UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 2014
Commission file number 000-499-68
COMDISCO HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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54-2066534 |
(State or other jurisdiction of |
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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5600 North River Road
Suite 800
Rosemont, Illinois 60018
(Address of principal executive offices) (Zip code)
Registrants telephone number, including area code: (847) 698-3000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer [ ] |
Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) |
Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No[X]
The registrant had 4,028,951 shares of common stock, $0.01 par value per share outstanding on January 31, 2015.
COMDISCO HOLDING COMPANY, INC.
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Consolidated Balance Sheet September 30, 2014 (Going Concern Basis) (Audited) |
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Notes to Consolidated Financial Statements (In Liquidation) (Unaudited) |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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Forward-Looking Statements
This quarterly report on Form 10-Q contains, and our periodic filings with the Securities and Exchange Commission (the SEC) and written and oral statements made by the Companys sole officer and director or any authorized representative, to press, potential investors, securities analysts and others, will contain, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the Securities Act) and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are not historical facts, but rather are predictions and generally can be identified by use of statements that include phrases such as believe, expect, anticipate, estimate, intend, plan, foresee, looking ahead, is confident, should be, will, predicted, likely or other words or phrases of similar import. Similarly, statements that describe or contain information related to matters such as our intent, belief, or expectation with respect to financial performance, claims resolution under the Plan (as defined below), cash availability and cost-cutting measures are forward-looking statements. These forward-looking statements often reflect a number of assumptions and involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those currently anticipated in these forward-looking statements. In light of these risks and uncertainties, the forward-looking events might or might not occur, which may affect the accuracy of forward-looking statements and cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.
In this quarterly report on Form 10-Q, references to the Company, Comdisco Holding, we, us and our mean Comdisco Holding Company, Inc., its consolidated subsidiaries, including Comdisco, Inc., and its predecessors, except in each case where the context indicates otherwise. References to Comdisco, Inc. mean Comdisco, Inc. and its subsidiaries prior to the Companys emergence from bankruptcy on August 12, 2002, except where the context indicates otherwise.
Important factors that could cause actual results to differ materially from those suggested by these written or oral forward-looking statements, and could adversely affect our future financial performance, include the risk factors discussed in the Companys Annual Report on Form 10-K in Part I, Item 1A, Risk Factors and in the Companys Quarterly Report on Form 10-Q in Part II, Item 1A, Risk Factors. Many of the risk factors that could affect the results of the Companys operations are beyond our ability to control or predict.
THE COMPANY EMERGED FROM CHAPTER 11 BANKRUPTCY PROCEEDINGS ON AUGUST 12, 2002. THE PURPOSE OF THE COMPANY IS TO SELL, COLLECT OR OTHERWISE REDUCE TO MONEY IN AN ORDERLY MANNER THE REMAINING ASSETS OF THE CORPORATION. PURSUANT TO THE COMPANYS FIRST AMENDED JOINT PLAN OF REORGANIZATION (THE PLAN) AND RESTRICTIONS CONTAINED IN THE COMPANYS CERTIFICATE OF INCORPORATION (THE CERTIFICATE), THE COMPANY IS SPECIFICALLY PROHIBITED FROM ENGAGING IN ANY BUSINESS ACTIVITIES INCONSISTENT WITH ITS LIMITED BUSINESS PURPOSE. ACCORDINGLY, WITHIN THE NEXT FEW YEARS, IT IS ANTICIPATED THAT THE COMPANY WILL HAVE REDUCED ALL OF ITS ASSETS TO CASH AND MADE DISTRIBUTIONS OF ALL AVAILABLE CASH TO HOLDERS OF ITS COMMON STOCK AND CONTINGENT DISTRIBUTION RIGHTS (CDRs) IN THE MANNER AND PRIORITIES SET FORTH IN THE PLAN. AT THAT POINT, THE COMPANY WILL CEASE OPERATIONS AND NO FURTHER DISTRIBUTIONS WILL BE MADE.
UNDER THE PLAN, THE COMPANY WAS CHARGED WITH, AND HAS BEEN, LIQUIDATING ITS ASSETS. WHILE THERE HAVE BEEN NO CHANGES EITHER TO THE PLAN, OR THE COMPANYS OBLIGATIONS UNDER IT, THE COMPANY ADOPTED ASU 2013-07, LIQUIDATION BASIS OF ACCOUNTING AS OF OCTOBER 1, 2014 AND ACCORDINGLY DETERMINED THAT LIQUIDATION WAS IMMINENT. THEREFORE, EFFECTIVE OCTOBER 1, 2014, THE COMPANY APPLIED THE LIQUIDATION BASIS OF ACCOUNTING ON A PROSPECTIVE BASIS. THE LIQUIDATION BASIS OF ACCOUNTING REQUIRES THE COMPANY TO ESTIMATE NET CASH FLOWS FROM OPERATIONS AND TO ACCRUE ALL COSTS ASSOCIATED WITH IMPLEMENTING AND COMPLETING THE PLAN OF LIQUIDATION AND REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT AFFECT THE AMOUNTS REPORTED IN THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES.
THE COMPANY FILED, ON AUGUST 12, 2004, A CERTIFICATE OF DISSOLUTION WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE TO FORMALLY EXTINGUISH COMDISCO HOLDING COMPANY, INC.S CORPORATE EXISTENCE WITH THE STATE OF DELAWARE EXCEPT FOR THE PURPOSE OF COMPLETING THE WIND-DOWN CONTEMPLATED BY THE PLAN. CAPITALIZED TERMS USED BUT NOT DEFINED IN THIS QUARTERLY REPORT ON FORM 10-Q HAVE THE MEANINGS AS DEFINED IN THE PLAN.
Comdisco Holding Company, Inc.
Consolidated Statement of Net Assets in Liquidation as of December 31, 2014 (Liquidation Basis) (Unaudited)
(in thousands)
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December 31, 2014 |
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ASSETS |
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Cash and cash equivalents |
$ |
46,512 |
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Cash legally restricted |
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4,000 |
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Receivable from securities sold |
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1,911 |
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Equity investments |
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415 |
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Assets held in trust for deferred compensation plan |
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502 |
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Other assets |
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519 |
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TOTAL ASSETS |
$ |
53,859 |
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LIABILITIES |
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Contingent Distribution Rights Liability |
$ |
16,436 |
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Accrued compensation |
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4,831 |
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Accrued professional fees |
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2,075 |
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Other accrued costs |
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1,203 |
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Accrued liability for deferred compensation plan |
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502 |
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Accrued estimated disposal costs of liquidation |
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588 |
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Income taxes payable |
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240 |
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TOTAL LIABILITIES |
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25,875 |
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NET ASSETS IN LIQUIDATION |
$ |
27,984 |
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See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Changes in Net Assets in Liquidation as of December 31, 2014 (Liquidation Basis) (Unaudited)
(in thousands)
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December 31, 2014 |
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Net assets in liquidation, beginning of period |
$ |
28,158 |
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Changes in net assets in liquidation |
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Change in other assets |
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170 |
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Change to Contingent Distribution Rights Liability |
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102 |
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Change in accrued liabilities |
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(26) |
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Change in accrued estimated disposal costs of liquidation |
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(420) |
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Liquidating distributions to CDR Holders |
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0 |
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Liquidating distributions to Common Shareholders |
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0 |
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Net increase (decrease) in net assets in liquidation |
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(174) |
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Net assets in liquidation, end of period |
$ |
27,984 |
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See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Cash Flows Three months ended December 31, 2014 (Liquidation Basis) (Unaudited)
(in thousands)
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Three Months Ended |
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Cash flows from operating activities: |
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Equity investment proceeds net of sharing |
$ |
15,144 |
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Bad debt recoveries, interest and other revenue |
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37 |
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Selling, general and administrative expenses |
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(579) |
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Income tax payments |
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(82) |
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Net cash provided by operating activities |
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14,520 |
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Net increase in cash and cash equivalents |
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14,520 |
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Cash and cash equivalents at beginning of period |
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31,992 |
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Cash and cash equivalents at end of period |
$ |
46,512 |
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See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Balance Sheet September 30, 2014 (Going Concern Basis) (Audited)
(in thousands, except share data)
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September 30, 2014 |
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ASSETS |
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Cash and cash equivalents |
$ |
31,992 |
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Cash legally restricted |
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4,000 |
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Equity investments |
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697 |
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Assets held in trust for deferred compensation plan |
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501 |
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Other assets |
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248 |
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Total assets |
$ |
37,438 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Accounts payable |
$ |
103 |
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Income taxes payable |
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90 |
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Other liabilities: |
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Accrued compensation |
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1,429 |
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Contingent Distribution Rights |
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10,437 |
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Other liabilities |
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168 |
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Total other liabilities |
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12,034 |
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Total liabilities |
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12,227 |
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Stockholders equity |
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Common Stock $.01 par value. Authorized 10,000,000 shares; originally issued 4,200,000 shares; 4,028,951 shares issued and outstanding at September 30, 2014 |
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70 |
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Additional paid-in capital |
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28,414 |
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Accumulated other comprehensive (loss) |
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(3) |
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Accumulated deficit |
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(3,270) |
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Total stockholders equity |
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25,211 |
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$ |
37,438 |
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See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Comprehensive Income Three months ended December 31, 2013
(Going Concern Basis) (Unaudited)
(in thousands, except per share data)
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Three Months Ended |
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Revenue |
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Gain on sale of equity investments |
$ |
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2 |
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Interest income |
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28 |
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Total revenue |
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30 |
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Costs and expenses
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Selling, general and administrative |
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662 |
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Contingent Distribution Rights |
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399 |
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Foreign exchange loss |
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161 |
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Bad debt recoveries |
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(29) |
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Total costs and expenses |
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1,193 |
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Net loss before income taxes |
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(1,163) |
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Income tax expense |
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56 |
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Net loss |
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(1,219) |
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Other comprehensive income, net of tax: |
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Unrealized gains on securities: |
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Unrealized holding gains arising during the period |
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1,612 |
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Other comprehensive income |
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1,612 |
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Comprehensive income |
$ |
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393 |
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Basic and diluted net loss per common share |
$ |
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(0.30) |
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See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Cash Flows Three months ended December 31, 2013 (Going Concern Basis) (Unaudited)
(in thousands)
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Three Months Ended |
| |
|
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Cash flows from operating activities: |
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Equity investment proceeds net of sharing |
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$ 2 |
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Bad debt recoveries, interest and other revenue |
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34 |
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Selling, general and administrative expenses |
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(593) |
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Income tax receipts |
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731 |
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Net cash provided by operating activities |
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174 |
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Effect of exchange rates on cash and cash equivalents |
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(23) |
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|
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Net increase in cash and cash equivalents |
|
151 |
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Cash and cash equivalents at beginning of period |
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27,671 |
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|
|
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Cash and cash equivalents at end of period |
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$ 27,822 |
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|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Cash Flows Three months ended December 31, 2013 (Going Concern Basis) (Unaudited) - Continued
(in thousands)
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Three Months |
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Reconciliation of net loss to net cash provided by operating activities: |
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|
| ||
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Net loss |
$ |
(1,219) |
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|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
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Taxes payable and other tax balances |
|
56 |
|
|
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Change in Canadian income tax receivables/payables |
|
731 |
|
|
|
Contingent Distribution Rights |
|
399 |
|
|
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Selling, general and administrative expenses |
|
69 |
|
|
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Other, including foreign exchange |
|
138 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
174 |
|
|
|
See accompanying notes to consolidated financial statements.
COMDISCO HOLDING COMPANY, INC.
Notes to Consolidated Financial Statements (In Liquidation) (Unaudited)
December 31, 2014
The following discussion and analysis should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations included in Item 2 of Part I and in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2014, and with the Consolidated Financial Statements and related notes in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2014. Capitalized terms used but not defined in this Quarterly Report on Form 10-Q have the meanings as defined in the Companys First Amended Joint Plan of Reorganization (the Plan). Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis.
1. Reorganization
On July 16, 2001, Comdisco, Inc. and 50 of its domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy court) (consolidated case number 01-24795). Comdisco Holding Company, Inc., as the successor company to Comdisco, Inc., emerged from bankruptcy under the Plan that became effective on August 12, 2002. For financial reporting purposes only, however, the effective date for implementation of fresh-start reporting was July 31, 2002. Effective October 1, 2014, the Company has applied the liquidation basis of accounting on a prospective basis. See Note 2 of these Notes to Consolidated Financial Statements (In Liquidation).
Comdisco Holding Company, Inc. (the Company) was formed on August 8, 2002 for the purpose of selling, collecting or otherwise reducing to money in an orderly manner the remaining assets of the Company and all of its direct and indirect subsidiaries, including Comdisco, Inc. The Companys business purpose is limited to the orderly sale or collection of all its remaining assets. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.
Litigation Trust: In February 1998, pursuant to Comdisco, Inc.s Shared Investment Plan (the SIP), 106 employees (the SIP Participants) took out full recourse, personal loans to purchase approximately six million shares of Comdisco, Inc.s common stock. In connection therewith, Comdisco, Inc. executed a guaranty dated February 2, 1998 (the Guaranty) providing a guaranty of the loans in the event of default by the SIP Participants to the lenders under the SIP (the SIP Lenders). The Company and the SIP Lenders subsequently reached a settlement on the Guaranty that was approved by the Bankruptcy court on December 9, 2004. The Plan and the litigation trust agreement provided that, under certain circumstances, subrogation rights that the Company may have against the SIP Participants and their respective promissory notes be placed in a trust for the benefit of the C-4 creditors (the Trust Assets). Under the Plan, the Litigation Trust is solely responsible for collection of amounts due on the promissory notes of the sixty-nine SIP Participants who did not take advantage of the SIP Relief (as defined in the Plan). The Company has a limited indemnification obligation to the litigation trustee under the litigation trust agreement.
SIP Litigation: On February 4, 2005, the Litigation Trust commenced lawsuits both in the United States District Court for the Northern District of Illinois (the Federal SIP Lawsuits) and in the Circuit Court of Cook County Illinois (the State SIP Lawsuits) to collect on the remaining SIP Participants promissory notes.
Federal SIP Lawsuits: The Litigation Trust filed and a federal district court judge entered summary judgments (and amended judgments) against all but one of the SIP Participants who were defendants in the federal cases (the Federal SIP Defendants) on their respective SIP promissory notes, and the Litigation Trust commenced collection actions against them. Additionally, the federal district court judge entered orders directing that certain CDRs and related proceeds held by the estate of Comdisco, Inc. and Computershare (f/k/a BNY Mellon) (holder of CDRs) on behalf of those Federal SIP Defendants be turned over to the Litigation Trust. Pursuant to such orders, the Company turned over CDRs and related proceeds and will continue to do so if additional orders are entered.
The Federal SIP Defendants filed appeals on those judgments. On October 18, 2010, the Seventh Circuit affirmed the rulings in favor of the Litigation Trust, but remanded certain fraud issues to the trial court. On November 1, 2010, the Federal SIP Defendants filed a petition for a hearing before the full appellate panel. On June 28, 2011, the Seventh Circuit ruled and vacated the summary judgments and remanded the cases for further proceedings.
Following a series of motions, hearings and the completion of discovery, at a hearing on July 8, 2013, Judge Robert Gettleman set a trial date for September 23, 2013. The trials actual start date was September 24, 2013. On October 21, 2014, the judge orally ruled and entered judgment in favor of the Federal SIP Defendants. The basis of the judges ruling and judgment was his finding that both the bank and the Company committed an arranging violation under the applicable margin lending regulations. Therefore, the judge ruled that the promissory notes were void and unenforceable.
On October 29, 2014, the litigation trustee filed an appeal of the judgment to the United States Court of Appeals for the Seventh Circuit (Appellate Court).
On November 6, 2014, the court scheduled a settlement conference for December 9, 2014. On November 7, 2014, the court issued a briefing schedule. On November 20, 2014, the Federal SIP Defendants filed a Notice of Appeal of the October 21, 2014 judgment and of an order entered on August 12, 2013. On December 10, 2014, the court suspended the briefing schedule for all of the appeals filed. Also, on November 20, 2014, the Federal SIP Defendants filed a Motion for Extension of Time to file Bills of Costs. On December 4, 2014, the judge approved this motion and allowed the Federal SIP Defendants to file their Bills of Costs after all appeals have been completed. As of the date of this filing, the settlement conference is still ongoing.
As part of the appeal and cross-appeal, the Company and its counsel filed motions to request that certain memos, testimony and offers of proof be kept under seal. On February 3, 2015, the Appellate Court granted the motions.
State SIP Lawsuits: After a series of hearings, motions and counter-motions, amended pleadings and individual bankruptcies and settlements, the remaining State SIP Defendants and the litigation trustee entered into an agreed Stipulation And Order (the Stipulation) which, among other things, stays the trials in the state cases pending the resolution and any appeal of the trial in the federal cases. On August 12, 2013, the Stipulation was approved by Judge Tailor. On December 30, 2014, Judge Tailor placed all state cases on the Law Division Stay Calendar. On February 2, 2015, fraudulent conveyance actions filed by the litigation trustee against certain State SIP Defendants were continued to August 4, 2015 for a status hearing.
On July 26, 2013, Nisen and Elliot, LLC, an outside legal firm for the Company, filed a Petition to Intervene and a Motion for Protective Order in the state cases in order to preserve the Companys attorney-client work product privilege in that litigation. Due to the state cases being placed on the Law Division Stay Calendar, this motion will not be heard until the state cases are removed from the Law Division Stay Calendar and returned back to Judge Tailor.
Litigation Trust Reports: By early 2005, sixty-nine SIP Participants promissory notes were transferred to the Litigation Trust. As reported in various Status Reports of Comdisco Litigation Trustee, of the sixty-nine SIP Participants: forty-one have settled or otherwise resolved their obligation; twelve have filed personal bankruptcy; and, sixteen notes remain outstanding (five in the federal court and eleven in the state court). During the quarter ended December 31, 2014, the Litigation Trust did not reach any settlements, which leaves the total number of promissory notes settled or otherwise resolved by the Litigation Trust at forty-one.
For more details regarding the Litigation Trust and related proceedings, please refer to the Status Reports of Comdisco Litigation Trustee filed quarterly in the Bankruptcy court. Any proceeds collected by the Litigation Trust, net of expenses, will be considered Trust Assets and distributed in accordance with the Plan and the litigation trust agreement.
2. Basis of Presentation and Recently Issued Accounting Pronouncements
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. The information furnished herein includes all adjustments, consisting of normal recurring adjustments except where indicated, which are, in the opinion of management, necessary for a fair presentation of the results of operations for these interim periods.
Going Concern Basis of Accounting periods prior to October 1, 2014
The consolidated financial statements for the periods ended September 30, 2014 and December 31, 2013, were prepared on the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Prior period financial results have not been restated under the liquidation basis of accounting.
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis in conformity with accounting principles generally accepted in the United States of America. The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. The Company continually evaluates opportunities for the orderly sale and collection of its remaining assets. It is anticipated that the Company will have reduced all of its assets to cash, determined its final CDR liability after the resolution of the pending SIP litigation, resolved its final federal and state tax obligations and made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan and completed all regulatory filings within the next few years. At that point, the Company will cease operations. The costs in liquidation will generally be incurred ratably over the remaining anticipated time frame. If the timing of any of these steps changes, the future accrued costs may change. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows.
These consolidated financial statements of net assets in liquidation should be read in conjunction with our audited consolidated financial statements and notes thereto as of and for the year ended September 30, 2014 included in the Annual Report on Form 10-K, as filed with the SEC on December 11, 2014.
The Company has evaluated subsequent events through the date of this filing and does not believe there are any material subsequent events which would require further disclosure.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Companys consolidated financial statements upon adoption.
3. Cumulative Effect of Accounting Change/Net Assets in Liquidation
The following is a reconciliation of Shareholders Equity under the going concern basis of accounting to net assets in liquidation under the liquidation basis of accounting as of October 1, 2014 (in thousands):
Shareholders Equity as of September 30, 2014 |
$ |
25,211 |
|
Increase due to estimated net realizable value of Equity Investments |
|
19,349 |
|
Increase due to estimated net realizable value of other assets |
|
157 |
|
Increase for CDR liability |
|
(6,101) |
|
Liability for accrued compensation |
|
(4,086) |
|
Liability for accrued professional fees |
|
(4,623) |
|
Liability for accrued other costs |
|
(1,349) |
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Income taxes payable |
|
(232) |
|
Liability for estimated disposal costs of liquidation |
|
(168) |
|
Adjustment to reflect the change to the liquidation basis of accounting |
|
2,947 |
|
Estimated value of net assets in liquidation as of October 1, 2014 |
$ |
28,158 |
|
In applying liquidation basis of accounting, the Company is recognizing a net increase of $2,947,000 in its estimated value of net assets in liquidation. The adjustment is accounted for as an increase to retained earnings in the balance sheet as of October 1, 2014.
During the period of October 1, 2014 through December 31, 2014, the Companys estimated net assets in liquidation decreased by $174,000. The primary reason for the decline in net assets was due to an increase in the estimated disposal costs of liquidation for the Companys stored paper and electronic records. Such paper and electronic records will continue to be stored and ultimately destroyed once the Company has completed its liquidation.
The net assets in liquidation as of the quarter ended December 31, 2014 would result in liquidating distributions of approximately $6.95 per common share. This estimate of liquidating distributions includes projections of costs and expenses to be incurred during the time period estimated to complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the completion of all the steps necessary for the liquidation.
4. Equity Investments
The Companys estimate of the fair value of its private company investments (Equity Investments) was made in consultation with Windspeed Acquisition Fund GP, LLC (Windspeed), a professional management group, who manages the Companys Equity Investments on an ongoing basis. Windspeed shares in the net receipts from the sale of the Companys Equity Investments at a set percentage in certain designated portions of the portfolio of companies. The Windspeed February 2004 management agreement was extended on April 5, 2011 (with an effective date of February 21, 2011) until February 20, 2013 (the Initial Extension). The Windspeed management agreement was subsequently extended effective February 21, 2013 through February 20, 2015 and extended again effective February 12, 2015 through February 12, 2017 (the Subsequent Extensions). Prior to the Initial Extension, Windspeed received fixed and declining management fees. Under the terms of the Initial and Subsequent Extensions, Windspeed is not, and will not, be paid any ongoing management fees. In lieu of such management fee payment, 100% of any proceeds from certain designated companies in the portfolio will go to Windspeed. Realized gains on the sale of Equity Investments are presented on a gross basis. Any management sharing amounts with Windspeed are included in accrued professional fees. The Company has received approximately $88,762,000 in proceeds (prior to management fees and sharing) since the inception of the management agreement with Windspeed. Windspeed has received a combined $15,354,000 in management fees and sharing through December 31, 2014.
Marketable equity investments:
At December 31, 2014, the Company did not own shares in any public company.
However, the Company does hold a limited number of securities in trust for a deferred compensation plan which are not available for distribution under the Plan.
The Companys practice is to work in conjunction with Windspeed to sell its marketable equity securities within a reasonable period of time after the expiration of the lockup period, utilizing various timing strategies which seek to maximize the return to the Company. However, in the future, there is no assurance as to whether or not the Company either will be able to liquidate such positions held for any lockup period or realize any amount on such positions.
Equity investments in private companies:
Under the going concern basis of accounting, the Companys policy for assessing the carrying value of Equity Investments was, in consultation with Windspeed, to regularly review and estimate the fair value of such Equity Investments. The Company also identified and recorded impairment losses on Equity Investments when market and customer specific events and circumstances indicated the carrying value might be impaired. All write-downs were considered permanent impairments for financial reporting purposes.
As of December 31, 2014, the Company had two investments in private companies. In conjunction with applying the liquidation basis of accounting, the Company has determined the liquidation value based on estimated cash proceeds anticipated to be received for such investments, which, in the aggregate amount is estimated to be approximately $415,000. See Note 9 of these Notes to Consolidated Financial Statement (In Liquidation) for the fair value disclosure.
5. Income Taxes
As of December 31, 2014, the Company files income tax returns in the U.S. federal jurisdiction and the State of Illinois.
As of the date of this filing, the federal tax years open to examination in the U.S. are fiscal years ended September 30, 2011 through September 30, 2013.
Uncertain Tax Positions:
The Company has no uncertain tax positions included in the Companys consolidated statement of net assets in liquidation.
6. Other Assets
During the quarter ended September 30, 2014, it was announced that Ebates, Inc. (Ebates) would be acquired by Rakuten, Inc., a Japanese company (Rakuten). The Plan of Merger was signed on September 24, 2014, pending various conditions, including regulatory approval. On October 9, 2014, Rakuten completed the acquisition and on October 29, 2014, the Company received the initial distribution. The gross proceeds distributed were approximately $17,720,000 of which the Company received approximately $15,144,000 in net proceeds and Windspeed received approximately $2,576,000 in management sharing. The Company holds a $1,911,000 receivable from securities sold before management sharing as of December 31, 2014 related to the Ebates transaction. Such proceeds are held in escrow under the terms of the merger documents until January 2016. The actual amount to be distributed from the escrow may be impacted by provisions of, and claims asserted against, the escrow.
The Company holds legally restricted cash in the amount of $4,000,000 as of December 31, 2014 and September 30, 2013 which is an indemnification reserve set aside by the Company for any potential indemnified losses in lieu of the litigation trustee purchasing insurance coverage.
Assets held in trust for deferred compensation plan are assets that are held in a Rabbi Trust for the benefit of deferred employee compensation and are not available for distribution under the Plan.
Other assets on the consolidated statement of net assets in liquidation include estimated recoveries, estimated accrued interest income, and other projected cash inflows expected to be received before liquidation.
7. Other Financial Information
The liability for accrued compensation includes payroll and estimated amounts payable under the Companys Bankruptcy court approved compensation plans. There is a separate liability representing the accrued liability for assets held in trust for deferred compensation plan that was previously included in the accrued compensation liability as of September 30, 2014.
The liability for accrued professional fees includes projected future costs for outside counsel for the corporate, bankruptcy, liquidation and SEC requirements, outside accounting and audit services, consulting fees, management sharing and corporate bankruptcy required work.
The liability for other accrued costs includes projected future costs for rent, insurance, travel, miscellaneous other corporate expenses and an accrued VAT liability for a foreign jurisdiction.
The liability for accrued estimated disposal costs of liquidation includes projected future costs to continue to store and dispose of the Companys paper and electronic records.
Contingent Distribution Rights
Although the CDRs trade over-the-counter, for financial reporting purposes, the Company records CDRs as a liability under both the going concern and liquidation bases of accounting and as an operating expense under the going concern basis of accounting.
The Plan entitled holders of CDRs to previously share at increasing percentages in the proceeds realized from the Companys assets based upon the present value of distributions to certain C-4 creditors in the bankruptcy estate of Comdisco, Inc. However, as of December 31, 2014, the sharing percentage is 37%, which is the maximum sharing percent. As of the date of this filing, there were 1,844 holders of record of the Companys CDRs and there were 148,448,188 outstanding CDRs.
The Company maintains sufficient cash reserves for operations and any increase in the potential CDR liability relating to increases in the Companys net assets in liquidation and any potential net distributions from the Litigation Trust to the C-4 creditors. The outcome and the timing of the actual net distributions from the Litigation Trust will impact both the timing and the amount of future liquidating dividends and CDR payments.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. However, any impact of potential net distributions from the Litigation Trust on the CDR liability is not included as estimates are currently not determinable.
8. Financial Information by Geographic Area
Since the year ended September 30, 2013, all revenues generated and assets held are in North America.
9. Fair Value Measurements
The three levels of inputs used to measure fair value are as follows:
· Level 1 - Quoted prices in active markets for identical assets and liabilities
· Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
· Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company has included a tabular disclosure for financial assets that are measured at fair value on a recurring basis in the consolidated statements of net assets in liquidation as of the period ending December 31, 2014 and in the consolidated balance sheet as of the year ending September 30, 2014. The Company currently holds no financial liabilities that are measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
| |||||||
|
|
December 31, 2014 |
| |||||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| |||||||
|
|
|
|
|
|
|
|
|
| |||||||
Assets |
|
|
|
|
|
|
|
|
| |||||||
Money market accounts |
|
$ |
46,342,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
46,342,000 |
| |||
Equity Investments (A) |
|
0 |
|
0 |
|
763,000 |
|
763,000 |
| |||||||
Assets held in trust for deferred compensation plan (C) |
|
502,000 |
|
0 |
|
0 |
|
502,000 |
| |||||||
Total |
|
$ |
46,844,000 |
|
$ |
0 |
|
$ |
763,000 |
|
$ |
47,607,000 |
| |||
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
| |||||||
|
|
September 30, 2014 |
| |||||||||||||
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
| |||||||
|
|
|
|
|
|
|
|
|
| |||||||
Assets |
|
|
|
|
|
|
|
|
| |||||||
Money market accounts |
|
$ |
31,791,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
31,791,000 |
| |||
Equity Investments (B) |
|
0 |
|
19,631,000 |
|
748,000 |
|
20,379,000 |
| |||||||
Assets held in trust for deferred compensation plan (C) |
|
501,000 |
|
0 |
|
0 |
|
501,000 |
| |||||||
Total |
|
$ |
32,292,000 |
|
$ |
19,631,000 |
|
$ |
748,000 |
|
$ |
52,671,000 |
| |||
(A) Equity investments for Level 3 are made up of stock in two privately held companies; FMV on a gross basis is $763,000 with management sharing of $114,000 and a net fair value balance of $649,000.
(B) Equity investments for Level 2 and 3 were made up of stock in three privately held companies; FMV on a gross basis was $20,379,000 with management sharing of $2,965,000 and a net fair value balance of $17,414,000.
(C) Assets held in trust for deferred compensation plan are made up of bonds, equity and money market funds that are actively traded.
These assets are held in a Rabbi Trust for the benefit of deferred employee compensation and are not available for distribution under the Plan.
Reconciliation of financial assets measured at fair value on a recurring basis using Level 3 inputs for the period ended December 31, 2014 and the year ended September 30, 2014 is as follows:
|
|
Fair Value |
|
Realized |
|
Change in |
|
Decrease due to |
|
Increase due to |
|
Decrease in cost |
|
Decrease due to |
|
Fair Value |
| |||||
Level 3 only |
|
$748,000 |
|
$ |
0 |
|
$ 15,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ 763,000 |
|
|
|
Fair Value |
|
Realized |
|
Change in |
|
Decrease due to |
|
Increase due to |
|
Decrease in cost |
|
Decrease due to |
|
Fair Value |
| ||||
Level 3 only |
|
$8,875,000 |
|
$ |
0 |
|
$ 11,504,000 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ (19,631,000 |
) |
$ 748,000 |
|
In accordance with the provisions of ASC Topic 320, Accounting for Certain Investments in Debt and Equity Securities, marketable equity investments (equity investments having a readily determinable fair value) would have a carrying value and a fair value based on quoted market prices. The Companys practice is to sell its marketable equity investments upon the expiration of the lock-up period.
Equity Investments consist primarily of preferred stock holdings in two private companies. As of December 31, 2014, the liquidation value of Equity Investments was $415,000 and the fair market value measured using Level 3 inputs was $763,000, before management sharing. The difference in valuation amounts is due to the fact that the Company may have limited options to dispose of these investments over the projected liquidation timeline. The liquidation value amount (which is the Companys current estimated amount of cash that could be collected on such Equity Investments) is the amount reflected in the consolidated statement of net assets in liquidation (rather than the fair value). The fair value of the Companys Equity Investments was determined in consultation with Windspeed based on the market approach, including, but not limited to, pending offers to purchase the preferred stock holdings, quoted trading levels for publicly-traded securities in similar industries and/or markets, industry and company multiples, industry acceptance in the market place, liquidity discounts due to lock ups, estimated revenue, and customer, product and market share growth by the respective companies in the portfolio. Substantially all of these factors are outside the control of the Company and are subject to significant volatility. There can be no assurance that the Company will be able to realize the estimated fair market value.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements (in liquidation) and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2014, and with the information under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. This discussion contains forward-looking information. Please see Forward-Looking Statements and Part II, Item 1A, Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these statements.
THE COMPANY EMERGED FROM CHAPTER 11 BANKRUPTCY PROCEEDINGS ON AUGUST 12, 2002. THE PURPOSE OF THE COMPANY IS TO SELL, COLLECT OR OTHERWISE REDUCE TO MONEY IN AN ORDERLY MANNER THE REMAINING ASSETS OF THE CORPORATION. PURSUANT TO THE COMPANYS FIRST AMENDED JOINT PLAN OF REORGANIZATION (THE PLAN) AND RESTRICTIONS CONTAINED IN THE COMPANYS CERTIFICATE OF INCORPORATION (THE CERTIFICATE), THE COMPANY IS SPECIFICALLY PROHIBITED FROM ENGAGING IN ANY BUSINESS ACTIVITIES INCONSISTENT WITH ITS LIMITED BUSINESS PURPOSE. ACCORDINGLY, WITHIN THE NEXT FEW YEARS, IT IS ANTICIPATED THAT THE COMPANY WILL HAVE REDUCED ALL OF ITS ASSETS TO CASH AND MADE DISTRIBUTIONS OF ALL AVAILABLE CASH TO HOLDERS OF ITS COMMON STOCK AND CONTINGENT DISTRIBUTION RIGHTS (CDRs) IN THE MANNER AND PRIORITIES SET FORTH IN THE PLAN. AT THAT POINT, THE COMPANY WILL CEASE OPERATIONS AND NO FURTHER DISTRIBUTIONS WILL BE MADE.
UNDER THE PLAN, THE COMPANY WAS CHARGED WITH, AND HAS BEEN, LIQUIDATING ITS ASSETS. WHILE THERE HAVE BEEN NO CHANGES EITHER TO THE PLAN, OR THE COMPANYS OBLIGATIONS UNDER IT, THE COMPANY ADOPTED ASU 2013-07, LIQUIDATION BASIS OF ACCOUNTING AS OF OCTOBER 1, 2014 AND ACCORDINGLY, DETERMINED THAT LIQUIDATION WAS IMMINENT. THEREFORE, EFFECTIVE OCTOBER 1, 2014, THE COMPANY APPLIED THE LIQUIDATION BASIS OF ACCOUNTING ON A PROSPECTIVE BASIS. THE LIQUIDATION BASIS OF ACCOUNTING REQUIRES THE COMPANY TO ESTIMATE NET CASH FLOWS FROM OPERATIONS AND TO ACCRUE ALL COSTS ASSOCIATED WITH IMPLEMENTING AND COMPLETING THE PLAN OF LIQUIDATION AND REQUIRES MANAGEMENT TO MAKE ESTIMATES AND ASSUMPTIONS THAT AFFECT THE AMOUNTS REPORTED IN THE CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES.
THE COMPANY FILED, ON AUGUST 12, 2004, A CERTIFICATE OF DISSOLUTION WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE TO FORMALLY EXTINGUISH COMDISCO HOLDING COMPANY, INC.S CORPORATE EXISTENCE WITH THE STATE OF DELAWARE EXCEPT FOR THE PURPOSE OF COMPLETING THE WIND-DOWN CONTEMPLATED BY THE PLAN.
General
Wind-Down of Operations
Since emerging from bankruptcy proceedings on August 12, 2002, the Company has, pursuant to the Plan, focused on the monetization of its remaining assets. Therefore, comparisons of quarter-to-quarter or year-to-year results of operations should not be relied upon as an indication of the Companys future performance. Capitalized terms used but not defined in this section shall have the meanings as defined in the Plan. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis.
The Company has reduced, and expects to continue to reduce, the size and complexity of its organizational and systems infrastructure concurrently with the monetization of its assets. As of the date of this filing, the Company had a total of five employees (one full-time and four part-time), a decrease of approximately 99 percent from approximately 600 employees upon emergence on August 12, 2002. Several consultants periodically assist the Company on a consulting basis.
On August 12, 2004, Randolph I. Thorntons appointment as Initial Disbursing Agent became effective. As Initial Disbursing Agent, Mr. Thornton performs the roles and responsibilities of the Board of Directors and officers of the Company, including all measures that are necessary to complete the administration of the reorganized debtors Plan and Chapter 11 cases. Mr. Thornton serves as Chief Executive Officer, President and Secretary and is the sole director and executive officer of the Company.
Overview
On July 16, 2001, Comdisco, Inc. and 50 of its domestic subsidiaries voluntarily filed for bankruptcy.
Comdisco Holding Company, Inc., as the successor company to Comdisco, Inc., emerged from bankruptcy under a confirmed plan of reorganization that was effective on August 12, 2002. In accordance with the Plan, Comdisco Holding Company, Inc. became the successor to Comdisco, Inc.
Since the Company emerged from Chapter 11 bankruptcy proceedings on August 12, 2002, the Companys business activities have been limited to the orderly sale or run-off of all of its existing asset portfolios. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose. Since emerging from bankruptcy, the Company has not engaged in any new leasing or financing activities, except for previously existing customer commitments and to restructure existing equipment leases and loans to maximize the value of the Companys assets. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis.
The Company maintains sufficient cash reserves for operations and any increase in the potential CDR liability relating to increases in the Companys net assets in liquidation and any potential net distributions from the Litigation Trust to C-4 creditors. The outcome and timing of any actual net distributions from the Litigation Trust will impact both the timing and the amount of future liquidating dividends and CDR payments.
The Company has material restrictions on its ability, and does not expect, to make significant investments in new or additional assets. The Company continually evaluates opportunities for the orderly sale and collection of its remaining assets. It is anticipated that the Company will have reduced all of its assets to cash, determined its final CDR liability after the resolution of the pending SIP litigation, resolved its final federal and state tax obligations and made distributions of all available cash to holders of its common stock and CDRs in the manner and
priorities set forth in the Plan and completed all regulatory filings within the next few years. At that point, the Company will cease operations.
During the quarter ended December 31, 2014, the decrease to the Companys net assets in liquidation was generated primarily by an increase to accrued estimated record storage and disposal costs in the liquidation that was offset partially by projected miscellaneous receipts.
The Companys operations continued to wind-down during the three months ended December 31, 2014. The Companys assets at December 31, 2014 consisted primarily of cash and cash-equivalents, receivable from securities sold, equity investments in two privately held companies and other assets. The timing and amount of a sale, if any, of such equity investments and other assets are uncertain. The equity investment portfolio requires liquidity events before those assets can be converted to cash.
Equity Investments: The Company holds preferred stock in two private companies (the Equity Investments). Beginning October 1, 2014, these investments are carried at the liquidation basis of accounting in the Companys consolidated statement of net assets in liquidation. As of December 31, 2014, the liquidation value of Equity Investments is $415,000 and the fair market value measured using Level 3 inputs is $763,000, before management sharing. See Notes 4 and 9 of Notes to Consolidated Financial Statements (in Liquidation).
The Companys estimate of the fair value of its Equity Investments was made in consultation with Windspeed Acquisition Fund GP, LLC (Windspeed), a professional management group, which the Company engaged in February 2004, who manages the Companys Equity Investments on an ongoing basis. Windspeed shares in the net receipts from the sale of the Companys Equity Investments at a set percentage in certain designated portions of the portfolio of companies.
The Windspeed management agreement was extended on April 5, 2011 (with an effective date of February 21, 2011) until February 20, 2013 (the Initial Extension). The Windspeed management agreement was subsequently extended effective February 21, 2013 through February 20, 2015 and again extended effective February 12, 2015 through February 12, 2017 (the Subsequent Extensions). Prior to the Initial Extension, Windspeed received fixed and declining management fees. Under the terms of the Initial and Subsequent Extensions, Windspeed is not, and will not, be paid any ongoing management fees. In lieu of such management fee payment, 100% of any proceeds from certain designated companies in the portfolio will go to Windspeed. Realized and unrealized gains on the sale of Equity Investments are presented on a gross basis. Any management sharing amounts with Windspeed are included in accrued professional fees.
The following table summarizes the changes in the estimated value of the Companys Equity Investments since September 30, 2014 (in thousands):
|
|
|
Private |
|
|
September 30, 2014 estimated gross realizable value |
$ |
|
20,379 |
|
|
Realized (3) |
|
|
(19,631) |
|
|
Increase in net unrealized estimated value |
|
|
15 |
|
|
|
|
|
|
|
|
December 31, 2014 estimated gross realizable value |
$ |
|
763 |
|
|
(1) The value of private companies in the consolidated statement of net assets in liquidation is the liquidation value, or approximately $415,000.
(2) Fair market value is shown on a gross basis (prior to payment of management sharing to Windspeed pursuant to the extended management agreement).
(3) Of the total realized amount from the Ebates, Inc. (Ebates) transaction of $19,631,000: the Company received cash proceeds after sharing of $15,144,000; $2,576,000 has been paid to Windspeed; the remaining amount due is $1,911,000, before management sharing, and is held in escrow until January 2016 in a receivable for securities sold.
Collections and recoveries: As of December 31, 2014, the Company has no significant potential collections and recoveries. Prior recoveries involved former lessees or debtors now in bankruptcy and against whom the Company has filed and was pursuing claims to maximize its recoveries. The Companys cost basis in these accounts was nominal. Additionally, the Company, periodically, recovers unclaimed property from various states.
Critical Accounting Policies
The Companys consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis. As such, the preparation of the fiscal year 2015 financial statements are under the liquidation basis of accounting which requires management to use estimates and assumptions that affect reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the consolidated statement of net assets in liquidation.
The SEC issued Financial Reporting Release No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, which recommends that companies provide additional disclosure and analysis of those accounting policies considered most critical.
The Company believes the following to be the most critical judgment area in the application of its accounting policies:
· Future Cash Inflows and Future Costs: As of October 1, 2014, the Company has adopted the liquidation basis of accounting on a prospective basis which requires the estimation of and accrual of all projected future cash inflows and future costs associated with implementing and completing the plan of liquidation and requires management to make estimates and assumptions that affect the amounts reported in the consolidated statements of net assets in liquidation and the related notes. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows.
The above listing is not intended to be a comprehensive list of all the Companys accounting policies. Please refer to the Companys annual Consolidated Financial Statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2014, which contain the Companys significant accounting policies and other disclosures required by accounting principles generally accepted in the United States of America.
Recent Developments
Ebates
During the quarter ended September 30, 2014, it was announced that Ebates would be acquired by Rakuten, Inc., a Japanese company (Rakuten). The Plan of Merger was signed on September 24, 2014, pending various conditions, including regulatory approval. As of September 30, 2014, the Company concluded that the offer price should be the primary input into the fair value measurement of Ebates.
On October 9, 2014, Rakuten completed the acquisition and on October 29, 2014, the Company received the initial distribution. The gross proceeds distributed were approximately $17,720,000 of which the Company received approximately $15,144,000 in net proceeds and Windspeed received approximately $2,576,000 in management sharing. The remaining amount due is approximately $1,911,000, before management sharing, and is held in a receivable from securities sold on the consolidated statement of net assets in liquidation. Such proceeds are held in escrow under the terms of the merger documents until January 2016. The actual amount to be distributed from the escrow may be impacted by provisions of, and claims asserted against, the escrow.
With the adoption of the liquidation basis of accounting, the impact of the Ebates transaction is included in the Cumulative Effect of Accounting Change. The amount included reflected the estimated cash that would be received as of the date of adoption. See Note 3 of Notes to Consolidated Financial Statements (In Liquidation).
Results of Operations
Due to the adoption of the liquidation basis of accounting as of October 1, 2014, the comparability of results of operations of current year periods to prior year periods is limited. Under the liquidation basis of accounting, the Company is required to present a statement of net assets in liquidation (which replaces the balance sheet) and a statement of changes in net assets in liquidation (which replaces the income statement). The Companys initial statement of changes in net assets in liquidation as set forth below presents the changes in net assets in liquidation since October 1, 2014.
Changes in Net Assets in Liquidation (Liquidation Basis)
|
|
|
December 31, 2014 |
|
|
Explanation of Change |
|
|
|
|
|
|
|
|
|
Net assets in liquidation, beginning of period |
$ |
|
28,158 |
|
|
|
|
Changes in net assets in liquidation |
|
|
|
|
|
|
|
Change in other assets |
|
|
170 |
|
|
(A) |
|
Change to Contingent Distribution Rights Liability |
|
|
102 |
|
|
(B) |
|
Change in accrued liabilities |
|
|
(26) |
|
|
|
|
Change in accrued estimated disposal costs of liquidation |
|
|
(420) |
|
|
(C) |
|
Liquidating distributions to CDR Holders |
|
|
0 |
|
|
|
|
Liquidating distributions to Common Shareholders |
|
|
0 |
|
|
|
|
Net increase (decrease) in net assets in liquidation |
|
|
(174) |
|
|
|
|
Net assets in liquidation, end of period |
$ |
|
27,984 |
|
|
|
|
(A) Increase in net other assets is a result of the projected receipt of uncashed distributions of the estate in accordance with the Plan.
(B) Reduction to the CDR liability in the three months ended December 31, 2104 is a result of higher accrued estimated record storage and disposal costs in the liquidation.
(C) Increase in the accrued estimated record storage and disposal costs in the liquidation is a result of the projected additional length of time to store and then ultimately dispose of the paper records and electronic records.
Income Taxes
As of December 31, 2014, the Company has a U.S. federal income tax payable recorded for approximately $240,000, driven by the Federal Alternative Minimum Tax due on the estimated full year taxable income.
Net Assets in Liquidation
As of December 31, 2014, net assets in liquidation were approximately $27,984,000, or $6.95 per common share.
Net loss (Going Concern)
Net loss was approximately ($1,219,000), or ($0.30) per share-basic and diluted, for the three months ended December 31, 2013.
Off-Balance Sheet Arrangements
The Company does not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that could be expected to have a material current or future effect upon the Companys financial condition or results of operations.
Liquidity and Capital Resources
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements in liquidation and the related notes. Actual results could differ from these estimates and may affect net assets in liquidation and actual cash flows.
The Companys liquidity generally depends on cash on hand. The Companys cash flow from operating activities is dependent on a number of variables, including, but not limited to, operating costs and expenses to affect the wind down, income tax obligations, and the ability of the Company to dispose or otherwise convert to cash its remaining assets. All funds generated from the collection of remaining assets are required by the Plan to be used to satisfy liabilities of the Company and, to the extent funds are available, to pay dividends on the Companys common stock and to make distributions with respect to the CDRs in the manner and priorities set forth in the Plan. Because of the composition and nature of its remaining assets, the Company expects to generate funds from the sale or collection of its remaining assets at a decreasing rate over time.
At December 31, 2014, the Company had unrestricted cash and cash equivalents of approximately $46,512,000, which represents an increase of approximately $14,520,000 compared to September 30, 2014. Net cash provided by operating activities for the three months ended December 31, 2014 was approximately $14,520,000.
During the three months ended December 31, 2014, approximately $15,144,000 in proceeds were generated from Equity Investments from the sale of the Ebates shares and approximately $37,000 was received from bad debt recoveries, interest income and other revenue. The Companys cash expenditures were primarily operating expenses of approximately $579,000 (principally professional services and employee compensation). The Company paid $15,000 to the Internal Revenue Service and paid $67,000 to the Illinois Department of Revenue.
The Companys current and future liquidity depends on cash on hand and may be augmented by proceeds from the sale of Equity Investments, recoveries, if any, interest income, and other projected cash inflows. The Company expects its cash on hand to be sufficient to fund operations and to meet its obligations (including its obligation to make distributions to its common stockholders and make payments to CDR holders) under the Plan.
Dividends
There were no dividends paid during the quarter ended December 31, 2014. The Company intends to treat any future dividend distributions for federal income tax purposes as part of a series of liquidating distributions in complete liquidation of the Company.
Contingent Distribution Rights
Although the CDRs trade over-the-counter, for financial reporting purposes, the Company records CDRs as a liability and as an operating expense.
The Plan entitled holders of CDRs to previously share at increasing percentages in the proceeds realized from the Companys assets based upon the present value of distributions to certain C-4 creditors in the bankruptcy estate of Comdisco, Inc. However, as of December 31, 2014, the sharing percentage is 37%, which is the maximum sharing percent. As of the date of this filing, there were 1,844 holders of record of the Companys CDRs and there were 148,448,188 outstanding CDRs.
The Company maintains sufficient cash reserves for operations and any increase in the potential CDR liability relating to increases in the Companys net assets in liquidation and any potential net distributions from the Litigation Trust to the C-4 creditors. The outcome and the timing of the actual net distributions from the Litigation Trust will impact both the timing and the amount of future dividends and CDR payments.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. However, any impact of potential net distributions from the Litigation Trust on the CDR liability is not included as estimates are currently not determinable.
CDR Payment
There were no CDR payments during the quarter ended December 31, 2014.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Randolph I. Thornton, the principal executive officer and principal financial officer of the Company, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Mr. Thornton concluded that the Companys disclosure controls and procedures are effective as of December 31, 2014 to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms and (ii) is accumulated and communicated to the Companys management, including its president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There has not been any change in the Companys internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Section 13(a)-15 or 15(d)-15 under the Exchange Act that occurred during the Companys first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
There have been no material updates to the Legal Proceedings as set forth in Item 3. of our Annual Report on Form 10-K, filed with the SEC on December 11, 2014 except for Note 1 of Notes to Consolidated Financial Statements (in Liquidation) for an update on the Litigation Trust ongoing litigation.
ITEM 1A. RISK FACTORS RELATING TO THE COMPANY
There have been no material updates to the Risk Factors as set forth in Item 1A. of our Annual Report on Form 10-K, filed with the SEC on December 11, 2014.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Repurchases of Common Stock
The Company does not regularly repurchase shares nor does the Company have a share repurchase plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None
Exhibit No. |
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Description of Exhibit |
3.1 |
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Certificate of Incorporation of Registrant dated August 8, 2002 and as Amended August 12, 2004 (Incorporated by reference to Exhibit 3.1 filed with the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2004, as filed with the SEC on December 14, 2004, File No. 0-49968). |
3.2 |
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By-Laws of Registrant, adopted as of August 9, 2002 (Incorporated by reference to Exhibit 3.2 filed with the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2002, as filed with the SEC on January 14, 2003, File No. 0-49968). |
10.1 |
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Sixth Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, effective as of February 12, 2015 by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC, Comdisco Ventures Fund B, LLC and Windspeed Acquisition Fund, L.P. |
11.1 |
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Statement re computation of net assets in liquidation per CDR and Common share (Filed herewith). |
31.1 |
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Certification of Principal Executive Officer and Principal Financial Officer, Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith). |
32.1 |
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Certification of the Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith). |
101.INS* |
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Instance document (Filed herewith). |
101.SCH* |
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Schema document (Filed herewith). |
101.CAL* |
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Calculation linkbase document (Filed herewith). |
101.LAB* |
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Labels linkbase document (Filed herewith). |
101.PRE* |
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Presentation linkbase document (Filed herewith). |
101.DEF* |
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Definition linkbase document (Filed herewith). |
* Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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COMDISCO HOLDING COMPANY, INC. | |
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Dated: February 13, 2015 |
By: |
/s/ Randolph I. Thornton |
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Name: |
Randolph I. Thornton |
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Title: |
Chief Executive Officer and President |
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(Principal Financial and Accounting Officer) |
Exhibit 10.1
SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
OF
COMDISCO VENTURES FUND A, LLC
(A Delaware Limited Liability Company)
THIS SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the Agreement), of Comdisco Ventures Fund A, LLC (the Company) effective as of February 12, 2015 (the Effective Date), is by and among Comdisco Inc., a Delaware corporation (CDI), Windspeed Acquisition Fund GP, LLC, a Delaware limited liability company (Windspeed), Comdisco Ventures Fund B, LLC, a Delaware limited liability company (Fund B), Windspeed Acquisition Fund, L. P., a Delaware limited partnership (the Windspeed Fund) and any other Persons who become parties hereto after the date of this Agreement. Certain terms used but not otherwise defined in this Agreement have the meanings assigned to them in Section 17.
RECITALS
A. The Company was originally organized as a Delaware corporation, and was converted into a Delaware limited liability company within the meaning of the Delaware Limited Liability Company Act (6 Del. C. § 18-101, et seq.), as amended from time to time (the Act), and any successor to such Act by filing a Certificate of Conversion with the Secretary of the State of Delaware on February 20, 2004, and by entering into a Limited Liability Company Agreement (the Initial Agreement), and
B. CDI, Windspeed and Fund B executed and delivered an Amended and Restated Limited Liability Company Agreement of the Company dated as of February 20, 2004 (the Restated Agreement) amending and restating the Initial Agreement to admit Windspeed and Fund B as Members, to appoint Windspeed the Manager of the Company, pursuant to the terms and conditions set forth therein, and to continue the Company as a Delaware limited liability company within the meaning of the Act., and
C. CDI, Windspeed and Fund B executed and delivered Amendment No. 1 to the Restated Agreement dated December 27, 2004, amending the Restated Agreement to increase the compensation payable to Windspeed thereunder, and correspondingly raise the initial threshold amount distributable to CDI thereunder, and
D. CDI, Windspeed and Fund B executed and delivered a Second Amended and Restated Limited Liability Agreement, dated April 11, 2006 (the Second Restated Agreement) amending and restating the Restated Agreement which extended the management of the Portfolio and provided for certain compensation arrangements, and
E. CDI, Windspeed and Fund B executed and delivered a Third Amended and Restated Limited Liability Agreement, dated March 16, 2009 (the Third Restated
Agreement) amending and restating the Second Restated Agreement which extended the management of the Portfolio and provided for certain compensation arrangements, and
F. CDI, Windspeed and Fund B executed and delivered a Fourth Amended and Restated Limited Liability Agreement, effective as of February 21, 2011 (the Fourth Restated Agreement) amending and restating the Restated Agreement which extended the management of the Portfolio and provided for certain compensation arrangements, and
G. CDI, Windspeed and Fund B executed and delivered a Fifth Amended and Restated Limited Liability Agreement, effective as of February 21, 2013 (the Fifth Restated Agreement) amending and restating the Restated Agreement which extended the management of the Portfolio and provided for certain compensation arrangements, and
H. CDI, Windspeed and the Windspeed Fund executed and delivered a Limited Liability Company Agreement of Fund B dated as of February 20, 2004 (the Initial Fund B Agreement), organizing the Company as a Delaware limited liability company within the meaning of the Delaware Limited Liability Company Act (6 Del. C. § 18-101, et seq.), as amended from time to time (the Act), and any successor to such Act, and
I. CDI, Windspeed and the Windspeed Fund on April 11, 2006 amended and restated the Initial Fund B Agreement to continue Fund B as a Delaware limited liability company within the meaning of the Act (First Amended and Restated Fund B Agreement), and
J. CDI, Windspeed, the Windspeed Fund and Fund B transferred certain specified assets of Fund B to Portfolio AA (as defined in Fifth Restated Agreement) and to continue to manage and administer Portfolio AA under this Agreement with Fund B having been dissolved and the First Amended and Restated Fund B Agreement having been terminated, and
K. CDI, Windspeed, Fund B and Windspeed Fund desire to amend and restate the Fifth Restated Agreement as hereinafter set forth, and to continue the Company as a Delaware limited liability company within the meaning of the Act.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Organization; Certificate; Name.
1.1 Organization. The Company is, and shall continue as, a Delaware limited liability company in accordance with, and subject to, the provisions of this Agreement.
1.2 Filings. The Members ratify and confirm the authority of the Manager and any individual authorized by the Manager, acting singly in any case, to execute, acknowledge, deliver, file and record in the appropriate offices, as applicable, (i) the Certificate and any amendments thereto, and (ii) such other instruments, certificates, documents and other writings which the Manager determines to be necessary or appropriate to secure or preserve the Companys status as a Delaware limited liability company or to qualify the Company to do business in states other than Delaware.
1.3 Name. The name of the Company shall be Comdisco Ventures Fund A, LLC or such other name as the Manager determines from time to time to be appropriate.
1.4 Tax Partnership. The parties have intended and intend that the Company be classified as a partnership, and that they be treated as partners, for tax purposes.
2. Purpose. The Companys purpose shall be to acquire, hold, manage and maximize the value in the liquidation of Portfolio A, Portfolio AA and Portfolio B and to do any and all things that are ancillary or incidental thereto. In furtherance of such purpose, the Company shall have the authority to: (a) negotiate, execute, deliver, perform, modify, supplement, amend and terminate contracts, agreements, instruments, documents, notices and other writings, including but not limited to purchase and sale agreements, subscription agreements, stockholder agreements, investor rights agreements, voting agreements, warrant and option agreements, exchange agreements, merger agreements, lock-up agreements, underwriting agreements, brokerage agreements, custodial agreements, escrow agreements, management agreements, advisory agreements, promissory notes, pledge and other security agreements, and exercise notices, (b) plan, structure, negotiate, coordinate, effect and participate in financings (including, without limitation, by offerings of debt and equity securities privately or publicly), recapitalizations, restructurings, sales, mergers, liquidations and similar transactions of Portfolio Companies, (c) exercise all rights, powers, privileges and other incidents of ownership or possession with respect to securities held by it (including, without limitation, to vote securities as to the election of directors and other matters and to exercise any and all rights and powers with respect to options, warrants and convertible securities held by it), (d) pay or otherwise provide for its expenses, debts and obligations , and make temporary investments in Short Term Investments pending the use of its available cash to pay expenses, debts and obligations or to make distributions to the Members, (e) borrow money and pledge assets to secure such borrowings on a short term basis, (f) hire and compensate advisors, consultants, agents, contractors, subcontractors, accountants, attorneys and other service providers, (g) establish and maintain bank and
other accounts and draw checks or other orders or expenditures from such accounts, (h) purchase, acquire, finance, hold, market and sell assets, (i) apply for and obtain insurance and (j) do any and all other things that are ancillary or incidental to any of the foregoing.
In furtherance of the purpose of this Agreement, the First Amended and Restated Fund B Agreement was terminated, the Fund B assets, rights and obligations were transferred to the Company and held as Portfolio AA hereunder and Fund B shall continue to be terminated and dissolved by its members in such a manner and time frame which shall facilitate the realization of any value from the Portfolio Companies in Fund B.
3. Place of Business; Registered Agent. The principal place of business of the Company shall be at 52 Waltham Street, Lexington, Massachusetts 02421. The Manager shall promptly provide the Members with written notice if the Companys principal place of business is changed. The Companys registered office in the State of Delaware shall be Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The registered agent for service of process on the Company in the State of Delaware shall be Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The Manager may at any time change the location of the Companys principal place of business, establish additional places of business and designate a new agent for service of process as it shall deem advisable.
4. Term; Existence. Unless sooner either extended or terminated by the parties as provided herein, this Agreement shall be in effect for a two (2) year period from the Effective Date and the Company shall continue in full force and effect from the Effective Date until dissolved pursuant to Section 14 (the Term).
5. Contributions; Interests; Capital Accounts.
5.1 Members and Interests. The parties to this Agreement agree and understand that (i) CDI is the Class A Member, (ii) Windspeed and the Windspeed Fund are the Class B Members, and (iii) CDI, Windspeed and Windspeed Fund have transferred their respective interests in Fund B and its assets to the Company, with the assets that were held in Fund B as of the time immediately before February 21, 2011 being held in Portfolio AA hereunder from and after February 21, 2011.
5.2 [Intentionally Omitted]
5.3 [Intentionally Omitted]
5.4 Additional Members. The Company shall not issue any additional interests or admit any additional Members without the approval of the Manager, the Class A Member, and the Class B Members. Nothing in this Section 5.4, however, shall limit
the rights of Members to Transfer their interests in the Company, or to cause Transferees of their interests to be admitted as substituted Members, pursuant to Section 11.
5.5 No Other Contributions. Except as provided in Section 5.1, Section 5.2, Section 5.3 or the Act, no Member shall be required or permitted to make any contribution of cash, property or services, to return any distributions received in accordance with this Agreement or to make any loan, to the Company or to any creditor of the Company (including, without limitation, to restore a deficit balance in such Members capital account). No Member shall be liable for any debts, liabilities, contracts or obligations of the Manager or any other Member.
5.6 Capital Accounts. The Manager shall maintain capital accounts for the Members in accordance with Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. In that regard, the Manager may make such adjustments to the Members capital accounts as it determines are necessary and in accordance with the Treasury Regulations in connection with any contribution to or distribution by the Company of more than a de minimis amount of money or other property in exchange for an interest in the Company. If a Member holds interests of more than one (1) class, separate capital accounts shall be maintained for such Member for each such class of interests. A Transferee of an interest in the Company shall succeed to the capital account of its Transferor to the extent allocable, based on the terms of the Transfer, to the Transferred interest.
5.7 Company Assets. All assets of the Company shall be owned by the Company as an entity.
6. Allocations of Profit and Loss; Tax Allocations.
6.1 Profit and Loss. The Manger shall allocate the Companys profits and losses (and the component items of income, gain, loss, deduction and credit) among the Members on a portfolio by portfolio basis. Without limiting the foregoing, the Manager may make such special allocations as it reasonably determines to be appropriate (i) to comply with the rules set forth in the Treasury Regulations under Section 704(b) of the Code governing (a) allocations of nonrecourse deductions, partner nonrecourse deductions and other items lacking economic effect, (b) minimum gain chargebacks and partner nonrecourse debt minimum gain chargebacks, and (c) allocations in connection with the exercise of options and conversions of equity or debt interests or instruments, and (ii) for this Agreement to contain a qualified income offset provision within the meaning of Treasury Regulations under Section 704(b) of the Code. In no event, however, shall any such allocations affect the amount or timing of any distribution to be made to any Member hereunder.
6.2 Curative Allocations. The Members intend that their capital account balances as of the time immediately before the liquidating distributions are made pursuant to Section 14 equal the amounts of such distributions to be made to them so that they have zero (0) balances in their capital accounts after the liquidating distributions are
made. Subject to the requirements of the Treasury Regulations as contemplated by Section 6.1 (the Regulatory Allocations), the Company shall make such special allocations of items of income, gain, loss, deduction and expenditure as the Manager determines are required to give effect to such intent (including, without limitation, to cure any imbalances that might otherwise be caused by the Regulatory Allocations). The Manager may reallocate items of income, gain, loss, deduction and expenditure for prior open taxable years to give effect to such intent if it reasonably and in good faith determines that such items for the current and future taxable years will be insufficient to give effect to such intent.
6.3 Varying Interests. If any interest in the Company is Transferred during any accounting period, allocations of profit or loss and items of income, gain, loss and deduction with respect to such interest for such period shall be made using such method or methods (including, without limitation, an interim closing method) as the Manager and the Members determine to be appropriate and in compliance with Section 706 of the Code.
6.4 Tax Allocations. Tax allocations shall be made consistent with the allocations of book profit or loss made pursuant to Sections 6.1, except that, solely for tax purposes, (i) items of income, gain, loss, deduction and expenditure with respect to Company assets reflected hereunder in the Members capital accounts and on the books of the Company at values that differ from the Companys adjusted tax bases in such assets shall be allocated among the Members in such manner, and using such method or methods as the Manager determines to be appropriate (it being agreed, however, that allocations made pursuant to this Section 6.6 on account of book/tax disparities with respect to securities held by the Company shall be made using the traditional method described in Section 1.704-3(b) of the Treasury Regulations except as the Manager, with the approval of the Class A Member, determines to be appropriate), and (ii) any items of gain recognized by the Company that are subject to the depreciation recapture provisions of Sections 1245 and 1250 of the Code shall be allocated among the Members in such manner as is necessary to comply with Sections 704, 1245 and 1250 of the Code and any applicable Treasury Regulations thereunder.
6.5 Tax Credits. Any tax credits of the Company for any fiscal year or other accounting period shall be allocated to the Members in proportion to their allocations of the Companys profit or loss, as the case may be, for such fiscal year or other accounting period.
6.6 Tax Elections. The Company shall make such elections under the Code and the Treasury Regulations (including, without limitation, those permitted by Sections 704(b), 704(c), 709(b) and 754 of the Code), and state tax or similar laws, as the Manager and the Fund A Advisor determine to be appropriate.
6.7 Tax Matters Partner. Windspeed (or an Entity that has become Manager pursuant to Section 8.1.3 upon the Transfer to it of Windspeeds interest in the Company) shall be the Tax Matters Partner of the Company, as defined in Section
6231(a)(7) of the Code, for purposes of any tax audit of the Company for as long as it is a Manager and a Class B Member. At such time as neither Windspeed nor any such Transferee of its interest is the Tax Matters Partner, a successor Tax Matters Partner shall be designated by the Portfolio A Advisor in accordance with the Code and the Treasury Regulations. The Tax Matters Partner shall have all of the rights, duties, obligations and powers of a Tax Matters Partner, as so defined, under the Code, subject to Section 8.3.10.
7. Distributions.
7.1 Net Portfolio Receipts. Subject to Sections 7.2, 7.5, 7.6, 8.1.4, 8.3, 14, 15 and any legal or contractual restrictions on the Companys ability to make distributions to the Members, the Manager shall make distributions by wire transfer of any Net Portfolio Receipts (and any other available cash, other than amounts contributed by the Members, the Company may have) as promptly as it determines to be appropriate (but not less frequently than quarterly) as follows:
7.1.1 For purposes of Portfolio A:
85% to the Class A Member and 15% to the Class B Member.
7.1.2 For purposes of Portfolio AA:
7.1.2.1 First, to all of the Members (Class A and Class B) in proportion to their respective Contribution Percentages until (i) the amount that has been distributed pursuant to this Section 7.1.2.1 (including so much of Sections 7.2 and 7.3 as relate to this Section 7.1.2.1) for all fiscal years and other accounting periods equals (ii) the sum of the Members Capital Contributions less the sum of the amounts that have been returned to the Members pursuant to Section 5.4;
7.1.2.2 Second, 90% to all of the Members (Class A and Class B) in proportion to their respective Contribution Percentages, and 10% to the Class B Member, until (i) the amount that has been distributed to the Class A Members pursuant to this Section 7.1.2 (including so much of Sections 7.2 and 7.3 as related to this Section 7.1.2) for all fiscal years and other accounting periods equals (ii) (a) 1.8 times (b) the sum of the Class A Members Capital Contributions less the sum of the amounts that have been returned to the Class A Members pursuant to Section 5.4;
7.1.2.3 Third, 80% to all of the Members (Class A and Class B) in proportion to their respective Contribution Percentages, and 20% to the Class B Member, until (i) the amount that has been distributed to the Class A Members pursuant to this Section 7.1.2 (including so much of Sections 7.2 and 7.3 as relate to this Section 7.1.2) for all fiscal years and other accounting periods equals (ii) (a) 2.3 times (b) the sum of the Class A Members Capital Contributions less the sum of the amounts that have been returned to the Class A Members pursuant to Section 5.4; and
7.1.2.4 Fourth, thereafter, 70% to all of the Members (Class A and Class B) in proportion to their respective Contribution Percentages, and 30% to the Class
B Member.
7.1.3 For purposes of Portfolio B:
In lieu of any further Management Fee under this Agreement, from and after February 21, 2011, 100% to the Class B Member. Based on discussions among the parties and the valuation estimates of the Manager, as of February 21, 2011, the parties concur that the estimated value of the securities related to the companies in Portfolio B is approximately $154,211.00.
7.2 Tax Distributions. Notwithstanding Sections 7.1 and 7.6, the Company shall use reasonable efforts to make advance distributions to the Members within a reasonable period of time before taxes are due in such amounts and proportions as are necessary for the distributions made with respect to their interests (including to predecessor holders of such interests) for all fiscal years and other accounting periods to equal their respective Tax Liabilities as of the time of determination; provided, however, that advance distributions may be made with respect to the portion of a Members Tax Liability relating to any particular portfolio only from cash receipts of the Company with respect to such portfolio. Distributions pursuant to this Section 7.2 shall be made in advance of the dates by which the corresponding tax amounts are due. Any advance distribution to a Member pursuant to this Section 7.2 shall offset an equal amount of distributions that would otherwise thereafter be made to such Member pursuant to Section 7.1 (or, in the case of the Class C Member, pursuant to Section 7.6).
7.3 [Intentionally Omitted]
7.4 Distributions in Kind. Subject to Sections 8.8, 14, 15 and any legal or contractual restrictions on the Companys ability to make distributions to the Members, the Manager may from time to time cause the Company to distribute Marketable Securities in kind. Any in kind distribution of a Marketable Security shall be made to the Members in accordance with Section 7.1. Any such in kind distribution shall be made as if such Marketable Security were an amount of Net Portfolio Receipts equal to its value as determined pursuant to Section 7.7 (and, for purposes of thereafter applying Section 7.1, or so much of any other provision of this Agreement as relates to the applicable one of such Sections, shall be treated as having been distributed pursuant to such Section). For purposes of determining and allocating profit, loss and other items pursuant to Section 6, any Marketable Security that is to be distributed in kind shall be treated as having then been sold by the Company for its value as determined for purposes of applying this Section 7.4. Notwithstanding the foregoing, for so long as CDI (or an Affiliate of CDI that has become a Class A Member upon the Transfer to it of CDIs Class A interest in the Company) is the Class A Member, the Manager will attempt to sell and convert into cash any Marketable Securities for at least 180 days after such securities have attained the status of Marketable Securities in Portfolio A and Portfolio AA. The Manager may, in its discretion and with the consent of the Class A Member, distribute Marketable Securities from Portfolio A or Portfolio AA in kind to a Class B Member
during such 180-day period; provided that the value of any such distribution to the Class B Member of a share of Marketable Securities in kind shall be deemed to be the comparable per share cash value of the cash distributions made to the Class A Member as a result of the disposition of such in kind Marketable Securities.
7.5 [Intentionally Omitted]
7.6 [Intentionally Omitted]
7.7 Valuation of Securities. The value of any security shall be determined as provided in this Section 7.7.
7.7.1 Any security that is listed on a national securities exchange shall be valued at its average last sale price as recorded by the New York composite tape system over the ten (10) trading days immediately preceding the date of such valuation or, if the security is not included in such system, at its average last sale price over such ten (10) trading days on the principal national securities exchange on which such security is traded, as recorded by such exchange (using instead of the last sale price, for any such day on which no sales occurred, the mean between the closing bid and asked prices on such day as recorded by such system or such exchange, as the case may be).
7.7.2 Any security that is listed on the Nasdaq National Market shall be valued at its average last sale price over the ten (10) trading days immediately preceding the date of such valuation as reported by Nasdaq (using instead of the last sale price, for any day on which no sales occurred, the mean between the closing bid and asked prices on such day as reported by Nasdaq).
7.7.3 Any security that is not listed on a national securities exchange or on the Nasdaq National Market but that is traded in the over-the-counter market in the United States shall be valued at the average mean between the closing bid and asked prices for the ten (10) trading days immediately preceding the date of such valuation as reported by Nasdaq or, if not so reported, as reported in the over-the-counter market in the United States.
7.7.4 Any security in the form of an option, warrant or similar security for which no price quotation is available shall be valued by determining the value of the underlying security in accordance with Sections 7.7.1, 7.7.2, 7.7.3 or 7.7.5, as applicable, and subtracting therefrom the exercise or conversion price of such security; and
7.7.5 Any security that is not subject to valuation under any of the preceding provisions of this Section 7.7 shall be assigned the value established for such security in the last round of financing of the issuer of such security plus or minus any adjustments which the Manager reasonably determines to be appropriate to reflect market, issuer or other events that have occurred subsequent to such last round of financing, all consistently applied.
The foregoing valuation methodologies contained in this Section 7.7 will be used by the Manager for purposes of stating the fair value for the period stated of the Companys Portfolio investments in the Companys Statement of Assets, Liabilities and Members Capital as of the applicable quarterly reporting date.
8. Management.
8.1 Manager.
8.1.1 The management and operation of the Company, and the development and implementation of Company policies, shall be and hereby are vested in the Manager, which shall be Windspeed unless and until it ceases to serve as Manager pursuant to Section 8.1.3 or Section 8.1.4. Subject to Section 8.3 and any other applicable limitations imposed by this Agreement, the Manager shall have exclusive authority to exercise on behalf of the Company all of the powers of the Company hereunder (including, without limitation, those specified in Section 2) and to take such other actions as it determines are necessary, advisable or incidental to the carrying on of the Companys business and affairs. The parties agree that any Person serving as Manager hereunder shall be a manager of the Company within the meaning of the Act (with the rights, powers and duties in such capacity provided in this Agreement) for as long as it so serves. In dealings with the Members, or with or on behalf of the Company, the Manager shall act in good faith and in the manner it believes to be, or not opposed to, the best interests of the Company and the Members. The Manager and its individual members shall have fiduciary responsibilities, solely with respect to the Members, as set forth under the Act and in accordance with the terms of this Agreement in like manner and to the same extent as if such persons served directly as individual Managers of the Company.
8.1.2 A Manager shall serve until its successor becomes Manager hereunder or, if earlier, until it ceases to serve as Manager pursuant to Section 8.1.3 or Section 8.1.4. If a Manager ceases to serve as such for any reason (other than, in the case of Windspeed, by its Transfer of its interest in the Company to another Entity that is Controlled by any two (2) or more of the individuals comprising the Windspeed Team and that thereupon becomes the Manager as provided in Section 8.1.3), any vacancy thereby created may be filled by a Person designated by the Class A Member or the Portfolio A Advisor. Except as otherwise expressly provided in this Agreement, the cessation of any Members services as Manager shall not, in and of itself, affect its rights, or constitute its withdrawal, as a Member.
8.1.3 A Manager may not resign without the approval of the Class A Member; provided, however, that upon any Transfer by Windspeed pursuant to Section 11 of its interest in the Company to an Entity Controlled by any two (2) or more of the individuals comprising the Windspeed Team, such Entity shall become the Manager upon its admission to the Company as a substituted Class B Member.
8.1.4 A Manager may not be removed except (i) by vote of the Class A Member and (ii) if such Manager is Windspeed (or an Entity that has become Manager pursuant to Section 8.1.3 upon the Transfer to it of Windspeeds interest in the Company), (a) for Cause, (b) if at least two (2) of the individuals comprising the Windspeed Team are no longer actively committed to the Manager in accordance with Section 8.1.5, or (c) upon the occurrence of a Retirement Event relating to the Manager. If so removed as a Manager for Cause, (i) any distributions (including distributions earned but not yet made) which such removed Manager, or any affiliate thereof, may be entitled to receive as a Member shall be forfeited and (ii) such removed Manager, or any affiliate thereof, shall thereafter no longer be entitled to any further distributions of the Company and (iii) shall have none of the rights and powers of a Member hereunder or under the Act (including, without limitation, to vote, give consents or approvals, or otherwise manage or participate in the affairs of the Company). A removal for Cause shall be effective immediately upon receipt of notice; a Managers removal without Cause shall be effective 30 days following receipt of notice.
8.1.5 Until the termination of the Company (as hereinafter provided in Section 14.4), Windspeed and at least two (2) of the individuals comprising the Windspeed Team shall devote to the Company such time and resources and maintain such staffing as are reasonably necessary and appropriate to administer and conduct the Companys affairs in accordance with the terms hereof and in a manner intended to conform to the best interest of the Company.
8.2 Portfolio A and Portfolio AA Advisor.
8.2.1 The Class A Member will from time to time appoint an individual to act as the Portfolio A and Portfolio AA Advisor hereunder (collectively the Portfolio A Advisor). A Portfolio A Advisor may (i) resign upon at least thirty (30) days written notice to the Class A Member (which notice will be waived by the Class A Member) and (ii) be removed at any time, for any reason or no reason, by the Class A Member. Any vacancy created by the resignation, removal or other event with respect to a Portfolio A Advisor may be filled by the Class A Member.
8.2.2 The Manager shall not take any action expressly requiring the approval of the Portfolio A Advisor hereunder without such approval (or, if there is then no Portfolio A Advisor, the approval of the Class A Member). In addition, the Manager shall consult with the Portfolio A Advisor regarding potential conflicts of interest and other matters as the Manager from time to time determines to be appropriate. With regard to any potential conflict of interest, the Manager shall provide the Portfolio A Advisor with a written proposal containing an analysis outlining the conflict and the reasonably foreseeable economic ramifications thereof to the Company and Portfolio A and/or Portfolio AA. The Manager shall promptly consider in good faith (without being obligated to comply with) any recommendations that are promptly made by the Portfolio A Advisor in response to any such proposal. Because of the relative interest of CDI in the Company and Portfolio A and Portfolio AA, the Manager acknowledges its fiduciary duty to CDI to maximize the value of CDIs interest in the Company after considering the
recommendations of the Portfolio A Advisor and consistent with its duties to the members.
8.2.3 Except in its capacity as Manager, liquidating trustee or other authorized service provider, no Member shall have any authority to act for or on behalf of the Company or any other Member or to bind the Company or any other Member in any way, to pledge the Companys credit or to render the Company liable for any purpose.
8.3 Actions Requiring Member Approval. Notwithstanding Section 8.1, and in addition to any other matters requiring the approval of some or all of the Members hereunder, without the approval of the Portfolio A Advisor (or, if there is then no Portfolio A Advisor, the Class A Member), the Manager shall have no authority to:
8.3.1 liquidate more than two (2) positions included in the Portfolio A in a single transaction or series of related transactions;
8.3.2 cause the Company to engage in a transaction that would result in a Company security being Transferred from Portfolio A or Portfolio AA to Portfolio B;
8.3.3 cause the Company to acquire any asset that would be included in either Portfolio A or Portfolio AA other than by reason of (i) any stock dividend, stock split, stock issuance, combination, recapitalization, reclassification, merger, consolidation, conversion or similar transaction with respect to any security held by in such portfolio, (ii) the Companys cashless exercise of any option, warrant, conversion or exchange right, with respect to securities held in such portfolio, or (iii) the Companys exercise, using cash available in the Company or, in the absence of such cash, borrowed in accordance with Sections 8.3.9 and 8.10, of any option, warrant, conversion or exchange right, with respect to securities held in that portfolio, that could not have been exercised on a cashless basis (such securities being Cash Option Securities);
8.3.4 cause the Company to incur with respect to Portfolio A or Portfolio AA any Non-Routine Expenses;
8.3.5 delegate or assign any of its obligations as Manager hereunder other than as permitted by Section 8.6;
8.3.6 cause the Company to merge or consolidate with or into any other Entity or change its form of organization (including, without limitation, for tax purposes);
8.3.7 cause the Company to pay any compensation to, or engage in any transaction with, the Manager or an Affiliate of the Manager except as provided herein;
8.3.8 cause the distribution of any Marketable Securities in kind except in accordance with Section 7.4;
8.3.9 except to borrow money to acquire Cash Option Securities in accordance with Section 8.10 or pay expenses pending the receipt of Net Portfolio Receipts cause the Company to borrow money or pledge assets to secure such borrowing; or
8.3.10 act, elect, report or otherwise exercise its duty or authority as the Tax Matters Partner with respect to Company tax matters.
8.4 Administrative Responsibilities. In addition to its other responsibilities hereunder, the Manager shall be responsible for providing the administrative and operating support the Company requires in connection with its business and affairs, including, without limitation, (i) the filing of such documents, instruments, certificates and other writings as are necessary or appropriate for the continuation of the Company as a limited liability company under the laws of the State of Delaware (and for the qualification of the Company to do business in states other than Delaware where the Manager determines such qualification to be necessary), (ii) preparing and filing any and all tax returns and other governmental filings in connection with the Companys affairs, (iii) maintaining the books and records of the Company in accordance with the Act, (iv) maintaining the documentation and records relating to the Portfolio, including the administration and tracking of all warrant and other antidilution rights, stock splits and other terms related to new rounds of financing by the Portfolio Companies, (v) investigating, reviewing and effecting transactions involving the Portfolio, (vi) leveraging its industry knowledge and relationships to identify attractive follow-on investment opportunities, and (vii) satisfying the Companys needs for office space, supplies and general office support and services.
8.5 Management Fee. Since and as of February 21, 2011, the Manager has not been, and shall not be, entitled to any further management fees (the Management Fee).
8.6 Assignment. With the approval of the Class A Member, the Manager may delegate or assign any or all of its duties and responsibilities hereunder, including, without limitation, pursuant to a separate management contract between the delegee and the Company. The Class A Member shall not unreasonably withhold its approval of any such delegation or assignment if the delegate or assignee is an Entity controlled by any two (2) or more of the individuals comprising the Windspeed Team.
8.7 Other Activities of Manager. Notwithstanding any other provision of this Agreement, and subject to Section 8.1.5, the Manager may engage in other profit-seeking and business ventures of any kind, nature or description (including, without limitation, making and managing investments in securities for its own account or the account of others), independently or with others, and the pursuit of such ventures by the
Manager shall not be deemed wrongful or improper. Neither the Company nor any Member shall have any rights or obligations by virtue of this Agreement or the relationship established hereby in or to any independent ventures of the Manager or the profits or losses derived therefrom.
8.8 [Intentionally Omitted]
8.9 Evidence of Authority. Any Person dealing with the Company may rely upon a certificate signed by the Manager as to:
8.9.1 the existence or non-existence of any fact or facts which constitute conditions precedent to acts by the Manager or in any other manner germane to the affairs of the Company; and
8.9.2 the Person or Persons who are authorized to execute and deliver any instrument or document of the Company or to take any action on behalf of the Company.
8.10 Borrowing. In connection with the acquisition of any Cash Option Securities in accordance with Sections 8.3.3 and 8.3.9 and with the approval of the Portfolio A Advisor, the Manager may cause the Company to borrow the exercise price of such securities from one (1) or more lenders (which may include the Manager, a Member or an Affiliate of the Manager or a Member), or advance the amount of such deficiency to the Company, on such terms and conditions (but at an interest rate not exceeding ten percent (10%) per annum) as the Manager, in the exercise of its business judgment, determines to be appropriate.
9. Fees and Expenses.
9.1 Management Fee. Since and as of February 21, 2011, no Management Fee has been, or shall be, due the Manager.
9.2 Fees and Expenses. Since and as of February 21, 2011 and except as provided in Section 6.3.4, any and all costs, fees and expenses incurred by the Company in connection with the acquisition, holding, sale, exchange or other disposition of the securities in any of Portfolio A, Portfolio AA or Portfolio B shall be paid from the proceeds and earnings from the respective portfolio holding such securities and borne by the Class A Member and Class B Member only to the extent of their respective distribution percentage in such portfolio. Any and all other costs, fees and expenses that are not specific to any particular portfolio shall be shared as mutually agreed from time to time.
9.3 [Intentionally Omitted]
9.4 [Intentionally Omitted]
9.5 Source of Payments.
9.5.1 [Intentionally Omitted]
9.5.2 [Intentionally Omitted]
9.5.3 In no event shall any Member be required to make any contributions, or return distributions received, to the Company to enable the Company to satisfy its obligations to pay its fees and expenses.
9.6 Additional Ebates Shares. In accordance with the terms, conditions definitions and provisions of that certain Amended and Restated Consent of Members Comdisco Ventures Fund A, LLC, effective as of May 31, 2012 (the Consent), the sharing of any costs, fees and expenses (or other such liabilities) related to, and the distribution of any and all Net Portfolio Receipts of the Company (and the allocation of any profits or losses of the Company and the component items of income, gain, loss, deduction and credit) with respect to, the proceeds now held in escrow resulting from the sale of the Additional Ebates Shares shall be: (a) in proportion to the amounts contributed by CDI, Annex E and Windspeed III to purchase the Additional Ebates Shares; or, (b) in the event of a sale, or other disposition, of such shares in proportion to the number of shares being sold, or disposed of, by each of the respective parties. No other assets within the Company shall be used to satisfy such liabilities.
10. Liability; Indemnification. No Member or Manager shall be liable, responsible or accountable to the Company or any Member for any loss or damage incurred by reason of any act or omission of such Member or Manager performed or omitted on behalf of the Company or in furtherance of the interests of the Company without bad faith, fraud, gross negligence or willful misconduct. To the fullest extent permitted by law, and notwithstanding any other provision of this Agreement, the Company shall indemnify the Members, the Managers and any officers for, and shall hold them harmless from and against, any and all damages, losses, liabilities, fines, penalties, amounts paid in settlement, costs and expenses (including attorneys fees and expenses) actually and reasonably incurred by them in connection with any threatened, pending or completed demands, claims, actions, suits or proceedings, whether civil, criminal, administrative or investigative, brought or threatened against them by reason of or in connection with actions taken or omitted to be taken by them on behalf of the Company, provided that no Member or Manager shall be entitled to indemnification hereunder for any damage, loss, liability, fine, penalty, amount paid in settlement, cost or expense incurred by such Member or Manager as a result of its bad faith, fraud, gross negligence or willful misconduct. Expenses (including attorneys fees) incurred by a Member or Manager in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company from available cash, if any, in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Member or Manager to repay such amount if it is ultimately determined that such Member or Manager is not entitled to be indemnified by
the Company pursuant to this Section 10. The cessation of a Members or Managers status as such shall not prevent such Member or Manager from being indemnified hereunder for actions taken or omitted while acting in such capacity.
11. Transfers.
11.1 Restrictions on Transfer. A Member may not Transfer any interest in the Company without the express written consent of the Manager and each of the other Members; provided, however, (i) that the consent of the Manager and the other Members pursuant to this Section 11.1 shall not be required if such Transfer (a) is made by CDI in accordance with Section 11.2, (b) will not violate or fail to comply with any federal or state securities law or regulation, (c) will not cause the Company to be treated as a publicly traded partnership as defined in Section 7704(b) of the Code, (d) will not cause the Company to be an investment company within the meaning of the Investment Company Act of 1940, as amended, (e) will not cause the assets of the Company or any part thereof to be treated as assets of any employee benefit plan or trust subject to ERISA, (f) will not constitute a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code, and (ii) that the Manager and the other Members may not unreasonably withhold their consents (if required) to any Transfer of an interest in the Company by an Entity to another Entity that directly or indirectly Controls, is Controlled by or is under common Control with the Transferring Entity if (a) in the case of a Transfer by a Class A Member, the Manager has determined that all of the obligations of such Class A Member to the Company will be satisfied in accordance with their terms or (b) in the case of a Transfer by a Class B Member, the Transferee is Controlled by any two (2) or more of the individuals comprising the Windspeed Team. The Manager, in its sole discretion, may require any Member (or unadmitted assignee of a Member) who proposes to make any Transfer not requiring consents under this Section 11.1 to provide the Company with a legal opinion reasonably satisfactory to the Manager that such Transfer will comply with applicable securities laws. In its sole discretion, the Manager may disregard as void any Transfer made in violation of this Section 11.1. Notwithstanding anything to the contrary contained herein, no consent or legal opinion will be required in connection with a Transfer of an interest in the Company by CDI to an Affiliate.
11.2 Right of First Offer. Notwithstanding the consent requirements of Section 11.1 (but subject to the other provisions thereof), a Class A Member may Transfer its interest (or any portion thereof) in compliance with the following procedures:
11.2.1 If a Class A Member (a Selling Member) proposes to Transfer all or any portion of its interest in the Company to any Person other than an Affiliate of CDI, such Selling Member shall give notice of its intent to make such Transfer (the Transfer Notice) to the Manager. The Transfer Notice shall set forth (i) the portion of the Selling Members interest to be Transferred (the Offered Interest) and (ii) if known to the Selling Member, the identity of the prospective Transferee and the material terms of the proposed Transfer to the prospective Transferee.
11.2.2 The Manager shall have the right, but not the obligation, to deliver to the Selling Member, before the close of the ten (10) day period after the delivery of the Transfer Notice to the Manager (such period, the Offer Period), a written offer (an Offer) to purchase the Offered Interest. An Offer shall set forth all of the material terms and conditions of the proposed purchase of the Offered Interest. The Managers rights to make the Offer and to purchase the Offered Interest pursuant thereto shall be assignable by the Manager to such one (1) or more Persons as the Manager determines to be appropriate (subject to compliance by the Manager with the provisions of Section 11.1 as if such rights were an interest in the Company). During the Offer Period, the Selling Member shall not solicit proposals or offers from, or engage in discussions with, other parties regarding the sale of the Offered Interest.
11.2.3 The Selling Member shall have no obligation to accept an Offer by the Manager (or its assignee). Any closing of the purchase of the Offered Interest by the Manager (or its assignee), however, shall take place on such date, and at such time and place, as the Selling Member and the Manager (or its assignee) shall agree upon. At such closing, the Manager (or its assignee) shall make such deliveries in payment for the Offered Interest as are contemplated by the Offer, and the Selling Member shall deliver such executed documentation (including, without limitation, any required consents) to the Manager (or its assignee) as may be required to effect the Transfer of the Offered Interest to the Manager (or its assignee) and the admission of the Manager (or its assignee) as a substituted Member with respect to the Offered Interest. All of the foregoing deliveries shall be deemed to be made simultaneously and none shall be deemed completed until all have been completed.
11.2.4 If the Manager (or its assignee) does not purchase the Offered Interest in accordance with Section 11.2.3, then, subject to Section 11.1, the Selling Member shall be entitled to Transfer the Offered Interest to a third party Transferee at any time during the one hundred fifty (150) day period after the delivery of the Transfer Notice. If the Offered Interest (or any portion thereof) has not been transferred within such one hundred fifty (150) day period, no Transfer of any portion of the Offered Interest shall be effective unless the Selling Member has again complied with the provisions of this Section 11 as to the Offered Interest. As a condition to the effectiveness of any Transfer of the Offered Interest to a third party Transferee pursuant to this Section 11.2.4, (i) such Transferee shall (a) execute and deliver such documents and agreements as the Manager reasonably determines to be appropriate to effect such Transferees agreement to be bound by the terms and conditions of this Agreement and (b) take such other actions as the Manager may reasonably determine to be necessary to effect the admission of such Transferee to the Company, to qualify the Company to conduct business or to preserve the limited liability status of the Members, and (ii) the Selling Member and the Transferee shall execute and deliver such documents and agreements, and take such other actions, as the Manager may reasonably require to ensure that all of the obligations of the Selling Member to the Company and Fund B (including, without limitation, the obligation of the Selling Member to fund its
commitment to Fund B with the escrow established pursuant to Section 7.5) will be satisfied in accordance with their terms.
11.3 Assignees. Unless and until a Person who has acquired an interest in the Company by any form of Transfer has been admitted to the Company as a Member, such Person shall have the status of an non-admitted assignee of such interest and, as such, shall have none of the rights and powers of a Member hereunder or under the Act (including, without limitation, to vote, give consents or approvals, access Company records or otherwise manage or participate in the affairs of the Company) other than to receive the distributions and allocations that such Persons predecessor would have been entitled to receive hereunder with respect to such interest. A Member who Transfers its entire interest in the Company shall cease to have any of the rights and powers of a Member. Notwithstanding anything herein to the contrary, the Company shall be entitled to treat the record holder of any interest as the absolute owner thereof in all respects, and shall incur no liability for distributions made in good faith to such record holder, until such time as it has received written notice of such Transfer and all of the conditions to the effectiveness of such Transfer hereunder have been satisfied. A Person who acquires an interest in the Company (by any form of Transfer) but is not admitted as a substituted Member may not Transfer all or any portion of such interest without complying with this Section 11 in full as if such Person were a Member for such purpose.
11.4 Substituted Members. A Person who acquires an interest in the Company by any form of Transfer shall be admitted to the Company as a substituted Member only (i) with the consent of the Manager and each of the other Members, (ii) by satisfying the applicable requirements of Sections 11.1 and 11.2, (iii) by executing and delivering such documents and agreements as the Manager reasonably determines to be appropriate to effect such Persons agreement to be bound by the terms and conditions of this Agreement, and (iv) if necessary, upon an amendment to this Agreement or such other instrument, executed by all necessary parties and filed or recorded in the proper records of each jurisdiction in which such recordation is necessary to preserve the limited liability status of the Members; provided, however, that the Manager and the other Members (a) shall have no rights to consent to the admission pursuant to this Section 11.4 of any Transferee of an interest in the Company if they had no rights to consent to the Transfer of such interest to such Transferee under Section 11.1 and (b) may not unreasonably withheld their consents to the admission pursuant to this Section 11.4 of any Transferee of an interest in the Company if they could not unreasonably withhold their consents to the Transfer of such interest to such Transferee under Section 11.1. The admission of a substituted Member shall not dissolve the Company and shall be shown in the books and records of the Company. The Manager shall promptly provide the Members with written notice of the admission of any substituted Member.
11.5 Rights of Representatives. Notwithstanding any other provision of this Agreement, if an individual Member that is an Entity is dissolved or terminated, the powers of such Member may be exercised by its personal representative to the extent required by the Act.
11.6 Partial Transfers. If there are two (2) or more Class A Members or Class B Members, as the case may be, after any Transfer by a Class A Member or Class B Member of an interest in the Company, then any subsequent consent, approval, vote or other action of the Class A Member or the Class B Members hereunder (including, without limitation, an amendment of this Agreement pursuant to Section 18.11) shall be validly effected if given or taken, as the case may be, by a majority in interest of the Class A Members or Class B Members as the case may be (based on their Capital Contributions, rights to share in distributions or other factors as the Manager determines, based on the terms of the Transfer, to be appropriate).
11.7 Costs and Expenses. Any costs or expenses incurred by the Company in connection with any Transfer or proposed Transferor of an interest in the Company shall be paid or reimbursed by the Transferor of such interest.
12. Withdrawals.
12.1 Withdrawals. Except as expressly permitted by this Agreement, no Member may (i) resign or withdraw from the Company or (ii) receive any distribution from the Company on account of its resignation or withdrawal (whether voluntary, involuntary or by operation of law) before the liquidation of the Company.
12.2 Retirement Events. From and after the time a Retirement Event occurs with respect to any Member (such Member, the Retired Member), such Retired Member (and, subject to Section 11, any Transferee of any interest of such Retired Member in the Company) shall, except as otherwise specifically provided in this Agreement, have the status of an unadmitted assignee of its interest in the Company and, as such, shall have none of the rights and powers of a Member hereunder or under the Act (including, without limitation, to vote, give consents or approvals, access Company records or otherwise manage or participate in the affairs of the Company) other than to receive the distributions and allocations that it otherwise would have been entitled to receive hereunder with respect to such interest.
13. Actions of the Members.
13.1 In General. Except as otherwise provided in this Agreement, a Members consent, approval, vote or other action as to any matter may be effected by (i) the affirmative vote by such Member to the doing of the act or thing under consideration at any meeting called and held pursuant to Section 13.2 to consider such act or thing or (ii) a written consent given by such Member at, prior to or after the doing of the act or thing under consideration pursuant to Section 13.3.
13.2 Meetings. Any matter requiring the action of any one (1) or more of the Members hereunder may be considered at a meeting called by the Manager or any Member and held not less than three (3) nor more than thirty (30) Business Days after written notice thereof shall have been given to the Member(s) entitled to vote at the meeting. Any such notice shall state briefly the purpose, time and place of the meeting.
A Member may waive in writing the requirements for notice of a meeting before, during or after such meeting (and the attendance of a Member at any meeting shall constitute such Members waiver). All such meetings shall be held at such reasonable times and places as the Manager (or, in the case of a meeting of the Class A Member(s), such Class A Member(s)) shall determine. A Member may participate in any meeting by conference telephone call or similar communications equipment if all the Persons participating in such meeting can hear each other. Such participation of a Member shall constitute the presence of such Member at such meeting. At any meeting of one (1) or more of the Members, the presence in person, or by conference telephone call or similar communications equipment, of Members sufficient to approve the action under consideration shall be required to constitute a quorum for the transaction of business at such meeting. When a quorum is present at any meeting of one (1) or more of the Members, the vote of Members sufficient to approve the action under consideration shall decide any matter brought before such meeting, unless the matter is one upon which by express provision of law or this Agreement, a different vote is required, in which case such express provision shall govern and control the decision on such matter.
13.3 Action Without Meeting. Any action that may be taken at a meeting of any one (1) or more of the Members may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, are signed by one (1) or more Members (or their proxy holders) whose votes would be sufficient to authorize or take such action at a meeting and delivered to the Company (and, if the consent of more than one (1) Member is required, are delivered to the Company within a period of sixty (60) consecutive days). Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing. Prompt notice of the taking of any action without a meeting by fewer than all of the Members entitled to participate in such action shall be given to those Members who have not consented in writing.
13.4 Proxies. A Member entitled to vote at a meeting of one (1) or more of the Members, or to express consent or dissent to Company action in writing without a meeting, may authorize another Person or Persons to act for it by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period.
13.5 No Other Voting Rights. A Member shall have no rights to vote, give consents or approvals, or otherwise manage or participate in the affairs of the Company except as expressly provided in this Agreement or in any mandatory provision of the Act.
14. Dissolution; Wind-up; Liquidating Distributions.
14.1 Events Causing Dissolution. The Company shall dissolve (i) at the time that there are no remaining Members of the Company unless the business of the Company is continued in accordance with the Act, (ii) on the effective date specified in a
written election to dissolve the Company adopted by the Class A Member at any time after the Effective Date of this Agreement or (iii) the time of the judicial dissolution of the Company under the Act.
14.2 Wind-up. The Manager (or, if one is appointed under the Act, a liquidating trustee) shall be responsible for the winding up and liquidation of the Company. Subject to Section 8.3 (it being agreed, however, that Section 8.3.1 shall not apply after the Companys dissolution), after the dissolution of the Company, the Manager (or such liquidating trustee) shall collect the Companys receivables, pay the Companys debts and obligations, and liquidate or distribute the Companys assets as promptly as is practicable and consistent with obtaining fair value for the Companys assets, having due regard to the activity and condition of the relevant markets and general financial and economic conditions. After the Companys affairs have been wound up and its debts and obligations have been paid or provided for, the Manager shall (i) make a final allocation of Profit or Loss, as the case may be, and other items in such amounts and proportions as are necessary (to the extent possible) for the Members capital account balances to equal the amounts of any remaining assets of the Company they would be entitled to receive if such remaining assets were to be distributed in accordance with Section 7 (subject to the limitations set forth therein) and (ii) then distribute such remaining assets to the Members in accordance with Section 7. Until the Companys termination pursuant to Section 14.4, the business of the Company and the affairs of the Manager and Members, as such, shall continue to be governed by this Agreement, provided that the Company shall engage in no further business other than in connection with its wind-up and liquidation.
14.3 Bid by the Manager. Within ninety (90) days after the Companys election to dissolve, the Manager shall prepare and deliver to the Class A Member, at the Managers expense, a bid for the Class A Members interest in the Company at a price, and on such other terms and conditions, as the Manager determines to be appropriate in its sole discretion. If, within thirty (30) days after the delivery of such bid, the Class A Member delivers a written notice to the Manager approving the sale of its interest in the Company to the Manager at the price, and on the other terms and conditions, set forth in such bid, then the Manager shall purchase, and the Class A Member shall sell, the Class A Members interest in the Company at such price and on such terms and conditions. The Manager may assign its right to purchase the interest of the Class A Member to one (1) or more Persons as it determines to be appropriate. At any closing of a purchase and sale pursuant to this Section 14.3, the Manager (or its assignee) shall make such deliveries in payment, and the Class A Member shall make such deliveries of instruments of assignment, as are necessary to effect such purchase and sale (with all of the required deliveries deemed made simultaneously and none deemed completed until all have been completed). If the Class A Member does not deliver such notice of approval to the Manager, the Manager shall have no obligation or right to purchase the Class A Members interest in the Company.
14.4 Termination. The dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution, but the Company shall
not terminate until the winding up of the business and affairs of the Company has been completed as provided herein and a certificate of cancellation of the Company has been filed with the Office of the Secretary of State of the State of Delaware. The Manager (or the liquidating trustee, as the case may be), acting singly, is authorized to execute and file a certificate of cancellation on behalf of the Company.
14.5 Liquidating Trust. With the approval of the Portfolio A Advisor, if the Company has not been liquidated by the second anniversary of the date of its dissolution pursuant to Section 14.1, the Manager (or liquidating trustee) may distribute the non-cash assets of the Company (other than any Marketable Securities) to a trust established for the sole purposes of liquidating such remaining assets, collecting amounts owed to the Company and paying any contingent or unforeseen liabilities or obligations of the Company. The Manager (or such liquidating trustee) shall use reasonable efforts to ensure that such trust qualifies as a liquidating trust under Treasury Regulations Section 301.7701-4(d). The distribution to the trust shall constitute a final, liquidating distribution of assets pursuant to 14.2 (with any asset distributed in kind to the trust being treated as if it were an amount of cash equal its fair market value as determined pursuant to Section 7.7). For purposes of determining and allocating Profit, Loss and other items pursuant to Section 6, any asset that is to be distributed in kind to such trust shall be treated as having then been sold by the Company for its value as determined for purposes of applying this Section 14.5 (provided that, for such purposes, the fair market value of any asset that is distributed subject to a nonrecourse indebtedness shall be deemed not to be less than the amount of such indebtedness). The Members relative beneficial interests in the trust shall be equal to their respective relative interests in the assets contributed to the liquidating trust as of the time that such assets are contributed to the liquidating trust.
15. Withholding. Notwithstanding any other provision of this Agreement, the Company shall be entitled to withhold and pay over, or otherwise pay, any withholding or other taxes payable by the Company at such times and based upon such rates as the Manager determines to be appropriate. If the Company makes a payment of tax for any accounting period with respect to any Member or as a result of any Members participation in the Company, such Member shall be deemed for all purposes of this Agreement to have received the amount of such payment as a distribution from the Company on the last day of the period for which the tax is withheld and paid or, if earlier, on the last day on which such Member owned an interest in the Company. Any deemed distribution to a Member pursuant to this Section 15 shall be treated (to the extent not repaid to the Company) as an advance of, and shall offset, an equal amount of distributions that would otherwise thereafter be made to such Member pursuant to the provisions of Section 7 in the order that such distributions would otherwise have been made. To the extent that the aggregate of such distributions to a Member for any month exceeds the distributions to which such Member would otherwise be entitled for such month, the amount of such excess shall be repaid by such Member to the Company within thirty (30) days after the end of such month.
16. Books; Reports.
16.1 Books and Records. The books and records of the Company, including a list of the names and business or mailing addresses of the Members, shall be maintained at the principal office of the Company in accordance with the Act. All of the books and records of the Company shall be available for examination at the offices of the Company in which they are maintained by any Member or by any Members duly authorized representatives at any and all reasonable times upon reasonable notice. Each Member, or such Members duly authorized representatives, upon written notice to the Manager and upon paying the costs of collection, duplication and mailing, shall be entitled for any purpose reasonably related to such Members interest as a Member in the Company to a copy of information to which such Member is entitled under the Act. The Company may maintain such other books and records and may provide such financial or other statements as the Manager and the Portfolio A Advisor mutually agree upon.
16.2 Accounting; Tax Year. The Company shall report its operations for tax purposes on such method and based upon such taxable year as the Manager determines to be appropriate consistent with applicable federal income tax laws. The financial statements of the Company shall be prepared in accordance with generally accepted accounting principles.
16.3 Reports
16.3.1 Within ninety (90) days after the end of each fiscal year of the Company, or as soon as practicable thereafter, the Manager shall send to each Person who was a Member at any time during such fiscal year such tax information as shall be necessary for the preparation by such Person of its federal, state and local income tax returns.
16.3.2 Within (45) forty five days after the end of each fiscal quarter of the Company, the Manager shall send to each Member and the Portfolio A Advisor, (i) an unaudited Statement of Assets, Liabilities and Members Capital of the Company as of the end of such quarter, (ii) unaudited statements of operations of the Company for such quarter and for the fiscal year that includes such quarter through the end of such quarter, (iii) a summary of any transactions by the Company during such quarter and (iv) a summary of any distributions made during such quarter.
17. Definitions. As used in this Agreement, the following terms shall have the meanings assigned to them in this Section 17:
Act has the meaning set forth in the Recitals.
Affiliate means (i) with respect to any individual, (a) any member of such individuals Family, (b) any Entity more than ten percent (10%) of the beneficial interests in which are directly or indirectly owned by one (1) or more of such individual and members of such individuals Family or (c) any member, manager, director, partner, shareholder, officer, trustee, beneficiary or employee of any Entity described in (b), and (ii) with respect to any Entity, (a) any direct or indirect member, manager, director,
partner, shareholder, officer, trustee or beneficiary of or in such Entity, (b) any member of the Family of an individual described in (a) or (c) any other Entity directly or indirectly Controlling, Controlled by or under common Control with such Entity.
Business Day means any day that is not a Saturday, Sunday or legal holiday in the Companys principal place of business.
Capital Contribution means, with respect to any Member as of any time of determination, the sum of (i) the amount of money that such Member has contributed to the Company pursuant to Section 5, (ii) the fair market value, as determined pursuant to Section 5, of any property that such Member has contributed to the Company (net of any liabilities that the Company has assumed or taken subject to, under Section 752 of the Code, in connection with acquiring such property from such Member), and (iii) the amount of any Company liabilities that such Member has assumed, within the meaning of Section 1.704-l(b)(2)(iv)(c) of the Treasury Regulations. A loan by a Member to the Company shall not be treated as part of such Members Capital Contribution. A Transferee of all or a portion of a Members interest in the Company shall succeed to the Capital Contribution of its Transferor to the extent allocable, based on the terms of the Transfer, to the Transferred interest.
Cash Option Securities has the meaning set forth in Section 8.3.3(iv).
Cause means, with respect to Windspeed (or an Entity that has become Manager pursuant to Section 8.1.3 upon the Transfer to it of Windspeeds interest in the Company), any of the following:
(i) the material breach of its duties as Manager under this Agreement without cure within a reasonable period of time after written notice to it of such breach;
(ii) the commitment of a material act of fraud, willful misconduct or breach of fiduciary duty under any federal or state securities laws, or fraud, gross negligence or willful misconduct relating to its duties as Manager;
(iii) the conviction of, or plea of nolo contendere to, a felony by any of the individual members of the Manager; or
(iv) at least two (2) of the individuals comprising the Windspeed Team are no longer actively committed to the Manager in accordance with Section 8.1.5 and such failure is volitional on the part of at least one (1) of such individuals.
CDI has the meaning set forth in the initial paragraph of this Agreement.
Certificate means the Companys Certificate of Formation filed with the Secretary of State of the State of Delaware.
Class A Member means any Person who, at the time of reference, has been admitted to the Company as, and remains, a Class A Member hereunder.
Class B Member means any Person who, at the time of reference, has been admitted to the Company as, and remains, a Class B Member hereunder.
Code means the Internal Revenue Code of 1986, as amended, and, where applicable, any predecessor or successor thereto.
Company means the Delaware limited liability company governed by this Agreement named Comdisco Ventures Fund A, LLC (or such other name as may be selected pursuant to Section 1.3).
Control (including the terms controlling, controlled by, and under common control with) means the direct or indirect possession of the power to direct or cause the direction of the management and policies of an Entity, whether through the ownership of Voting Securities, by contract, or otherwise.
Effective Date means February 12, 2015.
Entity means any corporation, partnership, limited liability company, trust, unincorporated association or other organization.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Event of Bankruptcy means, with respect to any Person (except CDI), any of the following events:
(i) the making by such Person of an assignment for the benefit of creditors;
(ii) the filing by such Person of a voluntary petition under any bankruptcy, insolvency or similar law;
(iii) the adjudication of such Person by a court of competent jurisdiction as a bankrupt or insolvent, or the entry against such Person of an order for relief under any bankruptcy, insolvency or similar proceeding;
(iv) the filing by such Person of a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute, law or regulation;
(v) the filing by such Person of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against him in any bankruptcy or insolvency proceeding;
(vi) such Persons written request for, consent to or acquiescence in the appointment of a trustee, receiver or liquidator of such Person or of all or any substantial part of such Persons properties; or
(vii) the passage of (i) one hundred twenty (120) days after the commencement of any proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any bankruptcy or insolvency statute, law or regulation without such proceeding having been dismissed, (ii) ninety (90) days after the appointment, without such Persons consent or acquiescence, of a trustee, receiver or liquidator of such Person or of all or any substantial portion of such Persons properties without such appointment having been vacated or stayed or (iii) ninety (90) days after the expiration of any stay of an appointment referred to in the foregoing clause (ii) without such appointment having been vacated.
Family means, with respect to any individual, any of such individuals spouse and descendants (by blood or adoption).
Fund B has the meaning set forth in the Recitals of this Agreement.
Initial Agreement has the meaning set forth in the Recitals.
Manager means Windspeed, or any successor thereto, in its capacity as manager of the Company hereunder.
Marketable Security means any security that is described in Section 7.7.1, Section 7.7.2 or Section 7.7.3, and which is not subject to any hold back or lock up required by a managing underwriter in connection with the public offering of equity securities of the Portfolio Company which issued such Marketable Securities, or any restriction on the disposition thereof under the terms of any other agreement or of any law, regulation or policy of any state, and each Members entire holdings of such Marketable Securities can be sold by such Member to the general public without the necessity of any federal, state or local government consent, approval or filing (other than any notice filings of the type required pursuant to Rule 144(h) under the Securities Act of 1933, as amended) and without violation of federal or state securities laws.
Member means any Person who is a member of the Company (whether of Class A or Class B) as shown on the books of record of the Company at the time of reference thereto, in such Persons capacity as a member of the Company.
Members Capital means, as of any date of determination, the amount that would be available for distribution to the Members pursuant to Sections 7 and 14 if the Company were to sell its assets at their values determined in accordance with Section 7.7 (as applicable), satisfy its debts and obligations (including, without limitation, any accrued but unpaid portion of the Management Fee) in accordance with their terms, and then liquidate.
Net Portfolio Receipts means the amounts of cash received by the Company with respect to securities included in the respective Portfolio A, or Portfolio AA, or Portfolio B, as the case may be, net of (i) amounts used or reserved by the Manager to acquire securities for either Portfolio A or Portfolio AA,(Note: Portfolio AA) including, without limitation, by exercising option, warrant, conversion, exchange, pre-emptive or other purchase rights with respect to securities held by the Company and (ii) any expenses of the acquisition, holding, sale, exchange or other disposition of such securities.
Non-Routine Expenses means any expenses that are not Routine Expenses.
Offer has the meaning set forth in Section 11.2.2.
Offered Interest has the meaning set forth in Section 11.2.1.
Offer Period has the meaning set forth in Section 11.2.2.
Person means any individual or Entity.
Portfoliomeans the securities listed on each of the schedules attached to and made a part of the Sixth Restated Agreement each respectively designated Schedule A, Schedule AA and Schedule B describing the Portfolio Companies in each of the respective Portfolio A, Portfolio AA and Portfolio B and any other securities that the Company directly or indirectly acquires in respect of, or in exchange for, such securities in each of the respective Portfolios, including, without limitation, by reason of (i) any stock dividend, stock split, stock issuance, combination, recapitalization, reclassification, merger, consolidation, conversion or similar transaction, (ii) exercising option, warrant, conversion, exchange, pre-emptive or other purchase rights, or (iii) participating in subsequent financing rounds of Portfolio Companies.
Portfolio A Advisor means the individual designated by the Class A Members from time to time pursuant to Section 8.2.
Portfolio Company means any issuer of any of the securities included in each of the respective Portfolios.
Regulatory Allocations has the meaning set forth in Section 6.4.
Retired Member has the meaning set forth in Section 12.2.
Retirement Event means, with respect to any Member, (i) an Event of Bankruptcy with respect to such Member (except CDI), or (ii) the Transfer (or the occurrence of any event which results or will result in the Transfer) by such Member of any interest in the Company in violation of this Agreement.
Routine Expenses means the following expenses:
(i) expenses(including, without limitation, legal, accounting, filing and other fees) incurred by the Company or the Manager in connection with the formation, operation, dissolution or termination of the Company and that are not specific to any particular portfolio or the securities therein (such as, for example, legal and accounting fees in connection with the Company dissolution, tax return preparation and filing costs, and annual report fees) in an aggregate amount from and after the Effective Date not exceeding $50,000 which will be shared 50/50 among the Class A Member and the Class B Members;
(ii) fees and out-of-pocket costs of evaluating, negotiating, structuring, documenting and effecting transactions by the Company in either Portfolio A or Portfolio AAof up to $5,000 per fee or expense, including finders, placement, brokerage, accounting, legal, investment banking and other fees;
(iii) taxes, fees or other governmental charges levied against the Company or in connection with its business or operations;
(iv) costs of litigation and similar matters of up to $5,000 per fee or expense (including matters that are the subject of indemnification pursuant to Section 10).
Selling Member has the meaning set forth in Section 11.2.1.
Short Term Investments means commercial paper, governmental obligations, money market instruments, money market mutual shares, certificates of deposit and other similar obligations and securities in each case of high investment grade quality.
Tax Liability means, as to any Member as of the close of any fiscal year or other accounting period, (i) the amount of net taxable income and gain of the Company allocated with respect to such Members interest in the Company (including to predecessor holders) pursuant to Section 6 for periods through and including the close of such fiscal year or other accounting period, multiplied by (ii) the highest combined federal and state rate (taking into account any federal deductibility of state taxes and vice versa, and any applicable capital gain or other preferences) applicable to individual residents of Massachusetts, in the case of allocations to a Class B Member , or to
corporations with principal places of business in Illinois, in the case of the Class A Member, for such fiscal year or other accounting period.
Tax Matters Partner has the meaning set forth in Section 6.9.
Term has the meaning set forth in Section 4.
Transfer means (i) when used as a verb, to sell, assign, transfer, bequeath, devise, pledge, encumber or otherwise dispose of, voluntarily, involuntarily or by operation of law, and (ii) when used as a noun, any sale, assignment, transfer, bequest, devise, pledge, encumbrance or other disposition, whether voluntary, involuntary or by operation of law.
Transfer Notice has the meaning set forth in Section 11.2.1.
Treasury Regulations means the Income Tax Regulations promulgated from time to time under the Code. References to specific sections of the Treasury Regulations shall be to such sections as amended, supplemented or superseded by Treasury Regulations currently in effect.
Voting Securities means, with respect to any Entity that is a corporation (or that is managed by one (1) or more Persons having powers similar to those of a corporate board of directors and who are subject to periodic re-election, or removal and replacement, similar to corporate directors), securities of such Entity having the right to vote in an election, or for the removal and replacement, of such Entitys board of directors (or such Persons having similar powers).
Windspeed has the meaning set forth in the initial paragraph of this Agreement.
Windspeed Fund has the meaning set forth in the initial paragraph of this Agreement.
Windspeed Team means Daniel H. Bathon Jr., John W. Bullock and Steven Karlson, the general partners of Windspeed.
18. Miscellaneous.
18.1 Successors and Assigns. The covenants and agreements contained herein shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto, and no other Person shall have any rights or benefits hereunder except to the extent expressly provided by applicable law.
18.2 Waivers. The failure of any Person to seek redress for violation, or to insist on strict performance, of any covenant or condition of this Agreement shall not
(i) prevent a subsequent act which would have constituted a violation from having the effect of an original violation or (ii) excuse strict performance of such covenant or condition in any subsequent case.
18.3 Certification. The Manager may cause any or all of the Members interests in the Company to be evidenced by certificates. Unless certificated pursuant to this Section 18.3, interests in the Company shall not be evidenced by certificates. As a condition to the effectiveness of any Transfer of an interest that has been certificated, the Manager may require the submission to the Company of the certificate(s) evidencing such interest (or an affidavit of loss in such form as the Manager determines to be appropriate).
18.4 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Delaware without regard to principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.
18.5 Separability. Each provision of this Agreement shall be considered separable, and if for any reason any provision or provisions of this Agreement, or the application of such provision to any Person or circumstance, shall be held invalid or unenforceable in any jurisdiction, such provision or provisions shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without invalidating the remaining provisions hereof, or the application of the affected provision to Persons or circumstances other than those to which it was held invalid or unenforceable, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
18.6 Entire Agreement. This Agreement (together with any exhibits, schedules, subscription or other agreements referred to herein, which are hereby incorporated herein by reference) constitutes the entire agreement among the parties governing the relationship established hereby. This Agreement (together with such exhibits, schedules and agreements) supersedes any prior agreement or understanding among the parties and may not be modified or amended in any manner other than as set forth herein or therein.
18.7 Section Titles. Section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.
18.8 Counterparts. This Agreement may be executed in several counterparts, all of which together shall constitute one (1) agreement binding on all parties hereto notwithstanding that all the parties have not signed the same counterpart.
18.9 Pronouns. When used herein, pronouns and variations thereof shall be deemed to refer to the masculine, feminine or neuter or to the singular or plural as the identity of the Person or Persons referenced or the context may require.
18.10 No Partition. Except as expressly provided herein, no Member or successor-in-interest to any Member shall have the right while this Agreement remains in effect to have any property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have such property of the Company partitioned, and the Member, on behalf of itself and its successors, representatives, heirs and assigns, hereby waives any such right.
18.11 Amendments. In addition to any amendments otherwise permitted by this Agreement, this Agreement may be amended from time to time with the consent of each of the Manager, the Class A Member and the Class B Members.
18.12 Notice Addresses. Any notice to a Member shall be delivered in writing at the address of such Member set forth below such Members name on the signature page hereof (or instrument of adherence hereto) executed by such Member or at such other mailing address of which such Member shall prospectively notify the Manager and the other Members in writing (any such other mailing address shall be duly noted by the Manager in the Companys books and records). Any notice to the Company or the Manager shall be at the principal office of the Company as set forth in Section 3 or at such other mailing address of which the Manager shall prospectively notify the Members in writing.
18.13 Notice Deemed Given. Any notice shall be deemed to have been duly given if personally delivered or sent by United States mail or express mail service or by telecopy or telegram confirmed by letter and will be deemed given, unless earlier received, (i) if sent by certified or registered mail, return receipt requested, or by first-class mail, five (5) calendar days after being deposited in the United States mails, postage prepaid, (ii) if sent by United States Express Mail or other express mail service, two (2) calendar days (other than Sundays and federal holidays) after being deposited therein, (iii) if sent by telegram, telecopy or other electronic transmission, on the date sent provided confirmatory notice is sent by first-class mail, postage prepaid, and (iv) if delivered by hand, on the date of receipt.
18.14 Dispute Resolution. In the event of any controversy, dispute or claim under, arising out of or related to this Agreement (including but not limited to claims relating to breach, termination, fraud or misrepresentation, or the invalidity, illegality or voidness of this Agreement) whether based on contract, tort, statute or other legal theory (collectively hereinafter, disputes), the parties shall first attempt to resolve the dispute, at the written request of any party to the dispute, through discussions between authorized senior representatives of the parties to the dispute. If, despite the good faith efforts of the parties, the dispute is not resolved by the foregoing discussions within fifteen (15) days, the dispute shall be referred to binding arbitration in Chicago, Illinois pursuant to the commercial arbitration rules then in effect of the American Arbitration Association by a sole arbitrator selected by the parties within fifteen (15) days after written request for arbitration by any party or, in the absence of such selection, to arbitrator(s) selected in accordance with such rules. Any award made pursuant to an
arbitration proceeding shall be made within four (4) months of the appointment of the arbitrator and may be entered in any court of competent jurisdiction. The arbitrator shall determine issues of arbitrability but may not limit, expand or otherwise modify the terms of this Agreement. Issues of arbitrability shall be determined in accordance with the federal substantive and procedural laws relating to arbitration.
[Remainder of Page Intentionally Left Blank]
COUNTERPART SIGNATURE PAGE
SIXTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
By its execution of this signature page, the undersigned does hereby agree to be bound by the provisions of the Sixth Amended and Restated Limited Liability Company Agreement to which this signature page is appended, a counterpart of which has been furnished to the undersigned, and the undersigned hereby authorizes the Company to append this signature page to a counterpart of the Sixth Amended and Restated Limited Liability Company Agreement as evidence thereof.
COMDISCO, INC.
By: \s\ Randolph I. Thornton
Name: Randolph I. Thornton
Title: President and Chief Executive Officer
Address: 5600 North River Road, Suite 800
Rosemont, Illinois 60018
WINDSPEED ACQUISITION FUND GP, LLC
By: \s\ John Bullock
Name: John Bullock
Title: Managing Partner
Address: 52 Waltham Street
Lexington, MA 02421
COMDISCO VENTURES FUND B, LLC
By: Windspeed Acquisition Fund GP, LLC
Its General Partner
By: |
\s\ John Bullock |
Name: |
John Bullock |
Title: |
Managing Partner |
Address: 52 Waltham Street
Lexington, MA 02421
[Signature Page to Fund A LLC Agreement]
WINDSPEED ACQUISITION FUND, L.P.
By: Windspeed Acquisition Fund GP, LLC
Its general partner.
By: |
\s\ John Bullock |
Name: |
John Bullock |
Title: Managing Partner |
Address: 52 Waltham Street
Lexington, MA 02421
SCHEDULE A
ATTACHED TO AND MADE PART OF THE SIXTH AMENDED AND RESTATED LIABILITY COMPANY AGREEMENT OF COMDISCO VENTURES FUND A, LLC.
PORTFOLIO A COMPANIES:
Ebates Shopping.com, Inc (proceeds held in escrow from previous sale of Shares)
IronPlanet.com, Inc.
On24, Inc.
SCHEDULE B
ATTACHED TO AND MADE PART OF THE SIXTH AMENDED AND RESTATED LIABILITY COMPANY AGREEMENT OF COMDISCO VENTURES FUND A, LLC.
PORTFOLIO B COMPANIES:
Alien Technology Corp.
Consolidated IP Holdings, Inc.
Integral Development Corp.
Kotura, Inc.
MetricStream Inc.
nlight Photonics, Corp.
Radiant Research, Inc.
Sportvision, Inc.
Topica, Inc.
Visto, Corp.
Vivre, Inc.
SCHEDULE AA
ATTACHED TO AND MADE PART OF THE SIXTH AMENDED AND RESTATED LIABILITY COMPANY AGREEMENT OF COMDISCO VENTURES FUND A, LLC.
PORTFOLIO AA COMPANIES:
None
Exhibit 11.1
COMDISCO HOLDING COMPANY, INC.
COMPUTATION OF NET ASSEST IN LIQUIDATION PER COMMON SHARE AND CDR LIABILITY PER CDR
(in thousands, except per share data)
Average contingent distribution rights and common shares used in computing Estimated Net Assets in Liquidation were as follows:
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
Average CDRs outstanding |
|
148,448 |
|
|
|
|
|
|
|
|
|
Average common shares outstanding |
|
4,029 |
|
|
|
|
|
|
|
|
|
Estimated CDR liability per CDR |
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net assets in liquidation per common stockholders |
$ |
6.95 |
|
|
|
Exhibit 31.1
CERTIFICATION
I, Randolph I. Thornton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Comdisco Holding Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. As the sole officer of the registrant, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. As the sole officer of the registrant, I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Dated: February 13, 2015
|
By: |
/s/ Randolph I. Thornton |
|
Name: |
Randolph I. Thornton |
|
Title: |
Chief Executive Officer and President |
|
|
(Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-Q of Comdisco Holding Company, Inc. (the Company) for the period ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: February 13, 2015 |
By: |
/s/ Randolph I. Thornton |
|
Name: |
Randolph I. Thornton |
|
Title: |
Chief Executive Officer and President |
|
|
|
|
|
|
Dated: February 13, 2015 |
By: |
/s/ Randolph I. Thornton |
|
Name: |
Randolph I. Thornton |
|
Title: |
Chief Executive Officer and President |
|
|
(Principal Financial and Accounting Officer) |
This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
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