates as a result of his or her death or disability after the vesting of any of his or her restricted shares, all of his or her remaining restricted shares will vest.
Transferability of our shares. Generally, a senior executive will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate his or her restricted shares, unless our board of directors (or a committee thereof) permits their transfer. The two exceptions to this general rule are that a senior executive will be able to accomplish such transfers:
Following our initial public offering, subject to securities and other of our applicable laws and policies, a senior executive will be able to transfer his or her vested shares.
If an initial public offering or "change in control" (as defined in the offer) has not occurred on or prior to October 1, 2007, the participant will have an opportunity to sell his or her shares to us (and we will have the opportunity to buy his or her shares).
Change in control. If we are acquired during the period between the date a senior executive received his or her restricted shares (and, if applicable, cash) and the date when his or her restricted shares vest, then the vesting of his or her restricted shares will be accelerated such that they will vest in full immediately prior to the closing of the acquisition transaction, and he or she will participate in the acquisition to the extent of, and in the same manner as, all of our other stockholders.
In addition, if a change in control occurs prior to our initial public offering, then we have the exclusive right and option to require the senior executive to sell or otherwise transfer to the acquiring party(ies) effecting such change in control all, or a portion, of his or her or her shares, in each case for the same consideration per share, and on the same terms and conditions, as all other stockholders.
Dividends. To the extent dividends are paid on our shares while they remain restricted and subject to vesting, a senior executive will be credited with corresponding dividends. Such dividends will be subject to the same restrictions applicable to restricted shares.
Offer to Exchange Options and Shares Held by Directors and Certain Employees. The following is intended to be a summary of our 2004 Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., as applicable to our employees (other than our senior executives) and directors, and does not describe all provisions of the plan.
Offer. On November 22, 2004, IHS Group Inc. offered to exchange all outstanding stock options to purchase shares of its Class A non-voting common stock that were granted to current employees and directors under IHS Group Inc.'s 1998 and 2002 non-qualified stock option plans and IHS Group Inc. shares previously acquired upon the exercise of such options. Robert R. Carpenter was offered the opportunity to participate in this offer under the terms described in "Employment Contracts, Termination of Employment and Change In Control ArrangementsRobert R. CarpenterEquity Compensation." The employees and directors who accepted this offer received:
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An accepting employee or director was required to tender all of his or her outstanding options for the full number of IHS Group Inc. shares subject to those options and if he or she held any IHS Group Inc. shares previously acquired upon the exercise of an option, all of those IHS Group Inc. shares, on or before the expiration of the offer, which was December 23, 2004. A current employee or director who accepted IHS Group Inc.'s offer was not required to be our employee or director to receive his or her deferred stock units, shares or cash. As a result of the offer, $4,262,647 in cash was paid out and deferred stock units representing 1,301,801 shares of our Class A common stock were granted to 201 people.
Purpose of offer. The purpose of the offer was to more closely align our programs with the incentive programs of public companies and to provide current employees or directors the opportunity to obtain an equity stake in us.
Deferred stock units and shares. Participants received their deferred stock units and, if applicable, cash, as soon as reasonably practicable after the expiration of the offer. Our shares underlying those deferred stock units will be delivered to participants on October 17, 2005.
Transferability. Generally, a participant will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate his or her deferred stock units, other than by will or by laws of descent and distribution, unless our board (or a committee thereof) permits their transfer.
Following our initial public offering, subject to securities and other of our applicable laws and policies, or contractual obligations, a participant may transfer his or her deferred stock units.
If an initial public offering or "change in control" (as defined in the offer) has not occurred on or prior to October 1, 2007, the participant will have an opportunity to sell his or her shares to us (and we will have the opportunity to buy his or her shares).
Change in control. If we are acquired during the period between the date the participant received his or her deferred stock units (and, if applicable, cash) and the date when he or she receives our shares underlying his or her deferred stock units, then the participant's right to receive such shares will be accelerated such that he or she will receive his or her shares immediately prior to the closing of the acquisition transaction (at which time his or her deferred stock units will be automatically cancelled), and he or she will participate in the acquisition to the extent of, and in the same manner as, all of our other stockholders.
The delivery date of a participant's shares will accelerate only if such acceleration is permitted under regulations promulgated in connection with recently enacted legislation relating to deferred compensation. If such acceleration is not permitted, then on October 17, 2005, for each share underlying his or her deferred stock units, he or she will receive the same per share consideration received by our stockholders for each share in the acquisition (at which time his or her deferred stock units will be automatically cancelled).
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table and accompanying footnotes set forth as of the date of this prospectus certain information regarding the beneficial ownership of our Class A common stock and Class B common stock:
In accordance with the rules of the Securities and Exchange Commission, "beneficial ownership" includes voting or investment power with respect to securities. The percentage of beneficial ownership for the following table is based on shares of Class B common stock outstanding as of the date of this prospectus and after completion of this offering, shares of Class A common stock outstanding as of the date of this prospectus, and shares of Class A common stock outstanding after the completion of this offering. Unless otherwise noted below, the address for each listed stockholder, director or executive officer is: c/o IHS Inc., 15 Inverness Way East, Englewood, CO 80112. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
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Balakrishnan S. Iyer(2) | | ||||||||||||||||||||||
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Richard W. Roedel(2) | | ||||||||||||||||||||||
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Urpasis Investments Limited (4)(5) |
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The Class B common stock is convertible at any time by the holder into shares of Class A common stock on a share-for-share basis. The Class B common stock will automatically be converted into Class A common stock upon the earlier of the occurrence of specified events or four years from the date of this offering.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship with Selling Stockholders
After the offering, shares of our Class A common stock and all of our Class B common stock will be held by Urvanos Investments Limited, and shares of our Class A common stock will be held by Urpasis Investments Limited, assuming the underwriters do not exercise their option to purchase additional shares. We refer to Urvanos Investments Limited and Urpasis Investments Limited as the "selling stockholders."
Our Class B common stock is entitled to ten votes per share and our Class A common stock, which is the stock we and the selling stockholders are selling in this offering, is entitled to one vote per share. We anticipate that upon the completion of this offering, the selling stockholders will own all of our Class B common stock and % of our Class A common stock, representing approximately % of the voting power of our outstanding capital stock in the aggregate (compared to % of the overall economic interest). The Class B common stock will automatically be converted into Class A common stock upon the earlier of the occurrence of specified events or four years from the date of this offering. See "Description of Capital StockCommon StockConversion."
Voting and investment decisions with respect to the shares of our company have historically been made by TBG Holdings NV (TBG), a Netherlands-Antilles company which is the indirect sole owner of the selling stockholders. As a result, TBG controls all matters requiring stockholder approval, including amendments to our certificate of incorporation, the election of directors and significant corporate transactions, such as potential mergers or other sales of our company or our assets. In addition, TBG could also influence our dividend policy. Jerre L. Stead, the chairman of our board of directors, is a member of the board of directors of TBG. Michael v. Staudt, an executive vice president of TBG, is a member of our board of directors. In addition, C. Michael Armstrong, Roger Holtback and Michael Klein, all members of our board of directors, are members of an advisory committee of TBG.
TBG is wholly-owned indirectly by The Thyssen-Bornemisza Continuity Trust (Trust), a Bermuda trust, which was created for the benefit of certain members of the Thyssen-Bornemisza family. The trustee of the Trust is Thybo Trustees Limited (Thybo), a Bermuda company. As trustee of the indirect sole stockholder of TBG, Thybo has the power to exercise significant influence over the management and affairs of TBG, including by electing or replacing TBG's board of directors. In addition, in certain circumstances, Thybo may be required to act with respect to TBG at the direction of Tornabuoni Limited (Tornabuoni), a Guernsey company, which is an oversight entity that was established at the time the Trust was created. The board of directors of Tornabuoni may only act by unanimous vote and one of its members is Georg Heinrich Thyssen-Bornemisza (a beneficiary of the Trust). Although Thybo has the power to exert influence over TBG, it has not done so in the past and is not required to do so, except in the case of fraud or as directed by Tornabuoni. In addition, while Tornabuoni has the power to direct Thybo to act with respect to TBG, Tornabuoni has not done so in the past. We have been advised by the current directors of each of Tornabuoni and Thybo that they have no intention at this time to exercise any power they may have to exert such influence with respect to TBG.
In addition, there are ongoing discussions among Thybo and the beneficiaries of the Trust with a view to reorganizing the Trust at some point after the completion of this offering. It is contemplated that if such a reorganization were to take place, separate trusts for the beneficiaries would be created, with the trust created for the benefit of Georg Heinrich Thyssen-Bornemisza and his immediate family becoming the sole indirect owner of TBG, which in turn will remain the sole indirect owner of Urvanos Investments Limited, which holds shares of our Class A common stock and all of our Class B common stock. The trusts created for the benefit of the other beneficiaries and their immediate families would become owners, directly or indirectly, of the shares of Class A Common Stock then held by Urpasis Investments Limited.
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Should this reorganization occur, TBG will continue to have the power to exercise significant influence over our management and affairs and over all matters requiring stockholder approval in the same manner as it currently does. In addition, Georg Heinrich Thyssen-Bornemisza (who is the chairman of the board of directors of TBG), along with the trustees of a new trust for his benefit, would have the power to exert significant influence over the management and affairs of TBG, including through electing or replacing members of the TBG board of directors. Georg Heinrich Thyssen-Bornemisza and these trustees may have interests that conflict with yours.
Investments in Related Parties
In September 2004, we sold our investment in the preferred stock of TriPoint Global Communications, Inc. for $94.2 million, which resulted in a pretax gain of $26.6 million. At the time, a subsidiary of TBG owned 80% of the common stock of TriPoint.
In October 2004, we distributed a $6.1 million dividend to a subsidiary of TBG. The dividend consisted of a preferred stock investment in Extruded Metals, Inc. with a fair value of approximately $4.3 million and $1.8 million in cash. At the time, TBG owned all of the common stock of Extruded Metals.
Registration Rights Agreement
We have entered into an agreement that provides registration rights to Urpasis Investments Limited and Urvanos Investments Limited and their permitted transferees (collectively, "holders"), who will hold an aggregate of shares of our Class A common stock and all of our shares of Class B common stock after the offering. Set forth below is a summary of these registration rights.
Demand Registration Rights
At any time on or after the first anniversary of our initial public offering, upon the written request of a holder, we will be required to use our best efforts to effect, as expeditiously as possible, the registration of all or a portion of their Class A common stock, provided that the aggregate proceeds of the offering is expected to equal or exceed $50 million. Urpasis and Urvanos and their permitted transferees will be entitled to a total of six and two demand registrations, respectively. However, we will not be required to effect more than one demand registration within any twelve month period, and we will have the right to preempt any demand registration with a primary registration, in which case the holders will have their incidental registration rights as described below. We will pay all expenses in connection with any registration of shares on behalf of the holders, except that the holders will pay the underwriting discount.
Incidental Registration Rights
Under the agreement, the holders have the right to request that their shares be included in any registration of our Class A common stock other than registrations on Form S-8 or S-4, registrations for our own account pursuant to Rule 415, or in compensation or acquisition-related registrations. In addition, the underwriters may, for marketing reasons, cut back all or a part of the shares requested to be registered and we have the right to terminate any registration we initiated prior to its effectiveness regardless of any request for inclusion by the holders.
Holdback Agreements
Urpasis and Urvanos have agreed that they and their permitted transferees will not, until the first anniversary following our initial public offering (except as part of the initial public offering), directly or indirectly offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of Class A common stock, or any options or warrants to purchase any shares of Class A common stock, or any securities convertible into, exchangeable
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for or that represent the right to receive shares of Class A common stock, whether now owned or later acquired.
The registration rights agreement contains the full legal text of the matters discussed above. We will file this agreement with the SEC as part of our registration statement of which this prospectus forms a part. See "Where You Can Find More Information" for more information on how to obtain a copy of this agreement.
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General Matters
The following description of our capital stock and the relevant provisions of our certificate of incorporation and bylaws are summaries thereof and are qualified by reference to our certificate of incorporation and bylaws, copies of which have been filed with the U.S. Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part, and applicable law.
Our authorized capital stock consists of 80,000,000 shares of Class A common stock, $0.01 par value, 13,750,000 shares of Class B common stock, $0.01 par value, and million shares of preferred stock, $ par value per share.
Common Stock
Voting Rights. The holders of our Class A common stock and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share on all matters to be voted upon by the stockholders. Our certificate of incorporation provides that, so long as the Class B common stock is outstanding, no person or entity is permitted to vote more than 79.9% of the total combined voting power of all classes of stock entitled to vote. We have not provided for cumulative voting for the election of directors in our certificate of incorporation.
Dividend Rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of Class A common stock and Class B common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. See "Dividend Policy." In the event a dividend is paid in the form of shares of common stock or rights to acquire common stock, the holders of Class A common stock shall receive Class A common stock, or rights to acquire Class A common stock, as the case may be, and the holders of Class B common stock shall receive Class B common stock, or rights to acquire Class B common stock, as the case may be.
Conversion. Our Class A common stock is not convertible into any other shares of our capital stock. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock shall convert automatically, without any action by the holder, into one share of Class A common stock upon the earlier of:
Once transferred and converted into Class A common stock, the Class B common stock shall not be reissued. No class of common stock may be subdivided or combined unless the other class
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of common stock concurrently is subdivided or combined in the same proportion and in the same manner.
Liquidation Rights. In the event of liquidation, dissolution or winding up, the holders of Class A common stock and Class B common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding.
Other Matters. The Class A common stock and Class B common stock have no preemptive or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of Class A common stock and Class B common stock are fully paid and non-assessable, and the shares of Class A common stock to be issued upon completion of this offering will be fully paid and non-assessable.
Preferred Stock
The board of directors has the authority to issue preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without any vote or action by the stockholders. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control and may adversely affect the voting, dividend and other rights of the holders of common stock.
At the closing of this offering, no shares of our preferred stock will be outstanding and, other than shares of our preferred stock that may become issuable pursuant to our rights agreement, we have no present plans to issue any shares of our preferred stock. See "Rights Plan."
As of the completion of this offering, shares of our series A junior participating preferred stock will be reserved for issuance upon exercise of our preferred share purchase rights.
Registration Rights
Certain holders of our common stock will be entitled to rights with respect to the registration of their shares under the Securities Act. See "Certain Relationships and Related TransactionsRegistration Rights Agreement."
Anti-Takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws
Delaware law, our certificate of incorporation and our bylaws contain certain provisions, which are summarized below, that:
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Dual Class Structure. As discussed above, our Class B common stock has ten votes per share, while our Class A common stock, which is the class of stock we are selling in this offering and which will be the only class which is publicly traded, has one vote per share. After the offering and assuming that the underwriters option to purchase additional shares has not been exercised, all of our Class B common stock and % of our Class A common stock, representing % of the voting power of our outstanding capital stock, will be controlled by the selling stockholders. Because of our dual class structure, the indirect sole owner of the selling stockholders, TBG, will continue to be able to control all matters submitted to our stockholders for approval even if they come to own significantly less than 50% of the shares of our outstanding common stock. See "Certain Relationships and Related TransactionsRelationship with the Selling Stockholders." This concentrated control could discourage others from initiating any potential merger, takeover or other change of control transaction that other stockholders may view as beneficial to them.
Classified Board. Our certificate of incorporation will provide that our board of directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible. As a result, approximately one-third of our board of directors will be elected each year. The classification of directors will have the effect of making it more difficult for stockholders to change the composition of our board. Our certificate of incorporation and bylaws will provide that the number of directors will be fixed from time to time exclusively pursuant to a resolution adopted by the board but must consist of not less than three or more than fifteen directors.
Removal of Directors; Vacancies. Under the Delaware General Corporation Law (the "DGCL"), unless otherwise provided in our certificate of incorporation, directors serving on a classified board may be removed by the stockholders only for cause. Our certificate of incorporation and bylaws will provide that directors may be removed only for cause and only upon the affirmative vote of the holders of at least 66 2 / 3 % of the votes of the outstanding shares of our common stock entitled to be cast in the election of directors. In addition, our certificate of incorporation will provide that any vacancies on our board of directors will be filled only by the affirmative vote of a majority of the remaining directors even if the number of directors voting would not constitute a quorum.
Supermajority Provisions. The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote is required to amend a corporation's certificate of incorporation or bylaws, unless the certificate of incorporation requires a greater percentage. Our certificate of incorporation will provide that the following provisions in the certificate of incorporation may be amended only by a vote of 66 2 / 3 % or more of all of the votes of the outstanding shares of our common stock entitled to be cast:
In addition, our certificate of incorporation will grant our board of directors the authority to amend our bylaws without a stockholder vote in any manner that is consistent with the laws of the State of Delaware and our certificate of incorporation. Our certificate of incorporation will also
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provide that the following provisions in our bylaws may be amended only by a vote of 66 2 / 3 % or more of all of the votes of the outstanding shares of our common stock entitled to be cast:
Authorized but Unissued Capital Stock. The DGCL does not require stockholder approval for any issuance of authorized shares. In addition, the listing requirements of the New York Stock Exchange, which will apply so long as our Class A common stock is listed on the New York Stock Exchange, only require stockholder approval of certain issuances that equal or exceed 20% of the then-outstanding voting power or then-outstanding number of shares of common stock (or, in the case of certain related-party and other transactions, 1% or 5% of the then-outstanding voting power or then-outstanding number of shares of common stock).
The ability to issue authorized but unissued capital stock could enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of stock at prices higher than prevailing market prices.
Undesignated Preferred Stock. The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.
Limits on Written Consent and Special Meetings. Our certificate of incorporation prohibits stockholders action by written consent. It also provides that special meetings of our stockholders may be called only by the chairman of our board of directors or by our president or corporate secretary at the direction of our board of directors.
Advance Notice Requirements for Nominations. Our bylaws contain advance notice procedures with regard to stockholder proposals related to the nomination of candidates for election as directors. These procedures provide that notice of stockholder proposals related to stockholder nominations for the election of directors must be received by our corporate secretary, in the case of an annual meeting, no later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the anniversary date of the immediately preceding annual meeting of stockholders. However, if the annual meeting is called for a date that is more than 30 days before or more than 70 days after that anniversary date, notice by the stockholder in order to be timely must be received not earlier than the close of business on the 120th day prior to such annual meeting or not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement is first made by us of the date of such meeting. With respect to our annual meeting of stockholders to be held in 2006, notice by the stockholder must be delivered no later than the close of business on , nor earlier than the close of business on . If the number of directors to be elected to our board of directors at an annual meeting is increased and
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there is no public announcement by us naming the nominees for the additional directorships at least 100 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice will be considered timely, but only with respect to nominees for the additional directorships, if it is delivered to our corporate secretary not later than the close of business on the tenth day following the day on which such public announcement is first made by us.
Stockholder nominations for the election of directors at a special meeting must be received by our corporate secretary no earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of such special meeting and of the nominees proposed by our board of directors to be elected at such meeting.
A stockholder's notice to our corporate secretary must be in proper written form and must set forth information related to the stockholder giving the notice and the beneficial owner (if any) on whose behalf the nomination is made, including:
As to each person whom the stockholder proposes to nominate for election as a director, the notice must include:
Advance Notice of Stockholder Proposals. Our bylaws also contain advance notice procedures with regard to stockholder proposals not related to director nominations. These notice procedures, in the case of an annual meeting of stockholders, are the same as the notice requirements for stockholder proposals related to director nominations discussed above insofar as they relate to the timing of receipt of notice by our corporate secretary.
A stockholder's notice to our corporate secretary must be in proper written form and must set forth, as to each matter the stockholder and the beneficial owner (if any) proposes to bring before the meeting:
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Limitations on Liability and Indemnification Matters. The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors' fiduciary duties. Our certificate of incorporation will include a provision that eliminates the personal liability of directors for actions taken as a director, except for liability:
Our certificate of incorporation and bylaws provide that we must indemnify our directors and officers to the fullest extent authorized by the DGCL. We are also expressly authorized to carry directors' and officers' insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Rights Plan. Our board of directors will adopt a rights agreement prior to this offering. Pursuant to our rights agreement, one preferred share purchase right will be issued for each outstanding share of our common stock. Our rights being issued are subject to the terms of our rights agreement.
Our board of directors will adopt our rights agreement to protect our stockholders from coercive or otherwise unfair takeover tactics. In general terms, our rights agreement works by imposing a significant penalty upon any person or group that acquires 15% or more of our outstanding common stock without the approval of our board of directors.
We provide the following summary description below. However, this description is only a summary, is not complete, and should be read together with our entire rights agreement, which has been publicly filed with the Securities and Exchange Commission as an exhibit to the registration statement of which this prospectus is a part.
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Our board of directors has authorized the issuance of one right for each share of our common stock outstanding on the date this offering is completed.
Our rights initially trade with, and are inseparable from, our common stock. Our rights are evidenced only by certificates that represent shares of our common stock. New rights will accompany any new shares of common stock we issue after the date this offering is completed until the date on which the rights are distributed as described below.
Each of our rights will allow its holder to purchase from us one one-hundredth of a share of our series A junior participating preferred stock for $ , once the rights become exercisable. Prior to exercise, our right does not give its holder any dividend, voting or liquidation rights.
Our rights will not be exercisable until:
In light of the selling stockholders' substantial ownership position, our rights agreement contains provisions excluding these stockholders and their permitted transferees from the operation of the adverse terms of our rights agreement.
Until the date our rights become exercisable, our common stock certificates also evidence our rights, and any transfer of shares of our common stock constitutes a transfer of our rights. After that date, our rights will separate from our common stock and be evidenced by book-entry credits or by rights certificates that we will mail to all eligible holders of our common stock. Any of our rights held by an acquiring person are void and may not be exercised.
If a person or group becomes an acquiring person, all holders of our rights except the acquiring person may, for the then applicable exercise price, purchase shares of our Class A common stock with a market value of twice the then applicable exercise price, based on the market price of our Class A common stock prior to such acquisition.
If we are later acquired in a merger or similar transaction after the date our rights become exercisable, all holders of our rights except the acquiring person may, for the then applicable exercise price, purchase shares of the acquiring corporation with a market value of twice the then applicable exercise price, based on the market price of the acquiring corporation's stock prior to such merger.
Each one one-hundredth of a share of our series A junior participating preferred stock, if issued:
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The value of one one-hundredth interest in a share of our preferred stock purchasable upon exercise of each right should approximate the value of one share of our Class A common stock. Our rights will expire on the tenth anniversary of the completion of this offering.
Our board of directors may redeem our rights for $0.01 per right at any time before any person or group becomes an acquiring person. If our board of directors redeems any of our rights, it must redeem all of our rights. Once our rights are redeemed, the only right of the holders of our rights will be to receive the redemption price of $0.01 per right. The redemption price will be adjusted if we have a stock split or stock dividends of our common stock.
After a person or group becomes an acquiring person, but before an acquiring person owns 50% or more of our outstanding common stock, our board of directors may extinguish our rights by exchanging one share of our common stock or an equivalent security for each right, other than rights held by the acquiring person.
Our board of directors may adjust the purchase price of our preferred stock, the number of shares of our preferred stock issuable and the number of our outstanding rights to prevent dilution that may occur from a stock dividend, a stock split or a reclassification of our preferred stock or common stock. No adjustments to the purchase price of our preferred stock of less than 1% will be made.
The terms of our rights agreement may be amended by our board of directors without the consent of the holders of our rights. After a person or group becomes an acquiring person, our board of directors may not amend the agreement in a way that adversely affects holders of our rights.
Delaware Anti-Takeover Statute. We will be subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
A business combination generally includes a merger, asset or stock sale, or other transaction with an interested stockholder. An interested stockholder is generally a person who, together with its affiliates and associates, owns or, in the case of affiliates or associates of the corporation, owned
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15% or more of a corporation's outstanding voting securities within three years prior to the determination of interested stockholder status.
Listing
Application will be made to list the Class A common stock on the New York Stock Exchange under the symbol "IHS."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our Class A common stock. Future sales of substantial amounts of our Class A common stock in the public market could adversely affect market prices prevailing from time to time. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have shares of Class B common stock outstanding, and shares of Class A common stock outstanding. Of these shares, the Class A common stock shares, or Class A common stock shares (if the underwriters exercise in full their option to purchase additional shares), sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our existing "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining shares of Class A common stock and shares of Class B common stock are "restricted shares" as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act. As a result of the contractual lock-up periods described below and the provisions of Rules 144 and 701, these shares will be available for sale in the public market as follows:
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after this offering, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of our then-outstanding shares of Class A common stock, which will equal approximately shares immediately after this offering, or the average weekly trading volume of our Class A common stock during the four calendar weeks preceding the filing of a notice of the sale on Form 144. Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us. We are unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our Class A common stock, the personal circumstances of the stockholder and other factors.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our affiliates at any time during the three months preceding a sale, and who owns shares within the definition of "restricted securities" under Rule 144 that were purchased from us, or any affiliate, at least two years previously, would be entitled to sell shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements described above. For so long as the selling stockholders continue to control us, they will be deemed to be our affiliates under Rule 144(k) and may not rely on the exemption from registration under Rule 144(k).
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Rule 701
In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchases shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701.
The Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Securities Exchange Act of 1934, along with the shares acquired upon exercise of such options, including exercises after the date of this prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described below under Lock-up Agreements, beginning 90 days after the date of this prospectus, may be sold by persons other than "affiliates," as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by "affiliates" under Rule 144 without compliance with its one-year minimum holding period requirement.
Registration Rights
Upon the one year anniversary of this offering, the selling stockholders will be entitled to various rights with respect to the registration of their shares of common stock under the Securities Act. See "Certain Relationships and Related TransactionsRegistration Rights Agreement."
Equity Compensation Awards
We have not granted any stock options to purchase shares of our Class A common stock. Deferred stock units representing 1,301,801 shares of our Class A common stock were granted on December 23, 2004 to our current employees and directors who accepted the offer by IHS Group Inc. to exchange all outstanding stock options to purchase shares of its Class A non-voting common stock and IHS Group Inc. shares previously acquired upon the exercise of such options. See "ManagementEquity Compensation PlansOffer to Exchange Options and Shares Held by Directors and Certain Employees." An additional shares of Class A common stock will be available for future equity compensation awards under our 2004 Long-Term Incentive Plan.
Upon completion of this offering, we intend to file a registration statement under the Securities Act covering all shares of our Class A common stock issuable pursuant to our 2004 Long-Term Incentive Plan and the 2004 Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc. Subject to Rule 144 volume limitations applicable to affiliates, shares registered under any registration statements will be available for sale in the open market, except to the extent that the shares are subject to vesting restrictions with us or the contractual restrictions described below.
Lock-Up Agreements
The selling stockholders have agreed with us not to sell or otherwise dispose of any of their shares of common stock for a period of one year following this offering. In addition we, our executive officers and directors and holders of substantially all of our common stock have agreed with the underwriters not to dispose of or hedge any of their Class A common stock or securities convertible into or exchangeable for shares of Class A common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. and Citigroup Global Markets Inc. or in other limited circumstances. Our agreement does not apply to any shares of Class A common stock or securities convertible into or exchangeable for shares of Class A common stock issued pursuant to any existing employee benefit plans.
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The 180-day restricted period described in the preceding paragraph will be extended if:
in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.
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MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock by a beneficial owner that is a "non-U.S. holder." This discussion does not apply to persons owning, or who have owned, more than 5% of our common stock. A "non-U.S. holder" is a person or entity that, for U.S. federal income tax purposes, is a:
A "non-U.S. holder" does not include an individual who is present in the United States for 183 days or more in the taxable year of disposition and is not otherwise a resident of the United States for U.S. federal income tax purposes. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange, or other disposition of common stock.
This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), and administrative pronouncements, judicial decisions and final, temporary, and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisors with respect to the particular tax consequences to them of owning and disposing of common stock, including the consequences under the laws of any state, local, or foreign jurisdiction.
Dividends
As discussed under "Dividend Policy" above, we do not currently expect to pay dividends. In the event that we do pay dividends, dividends paid to a non-U.S. holder of common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, a non-U.S. holder will be required to provide an Internal Revenue Service Form W-8BEN certifying its entitlement to benefits under a treaty.
The withholding tax does not apply to dividends paid to a non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder's conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. holder were a U.S. resident. A non-U.S. corporation receiving effectively connected dividends may also be subject to an additional "branch profits tax" imposed at a rate of 30% (or a lower treaty rate).
Gain on Disposition of Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax (including the "branch profits tax") on gain realized on a sale or other disposition of common stock unless:
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period is shorter, and our common stock has ceased to be regularly traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs.
We believe that we are not, and do not anticipate becoming, a U.S. real property holding corporation.
Information Reporting Requirements and Backup Withholding
Information returns will be filed with the Internal Revenue Service in connection with payments of dividends and the proceeds from a sale or other disposition of common stock. You may have to comply with certification procedures to establish that you are not a United States person in order to avoid information reporting and backup withholding tax requirements. The certification procedures required to claim a reduced rate of withholding under a treaty will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment to you will be allowed as a credit against your United States federal income tax liability and may entitle you to a refund, provided that the required information is furnished to the Internal Revenue Service.
Federal Estate Tax
An individual non-U.S. holder who is treated as the owner of, or has made certain lifetime transfers of, an interest in the common stock will be required to include the value of the stock in his gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.
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IHS, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co. and Citigroup Global Markets Inc. are acting as joint book-running managers for the offering, Morgan Stanley & Co. Incorporated is acting as joint lead manager for the offering and, together with UBS Securities LLC, KeyBanc Capital Markets, A Division of McDonald Investments Inc., and Piper Jaffray & Co., are the representatives of the underwriters.
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
If the underwriters sell more shares than the total number set forth in the table above, the underwriters have an option to buy up to an additional shares from the selling stockholders to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by IHS and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
Paid by the Selling Stockholders
|
No Exercise
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Full Exercise
|
||||
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Per Share | $ | $ | ||||
Total | $ | $ |
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.
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IHS and its executive officers and directors and holders of substantially all of the common stock of IHS have agreed with the underwriters not to dispose of or hedge any of their Class A common stock or securities convertible into or exchangeable for shares of Class A common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of Goldman, Sachs & Co. and Citigroup Global Markets Inc. or in other limited circumstances. IHS's agreement does not apply to any shares of Class A common stock or securities convertible into or exchangeable for shares of Class A common stock issued pursuant to any existing employee benefit plans. See "Shares Eligible for Future Sale" for a discussion of certain transfer restrictions.
The 180-day restricted period described in the preceding paragraph will be extended if:
in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.
Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated among IHS, the selling stockholders and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be IHS's historical performance, estimates of the business potential and earnings prospects of IHS, an assessment of IHS's management and the consideration of the above factors in relation to market valuation of companies in related businesses.
Application will be made to list the Class A common stock on the New York Stock Exchange under the symbol "IHS." In order to meet one of the requirements for listing the Class A common stock on the NYSE, the underwriters have undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.
In connection with the offering, the underwriters may purchase and sell shares of Class A common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares from the selling stockholders in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option granted to them. "Naked" short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class A common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of Class A common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
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Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of IHS's stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the Class A common stock. As a result, the price of the Class A common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.
Each underwriter has represented, warranted and agreed that: (i) it has not offered or sold and, prior to the expiry of a period of six months from the closing of the offering, will not offer or sell any shares 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 have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 ("FSMA")) received by it in connection with the issue or sale of any shares in circumstances in which section 21(1) of the FSMA does not apply to IHS; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.
The shares may not be offered or sold, transferred or delivered, as part of their initial distribution or at any time thereafter, directly or indirectly, to any individual or legal entity in the Netherlands other than to individuals or legal entities who or which trade or invest in securities in the conduct of their profession or trade, which includes banks, securities intermediaries, insurance companies, pension funds, other institutional investors and commercial enterprises which, as an ancillary activity, regularly trade or invest in securities.
The shares may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the shares may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made thereunder.
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation or subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than under circumstances in which such offer, sale or invitation does not constitute an offer or sale, or invitation for subscription or purchase, of the shares to the public in Singapore.
Each underwriter has acknowledged and agreed that the shares have not been registered under the Securities and Exchange Law of Japan and are not being offered or sold and may not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan, except (i) pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and (ii) in compliance with any other applicable requirements of Japanese law.
The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.
100
IHS and the selling stockholders estimate that the total expenses of the offering, excluding the underwriting discount, will be approximately $ . IHS has agreed that it will pay all expenses of the offering on behalf of itself and the selling stockholders, except that the selling stockholders will pay the underwriting discount with respect to the shares to be sold by them in this offering.
IHS and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for IHS for which they received or will receive customary fees and expenses. C. Michael Armstrong, who is on the board of directors of Citigroup Inc., an affiliate of Citigroup Global Markets Inc., and Michael Klein, who is Chief Executive Officer of Global Banking for Citigroup Inc. and Vice Chairman of Citigroup International PLC, an affiliate of Citigroup Global Markets Inc., serve on the board of directors of IHS. In addition, KeyBank National Association, an affiliate of KeyBanc Capital Markets, A Division of McDonald Investments Inc., is the lead arranger, sole book runner, administrative agent and a lender under IHS's credit facility.
VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A common stock offered hereby will be passed upon for us by Davis Polk & Wardwell, New York, New York, and for the underwriters by Sullivan & Cromwell LLP, Washington, D.C.
The consolidated financial statements of IHS Inc. at November 30, 2003 and 2004, and for each of the three years in the period ended November 30, 2004, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the Class A common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to the company and its Class A common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules thereto, may be read and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules thereto. The registration statement, including the exhibits and schedules thereto, are also available for reading and copying at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005.
As a result of the offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. We also maintain an Internet site at www.ihs.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.
101
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm | F-2 | |
Consolidated Financial Statements |
|
|
Consolidated Balance Sheets | F-3 | |
Consolidated Statements of Operations | F-4 | |
Consolidated Statements of Changes in Stockholders' Equity | F-5 | |
Consolidated Statements of Cash Flows | F-6 | |
Notes to Consolidated Financial Statements | F-7 |
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of IHS Inc.
We have audited the accompanying consolidated balance sheets of IHS Inc. as of November 30, 2004 and 2003, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended November 30, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IHS Inc. at November 30, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended November 30, 2004, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Denver,
Colorado
January 17, 2005
F-2
IHS INC.
CONSOLIDATED BALANCE SHEETS
|
As of November 30,
|
||||||||
---|---|---|---|---|---|---|---|---|---|
|
2003
|
2004
|
|||||||
|
(In thousands)
|
||||||||
Assets | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 24,051 | $ | 124,452 | |||||
Accounts receivable, net | 107,474 | 117,873 | |||||||
Deferred subscription costs | 15,209 | 25,727 | |||||||
Deferred income taxes | 3,774 | 12,173 | |||||||
Assets held for sale | 8,707 | | |||||||
Other | 8,274 | 11,625 | |||||||
|
|
||||||||
Total current assets | 167,489 | 291,850 | |||||||
Non-current assets: |
|
|
|
|
|
|
|
||
Property and equipment, net | 49,977 | 49,591 | |||||||
Intangible assets, net | 2,958 | 26,821 | |||||||
Goodwill, net | 229,418 | 301,880 | |||||||
Preferred stock investments in related parties | 71,850 | | |||||||
Prepaid pension asset | 96,835 | 81,242 | |||||||
Other | 1,586 | 1,260 | |||||||
|
|
||||||||
Total non-current assets | 452,624 | 460,794 | |||||||
|
|
||||||||
Total assets | $ | 620,113 | $ | 752,644 | |||||
|
|
||||||||
Liabilities and stockholders' equity | |||||||||
Current liabilities: | |||||||||
Short-term capital leases | $ | 68 | $ | 48 | |||||
Accounts payable | 53,459 | 39,516 | |||||||
Accrued expenses | 45,770 | 83,438 | |||||||
Income tax payable | 8,702 | 9,114 | |||||||
Deferred subscription revenue | 98,444 | 140,120 | |||||||
Other current liabilities | 2,428 | | |||||||
|
|
||||||||
Total current liabilities | 208,871 | 272,236 | |||||||
Long-term debt and capital leases |
|
|
725 |
|
|
607 |
|
||
Accrued pension liability | 3,855 | 7,531 | |||||||
Accrued post-retirement benefits | 31,458 | 18,740 | |||||||
Deferred income taxes | 13,237 | 11,533 | |||||||
Other liabilities | 317 | 8,065 | |||||||
Minority interests |
|
|
885 |
|
|
1,209 |
|
||
Stockholders' equity: |
|
|
|
|
|
|
|
||
Common stock, $1.00 par value, 1,000 shares authorized, issued and outstanding at November 30, 2003 | 1 | | |||||||
Class A common stock, $0.01 par value per share, 80,000,000 shares authorized, 41,250,000 issued and outstanding at November 30, 2004 | | 413 | |||||||
Class B common stock, $0.01 par value per share, 13,750,000 shares authorized, issued and outstanding at November 30, 2004 | | 138 | |||||||
Class C common stock, $1.00 par value per share, 1,000 shares authorized, issued and held in treasury at November 30, 2004 | | | |||||||
Additional paid-in capital | 122,850 | 133,972 | |||||||
Retained earnings | 252,725 | 301,887 | |||||||
Accumulated other comprehensive loss | (14,811 | ) | (3,687 | ) | |||||
|
|
||||||||
Total stockholders' equity | 360,765 | 432,723 | |||||||
|
|
||||||||
Total liabilities and stockholders' equity | $ | 620,113 | $ | 752,644 | |||||
|
|
See accompanying notes.
F-3
IHS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Years Ended November 30,
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2002
|
2003
|
2004
|
|||||||||
|
(In thousands,
except per share amounts) |
|||||||||||
Revenue | $ | 338,911 | $ | 345,840 | $ | 394,551 | ||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
||
Cost of revenue | 165,168 | 160,949 | 182,206 | |||||||||
Selling, general and administrative | 117,837 | 119,986 | 137,821 | |||||||||
Depreciation and amortization | 9,352 | 8,943 | 10,142 | |||||||||
Compensation expense related to equity awards (Note 12) | | | 21,805 | |||||||||
Gain on sales of assets, net | (2,660 | ) | (245 | ) | (5,532 | ) | ||||||
Impairment of assets | 8,556 | 567 | 1,972 | |||||||||
Recovery of investment | (1,598 | ) | | | ||||||||
Net periodic pension and post-retirement benefits | (10,866 | ) | (8,558 | ) | (5,791 | ) | ||||||
Earnings in unconsolidated subsidiaries | (2,934 | ) | (3,196 | ) | (437 | ) | ||||||
Other expense (income), net | (1,062 | ) | 1,105 | 2,672 | ||||||||
|
|
|
||||||||||
Total operating expenses | 281,793 | 279,551 | 344,858 | |||||||||
|
|
|
||||||||||
Operating income | 57,118 | 66,289 | 49,693 | |||||||||
Impairment of investment in affiliate | (7,900 | ) | | | ||||||||
Gain on sale of investment in affiliate (Note 2) | | | 26,601 | |||||||||
Interest income | 1,043 | 1,359 | 1,140 | |||||||||
Interest expense | (3,535 | ) | (1,104 | ) | (450 | ) | ||||||
|
|
|
||||||||||
Non-operating income (expense), net | (10,392 | ) | 255 | 27,291 | ||||||||
|
|
|
||||||||||
Income before income taxes and minority interests | 46,726 | 66,544 | 76,984 | |||||||||
Provision for income taxes | (16,775 | ) | (23,935 | ) | (15,395 | ) | ||||||
|
|
|
||||||||||
Income before minority interests | 29,951 | 42,609 | 61,589 | |||||||||
Minority interests | (23 | ) | (46 | ) | (275 | ) | ||||||
|
|
|
||||||||||
Net income | $ | 29,928 | $ | 42,563 | $ | 61,314 | ||||||
|
|
|
||||||||||
Earnings per share: | ||||||||||||
Basic and diluted | $ | 29,928 | $ | 42,563 | $ | 34 | ||||||
|
|
|
||||||||||
Weighted average shares: | ||||||||||||
Basic and diluted (Note 19) | 1 | 1 | 1,806 | |||||||||
|
|
|
See accompanying notes.
F-4
IHS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
|
Common
Stock: $1 Par Value; 1,000 Shares Authorized, Issued and Outstanding |
Class A
Common Stock: $0.01 Par Value; 80,000,000 Shares Authorized, 41,250,000 Shares Issued and Outstanding |
Class B
Common Stock: $0.01 Par Value; 13,750,000 Shares Authorized, Issued and Outstanding |
Additional
Paid-In Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
|
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
|||||||||||||||||||||
Balance at November 30, 2001 | $ | 1 | $ | | $ | | $ | 122,850 | $ | 180,234 | $ | (30,764 | ) | $ | 272,321 | |||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,928 |
|
|
|
|
|
29,928 |
|
Foreign currency translation adjustments | | | | | | 4,326 | 4,326 | |||||||||||||||
Minimum pension liability adjustment, net of tax | | | | | | (2,010 | ) | (2,010 | ) | |||||||||||||
|
||||||||||||||||||||||
Comprehensive income, net of tax | 32,244 | |||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance at November 30, 2002 | 1 | | | 122,850 | 210,162 | (28,448 | ) | 304,565 | ||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,563 |
|
|
|
|
|
42,563 |
|
Foreign currency translation adjustments | | | | | | 14,850 | 14,850 | |||||||||||||||
Minimum pension liability adjustment, net of tax | | | | | | (1,213 | ) | (1,213 | ) | |||||||||||||
|
||||||||||||||||||||||
Comprehensive income, net of tax | 56,200 | |||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance at November 30, 2003 | 1 | | | 122,850 | 252,725 | (14,811 | ) | 360,765 | ||||||||||||||
Effect of pension plan spin-off |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,009 |
) |
|
|
|
|
(6,009 |
) |
Equity awards | | | | 11,672 | | | 11,672 | |||||||||||||||
Cash dividend | | | | | (1,843 | ) | | (1,843 | ) | |||||||||||||
Distribution of preferred stock | | | | | (4,300 | ) | | (4,300 | ) | |||||||||||||
Recapitalization | (1 | ) | 413 | 138 | (550 | ) | | | | |||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,314 |
|
|
|
|
|
61,314 |
|
Foreign currency translation adjustments | | | | | | 13,268 | 13,268 | |||||||||||||||
Minimum pension liability adjustment, net of tax | | | | | | (2,144 | ) | (2,144 | ) | |||||||||||||
|
||||||||||||||||||||||
Comprehensive income, net of tax | 72,438 | |||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||
Balance at November 30, 2004 | $ | | $ | 413 | $ | 138 | $ | 133,972 | $ | 301,887 | $ | (3,687 | ) | $ | 432,723 | |||||||
|
|
|
|
|
|
|
See accompanying notes.
F-5
IHS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Years Ended November 30,
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2002
|
2003
|
2004
|
|||||||||
|
(In thousands)
|
|||||||||||
Operating activities | ||||||||||||
Net income | $ | 29,928 | $ | 42,563 | $ | 61,314 | ||||||
Reconciliation of net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization | 9,352 | 8,943 | 10,142 | |||||||||
Compensation expense related to equity awards (non-cash portion) | | | 11,872 | |||||||||
Gain on sales of assets, net | (2,660 | ) | (245 | ) | (5,532 | ) | ||||||
Gain on sale of investment in affiliate | | | (26,601 | ) | ||||||||
Recovery of investment | (1,598 | ) | | | ||||||||
Impairment of assets | 8,556 | 567 | 1,972 | |||||||||
Impairment of investment in affiliate | 7,900 | | | |||||||||
Net periodic pension and post-retirement benefits | (10,866 | ) | (8,558 | ) | (5,791 | ) | ||||||
Minority interests | 23 | 46 | 275 | |||||||||
Deferred income taxes | 17,791 | 7,165 | (1,424 | ) | ||||||||
Change in assets and liabilities: | ||||||||||||
Accounts receivable, net | 15,605 | (1,205 | ) | 4,557 | ||||||||
Other current assets | (2,622 | ) | 1,013 | (11,755 | ) | |||||||
Accounts payable | 383 | 4,005 | (15,208 | ) | ||||||||
Accrued expenses | 6,755 | (8,654 | ) | 25,972 | ||||||||
Income taxes | (7,544 | ) | 10,929 | 1,035 | ||||||||
Deferred subscription revenue | 4,034 | 3,576 | 16,152 | |||||||||
Other liabilities | (302 | ) | | | ||||||||
|
|
|
||||||||||
Net cash provided by operating activities | 74,735 | 60,145 | 66,980 | |||||||||
Investing activities |
|
|
|
|
|
|
|
|
|
|
||
Capital expenditures on property and equipment | (6,763 | ) | (4,123 | ) | (4,444 | ) | ||||||
Change in other assets | (548 | ) | 1,412 | 4,485 | ||||||||
Acquisitions of businesses, net of cash acquired | | (2,224 | ) | (70,331 | ) | |||||||
Proceeds from sales of assets and investment in affiliate | 4,652 | | 104,893 | |||||||||
|
|
|
||||||||||
Net cash provided by (used in) investing activities | (2,659 | ) | (4,935 | ) | 34,603 | |||||||
Financing activities |
|
|
|
|
|
|
|
|
|
|
||
Net payments on debt | (71,265 | ) | (44,153 | ) | (157 | ) | ||||||
Cash dividends | | | (1,843 | ) | ||||||||
|
|
|
||||||||||
Net cash used in financing activities | (71,265 | ) | (44,153 | ) | (2,000 | ) | ||||||
|
|
|
||||||||||
Net increase in cash and cash equivalents |
|
|
811 |
|
|
11,057 |
|
|
99,583 |
|
||
Foreign exchange impact on cash balance | 678 | 1,053 | 818 | |||||||||
Cash and cash equivalents at the beginning of the year | 10,452 | 11,941 | 24,051 | |||||||||
|
|
|
||||||||||
Cash and cash equivalents at the end of the year | $ | 11,941 | $ | 24,051 | $ | 124,452 | ||||||
|
|
|
See accompanying notes.
F-6
IHS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Business and Significant Accounting Policies
IHS Inc. ("IHS," "we," "our," or "us") is a Delaware corporation wholly owned by Urpasis Investments Limited and Urvanos Investments Limited, Cyprus limited liability companies. We are one of the leading global providers of critical technical information, decision-support tools and services to customers in the energy, defense, aerospace, construction, electronics, and automotive industries.
We manage our business through two reportable segments: Energy and Engineering. Our Energy segment develops and delivers critical oil and gas industry data on exploration, development, production, and transportation activities to major global energy producers and national and independent oil companies. Our Energy segment also provides decision-support tools and operational, research, and strategic advisory services to these customers, as well as to utilities and transportation, petrochemical, coal, and power companies. Our Engineering segment provides solutions incorporating technical specifications and standards, regulations, parts data, design guides, and other information to customers in its targeted industries. We maintain an international sales and service network of subsidiaries and distributors.
Fiscal Year End
Our fiscal years end on November 30 of each year. References herein to individual years mean the year ended November 30. For example, 2002 means the year ended November 30, 2002.
Consolidation Policy
The consolidated financial statements include the accounts of all wholly owned and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.
Revenue Recognition
Revenue is recognized when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is probable.
Sales of critical information and decision-support tools
The majority of our revenue is derived from the sale of subscriptions to our critical information, which is recognized ratably as delivered over the subscription period. Incremental costs that are directly related to the subscription revenue are generally deferred and amortized to cost of revenue over the subscription period.
We do not defer the revenue for the limited number of sales of subscriptions in which we have no continuing responsibility to maintain and update the underlying database. We recognize this revenue upon the sale of these subscriptions and delivery of the information and tools. For a limited number of our offerings, we serve as a sales agent for third parties. We recognize revenue from these sales in accordance with Emerging Issues Task Force 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent .
Revenue is recognized upon delivery for non-subscription-based sales.
Multiple-element arrangements
In our business, multiple-element arrangements refer to contracts with separate fees for decision-support tools, maintenance, and related services. If the four criteria of revenue recognition
F-7
are met, license fees are recognized ratably over the license period as long as there is an associated licensing period or a future obligation. Otherwise, revenue is recognized upon delivery. Certain contracts specify separate fees for decision-support tools and ongoing fees for maintenance and other support. If sufficient vendor-specific objective evidence of the fair value of each element of the arrangement exists, the elements of the contract are unbundled and the revenue for each element is recognized as appropriate.
Services
Revenue related to services performed under time- and material-based contracts is recognized in the period performed at the rate specified in the contract. Revenue associated with fixed price contracts is recognized upon completion of each specified performance obligation under the terms of the contract. If the contract includes acceptance contingencies, revenue is recognized in the period in which we receive documentation of acceptance from the customer.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.
Property and Equipment
Land, buildings and improvements, machinery and equipment are stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:
Buildings and improvements | 7 to 30 years | |
Machinery and equipment | 2 to 10 years |
Leasehold improvements are depreciated over their estimated useful life, or the life of the lease, whichever is shorter. Maintenance, repairs and renewals of a minor nature are expensed as incurred. Betterments and major renewals which extend the useful lives of buildings, improvements, and equipment are capitalized.
Preferred Stock Investment in Related Parties
Investment in related parties consisted solely of preferred stock of companies in which TBG Holding, NV (TBG), our indirect controlling stockholder, holds common stock and are stated at cost, net of impairments. During 2004, we liquidated our preferred stock investments in related parties in conjunction with the disposition of the equity investments by TBG (see Note 2).
Identifiable Intangible Assets and Goodwill
We account for our business acquisitions using the purchase method of accounting. We allocate the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, we must identify and attribute values and estimated lives to the intangible assets acquired.
Identifiable intangible assets with finite lives are amortized on a straight-line basis over their respective lives.
We review the carrying values of identifiable intangible assets with indefinite lives and goodwill at least annually to assess impairment because these assets are not amortized. Additionally, we review the carrying value of any intangible asset or goodwill whenever events or changes in
F-8
circumstances indicate that its carrying amount may not be recoverable. We assess impairment by comparing the fair value of an identifiable intangible asset or goodwill with its carrying value. Impairments are expensed when incurred.
Minority Interest
We recognize the minority interests' share of net income in an amount equal to the minority interests' allocable portion of the common equity of certain consolidated subsidiaries. These subsidiaries are located in Germany and Switzerland and are included in our Engineering segment.
Income Taxes
Deferred income taxes are provided using tax rates enacted for periods of expected reversal on all temporary differences. Temporary differences relate to differences between the book and tax basis of assets and liabilities, principally goodwill, property and equipment, deferred subscription revenue, and pension assets and accruals. Pursuant to the provisions of SFAS No. 109, Accounting for Income Taxes , we regularly review the adequacy of our deferred tax asset valuation allowance. We recognize these benefits only when the underlying assessments indicate that it is more likely than not that the benefits will be realized.
Judgment is required in determining the worldwide provision for income taxes. Additionally, the income tax provision is based on calculations and assumptions that are subject to examination by many different tax authorities and to changes in tax law and rates in many jurisdictions. We adjust our income tax provision in the period in which it becomes probable that actual results will differ from our estimates.
Foreign Currency
The functional currency of each of our foreign subsidiaries is that subsidiary's local currency. Monetary assets and liabilities are translated at year-end exchange rates. Income and expense items are translated at weighted-average rates of exchange prevailing during the year. Any translation adjustments are included in the foreign currency translation adjustment account in stockholders' equity. Transactions executed in different currencies resulting in exchange adjustments are translated at spot rates and resulting foreign exchange transaction gains and losses are included in the results of operations.
Research and Development
Costs of research and development, which are included in cost of revenue, are expensed as incurred and amounted to approximately $12.9 million, $7.0 million and $13.1 million for 2002, 2003 and 2004, respectively.
Impairment of Long-Lived Assets
In 2003, we adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of , and the accounting and reporting provisions of Accounting Principles Board (APB) Opinion No. 30, Reporting the Results of Operation, for the disposal of a segment of a business. Upon adoption, we evaluated the
F-9
recoverability of our property and equipment and other long-lived assets in accordance with the new standard.
We periodically review the carrying amounts of long-lived assets to determine whether current events or circumstances warrant adjustment to such carrying amounts. Any impairment is measured by the amount that the carrying value of such assets exceeds their fair value, primarily based on estimated discounted cash flows. Considerable management judgment is necessary to estimate the fair value of assets. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less costs to sell.
Stock Option Accounting
As discussed in Note 13, IHS Group Inc., our wholly owned subsidiary, settled all of its options outstanding at November 30, 2004. IHS Group Inc. has elected to follow APB Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations in accounting for its employee stock options. Under APB 25, because the exercise prices of IHS Group Inc.'s employee stock options have been equal to or greater than the estimated fair market value of the underlying stock on the date of the grant, no compensation expense for stock options has been recognized. SFAS No. 123, Accounting and Disclosure of Stock-Based Compensation (SFAS 123), establishes an alternative method of expense recognition for stock-based compensation awards to employees based on fair values. As of November 30, 2004, IHS Group Inc. has not yet adopted SFAS 123(R) for expense recognition purposes. See "New Accounting Pronouncement" below for further discussion concerning SFAS 123(R).
Pro forma information regarding net income and earnings per share is required by SFAS 123, and has been determined as if IHS Group Inc. had accounted for its employee stock options under the fair value method. The fair value of each option grant was estimated on the date of grant with the following weighted-average assumptions: risk-free interest rate of 3.0%, 2.8% and 3.0% in 2002, 2003 and 2004, respectively, expected life of five years, and expected dividends of 0%.
Option valuation models require the input of highly subjective assumptions including expected stock price characteristics significantly different from those of traded options. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
The weighted-average fair value of options granted during 2002 was $0.91 per option. The weighted-average fair value of options granted during 2003 at fair market value was $1.08 per option and for those granted in excess of fair market value was $0.64 per option. The weighted-average fair value of options granted during 2004 at fair market value was $1.27 per option. The options granted in excess of fair market value during 2004 had no value. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. Our pro forma net income if IHS Group Inc. had used the fair value accounting provisions of SFAS 123 are shown below, for the years ended November 30:
|
2002
|
2003
|
2004
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||||
As reported | $ | 29,928 | $ | 42,563 | $ | 61,314 | |||
Compensation (expense) benefit | (636 | ) | (2,543 | ) | 1,322 | ||||
|
|
|
|||||||
Pro forma | $ | 29,292 | $ | 40,020 | $ | 66,311 | |||
|
|
|
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The benefit recorded in 2004 represents the difference between amounts calculated in previous years under SFAS 123 and the ultimate cash settlement of the options in 2004.
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires the use of significant management estimates. Actual results could differ from those estimates.
Concentration of Credit Risk
Our financial instruments that are exposed to concentrations of credit risk consist principally of accounts receivable and equity investments in related parties. Credit is extended to commercial customers based on an evaluation of the customer's financial condition; generally, collateral is not required. We maintain reserves for potential credit losses from such customers.
Fair Value of Financial Instruments
The carrying value of our financial instruments, including cash, accounts receivable, accounts payable and long-term debt, approximates their fair value.
New Accounting Pronouncement
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment , which is a revision of FASB Statement No. 123, Accounting for Stock- Based Compensation . Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees , and amends FASB Statement No. 95, Statement of Cash Flows . Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.
Statement 123(R) permits public companies to adopt its requirements using one of two methods:
We are currently studying Statement 123(R) and have not yet decided which alternative to use when we adopt Statement 123(R), for our quarter ending on August 31, 2005. As permitted by Statement 123(R), we currently account for share-based payments to employees using APB Opinion 25's intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Subsequent to November 30, 2004, we cancelled all of our outstanding options. Consequently, the adoption of Statement 123(R) will impact our results of operations if we grant
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share-based payments in the future. Had we adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact under Statement 123(R) as described in the disclosure of pro forma net income appearing earlier in Note 1 to our consolidated financial statements.
2. Acquisitions and Divestitures
All acquisitions are accounted for using the purchase method of accounting. The consolidated financial statements include all the assets and liabilities acquired and the results of operations from the respective dates of acquisition. Pro forma results of the acquired businesses have not been presented as they did not have a material impact on the Company's results of operations. Significant transactions are discussed below.
Acquisitions
On December 9, 2003, we acquired the assets of International Petrodata Limited (IPL) for a total purchase price of approximately $16 million in cash. IPL, based in Calgary, Canada, provides critical information to the oil and gas exploration and production markets in Canada.
On September 1, 2004, we acquired the outstanding capital stock of Cambridge Energy Research Associates (CERA) for a total purchase price of approximately $31 million, net of cash acquired of $1.5 million. CERA provides syndicated research and strategic advisory services to energy companies.
On September 16, 2004, we acquired Intermat, Inc., a provider of decision-support tools for parts management, parts cleansing and predictive obsolescence projects, for a total purchase price of approximately $5 million in cash.
On September 20, 2004, we acquired the outstanding capital stock of USA Information Systems, Inc. (USA). The total purchase price was approximately $20 million, net of $0.5 million of acquired cash. USA provides decision-support tools and critical information to governments and government contractors.
The purchase prices for these acquisitions were allocated as follows:
|
IPL
|
CERA
|
Intermat
|
USA
|
Total
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
|||||||||||||||
Assets: | ||||||||||||||||
Current assets | $ | 1,242 | $ | 8,437 | $ | 729 | $ | 1,968 | $ | 12,376 | ||||||
Property and equipment | 215 | 2,512 | 212 | 65 | 3,004 | |||||||||||
Intangible assets | 4,518 | 14,770 | 3,607 | 2,788 | 25,683 | |||||||||||
Goodwill | 12,528 | 27,474 | 1,182 | 18,821 | 60,005 | |||||||||||
Deferred tax assets | | 2,241 | | | 2,241 | |||||||||||
|
|
|
|
|
||||||||||||
Total assets | 18,503 | 55,434 | 5,730 | 23,642 | 103,309 | |||||||||||
|
|
|
|
|
||||||||||||
Liabilities: | ||||||||||||||||
Current liabilities | 2,418 | 18,164 | 430 | 4,157 | 25,169 | |||||||||||
Long-term liabilities | | 7,809 | | | 7,809 | |||||||||||
|
|
|
|
|
||||||||||||
Total liabilities | 2,418 | 25,973 | 430 | 4,157 | 32,978 | |||||||||||
|
|
|
|
|
||||||||||||
Purchase price | $ | 16,085 | $ | 29,461 | $ | 5,300 | $ | 19,485 | $ | 70,331 | ||||||
|
|
|
|
|
F-12
Divestitures of Investments in Affiliates
During 2004, we divested our preferred stock investments in two related parties in which TBG held common stock. On September 17, 2004, we sold our preferred stock in one related party (TriPoint Global Communications, Inc.) for $94.2 million and we recorded a $26.6 million gain on the sale. On October 18, 2004, we distributed to TBG, in the form of a $4.3 million dividend, the preferred stock we owned in the second related party (Extruded Metals, Inc.).
3. Dissolution of Joint Venture
On January 1, 2004, we dissolved our joint venture with the British Standards Institution (BSI) in favor of a distribution agreement relating to certain offerings which incorporate BSI standards and were previously sold through the joint venture. We recorded a $4.4 million gain on sale of assets in connection with the dissolution of the joint venture because we received a cash distribution that exceeded our investment in the joint venture. Deferred revenue related to the subscription revenue stream of these offerings was recorded at fair value.
4. Impairment of Assets
An $8.6 million impairment charge was recorded in 2002 relating to the following: buildings held for sale ($4.6 million); miscellaneous balances within our Engineering segment's services business ($1.5 million); decision-support tools within our Energy segment ($0.5 million); and a note receivable related to the divestment of Pyramid ($2.0 million). The impairment charges related to prepaid royalties and decision-support tools were based on undiscounted future cash flows of the respective businesses or products.
A $0.6 million impairment charge was recorded in 2003 relating to decision-support tools within our Energy segment. This impairment charge was based on a fair value analysis of the future cash flows of the related product.
A $2.0 million impairment charge was recorded in 2004 relating to decision-support tools within our Energy segment. This impairment charge occurred as a result of a decision by management to discontinue development efforts on the product.
F-13
5. Accounts Receivable
Our accounts receivable balance consists of the following as of November 30:
|
2003
|
2004
|
||||||
---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
|||||||
Accounts receivable | $ | 111,695 | $ | 123,077 | ||||
Lessaccounts receivable allowance | (4,221 | ) | (5,204 | ) | ||||
|
|
|||||||
Accounts receivable, net | $ | 107,474 | $ | 117,873 | ||||
|
|
The activity in our accounts receivable allowance consists of the following as of November 30:
6. Property and Equipment
Property and equipment consists of the following at November 30:
|
2003
|
2004
|
|||||
---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||
Land, buildings and improvements | $ | 47,551 | $ | 49,228 | |||
Machinery and equipment | 53,880 | 56,700 | |||||
|
|
||||||
101,431 | 105,928 | ||||||
Less: accumulated depreciation | (51,454 | ) | (56,337 | ) | |||
|
|
||||||
$ | 49,977 | $ | 49,591 | ||||
|
|
Depreciation expense was approximately $9.0 million, $8.6 million, and $8.2 million in 2002, 2003, and 2004, respectively.
During 2002, we determined that certain office buildings met the criteria of SFAS 121 for assets held for sale. Accordingly, the carrying value of the buildings was adjusted to $8.7 million, which represented their fair value less costs to sell. The resulting $4.6 million impairment loss was recorded in 2002 as a component of impairment of assets.
F-14
7. Goodwill and Intangible Assets
The following tables present details of our intangible assets, other than goodwill, as of November 30, 2004:
Intangible assets as of November 30, 2003 were comprised of developed computer software.
The estimated future amortization expense of intangible assets is as follows:
Amortization expense of intangible assets was $0.4 million and $1.9 million for the years ended November 30, 2003 and November 30, 2004, respectively.
Changes in our goodwill from November 30, 2003 to November 30, 2004 were the result of the 2004 acquisitions (see Note 2) and foreign currency exchange rate fluctuations.
8. Debt
On October 22, 2002, we entered into a $95 million unsecured revolving credit agreement ("Agreement") with an expiration date of December 31, 2005, at which time any outstanding principal would have become due and payable. We paid origination fees and debt costs of $0.8 million, which we amortized to interest expense over the life of the Agreement.
The Agreement included various financial and operating covenants which we were in compliance with at November 30, 2004. Consistent with the terms of the Agreement, interest was payable periodically and ranged from LIBOR plus 125 basis points to LIBOR plus 187.5 basis points. At November 30, 2003 and 2004, there were no amounts outstanding under this Agreement. As discussed below, we terminated the Agreement subsequent to November 30, 2004, and we wrote off $0.3 million of remaining unamortized costs related to the Agreement at that time.
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On January 7, 2005, we entered into a $125 million unsecured revolving credit agreement ("New Agreement"), that has a feature allowing us to expand the facility to a maximum of $225 million. We expect origination fees and debt costs to be approximately $0.5 million, which will be amortized over the life of the New Agreement.
The New Agreement includes various financial and operating covenants. The New Agreement expires January 7, 2010, at which time any outstanding principal becomes due and payable.
Consistent with the terms of the New Agreement, interest is payable periodically and ranges from LIBOR plus 75 basis points to LIBOR plus 160 basis points. The facility fee is payable periodically and ranges from 15 basis points to 25 basis points.
9. Other Long-term Liabilities
Other long-term liabilities consist of the following at November 30:
|
2003
|
2004
|
|||||
---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||
Non-compete agreements | $ | | $ | 4,850 | |||
Purchased above-market lease commitment | | 2,903 | |||||
Other | 317 | 312 | |||||
|
|
||||||
Total | $ | 317 | $ | 8,065 | |||
|
|
10. Taxes on Income
The amounts of income before income taxes and minority interests by U.S. and foreign jurisdictions follow for the years ended November 30:
|
2002
|
2003
|
2004
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||||
U.S. | $ | 3,513 | $ | 25,804 | $ | 28,855 | |||
Foreign | 43,213 | 40,740 | 48,129 | ||||||
|
|
|
|||||||
$ | 46,726 | $ | 66,544 | $ | 76,984 | ||||
|
|
|
F-16
The provision for income tax expense (benefit), for the years ended November 30 was as follows:
The provision for income taxes recorded within the consolidated statements of operations differs from the provision determined by applying the U.S. statutory tax rate to pretax earnings as a result of the following for the years ended November 30:
Undistributed earnings of our foreign subsidiaries were approximately $21 million at November 30, 2004. Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable due to the complexities associated with its hypothetical calculation. Withholding
F-17
taxes of approximately $1.3 million would be payable upon remittance of all previously unremitted earnings at November 30, 2004.
The significant components of deferred tax assets and liabilities at November 30 were:
As of November 30, 2004, we have net operating loss carryforwards totaling approximately $8.3 million, comprised of $4.3 million of U.S. loss carryforwards and $4.0 million of foreign loss carryforwards for tax purposes, which will be available to offset future taxable income. If not used, the U.S. tax carryforwards will expire between 2021 and 2024; the foreign tax loss carryforwards generally may be carried forward indefinitely. We believe the realization of substantially all of the deferred tax asset related to foreign net operating losses is not more likely than not to occur, and, accordingly, have placed a valuation allowance on this asset.
As of November 30, 2004, we have foreign tax credit (FTC) carryforwards of approximately $11.5 million, Research and Development (R&D) credit carryforwards of approximately $2.9 million, and Alternative Minimum Tax (AMT) credit carryforwards of approximately $3.3 million, which will be available to offset future U.S. tax liabilities. If not used, the FTC carryforwards will expire between 2010 and 2012, and the R&D credit carryforwards will expire between 2006 and 2024. The AMT credit carryforwards may be carried forward indefinitely. We believe that it is more likely than not that we will realize our R&D and AMT tax credit assets. As of November 30, 2004, we have unused capital losses totaling $1.7 million. If not used, these losses will expire in 2009. We believe the realization of this deferred tax asset is not more likely than not to occur and, accordingly, have placed a valuation allowance on this asset.
The valuation allowance for deferred tax assets decreased by $6.1 million in 2004. The decrease in this allowance was primarily due to the removal of most of the allowance on realization of FTC carryforwards. A provision in the American Jobs Creation Act of 2004 extended the carryforward period for unused FTCs; this extension along with our updated projections of future
F-18
U.S. tax liabilities against which the unused FTCs may be utilized drove the release of this allowance as we believe it is more likely than not that substantially all of the FTCs will be realized before expiration.
We have provided what we believe to be an appropriate amount of tax for items that involve interpretation of the tax law. However, events may occur in the future that will cause us to reevaluate our current reserves and may result in an adjustment to the reserve for taxes.
11. Other Comprehensive Income (Loss)
|
Foreign
currency translation adjustments |
Minimum pension
liability adjustment |
Accumulated other
comprehensive income (loss) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
|
(In thousands)
|
|
||||||||
Balances, November 30, 2001 | $ | (30,764 | ) | $ | | $ | (30,764 | ) | |||
Foreign currency translation adjustments | 4,326 | | 4,326 | ||||||||
Minimum pension liability adjustment | | (2,872 | ) | (2,872 | ) | ||||||
Tax benefit | | 862 | 862 | ||||||||
|
|
|
|||||||||
(26,438 | ) | (2,010 | ) | (28,448 | ) | ||||||
Balances, November 30, 2002 | |||||||||||
Foreign currency translation adjustments | 14,850 | | 14,850 | ||||||||
Minimum pension liability adjustment | | (1,733 | ) | (1,733 | ) | ||||||
Foreign currency effect on pension | 297 | (297 | ) | | |||||||
Tax benefit | | 520 | 520 | ||||||||
Foreign currency effect on tax benefit | (89 | ) | 89 | | |||||||
|
|
|
|||||||||
(11,380 | ) | (3,431 | ) | (14,811 | ) | ||||||
Balances, November 30, 2003 | |||||||||||
Foreign currency translation adjustments | 13,268 | | 13,268 | ||||||||
Minimum pension liability adjustment | | (3,062 | ) | (3,062 | ) | ||||||
Foreign currency effect on pension | 565 | (565 | ) | | |||||||
Tax benefit | | 918 | 918 | ||||||||
Foreign currency effect on tax benefit | (170 | ) | 170 | | |||||||
|
|
|
|||||||||
Balances, November 30, 2004 | $ | 2,283 | $ | (5,970 | ) | $ | (3,687 | ) | |||
|
|
|
12. 2004 Long-Term Incentive and Directors Stock Plans and the Offer to Exchange Options and Shares
IHS Inc. 2004 Long-Term Incentive Plan
The IHS Inc. 2004 Long-Term Incentive Plan became effective as of November 30, 2004.
The plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares, cash-based awards, other stock-based awards and covered employee annual incentive awards.
We have authorized a maximum of 7,000,000 shares, minus the number of shares relating to any award granted and outstanding as of, or subsequent to, the effective date under any other of
F-19
our equity compensation plans. Subject to the plan, the maximum number of shares that may be available for grant pursuant to incentive stock options will be 4,000,000.
As of November 30, 2004, no awards of any kind under the IHS Inc. 2004 Long-Term Incentive Plan were outstanding.
IHS Inc. 2004 Directors Stock Plan
Our 2004 Directors Stock Plan became effective as of December 1, 2004. This plan is a sub-plan under our 2004 Long-Term Incentive Plan. Awards under this plan are granted in accordance with the 2004 Long-Term Incentive Plan and will constitute "nonemployee director awards" (as defined in that plan). Only nonemployee directors are eligible to participate in the plan. As of November 30, 2004, no awards were outstanding.
On each December 1, commencing with December 1, 2005, each nonemployee director (except for one):
On December 29, 2004, each nonemployee director (except for one):
Offer to Exchange Options and Shares
Offer. On November 22, 2004, IHS Group Inc. offered to exchange all outstanding stock options to purchase shares of its Class A non-voting common stock that were granted to senior executives, directors and certain employees (other than senior executives) under IHS Group Inc.'s 1998 and 2002 non-qualified stock option plans and IHS Group Inc. shares previously acquired upon the exercise of such options (the "Offer"). See Note 13 for further information concerning IHS Group Inc.'s 1998 and 2002 non-qualified stock options plans. The senior executives, employees and directors who accepted the Offer received:
F-20
or her outstanding option, vested or unvested, with an exercise price lower than $9.42 per share;
All senior executives, directors and certain other employees who received the Offer accepted it prior to the December 23, 2004 expiration of the Offer.
Vesting of our shares. Senior executives' restricted shares will vest in accordance with the following schedule:
Deferred stock units and shares. Participants received their deferred stock units and, if applicable, cash, as soon as reasonably practicable after the expiration of the Offer. The shares underlying those deferred stock units will be delivered to participants on October 17, 2005.
Former Chief Executive Officer's deferred stock units. Pursuant to the amendment to his termination agreement, our former Chief Executive Officer tendered options to IHS Group Inc. previously issued for $1,040,000 in cash and 583,333 deferred stock units, each representing the right to receive one share of our Class A common stock. The shares underlying the deferred stock units will be delivered to our former CEO on June 1, 2006. In the event we have not had an initial public offering or change in control (as defined in the amendment) on or prior to June 1, 2006, our former CEO may authorize us to retain that number of shares of our stock necessary to satisfy the tax withholding obligation arising in connection with the delivery of the shares described above.
F-21
Accounting treatment. On November 22, 2004, the Offer was extended to senior executives, directors, and certain employees other than senior executives. Although the corresponding awards were not granted until December 23, 2004, management believed at November 30, 2004, that the likelihood that the Offer would be accepted by all who received it was probable and the related cost could be reasonably estimated. Consequently, we accrued $21.8 million as of November 30, 2004. Of the $21.8 million charge, $4.4 million relates to cost of revenue and $17.4 million relates to selling, general and administrative expenses. The accrual of the Offer at November 30, 2004, includes (a) $9.9 million of cash to be paid to settle options under IHS Group Inc.'s 1998 and 2002 non-qualified stock option plans and IHS shares previously acquired upon the exercise of such options and (b) $11.9 million of the deferred stock units and shares. The cost associated with the restricted shares granted to senior executives will be recorded ratably over the vesting period.
13. IHS Group Inc. 1998 and 2002 Non-Qualified Stock Option Plans
Through IHS Group Inc., a wholly owned subsidiary of IHS Inc., we maintained a stock option plan (the "Plan") that provided for granting of non-qualified stock options to certain employees for the purchase of shares of common stock. As discussed in Note 12, on November 22, 2004, IHS Group Inc. offered to exchange all outstanding stock options under its 1998 and 2002 non-qualified stock option plans. All individuals who received the Offer accepted it.
During 2004, IHS Group Inc. authorized an additional 1.2 million shares, bringing the total shares reserved for issuance pursuant to the Plan to 8.7 million. Options were granted with an exercise price not less than equal to the estimated fair market value of IHS Group Inc. shares at the date of grant. Options granted under the Plan generally vested 100% after the third anniversary of the grant date, and the maximum life of options granted was seven years. In December 2002, IHS Group Inc. adopted certain revisions to the Plan which provided, among other things, IHS Group Inc. with the right or obligation to acquire shares of common stock pursuant to the issuance of such stock options at the estimated fair market value at the date of acquisition.
F-22
The following table summarizes IHS Group Inc.'s stock option activity for the three years ended November 30, 2004:
|
|
Outstanding Options
|
||||||
---|---|---|---|---|---|---|---|---|
|
Shares Available
for Grant |
Number of Shares
|
Weighted-
Average Exercise Price |
|||||
Balance at November 30, 2001: | ||||||||
(395,000 exercisable) | 1,614,000 | 3,386,000 | $ | 7.36 | ||||
Options authorized | 1,750,000 | | ||||||
Options granted | (1,307,250 | ) | 1,307,250 | 6.54 | ||||
Options forfeited | 1,723,000 | (1,723,000 | ) | 7.07 | ||||
|
|
|||||||
Balance at November 30, 2002: | ||||||||
(740,000 exercisable) | 3,779,750 | 2,970,250 | 7.27 | |||||
Options authorized | 750,000 | | ||||||
Options granted at fair market value | (2,688,000 | ) | 2,688,000 | 8.25 | ||||
Options granted in excess of fair market value | (1,500,000 | ) | 1,500,000 | 9.05 | ||||
Options forfeited | 610,600 | (610,600 | ) | 7.48 | ||||
|
|
|||||||
Balance at November 30, 2003: | ||||||||
(3,065,900 exercisable) | 952,350 | 6,547,650 | 8.06 | |||||
Options authorized | 1,200,000 | | ||||||
Options granted at fair market value | (1,877,500 | ) | 1,877,500 | 9.00 | ||||
Options granted in excess of fair market value | (250,000 | ) | 250,000 | 12.00 | ||||
Options exercised | | (475,200 | ) | 5.38 | ||||
Shares repurchased | 67,000 | | ||||||
Options forfeited | 889,250 | (889,250 | ) | 7.93 | ||||
|
|
|||||||
Balance at November 30, 2004: | ||||||||
(3,198,700 exercisable) | 981,100 | 7,310,700 | 7.91 | |||||
|
|
Certain of IHS Group Inc.'s stock options were originally granted to our former CEO with a feature that guaranteed that the option would have a minimum value of $3.00 per option. This feature required IHS Group Inc. to record compensation expense at an amount equal to the difference between the fair value of IHS Group Inc.'s stock and the exercise price, subject to the $3.00 minimum value, over the three-year vesting period. IHS Group Inc. issued 1,000,000 options with this guarantee during 2001 and 250,000 options in 2002. IHS Group Inc. was required to issue an additional 250,000 options with this guarantee over each of the next two years. During 2002, these options were cancelled, in exchange for a deferred cash award equal to the minimum value, and a commitment to issue a similar number of new options during 2003 and 2004. IHS Group Inc. recorded in selling, general and administrative expenses approximately $1.9 million, $1.8 million and $0.8 million of compensation expense associated with this deferred cash award for 2002, 2003 and 2004, respectively.
F-23
We settled all of these options at $9.42 after November 30, 2004 (see Note 12). The following table summarizes information concerning outstanding exercisable stock options as of November 30, 2004:
The weighted-average remaining contractual life for outstanding options was 4.6 years as of November 30, 2004.
Options granted to employees were recorded in accordance with APB 25. Therefore, since the exercise price of the employee stock options equaled the fair value of the underlying stock on the date of grant, no compensation expense was recognized.
14. Employee Retirement Benefits
We sponsor a non-contributory, defined-benefit retirement plan for all of the U.S. salaried employees of our Engineering segment. We also have a defined-benefit pension plan that covers certain employees of a subsidiary of our Engineering segment based in the United Kingdom (U.K.). We account for our participation in these plans in accordance with SFAS No. 87, Employers' Accounting for Pensions . Benefits for both plans are generally based on years of service and average base compensation. Plan funding strategies are influenced by employee benefit laws and tax laws. Our U.K. plan includes provision for employee contributions and inflation-based benefit increases for retirees.
On November 30, 2004, our U.S. plan was spun off. Previously, it was a part of a multi-employer plan sponsored by a related party. As a consequence of the spin-off, our net pension asset was reduced by the $25.4 million value of the net pension asset attributable to the non-IHS Inc. plans and recorded as a charge to equity.
The decrease in pension income from 2003 to 2004 is primarily due to the decline in the market value of plan investments that occurred from 2000 through 2002. Although pension investment returns were significant in 2003 and 2004, the impact of the three previous years' returns and a continued decline in interest rates reduced the funded positions of the plans to a level that resulted in the amortization of previously unrecognized actuarial losses. In addition, service cost for the U.K. plan in U.S. dollars increased due to the appreciation of the British pound sterling against the dollar. The underfunded position of our U.K. plan resulted in the recognition of an additional minimum liability in 2002, 2003 and 2004.
F-24
Both U.S. and U.K. plan assets consist primarily of equity securities with smaller holdings of bonds and real estate. Equity assets are diversified between international and domestic investments, with additional diversification in the domestic category through allocations to large-cap, small-cap, and growth and value investments.
The U.S. plan's established investment policy seeks to balance the need to maintain a viable and productive capital base and yet achieve investment results superior to the actuarial rate consistent with our funds' investment objectives. Asset allocations are subject to ongoing analysis and possible modification as basic capital market conditions change over time (interest rates, inflation, etc.).
The following compares target asset allocation percentages as of the beginning of 2004 with actual asset allocations at the end of the 2004:
|
U.S. Plan Assets
|
U.K. Plan Assets
|
|||||||
---|---|---|---|---|---|---|---|---|---|
|
Target Allocations
|
Actual Allocations
|
Target Allocations
|
Actual Allocations
|
|||||
Equities | 30-85 | % | 79 | % | (a | ) | 81 | % | |
Fixed Income | 10-50 | 12 | (a | ) | 9 | ||||
Real Estate | 0-15 | | (a | ) | | ||||
Other | 0-40 | 9 | (a | ) | 10 |
Investment return assumptions for both plans have been determined by obtaining independent estimates of expected long-term rates of return by asset class and applying the returns to assets on a weighted-average basis.
We do not expect any required contributions to the U.S. plan during 2005. However, we expect to contribute approximately $0.9 million to the U.K. plan during 2005.
The following table provides the expected benefit payments from our trustees for our pension plans:
|
U.S. Plan
|
U.K. Plan
|
Total
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||||
2005 | $ | 10,319 | $ | 752 | $ | 11,071 | |||
2006 | 10,279 | 775 | 10,054 | ||||||
2007 | 10,266 | 798 | 11,064 | ||||||
2008 | 10,397 | 821 | 11,218 | ||||||
2009 | 10,510 | 846 | 11,356 | ||||||
2010-2014 | 58,544 | 4,615 | 63,159 |
F-25
We recognized approximately $14.8 million, $12.8 million, and $10.5 million of net periodic pension benefit income in 2002, 2003, and 2004, respectively. The net periodic pension benefit income was based upon actuarial estimates. Net periodic pension benefit income in 2002, 2003, and 2004, includes the results from the multi-employer plan from which IHS's retirement plan was spun off effective November 30, 2004. The following table provides the components of the net periodic pension benefit income, for the years ended November 30:
The changes in the projected benefit obligation and fair value of plan assets were as follows, for the years ended November 30:
F-26
The funded status is as follows for the years ended November 30:
|
2003
|
2004
|
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
U.S. Plan
|
U.K. Plan
|
Total
|
U.S. Plan
|
U.K. Plan
|
Total
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||||
Reconciliation of funded status |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Over/(under)funded status | $ | 38,349 | $ | (4,964 | ) | $ | 33,385 | $ | 50,510 | $ | (8,674 | ) | $ | 41,836 | |||||
Unrecognized net transition asset | (4,173 | ) | | (4,173 | ) | (2,499 | ) | | (2,499 | ) | |||||||||
Unrecognized prior service costs | 1,099 | | 1,099 | 397 | | 397 | |||||||||||||
Unrecognized net loss | 61,560 | 6,011 | 67,571 | 32,834 | 9,672 | 42,506 | |||||||||||||
|
|
|
|
|
|
||||||||||||||
Prepaid asset recognized in balance sheets | $ | 96,835 | $ | 1,047 | $ | 97,882 | $ | 81,242 | $ | 998 | $ | 82,240 | |||||||
|
|
|
|
|
|
The amounts recognized in the balance sheet consist of the following as of November 30:
Pension expense is actuarially calculated annually based on data available at the beginning of each year. Assumptions used in the actuarial calculation include the discount rate selected and disclosed at the end of the previous year as well as other assumptions detailed in the table below, for the years ended November 30:
|
U.S. Plan
|
U.K. Plan
|
|||||||
---|---|---|---|---|---|---|---|---|---|
|
2003
|
2004
|
2003
|
2004
|
|||||
Weighted-average assumptions as of year end |
|
|
|
|
|
|
|
|
|
Discount rate | 6.0 | % | 6.0 | % | 6.0 | % | 5.3 | % | |
Average salary increase rate | 4.5 | 4.5 | 4.5 | 4.3 | |||||
Expected long-term rate of return on assets | 8.5 | 8.5 | 8.5 | 6.7 |
Employees of certain subsidiaries of both the Energy and Engineering segments may participate in defined contribution plans. Benefit expense relating to these plans was approximately $2.2 million, $2.2 million, and $2.4 million for 2002, 2003 and 2004, respectively.
We have a Supplemental Income Plan, which is a non-qualified pension plan, for certain company executives. Benefit expense recognized under this plan was approximately $0.7 million, $0.2 million, and $0.7 million for 2002, 2003 and 2004, respectively.
15. Post-retirement Benefits
We sponsor a non-contributory, defined-benefit post-retirement plan, which provides certain health care benefits, for all U.S. salaried employees of our Engineering segment who also participate in the U.S. pension plan. We account for the plan pursuant to SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other Than Pensions . Substantially all of our employees of
F-27
our Engineering segment may become eligible for these benefits if they reach normal retirement age while working for us.
We recognized approximately $3.9 million, $4.3 million, and $4.7 million of net periodic post-retirement benefit expense in 2002, 2003, and 2004, respectively, based upon actuarial estimates. The obligation under these plans was determined by the application of the terms of medical and life insurance plans together with relevant actuarial assumptions and health care cost trend rates ranging ratably from 10.25% in 2003 to 5.00% in 2011. We have not measured the impact of the prescription drug coverage under the Medicare Modernization Act because our plans are fully insured plans and the savings are dependent upon outside vendors. The discount rate used in determining the accumulated post-retirement benefit obligation was 6.5%, 6.0%, and 6.0% at November 30, 2002, 2003, and 2004, respectively.
On November 30, 2004, our plan was spun off. Previously, it was a part of a multi-employer plan sponsored by a related party. As a consequence of the spin-off, our accrued post-retirement benefit account was reduced by the $15.7 million value of the accrued post-retirement benefit account attributable to the non-IHS Inc. plans and recorded as a charge to equity.
Net periodic pension expense for 2002, 2003, and 2004 includes the results from the multi-employer plan from which the IHS post-retirement plan was spun off effective November 30, 2004. The following table provides the components of the net periodic post-retirement benefit expense for the years ended November 30:
The following table provides the components in the changes in the projected post-retirement benefit plan obligation for the years ended November 30:
The following table provides the reconciliation of funded status for the years ended November 30:
|
2003
|
2004
|
|||||
---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||
Underfunded status | $ | (43,438 | ) | $ | (24,852 | ) | |
Unrecognized net actuarial loss | 11,980 | 6,112 | |||||
|
|
||||||
Accrued post-retirement benefit liability at end of year | $ | (31,458 | ) | $ | (18,740 | ) | |
|
|
F-28
Employer contributions to the post-retirement benefit plan expected to be paid during the year ending November 30, 2005, are approximately $0.9 million.
The following table provides the expected cash flows for our post-retirement benefit plan (in thousands):
Assumed health-care cost trend rates have a significant effect on the amounts reported for the health-care plans. A one-percentage-point change in assumed health-care cost trend rates would have the following effects:
|
One-percentage-
point increase |
One-percentage-
point decrease |
|||||
---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||
Effect on total of service and interest cost for the year ended November 30, 2004 | $ | 820 | $ | (645 | ) | ||
Effect on post-retirement benefit obligation as of November 30, 2004 | 4,288 | (3,434 | ) |
16. Long-term Leases, Commitments and Contingencies
Rental charges in 2002, 2003, and 2004 approximated $11.0 million, $10.8 million, and $12.7 million, respectively. Minimum rental commitments under noncancelable operating leases in effect at November 30, 2004 are as follows (in thousands):
We had outstanding letters of credit in the aggregate amount of approximately $1.5 million and $1.7 million at November 30, 2003 and 2004, respectively.
From time to time, we are involved in litigation, most of which is incidental to our business. In our opinion, no litigation to which we currently are a party is likely to have a material adverse effect on our results of operations or financial condition.
F-29
17. Supplemental Cash Flow Information
Net cash provided by operating activities reflects cash payments for interest and income taxes as shown below, for the years ended November 30:
|
2002
|
2003
|
2004
|
||||||
---|---|---|---|---|---|---|---|---|---|
|
(In thousands)
|
||||||||
Interest paid | $ | 2,972 | $ | 839 | $ | 127 | |||
|
|
|
|||||||
Income tax payments, net | $ | 4,519 | $ | 10,204 | $ | 16,651 | |||
|
|
|
In 2004, we distributed a preferred stock investment with a fair value of approximately $4.3 million to an affiliate.
Cash and cash equivalents amounting to approximately $124.5 million reflected on the consolidated balance sheets at November 30, 2004, are maintained primarily in U.S. Dollars, Canadian Dollars, British Pound Sterling, and Swiss Francs, and are subject to fluctuation in the current exchange rate.
18. Segment Information
We have two reportable segments: Energy and Engineering. Our Energy segment develops and delivers critical oil and gas industry data on exploration, development, production, and transportation activities to major global energy producers and national and independent oil companies. Our Energy segment also provides operational, research, and strategic advisory services to these customers, as well as to utilities and transportation, petrochemical, coal, and power companies. Our Engineering segment provides solutions incorporating technical specifications and standards, regulations, parts data, design guides, and other information to customers in its targeted industries. Both segments primarily derive their revenue from subscriptions.
Information as to the operations of our two segments is set forth below based on the nature of the offerings. Our Chief Executive Officer and his direct reports represent our chief operating decision maker, and they evaluate segment performance based primarily on revenue and operating profit. The accounting policies of our segments are the same as those described in the summary of significant accounting policies (see Note 1).
No single customer accounted for 10% or more of our total revenue for 2002, 2003, or 2004. There are no intersegment revenues for any period presented.
As shown below, certain corporate transactions are not allocated to the reportable segments. Amounts not allocated include compensation expense related to equity awards, net periodic pension and post-retirement benefits income, corporate-level impairments, gain on sales of corporate assets, and gain on sale of investment in affiliate.
F-30
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | 156,151 | $ | 189,689 | $ | 345,840 | $ | | $ | 345,840 | |||||
Segment operating income | 29,541 | 28,190 | 57,731 | 8,558 | 66,289 | ||||||||||
Depreciation and amortization | 3,841 | 3,886 | 7,727 | 1,216 | 8,943 | ||||||||||
Assets | 229,211 | 192,258 | 421,469 | 198,644 | 620,113 | ||||||||||
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue | $ | 186,374 | $ | 208,177 | $ | 394,551 | $ | | $ | 394,551 | |||||
Segment operating income | 32,311 | 32,983 | 65,294 | (15,601 | ) | 49,693 | |||||||||
Depreciation and amortization | 5,424 | 3,772 | 9,196 | 946 | 10,142 | ||||||||||
Assets | 307,366 | 224,059 | 531,425 | 221,219 | 752,644 |
The following is a schedule of revenue and long-lived assets by geographic location:
Revenue by geographic area is generally based on the location of our subsidiary that receives credit for the sale (which may not correspond to either the billing address of the customer to which it was shipped or the foreign currency in which it was billed). Long-lived assets include property and equipment, net; intangible assets, net; and goodwill.
19. Reorganization and Recapitalization
Until November 9, 2004, Holland America Investment Corporation (HAIC U.S.), a Delaware corporation, was a wholly owned subsidiary of NV H.A.I.C. HAIC U.S. owned all of our outstanding stock. Effective November 9, 2004, HAIC U.S. became a wholly owned subsidiary of Urpasis Investments Limited and Urvanos Investments Limited, Cyprus limited liability companies.
On November 10, 2004, we changed our capitalization to 80,000 shares of Class A common stock, 13,750 shares of Class B common stock, and 1,000 shares of Class C common stock.
On November 12, 2004, HAIC U.S. contributed substantially all of its assets to us in exchange for our new common stock. Subsequently, HAIC U.S. liquidated by distributing its assets, comprised principally of our new common stock, to Urpasis Investments Limited and Urvanos Investments Limited.
On November 19, 2004, we changed our capitalization to 80,000,000 shares of Class A common stock, 13,750,000 shares of Class B common stock and 1,000 Shares of Class C common stock.
On December 13, 2004, we changed our name from IHS Group Inc. to IHS Inc.
F-31
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
TABLE OF CONTENTS
|
Page
|
|
---|---|---|
Prospectus Summary | 1 | |
Risk Factors | 9 | |
Special Note Regarding Forward-Looking Statements | 16 | |
Use of Proceeds | 17 | |
Dividend Policy | 17 | |
Capitalization | 18 | |
Dilution | 19 | |
Selected Historical Consolidated Financial Data | 20 | |
Management's Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
Business | 37 | |
Management | 50 | |
Principal and Selling Stockholders | 79 | |
Certain Relationships and Related Transactions | 81 | |
Description of Capital Stock | 84 | |
Shares Eligible for Future Sale | 93 | |
Material United States Federal Tax Considerations for Non-U.S. Holders of Common Stock | 96 | |
Underwriting | 98 | |
Validity of Class A Common Stock | 101 | |
Experts | 101 | |
Where You Can Find More Information | 101 | |
Index to Consolidated Financial Statements | F-1 |
Through and including , 2005 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Shares
IHS Inc.
Class A Common Stock
PROSPECTUS
Joint Book-Running Managers
Goldman, Sachs & Co.
Citigroup
Joint Lead Manager
Morgan Stanley
UBS Investment Bank
KeyBanc Capital Markets
Piper Jaffray
Representatives of the Underwriters
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
|
Amount
To Be Paid |
||
---|---|---|---|
SEC registration fee | $ | 41,195 | |
NASD filing fee | 35,500 | ||
New York Stock Exchange listing fee | * | ||
Printing and engraving expenses | * | ||
Legal fees and expenses | * | ||
Accounting fees and expenses | * | ||
Blue Sky fees and expenses | * | ||
Transfer agent and registrar fees | * | ||
Miscellaneous | * | ||
|
|||
Total | $ | * | |
|
Each of the amounts set forth above, other than the SEC registration fee, the NASD filing fee and the New York Stock Exchange listing fee, is an estimate. These expenses will be borne by the Registrant.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the Registrant. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Registrant's Bylaws provide for indemnification by the Registrant of its directors, officers and employees to the fullest extent permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that 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, 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) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal benefit. The Registrant's Certificate of Incorporation provides for such limitation of liability.
The Registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act, and (b) to the Registrant with respect to payments which may be made by the Registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.
II-1
The proposed form of Underwriting Agreement will provide for indemnification of directors and officers of the Registrant by the underwriters against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Since October 2004, the Registrant issued the following securities:
The issuances of the securities described in the transactions above were deemed to be exempt from registration under the Securities Act of 1933 in reliance on Rule 701 promulgated under the Securities Act as transactions pursuant to a compensatory benefit plan or a written contract related to compensation.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit
Number |
Description
|
|
---|---|---|
1* | Form of Underwriting Agreement | |
3.1* |
|
Amended and Restated Certificate of Incorporation |
3.2* |
|
Amended and Restated By-Laws |
4.1* |
|
Form of Class A Common Stock Certificate |
4.2* |
|
Registration Rights Agreement among IHS Inc. and Urvanos Investments Limited and Urpasis Investments Limited |
5* |
|
Opinion of Davis Polk & Wardwell |
10.1* |
|
Amended and Restated Credit Agreement among IHS Inc., Information Handling Services Group Inc., Information Handling Services Inc., IHS Energy Group Inc., IHS Engineering Group UK Ltd., Petroconsultants S.A., KeyBank National Association, U.S. Bank National Association, Wells Fargo Bank, National Association, and the other lenders party thereto, dated as of January 7, 2005 |
10.2 |
|
Employment Agreement by and between IHS Inc. and Charles A. Picasso, dated as of October 15, 2004 |
10.3 |
|
Employment Agreement by and between IHS Inc. and Stephen Green, dated as of November 1, 2004 |
10.4 |
|
Employment Agreement by and between IHS Inc. and Michael J. Sullivan, dated as of November 1, 2004 |
10.5 |
|
Employment Agreement by and between IHS Inc. and H. John Oechsle, dated as of November 1, 2004 |
10.6 |
|
Termination Agreement by and between Robert R. Carpenter and Information Handling Services Group Inc., dated as of August 4, 2004 |
II-2
10.7 |
|
Amendment to Termination Agreement by and between Robert R. Carpenter and Information Handling Services Group Inc., dated as of November 29, 2004 |
10.8 |
|
Termination Agreement and General Release and Waiver of Claims by and between Randolph A. Weil and Information Handling Services Group Inc., dated as of November 5, 2004 |
10.9 |
|
IHS Inc. 2004 Long-Term Incentive Plan |
10.10 |
|
IHS Inc. 2004 Directors Stock Plan |
10.11 |
|
IHS Inc. 2004 Long-Term Incentive Plan, Form of 2004 Restricted Stock Award |
10.12 |
|
IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for Charles A. Picasso, dated as of December 23, 2004 |
10.13 |
|
IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for Jerre L. Stead, dated as of December 23, 2004 |
10.14 |
|
IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for H. John Oechsle, dated as of December 23, 2004 |
10.15 |
|
Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., dated as of November 22, 2004 (for senior executives) |
10.16 |
|
Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., dated as of November 22, 2004 (for directors and other employees) |
10.17 |
|
IHS Supplemental Income Plan |
10.18 |
|
Summary sheet for nonemployee director compensation |
21* |
|
List of Subsidiaries of the Registrant |
23.1 |
|
Consent of Ernst & Young LLP |
23.2* |
|
Consent of Davis Polk & Wardwell (included in Exhibit 5) |
24 |
|
Power of Attorney (included on signature page) |
All schedules for the Registrant have been omitted since the required information is not present or because the information is included in the financial statements or notes thereto.
Item 17. Undertakings
The undersigned hereby undertakes:
(a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this Registration Statement, or otherwise, the registrant has
II-3
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 hereunder, 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 of 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-4
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Englewood, State of Colorado, on the 4th day of February 2005.
IHS INC. | |||
|
|
By: |
/s/ CHARLES A. PICASSO Name: Charles A. Picasso Title: President and Chief Executive Officer |
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jerre L. Stead and Stephen Green, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agents full power and authority to do and perform each and every act in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on the 4th day of February 2005.
Signature
|
Title
|
|
---|---|---|
|
|
|
/s/
CHARLES A. PICASSO
Charles A. Picasso |
President and Chief Executive Officer (Principal Executive Officer) | |
/s/ MICHAEL J. SULLIVAN Michael J. Sullivan |
|
Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ JERRE L. STEAD Jerre L. Stead |
|
Chairman of the Board |
/s/ C. MICHAEL ARMSTRONG C. Michael Armstrong |
|
Director |
/s/ ROGER HOLTBACK Roger Holtback |
|
Director |
/s/ BALAKRISHNAN S. IYER Balakrishnan S. Iyer |
|
Director |
/s/ MICHAEL KLEIN Michael Klein |
|
Director |
/s/ RICHARD W. ROEDEL Richard W. Roedel |
|
Director |
/s/ MICHAEL V. STAUDT Michael v. Staudt |
|
Director |
II-5
Exhibit
Number |
Description
|
|
---|---|---|
1* | Form of Underwriting Agreement | |
3.1* |
|
Amended and Restated Certificate of Incorporation |
3.2* |
|
Amended and Restated By-Laws |
4.1* |
|
Form of Class A Common Stock Certificate |
4.2* |
|
Registration Rights Agreement among IHS Inc. and Urvanos Investments Limited and Urpasis Investments Limited |
5* |
|
Opinion of Davis Polk & Wardwell |
10.1* |
|
Amended and Restated Credit Agreement among IHS Inc., Information Handling Services Group Inc., Information Handling Services Inc., IHS Energy Group Inc., IHS Engineering Group UK Ltd., Petroconsultants S.A., KeyBank National Association, U.S. Bank National Association, Wells Fargo Bank, National Association, and the other lenders party thereto, dated as of January 7, 2005 |
10.2 |
|
Employment Agreement by and between IHS Inc. and Charles A. Picasso, dated as of October 15, 2004 |
10.3 |
|
Employment Agreement by and between IHS Inc. and Stephen Green, dated as of November 1, 2004 |
10.4 |
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Employment Agreement by and between IHS Inc. and Michael J. Sullivan, dated as of November 1, 2004 |
10.5 |
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Employment Agreement by and between IHS Inc. and H. John Oechsle, dated as of November 1, 2004 |
10.6 |
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Termination Agreement by and between Robert R. Carpenter and Information Handling Services Group Inc., dated as of August 4, 2004 |
10.7 |
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Amendment to Termination Agreement by and between Robert R. Carpenter and Information Handling Services Group Inc., dated as of November 29, 2004 |
10.8 |
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Termination Agreement and General Release and Waiver of Claims by and between Randolph A. Weil and Information Handling Services Group Inc., dated as of November 5, 2004 |
10.9 |
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IHS Inc. 2004 Long-Term Incentive Plan |
10.10 |
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IHS Inc. 2004 Directors Stock Plan |
10.11 |
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IHS Inc. 2004 Long-Term Incentive Plan, Form of 2004 Restricted Stock Award |
10.12 |
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IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for Charles A. Picasso, dated as of December 23, 2004 |
10.13 |
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IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for Jerre L. Stead, dated as of December 23, 2004 |
10.14 |
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IHS Inc. 2004 Long-Term Incentive Plan, 2004 Restricted Stock Award for H. John Oechsle, dated as of December 23, 2004 |
10.15 |
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Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., dated as of November 22, 2004 (for senior executives) |
10.16 |
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Offer Under the Non-Qualified Stock Option Plan (Effective December 1, 1998) and the 2002 Non-Qualified Stock Option Plan of IHS Group Inc., dated as of November 22, 2004 (for directors and other employees) |
10.17 |
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IHS Supplemental Income Plan |
10.18 |
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Summary sheet for nonemployee director compensation |
21* |
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List of Subsidiaries of the Registrant |
23.1 |
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Consent of Ernst & Young LLP |
23.2* |
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Consent of Davis Polk & Wardwell (included in Exhibit 5) |
24 |
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Power of Attorney (included on signature page) |
IHS GROUP INC.
15 Inverness Way East
Englewood, CO 80112
October 15, 2004
Charles
Picasso
c/o IHS Group Inc.
15 Inverness Way East
Englewood, CO 80112
Dear Mr. Picasso:
This letter, written on behalf of the Board of Directors (the " Board ") of IHS Group Inc., a Delaware corporation formerly known as HAIC Inc. (the " Company "), confirms the terms and conditions of your employment with the Company.
1. Term of Employment. Your employment under this Letter Agreement is effective as of the date hereof (the " Effective Date ") and, subject to termination as provided in Sections 7 or 8, will end on the first anniversary of the Effective Date; provided that on each anniversary of the Effective Date, the term of your employment will automatically be extended by an additional year unless the Company or you give the other party written notice, at least 30 days prior to the applicable anniversary of the Effective Date, that you do not or it does not want the term to be so extended. Such employment period, as may be so extended, will hereinafter be referred to as the " Term ".
2. Title and Duties.
(a) Position . During the Term, you will be employed by the Company as President and Chief Executive Officer. You will have such duties and responsibilities and power and authority as assigned to you by the Board or the Chairman of the Company (the " Chairman ").
(b) Exclusive Duties . During your employment by the Company, you will devote substantially all your entire working time, attention and energies to the business of the Company and its Affiliates (as defined below) and will not, without the prior written consent of the Board undertake any other business activities. Without limiting the generality of the foregoing, you will not take any actions of the kind described in Section 11.
3. Base Salary. During the Term, the Company will pay you a minimum base salary at the annual rate of $550,000, payable in accordance with the Company's regular payroll practices. The Compensation Committee of the Board (the " Committee ") will review your base salary annually and may, in its sole discretion, increase your base salary based on your performance and the Company's performance. Such base salary, as may be increased, will hereinafter be referred to as your " Base Salary ".
4. Bonus. During the Term, you will be eligible to receive an annual bonus (the " Annual Bonus ") pursuant to the Company's then current annual incentive plan. Commencing with the fiscal year beginning December 1, 2004, and for each subsequent fiscal year during the Term, the bonus you shall be eligible to receive shall be in an amount equal to 80% of your Base Salary in effect at the beginning of such fiscal year at "target performance" and in an amount equal to 120% at "maximum performance". The performance objectives for your Annual Bonus will be determined by the Board. The Annual Bonus will be prorated for achievement of objectives between 80% and 100% of "target performance" and between "target performance" and "maximum performance". No Annual Bonus shall be payable in any year for performance at or below 80% of "target performance" objectives.
5. Annual Long-Term Incentive Grant. During the Term, you will be eligible to receive such long-term incentive grant, consisting of stock options, restricted stock, other equity-based awards, or a combination thereof, as determined by the Board (the " Equity Grant "). The size and terms of the Equity Grant will be determined by the Board based on your performance and the Company's
performance, as well as the terms of the equity compensation plan under which the Equity Grant is granted. The Company intends to amend its Certificate of Incorporation to authorize the Company to issue up to 80,000,000 shares of class A common stock. As soon as practicable after such amendment, the Company will grant you 240,000 shares of restricted stock and/or restricted stock units. The restricted stock and/or restricted stock units will vest 25% on the second anniversary of the Effective Date, 25% on the third anniversary of the Effective Date and 50% on the fourth anniversary of the Effective Date. It is understood that no additional equity-based awards are intended to be granted to you at the time of an initial public offering of the Company.
6. Other Benefits.
(a) Employee Benefits . You will be eligible to participate in the employee benefit plans, programs and arrangements maintained by the Company.
(b) Vacation . You will be entitled to not less than 24 days of paid vacation per calendar year in accordance with the Company's vacation policy as in effect from time to time.
(c) Reimbursement . The Company will reimburse you for all reasonable expenses and disbursements in carrying out your duties and responsibilities under this Letter Agreement in accordance with Company policy for executive officers as in effect from time to time.
7. Termination of Employment (Non-Change in Control). Subject to Section 9:
(a) Resignation for Good Reason or Termination Without Cause . If you terminate your employment for Good Reason (as defined below) or you are terminated by the Company without Cause (as defined below) at any time during the Term, including by the Company giving you notice that it does not want the Term to be extended as provided in Section 1, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) in the event of termination prior to the date of your sixty-fifth birthday, an amount equal to 2 years of your then Base Salary;
(iii) in the event of termination on or after the date of your sixty-fifth birthday, in lieu of the payment provided in (ii) above, the Company shall engage you as a consultant for the one year period following termination and shall pay you for such consulting services an amount equal to 1 year of your then Base Salary; and
(iv) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits) for the Relevant Period (as defined below) following the date of such termination;
(x) vesting of unvested stock options, restricted stock and other equity awards then held by you will be determined in accordance with the terms and conditions of the applicable equity compensation plan under which each such Equity Grant is granted;
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(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates in which you participated at the time of such termination.
For purposes of this Letter Agreement, the Relevant Period means, in the event you receive payments pursuant to Sections 7(a)(ii) or 8(a)(ii), the period of 2 years following termination of your employment, and, in the event you are engaged to provide consulting services pursuant to Sections 7(a)(iii) or 8(a)(iii), the period of 1 year following termination of your employment.
(b) Termination Other than for Good Reason or for Cause . If you terminate your employment other than for Good Reason (including if you give notice that you do not want to extend the Term as provided in Section 1) for if your employment is terminated by the Company for Cause, you will receive no further payments, compensation or benefits under this Letter Agreement, except you will be eligible to receive, immediately upon the effectiveness of such termination, amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing prior to the effectiveness of your termination and such compensation or benefits that have been earned and will become payable without regard to future services.
(c) Death, Disability or Retirement . If your employment terminates by reason of death, Disability or retirement (as defined in the Company's equity compensation plan then in effect), you or your beneficiaries will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination; and
(ii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
If your employment terminates by reason of your retirement, then in addition to benefits to which you may be entitled pursuant to this Letter Agreement, your entitlements in connection with a termination of your employment pursuant to your retirement under the Company's otherwise applicable employee benefit and retirement plans and programs (including without limitation under the Company's equity compensation plans), will be determined in accordance with such applicable plans and programs.
For purposes of this Letter Agreement, " Good Reason " means the Company's breach of any of its material obligations under this Letter Agreement, excluding immaterial actions (or failures of action) not taken (or omitted to be taken) in bad faith and which, if capable of being remedied, are remedied by the Company within 30 days of receipt of notice thereof given by you. For purposes of this Letter Agreement, " Cause " means any of the following: (i) conviction of or pleading guilty to a felony, (ii) commission of intentional acts of misconduct that materially impair the goodwill or business of the Company or cause material damage to its property, goodwill or business, or (iii) willful refusal or willful failure to perform your material duties under this Letter Agreement after written demand that you do so. Termination of the employment shall not be deemed to be for Cause hereunder unless and until (A) written notice has been delivered to you by the Company which specifically identifies the
3
Cause which is the basis of the termination and, if the Cause is capable of cure, you have failed to cure or remedy the act or omission so identified within 14 calendar days after written notice of such breach. For purposes of this provision, no act or failure to act on your part shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause without reasonable notice to you setting forth the reasons, facts and circumstances for the Company's intention to terminate for Cause and an opportunity for you, together with your counsel, to be heard before the Committee or the Board.
8. Change in Control. Subject to Section 9:
(a) General . If there is a Change in Control (as defined below) and, within 1 year of such Change in Control, you terminate your employment for CIC Good Reason (as defined below) or you are terminated by the Company without Cause, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) in the event of termination prior to the date of your sixty-fifth birthday, an amount equal to 2 years of your then Base Salary;
(iii) in the event of termination on or after the date of your sixty-fifth birthday, in lieu of the payment provided in (ii) above, the Company shall engage you as a consultant for the one year period following termination and shall pay you for such consulting services an amount equal to 1 year of your then Base Salary; and
(iv) your Target Bonus for the fiscal year of such termination, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits), for the Relevant Period following the date of such termination;
(x) all unvested stock options, restricted stock and other equity awards then held by you will fully vest and become exercisable as of the effective date of such termination;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates, in which you participated at the time of such termination.
For purposes of this Letter Agreement, " Change in Control " means the first to occur of:
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Notwithstanding the foregoing, in no event will a Change in Control be considered to have occurred as a result of: (i) the distribution by the Company to its stockholder(s) of stock in an Affiliate; (ii) the contribution by the Company of some or all of its assets in a transaction governed by Section 351 of the Code; (iii) any inter-company sale or transfer of assets between the Company and any Affiliate; (iv) a dividend distribution by the Company; (v) a loan by the Company to any third party or an Affiliate; (vi) a Transaction, or series of Transactions, after which an Affiliate of the Company before such Transaction or series of Transactions, is either directly or indirectly in control of the Company thereafter; (vii) if the controlling shareholder is a trust, the acquisition, directly or indirectly, of the beneficial ownership of securities of the Company by any beneficiary of such trust if such beneficiary has a greater than 25% interest in such trust, or any descendants, spouse, estate or heirs of any such beneficiary, or a trust established for such beneficiary or for any descendants, spouse or heirs of such beneficiary; or (viii) the first underwritten primary public offering of the shares of common stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) under the Securities Act of 1933, as from time to time amended. For purposes of this Agreement, " Affiliate " means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including, without limitation, any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Revenue Code of 1986, as from time to time amended (the " Code ").
For purposes of this Letter Agreement, " CIC Good Reason " means any of:
5
(b) Tax Indemnity . If it is determined that any payments and benefits that you receive from the Company or an Affiliate as a result of the Change in Control will result in you being subject to an excise tax under Section 4999 of the Code, then the Company will make a Gross-Up Payment (as defined below) to or on behalf of you as and when any such determination is made; provided you take such action (other than waiving your right to any payments or benefits) as the Company reasonably requests under the circumstances to mitigate or challenge such tax. Any such determination will be made in accordance with Sections 280G and 4999 of the Code and any other applicable law, regulations, rulings or case law. If the Company reasonably requests that you take action to avoid assessment of, or to mitigate or challenge, any such tax or assessment, including restructuring your right to receive any payments or benefits to which you are entitled (other than under this paragraph), you agree to consider such request (but in no event to waive or limit your right to any payments or benefits in a manner that would not be neutral to you from a financial point of view), and in connection with any such consideration, the Company will provide such information and advice as you may reasonably request and will pay for all reasonable expenses incurred in effecting your compliance with such request and any related taxes, fines, penalties, interest and other assessments. The term " Gross-Up Payment " means an additional amount such that you will, on an after-tax basis (including any income tax, payroll tax, further excise tax, interest, penalties and other assessments levied on any payment or benefit) receive the full amount of the payments and benefits for which the Company is liable, as if there was no excise tax under Section 4999 of the Code on any of your payments or benefits. To the extent permitted by applicable law, you agree to return to the Company the excess of any Gross-Up Payment made to you over the payment which would have been sufficient to put you in such same after-tax position. Nothing in this Section 8 is intended to violate the Sarbanes-Oxley Act and to the extent that any advance or payment obligation hereunder would do so, such obligation will be modified so as to make the advance a nonrefundable payment to you and the payment obligation null and void. This Section 8 will continue in effect until you agree that all of the Company's obligations to you under this Section 8 have been satisfied in full or a court of competent jurisdiction makes a final determination that the Company has no further obligations to you under this Section 8, whichever comes first.
9. Release. Other than if your employment terminates by reason of death or Disability, any payment or benefit that you are eligible to receive under Sections 7 or 8 will be contingent on your execution of a release substantially in the form attached hereto as Exhibit A prior to or concurrently with the provision of such payment or benefit. The payments or benefits you are eligible to receive under Sections 7 or 8 are in lieu of any termination payments or benefits which you might otherwise be eligible to receive under any standard severance policy maintained by the Company and/or its Affiliates.
10. Covenants. In exchange for the remuneration outlined above, in addition to providing service to the Company as set forth in this Letter Agreement, you agree to the following covenants:
(a) Confidentiality . You acknowledge that during your employment, you will occupy a position of trust and confidence. Accordingly, you agree that following any termination of your employment, you will keep confidential any trade secrets and confidential or proprietary information of the Company and its affiliates which are now known to you or which hereafter may become known to you as a result of your employment or association with the Company and will not at any time directly or indirectly disclose any such information to any person, firm or corporation, or use the same in any way other than in connection with the business of the Company during, and at all times after, the termination of your employment. For purposes of this
6
Letter Agreement, " trade secrets and confidential or proprietary information " means information unique to the Company or an affiliate of the Company which has a significant business purpose and is not known or generally available from sources outside the Company or typical of industry practice, but will not include any of the foregoing (i) that becomes a matter of public record or is published in a newspaper, magazine or other periodical available to the general public, other than as a result of any act or omission of you or (ii) that is required to be disclosed by any law, regulation or order of any court or regulatory commission, department or agency; provided that you give prompt notice of such requirement to the Company to enable the Company to seek an appropriate protective order or confidential treatment.
(b) Non-Competition . You further covenant that during your employment and during the Restricted Period (as defined below), you will not, for yourself or on behalf of any other person, partnership, company or corporation, in the United States of America of elsewhere in the world, directly or indirectly, engage in, acquire any financial or beneficial interest in (except as provided in the next sentence), be employed by, or own, manage, operate or control any entity which is engaged in, any business in competition with any business of the Company or any subsidiary of the Company. Notwithstanding the preceding sentence, (i) you will not be prohibited from owning less than 1% of any publicly traded corporation, whether or not such corporation is in competition with the Company, and (ii) you will not be prohibited during the Restricted Period from being employed by or providing services to a company with multiple product-lines and/or service lines where one or more of its product-lines or service-lines is in competition with the Company so long as you have no direct or indirect contact with the units(s) involved with the competitive products/services. For purposes of this Letter Agreement, " Restricted Period " means the the 2-year period following termination of your employment.
(c) Non-Solicitation of Employees . You further covenant that during your employment and during the Restricted Period, you will not, directly or indirectly, hire, or cause to be hired by an employer with whom you may ultimately become associated, any employee of the Company or a subsidiary of the Company at the time of termination of your employment with the Company.
(d) Employee Invention Agreement . If you have not previously executed the Company's standard form of Employee Invention Agreement, simultaneously with the execution of this Agreement you will also execute and deliver to the Company the Company's standard form of Employee Invention Agreement.
(e) Equitable Relief and Other Remedies . You acknowledge and agree that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 10 would be inadequate and, in recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, will be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.
(f) Reformation . If it is determined by a court of competent jurisdiction that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under the law of that jurisdiction, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that jurisdiction.
(g) Survival of Provisions. Without effect as to the survival of other provisions of this Letter Agreement intended to survive the termination or expiration of your employment, the obligations contained in this Section 10 will survive the termination or expiration of your employment with the Company and will be fully enforceable thereafter.
7
11. Indemnification. The Company will indemnify and make permitted advances to you to the fullest extent permitted by applicable law, if you are made or threatened to be made a party to a proceeding by reason of your being or having been an officer, director or employee of the Company or any of its subsidiaries or affiliates or your having served on any other enterprise as a director, officer or employee at the request of the Company. In addition, the Company will maintain insurance, at its expense, to protect you against any such expense, liability or loss to which you would be entitled to indemnification or reimbursement under the foregoing sentence.
12. Representations. By signing this Letter Agreement where indicated below, you represent that you are not subject to any employment agreement or non-competition agreement that could subject the Company or any of its affiliates to any future liability or obligation to any third party as a result of the execution of this Letter Agreement and your employment by the Company.
13. Additional Pension Credit. In the event you are employed by the Company from the date hereof to the date of your sixty-fifth birthday or in the event your employment is terminated by the Company prior to the date of your sixty-fifth birthday other than for Cause, you terminate your employment prior to such date for Good Reason, your employment terminates prior to such date by reason of death or disability or you terminate your employment prior to such date following a Change in Control, you will be credited with ten additional years for purposes of service requirements under the pension plan in which you participate on such date. Credit pursuant to this Section 13 shall be in addition to any credit to which you may be entitled under Section 7(z) and 8(z).
14. Miscellaneous Provisions .
(a) This Letter Agreement may not be amended or terminated without the prior written consent of you and the Company.
(b) This Letter Agreement may be executed in any number of counterparts which together will constitute but one agreement.
(c) This Letter Agreement will be binding on and inure to the benefit of our respective successors and permitted assigns and, in your case, your heirs and other legal representatives. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Letter Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. The rights and obligations described in this Letter Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, the Company may assign its rights and obligations described in this Letter Agreement without your consent upon the transfer of all or substantially all of the business and/or assets of the Company (whether by purchase, merger, consolidation or otherwise).
(d) Subject to Section 10, all disputes arising under or related to this Letter Agreement will be settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association then in effect, such arbitration to be held in the Denver, Colorado metropolitan area, as the sole and exclusive remedy of either party. Any judgment on the award rendered by such arbitration may be entered in any court having jurisdiction over such matters.
(e) Except where prohibited by applicable law, all amounts payable to you under this Letter Agreement will be subject to required tax withholding but will otherwise not be subject to offset.
(f) All notices under this Letter Agreement will be in writing and will be deemed effective when delivered in person, by courier service, or 5 days after deposit thereof in the U.S. mail, postage prepaid, for delivery as registered or certified mail, addressed to the respective party at the
8
address set forth below or to such other address as may hereafter be designated by like notice. Unless otherwise notified as set forth above, notice will be sent to each party as follows:
You, to:
The address as is maintained in the Company's records
The Company, to:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
(g) This Letter Agreement will be governed by and construed and entered in accordance with the laws of the State of Colorado without reference to rules relating to conflict of laws.
(h) This Letter Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral (including any term sheet) between the Company (or its predecessor or affiliates) and you with respect to the subject matter hereof. This Letter Agreement also supersedes any inconsistent provisions of any plan or arrangement that would otherwise be applicable to you to the extent such provisions would limit any rights granted to you hereunder or expand any restrictions imposed on you hereby.
This Letter Agreement is intended to be a binding obligation upon both the Company and yourself. If this Letter Agreement correctly reflects your understanding, please sign and return one copy to Susan Auxer for the Company's records.
IHS GROUP INC. | |||
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By: |
/s/ STEPHEN GREEN Name: Stephen Green Title: Senior Vice President |
The above Letter Agreement correctly reflects our understanding, and I hereby confirm my agreement to the same.
Dated as of October 15, 2004 |
/s/
CHARLES A. PICASSO
Charles A. Picasso |
9
EXHIBIT A
FULL AND COMPLETE RELEASE
I, , in consideration for the payment of the severance described in my Letter Agreement dated , 2004, for myself and my heirs, executors, administrators and assigns, do hereby knowingly and voluntarily release and forever discharge IHS Group Inc. (the " Company ") and its respective predecessors, successors and affiliates and current and former directors, officers and employees from any and all claims, actions and causes of action under those federal, state and local laws and those applicable laws of any other jurisdiction prohibiting employment discrimination based on age, sex, race, color, national origin, religion, disability, veteran or marital status, sexual orientation or any other protected trait or characteristic, or retaliation for engaging in any protected activity, including without limitation, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. , as amended by the Older Workers Benefit Protection Act, P.L. 101-433, the Equal Pay Act of 1963, 9 U.S.C. § 206, et seq. , Title VII of The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. , the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Civil Rights Act of 1991, 42 U.S.C. § 1981a, the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. , the Rehabilitation Act of 1973, 29 U.S.C. § 791 et seq. , the Family and Medical Leave Act of 1993, 28 U.S.C. §§ 2601 and 2611 et seq. , whether KNOWN OR UNKNOWN, fixed or contingent, which I ever had, now have, or may have, or which my heirs, executors, administrators or assigns hereafter can, will or may have from the beginning of time through the date on which I sign this Full and Complete Release (this " Release "), including without limitation those arising out of or related to my employment or separation from employment with the Company (collectively the " Released Claims ").
I warrant and represent that I have made no sale, assignment or other transfer, or attempted sale, assignment or other transfer, of any of the Released Claims.
I fully understand and agree that:
If I choose to revoke this Release, I must do so by notifying the Company in writing. This written notice of revocation must be mailed by U.S. first class mail or by U.S. certified mail within the 7 day revocation period and addressed as follows:
IHS
Energy Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
This Release is the complete understanding between me and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to the same subject matter. I have not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.
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In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release will remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision will be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.
This Release is to be governed and enforced under the laws of the State of Colorado (except to the extent that Colorado conflicts of law rules would call for the application of the law of another jurisdiction).
This Release inures to the benefit of the Company and its successors and assigns.
I have carefully read this Release, fully understand each of its terms and conditions, and intend to abide by this Release in every respect. As such, I knowingly and voluntarily sign this Release.
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Date: |
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11
November 1, 2004
Mr. Stephen
Green
c/o IHS Group Inc.
15 Inverness Way East
Englewood, CO 80112
Dear Stephen:
This letter, written on behalf of the Board of Directors (the " Board ") of IHS Group Inc., a Delaware corporation formerly known as HAIC Inc. (the " Company "), confirms the terms and conditions of your employment with the Company.
1. Term of Employment. Your employment under this Letter Agreement is effective as of the date hereof (the " Effective Date ") and, subject to termination as provided in Sections 7 or 8, will end on the first anniversary of the Effective Date; provided that on each anniversary of the Effective Date, the term of your employment will automatically be extended by an additional year unless the Company or you give the other party written notice, at least 30 days prior to the applicable anniversary of the Effective Date, that you do not or it does not want the term to be so extended. Such employment period, as may be so extended, will hereinafter be referred to as the " Term ".
2. Title and Duties.
(a) Position . During the Term, you will be employed by the Company as General Counsel, IHS Group. You will have such duties and responsibilities and power and authority as assigned to you by the Board or the President and Chief Executive Officer of the Company (the " CEO ").
(b) Exclusive Duties . During your employment by the Company, you will devote substantially all your entire working time, attention and energies to the business of the Company and its Affiliates (as defined below) and will not, without the prior written consent of the Board undertake any other business activities. Without limiting the generality of the foregoing, you will not take any actions of the kind described in Section 11.
3. Base Salary. During the Term, the Company will pay you a minimum base salary at the annual rate of $275,000, payable in accordance with the Company's regular payroll practices. The Compensation Committee of the Board (the " Committee ") will review your base salary annually and may, in its sole discretion, increase your base salary based on your performance and the Company's performance. Such base salary, as may be increased, will hereinafter be referred to as your " Base Salary ".
4. Bonus. During the Term, you will be eligible to receive an annual bonus (the " Annual Bonus ") pursuant to the Company's then current annual incentive plan. The performance objectives for your Annual Bonus will be determined by the CEO.
5. Annual Long-Term Incentive Grant. During the Term, you will be eligible to receive such long-term incentive grant, consisting of stock options, restricted stock, other equity-based awards, or a combination thereof, as determined by the Committee (the " Equity Grant "). The size and terms of the Equity Grant will be determined by the Committee based on your performance and the Company's performance, as well as the terms of the equity compensation plan under which the Equity Grant is granted.
6. Other Benefits.
(a) Employee Benefits . You will be eligible to participate in the employee benefit plans, programs and arrangements maintained by the Company.
(b) Vacation . You will be entitled to not less than 24 days of paid vacation per calendar year in accordance with the Company's vacation policy as in effect from time to time.
(c) Reimbursement . The Company will reimburse you for all reasonable expenses and disbursements in carrying out your duties and responsibilities under this Letter Agreement in accordance with Company policy for executive officers as in effect from time to time.
7. Termination of Employment (Non-Change in Control) . Subject to Section 9:
(a) Resignation for Good Reason or Termination Without Cause . If you terminate your employment for Good Reason (as defined below) or you are terminated by the Company without Cause (as defined below) at any time during the Term, including by the Company giving you notice that it does not want the Term to be extended as provided in Section 1, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits) for the Relevant Period (as defined below) following the date of such termination;
(x) vesting of unvested stock options, restricted stock and other equity awards then held by you will be determined in accordance with the terms and conditions of the applicable equity compensation plan under which each such Equity Grant is granted;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates in which you participated at the time of such termination.
For purposes of this Letter Agreement, the Relevant Period means, in the event you receive payments pursuant to Sections 7(a)(ii) or 8(a)(ii), the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years. Credit for the year in which termination occurs will be given for purposes of calculating payments pursuant to Sections 7(a)(ii) or 8(a)(ii) if you have completed six months or more of service beyond the prior anniversary date of your employment.
(b) Termination Other than for Good Reason or for Cause . If you terminate your employment other than for Good Reason (including if you give notice that you do not want to extend the Term
2
as provided in Section 1) or if your employment is terminated by the Company for Cause, you will receive no further payments, compensation or benefits under this Letter Agreement, except you will be eligible to receive, immediately upon the effectiveness of such termination, amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing prior to the effectiveness of your termination and such compensation or benefits that have been earned and will become payable without regard to future services.
(c) Death, Disability or Retirement . If your employment terminates by reason of death, Disability or retirement (as defined in the Company's equity compensation plan then in effect), you or your beneficiaries will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination; and
(ii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
If your employment terminates by reason of your retirement, then in addition to benefits to which you may be entitled pursuant to this Letter Agreement, your entitlements in connection with a termination of your employment pursuant to your retirement under the Company's otherwise applicable employee benefit and retirement plans and programs (including without limitation under the Company's equity compensation plans), will be determined in accordance with such applicable plans and programs.
For purposes of this Letter Agreement, " Good Reason " means the Company's breach of any of its material obligations under this Letter Agreement, excluding immaterial actions (or failures of action) not taken (or omitted to be taken) in bad faith and which, if capable of being remedied, are remedied by the Company within 30 days of receipt of notice thereof given by you. For purposes of this Letter Agreement, " Cause " means any of the following: (i) conviction of or pleading guilty to a felony, (ii) commission of intentional acts of misconduct that materially impair the goodwill or business of the Company or cause material damage to its property, goodwill or business, or (iii) willful refusal or willful failure to perform your material duties under this Letter Agreement after written demand that you do so. Termination of the employment shall not be deemed to be for Cause hereunder unless and until (A) written notice has been delivered to you by the Company which specifically identifies the Cause which is the basis of the termination and, if the Cause is capable of cure, you have failed to cure or remedy the act or omission so identified within 14 calendar days after written notice of such breach. For purposes of this provision, no act or failure to act on your part shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause without reasonable notice to you setting forth the reasons, facts and circumstances for the Company's intention to terminate for Cause and an opportunity for you, together with your counsel, to be heard before the Committee or the Board.
8. Change in Control . Subject to Section 9:
(a) General . If there is a Change in Control (as defined below) and, within 1 year of such Change in Control, you terminate your employment for CIC Good Reason (as defined below) or
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you are terminated by the Company without Cause, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subsclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for the fiscal year of such termination, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits), for the Relevant Period following the date of such termination;
(x) all unvested stock options, restricted stock and other equity awards then held by you will fully vest and become exercisable as of the effective date of such termination;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates, in which you participated at the time of such termination.
For purposes of this Letter Agreement, " Change in Control " means the first to occur of:
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Notwithstanding the foregoing, in no event will a Change in Control be considered to have occurred as a result of: (i) the distribution by the Company to its stockholder(s) of stock in an Affiliate; (ii) the contribution by the Company of some or all of its assets in a transaction governed by Section 351 of the Code; (iii) any inter-company sale or transfer of assets between the Company and any Affiliate; (iv) a dividend distribution by the Company; (v) a loan by the Company to any third party or an Affiliate; (vi) a Transaction, or series of Transactions, after which an Affiliate of the Company before such Transaction or series of Transactions, is either directly or indirectly in control of the Company thereafter; (vii) if the controlling shareholder is a trust, the acquisition, directly or indirectly, of the beneficial ownership of securities of the Company by any beneficiary of such trust if such beneficiary has a greater than 25% interest in such trust, or any descendants, spouse, estate or heirs of any such beneficiary, or a trust established for such beneficiary or for any descendants, spouse or heirs of such beneficiary; or (viii) the first underwritten primary public offering of the shares of common stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) under the Securities Act of 1933, as from time to time amended. For purposes of this Agreement, " Affiliate " means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including, without limitation, any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Revenue Code of 1986, as from time to time amended (the " Code ").
For purposes of this Letter Agreement, " CIC Good Reason " means any of:
(b) Tax Indemnity . If it is determined that any payments and benefits that you receive from the Company or an Affiliate as a result of the Change in Control will result in you being subject to an excise tax under Section 4999 of the Code, then the Company will make a Gross-Up Payment (as defined below) to or on behalf of you as and when any such determination is made; provided you take such action (other than waiving your right to any payments or benefits) as the Company reasonably requests under the circumstances to mitigate or challenge such tax. Any such determination will be made in accordance with Sections 280G and 4999 of the Code and any other
5
applicable law, regulations, rulings or case law. If the Company reasonably requests that you take action to avoid assessment of, or to mitigate or challenge, any such tax or assessment, including restructuring your right to receive any payments or benefits to which you are entitled (other than under this paragraph), you agree to consider such request (but in no event to waive or limit your right to any payments or benefits in a manner that would not be neutral to you from a financial point of view), and in connection with any such consideration, the Company will provide such information and advice as you may reasonably request and will pay for all reasonable expenses incurred in effecting your compliance with such request and any related taxes, fines, penalties, interest and other assessments. The term " Gross-Up Payment " means an additional amount such that you will, on an after-tax basis (including any income tax, payroll tax, further excise tax, interest, penalties and other assessments levied on any payment or benefit) receive the full amount of the payments and benefits for which the Company is liable, as if there was no excise tax under Section 4999 of the Code on any of your payments or benefits. To the extent permitted by applicable law, you agree to return to the Company the excess of any Gross-Up Payment made to you over the payment which would have been sufficient to put you in such same after-tax position. Nothing in this Section 8 is intended to violate the Sarbanes-Oxley Act and to the extent that any advance or payment obligation hereunder would do so, such obligation will be modified so as to make the advance a nonrefundable payment to you and the payment obligation null and void. This Section 8 will continue in effect until you agree that all of the Company's obligations to you under this Section 8 have been satisfied in full or a court of competent jurisdiction makes a final determination that the Company has no further obligations to you under this Section 8, whichever comes first.
9. Release. Other than if your employment terminates by reason of death or Disability, any payment or benefit that you are eligible to receive under Sections 7 or 8 will be contingent on your execution of a release substantially in the form attached hereto as Exhibit A prior to or concurrently with the provision of such payment or benefit. The payments or benefits you are eligible to receive under Sections 7 or 8 are in lieu of any termination payments or benefits which you might otherwise be eligible to receive under any standard severance policy maintained by the Company and/or its Affiliates.
10. Covenants . In exchange for the remuneration outlined above, in addition to providing service to the Company as set forth in this Letter Agreement, you agree to the following covenants:
(a) Confidentiality . You acknowledge that during your employment, you will occupy a position of trust and confidence. Accordingly, you agree that following any termination of your employment, you will keep confidential any trade secrets and confidential or proprietary information of the Company and its affiliates which are now known to you or which hereafter may become known to you as a result of your employment or association with the Company and will not at any time directly or indirectly disclose any such information to any person, firm or corporation, or use the same in any way other than in connection with the business of the Company during, and at all times after, the termination of your employment. For purposes of this Letter Agreement, " trade secrets and confidential or proprietary information " means information unique to the Company or an affiliate of the Company which has a significant business purpose and is not known or generally available from sources outside the Company or typical of industry practice, but will not include any of the foregoing (i) that becomes a matter of public record or is published in a newspaper, magazine or other periodical available to the general public, other than as a result of any act or omission of you or (ii) that is required to be disclosed by any law, regulation or order of any court or regulatory commission, department or agency; provided that you give prompt notice of such requirement to the Company to enable the Company to seek an appropriate protective order or confidential treatment.
(b) Non-Competition . You further covenant that during your employment and during the Restricted Period (as defined below), you will not, for yourself or on behalf of any other person,
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partnership, company or corporation, in the United States of America of elsewhere in the world, directly or indirectly, engage in, acquire any financial or beneficial interest in (except as provided in the next sentence), be employed by, or own, manage, operate or control any entity which is engaged in, any business in competition with any business of the Company or any subsidiary of the Company. Notwithstanding the preceding sentence, (i) you will not be prohibited from owning less than 1% of any publicly traded corporation, whether or not such corporation is in competition with the Company, and (ii) you will not be prohibited during the Restricted Period from being employed by or providing services to a company with multiple product-lines and/or service lines where one or more of its product-lines or service-lines is in competition with the Company so long as you have no direct or indirect contact with the units(s) involved with the competitive products/services. For purposes of this Letter Agreement, " Restricted Period " means the longer of (i) the 1-year period following termination of your employment, or (ii) in the event you receive payments pursuant to Sections 7(a) (ii) or 8(a) (ii) in an amount greater than 1 year of your then Base Salary, the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years.
(c) Non-Solicitation of Employees . You further covenant that during your employment and during the Restricted Period, you will not, directly or indirectly, hire, or cause to be hired by an employer with whom you may ultimately become associated, any employee of the Company or a subsidiary of the Company at the time of termination of your employment with the Company.
(d) Employee Invention Agreement . If you have not previously executed the Company's standard form of Employee Invention Agreement, simultaneously with the execution of this Agreement you will also execute and deliver to the Company the Company's standard form of Employee Invention Agreement.
(e) Equitable Relief and Other Remedies . You acknowledge and agree that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 10 would be inadequate and, in recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, will be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.
(f) Reformation . If it is determined by a court of competent jurisdiction that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under the law of that jurisdiction, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that jurisdiction.
(g) Survival of Provisions. Without effect as to the survival of other provisions of this Letter Agreement intended to survive the termination or expiration of your employment, the obligations contained in this Section 10 will survive the termination or expiration of your employment with the Company and will be fully enforceable thereafter.
11. Indemnification . The Company will indemnify and make permitted advances to you to the fullest extent permitted by applicable law, if you are made or threatened to be made a party to a proceeding by reason of your being or having been an officer, director or employee of the Company or any of its subsidiaries or affiliates or your having served on any other enterprise as a director, officer or employee at the request of the Company. In addition, the Company will maintain insurance, at its expense, to protect you against any such expense, liability or loss to which you would be entitled to indemnification or reimbursement under the foregoing sentence.
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12. Representations . By signing this Letter Agreement where indicated below, you represent that you are not subject to any employment agreement or non-competition agreement that could subject the Company or any of its affiliates to any future liability or obligation to any third party as a result of the execution of this Letter Agreement and your employment by the Company.
13. Miscellaneous Provisions .
(a) This Letter Agreement may not be amended or terminated without the prior written consent of you and the Company.
(b) This Letter Agreement may be executed in any number of counterparts which together will constitute but one agreement.
(c) This Letter Agreement will be binding on and inure to the benefit of our respective successors and permitted assigns and, in your case, your heirs and other legal representatives. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Letter Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. The rights and obligations described in this Letter Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, the Company may assign its rights and obligations described in this Letter Agreement without your consent upon the transfer of all or substantially all of the business and/or assets of the Company (whether by purchase, merger, consolidation or otherwise).
(d) Subject to Section 10, all disputes arising under or related to this Letter Agreement will be settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association then in effect, such arbitration to be held in the Denver, Colorado metropolitan area, as the sole and exclusive remedy of either party. Any judgment on the award rendered by such arbitration may be entered in any court having jurisdiction over such matters.
(e) Except where prohibited by applicable law, all amounts payable to you under this Letter Agreement will be subject to required tax withholding but will otherwise not be subject to offset.
(f) All notices under this Letter Agreement will be in writing and will be deemed effective when delivered in person, by courier service, or 5 days after deposit thereof in the U.S. mail, postage prepaid, for delivery as registered or certified mail, addressed to the respective party at the address set forth below or to such other address as may hereafter be designated by like notice. Unless otherwise notified as set forth above, notice will be sent to each party as follows:
You, to:
The address as is maintained in the Company's records
The Company, to:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
(g) This Letter Agreement will be governed by and construed and entered in accordance with the laws of the State of Colorado without reference to rules relating to conflict of laws.
(h) This Letter Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral (including any term sheet) between the Company (or its predecessor or affiliates) and you with respect to the subject matter hereof. This Letter Agreement also supersedes any inconsistent
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provisions of any plan or arrangement that would otherwise be applicable to you to the extent such provisions would limit any rights granted to you hereunder or expand any restrictions imposed on you hereby.
This Letter Agreement is intended to be a binding obligation upon both the Company and yourself. If this Letter Agreement correctly reflects your understanding, please sign and return one copy to Susan Auxer for the Company's records.
IHS GROUP INC. | |||
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By: |
/s/ CHARLES PICASSO Name: Charles Picasso Title: CEO, IHS Group |
The above Letter Agreement correctly reflects our understanding, and I hereby confirm my agreement to the same.
Dated as of November 1, 2004 |
/s/
STEPHEN GREEN
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EXHIBIT A
FULL AND COMPLETE RELEASE
I, , in consideration for the payment of the severance described in my Letter Agreement dated , 2004, for myself and my heirs, executors, administrators and assigns, do hereby knowingly and voluntarily release and forever discharge IHS Group Inc. (the " Company ") and its respective predecessors, successors and affiliates and current and former directors, officers and employees from any and all claims, actions and causes of action under those federal, state and local laws and those applicable laws of any other jurisdiction prohibiting employment discrimination based on age, sex, race, color, national origin, religion, disability, veteran or marital status, sexual orientation or any other protected trait or characteristic, or retaliation for engaging in any protected activity, including without limitation, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. , as amended by the Older Workers Benefit Protection Act, P.L. 101-433, the Equal Pay Act of 1963, 9 U.S.C. § 206, et seq. , Title VII of The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. , the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Civil Rights Act of 1991, 42 U.S.C. § 1981a, the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. , the Rehabilitation Act of 1973, 29 U.S.C. § 791 et seq. , the Family and Medical Leave Act of 1993, 28 U.S.C. §§ 2601 and 2611 et seq. , whether KNOWN OR UNKNOWN, fixed or contingent, which I ever had, now have, or may have, or which my heirs, executors, administrators or assigns hereafter can, will or may have from the beginning of time through the date on which I sign this Full and Complete Release (this " Release "), including without limitation those arising out of or related to my employment or separation from employment with the Company (collectively the " Released Claims ").
I warrant and represent that I have made no sale, assignment or other transfer, or attempted sale, assignment or other transfer, of any of the Released Claims.
I fully understand and agree that:
If I choose to revoke this Release, I must do so by notifying the Company in writing. This written notice of revocation must be mailed by U.S. first class mail or by U.S. certified mail within the 7 day revocation period and addressed as follows:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
This Release is the complete understanding between me and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to the same subject matter. I have not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.
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In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release will remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision will be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.
This Release is to be governed and enforced under the laws of the State of Colorado (except to the extent that Colorado conflicts of law rules would call for the application of the law of another jurisdiction).
This Release inures to the benefit of the Company and its successors and assigns.
I have carefully read this Release, fully understand each of its terms and conditions, and intend to abide by this Release in every respect. As such, I knowingly and voluntarily sign this Release.
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Date: |
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11
November 1, 2004
Mr. Michael Sullivan
c/o
IHS Group Inc.
15 Inverness Way East
Englewood, CO 80112
Dear Mike:
This letter, written on behalf of the Board of Directors (the " Board ") of IHS Group Inc., a Delaware corporation formerly known as HAIC Inc. (the " Company "), confirms the terms and conditions of your employment with the Company.
1. Term of Employment. Your employment under this Letter Agreement is effective as of the date hereof (the " Effective Date ") and, subject to termination as provided in Sections 7 or 8, will end on the first anniversary of the Effective Date; provided that on each anniversary of the Effective Date, the term of your employment will automatically be extended by an additional year unless the Company or you give the other party written notice, at least 30 days prior to the applicable anniversary of the Effective Date, that you do not or it does not want the term to be so extended. Such employment period, as may be so extended, will hereinafter be referred to as the " Term ".
2. Title and Duties .
(a) Position . During the Term, you will be employed by the Company as CFO, IHS Group. You will have such duties and responsibilities and power and authority as assigned to you by the Board or the President and Chief Executive Officer of the Company (the " CEO ").
(b) Exclusive Duties . During your employment by the Company, you will devote substantially all your entire working time, attention and energies to the business of the Company and its Affiliates (as defined below) and will not, without the prior written consent of the Board undertake any other business activities. Without limiting the generality of the foregoing, you will not take any actions of the kind described in Section 11.
3. Base Salary. During the Term, the Company will pay you a minimum base salary at the annual rate of $275,000, payable in accordance with the Company's regular payroll practices. The Compensation Committee of the Board (the " Committee ") will review your base salary annually and may, in its sole discretion, increase your base salary based on your performance and the Company's performance. Such base salary, as may be increased, will hereinafter be referred to as your " Base Salary ".
4. Bonus. During the Term, you will be eligible to receive an annual bonus (the " Annual Bonus ") pursuant to the Company's then current annual incentive plan. The performance objectives for your Annual Bonus will be determined by the CEO.
5. Annual Long-Term Incentive Grant. During the Term, you will be eligible to receive such long-term incentive grant, consisting of stock options, restricted stock, other equity-based awards, or a combination thereof, as determined by the Committee (the " Equity Grant "). The size and terms of the Equity Grant will be determined by the Committee based on your performance and the Company's performance, as well as the terms of the equity compensation plan under which the Equity Grant is granted.
6. Other Benefits .
(a) Employee Benefits . You will be eligible to participate in the employee benefit plans, programs and arrangements maintained by the Company.
(b) Vacation . You will be entitled to not less than 24 days of paid vacation per calendar year in accordance with the Company's vacation policy as in effect from time to time.
(c) Reimbursement . The Company will reimburse you for all reasonable expenses and disbursements in carrying out your duties and responsibilities under this Letter Agreement in accordance with Company policy for executive officers as in effect from time to time.
7. Termination of Employment (Non-Change in Control). Subject to Section 9:
(a) Resignation for Good Reason or Termination Without Cause . If you terminate your employment for Good Reason (as defined below) or you are terminated by the Company without Cause (as defined below) at any time during the Term, including by the Company giving you notice that it does not want the Term to be extended as provided in Section 1, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits) for the Relevant Period (as defined below) following the date of such termination;
(x) vesting of unvested stock options, restricted stock and other equity awards then held by you will be determined in accordance with the terms and conditions of the applicable equity compensation plan under which each such Equity Grant is granted;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates in which you participated at the time of such termination.
For purposes of this Letter Agreement, the Relevant Period means, in the event you receive payments pursuant to Sections 7(a)(ii) or 8(a)(ii), the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years. Credit for the year in which termination occurs will be given for purposes of calculating payments pursuant to Sections 7(a)(ii) or 8(a)(ii) if you have completed six months or more of service beyond the prior anniversary date of your employment.
(b) Termination Other than for Good Reason or for Cause . If you terminate your employment other than for Good Reason (including if you give notice that you do not want to extend the Term as provided in Section 1) or if your employment is terminated by the Company for Cause, you will receive no further payments, compensation or benefits under this Letter Agreement, except you will be eligible to receive, immediately upon the effectiveness of such termination, amounts
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(including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing prior to the effectiveness of your termination and such compensation or benefits that have been earned and will become payable without regard to future services.
(c) Death, Disability or Retirement . If your employment terminates by reason of death, Disability or retirement (as defined in the Company's equity compensation plan then in effect), you or your beneficiaries will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination; and
(ii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
If your employment terminates by reason of your retirement, then in addition to benefits to which you may be entitled pursuant to this Letter Agreement, your entitlements in connection with a termination of your employment pursuant to your retirement under the Company's otherwise applicable employee benefit and retirement plans and programs (including without limitation under the Company's equity compensation plans), will be determined in accordance with such applicable plans and programs.
For purposes of this Letter Agreement, " Good Reason " means the Company's breach of any of its material obligations under this Letter Agreement, excluding immaterial actions (or failures of action) not taken (or omitted to be taken) in bad faith and which, if capable of being remedied, are remedied by the Company within 30 days of receipt of notice thereof given by you. For purposes of this Letter Agreement, " Cause " means any of the following: (i) conviction of or pleading guilty to a felony, (ii) commission of intentional acts of misconduct that materially impair the goodwill or business of the Company or cause material damage to its property, goodwill or business, or (iii) willful refusal or willful failure to perform your material duties under this Letter Agreement after written demand that you do so. Termination of the employment shall not be deemed to be for Cause hereunder unless and until (A) written notice has been delivered to you by the Company which specifically identifies the Cause which is the basis of the termination and, if the Cause is capable of cure, you have failed to cure or remedy the act or omission so identified within 14 calendar days after written notice of such breach. For purposes of this provision, no act or failure to act on your part shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause without reasonable notice to you setting forth the reasons, facts and circumstances for the Company's intention to terminate for Cause and an opportunity for you, together with your counsel, to be heard before the Committee or the Board.
8. Change in Control. Subject to Section 9:
(a) General . If there is a Change in Control (as defined below) and, within 1 year of such Change in Control, you terminate your employment for CIC Good Reason (as defined below) or you are terminated by the Company without Cause, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
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(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subsclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for the fiscal year of such termination, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits), for the Relevant Period following the date of such termination;
(x) all unvested stock options, restricted stock and other equity awards then held by you will fully vest and become exercisable as of the effective date of such termination;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates, in which you participated at the time of such termination.
For purposes of this Letter Agreement, " Change in Control " means the first to occur of:
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Notwithstanding the foregoing, in no event will a Change in Control be considered to have occurred as a result of: (i) the distribution by the Company to its stockholder(s) of stock in an Affiliate; (ii) the contribution by the Company of some or all of its assets in a transaction governed by Section 351 of the Code; (iii) any inter-company sale or transfer of assets between the Company and any Affiliate; (iv) a dividend distribution by the Company; (v) a loan by the Company to any third party or an Affiliate; (vi) a Transaction, or series of Transactions, after which an Affiliate of the Company before such Transaction or series of Transactions, is either directly or indirectly in control of the Company thereafter; (vii) if the controlling shareholder is a trust, the acquisition, directly or indirectly, of the beneficial ownership of securities of the Company by any beneficiary of such trust if such beneficiary has a greater than 25% interest in such trust, or any descendants, spouse, estate or heirs of any such beneficiary, or a trust established for such beneficiary or for any descendants, spouse or heirs of such beneficiary; or (viii) the first underwritten primary public offering of the shares of common stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) under the Securities Act of 1933, as from time to time amended. For purposes of this Agreement, " Affiliate " means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including, without limitation, any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Revenue Code of 1986, as from time to time amended (the " Code ").
For purposes of this Letter Agreement, " CIC Good Reason " means any of:
(b) Tax Indemnity . If it is determined that any payments and benefits that you receive from the Company or an Affiliate as a result of the Change in Control will result in you being subject to an excise tax under Section 4999 of the Code, then the Company will make a Gross-Up Payment (as defined below) to or on behalf of you as and when any such determination is made; provided you take such action (other than waiving your right to any payments or benefits) as the Company reasonably requests under the circumstances to mitigate or challenge such tax. Any such determination will be made in accordance with Sections 280G and 4999 of the Code and any other applicable law, regulations, rulings or case law. If the Company reasonably requests that you take action to avoid assessment of, or to mitigate or challenge, any such tax or assessment, including restructuring your right to receive any payments or benefits to which you are entitled (other than under this paragraph), you agree to consider such request (but in no event to waive or limit your right to any payments or benefits in a manner that would not be neutral to you from a financial point of view), and in connection with any such consideration, the Company will provide such information and advice as you may reasonably request and will pay for all reasonable expenses incurred in effecting your compliance with such request and any related taxes, fines, penalties, interest and other assessments. The term " Gross-Up Payment " means an additional amount such that
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you will, on an after-tax basis (including any income tax, payroll tax, further excise tax, interest, penalties and other assessments levied on any payment or benefit) receive the full amount of the payments and benefits for which the Company is liable, as if there was no excise tax under Section 4999 of the Code on any of your payments or benefits. To the extent permitted by applicable law, you agree to return to the Company the excess of any Gross-Up Payment made to you over the payment which would have been sufficient to put you in such same after-tax position. Nothing in this Section 8 is intended to violate the Sarbanes-Oxley Act and to the extent that any advance or payment obligation hereunder would do so, such obligation will be modified so as to make the advance a nonrefundable payment to you and the payment obligation null and void. This Section 8 will continue in effect until you agree that all of the Company's obligations to you under this Section 8 have been satisfied in full or a court of competent jurisdiction makes a final determination that the Company has no further obligations to you under this Section 8, whichever comes first.
9. Release. Other than if your employment terminates by reason of death or Disability, any payment or benefit that you are eligible to receive under Sections 7 or 8 will be contingent on your execution of a release substantially in the form attached hereto as Exhibit A prior to or concurrently with the provision of such payment or benefit. The payments or benefits you are eligible to receive under Sections 7 or 8 are in lieu of any termination payments or benefits which you might otherwise be eligible to receive under any standard severance policy maintained by the Company and/or its Affiliates.
10. Covenants. In exchange for the remuneration outlined above, in addition to providing service to the Company as set forth in this Letter Agreement, you agree to the following covenants:
(a) Confidentiality . You acknowledge that during your employment, you will occupy a position of trust and confidence. Accordingly, you agree that following any termination of your employment, you will keep confidential any trade secrets and confidential or proprietary information of the Company and its affiliates which are now known to you or which hereafter may become known to you as a result of your employment or association with the Company and will not at any time directly or indirectly disclose any such information to any person, firm or corporation, or use the same in any way other than in connection with the business of the Company during, and at all times after, the termination of your employment. For purposes of this Letter Agreement, " trade secrets and confidential or proprietary information " means information unique to the Company or an affiliate of the Company which has a significant business purpose and is not known or generally available from sources outside the Company or typical of industry practice, but will not include any of the foregoing (i) that becomes a matter of public record or is published in a newspaper, magazine or other periodical available to the general public, other than as a result of any act or omission of you or (ii) that is required to be disclosed by any law, regulation or order of any court or regulatory commission, department or agency; provided that you give prompt notice of such requirement to the Company to enable the Company to seek an appropriate protective order or confidential treatment.
(b) Non-Competition . You further covenant that during your employment and during the Restricted Period (as defined below), you will not, for yourself or on behalf of any other person, partnership, company or corporation, in the United States of America of elsewhere in the world, directly or indirectly, engage in, acquire any financial or beneficial interest in (except as provided in the next sentence), be employed by, or own, manage, operate or control any entity which is engaged in, any business in competition with any business of the Company or any subsidiary of the Company. Notwithstanding the preceding sentence, (i) you will not be prohibited from owning less than 1% of any publicly traded corporation, whether or not such corporation is in competition with the Company, and (ii) you will not be prohibited during the Restricted Period from being employed by or providing services to a company with multiple product-lines and/or service lines where one or more of its product-lines or service-lines is in competition with the Company so long
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as you have no direct or indirect contact with the units(s) involved with the competitive products/services. For purposes of this Letter Agreement, " Restricted Period " means the longer of (i) the 1-year period following termination of your employment, or (ii) in the event you receive payments pursuant to Sections 7(a) (ii) or 8(a) (ii) in an amount greater than 1 year of your then Base Salary, the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years.
(c) Non-Solicitation of Employees . You further covenant that during your employment and during the Restricted Period, you will not, directly or indirectly, hire, or cause to be hired by an employer with whom you may ultimately become associated, any employee of the Company or a subsidiary of the Company at the time of termination of your employment with the Company.
(d) Employee Invention Agreement . If you have not previously executed the Company's standard form of Employee Invention Agreement, simultaneously with the execution of this Agreement you will also execute and deliver to the Company the Company's standard form of Employee Invention Agreement.
(e) Equitable Relief and Other Remedies . You acknowledge and agree that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 10 would be inadequate and, in recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, will be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.
(f) Reformation . If it is determined by a court of competent jurisdiction that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under the law of that jurisdiction, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that jurisdiction.
(g) Survival of Provisions. Without effect as to the survival of other provisions of this Letter Agreement intended to survive the termination or expiration of your employment, the obligations contained in this Section 10 will survive the termination or expiration of your employment with the Company and will be fully enforceable thereafter.
11. Indemnification. The Company will indemnify and make permitted advances to you to the fullest extent permitted by applicable law, if you are made or threatened to be made a party to a proceeding by reason of your being or having been an officer, director or employee of the Company or any of its subsidiaries or affiliates or your having served on any other enterprise as a director, officer or employee at the request of the Company. In addition, the Company will maintain insurance, at its expense, to protect you against any such expense, liability or loss to which you would be entitled to indemnification or reimbursement under the foregoing sentence.
12. Representations. By signing this Letter Agreement where indicated below, you represent that you are not subject to any employment agreement or non-competition agreement that could subject the Company or any of its affiliates to any future liability or obligation to any third party as a result of the execution of this Letter Agreement and your employment by the Company.
13. Miscellaneous Provisions .
(a) This Letter Agreement may not be amended or terminated without the prior written consent of you and the Company.
(b) This Letter Agreement may be executed in any number of counterparts which together will constitute but one agreement.
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(c) This Letter Agreement will be binding on and inure to the benefit of our respective successors and permitted assigns and, in your case, your heirs and other legal representatives. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Letter Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. The rights and obligations described in this Letter Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, the Company may assign its rights and obligations described in this Letter Agreement without your consent upon the transfer of all or substantially all of the business and/or assets of the Company (whether by purchase, merger, consolidation or otherwise).
(d) Subject to Section 10, all disputes arising under or related to this Letter Agreement will be settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association then in effect, such arbitration to be held in the Denver, Colorado metropolitan area, as the sole and exclusive remedy of either party. Any judgment on the award rendered by such arbitration may be entered in any court having jurisdiction over such matters.
(e) Except where prohibited by applicable law, all amounts payable to you under this Letter Agreement will be subject to required tax withholding but will otherwise not be subject to offset.
(f) All notices under this Letter Agreement will be in writing and will be deemed effective when delivered in person, by courier service, or 5 days after deposit thereof in the U.S. mail, postage prepaid, for delivery as registered or certified mail, addressed to the respective party at the address set forth below or to such other address as may hereafter be designated by like notice. Unless otherwise notified as set forth above, notice will be sent to each party as follows:
You, to:
The address as is maintained in the Company's records
The Company, to:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
(g) This Letter Agreement will be governed by and construed and entered in accordance with the laws of the State of Colorado without reference to rules relating to conflict of laws.
(h) This Letter Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral (including any term sheet) between the Company (or its predecessor or affiliates) and you with respect to the subject matter hereof. This Letter Agreement also supersedes any inconsistent provisions of any plan or arrangement that would otherwise be applicable to you to the extent such provisions would limit any rights granted to you hereunder or expand any restrictions imposed on you hereby.
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This Letter Agreement is intended to be a binding obligation upon both the Company and yourself. If this Letter Agreement correctly reflects your understanding, please sign and return one copy to Susan Auxer for the Company's records.
IHS GROUP INC. | |||
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By: |
/s/ CHARLES PICASSO Name: Charles Picasso Title: CEO, IHS Group |
The above Letter Agreement correctly reflects our understanding, and I hereby confirm my agreement to the same.
Dated as of November 8, 2004 |
/s/
MICHAEL J. SULLIVAN
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EXHIBIT A
FULL AND COMPLETE RELEASE
I, , in consideration for the payment of the severance described in my Letter Agreement dated , 2004, for myself and my heirs, executors, administrators and assigns, do hereby knowingly and voluntarily release and forever discharge IHS Group Inc. (the " Company ") and its respective predecessors, successors and affiliates and current and former directors, officers and employees from any and all claims, actions and causes of action under those federal, state and local laws and those applicable laws of any other jurisdiction prohibiting employment discrimination based on age, sex, race, color, national origin, religion, disability, veteran or marital status, sexual orientation or any other protected trait or characteristic, or retaliation for engaging in any protected activity, including without limitation, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. , as amended by the Older Workers Benefit Protection Act, P.L. 101-433, the Equal Pay Act of 1963, 9 U.S.C. § 206, et seq. , Title VII of The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. , the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Civil Rights Act of 1991, 42 U.S.C. § 1981a, the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. , the Rehabilitation Act of 1973, 29 U.S.C. § 791 et seq. , the Family and Medical Leave Act of 1993, 28 U.S.C. §§ 2601 and 2611 et seq. , whether KNOWN OR UNKNOWN, fixed or contingent, which I ever had, now have, or may have, or which my heirs, executors, administrators or assigns hereafter can, will or may have from the beginning of time through the date on which I sign this Full and Complete Release (this " Release "), including without limitation those arising out of or related to my employment or separation from employment with the Company (collectively the " Released Claims ").
I warrant and represent that I have made no sale, assignment or other transfer, or attempted sale, assignment or other transfer, of any of the Released Claims.
I fully understand and agree that:
If I choose to revoke this Release, I must do so by notifying the Company in writing. This written notice of revocation must be mailed by U.S. first class mail or by U.S. certified mail within the 7 day revocation period and addressed as follows:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
This Release is the complete understanding between me and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to the same subject matter. I have not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.
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In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release will remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision will be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.
This Release is to be governed and enforced under the laws of the State of Colorado (except to the extent that Colorado conflicts of law rules would call for the application of the law of another jurisdiction).
This Release inures to the benefit of the Company and its successors and assigns.
I have carefully read this Release, fully understand each of its terms and conditions, and intend to abide by this Release in every respect. As such, I knowingly and voluntarily sign this Release.
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Date: |
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November 1, 2004
Mr. John
Oechsle
c/o IHS Group Inc.
15 Inverness Way East
Englewood, CO 80112
Dear John:
This letter, written on behalf of the Board of Directors (the " Board ") of IHS Group Inc., a Delaware corporation formerly known as HAIC Inc. (the " Company "), confirms the terms and conditions of your employment with the Company.
1. Term of Employment. Your employment under this Letter Agreement is effective as of the date hereof (the " Effective Date ") and, subject to termination as provided in Sections 7 or 8, will end on the first anniversary of the Effective Date; provided that on each anniversary of the Effective Date, the term of your employment will automatically be extended by an additional year unless the Company or you give the other party written notice, at least 30 days prior to the applicable anniversary of the Effective Date, that you do not or it does not want the term to be so extended. Such employment period, as may be so extended, will hereinafter be referred to as the " Term ".
2. Title and Duties .
(a) Position . During the Term, you will be employed by the Company as Sr. Vice President, CIO, IHS Group. You will have such duties and responsibilities and power and authority as assigned to you by the Board or the President and Chief Executive Officer of the Company (the " CEO ").
(b) Exclusive Duties . During your employment by the Company, you will devote substantially all your entire working time, attention and energies to the business of the Company and its Affiliates (as defined below) and will not, without the prior written consent of the Board undertake any other business activities. Without limiting the generality of the foregoing, you will not take any actions of the kind described in Section 11.
3. Base Salary. During the Term, the Company will pay you a minimum base salary at the annual rate of $247,000, payable in accordance with the Company's regular payroll practices. The Compensation Committee of the Board (the " Committee ") will review your base salary annually and may, in its sole discretion, increase your base salary based on your performance and the Company's performance. Such base salary, as may be increased, will hereinafter be referred to as your " Base Salary ".
4. Bonus. During the Term, you will be eligible to receive an annual bonus (the " Annual Bonus ") pursuant to the Company's then current annual incentive plan. The performance objectives for your Annual Bonus will be determined by the CEO.
5. Annual Long-Term Incentive Grant. During the Term, you will be eligible to receive such long-term incentive grant, consisting of stock options, restricted stock, other equity-based awards, or a combination thereof, as determined by the Committee (the " Equity Grant "). The size and terms of the Equity Grant will be determined by the Committee based on your performance and the Company's performance, as well as the terms of the equity compensation plan under which the Equity Grant is granted. The Company intends to amend its Certificate of Incorporation to authorize the Company to issue up to 80,000,000 shares of class A common stock. As soon as practicable after such amendment, the Company will grant you 17,000 shares of restricted stock and/or restricted stock units. The restricted stock and/or restricted stock units will vest 25% on the second anniversary of the Effective Date, 25% on the third anniversary of the Effective Date and 50% on the fourth anniversary of the Effective Date.
6. Other Benefits .
(a) Employee Benefits . You will be eligible to participate in the employee benefit plans, programs and arrangements maintained by the Company.
(b) Vacation . You will be entitled to not less than 24 days of paid vacation per calendar year in accordance with the Company's vacation policy as in effect from time to time.
(c) Reimbursement . The Company will reimburse you for all reasonable expenses and disbursements in carrying out your duties and responsibilities under this Letter Agreement in accordance with Company policy for executive officers as in effect from time to time.
7. Termination of Employment (Non-Change in Control). Subject to Section 9:
(a) Resignation for Good Reason or Termination Without Cause . If you terminate your employment for Good Reason (as defined below) or you are terminated by the Company without Cause (as defined below) at any time during the Term, including by the Company giving you notice that it does not want the Term to be extended as provided in Section 1, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits) for the Relevant Period (as defined below) following the date of such termination;
(x) vesting of unvested stock options, restricted stock and other equity awards then held by you will be determined in accordance with the terms and conditions of the applicable equity compensation plan under which each such Equity Grant is granted;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates in which you participated at the time of such termination.
For purposes of this Letter Agreement, the Relevant Period means, in the event you receive payments pursuant to Sections 7(a)(ii) or 8(a)(ii), the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years. Credit for the year in which termination occurs will
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be given for purposes of calculating payments pursuant to Sections 7(a)(ii) or 8(a)(ii) if you have completed six months or more of service beyond the prior anniversary date of your employment.
(b) Termination Other than for Good Reason or for Cause . If you terminate your employment other than for Good Reason (including if you give notice that you do not want to extend the Term as provided in Section 1) or if your employment is terminated by the Company for Cause, you will receive no further payments, compensation or benefits under this Letter Agreement, except you will be eligible to receive, immediately upon the effectiveness of such termination, amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing prior to the effectiveness of your termination and such compensation or benefits that have been earned and will become payable without regard to future services.
(c) Death, Disability or Retirement . If your employment terminates by reason of death, Disability or retirement (as defined in the Company's equity compensation plan then in effect), you or your beneficiaries will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination; and
(ii) your Target Bonus for such year, prorated for the number of days that have elapsed during such year.
If your employment terminates by reason of your retirement, then in addition to benefits to which you may be entitled pursuant to this Letter Agreement, your entitlements in connection with a termination of your employment pursuant to your retirement under the Company's otherwise applicable employee benefit and retirement plans and programs (including without limitation under the Company's equity compensation plans), will be determined in accordance with such applicable plans and programs.
For purposes of this Letter Agreement, " Good Reason " means the Company's breach of any of its material obligations under this Letter Agreement, excluding immaterial actions (or failures of action) not taken (or omitted to be taken) in bad faith and which, if capable of being remedied, are remedied by the Company within 30 days of receipt of notice thereof given by you. For purposes of this Letter Agreement, " Cause " means any of the following: (i) conviction of or pleading guilty to a felony, (ii) commission of intentional acts of misconduct that materially impair the goodwill or business of the Company or cause material damage to its property, goodwill or business, or (iii) willful refusal or willful failure to perform your material duties under this Letter Agreement after written demand that you do so. Termination of the employment shall not be deemed to be for Cause hereunder unless and until (A) written notice has been delivered to you by the Company which specifically identifies the Cause which is the basis of the termination and, if the Cause is capable of cure, you have failed to cure or remedy the act or omission so identified within 14 calendar days after written notice of such breach. For purposes of this provision, no act or failure to act on your part shall be considered "willful" unless it is done, or omitted to be done, by you in bad faith or without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause without reasonable notice to you setting forth the reasons, facts and circumstances for the Company's intention to terminate for Cause and an opportunity for you, together with your counsel, to be heard before the Committee or the Board.
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8. Change in Control. Subject to Section 9:
(a) General . If there is a Change in Control (as defined below) and, within 1 year of such Change in Control, you terminate your employment for CIC Good Reason (as defined below) or you are terminated by the Company without Cause, you will receive a lump-sum cash payment equal to the sum of:
(i) any earned but unpaid Base Salary or other amounts (including reimbursable expenses and any vested amounts or benefits owing under or in accordance with the Company's otherwise applicable employee benefit plans or programs, including retirement plans and programs) accrued or owing through the date of termination;
(ii) an amount equal to 9 months of your then Base Salary plus an additional month of your then Base Salary for each year of your employment with the Company and/or an Affiliate both prior to and subsequent to the Effective Date, up to a maximum aggregate amount under this subsclause (ii) equal to 2 years of your then Base Salary; and
(iii) your Target Bonus for the fiscal year of such termination, prorated for the number of days that have elapsed during such year.
In addition to the foregoing lump-sum payment:
(w) the Company will continue your participation in the Company's medical, dental and vision plans (or if you are ineligible to continue to participate under the terms thereof, in substitute arrangements adopted by the Company providing substantially comparable benefits), for the Relevant Period following the date of such termination;
(x) all unvested stock options, restricted stock and other equity awards then held by you will fully vest and become exercisable as of the effective date of such termination;
(y) outplacement services during the 6-month period following such termination provided by a service provider selected by the Company for the benefit of the executive officers of the Company; and
(z) you will be credited with 2 additional years for the purposes of each of the age and service requirements of any retirement related employee benefit plans, programs and arrangements maintained by the Company and/or its Affiliates, in which you participated at the time of such termination.
For purposes of this Letter Agreement, " Change in Control " means the first to occur of:
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Notwithstanding the foregoing, in no event will a Change in Control be considered to have occurred as a result of: (i) the distribution by the Company to its stockholder(s) of stock in an Affiliate; (ii) the contribution by the Company of some or all of its assets in a transaction governed by Section 351 of the Code; (iii) any inter-company sale or transfer of assets between the Company and any Affiliate; (iv) a dividend distribution by the Company; (v) a loan by the Company to any third party or an Affiliate; (vi) a Transaction, or series of Transactions, after which an Affiliate of the Company before such Transaction or series of Transactions, is either directly or indirectly in control of the Company thereafter; (vii) if the controlling shareholder is a trust, the acquisition, directly or indirectly, of the beneficial ownership of securities of the Company by any beneficiary of such trust if such beneficiary has a greater than 25% interest in such trust, or any descendants, spouse, estate or heirs of any such beneficiary, or a trust established for such beneficiary or for any descendants, spouse or heirs of such beneficiary; or (viii) the first underwritten primary public offering of the shares of common stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) under the Securities Act of 1933, as from time to time amended. For purposes of this Agreement, " Affiliate " means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than the Company) that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with, the Company, including, without limitation, any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Revenue Code of 1986, as from time to time amended (the " Code ").
For purposes of this Letter Agreement, " CIC Good Reason " means any of:
(b) Tax Indemnity . If it is determined that any payments and benefits that you receive from the Company or an Affiliate as a result of the Change in Control will result in you being subject to an excise tax under Section 4999 of the Code, then the Company will make a Gross-Up Payment (as defined below) to or on behalf of you as and when any such determination is made; provided you take such action (other than waiving your right to any payments or benefits) as the Company reasonably requests under the circumstances to mitigate or challenge such tax. Any such determination will be made in accordance with Sections 280G and 4999 of the Code and any other
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applicable law, regulations, rulings or case law. If the Company reasonably requests that you take action to avoid assessment of, or to mitigate or challenge, any such tax or assessment, including restructuring your right to receive any payments or benefits to which you are entitled (other than under this paragraph), you agree to consider such request (but in no event to waive or limit your right to any payments or benefits in a manner that would not be neutral to you from a financial point of view), and in connection with any such consideration, the Company will provide such information and advice as you may reasonably request and will pay for all reasonable expenses incurred in effecting your compliance with such request and any related taxes, fines, penalties, interest and other assessments. The term " Gross-Up Payment " means an additional amount such that you will, on an after-tax basis (including any income tax, payroll tax, further excise tax, interest, penalties and other assessments levied on any payment or benefit) receive the full amount of the payments and benefits for which the Company is liable, as if there was no excise tax under Section 4999 of the Code on any of your payments or benefits. To the extent permitted by applicable law, you agree to return to the Company the excess of any Gross-Up Payment made to you over the payment which would have been sufficient to put you in such same after-tax position. Nothing in this Section 8 is intended to violate the Sarbanes-Oxley Act and to the extent that any advance or payment obligation hereunder would do so, such obligation will be modified so as to make the advance a nonrefundable payment to you and the payment obligation null and void. This Section 8 will continue in effect until you agree that all of the Company's obligations to you under this Section 8 have been satisfied in full or a court of competent jurisdiction makes a final determination that the Company has no further obligations to you under this Section 8, whichever comes first.
9. Release. Other than if your employment terminates by reason of death or Disability, any payment or benefit that you are eligible to receive under Sections 7 or 8 will be contingent on your execution of a release substantially in the form attached hereto as Exhibit A prior to or concurrently with the provision of such payment or benefit. The payments or benefits you are eligible to receive under Sections 7 or 8 are in lieu of any termination payments or benefits which you might otherwise be eligible to receive under any standard severance policy maintained by the Company and/or its Affiliates.
10. Covenants. In exchange for the remuneration outlined above, in addition to providing service to the Company as set forth in this Letter Agreement, you agree to the following covenants:
(a) Confidentiality . You acknowledge that during your employment, you will occupy a position of trust and confidence. Accordingly, you agree that following any termination of your employment, you will keep confidential any trade secrets and confidential or proprietary information of the Company and its affiliates which are now known to you or which hereafter may become known to you as a result of your employment or association with the Company and will not at any time directly or indirectly disclose any such information to any person, firm or corporation, or use the same in any way other than in connection with the business of the Company during, and at all times after, the termination of your employment. For purposes of this Letter Agreement, " trade secrets and confidential or proprietary information " means information unique to the Company or an affiliate of the Company which has a significant business purpose and is not known or generally available from sources outside the Company or typical of industry practice, but will not include any of the foregoing (i) that becomes a matter of public record or is published in a newspaper, magazine or other periodical available to the general public, other than as a result of any act or omission of you or (ii) that is required to be disclosed by any law, regulation or order of any court or regulatory commission, department or agency; provided that you give prompt notice of such requirement to the Company to enable the Company to seek an appropriate protective order or confidential treatment.
(b) Non-Competition . You further covenant that during your employment and during the Restricted Period (as defined below), you will not, for yourself or on behalf of any other person,
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partnership, company or corporation, in the United States of America of elsewhere in the world, directly or indirectly, engage in, acquire any financial or beneficial interest in (except as provided in the next sentence), be employed by, or own, manage, operate or control any entity which is engaged in, any business in competition with any business of the Company or any subsidiary of the Company. Notwithstanding the preceding sentence, (i) you will not be prohibited from owning less than 1% of any publicly traded corporation, whether or not such corporation is in competition with the Company, and (ii) you will not be prohibited during the Restricted Period from being employed by or providing services to a company with multiple product-lines and/or service lines where one or more of its product-lines or service-lines is in competition with the Company so long as you have no direct or indirect contact with the units(s) involved with the competitive products/services. For purposes of this Letter Agreement, " Restricted Period " means the longer of (i) the 1-year period following termination of your employment, or (ii) in the event you receive payments pursuant to Sections 7(a) (ii) or 8(a) (ii) in an amount greater than 1 year of your then Base Salary, the period following termination of your employment equal to the total number of months upon which the payments thereunder are calculated, up to a maximum period of 2 years.
(c) Non-Solicitation of Employees . You further covenant that during your employment and during the Restricted Period, you will not, directly or indirectly, hire, or cause to be hired by an employer with whom you may ultimately become associated, any employee of the Company or a subsidiary of the Company at the time of termination of your employment with the Company.
(d) Employee Invention Agreement . If you have not previously executed the Company's standard form of Employee Invention Agreement, simultaneously with the execution of this Agreement you will also execute and deliver to the Company the Company's standard form of Employee Invention Agreement.
(e) Equitable Relief and Other Remedies . You acknowledge and agree that the Company's remedies at law for a breach or threatened breach of any of the provisions of this Section 10 would be inadequate and, in recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, will be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.
(f) Reformation . If it is determined by a court of competent jurisdiction that any restriction in this Section 10 is excessive in duration or scope or is unreasonable or unenforceable under the law of that jurisdiction, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that jurisdiction.
(g) Survival of Provisions. Without effect as to the survival of other provisions of this Letter Agreement intended to survive the termination or expiration of your employment, the obligations contained in this Section 10 will survive the termination or expiration of your employment with the Company and will be fully enforceable thereafter.
11. Indemnification. The Company will indemnify and make permitted advances to you to the fullest extent permitted by applicable law, if you are made or threatened to be made a party to a proceeding by reason of your being or having been an officer, director or employee of the Company or any of its subsidiaries or affiliates or your having served on any other enterprise as a director, officer or employee at the request of the Company. In addition, the Company will maintain insurance, at its expense, to protect you against any such expense, liability or loss to which you would be entitled to indemnification or reimbursement under the foregoing sentence.
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12. Representations. By signing this Letter Agreement where indicated below, you represent that you are not subject to any employment agreement or non-competition agreement that could subject the Company or any of its affiliates to any future liability or obligation to any third party as a result of the execution of this Letter Agreement and your employment by the Company.
13. Miscellaneous Provisions .
(a) This Letter Agreement may not be amended or terminated without the prior written consent of you and the Company.
(b) This Letter Agreement may be executed in any number of counterparts which together will constitute but one agreement.
(c) This Letter Agreement will be binding on and inure to the benefit of our respective successors and permitted assigns and, in your case, your heirs and other legal representatives. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Letter Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. The rights and obligations described in this Letter Agreement may not be assigned by either party without the prior written consent of the other party; provided, however, the Company may assign its rights and obligations described in this Letter Agreement without your consent upon the transfer of all or substantially all of the business and/or assets of the Company (whether by purchase, merger, consolidation or otherwise).
(d) Subject to Section 10, all disputes arising under or related to this Letter Agreement will be settled by arbitration under the Commercial Arbitration Rules of the American Arbitration Association then in effect, such arbitration to be held in the Denver, Colorado metropolitan area, as the sole and exclusive remedy of either party. Any judgment on the award rendered by such arbitration may be entered in any court having jurisdiction over such matters.
(e) Except where prohibited by applicable law, all amounts payable to you under this Letter Agreement will be subject to required tax withholding but will otherwise not be subject to offset.
(f) All notices under this Letter Agreement will be in writing and will be deemed effective when delivered in person, by courier service, or 5 days after deposit thereof in the U.S. mail, postage prepaid, for delivery as registered or certified mail, addressed to the respective party at the address set forth below or to such other address as may hereafter be designated by like notice. Unless otherwise notified as set forth above, notice will be sent to each party as follows:
You, to:
The address as is maintained in the Company's records
The Company, to:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
(g) This Letter Agreement will be governed by and construed and entered in accordance with the laws of the State of Colorado without reference to rules relating to conflict of laws.
(h) This Letter Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral (including any term sheet) between the Company (or its predecessor or affiliates) and you with respect to the subject matter hereof. This Letter Agreement also supersedes any inconsistent provisions of any plan or arrangement that would otherwise be applicable to you to the extent such
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provisions would limit any rights granted to you hereunder or expand any restrictions imposed on you hereby.
This Letter Agreement is intended to be a binding obligation upon both the Company and yourself. If this Letter Agreement correctly reflects your understanding, please sign and return one copy to Susan Auxer for the Company's records.
IHS GROUP INC. | |||
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By: |
/s/ CHARLES PICASSO Name: Charles Picasso Title: CEO, IHS Group |
The above Letter Agreement correctly reflects our understanding, and I hereby confirm my agreement to the same.
Dated as of November 1, 2004 |
/s/
H. JOHN OECHSLE
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EXHIBIT A
FULL AND COMPLETE RELEASE
I, , in consideration for the payment of the severance described in my Letter Agreement dated , 2004, for myself and my heirs, executors, administrators and assigns, do hereby knowingly and voluntarily release and forever discharge IHS Group Inc. (the " Company ") and its respective predecessors, successors and affiliates and current and former directors, officers and employees from any and all claims, actions and causes of action under those federal, state and local laws and those applicable laws of any other jurisdiction prohibiting employment discrimination based on age, sex, race, color, national origin, religion, disability, veteran or marital status, sexual orientation or any other protected trait or characteristic, or retaliation for engaging in any protected activity, including without limitation, the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. , as amended by the Older Workers Benefit Protection Act, P.L. 101-433, the Equal Pay Act of 1963, 9 U.S.C. § 206, et seq. , Title VII of The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq. , the Civil Rights Act of 1866, 42 U.S.C. § 1981, the Civil Rights Act of 1991, 42 U.S.C. § 1981a, the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. , the Rehabilitation Act of 1973, 29 U.S.C. § 791 et seq. , the Family and Medical Leave Act of 1993, 28 U.S.C. §§ 2601 and 2611 et seq. , whether KNOWN OR UNKNOWN, fixed or contingent, which I ever had, now have, or may have, or which my heirs, executors, administrators or assigns hereafter can, will or may have from the beginning of time through the date on which I sign this Full and Complete Release (this " Release "), including without limitation those arising out of or related to my employment or separation from employment with the Company (collectively the " Released Claims ").
I warrant and represent that I have made no sale, assignment or other transfer, or attempted sale, assignment or other transfer, of any of the Released Claims.
I fully understand and agree that:
If I choose to revoke this Release, I must do so by notifying the Company in writing. This written notice of revocation must be mailed by U.S. first class mail or by U.S. certified mail within the 7 day revocation period and addressed as follows:
IHS
Group Inc.
15 Inverness Way East
Englewood, CO 80112
Attention: Senior Vice President, Human Resources
This Release is the complete understanding between me and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to the same subject matter. I have not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.
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In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release will remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision will be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.
This Release is to be governed and enforced under the laws of the State of Colorado (except to the extent that Colorado conflicts of law rules would call for the application of the law of another jurisdiction).
This Release inures to the benefit of the Company and its successors and assigns.
I have carefully read this Release, fully understand each of its terms and conditions, and intend to abide by this Release in every respect. As such, I knowingly and voluntarily sign this Release.
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Date: |
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AGREEMENT dated August 4, 2004 between Robert R. Carpenter, residing at 1174 Scott Avenue, Winnetka, Illinois 60093 ("Carpenter"), and Information Handling Services Group Inc., a Delaware corporation ("IHS Group").
Carpenter wishes to resign from employment with IHS Group and its affiliates. This Agreement sets forth the agreements of the parties in connection with Carpenter's resignation to assure an orderly transition for the business. Accordingly, the parties agree as follows:
equity related instruments are substituted for IRS options awarded under the Plan for such other senior executives. In valuing Carpenter's options for the purpose of any such substitution, it is understood that to the extent the valuation reflects the exercise price, the valuation of Carpenter's options will reflect the exercise price of the options set forth in the Stock Option Agreements. Carpenter will execute and be bound by any lock-up or similar agreement required of other senior executives of IHS Group and/or its affiliates in connection with an IPO.
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also specifically covenants that he will not bring suit or file any grievance or complaint of any nature in relation to any claim or right waived herein.
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IN WITNESS WHEREOF , Carpenter and IHS Group have executed this Agreement as of the day and year first above written.
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/s/ ROBERT R. CARPENTER Robert R. Carpenter |
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Information Handling Services Group Inc. |
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By: |
/s/ JERRE STEAD |
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Title: |
Chairman of HAIC |
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Amendment dated as of November 29, 2004 between Robert R. Carpenter, residing at 1174 Scott Avenue, Winnetka, Illinois 60093 ("Carpenter"), and Information Handling Services Group Inc., a Delaware corporation ("IHS Group").
Carpenter and IHS Group entered into an Agreement dated August 4, 2004 (the "Agreement") with respect to Carpenter's resignation from employment with IHS Group and its affiliates. Carpenter and IHS Group wish to amend the Agreement.
Accordingly, the parties agree as follows:
"7. Simultaneously with the execution of this Amendment, Carpenter has executed and delivered to IHS Group Inc., a Colorado corporation ("IHSG"), a Letter of Transmittal tendering to IHSG his 1,750,000 outstanding stock options granted pursuant to the Stock Option Agreements for cash and deferred stock units upon the terms and subject to the conditions set forth in the Offer Plan and the Letter of Transmittal provided to Carpenter with this Amendment, as such Offer Plan and Letter of Transmittal are amended by the terms set forth in the next three subparagraphs (a), (b) and (c).
If requested by IHS Group, Carpenter will execute and be bound by any lock-up agreement required of the senior executives of IHS Group and/or its affiliates in connection with an IPO, which will not extend for a period in excess of 211 days from the date of the IPO. In the event following an IPO Carpenter is bound by a lock-up agreement on June 1, 2006, such agreement shall not prevent Carpenter from selling that number of shares of IHS Group Inc. stock necessary to satisfy an amount equal to the withholding at the statutory rates for employees in effect at that time in connection with the delivery of the shares.
"This Agreement, as amended by Amendment dated as of November 29, 2004, constitutes the entire agreement and understanding of Carpenter and IHS Group with respect to the matters herein set forth, and all prior agreements, negotiations and understandings relating to the subject matter of this Agreement are merged herein and superseded and cancelled by this Agreement."
IN WITNESS WHEREOF, Carpenter and IHS Group have executed this Amendment as of the day and year first above written.
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/s/ ROBERT R. CARPENTER Robert R. Carpenter |
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INFORMATION HANDLING SERVICES GROUP INC. |
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By: |
/s/ STEPHEN GREEN |
Title: | Senior Vice President |
TERMINATION AGREEMENT AND GENERAL RELEASE AND WAIVER OF CLAIMS
The parties to this Termination Agreement and General Release and Waiver of Claims ("Agreement") are Randolph Weil ("Employee") and Information Handling Services Group Inc. ("IHS").
Employee's medical, dental and vision coverages will be continued through November 30, 2005. Employee's premiums for such period will be deducted from the severance pay provided above. Should there be an increase in insurance premiums during the period through November 30, 2005, Employee agrees to reimburse IHS for the additional amount. Employee may continue health coverage to the extent provided under COBRA following November 30, 2005.
In consideration of the cancellation of the Stock Options, IHS shall pay to Employee, upon Employee's execution of this Agreement and the expiration of the seven-day revocation period described in paragraph 14, the sum of $1,099,400.
and former officers, directors, employees, agents, representatives, legal representatives, accountants, successors, and assigns, (collectively, the "Released Parties") from all claims, demands, and actions of any nature, known or unknown, that he may have against Released Parties, including but not limited to claims that in any manner relate to, arise out of or involve any aspect of his employment with IHS or any of the other Released Parties, and the termination of that employment, including, but not limited to, any rights or claims under the Worker Adjustment and Retraining Notification Act ("WARN"), 29 U.S.C. § 2101 et seq.; Colorado Anti-Discrimination Act, Colo. Rev. Stat. § 24-34-401, et seq.; Family and Medical Leave Act, 29 U.S.C. § 2601 et seq.; Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq.; Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e, et seq.; Vocational Rehabilitation Act, 29 U.S.C. § 701, et seq.; Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.; Executive Order 11246; the Civil Rights Act of 1866, as reenacted, 42 U.S.C. § 1981; the National Labor Relations Act, as amended, 29 U.S.C. § 141, et seq.; and any and all other municipal, state, and/or federal statutory, executive order, or constitutional provisions pertaining to an employment relationship. This release and waiver also specifically includes, but is not limited to, any claims in the nature of tort or contract claims, including specifically but not limited to any claim of wrongful discharge, breach of contract, promissory estoppel, intentional or negligent infliction of emotional distress, interference with contract, libel, breach of covenant of good faith and fair dealing, or other such claims, including but not limited to those arising out of or involving any aspect of his or her employment with IHS or any of the other Released Parties or his Stock Options. This release includes any and all claims concerning attorney fees, costs, and any and all other expenses related to the claims released herein. Provided, however, that this release and waiver shall not apply to any rights which, by law, may not be waived; to rights and claims which arise from acts or events occurring after the effective date of this Agreement; or to claims for breach of this Agreement. Employee also specifically covenants (a) that he will not bring suit or file any grievance or complaint of any nature in relation to any claim or right waived herein; and (b) that he will immediately withdraw or otherwise secure the immediate dismissal of any pending complaint, grievance, or lawsuit by Employee, which is presently pending against any of the Released Parties, without further proceedings, or findings adverse to Released Parties. However, nothing in this Agreement shall be construed to affect Employee's right to test the knowing and voluntary nature of this Agreement under the Older Worker Benefit Protection Act, 29 U.S.C. § 626 (f).
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supplier to, or other person or entity having material business relations with IHS or any subsidiary. Notwithstanding the preceding sentence, (i) Employee will not be prohibited from owning less than 1% of any publicly traded corporation, whether or not such corporation is in competition with IHS or a subsidiary, (ii) Employee will not be prohibited during such twelve month period from being employed by or providing services to a company with multiple product-lines and/or service lines where one or more of its product-lines or service lines is in competition with IHS or a subsidiary so long as Employee has no direct or indirect contact with the unit(s) involved with the competitive products/services, and (iii) Employee will not be prohibited during such twelve month period from being employed by PennPoint LLC.. Although the Employee acknowledges and agrees that the restrictions herein are reasonable, to the extent that any part of this paragraph 8 may be invalid, illegal or unenforceable for any reason, it is intended that such part shall be enforceable to the maximum extent that a court of competent jurisdiction shall determine that such part, if more limited in scope, would have been enforceable, and such part shall be deemed to have been so written and the remaining parts shall as written be effective and enforceable in all events.
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Agreed to and accepted this 5 th day of November, 2004, declared to be the effective date of this Agreement.
/s/ S. AUXER Witness |
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/s/ RANDOLPH A. WEIL Randolph Weil |
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INFORMATION HANDLING SERVICES GROUP INC. |
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By: |
/s/ S. AUXER |
Title: | Senior Vice President IHS Group |
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2004 Long-Term Incentive Plan
IHS Inc.
Article 1. Establishment, Purpose and Duration | 1 | |
Article 2. Definitions | 1 | |
Article 3. Administration | 5 | |
Article 4. Shares Subject to this Plan and Maximum Awards | 6 | |
Article 5. Eligibility and Participation | 7 | |
Article 6. Stock Options | 7 | |
Article 7. SARs | 9 | |
Article 8. Restricted Stock and RSUs | 11 | |
Article 9. Performance Units/Performance Shares | 12 | |
Article 10. Cash-Based Awards and Other Stock-Based Awards | 13 | |
Article 11. Performance Measures | 13 | |
Article 12. Covered Employee Annual Incentive Award | 15 | |
Article 13. Nonemployee Director Awards | 15 | |
Article 14. Dividend Equivalents | 15 | |
Article 15. Beneficiary Designation | 15 | |
Article 16. Deferrals | 16 | |
Article 17. Rights of Participants | 16 | |
Article 18. Change in Control | 16 | |
Article 19. Amendment, Modification, Suspension and Termination | 17 | |
Article 20. Withholding | 17 | |
Article 21. Successors | 18 | |
Article 22. General Provisions | 18 |
IHS Inc.
2004 Long-Term Incentive Plan
Article 1. Establishment, Purpose and Duration
1.1 Establishment . IHS Inc., a Delaware corporation (the " Company "), establishes an incentive compensation plan to be known as the IHS Inc. 2004 Long-Term Incentive Plan (this " Plan "), as set forth in this document.
This Plan permits the grant of NQSOs, ISOs, SARs, Restricted Stock, RSUs, Performance Shares, Performance Units, Cash-Based Awards, Other Stock-Based Awards and Covered Employee Annual Incentive Awards.
This Plan shall become effective upon approval of the Company's stockholders (the " Effective Date ") and shall remain in effect as provided in Section 1.3.
1.2 Purpose . The purpose of this Plan is to provide a means whereby Employees, Directors and Service Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders.
A further purpose of this Plan is to provide a means through which the Company may attract able individuals to become Employees or serve as Directors or Service Providers of the Company and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.
1.3 Duration of this Plan . Unless sooner terminated as provided in this Plan, this Plan shall terminate ten (10) years from the Effective Date. After this Plan is terminated, no Awards may be granted, but any Award previously granted shall remain outstanding in accordance with the terms and conditions of this Plan and such Award's Award Document.
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
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Notwithstanding the foregoing, in no event will a Change in Control be considered to have occurred as a result of: (i) the distribution by the Company to its stockholder(s) of stock in an Affiliate; (ii) the contribution by the Company of some or all of its assets in a transaction governed by Section 351 of the Code; (iii) any inter-company sale or transfer of assets between the Company and any Affiliate thereof; (iv) a dividend distribution by the Company; (v) a loan by the Company to any third party or an Affiliate; (vi) a Transaction, or series of Transactions, after which an Affiliate of the Company before such Transaction or series of Transactions, is either directly or indirectly in control of the Company thereafter; (vii) if the controlling stockholder is a trust, the acquisition, directly or indirectly, of the beneficial ownership of securities of the Company by any beneficiary of such trust if such beneficiary has a greater than twenty-five percent (25%) interest in such trust, or any descendants, spouse, estate or heirs of any such beneficiary, or a trust established for such beneficiary or for any descendants, spouse or heirs of such beneficiary; or (viii) the first underwritten primary public offering of the shares of common stock of the Company pursuant to an effective registration statement (other than a registration statement on Form S-4 or Form S-8 or any similar or successor form) under the Securities Act; and provided further that if and to the extent any of the events described in clauses (a) through (f) above would cause penalty taxation under Section 409A of the Code with respect to any Award, then the relevant clause(s) and/or any relevant provision of this Plan or an Award Document may be unilaterally amended by the Committee with respect to such Award(s), and correlative action may be unilaterally taken by the Committee with respect to such Award(s), to avoid such penalty.
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goals or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.
Article 3. Administration
3.1 General . The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents and other individuals, any of whom may be an Employee, and the Committee, the Company and its officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final, binding and conclusive upon the Participants, the Company and all other interested individuals.
3.2 Authority of the Committee . The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Document or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include selecting Award recipients; establishing all Award terms and conditions, including the terms and conditions set forth in Award
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Documents; granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company; and, subject to Article 19, adopting modifications and amendments to this Plan or any Award Document, including any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company and/or its Affiliates operate.
3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company and/or its Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize one or more officers of the Company to designate Employees to be recipients of Awards; provided, however , the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee who is subject to Section 16 of the Exchange Act.
Article 4. Shares Subject to this Plan and Maximum Awards
4.1 Number of Shares Available for Awards .
4.2 Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued or otherwise delivered. Any Shares related to Awards (other than a Substitute Award) which terminate by expiration, forfeiture, cancellation or otherwise without the issuance or other delivery of such Shares, are settled in cash in lieu of Shares or are exchanged with the Committee's permission, prior to the issuance or other delivery of Shares, for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, other than with respect to a Substitute Award, if the Exercise Price of any Option or the tax withholding requirements with respect to any Award are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if a SAR is exercised, only the number of Shares issued or otherwise delivered, net of the Shares tendered, if any, will be deemed "used" for purposes of determining the maximum number of Shares available for delivery under this Plan The Shares available under this Plan may be authorized and unissued Shares or treasury Shares.
4.3 Annual Award Limits. Notwithstanding the foregoing and subject to adjustment as provided in Section 4.4, no individual Participant may receive awards in any Plan Year that relate to more than five hundred thousand (500,000) Shares. Subject to Section 12.1, in the case of an Award which is not valued in a way in which the limitation set forth in the preceding sentence would operate as an effective limitation satisfying applicable law, any individual Participant may not be granted Awards authorizing the earning during any Plan Year of an amount that exceeds such Participant's annual limit, which for this purpose shall be equal to five million dollars ($5,000,000) plus the amount of such Participant's unused annual limit as of the close of the previous Plan Year (this limitation is separate and not affected by the number of Awards granted during such Plan Year subject to the limitation in the preceding sentence). For purposes of the Plan, (i) " earning " means satisfying performance conditions so that an amount becomes payable, without regard to whether it is to be paid currently or on a deferred basis or continues to be subject to any service requirement or other nonperformance
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condition, and (ii) a Participant's annual limit is " used " to the extent an amount or number of Shares may be potentially earned or paid under an Award, regardless of whether such amount or Shares are in fact earned or paid.
4.4 Adjustments in Authorized Shares . In the event of any corporate event or transaction (including a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind or other like change in capital structure or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants' rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued or otherwise delivered under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Exercise Price or Grant Price applicable to outstanding Awards, the Annual Award Limits and other value determinations applicable to outstanding Awards.
The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
Subject to the provisions of Article 19, without affecting the number of Shares available under this Plan, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with any applicable accounting rules or the "incentive stock option" rules under Section 422 of the Code, where applicable.
Article 5. Eligibility and Participation
5.1 Eligibility . Individuals eligible to participate in this Plan include all Employees, Directors and Service Providers.
5.2 Actual Participation . Subject to the provisions of this Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.
Article 6. Stock Options
6.1 Grant of Options . Subject to the provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or of any parent corporation or subsidiary corporation (as permitted by Section 422 of the Code and the Treasury regulations promulgated thereunder).
6.2 Award Document . Each Option grant shall be evidenced by an Award Document that shall specify the Exercise Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Document also shall specify whether the Option is intended to be an ISO or a NQSO.
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6.3 Exercise Price . The Exercise Price for each grant of an Option shall be as determined by the Committee and shall be specified in the Award Document. The Exercise Price shall be: (i) based on one hundred percent (100%) of the FMV of the Shares on the date of grant, (ii) set at a premium to the FMV of the Shares on the date of grant or (iii) indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion; provided, however , other than with respect to Substitute Awards, the Exercise Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares on the date of grant.
6.4 Term . Each Option shall expire at such time as the Committee shall determine at the time of its grant; provided, however , no Option shall be exercisable later than the tenth (10 th ) anniversary date of its grant. Notwithstanding the foregoing, for Options granted to Participants outside the United States, the Committee has the authority to grant Options that have a term greater than ten (10) years.
6.5 Exercise of Options . Options shall be exercisable at such times and be subject to such terms and conditions as the Committee shall in each instance approve, which terms and conditions need not be the same for each grant or for each Participant.
6.6 Payment . Options shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance or other delivery of the Shares as to which an Option shall be exercised shall be the payment of the Exercise Price. The Exercise Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate FMV at the time of exercise equal to the Exercise Price ( provided that except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Exercise Price or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion, including, if the Committee so determines, a cashless (broker-assisted) exercise.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant's request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
6.7 Restrictions on Share Transferability . The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including minimum holding period requirements or restrictions under applicable federal securities laws, the requirements of any stock exchange or market upon which Shares are then listed and/or traded or any Blue Sky or state securities laws applicable to such Shares.
6.8 Termination of Employment . Each Participant's Award Document shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant's employment or provision of services to the Company and/or its Affiliates, as the case may be. Such provisions shall be determined in the sole discretion of the Committee and need not be uniform among all Options, and may reflect distinctions based on the reasons for termination.
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6.9 Transferability .
6.10 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares acquired pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.
6.11. Substituting SARs . Only in the event the Company is not accounting for equity compensation under APB Opinion No. 25, the Committee shall have the ability to substitute, without receiving Participant permission, SARs paid only in Shares (or SARs paid in Shares or cash at the Committee's discretion) for outstanding Options; provided , the terms of the substituted stock SARs are the same as the terms for the Options and the aggregate difference between the FMV of the underlying Shares and the Grant Price of the SARs is equivalent to the aggregate difference between the FMV of the underlying Shares and the Exercise Price of the Options. If, in the opinion of the Company's auditors, this provision creates adverse accounting consequences for the Company, it shall be considered null and void.
Article 7. SARs
7.1 Grant of SARs . Subject to the provisions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs or any combination of these forms of SARs.
Subject to the provisions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs.
The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Document. The Grant Price shall be: (i) based on one hundred percent (100%) of the FMV of the Shares on the date of grant, (ii) set at a premium to the FMV of the Shares on the date of grant, or (iii) indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion; provided, however , other than with respect to Substitute Awards, the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares on the date of grant. The Grant Price of Tandem SARs shall be equal to the Exercise Price of the related Option.
7.2 Award Document . Each SAR shall be evidenced by an Award Document that shall specify the Grant Price, the term of the SAR and such other provisions as the Committee shall determine.
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7.3 Term. The term of a SAR shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the Award Document, no SAR shall be exercisable later than the tenth (10 th ) anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant SARs that have a term greater than ten (10) years.
7.4 Exercise of Freestanding SARs . Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
7.5. Exercise of Tandem SARs . Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the FMV of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Exercise Price of the underlying ISO; and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject to the ISO exceeds the Exercise Price of the ISO.
7.6 Settlement . Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
At the discretion of the Committee, the payment upon exercise may be in cash, Shares or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee's determination regarding the form of settlement shall be set forth in the Award Document pertaining to the grant of the SAR.
7.7 Termination of Employment . Each Award Document shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant's employment with or provision of services to the Company and/or its Affiliates, as the case may be. Such provisions shall be determined in the sole discretion of the Committee and need not be uniform among all SARs, and may reflect distinctions based on the reasons for termination.
7.8 Transferability . Except as otherwise provided in a Participant's Award Document or otherwise determined at any time by the Committee, no SAR may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award Document or otherwise determined at any time by the Committee, all SARs granted to a Participant shall be exercisable during his lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another individual, references in this Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant's permitted transferee.
7.9 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time.
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Article 8. Restricted Stock and RSUs
8.1 Grant of Restricted Stock or RSUs . Subject to the provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or RSUs to Participants in such amounts as the Committee shall determine. RSUs shall be similar to Restricted Stock, except that no Shares are actually awarded to the Participant on the date of grant.
8.2 Award Document . Each Restricted Stock and/or RSU grant shall be evidenced by an Award Document that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of RSUs granted and such other provisions as the Committee shall determine.
8.3 Transferability . Except as provided in this Plan or an Award Document, the Shares of Restricted Stock and/or RSUs may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Document (and in the case of RSUs until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Award Document or otherwise at any time by the Committee. All rights with respect to the Restricted Stock and/or RSUs granted to a Participant shall be available during his lifetime only to such Participant, except as otherwise provided in an Award Document or at any time by the Committee.
8.4 Other Restrictions . The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock or RSUs as it may deem advisable including a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each RSU, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which Shares are then listed and/or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Stock or RSUs.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and RSUs shall be paid in cash, Shares or a combination of cash and Shares, as determined by the Committee in its sole discretion.
8.5 Certificate Legend . In addition to any legends placed on certificates pursuant to Section 8.4, each certificate representing Shares of Restricted Stock may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion:
The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the IHS Inc. 2004 Long-Term Incentive Plan, and in the associated Award Document. A copy of this Plan and such Award Document may be obtained from IHS Inc.
8.6 Voting Rights . Unless otherwise determined by the Committee and set forth in a Participant's Award Document, to the extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any RSUs.
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8.7 Termination of Employment . Each Award Document shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or RSUs following termination of the Participant's employment with or provision of services to the Company and/or its Affiliates, as the case may be. Such provisions shall be determined in the sole discretion of the Committee and need not be uniform among all Shares of Restricted Stock or RSUs, and may reflect distinctions based on the reasons for termination.
8.8 Section 83(b) Election . The Committee may provide in an Award Document that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.
Article 9. Performance Units/Performance Shares
9.1 Grant of Performance Units/Performance Shares . Subject to the provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
9.2 Value of Performance Units/Performance Shares . Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the FMV of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.
9.3 Earning of Performance Units/Performance Shares . Subject to the provisions of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4 Form and Timing of Payment of Performance Units/Performance Shares . Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Document. Subject to the provisions of this Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Document pertaining to the grant of the Award.
9.5 Termination of Employment . Each Award Document shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant's employment with or provision of services to the Company and/or its Affiliates as the case may be. Such provisions shall be determined in the sole discretion of the Committee and need not be uniform among all Awards of Performance Units or Performance Shares granted under this Plan, and may reflect distinctions based on the reasons for termination.
9.6 Transferability . Except as otherwise provided in a Participant's Award Document or otherwise determined at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant's Award
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Document or otherwise determined at any time by the Committee, a Participant's rights under this Plan shall be exercisable during his lifetime only by such Participant.
Article 10. Cash-Based Awards and Other Stock-Based Awards
10.1 Grant of Cash-Based Awards . Subject to the provisions of this Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms, including the achievement of specific performance goals, as the Committee may determine.
10.2 Other Stock-Based Awards . The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the provisions of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3 Value of Cash-Based and Other Stock-Based Awards . Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Stock-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4 Payment of Cash-Based Awards and Other Stock-Based Awards . Payment, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.
10.5 Termination of Employment . The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Stock-Based Awards following termination of the Participant's employment with or provision of services to the Company and/or its Affiliates, as the case may be. Such provisions shall be determined in the sole discretion of the Committee and need not be uniform among all Awards of Cash-Based Awards or Other Stock-Based Awards granted under this Plan, and may reflect distinctions based on the reasons for termination.
10.6 Transferability . Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Stock-Based Awards may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant's rights under this Plan, if exercisable, shall be exercisable during his lifetime only by such Participant. With respect to those Cash-Based Awards or Other Stock-Based Awards, if any, that are permitted to be transferred to another individual, references in this Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant's permitted transferee.
Article 11. Performance Measures
11.1 Performance Measures. Unless and until the Committee proposes for stockholder vote and the stockholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the payment or vesting of an Award to a Covered Employee (other than a Covered Employee Annual Incentive Award awarded or credited pursuant to Article 12) that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
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Any Performance Measure(s) may be used to measure the performance of the Company and/or Affiliate as a whole or any business unit of the Company and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies or published on a special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 11.
11.2 Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles or other laws or regulations affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of tax deductibility under Section 162(m) of the Code.
11.3 Adjustment of Performance-Based Compensation. Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.
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11.4 Committee Discretion. In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining stockholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining stockholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Section 162(m) of the Code and base vesting on Performance Measures other than those set forth in Section 11.1.
Article 12. Covered Employee Annual Incentive Award
12.1 Establishment of Incentive Pool. The Committee may designate Covered Employees who are eligible to receive a monetary payment in any Plan Year based on a percentage of an incentive pool equal to the greater of: (i) nine percent (9%) of the Company's Consolidated Operating Earnings for the Plan Year, (ii) ten percent (10%) of the Company's Operating Cash Flow for the Plan Year, or (iii) fifteen percent (15%) of the Company's Net Income for the Plan Year. The Committee shall allocate an incentive pool percentage to each designated Covered Employee for each Plan Year. In no event may (1) any Covered Employee receive more than one million two hundred thousand dollars ($1,200,000) from the incentive pool and (2) the sum of the incentive pool percentages for all Covered Employees cannot exceed one hundred percent (100%) of the total pool.
12.2 Determination of Covered Employees' Portions. As soon as possible after the determination of the incentive pool for a Plan Year, the Committee shall calculate each Covered Employee's allocated portion of the incentive pool based upon the percentage established at the beginning of such Plan Year. Each Covered Employee's incentive award then shall be determined by the Committee based on the Covered Employee's allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no event may the portion of the incentive pool allocated to a Covered Employee be increased in any way, including as a result of the reduction of any other Covered Employee's allocated portion. The Committee shall retain the discretion to adjust such Awards downward.
Article 13. Nonemployee Director Awards
All Awards to Nonemployee Directors shall be determined by the Board or Committee.
Article 14. Dividend Equivalents
Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee.
Article 15. Beneficiary Designation
Each Participant under this Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under this Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate.
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Article 16. Deferrals
The Committee may permit or require a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or RSUs, or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash-Based Awards, Other Stock-Based Awards or Covered Employee Annual Incentive Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
Article 17. Rights of Participants
17.1 Employment . Nothing in this Plan or an Award Document shall interfere with or limit in any way the right of the Company and/or its Affiliates to terminate any Participant's employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director or Service Provider for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company and/or its Affiliates and, accordingly, subject to Articles 3 and 19, this Plan and the benefits under this Plan may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company and/or its Affiliates.
17.2 Participation . No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
17.3 Rights as a Stockholder . Except as otherwise provided in this Plan, a Participant shall have none of the rights of a stockholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 18. Change in Control
18.1 Change in Control of the Company . Subject to Section 2.6, notwithstanding any other provision of this Plan to the contrary, the provisions of this Article 18 shall apply in the event of a Change in Control, unless otherwise determined by the Committee in connection with the grant of an Award as reflected in the applicable Award Document.
Upon a Change in Control, all then-outstanding Stock Options and SARs shall become fully vested and exercisable, and all other then-outstanding Awards that vest on the basis of continuous service shall vest in full and be free of restrictions, except to the extent that another Award meeting the requirements of Section 18.2 (a " Replacement Award ") is provided to the Participant pursuant to Section 4.4 to replace such Award (the " Replaced Award "). The treatment of any other Awards shall be as determined by the Committee in connection with the grant thereof, as reflected in the applicable Award Document.
18.2 Replacement Awards . An Award shall meet the conditions of this Section 18.2 (and hence qualify as a Replacement Award) if: (i) it has a value at least equal to the value of the Replaced Award; (ii) it relates to publicly traded equity securities of the Company or its successor in the Change in Control or another entity that is affiliated with the Company or its successor following the Change in Control; and (iii) its other terms and conditions are not less favorable to the Participant than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 18.2 are
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satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.
18.3 Termination of Employment . Upon a termination of employment or termination of directorship of a Participant occurring in connection with or during the period of one (1) year after such Change in Control, other than for Cause, (i) all Replacement Awards held by the Participant shall become fully vested and (if applicable) exercisable and free of restrictions; provided, however , that if such acceleration would cause penalty taxation under Section 409A of the Code with respect to any Replacement Award, then the Committee may unilaterally delay such acceleration for such time as is sufficient to avoid such penalty, and (ii) all Stock Options and SARs held by the Participant immediately before the termination of employment or termination of directorship that the Participant held as of the date of the Change in Control or that constitute Replacement Awards shall remain exercisable for not less than one (1) year following such termination or until the expiration of the stated term of such Stock Option or SAR, whichever period is shorter; provided , that if the applicable Award Document provides for a longer period of exercisability, that provision shall control.
Article 19. Amendment, Modification, Suspension and Termination
19.1 Amendment, Modification, Suspension and Termination . Subject to Section 19.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend or terminate this Plan and any Award Document in whole or in part; provided, however , that, without the prior approval of the Company's stockholders and except as provided in Sections 4.4 and 6.11, Options or SARs will not be repriced, replaced or regranted through cancellation, or by lowering the Exercise Price of a previously granted Option or the Grant Price of a previously granted SAR, and no amendment of this Plan shall be made without stockholder approval if stockholder approval is required by law, regulation or stock exchange rule, including the Exchange Act, the Code and/or the NYSE Listed Company Manual.
19.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events . The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including the events described in Section 4.4) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
19.3 Awards Previously Granted . Notwithstanding any other provision of this Plan to the contrary, no termination, amendment, suspension or modification of this Plan or an Award Document shall adversely affect in any material way any previously granted Award, without the written consent of the Participant holding such Award.
Article 20. Withholding
20.1 Tax Withholding . The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory amount to satisfy federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
20.2 Share Withholding . With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock and RSUs, or upon the achievement of performance goals related to Performance Shares, or any other taxable event arising as a result of an Award, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a FMV on the date
17
the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction. All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
Article 21. Successors
All obligations of the Company under this Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.
Article 22. General Provisions
22.1 Forfeiture Events .
22.2 Legend . The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
22.3 Gender and Number . Except where otherwise indicated by the context, any masculine term used in this Plan or in an Award Document also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
22.4 Severability . In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
22.5 Requirements of Law . The granting of Awards and the issuance or other delivery of Shares under this Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any applicable governmental agencies or stock exchange or market upon which Shares are then listed and/or traded, as may be required.
22.6 Delivery of Title . The Company shall have no obligation to issue or deliver evidence of title for Shares issued or otherwise delivered under this Plan prior to:
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22.7 Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance (or other delivery) and sale of any Shares under this Plan, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
22.8 Investment Representations . The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
22.9 Employees Based Outside of the United States . Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company and/or its Affiliates operate or have Employees, Directors or Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
Notwithstanding the above, the Committee may not take any actions under this Plan, and no Awards shall be granted, that would violate applicable law.
22.10 Uncertificated Shares . To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on an uncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange or market upon which Shares are then listed and/or traded.
22.11 Unfunded Plan . Participants shall have no right, title or interest whatsoever in or to any investments that the Company and/or its Affiliates may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative or any other individual. To the extent that any person acquires a right to receive payments from the Company and/or its Affiliates under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or an Affiliate, as the case may be. All payments to be made under this Plan shall be paid from the general funds of the Company or an Affiliate, as the case may be, and no special or separate fund shall be established and no segregation of assets shall be made to ensure payment of such amounts except as expressly set forth in this Plan.
22.12 No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. The Committee shall determine whether cash, Awards or other property shall be
19
issued, delivered or otherwise paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
22.13 Retirement and Welfare Plans . Neither Awards made under this Plan nor Shares or cash paid pursuant to such Awards, except pursuant to Covered Employee Annual Incentive Awards, may be included as "compensation" for purposes of computing the benefits payable to any Participant under the Company's or Affiliate's retirement plans (both qualified and nonqualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant's benefit.
22.14 Nonexclusivity of this Plan . The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
22.15 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair or otherwise affect the Company's or an Affiliate's right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
22.16 Governing Law . This Plan and each Award Document shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Document, recipients of an Award are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to this Plan or any related Award Document.
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IHS Inc.
2004 Directors Stock Plan
1. Purpose of this Plan.
This IHS Inc. 2004 Directors Stock Plan (as from time to time amended, this " Plan ") is a sub-plan under the IHS Inc. 2004 Long-Term Incentive Plan (as from time to time amended, the " 2004 LTIP "). Awards under this Plan shall be granted in accordance with the 2004 LTIP, including Section 13 thereof, and shall constitute Nonemployee Director Awards. Unless defined in this Plan, capitalized terms shall have the same meanings ascribed to them in the 2004 Plan.
2. Effective Date; Eligibility.
(a) This Plan is effective as of December 1, 2004 (the " Plan Effective Date ").
(b) Only Nonemployee Directors shall be eligible to participate in this Plan.
3. Awards.
(a) On December 29, 2004:
(i) Each Nonemployee Director who was elected to the Board on or before November 18, 2004 shall receive eight thousand (8,000) Shares of Restricted Stock.
(ii) Each Nonemployee Director who was elected to the Board on or after November 22, 2004 but prior to November 30, 2004 shall receive five thousand (5,000) Shares of Restricted Stock.
(iii) Each Nonemployee Director who was a Nonemployee Director as of December 1, 2004 shall receive four thousand five hundred (4,500) Shares of Restricted Stock, in addition to the Shares of Restricted Stock that he may have received under Sections 3(a)(i) or 3(a)(ii).
(b) On each December 1, commencing with December 1, 2005:
(i) Each Nonemployee Director who was not on the preceding December 1 a Director shall receive a one-time Award consisting of RSUs whose underlying Shares shall have, on the date of grant, a FMV (as defined below) equal to $80,000; provided that he was duly elected to be a Director at the annual meeting of stockholders of the Company immediately preceding such December 1 (or pursuant to a written consent of the stockholders of the Company in lieu thereof).
(ii) Each Nonemployee Director shall receive (A) an Award consisting of RSUs whose underlying Shares shall have, on the date of grant, a FMV equal to $50,000 and (B) an annual retainer Award consisting of an amount in cash equal to $40,000, which Cash-Based Award may be converted into deferred stock units (" DSUs ") in accordance with Section 4(c) or deferred in accordance with Section 4(d); provided that he was duly elected to continue as a Director at the annual meeting of stockholders of the Company immediately preceding such December 1 (or pursuant to a written consent of the stockholders of the Company in lieu thereof).
(iii) For purposes of this Plan, " FMV " means, in accordance with Section 2.19 of the Plan, the fair market value of a Share, as determined in good faith by the Committee. In determining FMV, the Committee may consider such valuation methodologies and factors as it deems appropriate, which may include one or more of the methodologies and/or factors listed in Exhibit A attached hereto, and, if desired by the Committee, may take into consideration the advice of third-party advisors.
(c) Any Nonemployee Director who is elected to fill a vacancy or a newly created directorship in the interim shall receive, effective as of the date of such election, a prorated Award under Sections 3(a)(iii) or 3(b)(ii), as applicable, based upon the number of full months he shall serve as a Director between the month in which he is elected and the next December 1.
(d) All Shares of Restricted Stock, RSUs, DSUs and Cash-Based Awards under this Plan are subject to the terms and conditions set forth in Section 4.
(e) Each Restricted Stock or RSU grant under this Plan shall be evidenced by an Award Document. An acceptable form of an Award Document for a Restricted Stock grant is attached hereto as Exhibit B , and an acceptable form of an Award Document for a RSU grant is attached hereto as Exhibit C .
4. Terms and Conditions of Awards.
(a) Restricted Stock .
(i) Shares of Restricted Stock granted under Section 3(a) shall be unvested and forfeitable until ten (10) days after the earlier of (x) the Participant attains age fifty-five (55) and completes at least five (5) years service as a Director or (y) the Participant resigns from the Board or ceases to be a Director, in either case, by reason of the antitrust laws, compliance with the Company's conflict of interest policies, death or Disability, at which time (the " Restricted Stock Vesting Date ") such Shares shall be considered vested and non-forfeitable. If a Participant terminates his service as a Director without satisfying the conditions contained in clause (x) above and other than in connection with an event described in clause (y) above, then (A) his Restricted Stock shall be forfeited without any payment therefor and (B) for purposes of Section 4.2 of the 2004 LTIP, the Shares of Restricted Stock shall again be available for issuance under the 2004 LTIP.
For purposes of this Plan, " Disability ", with respect to a Nonemployee Director, shall mean a mental or physical illness that renders him totally disabled for six (6) consecutive months.
(ii) Shares of Restricted Stock shall carry full voting and dividend rights; provided, however , that any cash dividends with respect to any such Shares of Restricted Stock shall be reinvested in Shares (" Dividend Shares ") and any such Dividend Shares and any stock dividends with respect to any Shares of Restricted Stock shall be subject to the same restrictions as the underlying Shares of Restricted Stock.
(iii) Shares of Restricted Stock shall not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant until the Restricted Stock Vesting Date; provided, however , that they shall be transferable (A) by will or by the laws of descent and distribution; or (B) to (1) a member of such Participant's immediate family (as defined in Rule 16a-1(e) under the Exchange Act); (2) a trust in which one or more permitted transferees described in clause (1) in the aggregate have more then fifty percent (50%) of the beneficial interest; (3) a foundation in which one or more of the permitted transferees described in clause (1) and such Participant in the aggregate control the management of the assets and (4) any other entity in which one or more permitted transferees described in clause (1) and such Participant in the aggregate own more then fifty percent (50%) of the voting interests; provided that any permitted transferees described in any of the foregoing four clauses shall be subject to the same terms and conditions of this Award to which such Participant is subject ( e.g. , restrictions on transfer, forfeiture, "put", "call" and "drag-along" rights, etc.).
(iv) Shares of Restricted Stock shall be held for a Participant by the Company (or its designee) and shall be evidenced by book-entry in the Company's books. The Participant in whose name such Shares are registered shall execute a stock power or other instrument of assignment
2
endorsed in blank which shall permit transfer to the Company of all or any portion of such Shares that shall be forfeited pursuant to Section 4(a)(i).
(v) By receiving an Award of Restricted Stock, the Participant shall, to the extent applicable, be deemed to (A) acknowledge that such Shares have not been registered under the Securities Act or any other applicable securities or "blue sky" laws; (B) represent and warrant that such Participant has acquired such Shares without a view to the offer, offer for sale, or sale in connection with, the distribution of such Shares, and that such Participant shall hold such Shares indefinitely unless subsequently registered under the Securities Act or such other applicable securities or "blue sky" laws, or unless exemption from such registration is available; (C) acknowledge that the Company does not currently file, and does not in the foreseeable future contemplate filing, periodic reports in accordance with the provisions of Section 13 or 15(d) of the Exchange Act; and (D) understand that the Company has not agreed to register any of its securities for distribution in accordance with the provisions of the Securities Act or to take any actions respecting the obtaining of an exemption from registration for such securities or any transaction with respect thereto.
(vi) To the extent applicable, in addition to any other legend that may be required, any certificate for Shares of Restricted Stock issued to a Participant shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY FOREIGN OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. IN ADDITION, THE SALE OR TRANSFER OF THIS SECURITY REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE IHS INC. 2004 LONG-TERM INCENTIVE PLAN (THE "2004 LTIP"), THE IHS INC. 2004 DIRECTORS STOCK PLAN (THE "2004 DIRECTORS PLAN"), A SUB-PLAN OF THE 2004 LTIP AND THE RESTRICTED STOCK AWARD AWARDED UNDER THE 2004 LTIP AND THE 2004 DIRECTORS PLAN, COPIES OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM IHS INC. OR ANY SUCCESSOR THERETO.
(vii) As a condition to a Participant's receiving an Award of Restricted Stock, he shall be required to execute and deliver an irrevocable proxy in the form provided by the Company, appointing Urvanos Investments Limited to vote the Shares that he receives in connection with his Award and any other Shares that he owns as of the date of the proxy or may acquire until the Expiration Date (as defined in the proxy). The proxy shall automatically terminate on the Expiration Date.
(b) RSUs .
(i) Each RSU granted under Section 3(b) shall represent a Participant's right to receive one Share, which right shall be unvested and forfeitable until the first anniversary of the date of grant (the " RSU Vesting Date "). If a Participant terminates his service as a Director prior to the RSU Vesting Date, then (1) his RSUs shall be forfeited without any payment therefor and (2) for purposes of Section 4.2 of the 2004 LTIP, the Shares underlying such RSUs shall again be available for issuance under the 2004 LTIP.
(ii) Following the RSU Vesting Date, the Shares underlying a Participant's RSUs shall be delivered to him on the tenth (10 th ) day following his termination of service as a Director for any reason, including for death or Disability (the " RSU Delivery Date ").
3
(iii) RSUs shall carry no voting rights.
(iv) RSUs shall be credited with Dividend Equivalents, which shall have the same unvested or vested status as the underlying RSUs. Dividend Equivalents shall be paid out in the form of Shares (or such other cash, securities or other property that may be or become the consideration for such Shares in the event of an acquisition of the Company or its successor) at the same time that the Shares underlying the RSUs are delivered.
(v) RSUs, and the Shares underlying such RSUs, may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant until the RSU Delivery Date.
(c) DSUs .
(i) A Participant may elect to convert his annual retainer Award into DSUs whose underlying Shares shall have, on the date of grant, a FMV equal to $40,000; provided that such election is made before the close of the calendar year preceding the calendar year in respect of which the annual retainer Award is made. Each DSU shall represent such Participant's right to receive one Share, which right shall be fully vested and non-forfeitable.
(ii) The Shares underlying a Participant's DSUs shall be delivered to him on the tenth (10 th ) day following his termination of service as a Director for any reason, including for death or Disability (the " DSU Delivery Date ").
(iii) DSUs shall carry no voting rights.
(iv) DSUs shall be credited with Dividend Equivalents, which shall also be fully vested and non-forfeitable. Dividend Equivalents shall be paid out in the form of Shares (or such other cash, securities or other property that may be or become the consideration for such Shares in the event of an acquisition of the Company or its successor) at the same time that the Shares underlying the DSUs are delivered.
(v) DSUs, and the Shares underlying such DSUs, may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant until the DSU Delivery Date.
(d) Deferral of Annual Retainer Award . A Participant may elect to defer payment of his annual retainer Award; provided that such election is made before the close of the calendar year preceding the fiscal year in respect of which the annual retainer Award is made. Such annual retainer Award shall be paid to such Participant in accordance with his deferral election, which date of payment shall be (i) a specified date that is at least two (2) years following the date of election, (ii) on the tenth (10 th ) day following his termination of service as a Director for any reason, including for death or Disability, (iii) the occurrence of an unforeseeable emergency resulting in severe financial hardship, to the extent necessary to relieve the hardship and pay any applicable taxes or (iv) in the event of a Change in Control; provided that for purposes of this Section 4(d)(iv), if such payment is not permitted under the regulations promulgated by the Treasury Secretary pursuant to federal legislation currently referred to as the American Jobs Creation Act of 2004 (the " Jobs Act Regulations "), then such payment shall be made in accordance with Section 4(d)(ii).
(e) "Put", "Call" and "Drag-Along" Rights .
(i) If no Listing Event (as defined below) occurs on or prior to the Relevant Date (as defined below), then each Participant shall have the one-time right and option to sell to the Company, and to cause the Company to purchase, all of the Shares held by him (including, for these purposes, any Shares underlying RSUs or DSUs) as of such date (the " Put Right "). The Put Right may be exercised by such Participant delivering written notice (a " Put Notice ") to the Company within twenty (20) calendar days following the Relevant Date (the " Put Deadline ") and shall expires at 11:59 pm of the Put Deadline. The Company shall, by written notice to such Participant, fix a closing date (the " Put Closing Date ") for the purchase, which
4
shall be not less than two (2) days after the date of receipt of the Put Notice. The Shares subject to the Put Notice shall be purchased by the Company at a purchase price (the " Put Purchase Price ") equal to the FMV of such Shares at the FMV Determination Date (as defined below) immediately preceding the date of the Put Notice. The Put Purchase Price shall be payable in cash on the Put Closing Date.
(ii) If no Listing Event occurs on or prior to the Relevant Date, then the Company shall have the exclusive one-time right and option to purchase from each Participant, and to cause each Participant to sell, all or a portion of the Shares held by you (including, for these purposes, any Shares underlying RSUs or DSUs) as of such date (the " Call Right "). The Call Right may be exercised by the Company delivering to such Participant written notice (a " Call Notice ") within twenty (20) calendar days following the Relevant Date (the " Call Deadline ") and shall expire at 11:59 pm of the Call Deadline. The Call Notice shall indicate the number of Shares which the Company intends to purchase from such Participant and the closing date (the " Call Closing Date ") for the purchase, which shall be not less than two (2) days after the date of the Call Notice. The Shares subject to the Call Notice shall be purchased by the Company at a purchase price (the " Call Purchase Price ") equal to the FMV of such shares at the FMV Determination Date immediately preceding the date of the Call Notice. The Call Purchase Price shall be payable in cash on the Call Closing Date.
(iii) Subject to Section 4(e)(iv), in the event of a Change in Control, all Shares of Restricted Stock shall vest in full and be free of restrictions (and, in the case of RSUs and DSUs, a Participant's right to receive the Shares underlying such RSUs and DSUs, as applicable, shall be accelerated such that he shall receive such Shares immediately prior to the closing of the acquisition transaction (at which time such RSUs and/or DSUs shall automatically be cancelled)), and such Participant shall participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company. If a Change in Control occurs prior to a Listing Event, then the Company shall have the exclusive right and option to require each Participant to sell or otherwise transfer to the acquiring party(ies) effecting such Change in Control (the " Acquiror ") all or a portion of such Shares held (including, for these purposes, any Shares underlying RSUs or DSUs) as of the effective date of such Change in Control, in each case for the same consideration per Share and on the same terms and conditions as all other Company stockholders (the " Drag-Along Right "). The Drag-Along Right may be exercised by the Company delivering to such Participant written notice (the " Drag-Along Notice "), specifying the number of Shares which will be sold or otherwise transferred by such Participant to the Acquiror, the consideration per Share and the closing date for such sale or other transfer, which shall be not less than two (2) days after the date of the Drag-Along Notice. The Shares subject to the Drag-Along Notice shall be sold or otherwise transferred to the Acquiror in accordance with the terms of the Drag-Along Notice.
(iv) The delivery date of any Shares underlying RSUs and DSUs shall accelerate only if such acceleration is permitted under the Jobs Act Regulations. If the acceleration of such delivery date is not permitted under such Jobs Act Regulations, then on the tenth (10 th ) day following his termination of service as a Director of the Company (or its successor) for any reason, including for death or Disability, for each Share underlying RSUs or DSUs, as applicable, a Participant shall receive the same per share consideration received by the Company's stockholders for each Share in the acquisition (at which time such RSUs and/or DSUs shall automatically be cancelled).
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(v) For purposes of this Section 4(e), the following terms shall have definitions set forth below:
(A) " FMV Determination Date " means the applicable date on which FMV is determined by the Committee for purposes of this Section 4(e).
(B) " Listing Event " means the occurrence of the listing or quoting of Shares on any established stock exchange (including, without limitation, the New York Stock Exchange) or a national market system (including, without limitation, The Nasdaq National Market or The Nasdaq Small Cap Market of The Nasdaq Stock Market) on which securities are listed or quoted.
(C) " Relevant Date " means, with respect to a Participant (x) for purposes of Shares of Restricted Stock, such Participant's Restricted Stock Vesting Date and (y) for purposes of RSUs and DSUs, the date that is the tenth (10 th ) day following such Participant's termination of service as a Director for any reason, including for death or Disability.
5. Amendment, Termination, Suspension and Termination.
Awards under this Plan are subject to Article 19 of the 2004 LTIP.
6. Miscellaneous.
(a) No Right to Nomination . Nothing contained in this Plan shall confer upon any Director the right to be nominated for re-election to the Board.
(b) Duration of This Plan . Unless sooner terminated as provided in this Plan, this Plan shall terminate ten (10) years from the Plan Effective Date. After this Plan is terminated, no Awards may be granted, but any Award previously granted shall remain outstanding in accordance with the terms and conditions of this Plan and such Award's Award Document.
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EXHIBIT A
VALUATION METHODOLOGIES
Under specified circumstances, the Committee will determine the FMV of Shares in good faith in its sole discretion. In order to determine FMV in the absence of a public trading market, the Committee will consider the following methodologies in determining FMV.
The Committee will assess the range of valuations indicated by the above methodologies and select what it deems to be the most representative indicator of fair market value.
A-1
EXHIBIT B
IHS INC.
DIRECTORS STOCK PLAN
AWARD DOCUMENTRESTRICTED STOCK
Nonemployee Director Name: |
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[Full Name] |
||
Address: |
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[Address] |
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Grant Date: |
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/ /20 |
||
Number: |
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[Number] of Shares of Restricted Stock |
||
FMV per Share: |
|
$ per Share |
||
Total FMV of Award: |
|
$ |
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IHS INC. |
||
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By: |
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Name: Title: |
B-1
EXHIBIT C
IHS INC.
DIRECTORS STOCK PLAN
AWARD DOCUMENTRSUs
Nonemployee Director Name: |
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[Full Name] |
||
Address: |
|
[Address] |
||
Grant Date: |
|
/ /20 |
||
Number: [Number] of Shares underlying RSUs |
||||
FMV per Share underlying RSUs: |
|
$ per Share |
||
Total FMV of Award: |
|
$ |
|
|
IHS INC. |
||
|
|
By: |
|
|
Name: Title: |
C-1
IHS INC.
2004 LONG-TERM INCENTIVE PLAN
2004 RESTRICTED STOCK AWARD
Unless defined in this Restricted Stock Award (this " Award Document "), capitalized terms will have the same meanings ascribed to them in the IHS Inc. 2004 Long-Term Incentive Plan (as may be amended from time to time, the " Plan ").
Pursuant to Section 8 of the Plan, you have been granted restricted Shares on the following terms and subject to the provisions of the Plan, which is incorporated by reference. In the event of a conflict between the provisions of the Plan and this Award Document, the provisions of the Plan will prevail.
Participant:
Total Number of Shares Granted:
Fair Market Value per Share:
Total Fair Market Value of Award:
Grant Date:
Vesting Schedule:
By your signature and the signature of the Company's representative below, you and the Company agree that these Shares are granted under and governed by the terms and conditions of the Plan and the terms and conditions set forth in the attached as Exhibit A .
RECIPIENT |
|
|
|
IHS INC. |
|
|
|
|
|
By: |
|
Print Name |
Title: |
|
IHS INC.
2004 LONG-TERM INCENTIVE PLAN
2004 RESTRICTED STOCK AWARD
Unless defined in this Restricted Stock Award (this " Award Document "), capitalized terms will have the same meanings ascribed to them in the IHS Inc. 2004 Long-Term Incentive Plan (as may be amended from time to time, the " Plan ").
Pursuant to Section 8 of the Plan, you have been granted restricted Shares on the following terms and subject to the provisions of the Plan, which is incorporated by reference. In the event of a conflict between the provisions of the Plan and this Award Document, the provisions of the Plan will prevail.
Participant: | Charles Picasso | |
Total Number of Shares Granted: |
|
240,000 Shares |
Fair Market Value per Share: |
|
$8.61 per Share |
Total Fair Market Value of Award: |
|
$2,066,400 |
Grant Date: |
|
December 23, 2004 |
Vesting Schedule: |
|
25% will vest on October 15, 2006, another 25% will vest on October 15, 2007 and the last 50% will vest on October 15, 2008; provided, however , that in the event of a Change in Control, this Award shall vest in full and be free of restrictions, and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company; and provided further that in the event of your death or termination of employment due to your Disability (as defined in Exhibit A attached), this Award shall vest in full and be free of restrictions. |
By your signature and the signature of the Company's representative below, you and the Company agree that these Shares are granted under and governed by the terms and conditions of the Plan and the terms and conditions set forth in the attached as Exhibit A .
RECIPIENT |
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|
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IHS INC. |
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/s/ CHARLES A. PICASSO |
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|
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By: |
/s/ S. AUXER |
Charles A. Picasso Print Name |
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Title: |
Senior Vice President IHS Inc. |
IHS INC.
2004 LONG-TERM INCENTIVE PLAN
2004 RESTRICTED STOCK AWARD
Unless defined in this Restricted Stock Award (this " Award Document "), capitalized terms will have the same meanings ascribed to them in the IHS Inc. 2004 Long-Term Incentive Plan (as may be amended from time to time, the " Plan ").
Pursuant to Section 8 of the Plan, you have been granted restricted Shares on the following terms and subject to the provisions of the Plan, which is incorporated by reference. In the event of a conflict between the provisions of the Plan and this Award Document, the provisions of the Plan will prevail.
Participant: | Jerre Stead | |
Total Number of Shares Granted: |
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200,000 Shares |
Fair Market Value per Share: |
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$8.61 per Share |
Total Fair Market Value of Award: |
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$1,722,000 |
Grant Date: |
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December 23, 2004 |
Vesting Schedule: |
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1 / 3 rd will vest on November 30, 2005, another 1 / 3 rd will vest on November 30, 2006 and the last 1 / 3 rd will vest on November 30, 2007; provided, however , that in the event of a Change in Control, this Award shall vest in full and be free of restrictions, and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company; and provided further that in the event of your death or termination of employment due to your Disability (as defined in Exhibit A attached), this Award shall vest in full and be free of restrictions. |
By your signature and the signature of the Company's representative below, you and the Company agree that these Shares are granted under and governed by the terms and conditions of the Plan and the terms and conditions set forth in the attached as Exhibit A .
RECIPIENT |
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IHS INC. |
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/s/ JERRE L. STEAD |
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By: |
/s/ S. AUXER |
Jerre L. Stead
Print Name |
Title: |
Senior Vice President IHS Inc.
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IHS INC.
2004 LONG-TERM INCENTIVE PLAN
2004 RESTRICTED STOCK AWARD
Unless defined in this Restricted Stock Award (this " Award Document "), capitalized terms will have the same meanings ascribed to them in the IHS Inc. 2004 Long-Term Incentive Plan (as may be amended from time to time, the " Plan ").
Pursuant to Section 8 of the Plan, you have been granted restricted Shares on the following terms and subject to the provisions of the Plan, which is incorporated by reference. In the event of a conflict between the provisions of the Plan and this Award Document, the provisions of the Plan will prevail.
Participant: | John Oechsle | |
Total Number of Shares Granted: |
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17,000 Shares |
Fair Market Value per Share: |
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$8.61 per Share |
Total Fair Market Value of Award: |
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$146,370 |
Grant Date: |
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December 23, 2004 |
Vesting Schedule: |
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25% will vest on October 15, 2006, another 25% will vest on October 15, 2007 and the last 50% will vest on October 15, 2008; provided, however , that in the event of a Change in Control, this Award shall vest in full and be free of restrictions, and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company; and provided further that in the event of your death or termination of employment due to your Disability (as defined in Exhibit A attached), this Award shall vest in full and be free of restrictions. |
By your signature and the signature of the Company's representative below, you and the Company agree that these Shares are granted under and governed by the terms and conditions of the Plan and the terms and conditions set forth in the attached as Exhibit A .
RECIPIENT |
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IHS INC. |
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/s/ H. JOHN OECHSLE |
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By: |
/s/ S. AUXER |
H. John Oechsle Print Name |
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Title: |
Senior Vice President IHS |
OFFER UNDER THE
NON-QUALIFIED STOCK OPTION PLAN
(EFFECTIVE DECEMBER 1, 1998) AND THE
2002 NON-QUALIFIED STOCK OPTION PLAN OF IHS GROUP INC.
THIS OFFER WILL EXPIRE
AT 11:59 PM, EASTERN TIME, ON THURSDAY, DECEMBER 23, 2004,
UNLESS IHS GROUP INC. EXTENDS THE OFFER.
IHS Group Inc., a Colorado corporation (" IHS "), is making this offer upon the terms and subject to the conditions set forth in this Offer Plan (this " Offer Plan ") and in the related Letter of Transmittal (the " Letter of Transmittal ," which together with the Offer Plan, as they may be amended or supplemented from time to time, constitute the " Offer ").
THE INFORMATION IN THIS OFFER IS CONFIDENTIAL, PARTICULARLY INFORMATION WITH RESPECT TO A POTENTIAL INITIAL PUBLIC OFFERING. YOU SHOULD NOT DISCLOSE THIS INFORMATION TO ANYONE OTHER THAN YOUR LEGAL, INVESTMENT AND/OR TAX ADVISORS.
IHS IS NOT MAKING THE OFFER TO, NOR WILL IHS ACCEPT ANY TENDER OF OPTIONS OR SHARES FROM OR ON BEHALF OF, ANY OPTION HOLDERS OR HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE OFFER OR THE ACCEPTANCE OF ANY TENDER OF OPTIONS OR SHARES, OR THE DELIVERY OF RESTRICTED STOCK, WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
THE DATE OF THIS OFFER PLAN IS NOVEMBER 22, 2004.
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SUMMARY TERM SHEET | 1 | |||
INTRODUCTION |
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10 |
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THE OFFER |
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10 |
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1. |
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The Offer; Number of Options; Expiration Date |
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10 |
2. |
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Purpose of the Offer |
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3. |
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Procedures for Tendering Options |
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4. |
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Acceptance of Options and/or IHS Shares |
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5. |
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Conditions of the Offer |
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6. |
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Terms of Restricted and Unrestricted Company Shares |
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7. |
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Material U.S. Federal Income Tax Consequences |
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8. |
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Non-U.S. Income Tax Consequences |
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19 |
9. |
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Extension of Offer; Termination; Amendment |
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19 |
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The following are answers to some of the questions that you may have about the Offer. We urge you to read carefully the remainder of this Offer Plan and the accompanying Letter of Transmittal because the information in this summary is not complete and additional important information is contained in the remainder of this document and the Letter of Transmittal.
WHAT ARE WE OFFERING?
We are offering to exchange all outstanding stock options to purchase shares of our Class A non-voting common stock (" IHS Shares ") that were granted:
and IHS Shares previously acquired upon the prior exercise of such an option. If you are a current senior executive and you accept this offer, then you will receive the following:
If you wish to accept the Offer, then you must tender:
on or before the expiration of the Offer, currently scheduled for Thursday, December 23, 2004. The Offer is not conditioned upon any minimum threshold number of options or IHS Shares being tendered, but is subject to conditions that we describe in Section 5 of this Offer Plan.
HOW DID WE ARRIVE AT THE $9.42 PER IHS SHARE AMOUNT?
In accordance with the terms of the Option Plans, the committee administering the Option Plans determined the fair market value of an IHS Share on the most recent fair market value determination date under the Option Plans to be $9.42.
WHY ARE WE MAKING THE OFFER?
We are currently considering a possible initial public offering (an " IPO "). Upon a review of our incentive programs and consultation with our advisors, including our compensation consultants, we believe this Offer will more closely align our programs with the incentive programs of public companies. We are also making this Offer in order to provide you with an opportunity to obtain an equity stake in the Company and, if applicable, cash. The Company is the indirect parent company of IHS and, if there were to be an IPO of the IHS enterprise, it would likely be the Company stock that would be offered and sold to the public.
UNDER WHAT CIRCUMSTANCES WILL I RECEIVE AN EQUITY STAKE IN THE IHS ENTERPRISE?
If you accept the Offer, then you will receive an equity stake in the IHS enterprise. For every three IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option), you will receive one restricted Company Share upon terms and conditions specified in the next paragraph. No fractional restricted Company Shares will be issued or delivered pursuant to this Offer. As a result, you may forfeit up to two IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option) without the grant of a restricted Company Share in exchange.
You will receive your restricted Company Shares regardless of whether your options are vested or unvested, and regardless of their exercise price, as soon as reasonably practicable following the expiration of the Offer (unless the Offer is extended). The expiration of the Offer is currently scheduled for Thursday, December 23, 2004. Subject to the following sentence, your restricted Company Shares will vest ( i.e. , become unrestricted) in accordance with the following schedule:
If your employment with IHS or the Company terminates for any reason other as a result of your death or Disability (as defined in Section 1 of this Offer Plan) before all of your restricted Company Shares vest, unless the board of directors of the Company (or a committee thereof) determines otherwise, you will forfeit your remaining unvested restricted Company Shares as of the date of your termination of employment. If your employment with IHS or the Company terminates as a result of your death or Disability:
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UNDER WHAT CIRCUMSTANCES WILL I RECEIVE CASH?
If you accept the Offer, then you will receive:
You will not be required to be an employee or director of IHS or the Company to receive your cash.
IS IT POSSIBLE TO RECEIVE BOTH RESTRICTED COMPANY SHARES AND CASH?
Yes. If (1) you have options with an exercise price lower than $9.42 per share or (2) you have IHS Shares from previously exercising options, and you accept the Offer, then you will receive both restricted Company Shares and cash.
CAN YOU SHOW ME SOME EXAMPLES?
Example 1: You have an outstanding option to purchase 300 IHS Shares granted under an Option Plan. The exercise price of this option is $5.38 per share. You have never exercised this option. If you accept the Offer, then you will tender this option to us and, in exchange, receive (1) 100 restricted Company Shares plus (2) $1,212 in cash, before any applicable withholding. The $1,212 in cash was derived by taking the excess of $9.42 over $5.38 ( i.e. , $4.04) and multiplying that by the number of IHS Shares underlying your option ( i.e. , 300 IHS Shares).
Example 2: You were granted an option to purchase 300 IHS Shares under an Option Plan. The exercise price of this option was $5.38 per share, and in March 2004, you exercised this option in full ( i.e. , you previously acquired 300 IHS Shares). You took a loan from IHS to purchase the IHS Shares in the amount of $1614 ( i.e. , $5.38 per share multiplied by 300). You surrendered 50 IHS Shares to satisfy your payroll tax withholding. If you accept the Offer, then you will tender your IHS Shares to us and, in exchange, receive (1) 100 restricted Company Shares plus (2) $762 in cash, before any applicable withholding. The $762 in cash was derived by:
Example 3: You were granted an option to purchase 300 IHS Shares under an Option Plan. The exercise price of this option was $5.38 per share, and in March 2004, you exercised this option in part by acquiring 120 IHS Shares. You surrendered 20 IHS Shares to satisfy your payroll tax withholding.
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You still hold an option to purchase 180 IHS Shares. If you accept the Offer, then you will tender your remaining option and your IHS Shares to us and, in exchange, receive (1) 100 restricted Company Shares plus (2) $1,677.60 in cash, before any applicable withholding. The $1,677.60 in cash was derived by:
Example 4: You have an outstanding option to purchase 300 IHS Shares granted under an Option Plan. The exercise price of this option is $13.42 per share. You have never exercised this option. If you accept the Offer, then you will tender this option to us and, in exchange, receive 100 restricted Company Shares.
IF I CHOOSE TO ACCEPT THE OFFER, DO I HAVE TO TENDER ALL MY OPTIONS AND PREVIOUSLY ACQUIRED IHS SHARES?
Yes. If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option.
CAN I TENDER OPTIONS THAT I HAVE ALREADY EXERCISED?
No, you cannot tender an option that you have already fully exercised, but you can tender the IHS Shares that you previously acquired upon exercise of that option and continue to hold.
CAN I TENDER UNVESTED OPTIONS?
Yes, you may tender your options, regardless of whether such options are vested or unvested.
WHEN WILL I RECEIVE MY RESTRICTED COMPANY SHARES AND, IF APPLICABLE, CASH?
You will receive your restricted Company Shares and, if applicable, cash as soon as reasonably practicable following the expiration of the Offer (unless the Offer is extended). If your tender of options and/or IHS Shares is accepted prior to the expiration of the Offer, we may, in our sole discretion, pay your cash amount (if applicable) to you prior to the expiration of the Offer. The expiration of the Offer is currently scheduled for Thursday, December 23, 2004.
WHEN WILL MY RESTRICTED COMPANY SHARES VEST?
Your restricted Company Shares will vest ( i.e. , become unrestricted) in accordance with the following schedule:
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For example, if you were to receive 300 restricted Company Shares in the Offer and, hypothetically, an IPO of the Company were to occur on May 13, 2005:
However, if you are no longer employed by IHS or the Company as of the applicable vesting date, other than in the case of a termination of your employment resulting from your death or Disability, unless the board of directors of the Company (or a committee thereof) determines otherwise, you will forfeit all of your remaining restricted Company Shares as of the date of your termination of employment.
WHY AM I RECEIVING RESTRICTED COMPANY SHARES SUBJECT TO A VESTING SCHEDULE?
While your restricted Company Shares will generally not be taxable to you upon your receipt, unrestricted Company Shares will be taxable to you immediately upon your receipt. If unrestricted Company Shares were granted to you sooner than the 211 th day following an IPO, you might be subject to an underwriters' lock-up (which typically lasts for 210 days following an IPO), in which case, you would not be able to sell or otherwise transfer your Company Shares, even though you would have a tax liability with respect to those Company Shares. To avoid a situation where you would have to pay your taxes, without having the immediate resources to do so, we have designed the Offer so that you would only be liable for taxes at a time when you would actually be able to sell or otherwise transfer a sufficient number of Company Shares to cover your tax liability. In addition, our Board of Directors believes that the benefit of the restricted Company Shares should be realized by its senior executives who remain with IHS or the Company in the period leading up to the IPO and following an IPO of the Company. As long as you remain with IHS or the Company, your restricted Company Shares will by fully vested no later than October 1, 2007.
DO I NEED TO BE AN EMPLOYEE OF IHS OR THE COMPANY IN ORDER FOR MY RESTRICTED COMPANY SHARES TO VEST?
Yes. If your employment with IHS or the Company terminates for any reason other as a result of your death or Disability before all of your restricted Company Shares vest, unless the board of directors of the Company (or a committee thereof) determines otherwise, you will forfeit your remaining unvested restricted Company Shares as of the date of your termination of employment.
DO I NEED TO BE AN EMPLOYEE OF IHS OR THE COMPANY IN ORDER TO RECEIVE MY CASH?
No. You will not be required to be an employee of IHS or the Company to receive your cash.
WILL I BE ABLE TO TRANSFER MY RESTRICTED COMPANY SHARES?
Generally, you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your restricted Company Shares, unless the board of directors of the Company (or a committee
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thereof) permits their transfer. The two exceptions to this general rule are that you will be able to accomplish such transfers:
Currently, we do not anticipate that the board of directors of the Company (or a committee thereof) will permit any other transfers of restricted Company Shares.
WILL I BE ABLE TO TRANSFER MY VESTED COMPANY SHARES PRIOR TO THE OCCURRENCE OF AN IPO OR A CHANGE IN CONTROL?
If an IPO of the IHS enterprise or a Change in Control (as defined in Section 1 of the Offer Plan) has not occurred on or prior to October 1, 2007, you will have an opportunity to sell your Company Shares to the Company (and the Company will have an opportunity to buy your Company Shares) upon your notification to the Company (or upon the Company's notification to you), which notification must be delivered within 20 calendar days following October 1, 2007.
WILL I BE ABLE TO TRANSFER MY VESTED COMPANY SHARES FOLLOWING AN IPO?
Yes, subject to whatever securities and other applicable laws and policies of the Company ( e.g. , a trading policy, a share retention policy) or contractual obligations ( e.g. , an underwriters' lock-up following an IPO), which may apply to you or a transfer of Company Shares by you.
WHAT ARE THE TAX CONSEQUENCES IF I TENDER MY OPTIONS?
Generally, if you are a U.S. resident holder you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
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While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of receiving restricted Company Shares.
WHAT ARE THE TAX CONSEQUENCES IF I TENDER MY PREVIOUSLY ACQUIRED IHS SHARES?
Generally, if you are a U.S. resident holder you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of receiving restricted Company Shares.
WHAT ARE THE TAX CONSEQUENCES IF THE ACCRUED INTEREST ON MY LOAN IS FORGIVEN?
Generally, if you are a U.S. resident holder, you will have the following tax consequences under current U.S. tax law for federal income tax purposes. The accrued interest on the principal amount of your loan that we forgive will be taxable to you as ordinary income at the end of the taxable year in which the forgiveness occurred (subject to withholding in the same manner as other compensation). While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of our forgiving the accrued interest on the principal amount of your loan.
WHAT ARE THE TAX CONSEQUENCES IF I AM GOVERNED BY NON-U.S. TAX LAW?
Tax laws in other countries may differ from those in the United States. We recommend that you consult your own tax advisor with respect to the foreign tax consequences of participating in the Offer.
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ARE THERE ANY CONDITIONS TO THE OFFER?
The Offer is not conditioned upon any minimum threshold number of options or IHS Shares being tendered. However, the Offer is subject to a number of other conditions with regard to events that could occur before the expiration of the Offer. These events include a change in accounting principles or a lawsuit challenging the Offer. These and various other conditions are more fully described in Section 5 of this Offer Plan.
WHAT HAPPENS IF A CHANGE IN CONTROL OF IHS OCCURS DURING THE PERIOD AFTER I HAVE TENDERED MY OPTIONS OR IHS SHARES BUT BEFORE I RECEIVE MY COMPANY SHARES?
If we are acquired during the period between the date when you receive your restricted Company Shares (and, if applicable, cash) and the date when your restricted Company Shares vest, then the vesting of your restricted Company Shares will be accelerated such that your restricted Company Shares will vest in full immediately prior to the closing of the acquisition transaction, and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company.
WHAT HAPPENS IF I TENDER MY OPTIONS AND/OR IHS SHARES BUT THEY ARE NOT ACCEPTED?
We reserve the right to reject any or all tenders of options and/or shares that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept all properly and timely tendered options and/or shares.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER OPTIONS AND/OR IHS SHARES IN THE OFFER? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED?
You have until 11:59 pm, Eastern Time, on Thursday, December 23, 2004 to tender your options and/or shares in the Offer. This means that you will be able to tender your options and/or shares at any time on or before Thursday, December 23, 2004, including during business hours on that Thursday; however, any options and/or Shares tendered on or after midnight on Friday, December 24, 2004 will not be accepted.
We may, in our sole discretion, extend the Offer at any time, but we cannot assure you that the Offer will be extended or, if extended, for how long. If we extend the Offer, we will make a company-wide announcement (including to subsidiaries and our direct parent company) of the extension no later than 9:00 am, Eastern Time, on the next business day following the previously scheduled expiration date. If we extend the Offer, we may delay the acceptance of any options and/or IHS Shares that have been tendered.
HOW DO I TENDER MY OPTIONS AND/OR IHS SHARES?
If you decide to tender your options and/or IHS Shares, we must receive, before the Offer expires, a properly completed and duly executed Letter of Transmittal, including any stock certificate(s) if applicable. Please mail, fax or hand deliver it to:
Susan
Auxer
IHS Group Inc.
15 Inverness Way East,
Englewood, Colorado 80112
Facsimile: 303-792-9034
E-mail: susan.auxer@ihs.com
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WHAT DOES OUR BOARD OF DIRECTORS THINK OF THE OFFER?
Although our Board of Directors has approved the Offer, neither IHS, the Company nor our or their Board of Directors makes any recommendation as to whether or not you should tender your options and/or IHS Shares for exchange. You must make your own decision whether or not to tender your options and/or IHS Shares for exchange. For questions regarding tax implications or other investment-related questions, you should talk to your own legal, investment and/or tax advisors.
WHY AM I RECEIVING SO MANY DOCUMENTS IN CONNECTION WITH THIS OFFER? DO I HAVE TO REVIEW EVERYTHING?
We are required to provide you with these documents to satisfy our legal obligations and the disclosure requirements of the Securities and Exchange Commission. While the documents may be lengthy, for your benefit as well as for our own, we recommend that you read this entire document and the related Letter of Transmittal carefully before deciding whether or not to exchange your options and/or IHS Shares.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
You should direct questions about the Offer or requests for assistance or additional copies of the Offer Plan or the Letter of Transmittal to Susan Auxer at 303-397-2949 (tel) or susan.auxer@ihs.com (e-mail).
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We are making this offer upon the terms and subject to the conditions set forth in this Offer Plan and in the related Letter of Transmittal.
All tendered options and IHS Shares accepted by us pursuant to the Offer will be canceled and terminated.
If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option. The Offer is not conditioned upon any minimum threshold number of options and/or IHS Shares being tendered. The Offer is subject to conditions that we describe in Section 5 of this Offer Plan.
1. THE OFFER; NUMBER OF OPTIONS; EXPIRATION DATE.
In this offer, IHS is offering to exchange all outstanding stock options to purchase IHS Shares that were granted:
and IHS Shares previously acquired upon the prior exercise of such an option. If you are a current senior executive and you accept this offer, then you will receive the following:
No fractional restricted Company Shares will be issued or delivered pursuant to this Offer. As a result, you may forfeit up to two IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option) without the grant of a restricted Company Share in exchange.
To participate in the Offer, your options and/or IHS Shares must be properly tendered before the Expiration Date (as defined below in Section 3 of this Offer Plan). If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option.
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If your options and/or IHS Shares are properly tendered and accepted for exchange, then unless we terminate the Offer pursuant to its terms and conditions:
Restricted Company Shares
For every three IHS Shares underlying your options granted under the Option Plan (or previously acquired upon the exercise of such an option), you will receive one restricted Company Share. You will receive your restricted Company Shares regardless of whether your options are vested or unvested, and regardless of their exercise price, as soon as reasonably practicable following the Expiration Date.
Your restricted Company Shares will vest ( i.e. , become unrestricted) in accordance with the following schedule:
However, if you are no longer employed by IHS or the Company as of the applicable vesting date, other than in the case of a termination of your employment resulting from your death or Disability (as defined below), unless the board of directors of the Company (or a committee thereof) determines otherwise, you will forfeit all of your remaining restricted Company Shares as of the date of your termination of employment.
If your employment with IHS or the Company terminates as a result of your death or Disability (as defined below):
For purposes of this Offer, " Disability " shall mean a mental or physical illness that entitles you to receive benefits under the long-term disability plan of IHS, the Company or a respective affiliate thereof provided that you remain totally disabled for six consecutive months. If you are not covered by such a plan, "Disability" shall be defined by reference to IHS's or the Company's long-term disability policy as if such policy applied to you.
Cash
You will receive your applicable cash amount as soon as reasonably practicable following the Expiration Date. If your tender of options and/or IHS shares is accepted prior to the expiration of the Offer, we may, in our sole discretion, pay your cash amount (if applicable) to you prior to the expiration of the Offer.
You will not be required to be an employee of IHS or the Company to receive your cash.
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Reservation of Rights; Compliance with Law
We reserve the right to terminate the Offer upon the occurrence of certain events. If the Offer is so terminated, any tendered options and/or IHS Shares will be returned.
We are not making the Offer to, nor will we accept any tender of options or IHS Shares from or on behalf of, any option holders or holders of IHS Shares in any jurisdiction in which the Offer or the acceptance of any tender of options or shares, or the delivery of restricted Company Shares, would not be in compliance with the laws of such jurisdiction. Without limiting the generality of the foregoing, in order to comply with the laws in which option holders or holders of IHS Shares reside or to which they are subject, our board or the board of directors of the Company, as applicable (or a committee thereof), has the power and authority to:
Notwithstanding the above, no person may take any action with respect to the Offer that would violate applicable law.
Change in Control of Us
If we are acquired during the period between the date when you receive your restricted Company Shares (and, if applicable, cash) and the date when your restricted Company Shares vest, then the vesting of your restricted Company Shares will be accelerated such that you restricted Company Shares will vest in full immediately prior to the closing of the acquisition transaction, and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company.
For purposes of the Offer, a Change in Control of us will occur upon the occurrence of an event that constitutes a "Change in Control" under the 2004 Omnibus Incentive Plan of the Company.
2. PURPOSE OF THE OFFER.
We are currently considering a possible initial public offering. Upon a review of our incentive programs and consultation with our advisors, including our compensation consultants, we believe this Offer will more closely align our programs with the incentive programs of public companies. We are also making this Offer in order to provide you with an opportunity to obtain an equity stake in the Company and, if applicable, cash. The Company is the indirect parent company of IHS and, if there were to be an IPO of the IHS enterprise, it would likely be the Company stock that would be offered and sold to the public.
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS AND/OR IHS SHARES, NOR HAVE WE AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. YOU ARE URGED TO EVALUATE CAREFULLY ALL OF THE INFORMATION IN THIS OFFER PLAN AND THE RELATED LETTER OF TRANSMITTAL AND TO CONSULT YOUR
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OWN LEGAL, INVESTMENT AND/OR TAX ADVISORS. YOU MUST MAKE YOUR OWN DECISION WHETHER OR NOT TO TENDER YOUR OPTIONS AND/OR SHARES.
3. PROCEDURES FOR TENDERING OPTIONS.
Proper Tender of Options. To validly tender your options and/or IHS Shares under the Offer, you must, in accordance with the terms of the Letter of Transmittal, properly complete, duly execute and deliver to us the Letter of Transmittal, or a facsimile. If you possess stock certificate(s) representing IHS Shares that you are tendering, you must also deliver to us the original copy of each such stock certificate together with your Letter of Transmittal. We must receive your Letter of Transmittal, and stock certificate(s) if applicable, before the Expiration Date. You should mail, fax or hand deliver it to:
Susan
Auxer
IHS Group Inc.
15 Inverness Way East,
Englewood, Colorado 80112
Telephone No. 303-397-2949
Facsimile No.: 303-792-9034
E-mail: susan.auxer@ihs.com
The term " Expiration Date " means 11:59 pm, Eastern Time, on Thursday, December 23, 2004, unless and until we, in our sole discretion, have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" refers to the latest time and date when the Offer, as so extended, expires. See Section 9 of this Offer Plan for a description of our rights to extend, delay, terminate or amend the Offer. If we do not extend the Offer, you will be able to tender your options and/or IHS Shares at any time on or before Thursday, December 23, 2004, including during business hours on that Thursday; however, any options and/or IHS Shares tendered on or after midnight on Friday, December 24, 2004 will not be accepted.
THE METHOD OF DELIVERY OF YOUR LETTER OF TRANSMITTAL, AND STOCK CERTIFICATE(S) IF APPLICABLE, IS AT YOUR ELECTION AND RISK. IF YOU DELIVER BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE THE DOCUMENTS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our sole discretion, all questions as to form of documents and the validity (including eligibility and time of receipt), form and acceptance of any tender of options and/or IHS Shares. Our determination of these matters will be final and binding on all interested persons, including you. We reserve the right to reject any or all tenders of options and/or shares that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept all properly and timely tendered options and/or shares.
We also reserve the right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular options and/or IHS Shares or any particular option holder or holder of IHS Shares.
No tender of options and/or IHS Shares will be deemed to have been properly made until all defects or irregularities have been cured by the tendering holder or waived by us. Neither we nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any such notice.
Our Acceptance Constitutes an Agreement. Your tender of options and/or IHS Shares pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Offer. Our acceptance for exchange of your options and/or IHS Shares tendered by you pursuant to the Offer
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will constitute a binding agreement between us and you, upon the terms and subject to the conditions of the Offer.
No Employment or Other Rights. The Offer will not confer upon you any right with respect to continuation of employment, consulting relationship or directorship with IHS, the Company or any affiliate thereof, nor shall it interfere in any way with your right or your employer's right to increase or decrease compensation or terminate your employment, consulting relationship or directorship at any time.
Withholding. By accepting the Offer, you acknowledge that IHS or the Company, as applicable, is authorized to withhold from any cash, Company Shares or other compensation or other amount owing to you the amount of withholding taxes due in respect of any tax liability that you incur in connection with the Offer and that IHS or the Company, as applicable, may take such other action (including providing for elective payment of such amount in cash or otherwise by you) as may be necessary or advisable to satisfy all obligations for the payment of such taxes.
Governing law; Jurisdiction and Venue: By accepting the Offer, you acknowledge that the Offer and any documents ancillary thereto (including this Offer Plan and your Letter of Transmittal) will be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Offer or of such ancillary document, and you are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to the Offer or such ancillary document.
Subject to our rights to extend, delay, terminate or amend the Offer, we currently expect that we will accept as soon as reasonably practicable following the Expiration Date all properly tendered options and/or IHS Shares.
4. ACCEPTANCE OF OPTIONS AND/OR IHS SHARES.
Upon the terms and subject to the conditions of the Offer and as soon as reasonably practicable following the Expiration Date, we will accept for exchange and will cancel options and/or IHS Shares properly tendered before the Expiration Date.
For purposes of the Offer, we will be deemed to have accepted for exchange options and/or IHS Shares that are validly tendered when we give oral or written notice to you of our acceptance for exchange of such options and/or IHS Shares, which may be by company-wide (including subsidiaries and our direct parent company) e-mail. Subject to our rights to extend, delay, terminate or amend the Offer, we currently expect that we will accept as soon as reasonably practicable following the Expiration Date all properly tendered options and/or IHS Shares.
As soon as reasonably practicable after we accept tendered options and/or IHS Shares, we will send to each tendering holder a notice indicating our acceptance of your options and/or IHS Shares
5. CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, we will not be required to accept any options and/or IHS Shares tendered for exchange, and we may terminate or amend the Offer, or postpone our acceptance and cancellation of any options and/or IHS Shares tendered for exchange, if at any time on or after the commencement date of the Offer and before the Expiration Date:
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inadvisable for us to proceed with the Offer or with such acceptance and cancellation of options tendered for exchange:
(a) there shall have been any action or proceeding (pending or threatened) or any approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or IHS or any of our affiliates, by any court or any agency, authority or tribunal that, in our reasonable judgment, would or might directly or indirectly:
(1) make the acceptance for exchange of, or grant of restricted Company Shares for, some or all of the tendered options and/or IHS Shares illegal or otherwise restrict or prohibit consummation of the Offer or otherwise relates in any manner to the Offer;
(2) delay or restrict our ability, or render us unable, to accept for exchange, or grant restricted Company Shares for, some or all of the tendered options and/or IHS Shares;
(3) materially impair the contemplated benefits of the Offer to us; or
(4) materially and adversely affect the business, condition (financial or other), income, operations or prospects of IHS or any of our affiliates, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our affiliates;
(b) there shall have occurred any change, development, clarification or position taken in generally accepted accounting principles which could or would require us to record any unexpected compensation expense against our earnings in connection with the Offer for financial reporting purposes; or
(c) any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of IHS or any of our affiliates that, in our reasonable judgment, is or may be material to IHS or any of our affiliates and which materially impairs or may materially impair the contemplated benefits of the Offer to us.
The conditions to the Offer are for our benefit. Before the Expiration Date, we may assert them in our sole discretion, regardless of the circumstances giving rise to them. We may waive them, in whole or in part, at any time and from time to time before the Expiration Date, in our sole discretion, whether or not we waive any other condition to the Offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 5 will be final and binding upon all interested persons, including you.
6. TERMS OF RESTRICTED AND UNRESTRICTED COMPANY SHARES.
Number of Company Shares Available for this Offer. The maximum number of Company Shares available for grant to be received by those whose tendered options and/or IHS Shares have been accepted is the number of Company Shares required to grant all such individuals Company Shares pursuant to the terms of this Offer. Together with the maximum number of Company Shares available for grant under the Offer Plan for non-executives and the Offer Plan for California executives, we currently estimate the maximum number of Company Shares available for grant to be approximately 2,825,000, subject to adjustments for any stock splits, stock dividends and similar events that occur before the grant date of the restricted Company Shares or the vesting of such shares.
Transferability of Restricted Company Shares. Generally, you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your restricted Company Shares, unless the board
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of directors of the Company (or a committee thereof) permits their transfer. The two exceptions to this general rule are that you will be able to accomplish such transfers:
Transferability of Vested Company Shares Following an IPO. Following an IPO of the IHS enterprise, you will be able to freely transfer your Company Shares subject to whatever securities and other applicable laws and policies of the Company ( e.g. , a trading policy, a share retention policy) or contractual obligations ( e.g. , an underwriters' lock-up following an IPO), which may apply to you or a transfer of Company Shares by you.
Transferability of Vested Company Shares Prior to the Occurrence of an IPO. Except for Company Shares withheld in order to satisfy your tax liability (and subject to the "Put Right", "Call Right" and "Drag-Along Right" described below), if your Company Shares vest prior to the occurrence of an IPO of the IHS enterprise or a Change in Control, you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your Company Shares, other than by will or by the laws of descent and distribution or to a permitted transferee described above under "Transferability of Restricted Company Shares", unless the board of directors of the Company (or a committee thereof) permits their transfer.
"Put", "Call" and "Drag-Along" Rights Relating to Company Shares .
If no IPO or Change in Control occurs on or prior to October 1, 2007 (the " Relevant Date "), then you will have the right and option to sell to the Company, and to cause the Company to purchase, all of the Company Shares held by you as of such date (the " Put Right "). The Put Right may be exercised by you delivering to the Company within 20 calendar days following the Relevant Date written notice (the " Put Notice "). The Company will, by written notice to you, fix a closing date (the " Put Closing Date ") for the purchase, which will be not less than two (2) days, but in no event longer than ten (10) days after the date of receipt of the Put Notice. The Company Shares subject to the Put Notice will be purchased by the Company at a purchase price (the " Put Purchase Price ") equal to the Fair Market Value (as defined below) of such Company Shares at the Fair Market Value Determination Date (as defined below) immediately preceding the date of the Put Notice. The Put Purchase Price will be payable in cash on the Put Closing Date.
If no IPO or Change in Control occurs on or prior to the Relevant Date, then the Company has the exclusive right and option to purchase from you, and to cause you to sell, all or a portion of the Company Shares held by you as of such date (the " Call Right "). The Call Right may be exercised by the Company delivering to you within 20 calendar days following the Relevant Date written notice (the " Call Notice "). The Call Notice will indicate the number of Company Shares which the Company intends to purchase from you and the closing date (the " Call Closing Date ") for the purchase, which will be not less than two (2) days, but in no event longer than ten (10) days after the date of the Call Notice. The Company Shares subject to the Call Notice will be purchased by the Company at a purchase price (the " Call Purchase Price ") equal to the Fair Market Value of such shares at the Fair
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Market Value Determination Date immediately preceding the date of the Call Notice. The Call Purchase Price will be payable in cash on the Call Closing Date.
If a Change in Control occurs prior to an IPO, then the Company has the exclusive right and option to require you to sell or otherwise transfer to the acquiring party(ies) effecting such Change in Control (the " Acquiror ") all or a portion of such Company Shares held as of the effective date of such Change in Control, in each case for the same consideration per Company Share and on the same terms and conditions as all other Company stockholders (the " Drag-Along Right "). The Drag-Along Right may be exercised by the Company delivering to you written notice (the " Drag-Along Notice "), specifying the number of shares of Common Stock which will be sold or otherwise transferred by you to the Acquiror, the consideration per Company Share and the closing date for such sale or other transfer, which will be not less than two (2) days after the date of the Drag-Along Notice. The Company Shares subject to the Drag-Along Notice will be sold or otherwise transferred to the Acquiror in accordance with the terms of the Drag-Along Notice.
For purposes of the Offer, the following terms will have definitions set forth below:
Investment Representations. The Company may require any person to whom a restricted Company Share is granted, as a condition of receiving such restricted Company Share, to give written assurances to the Company to the effect that such person is acquiring the Company Shares for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with applicable federal, state and foreign securities and other laws.
Dividends. To the extent dividends are paid on Company Shares while they remain restricted and subject to vesting, you will be credited with corresponding dividends. The dividends credited to you will be subject to the same restrictions applicable to the restricted Company Shares.
7. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of the material U.S. federal income tax consequences of the exchange of options and/or IHS Shares applicable to U.S. resident holders. This discussion is based on the Internal Revenue Code, its legislative history, Treasury regulations thereunder and administrative and judicial interpretations thereof as of the date of this Offer Plan, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders and holders of IHS Shares ( e.g ., this summary does not discuss consequences to non-U.S. holders of options or IHS Shares). Therefore, we strongly encourage you to consult your own tax advisor with respect to your individual tax consequences by virtue of participating in the Offer.
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If you tender your options, generally you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
If you tender your previously acquired IHS Shares, generally you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
If we forgive the accrued interest on the principal amount of your loan, generally under current U.S. tax law for federal income tax purposes, you will recognize ordinary income in the amount of the accrued interest for the taxable year in which the accrued interest was forgiven (subject to withholding in the same manner as other compensation).
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.
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8. NON-U.S. INCOME TAX CONSEQUENCES.
Tax laws in other countries may differ from those in the United States. We recommend that you consult your own tax advisor with respect to the foreign tax consequences of participating in the Offer.
9. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
We expressly reserve the right, in our sole discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 5 of this Offer Plan has occurred or is deemed by us to have occurred, to extend the period of time during which the Offer is open, and thereby delay the acceptance for exchange of any options and/or IHS Shares, by giving oral or written notice of such an extension to the option holders and holders of IHS Shares and making a public announcement of such an extension.
We also expressly reserve the right, in our sole discretion, before the Expiration Date, to terminate or amend the Offer and to postpone our acceptance and cancellation of any options and/or IHS Shares tendered for exchange upon the occurrence of any of the conditions specified in Section 5 of this Offer Plan, by giving oral or written notice of such termination or postponement to the option holders and holders of IHS Shares and making a public announcement thereof.
Amendments to the Offer may be made, at any time and from time to time, by public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 9:00 am, Eastern Time, on the next business day after the last previously scheduled or announced Expiration Date. Any company-wide announcement made pursuant to the Offer will be disseminated promptly to option holders and holders of IHS Shares in a manner reasonably designed to inform holders of such change. Any company-wide announcement most likely would be made by e-mail.
If we materially change the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we may extend the Offer.
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EXHIBIT A
VALUATION METHODOLOGIES
The board of directors of the Company (or a committee thereof) will determine the Fair Market Value of Company Shares in good faith in its sole discretion. In order to determine Fair Market Value in the absence of a public trading market, such board (or committee) will consider the following methodologies in determining Fair Market Value.
Such board (or committee) will assess the range of valuations indicated by the above methodologies and select what it deems to be the most representative indicator of fair market value.
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OFFER UNDER THE
NON-QUALIFIED STOCK OPTION PLAN
(EFFECTIVE DECEMBER 1, 1998) AND THE
2002 NON-QUALIFIED STOCK OPTION PLAN OF IHS GROUP INC.
THIS OFFER WILL EXPIRE
AT 11:59 PM, EASTERN TIME, ON THURSDAY, DECEMBER 23, 2004,
UNLESS IHS GROUP INC. EXTENDS THE OFFER.
IHS Group Inc., a Colorado corporation (" IHS "), is making this offer upon the terms and subject to the conditions set forth in this Offer Plan (this " Offer Plan ") and in the related Letter of Transmittal (the " Letter of Transmittal ," which together with the Offer Plan, as they may be amended or supplemented from time to time, constitute the " Offer ").
THE INFORMATION IN THIS OFFER IS CONFIDENTIAL, PARTICULARLY INFORMATION WITH RESPECT TO A POTENTIAL INITIAL PUBLIC OFFERING. YOU SHOULD NOT DISCLOSE THIS INFORMATION TO ANYONE OTHER THAN YOUR LEGAL, INVESTMENT AND/OR TAX ADVISORS.
IHS IS NOT MAKING THE OFFER TO, NOR WILL IHS ACCEPT ANY TENDER OF OPTIONS OR SHARES FROM OR ON BEHALF OF, ANY OPTION HOLDERS OR HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE OFFER OR THE ACCEPTANCE OF ANY TENDER OF OPTIONS OR SHARES, OR THE DELIVERY OF DEFERRED STOCK UNITS, WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION.
THE DATE OF THIS OFFER PLAN IS NOVEMBER 22, 2004.
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SUMMARY TERM SHEET | 1 | |||
INTRODUCTION |
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THE OFFER |
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1. |
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The Offer; Number of Options; Expiration Date |
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2. |
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Purpose of the Offer |
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3. |
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Procedures for Tendering Options |
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4. |
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Acceptance of Options and/or IHS Shares |
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5. |
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Conditions of the Offer |
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6. |
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Terms of DSUs and Company Shares |
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7. |
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Material U.S. Federal Income Tax Consequences |
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8. |
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Non-U.S. Income Tax Consequences |
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9. |
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Extension of Offer; Termination; Amendment |
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The following are answers to some of the questions that you may have about the Offer. We urge you to read carefully the remainder of this Offer Plan and the accompanying Letter of Transmittal because the information in this summary is not complete and additional important information is contained in the remainder of this document and the Letter of Transmittal.
WHAT ARE WE OFFERING?
We are offering to exchange all outstanding stock options to purchase shares of our Class A non-voting common stock (" IHS Shares ") that were granted:
and IHS Shares previously acquired upon the prior exercise of such an option. If you are a current employee or director and you accept this offer, then you will receive the following:
If you wish to accept the Offer, then you must tender:
on or before the expiration of the Offer, currently scheduled for Thursday, December 23, 2004. The Offer is not conditioned upon any minimum threshold number of options or IHS Shares being tendered, but is subject to conditions that we describe in Section 5 of this Offer Plan.
HOW DID WE ARRIVE AT THE $9.42 PER IHS SHARE AMOUNT?
In accordance with the terms of the Option Plans, the committee administering the Option Plans determined the fair market value of an IHS Share on the most recent fair market value determination date under the Option Plans to be $9.42.
WHY ARE WE MAKING THE OFFER?
We are currently considering a possible initial public offering (an " IPO "). Upon a review of our incentive programs and consultation with our advisors, including our compensation consultants, we believe this Offer will more closely align our programs with the incentive programs of public companies. We are also making this Offer in order to provide you with an opportunity to obtain an equity stake in the Company and, if applicable, cash. The Company is the indirect parent company of IHS and, if there were to be an IPO of the IHS enterprise, it would likely be the Company stock that would be offered and sold to the public.
UNDER WHAT CIRCUMSTANCES WILL I RECEIVE AN EQUITY STAKE IN THE IHS ENTERPRISE?
If you accept the Offer, then you will receive an equity stake in the IHS enterprise. For every three IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option), you will receive one DSU representing the right to receive a Company Share upon terms and conditions specified in the next paragraph. No fractional DSUs will be issued or delivered pursuant to this Offer. As a result, you may forfeit up to two IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option) without the grant of a DSU in exchange.
You will receive your DSUs regardless of whether your options are vested or unvested, and regardless of their exercise price, as soon as reasonably practicable following the expiration of the Offer (unless the Offer is extended). The expiration of the Offer is currently scheduled for Thursday, December 23, 2004. The Company Shares underlying your DSUs will be delivered to you on October 17, 2005.
You will not be required to be an employee or director of IHS or the Company to receive your DSUs or your Company Shares.
UNDER WHAT CIRCUMSTANCES WILL I RECEIVE CASH?
If you accept the Offer, then you will receive:
You will not be required to be an employee or director of IHS or the Company to receive your cash.
IS IT POSSIBLE TO RECEIVE BOTH DSUs AND CASH?
Yes. If (1) you have options with an exercise price lower than $9.42 per share or (2) you have IHS Shares from previously exercising options, and you accept the Offer, then you will receive both DSUs and cash.
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CAN YOU SHOW ME SOME EXAMPLES?
Example 1: You have an outstanding option to purchase 300 IHS Shares granted under an Option Plan. The exercise price of this option is $5.38 per share. You have never exercised this option. If you accept the Offer, then you will tender this option to us and, in exchange, receive (1) DSUs for 100 Company Shares plus (2) $1,212 in cash, before any applicable withholding. The $1,212 in cash was derived by taking the excess of $9.42 over $5.38 ( i.e. , $4.04) and multiplying that by the number of IHS Shares underlying your option ( i.e. , 300 IHS Shares).
Example 2: You were granted an option to purchase 300 IHS Shares under an Option Plan. The exercise price of this option was $5.38 per share, and in March 2004, you exercised this option in full ( i.e. , you previously acquired 300 IHS Shares). You took a loan from IHS to purchase the IHS Shares in the amount of $1614 ( i.e. , $5.38 per share multiplied by 300). You surrendered 50 IHS Shares to satisfy your payroll tax withholding. If you accept the Offer, then you will tender your IHS Shares to us and, in exchange, receive (1) DSUs for 100 Company Shares plus (2) $762 in cash, before any applicable withholding. The $762 in cash was derived by:
Example 3: You were granted an option to purchase 300 IHS Shares under an Option Plan. The exercise price of this option was $5.38 per share, and in March 2004, you exercised this option in part by acquiring 120 IHS Shares. You surrendered 20 IHS Shares to satisfy your payroll tax withholding. You still hold an option to purchase 180 IHS Shares. If you accept the Offer, then you will tender your remaining option and your IHS Shares to us and, in exchange, receive (1) DSUs for 100 Company Shares plus (2) $1,677.60 in cash, before any applicable withholding. The $1,677.60 in cash was derived by:
Example 4: You have an outstanding option to purchase 300 IHS Shares granted under an Option Plan. The exercise price of this option is $13.42 per share. You have never exercised this option. If you accept the Offer, then you will tender this option to us and, in exchange, receive DSUs for 100 Company Shares.
IF I CHOOSE TO ACCEPT THE OFFER, DO I HAVE TO TENDER ALL MY OPTIONS AND PREVIOUSLY ACQUIRED IHS SHARES?
Yes. If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option.
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CAN I TENDER OPTIONS THAT I HAVE ALREADY EXERCISED?
No, you cannot tender an option that you have already fully exercised, but you can tender the IHS Shares that you previously acquired upon exercise of that option and continue to hold.
CAN I TENDER UNVESTED OPTIONS?
Yes, you may tender your options, regardless of whether such options are vested or unvested.
WHEN WILL I RECEIVE MY DSUs AND, IF APPLICABLE, CASH?
You will receive your DSUs and, if applicable, cash as soon as reasonably practicable following the expiration of the Offer (unless the Offer is extended). If your tender of options and/or IHS Shares is accepted prior to the expiration of the Offer, we may, in our sole discretion, pay your cash amount (if applicable) to you prior to the expiration of the Offer. The expiration of the Offer is currently scheduled for Thursday, December 23, 2004.
WHEN WILL I RECEIVE THE COMPANY SHARES UNDERLYING MY DSUs?
The Company Shares underlying your DSUs will be delivered to you on October 17, 2005.
WHY WON'T I RECEIVE MY COMPANY SHARES SOONER?
While your DSUs will generally not be taxable to you upon your receipt, Company Shares will generally be taxable to you immediately upon your receipt. To try to avoid a situation where you would have to pay your taxes, without having the immediate resources to do so, we have designed the Offer using our current best estimate of the date for a possible IPO to try to establish a Company Share delivery date on which you will be liable for taxes at a time when you would actually be able to sell or otherwise transfer a sufficient number of Company Shares to cover your tax liability.
DO I NEED TO BE AN EMPLOYEE OR DIRECTOR OF IHS OR THE COMPANY IN ORDER TO RECEIVE MY DSUs, MY COMPANY SHARES OR MY CASH?
No. If you are a current employee or director on the date of this Offer Plan, you will not be required to be an employee or director of IHS or the Company to receive your DSUs, your Company Shares or your cash.
WILL I BE ABLE TO TRANSFER MY DSUs?
No, you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your DSUs, other than by will or by the laws of descent and distribution, unless the board of directors of the Company (or a committee thereof) permits their transfer. Currently, we do not anticipate that the board of directors of the Company (or a committee thereof) will permit such transferability.
WILL I BE ABLE TO TRANSFER MY COMPANY SHARES PRIOR TO THE OCCURRENCE OF AN IPO OR A CHANGE IN CONTROL?
Except for Company Shares withheld in order to satisfy your tax liability, if you receive Company Shares prior to the occurrence of an IPO of the IHS enterprise or a Change in Control (as defined in Section 1 of the Offer Plan), you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your Company Shares, other than by will or by the laws of descent and distribution, unless the board of directors of the Company (or a committee thereof) permits their transfer. Currently, we do not anticipate that the board of directors of the Company (or a committee thereof) will permit such transferability.
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If an IPO of the IHS enterprise or a Change in Control (as defined in Section 1 of the Offer Plan) has not occurred on or prior to October 1, 2007, you will have an opportunity to sell your Company Shares to the Company (and the Company will have an opportunity to buy your Company Shares) upon your notification to the Company (or upon the Company's notification to you), which notification must be delivered within 20 calendar days following such third anniversary of the date of this Offer.
WILL I BE ABLE TO TRANSFER MY COMPANY SHARES FOLLOWING AN IPO?
Yes, subject to whatever securities and other applicable laws and policies of the Company ( e.g. , a trading policy) or contractual obligations ( e.g. , an underwriters' lock-up following an IPO), which may apply to you or a transfer of Company Shares by you.
WHAT ARE THE TAX CONSEQUENCES IF I TENDER MY OPTIONS?
Generally, if you are a U.S. resident holder you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
You will, however, be liable for the employee share of FICA taxes ( i.e. , Social Security and Medicare) at the time you receive your DSUs and, if applicable, cash. You will not be liable for any further FICA taxes at the time you receive Company Shares in respect of your DSUs.
While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of receiving DSUs.
WHAT ARE THE TAX CONSEQUENCES IF I TENDER MY PREVIOUSLY ACQUIRED IHS SHARES?
Generally, if you are a U.S. resident holder you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
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You will, however, be liable for the employee share of FICA taxes ( i.e. , Social Security and Medicare) at the time you receive your DSUs. You will not be liable for any further FICA taxes at the time you receive Company Shares in respect of your DSUs.
While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of receiving DSUs.
WHAT ARE THE TAX CONSEQUENCES IF THE ACCRUED INTEREST ON MY LOAN IS FORGIVEN?
Generally, if you are a U.S. resident holder, you will have the following tax consequences under current U.S. tax law for federal income tax purposes. The accrued interest on the principal amount of your loan that we forgive will be taxable to you as ordinary income at the end of the taxable year in which the forgiveness occurred (subject to withholding in the same manner as other compensation). While this is generally the case, we recommend that you consult with your own tax advisor to determine the specific tax consequences to you of our forgiving the accrued interest on the principal amount of your loan.
WHAT ARE THE TAX CONSEQUENCES IF I AM GOVERNED BY NON-U.S. TAX LAW?
Tax laws in other countries may differ from those in the United States. We recommend that you consult your own tax advisor with respect to the foreign tax consequences of participating in the Offer.
ARE THERE ANY CONDITIONS TO THE OFFER?
The Offer is not conditioned upon any minimum threshold number of options or IHS Shares being tendered. However, the Offer is subject to a number of other conditions with regard to events that could occur before the expiration of the Offer. These events include a change in accounting principles or a lawsuit challenging the Offer. These and various other conditions are more fully described in Section 5 of this Offer Plan.
WHAT HAPPENS IF A CHANGE IN CONTROL OF IHS OCCURS DURING THE PERIOD AFTER I HAVE TENDERED MY OPTIONS OR IHS SHARES BUT BEFORE I RECEIVE MY COMPANY SHARES?
If we are acquired during the period between the date when you receive your DSUs (and, if applicable, cash) and the date when you receive the Company Shares underlying your DSUs, subject to the next paragraph, your right to receive the Company Shares underlying your DSUs will be accelerated such that you will receive your Company Shares immediately prior to the closing of the acquisition transaction (at which time your DSUs will automatically be cancelled), and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company.
The delivery date of your Company Shares will accelerate only if such acceleration is permitted under regulations promulgated by the Treasury Secretary pursuant to federal legislation currently referred to as the American Jobs Creation Act of 2004 (H.R. 4520). If the acceleration of your Company Share delivery date is not permitted under such regulations, then on October 17, 2005, for each IHS Share underlying your DSUs, you will receive the same per share consideration received by our stockholders for each Company Share in the acquisition (at which time your DSUs will automatically be cancelled).
6
WHAT HAPPENS IF I TENDER MY OPTIONS AND/OR IHS SHARES BUT THEY ARE NOT ACCEPTED?
We reserve the right to reject any or all tenders of options and/or shares that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept all properly and timely tendered options and/or shares.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER OPTIONS AND/OR IHS SHARES IN THE OFFER? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED?
You have until 11:59 pm, Eastern Time, on Thursday, December 23, 2004 to tender your options and/or shares in the Offer. This means that you will be able to tender your options and/or shares at any time on or before Thursday, December 23, 2004, including during business hours on that Thursday; however, any options and/or Shares tendered on or after midnight on Friday, December 24, 2004 will not be accepted.
We may, in our sole discretion, extend the Offer at any time, but we cannot assure you that the Offer will be extended or, if extended, for how long. If we extend the Offer, we will make a company-wide announcement (including to subsidiaries and our direct parent company) of the extension no later than 9:00 am, Eastern Time, on the next business day following the previously scheduled expiration date. If we extend the Offer, we may delay the acceptance of any options and/or IHS Shares that have been tendered.
HOW DO I TENDER MY OPTIONS AND/OR IHS SHARES?
If you decide to tender your options and/or IHS Shares, we must receive, before the Offer expires, a properly completed and duly executed Letter of Transmittal, including any stock certificate(s) if applicable. Please mail, fax or hand deliver it to:
Susan
Auxer
IHS Group Inc.
15 Inverness Way East,
Englewood, Colorado 80112
Telephone No. 303-397-2949
Facsimile No.: 303-792-9034
E-mail: susan.auxer@ihs.com
WHAT DOES OUR BOARD OF DIRECTORS THINK OF THE OFFER?
Although our Board of Directors has approved the Offer, neither IHS, the Company nor our or their Board of Directors makes any recommendation as to whether or not you should tender your options and/or IHS Shares for exchange. You must make your own decision whether or not to tender your options and/or IHS Shares for exchange. For questions regarding tax implications or other investment-related questions, you should talk to your own legal, investment and/or tax advisors.
WHY AM I RECEIVING SO MANY DOCUMENTS IN CONNECTION WITH THIS OFFER? DO I HAVE TO REVIEW EVERYTHING?
We are required to provide you with these documents to satisfy our legal obligations and the disclosure requirements of the Securities and Exchange Commission. While the documents may be lengthy, for your benefit as well as for our own, we recommend that you read this entire document and the related Letter of Transmittal carefully before deciding whether or not to exchange your options and/or IHS Shares.
7
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
You should direct questions about the Offer or requests for assistance or additional copies of the Offer Plan or the Letter of Transmittal to Susan Auxer at 303-397-2949 (tel) or susan.auxer@ihs.com (e-mail).
We are making this offer upon the terms and subject to the conditions set forth in this Offer Plan and in the related Letter of Transmittal.
All tendered options and IHS Shares accepted by us pursuant to the Offer will be canceled and terminated.
If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option. The Offer is not conditioned upon any minimum threshold number of options and/or IHS Shares being tendered. The Offer is subject to conditions that we describe in Section 5 of this Offer Plan.
In this offer, IHS is offering to exchange all outstanding stock options to purchase IHS Shares that were granted:
and IHS Shares previously acquired upon the prior exercise of such an option. If you are a current employee or director and you accept this offer, then you will receive the following:
No fractional DSUs will be issued or delivered pursuant to this Offer. As a result, you may forfeit up to two IHS Shares underlying your options granted under an Option Plan (or previously acquired upon the exercise of such an option) without the grant of a DSU in exchange.
8
To participate in the Offer, your options and/or IHS Shares must be properly tendered before the Expiration Date (as defined below in Section 3 of this Offer Plan). If you choose to accept the Offer, you must tender all of your outstanding options, for the full number of IHS Shares subject to the option, and any IHS Shares that you previously acquired upon exercise of an option.
If your options and/or IHS Shares are properly tendered and accepted for exchange, then unless we terminate the Offer pursuant to its terms and conditions:
DSUs and Company Shares
You will receive your DSUs as soon as reasonably practicable following the Expiration Date. The Company Shares underlying your DSUs will be delivered to you on October 17, 2005.
You will not be required to be an employee or director of IHS or the Company to receive your DSUs or your Company Shares.
Cash
You will receive your applicable cash amount as soon as reasonably practicable following the Expiration Date. If your tender of options and/or IHS shares is accepted prior to the expiration of the Offer, we may, in our sole discretion, pay your cash amount (if applicable) to you prior to the expiration of the Offer.
You will not be required to be an employee or director of IHS or the Company to receive your cash.
Reservation of Rights; Compliance with Law
We reserve the right to terminate the Offer upon the occurrence of certain events. If the Offer is so terminated, any tendered options and/or IHS Shares will be returned.
We are not making the Offer to, nor will we accept any tender of options or IHS Shares from or on behalf of, any option holders or holders of IHS Shares in any jurisdiction in which the Offer or the acceptance of any tender of options or shares, or the delivery of DSUs, would not be in compliance with the laws of such jurisdiction. Without limiting the generality of the foregoing, in order to comply with the laws in which option holders or holders of IHS Shares reside or to which they are subject, our board or the board of directors of the Company, as applicable (or a committee thereof), has the power and authority to:
Notwithstanding the above, no person may take any action with respect to the Offer that would violate applicable law.
9
FOR GEORGIA RESIDENTS ONLY: The DSUs and the Company Shares underlying the DSUs will be issued or sold in reliance on Paragraph (13) of Code Section 10-5-9 of the "Georgia Securities Act of 1973" and may not be sold or transferred except in a transfer which is exempt under such Act or pursuant to an effective registration under such Act.
Change in Control of Us
If we are acquired ( i.e. , there is a Change in Control, as defined in the next paragraph) during the period between the date when you receive your DSUs (and, if applicable, cash) and the date when you receive the Company Shares underlying your DSUs, subject to the next paragraph, your right to receive the Company Shares underlying your DSUs will be accelerated such that you will receive your Company Shares immediately prior to the closing of the acquisition transaction (at which time your DSUs will automatically be cancelled), and you will participate in the acquisition to the extent of and in the same manner as all other stockholders of the Company.
The delivery date of your Company Shares will accelerate only if such acceleration is permitted under regulations promulgated by the Treasury Secretary pursuant to federal legislation currently referred to as the American Jobs Creation Act of 2004 (H.R. 4520). If the acceleration of your Company Share delivery date is not permitted under such regulations, then on October 17, 2005, for each IHS Share underlying your DSUs, you will receive the same per share consideration received by our stockholders for each Company Share in the acquisition (at which time your DSUs will automatically be cancelled).
For purposes of the Offer, a Change in Control of us will occur upon the occurrence of an event that constitutes a "Change in Control" under the 2004 Omnibus Incentive Plan of the Company.
We are currently considering a possible initial public offering. Upon a review of our incentive programs and consultation with our advisors, including our compensation consultants, we believe this Offer will more closely align our programs with the incentive programs of public companies. We are also making this Offer in order to provide you with an opportunity to obtain an equity stake in the Company and, if applicable, cash. The Company is the indirect parent company of IHS and, if there were to be an IPO of the IHS enterprise, it would likely be the Company stock that would be offered and sold to the public.
NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS AND/OR IHS SHARES, NOR HAVE WE AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. YOU ARE URGED TO EVALUATE CAREFULLY ALL OF THE INFORMATION IN THIS OFFER PLAN AND THE RELATED LETTER OF TRANSMITTAL AND TO CONSULT YOUR OWN LEGAL, INVESTMENT AND/OR TAX ADVISORS. YOU MUST MAKE YOUR OWN DECISION WHETHER OR NOT TO TENDER YOUR OPTIONS AND/OR SHARES.
Proper Tender of Options. To validly tender your options and/or IHS Shares under the Offer, you must, in accordance with the terms of the Letter of Transmittal, properly complete, duly execute and deliver to us the Letter of Transmittal, or a facsimile. If you possess stock certificate(s) representing IHS Shares that you are tendering, you must also deliver to us the original copy of each such stock certificate together with your Letter of Transmittal. We must receive your Letter of Transmittal, and stock certificate(s) if applicable, before the Expiration Date. You should mail, fax or hand deliver it to:
Susan
Auxer
IHS Group Inc.
15 Inverness Way East,
Englewood, Colorado 80112
Telephone No. 303-397-2949
Facsimile No.: 303-792-9034
E-mail: susan.auxer@ihs.com
10
The term " Expiration Date " means 11:59 pm, Eastern Time, on Thursday, December 23, 2004, unless and until we, in our sole discretion, have extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" refers to the latest time and date when the Offer, as so extended, expires. See Section 9 of this Offer Plan for a description of our rights to extend, delay, terminate or amend the Offer. If we do not extend the Offer, you will be able to tender your options and/or IHS Shares at any time on or before Thursday, December 23, 2004, including during business hours on that Thursday; however, any options and/or IHS Shares tendered on or after midnight on Friday, December 24, 2004 will not be accepted.
THE METHOD OF DELIVERY OF YOUR LETTER OF TRANSMITTAL, AND STOCK CERTIFICATE(S) IF APPLICABLE, IS AT YOUR ELECTION AND RISK. IF YOU DELIVER BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE THE DOCUMENTS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY.
Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our sole discretion, all questions as to form of documents and the validity (including eligibility and time of receipt), form and acceptance of any tender of options and/or IHS Shares. Our determination of these matters will be final and binding on all interested persons, including you. We reserve the right to reject any or all tenders of options and/or shares that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept all properly and timely tendered options and/or shares.
We also reserve the right to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to any particular options and/or IHS Shares or any particular option holder or holder of IHS Shares.
No tender of options and/or IHS Shares will be deemed to have been properly made until all defects or irregularities have been cured by the tendering holder or waived by us. Neither we nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any such notice.
Our Acceptance Constitutes an Agreement. Your tender of options and/or IHS Shares pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the Offer. Our acceptance for exchange of your options and/or IHS Shares tendered by you pursuant to the Offer will constitute a binding agreement between us and you, upon the terms and subject to the conditions of the Offer.
No Employment or Other Rights. The Offer will not confer upon you any right with respect to continuation of employment, consulting relationship or directorship with IHS, the Company or any affiliate thereof, nor shall it interfere in any way with your right or your employer's right to increase or decrease compensation or terminate your employment, consulting relationship or directorship at any time.
Withholding. By accepting the Offer, you acknowledge that IHS or the Company, as applicable, is authorized to withhold from any cash, Company Shares or other compensation or other amount owing to you the amount of withholding taxes due in respect of any tax liability that you incur in connection with the Offer and that IHS or the Company, as applicable, may take such other action (including providing for elective payment of such amount in cash or otherwise by you) as may be necessary or advisable to satisfy all obligations for the payment of such taxes.
Governing law; Jurisdiction and Venue: By accepting the Offer, you acknowledge that the Offer and any documents ancillary thereto (including this Offer Plan and your Letter of Transmittal) will be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle
11
that might otherwise refer construction or interpretation of the Offer or of such ancillary document, and you are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Delaware, to resolve any and all issues that may arise out of or relate to the Offer or such ancillary document.
Subject to our rights to extend, delay, terminate or amend the Offer, we currently expect that we will accept as soon as reasonably practicable following the Expiration Date all properly tendered options and/or IHS Shares.
Upon the terms and subject to the conditions of the Offer and as soon as reasonably practicable following the Expiration Date, we will accept for exchange and will cancel options and/or IHS Shares properly tendered before the Expiration Date.
For purposes of the Offer, we will be deemed to have accepted for exchange options and/or IHS Shares that are validly tendered when we give oral or written notice to you of our acceptance for exchange of such options and/or IHS Shares, which may be by company-wide (including subsidiaries and our direct parent company) e-mail. Subject to our rights to extend, delay, terminate or amend the Offer, we currently expect that we will accept as soon as reasonably practicable following the Expiration Date all properly tendered options and/or IHS Shares.
As soon as reasonably practicable after we accept tendered options and/or IHS Shares, we will send to each tendering holder a notice indicating our acceptance of your options and/or IHS Shares
Notwithstanding any other provision of the Offer, we will not be required to accept any options and/or IHS Shares tendered for exchange, and we may terminate or amend the Offer, or postpone our acceptance and cancellation of any options and/or IHS Shares tendered for exchange, if at any time on or after the commencement date of the Offer and before the Expiration Date:
(a) there shall have been any action or proceeding (pending or threatened) or any approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or IHS or any of our affiliates, by any court or any agency, authority or tribunal that, in our reasonable judgment, would or might directly or indirectly:
(1) make the acceptance for exchange of, or grant of DSUs for, some or all of the tendered options and/or IHS Shares illegal or otherwise restrict or prohibit consummation of the Offer or otherwise relates in any manner to the Offer;
(2) delay or restrict our ability, or render us unable, to accept for exchange, or grant DSUs for, some or all of the tendered options and/or IHS Shares;
(3) materially impair the contemplated benefits of the Offer to us; or
(4) materially and adversely affect the business, condition (financial or other), income, operations or prospects of IHS or any of our affiliates, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our affiliates;
12
(b) there shall have occurred any change, development, clarification or position taken in generally accepted accounting principles which could or would require us to record any unexpected compensation expense against our earnings in connection with the Offer for financial reporting purposes; or
(c) any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of IHS or any of our affiliates that, in our reasonable judgment, is or may be material to IHS or any of our affiliates and which materially impairs or may materially impair the contemplated benefits of the Offer to us.
The conditions to the Offer are for our benefit. Before the Expiration Date, we may assert them in our sole discretion, regardless of the circumstances giving rise to them. We may waive them, in whole or in part, at any time and from time to time before the Expiration Date, in our sole discretion, whether or not we waive any other condition to the Offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 5 will be final and binding upon all interested persons, including you.
Number of Company Shares Available for this Offer. The maximum number of Company Shares available for grant to be represented as DSUs, and to be delivered under such DSUs, to be received by those whose tendered options and/or IHS Shares have been accepted is the number of Company Shares required to be delivered under such DSUs to all such individuals pursuant to the terms of this Offer. Together with the maximum number of Company Shares available for grant under the Offer Plan for certain senior executives and the Offer Plan for California executives, we currently estimate the maximum number of Company Shares available for grant to be approximately 2,825,000, subject to adjustments for any stock splits, stock dividends and similar events that occur before the grant date of the DSUs or the delivery of Company Shares thereunder.
Transferability of DSUs. You will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your DSUs, other than by will or by the laws of descent and distribution, unless the board of directors of the Company (or a committee thereof) permits their transfer.
Transferability of Company Shares Following an IPO. Following an IPO of the IHS enterprise, you will be able to freely transfer your Company Shares subject to whatever securities and other applicable laws and policies of the Company ( e.g. , a trading policy) or contractual obligations ( e.g. , an underwriters' lock-up following an IPO), which may apply to you or a transfer of Company Shares by you.
Transferability of Company Shares Prior to the Occurrence of an IPO. Except for Company Shares withheld in order to satisfy your tax liability (and subject to the "Put Right", "Call Right" and "Drag-Along Right" described below), if you receive Company Shares prior to the occurrence of an IPO of the IHS enterprise or a Change in Control, you will not be able to sell, transfer, pledge, assign or otherwise alienate or hypothecate your Company Shares, other than by will or by the laws of descent and distribution, unless the board of directors of the Company (or a committee thereof) permits their transfer.
"Put", "Call" and "Drag-Along" Rights Relating to Company Shares .
If no IPO or Change in Control occurs on or prior to October 1, 2007 (the " Relevant Date "), then you will have the right and option to sell to the Company, and to cause the Company to purchase, all of the Company Shares held by you as of such date (the " Put Right "). The Put Right may be exercised
13
by you delivering to the Company within 20 calendar days following the Relevant Date written notice (the " Put Notice "). The Company will, by written notice to you, fix a closing date (the " Put Closing Date ") for the purchase, which will be not less than two (2) days, but in no event longer than ten (10) days after the date of receipt of the Put Notice. The Company Shares subject to the Put Notice will be purchased by the Company at a purchase price (the " Put Purchase Price ") equal to the Fair Market Value (as defined below) of such Company Shares at the Fair Market Value Determination Date (as defined below) immediately preceding the date of the Put Notice. The Put Purchase Price will be payable in cash on the Put Closing Date.
If no IPO or Change in Control occurs on or prior to the Relevant Date, then the Company has the exclusive right and option to purchase from you, and to cause you to sell, all or a portion of the Company Shares held by you as of such date (the " Call Right "). The Call Right may be exercised by the Company delivering to you within 20 calendar days following the Relevant Date written notice (the " Call Notice "). The Call Notice will indicate the number of Company Shares which the Company intends to purchase from you and the closing date (the " Call Closing Date ") for the purchase, which will be not less than two (2) days, but in no event longer than ten (10) days after the date of the Call Notice. The Company Shares subject to the Call Notice will be purchased by the Company at a purchase price (the " Call Purchase Price ") equal to the Fair Market Value of such shares at the Fair Market Value Determination Date immediately preceding the date of the Call Notice. The Call Purchase Price will be payable in cash on the Call Closing Date.
If a Change in Control occurs prior to an IPO, and Company Shares have been delivered in connection with DSUs, then the Company has the exclusive right and option to require you to sell or otherwise transfer to the acquiring party(ies) effecting such Change in Control (the " Acquiror ") all or a portion of such Company Shares held as of the effective date of such Change in Control, in each case for the same consideration per Company Share and on the same terms and conditions as all other Company stockholders (the " Drag-Along Right "). The Drag-Along Right may be exercised by the Company delivering to you written notice (the " Drag-Along Notice "), specifying the number of shares of Common Stock which will be sold or otherwise transferred by you to the Acquiror, the consideration per Company Share and the closing date for such sale or other transfer, which will be not less than two (2) days after the date of the Drag-Along Notice. The Company Shares subject to the Drag-Along Notice will be sold or otherwise transferred to the Acquiror in accordance with the terms of the Drag-Along Notice.
For purposes of the Offer, the following terms will have definitions set forth below:
Investment Representations. The Company may require any person to whom a DSU is granted, as a condition of receiving such DSU, to give written assurances to the Company to the effect that such person will acquire the Company Shares underlying such DSU for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with applicable federal, state and foreign securities and other laws.
14
No Stockholder Rights. The holder of a DSU shall have no rights as a stockholder of the Company with respect to any Company Shares underlying the DSU until such Company Shares are delivered to such holder. Except as otherwise expressly provided by the board of directors of the Company (or a committee thereof), no adjustment will be made for dividends or other rights for which the record date is prior to the date of such delivery.
The following is a general summary of the material U.S. federal income tax consequences of the exchange of options and/or IHS Shares applicable to U.S. resident holders. This discussion is based on the Internal Revenue Code, its legislative history, Treasury regulations thereunder and administrative and judicial interpretations thereof as of the date of this Offer Plan, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders and holders of IHS Shares ( e.g ., this summary does not discuss consequences to non-U.S. holders of options or IHS Shares). Therefore, we strongly encourage you to consult your own tax advisor with respect to your individual tax consequences by virtue of participating in the Offer.
If you tender your options, generally you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
You will, however, be liable for the employee share of FICA taxes ( i.e. , Social Security and Medicare) at the time you receive your DSUs and, if applicable, cash. You will not be liable for any further FICA taxes at the time you receive Company Shares in respect of your DSUs.
If you tender your previously acquired IHS Shares, generally you will have the following tax consequences under current U.S. tax law for federal income tax purposes:
15
You will, however, be liable for the employee share of FICA taxes ( i.e. , Social Security and Medicare) at the time you receive your DSUs. You will not be liable for any further FICA taxes at the time you receive Company Shares in respect of your DSUs.
If we forgive the accrued interest on the principal amount of your loan, generally under current U.S. tax law for federal income tax purposes, you will recognize ordinary income in the amount of the accrued interest for the taxable year in which the accrued interest was forgiven (subject to withholding in the same manner as other compensation).
WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER.
Tax laws in other countries may differ from those in the United States. We recommend that you consult your own tax advisor with respect to the foreign tax consequences of participating in the Offer.
We expressly reserve the right, in our sole discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 5 of this Offer Plan has occurred or is deemed by us to have occurred, to extend the period of time during which the Offer is open, and thereby delay the acceptance for exchange of any options and/or IHS Shares, by giving oral or written notice of such an extension to the option holders and holders of IHS Shares and making a public announcement of such an extension.
We also expressly reserve the right, in our sole discretion, before the Expiration Date, to terminate or amend the Offer and to postpone our acceptance and cancellation of any options and/or IHS Shares tendered for exchange upon the occurrence of any of the conditions specified in Section 5 of this Offer Plan, by giving oral or written notice of such termination or postponement to the option holders and holders of IHS Shares and making a public announcement thereof.
Amendments to the Offer may be made, at any time and from time to time, by public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 9:00 am, Eastern Time, on the next business day after the last previously scheduled or announced Expiration Date. Any company-wide announcement made pursuant to the Offer will be disseminated promptly to option holders and holders of IHS Shares in a manner reasonably designed to inform holders of such change. Any company-wide announcement most likely would be made by e-mail.
If we materially change the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we may extend the Offer.
16
EXHIBIT A
VALUATION METHODOLOGIES
The board of directors of the Company (or a committee thereof) will determine the Fair Market Value of Company Shares in good faith in its sole discretion. In order to determine Fair Market Value in the absence of a public trading market, such board (or committee) will consider the following methodologies in determining Fair Market Value.
Such board (or committee) will assess the range of valuations indicated by the above methodologies and select what it deems to be the most representative indicator of fair market value.
17
IHS SUPPLEMENTAL INCOME PLAN
(Effective November 30, 2004)
IHS SUPPLEMENTAL INCOME PLAN
(Effective November 30, 2004)
ARTICLE 1. DEFINITIONS | |||
1.01 |
Administrator |
|
2 |
1.02 | Beneficiary | 2 | |
1.03 | Benefit Payment Date | 2 | |
1.04 | Code | 2 | |
1.05 | Early Retirement Date | 2 | |
1.06 | Effective Date | 2 | |
1.07 | Employer | 2 | |
1.08 | Excess Benefit | 2 | |
1.09 | Excess Compensation Benefit | 2 | |
1.10 | Normal Retirement Date | 2 | |
1.11 | Participant | 2 | |
1.12 | Plan Year | 2 | |
1.13 | Regulations | 2 | |
1.14 | Retirement Benefit | 2 | |
1.15 | Retirement Income Plan | 2 | |
1.16 | Separation from Service | 3 | |
1.17 | Sponsor | 3 | |
1.18 | Supplemental Income Benefit | 3 | |
ARTICLE 2. PARTICIPATION |
|||
2.01 |
Participation |
|
4 |
ARTICLE 3. SUPPLEMENTAL INCOME BENEFITS |
|||
3.01 |
Benefit Amount |
|
5 |
3.02 | Excess Benefit | 5 | |
3.03 | Excess Compensation Benefit | 5 | |
3.04 | Early Retirement Reduction Factors | 5 | |
3.05 | Special Rules | 5 | |
ARTICLE 4. VESTING AND PAYMENT OF PLAN BENEFITS |
|||
4.01 |
Vesting |
|
6 |
4.02 | Benefit Payment Date | 6 | |
4.03 | Form of Payment of Plan Benefits to Participants | 6 | |
4.04 | Form of Payment of Plan Benefits to Beneficiaries | 7 | |
4.05 | Facility of Payment | 7 | |
4.06 | Benefits May Not Be Assigned or Alienated | 7 | |
4.07 | Permitted Acceleration of Payment | 7 | |
ARTICLE 5. ADMINISTRATION |
|||
5.01 |
Administrator |
|
8 |
5.02 | Allocation and Delegation of Administrator Responsibilities and Powers | 8 | |
5.03 | Information to be Furnished to Administrator | 8 | |
5.04 | Applying for Benefits | 8 | |
i
5.05 | Administrator's Decision Final | 13 | |
ARTICLE 6. AMENDMENT AND TERMINATION |
|||
6.01 |
Amendment and Termination |
|
14 |
6.02 | Merger | 14 | |
ARTICLE 7. GENERAL |
|||
7.01 |
Plan Not Contract of Employment |
|
15 |
7.02 | Unsecured General Creditor | 15 | |
7.03 | Participating Employers | 15 | |
7.04 | Funding | 15 | |
7.05 | Tax Liability | 16 | |
7.06 | Indemnification and Exculpation | 16 | |
7.07 | Action by Employers | 16 | |
7.08 | Notices | 16 | |
7.09 | Construction | 16 | |
7.10 | Severability of Plan Provisions | 16 | |
7.11 | Applicable Laws | 16 |
Appendix A
ii
IHS SUPPLEMENTAL INCOME PLAN
(Effective November 30, 2004)
IHS Sponsor Inc., a Delaware corporation, establishes the Supplemental Income Plan to the IHS Retirement Income Plan (the "Plan") to enable the eligible Employees of the Employer to receive retirement income and other benefits in addition to the retirement income and other benefits payable under the IHS Retirement Income Plan (the "Retirement Income Plan"). The Plan was designed and implemented as an "excess benefit plan" within the meaning of ERISA Section 3(36), maintained solely to provide certain participants in the Retirement Income Plan with benefits in excess of those benefits allowed under Code Section 415 in compliance with Code Section 409A.
The Plan is not intended to qualify under Code Section 401(a), or be subject to Parts 2, 3 or 4 of Title I of ERISA. For purposes of applying Title I of ERISA, the Plan constitutes a plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of ERISA Section 301(a)(3).
1
Capitalized terms not defined herein shall have the meaning set forth in the Retirement Income Plan.
2
* * * End of Article 1 * * *
3
* * * End of Article 2 * * *
4
ARTICLE 3. SUPPLEMENTAL INCOME BENEFITS
REDUCED BY
The Excess Benefit shall be determined without consideration of ancillary benefits commencing on Normal Retirement Date.
REDUCED BY
FURTHER REDUCED BY
The Excess Compensation Benefit shall be determined without consideration of ancillary benefits commencing on Normal Retirement Date.
* * * End of Article 3 * * *
5
ARTICLE 4. VESTING AND PAYMENT OF PLAN BENEFITS
For purposes of this section, actuarial equivalence shall be based on
6
factors used by the Retirement Income Plan for the purposes of converting the Retirement Benefit into different forms of distribution.
No benefits under the Plan shall be payable to a Participant sooner than 30 days after the Participant (and his spouse or Beneficiary, as applicable) has made all elections required to commence distributions under the terms of the Retirement Income Plan.
* * * End of Article 4 * * *
7
The certificate of a majority of the members of the Administrator, certifying that the Administrator has taken or authorized any action, shall be conclusive in favor of any person relying on the certificate.
8
reasonable and may include the completion of forms and the submission of documents and additional information.
9
later than 60 days after the Administrator receives the claimant's written request for review unless special circumstances require additional time for review of the claim. If the Administrator needs an extension of time to review the claim, it shall notify the claimant in writing before the end of the initial 60-day period, and shall indicate the special circumstances requiring an extension of time and the date by which the Administrator expects to render the determination on review. The extension shall not be longer than an additional 60 days. The decision on review will be written in a manner calculated to be understood by the claimant. If the claim is denied, the written noticed shall include specific reasons for the decision as well as specific references to pertinent Plan provisions on which the decision is based, a statement of the claimant's right to bring an action under ERISA § 502(a) and a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claimant's claim for benefits, with "relevant" defined as provided in the previous subsection.
In the case of any extension, the notice of extension shall specifically explain the standards on which entitlement to a benefit is based, the unresolved issues that prevent a decision on the claim, and the additional information needed to resolve those issues, and the claimant shall be afforded at least 45 days within which to provide the specified information.
10
In the event that a period of time is extended due to a claimant's failure to submit necessary information, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.
The Administrator shall notify the claimant of the benefit determination on review within a reasonable period of time, not to exceed 45 days after receipt by the Plan of the claimant's request for review, unless the Administrator determines that special circumstances (such as the need to hold a hearing, if the Plan's procedures provide for a hearing) require an extension of time for processing the claim. If the Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 45-day period. In no event shall such extension exceed a period of 45 days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan expects to render the determination on review.
Notwithstanding the previous paragraph, if the Administrator holds regularly scheduled meetings at least quarterly, the Administrator shall instead make a benefit determination no later than the date of such meeting that immediately follows the Plan's receipt of a request for review, unless the request for review is filed within 30 days preceding the date of such meeting. In such case, a benefit determination may be made by no later than the date of the second meeting following the Plan's receipt of the request for review. If special circumstances (such as the need to hold a hearing, if the Plan's procedures provide for a hearing) require a further extension of time for processing, a benefit determination shall be rendered not later than the third meeting of the Administrator following the Plan's receipt of the request for review. If such an extension of time for review is required because of special circumstances, the Administrator shall provide the
11
claimant with written notice of the extension, describing the special circumstances and the date as of which the benefit determination will be made, prior to the commencement of the extension. The Administrator shall notify the claimant of the benefit determination as soon as possible, but not later than 5 days after the benefit determination is made.
The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing. In the event that a period of time is extended due to a claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.
12
* * * End of Article 5 * * *
13
ARTICLE 6. AMENDMENT AND TERMINATION
Notwithstanding the foregoing, if the Plan is not terminated earlier, the Plan shall terminate automatically as of the effective date of the termination of the Retirement Income Plan.
* * * End of Article 6 * * *
14
15
* * * End of Article 7 * * *
16
The Sponsor has caused the IHS Supplemental Income Plan to be executed in the name of and on behalf of the Employers on this day of December, 2004, amended and restated effective as of November 30, 2004.
IHS SPONSOR INC.
SPONSOR |
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By: |
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Title: |
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17
With respect to the Participants indicated in this Appendix A, the specified adjustments to Excess Benefits and/or Excess Compensation Benefits shall be made under the Plan.
A1
A2
Nonemployee directors receive compensation for their board service. That compensation is comprised of:
Annual Retainer: | $40,000, which may be converted into deferred stock units or deferred under the Directors Stock Plan | |
Audit Committee Chair Retainer: |
|
$20,000 annually |
Other Committee Chair Retainer: |
|
$5,000 annually |
Audit Committee Member Retainer: |
|
$5,000 annually |
Attendance Fees: |
|
$1,500 per board and committee meeting, plus reimbursement of reasonably incurred expenses |
Equity Compensation: |
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One-time grant of 5,000 shares of restricted stock upon joining the IHS Inc. board (to be changed as of December 1, 2005 to a one-time grant of restricted stock units equal to $80,000 fair market value on the grant date), a grant of 3,000 shares of restricted stock for fiscal year 2004, a grant of 4,500 shares of restricted stock for fiscal year 2005 and annual grants of restricted stock units commencing on December 1, 2005 equal to $50,000 fair market value on the grant date thereafter |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption "Experts" and to the use of our report dated January 17, 2005, in the Registration Statement (Form S-1 No. 333- ) and related Prospectus of IHS Inc. for the registration of shares of its Class A common stock.
/s/ Ernst & Young LLP
Denver,
Colorado
February 3, 2005