commercehub, inc. - Investor Relations

COMMERCEHUB, INC.
FORM S-1/A
(Securities Registration Statement)
Filed 07/14/16
Address
Telephone
CIK
SIC Code
Fiscal Year
255 FULLER ROAD, SUITE 327
ALBANY, NY 12203
518-810-0700
0001665658
7372 - Prepackaged Software
12/31
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Use these links to rapidly review the document TABLE OF CONTENTS FINANCIAL STATEMENTS Table
of
Contents
As filed with the Securities and Exchange Commission on July 14, 2016
REGISTRATION NO. 333-210508
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COMMERCEHUB, INC.
(Exact
name
of
Registrant
as
specified
in
its
charter)
Delaware
(State
or
other
jurisdiction
of
incorporation
or
organization)
7372
(Primary
Standard
Industrial
Classification
code
number)
81-1001640
(I.R.S.
Employer
Identification
No.)
201 Fuller Road, 6 th Floor, Albany, New York 12203, (518) 810-0700
(Address,
including
zip
code,
and
telephone
number,
including
area
code,
of
Registrant's
principal
executive
offices)
Douglas Wolfson
CommerceHub, Inc.
201 Fuller Road, 6 th Floor
Albany, New York 12203
(518) 810-0700
(Name,
address,
including
zip
code,
and
telephone
number,
including
area
code,
of
agent
for
service)
Copy to:
Renee Wilm
Jonathan Gordon
Courtney York
Baker Botts L.L.P.
30 Rockefeller Plaza
New York, New York 10112
(212) 408-2500
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective and all other conditions to the proposed transaction described herein have been
satisfied or waived, as applicable.
If
the
securities
being
registered
on
this
Form
are
being
offered
in
connection
with
the
formation
of
a
holding
company
and
there
is
compliance
with
General
Instruction
G,
check
the
following
box:
o
If
this
Form
is
filed
to
register
additional
securities
for
an
offering
pursuant
to
Rule
462(b)
under
the
Securities
Act,
check
the
following
box
and
list
the
Securities
Act
registration
statement
number
of
the
earlier
effective
registration
statement
for
the
same
offering.
o
If
this
Form
is
a
post-effective
amendment
filed
pursuant
to
Rule
462(d)
under
the
Securities
Act,
check
the
following
box
and
list
the
Securities
Act
registration
statement
number
of
the
earlier
registration
statement
for
the
same
offering.
o
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
the
definitions
of
"large
accelerated
filer,"
"accelerated
filer"
and
"smaller
reporting
company"
in
Rule
12b-2
of
the
Exchange
Act.
Large
accelerated
filer
o
Accelerated
filer
o
Non-accelerated
filer
ý
Smaller
reporting
company
o
(Do
not
check
if
a
smaller
reporting
company)
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Table
of
Contents
PROSPECTUS
COMMERCEHUB, INC.
201 Fuller Road, 6 th Floor
Albany, New York 12203
Series A Common Stock
(par value $0.01 per share)
Series B Common Stock
(par value $0.01 per share)
Series C Common Stock
(par value $0.01 per share)
CommerceHub,
Inc.
(
CH Parent ,
which
is
also
referred
to
in
this
prospectus
as
we ,
our ,
or
the company )
is
currently
a
subsidiary
of
Liberty
Interactive
Corporation
(
Liberty ).
Immediately
following
the
Spin-Off
(as
defined
below)
and
the
internal
restructuring
(as
described
below),
CH
Parent's
business,
assets
and
liabilities
will
consist
of
its
wholly
owned
subsidiary
Commerce
Technologies,
LLC,
a
Delaware
limited
liability
company
(currently
Commerce
Technologies,
Inc.
(d/b/a
CommerceHub),
a
New
York
corporation)
(
CommerceHub ).
Liberty
has
determined
to
spin
off
our
company
by
distributing
(the
distribution )
to
the
holders
of
its
Liberty
Ventures
common
stock,
as
a
dividend,
all
of
our
common
stock
held
by
Liberty.
We
are
sending
this
prospectus
to
you
in
connection
with
that
spin-off
(the
Spin-Off ).
Liberty
currently
has
two
tracking
stocks,
the
QVC
Group
common
stock
and
the
Liberty
Ventures
common
stock,
which
are
intended
to
track
and
reflect
the
economic
performance
of
the
QVC
Group
and
the
Ventures
Group,
respectively,
as
described
in
more
detail
in
this
prospectus.
See
"The
Spin-Off—Background
for
the
Spin-Off."
At
present,
Liberty's
interest
in
CH
Parent
is
attributed
to
its
Ventures
Group.
If
all
conditions
to
the
Spin-Off
are
satisfied
or
waived
by
the
board
of
directors
of
Liberty
in
its
sole
discretion,
at
5:00
p.m.,
New
York
City
time,
on
July
22,
2016
(such
date
and
time,
the
distribution date ),
(i)
for
each
whole
share
of
Liberty's
Series
A
Liberty
Ventures
common
stock
(
LVNTA )
held
by
you
as
of
5:00
p.m.,
New
York
City
time,
on
July
8,
2016
(such
date
and
time,
the
record date ),
you
will
receive
0.1
of
a
share
of
our
Series
A
common
stock
and
0.2
of
a
share
of
our
Series
C
common
stock,
and
(ii)
for
each
whole
share
of
Liberty's
Series
B
Liberty
Ventures
common
stock
(
LVNTB ,
and
together
with
LVNTA,
the
Liberty Ventures common stock )
held
by
you
on
the
record
date,
you
will
receive
0.1
of
a
share
of
our
Series
B
common
stock
and
0.2
of
a
share
of
our
Series
C
common
stock.
Cash
will
be
paid
in
lieu
of
fractional
shares.
No
shares
of
our
common
stock
are
being
distributed
to
holders
of
Liberty's
Series
A
QVC
Group
common
stock
(
QVCA )
or
Series
B
QVC
Group
common
stock
(
QVCB ).
No
vote
of
Liberty's
stockholders
is
required
or
is
being
sought
to
authorize
or
effectuate
the
Spin-Off.
No
action
is
required
of
you
to
receive
your
shares
of
our
common
stock.
There
is
no
current
trading
market
for
our
common
stock.
We
expect
to
list
our
Series
A
common
stock
and
Series
C
common
stock
on
the
Nasdaq
Global
Select
Market
under
the
symbols
"CHUBA"
and
"CHUBK,"
respectively.
Although
no
assurance
can
be
given,
we
currently
expect
that
our
Series
B
common
stock
will
be
quoted
on
the
OTC
Markets
under
the
symbol
"CHUBB."
We
are
an
"emerging
growth
company"
as
defined
in
the
Jumpstart
Our
Business
Startups
Act
of
2012
(the
JOBS Act ).
Investing
in
our
common
stock
involves
risks.
See
"Risk
Factors"
beginning
on
page
9.
In
addition,
we
may
elect
to
comply
with
certain
reduced
public
company
reporting
requirements
for
future
filings.
See
"Summary—Emerging
Growth
Company
Status."
In
reviewing this prospectus, you should carefully consider the matters described under the caption "Risk Factors"
beginning on page 9.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or has passed
upon the adequacy or accuracy of this prospectus as truthful or complete. Any representation to the contrary is a criminal offense.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
The
date
of
this
prospectus
is
July
14,
2016.
Table
of
Contents
TABLE OF CONTENTS
SUMMARY
Our
Company
Liberty's
Current
Corporate
Structure
Emerging
Growth
Company
Status
The
Spin-Off
RISK
FACTORS
Factors
Relating
to
Our
Corporate
History
and
Structure
Factors
Relating
to
Our
Business
Factors
Relating
to
the
Spin-Off
Factors
Relating
to
our
Common
Stock
and
the
Securities
Market
CAUTIONARY
STATEMENTS
CONCERNING
FORWARD
LOOKING
STATEMENTS
1
1
1
2
3
9
9
9
25
28
33
35
35
36
37
37
37
38
39
40
41
45
45
45
45
45
46
46
46
46
47
49
50
50
52
53
56
59
61
61
62
62
62
63
78
THE
SPIN-OFF
Background
for
the
Spin-Off
Reasons
for
the
Spin-Off
Internal
Restructuring
Interests
of
Certain
Persons
Conditions
to
the
Spin-Off
Manner
of
Effecting
the
Spin-Off
Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards
Effect
of
the
Spin-Off
on
Outstanding
CommerceHub
Incentive
Awards
Material
U.S.
Federal
Income
Tax
Consequences
of
the
Spin-Off
Conduct
of
the
Business
of
CommerceHub
and
the
Ventures
Group
if
the
Spin-Off
is
Not
Completed
Amount
and
Source
of
Funds
and
Financing
of
the
Transaction;
Expenses
Accounting
Treatment
No
Appraisal
Rights
Results
of
the
Spin-Off
Listing
and
Trading
of
our
Common
Stock
Stock
Transfer
Agent
and
Registrar
Trading
Prior
to
the
Record
Date
Reasons
for
Furnishing
this
Prospectus
CAPITALIZATION
SELECTED
FINANCIAL
DATA
DESCRIPTION
OF
OUR
BUSINESS
Overview
Our
Role
as
Strategic
Partner
to
Retailers
and
their
Suppliers
Our
Industry
CommerceHub
Solutions
and
Capabilities
Regulatory
Matters
Intellectual
Property
Competition
Properties
Employees
Legal
Proceedings
MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
DESCRIPTION
OF
CERTAIN
INDEBTEDNESS
i
Table
of
Contents
MANAGEMENT
Directors
Executive
Officers
Director
Independence
Board
Composition
Committees
of
the
Board
Compensation
Committee
Interlocks
and
Insider
Participation
EXECUTIVE
COMPENSATION
Summary
Compensation
Table
Executive
Compensation
Arrangements
2015
Bonus
Program
Equity
Incentive
Plans
Outstanding
Equity
Awards
at
Fiscal
Year-End
Post-Employment
Compensation
and
Benefits
Director
Compensation
CH
Parent
Equity
Incentive
Plans
Equity
Compensation
Plan
Information
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
Security
Ownership
of
Certain
Beneficial
Owners
Security
Ownership
of
Management
Change
of
Control
CERTAIN
RELATIONSHIPS
AND
RELATED
PARTY
TRANSACTIONS
Relationship
Between
CH
Parent
and
QVC
Relationships
Between
CH
Parent
and
Liberty
and/or
Liberty
Media
DESCRIPTION
OF
OUR
CAPITAL
STOCK
Authorized
Capital
Stock
Our
Common
Stock
Dividend
Policy
Other
Provisions
of
our
Certificate
of
Incorporation
and
Bylaws
Section
203
of
the
Delaware
General
Corporation
Law
Transfer
Agent
and
Registrar
LEGAL
MATTERS
EXPERTS
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
WHERE
YOU
CAN
FIND
MORE
INFORMATION
FINANCIAL
STATEMENTS
80
80
84
85
86
86
86
87
87
88
91
92
93
94
96
96
97
99
99
100
103
104
104
104
109
109
109
111
112
114
115
116
117
118
119
II-5
This
prospectus
describes
the
business
and
assets
of
our
company
as
though
they
were
our
business
and
assets
for
all
historical
periods
described.
However,
our
company
is
a
newly
formed
entity
that
will
not
have
conducted
any
operations
prior
to
the
Spin-Off
and
instead
will
have
had
such
business
and
assets
transferred
to
it
prior
to
the
Spin-Off.
References
in
this
prospectus
to
the
historical
assets,
liabilities,
business
or
activities
of
our
business
are
intended
to
refer
to
the
historical
assets,
liabilities,
business
or
activities
of
CommerceHub
as
they
were
conducted
or
held
by
Liberty
prior
to
the
Spin-Off.
Upon
completion
of
the
Spin-Off,
we
will
be
an
independent
publicly
traded
company,
and
Liberty
will
have
no
continuing
stock
ownership
in
our
company.
The
historical
consolidated
financial
information
of
our
company
contained
in
this
prospectus
is
not
necessarily
indicative
of
our
future
financial
position,
future
results
of
operations
or
future
cash
flows,
nor
does
it
reflect
what
the
financial
ii
Table
of
Contents
position,
results
of
operations
or
cash
flows
of
our
company
would
have
been
had
we
been
operated
as
a
stand-alone
company,
independent
from
Liberty,
during
the
periods
presented.
You
should
not
assume
that
the
information
contained
in
this
prospectus
is
accurate
as
of
any
date
other
than
the
date
set
forth
on
the
cover
page
of
this
prospectus.
Changes
to
the
information
contained
herein
may
occur
after
that
date
and
we
do
not
undertake
any
obligation
to
update
the
information
unless
required
to
do
so
by
law.
iii
Table
of
Contents
SUMMARY
The following is a summary of material information discussed in this prospectus. It is included for convenience only and should not be considered
complete. You should carefully review this entire prospectus, including the risk factors, to better understand the Spin-Off and our business and financial
position.
Our Company
CH
Parent
is
currently
a
subsidiary
of
Liberty.
Immediately
following
the
Spin-Off,
our
principal
business,
assets
and
liabilities
will
consist
of
our
wholly
owned
subsidiary
CommerceHub.
Upon
completion
of
the
Spin-Off,
we
will
be
an
independent
publicly
traded
company
and
Liberty
will
not
retain
any
ownership
interest
in
us.
In
connection
with
the
Spin-Off,
we
expect
to
enter
into
certain
agreements,
including
the
reorganization
agreement
and
the
tax
sharing
agreement,
with
Liberty
and/or
Liberty
Media
Corporation
(
Liberty Media ),
pursuant
to
which,
among
other
things,
we
and
Liberty
will
indemnify
each
other
against
certain
liabilities
that
may
arise
from
our
respective
businesses.
See
"Certain
Relationships
and
Related
Party
Transactions—Relationships
Between
CH
Parent
and
Liberty
and/or
Liberty
Media."
We
are
a
cloud-based
e-commerce
fulfillment
and
marketing
software
platform
of
integrated
supply,
demand
and
delivery
solutions
for
large
retailers,
online
marketplaces
and
digital
marketing
channels,
as
well
as
consumer
brands,
manufacturers,
distributors
and
other
market
participants.
Our
solutions
unite
supply,
demand
and
delivery
and
provide
our
customers
with
a
single
platform
to
source
and
market
the
products
consumers
desire
and
to
have
those
products
delivered
more
rapidly
to
the
consumer's
doorstep.
Our
software
platform
acts
as
a
hub
that
allows
trading
partners—our
customers—to
develop
and
maintain
omni-channel
commercial
relationships
in
consumer
and
business-to-business
e-commerce
markets.
Approximately
9,500
trading
partners
have
access
to
our
platform
daily
to
exchange
critical
information
with
each
other,
including
orders,
invoices,
product
information
and
other
electronic
documents.
Collectively,
our
trading
partner
customers
constitute
a
vibrant
network
of
the
largest
retailers,
marketplaces
and
brands
in
North
America
that
use
our
platform
to
interact
with
one
another
to
more
efficiently
manage
and
orchestrate
sophisticated
supply-chain
strategies
across
thousands
of
trading
partners
and
physical
distribution
centers.
We
continue
to
enhance
our
software
platform
and
introduce
new
solutions
that
we
believe
position
us
well
for
the
further
evolution
of
e-commerce.
We
currently
derive
the
majority
of
our
revenue
from
usage
fees
that
are
based
on
the
volume
of
activity
our
customers
achieve
through
our
platform
and
from
recurring
subscription
fees,
generated
primarily
from
the
United
States
and
Canada.
When
we
refer
to
"our
business"
in
this
prospectus,
we
are
referring
to
the
business
of
CommerceHub
and
its
respective
subsidiaries
and
affiliates
following
the
Spin-Off.
Our
principal
executive
offices
are
located
at
201
Fuller
Road,
6
th
Floor,
Albany,
New
York
12203.
Our
main
telephone
number
is
(518)
810-0700.
Liberty's Current Corporate Structure
Liberty's
QVC
Group
common
stock
and
Liberty
Ventures
common
stock
are
intended
to
track
and
reflect
the
economic
performance
of
Liberty's
QVC
Group
and
Ventures
Group,
respectively.
Tracking
stock
is
a
type
of
common
stock
that
the
issuing
company
intends
to
reflect
or
"track"
the
economic
performance
of
a
particular
business
or
"group,"
rather
than
the
economic
performance
of
the
company
as
a
whole.
While
the
QVC
Group
and
the
Ventures
Group
have
separate
collections
of
businesses,
assets
and
liabilities
attributed
to
them,
no
group
is
a
separate
legal
entity
and
therefore
no
group
can
own
assets,
issue
securities
or
enter
into
legally
binding
agreements.
Holders
of
tracking
stocks
have
no
direct
claim
to
the
group's
assets
and
are
not
represented
by
separate
boards
of
directors.
Instead,
holders
of
tracking
stock
are
stockholders
of
the
parent
corporation,
with
a
single
board
of
directors
and
subject
to
all
of
the
risks
and
liabilities
of
the
parent
corporation.
The
Ventures
1
Table
of
Contents
Group
is
comprised
primarily
of
Liberty's
operating
subsidiaries
Bodybuilding.com,
LLC
(
Bodybuilding )
and
CommerceHub
and
Liberty's
interests
in
Expedia,
Inc.
(
Expedia ),
FTD
Companies,
Inc.
(
FTD ),
Interval
Leisure
Group,
Inc.
(
Interval )
and
LendingTree,
Inc.
(
Lending Tree ),
along
with
investments
in
Time
Warner
Inc.
(
TWX ),
Liberty
Broadband
Corporation
(
Liberty Broadband )
and
Charter
Communications,
Inc.
(
Charter ),
cash,
certain
liabilities
related
to
exchangeable
debentures
of
Liberty
Interactive
LLC
(
Liberty LLC )
and
certain
deferred
tax
liabilities.
The
QVC
Group
is
primarily
focused
on
Liberty's
merchandise-focused
televised-shopping
programs,
Internet
and
mobile
application
businesses
and
has
attributed
to
it
Liberty's
wholly
owned
operating
subsidiaries
QVC
and
zulily,
llc
(
zulily ),
and
Liberty's
interest
in
HSN,
Inc.
(
HSN ),
along
with
cash
and
certain
liabilities
that
reside
with
QVC
and
the
other
attributed
entities,
as
well
as
outstanding
senior
notes
and
one
series
of
Liberty
LLC's
exchangeable
debentures
and
certain
deferred
tax
liabilities.
At
present,
Liberty
intends
to
pursue
a
plan
to
split-off
a
newly
formed
company,
Liberty
Expedia
Holdings,
Inc.,
comprised
of,
among
other
things,
its
entire
ownership
interest
in
Expedia
and
its
subsidiary
Bodybuilding.
In
the
event
such
split-off
occurs,
Liberty's
interest
in
Expedia
and
Bodybuilding
will
no
longer
be
attributed
to
the
Ventures
Group.
Similarly,
upon
completion
of
the
Spin-Off,
CommerceHub
will
no
longer
be
attributed
to
the
Ventures
Group.
Emerging Growth Company Status
We
qualify
as
an
"emerging
growth
company,"
as
defined
in
Section
2(a)(19)
of
the
Securities
Act
of
1933,
as
amended
(the
Securities Act ).
As
such,
we
are
eligible
to
take
advantage
of
certain
exemptions
from
various
reporting
requirements
that
are
applicable
to
public
companies
that
are
not
"emerging
growth
companies"
including,
but
not
limited
to:
an
exemption
from
the
provisions
of
Section
404(b)
of
the
Sarbanes-Oxley
Act
of
2002
requiring
that
our
independent
registered
public
accounting
firm
provide
an
attestation
report
on
the
effectiveness
of
our
internal
control
over
financial
reporting;
an
exemption
from
the
"say
on
pay"
provisions
(requiring
a
non-binding
shareholder
vote
to
approve
compensation
of
certain
executive
officers)
and
the
"say
on
golden
parachute"
provisions
(requiring
a
non-binding
shareholder
vote
to
approve
golden
parachute
arrangements
for
certain
executive
officers
in
connection
with
mergers
and
certain
other
business
combinations)
of
the
Dodd-Frank
Act
and
certain
disclosure
requirements
of
the
Dodd-Frank
Act
relating
to
compensation
of
our
chief
executive
officer;
permission
to
omit
the
detailed
compensation
discussion
and
analysis
from
proxy
statements
and
reports
filed
under
the
Securities
Exchange
Act
of
1934,
as
amended
(the
Exchange Act ),
and
instead
provide
a
reduced
level
of
disclosure
concerning
executive
compensation;
and
an
exemption
from
any
rules
that
may
be
adopted
by
the
Public
Company
Accounting
Oversight
Board
requiring
mandatory
audit
firm
rotation
or
a
supplement
to
the
auditor's
report
on
financial
statements.
We
have
taken
advantage
of
reduced
disclosure
regarding
executive
compensation
arrangements
in
this
prospectus,
and
we
may
choose
to
take
advantage
of
some
of
these
reduced
disclosure
obligations
in
future
filings
while
we
remain
an
emerging
growth
company.
If
we
do,
the
information
that
we
provide
to
our
stockholders
may
be
different
than
the
information
that
other
public
companies
provide
stockholders.
In
addition,
Section
107
of
the
JOBS
Act
also
provides
that
an
"emerging
growth
company"
can
take
advantage
of
the
extended
transition
period
provided
in
Section
7(a)(2)(B)
of
the
Securities
Act
for
complying
with
new
or
revised
accounting
standards.
However,
we
are
choosing
to
opt
out
of
any
extended
transition
period,
and
as
a
result,
we
will
comply
with
new
or
revised
accounting
standards
on
the
relevant
dates
on
which
adoption
of
such
standards
is
required
for
non-emerging
growth
companies.
Section
107
of
the
JOBS
Act
provides
that
our
decision
to
opt
out
of
the
extended
transition
period
for
complying
with
new
or
revised
accounting
standards
is
irrevocable.
We
may
take
advantage
of
these
exemptions
for
up
to
five
years
or
until
such
earlier
time
that
we
no
longer
qualify
as
an
emerging
growth
company.
We
will
cease
to
be
an
emerging
growth
company
2
Table
of
Contents
upon
the
earliest
of
(i)
the
end
of
the
fiscal
year
following
the
fifth
anniversary
of
the
Spin-Off,
(ii)
the
first
fiscal
year
after
our
annual
gross
revenue
is
$1.0
billion
or
more,
(iii)
the
date
on
which
we
have,
during
the
previous
three-year
period,
issued
more
than
$1.0
billion
in
non-convertible
debt
securities,
or
(iv)
the
end
of
any
fiscal
year
in
which
the
market
value
of
our
common
stock
held
by
non-affiliates
exceeds
$700
million
as
of
the
end
of
the
second
quarter
of
that
fiscal
year.
The Spin-Off
The following is a brief summary of the terms of the Spin-Off. Please see "The Spin-Off" for a more detailed description of the matters described below.
Q:
A:
Q:
A:
Q:
A:
Q:
A:
What is the Spin-Off?
In
the
Spin-Off,
Liberty
will
distribute
to
the
holders
of
its
Series
A
Liberty
Ventures
common
stock
and
Series
B
Liberty
Ventures
common
stock
all
the
shares
of
our
common
stock
held
by
Liberty.
Holders
of
Liberty's
Series
A
QVC
Group
common
stock
and
Series
B
QVC
Group
common
stock
will
not
receive
shares
of
our
common
stock
in
the
Spin-Off.
Upon
completion
of
the
Spin-Off,
we
will
be
a
separate
company
from
Liberty,
and
Liberty
will
not
have
any
ownership
interest
in
us.
You
are
not
required
to
pay
any
consideration,
give
up
any
portion
of
your
Series
A
Liberty
Ventures
common
stock
or
Series
B
Liberty
Ventures
common
stock
or
take
any
other
action
to
receive
shares
of
our
common
stock
in
the
Spin-Off.
Can Liberty decide not to complete the Spin-Off?
Yes.
Liberty's
board
of
directors
has
reserved
the
right,
in
its
sole
discretion,
to
amend,
modify,
delay
or
abandon
the
Spin-Off
and
related
transactions
at
any
time
prior
to
the
distribution
date.
In
addition,
the
Spin-Off
is
subject
to
the
satisfaction
of
certain
conditions,
some
of
which
may
be
waived
by
the
Liberty
board
of
directors
in
its
sole
discretion.
See
"The
Spin-Off—Conditions
to
the
Spin-Off."
In
the
event
the
Liberty
board
of
directors
amends,
modifies,
delays
or
abandons
the
Spin-Off,
Liberty
intends
to
promptly
issue
a
press
release
and
file
a
Current
Report
on
Form
8-K
to
report
such
event.
What will I receive in the Spin-Off?
Holders
of
LVNTA
will
receive
a
dividend
of
(i)
0.1
of
a
share
of
our
Series
A
common
stock
and
(ii)
0.2
of
a
share
of
our
Series
C
common
stock
for
each
whole
share
of
LVNTA
held
by
them
on
the
record
date.
Holders
of
LVNTB
will
receive
a
dividend
of
(i)
0.1
of
a
share
of
our
Series
B
common
stock
and
(ii)
0.2
of
a
share
of
our
Series
C
common
stock
for
each
whole
share
of
LVNTB
held
by
them
on
the
record
date.
Cash
will
be
paid
in
lieu
of
fractional
shares
of
our
Series
A,
Series
B
or
Series
C
common
stock.
These
distribution
ratios
were
determined
taking
into
account
the
projected
trading
price
per
share
and
the
intended
liquidity
level
for
each
series
of
our
company's
common
stock
following
the
completion
of
the
Spin-Off.
Is the completion of the Spin-Off subject to any conditions?
The
completion
of
the
Spin-Off
and
related
transactions
are
subject
to
the
satisfaction
(as
determined
by
the
Liberty
board
of
directors
in
its
sole
discretion)
of
the
following
conditions,
certain
of
which
may
be
waived
by
the
Liberty
board
of
directors
in
its
sole
discretion:
•
Liberty's
receipt
of
the
opinion
of
Baker
Botts
L.L.P.
(
Baker Botts )
to
the
effect
that
the
Spin-Off
will
qualify
as
a
tax-free
transaction
under
Section
355
of
the
Internal
Revenue
Code
of
1986,
as
amended
(the
Code )
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock),
and
that
for
U.S.
federal
income
tax
purposes,
(i)
no
gain
or
loss
will
be
recognized
by
Liberty
upon
the
distribution
of
our
common
stock
in
the
Spin-Off,
and
3
Table
of
Contents
(ii)
no
gain
or
loss
will
be
recognized
by,
and
no
amount
will
be
included
in
the
income
of,
holders
of
Liberty
Ventures
common
stock
upon
the
receipt
of
shares
of
our
common
stock
in
the
Spin-Off
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock);
•
the
effectiveness
under
the
Securities
Act
of
the
Registration
Statement
on
Form
S-1,
of
which
this
prospectus
forms
a
part,
and
the
effectiveness
of
the
registration
of
our
company's
common
stock
under
Section
12(b)
of
the
Exchange
Act;
•
the
approval
of
the
Nasdaq
Stock
Market
LLC
(
Nasdaq )
for
the
listing
of
our
company's
Series
A
and
Series
C
common
stock;
and
•
the
receipt
of
any
material
regulatory
or
contractual
consents
or
approvals
that
the
Liberty
board
of
directors
determines
to
obtain.
The
conditions
set
forth
in
the
first,
second
and
third
bullet
points
are
non-waivable.
The
Liberty
board
may,
however,
waive
the
condition
set
forth
in
the
fourth
bullet
point.
In
the
event
the
Liberty
board
of
directors
waives
a
material
condition
to
the
Spin-Off,
Liberty
intends
to
promptly
issue
a
press
release
and
file
a
Current
Report
on
Form
8-K
to
report
such
event.
See
"The
Spin-Off—Conditions
to
the
Spin-Off."
Q:
What is being distributed in the Spin-Off?
A:
Approximately
13,506,200
shares
of
our
Series
A
common
stock,
710,400
shares
of
our
Series
B
common
stock
and
28,433,200
shares
of
our
Series
C
common
stock
will
be
distributed
in
the
Spin-Off,
based
on
the
number
of
shares
of
LVNTA
and
LVNTB
outstanding
on
April
30,
2016.
The
shares
of
our
common
stock
to
be
distributed
by
Liberty
in
connection
with
the
Spin-Off
will
constitute
approximately
99%
of
the
issued
and
outstanding
shares
of
our
common
stock
immediately
after
the
distribution.
John
C.
Malone
currently
beneficially
owns
shares
of
Liberty
Ventures
common
stock
representing
approximately
33%
of
the
aggregate
voting
power
of
the
outstanding
shares
of
Liberty
Ventures
common
stock
as
of
April
30,
2016.
Following
the
consummation
of
the
Spin-Off,
Mr.
Malone
is
expected
to
beneficially
own
shares
of
our
common
stock
representing
less
than
1%
of
CH
Parent's
Series
A
common
stock,
approximately
94.3%
of
CH
Parent's
Series
B
common
stock,
approximately
5.4%
of
CH
Parent's
Series
C
common
stock
and
approximately
33%
of
CH
Parent's
voting
power,
based
upon
the
distribution
ratios
for
the
Spin-Off
and
his
beneficial
ownership
of
LVNTA
and
LVNTB
as
of
April
30,
2016.
Q:
When will the Spin-Off be effective?
A:
Q:
A:
Liberty
intends
to
effect
the
Spin-Off
on
the
distribution
date,
which
will
be
at
5:00
p.m.,
New
York
City
time,
on
July
22,
2016.
At
such
time,
holders
of
Liberty
Ventures
common
stock
as
of
the
record
date
will
receive
their
shares
of
our
company's
common
stock.
Following
the
record
date
and
prior
to
the
distribution
date,
Liberty
will
cause
the
shares
of
our
common
stock
to
be
distributed
in
the
Spin-Off
to
be
placed
in
a
reserve
account
with
Computershare
Trust
Company,
N.A.
(
Computershare ),
as
distribution
agent
for
the
Spin-Off,
with
instructions
to
distribute
such
shares
on
the
distribution
date.
What will the relationship be between our company and Liberty after the Spin-Off?
Upon
completion
of
the
Spin-Off,
our
company
and
Liberty
will
operate
independently,
and
neither
will
have
any
ownership
interest
in
the
other.
In
connection
with
the
Spin-Off,
however,
we
and
Liberty
and/or
Liberty
Media
are
entering
into
certain
agreements
in
order
to
govern
the
ongoing
relationships
between
our
company
and
Liberty
after
the
Spin-Off
and
to
provide
for
an
4
Table
of
Contents
orderly
transition.
Such
agreements
will
include
(i)
a
reorganization
agreement
with
Liberty
to
provide
for,
among
other
things,
the
principal
corporate
transactions
(including
the
internal
restructuring)
required
to
effect
the
Spin-Off,
certain
conditions
to
the
Spin-Off
and
provisions
governing
the
relationship
between
us
and
Liberty
with
respect
to
and
resulting
from
the
Spin-Off;
(ii)
a
tax
sharing
agreement
with
Liberty
that
governs
Liberty's
and
our
respective
rights,
responsibilities
and
obligations
with
respect
to
taxes
and
tax
benefits,
the
filing
of
tax
returns,
the
control
of
audits
and
other
tax
matters;
and
(iii)
a
services
agreement
with
Liberty
Media,
pursuant
to
which,
for
three
years
following
the
Spin-Off,
Liberty
Media
will
provide
us
with
specified
services,
including
services
typically
performed
by
Liberty
Media's
legal,
investor
relations,
tax,
accounting,
and
internal
audit
departments,
and
such
other
services
as
Liberty
Media
may
obtain
from
its
officers,
employees
and
consultants
in
the
management
of
its
own
operations
that
we
may
from
time
to
time
request
or
require.
See
"Certain
Relationships
and
Related
Party
Transactions—Relationships
Between
CH
Parent
and
Liberty
and/or
Liberty
Media."
In
addition,
Richard
N.
Baer,
Chief
Legal
Officer
and
an
executive
officer
of
Liberty,
Chad
Hollingsworth,
a
Senior
Vice
President
of
Liberty,
and
Brian
Wendling,
a
Senior
Vice
President
and
Controller
of
Liberty,
will
each
serve
as
directors
of
our
company
and
continue
to
serve
in
their
respective
roles
at
Liberty,
in
each
case,
immediately
following
the
Spin-Off.
Q:
A:
What are the reasons for the Spin-Off?
In
2012,
Liberty
recapitalized
its
common
stock
into
two
new
tracking
stocks:
the
Interactive
Group
(which,
in
2015,
was
renamed
the
QVC
Group)
and
the
Ventures
Group,
for
the
purpose
of
creating
greater
transparency
for
the
assets
and
liabilities
attributed
to
each
group,
among
other
reasons.
Our
company
is
currently
attributed
to
the
Ventures
Group.
For
a
description
of
these
tracking
stocks,
see
"The
Spin-Off—Background
for
the
SpinOff."
Although
the
public
markets
have
responded
favorably
to
these
two
tracking
stocks,
Liberty
believes
that
a
meaningful
trading
discount
continues
to
apply
to
the
underlying
value
of
the
businesses
and
assets
attributed
to
its
Ventures
Group.
Although
there
can
be
no
assurance,
Liberty
believes
that
the
Spin-Off
will
result
in
a
higher
aggregate
trading
value
for
our
common
stock
and
the
Liberty
Ventures
common
stock
as
compared
to
the
trading
price
of
Liberty
Ventures
common
stock
in
the
absence
of
the
Spin-Off.
The
asset-backed
nature
of
our
stock
is
expected
to
provide
greater
transparency
for
investors
with
respect
to
our
business,
CommerceHub,
which
should
result
in
greater
focus
and
attention
by
the
investment
community
on
this
business
and
highlight
its
value.
The
Spin-Off
is
also
expected
to
allow
for
more
targeted
capital
raising
in
the
future,
to
enhance
our
ability
to
issue
equity
for
strategic
acquisitions
and
other
business
combinations
by
creating
a
more
efficiently
priced
equity
security,
to
enable
us
to
more
effectively
tailor
equity
incentives
for
our
management
and
employees
with
less
dilution
to
public
stockholders,
and
to
provide
our
management
team
with
greater
flexibility
and
independence
in
making
commercial
decisions
that
benefit
our
company.
For
a
discussion
of
additional
reasons,
factors,
costs
and
risks
associated
with
the
Spin-Off
considered
by
the
Liberty
board
of
directors,
see
"The
Spin-Off—Reasons
for
the
Spin-Off."
Q:
A:
What do I have to do to participate in the Spin-Off?
Nothing.
Holders
of
Liberty
Ventures
common
stock
on
the
record
date
for
the
Spin-Off
are
not
required
to
pay
any
cash
or
deliver
any
other
consideration,
give
up
any
shares
of
Liberty
Ventures
common
stock
or
take
any
other
action
to
receive
the
shares
of
our
common
stock
distributable
to
them
in
the
Spin-Off.
However,
if
you
own
shares
of
Liberty
Ventures
common
stock
and
sell
those
shares
prior
to
the
record
date,
so
that
you
are
not
the
record
holder
of
such
shares
on
the
record
date,
you
will
also
5
Table
of
Contents
be
selling
the
shares
of
our
common
stock
that
would
have
been
distributed
to
you
in
the
Spin-Off
with
respect
to
the
shares
of
Liberty
Ventures
common
stock
you
sell.
If
you
are
a
holder
of
shares
of
Liberty
Ventures
common
stock
on
the
record
date,
you
will
be
entitled
to
receive
the
shares
of
our
company's
common
stock
issuable
in
respect
of
those
shares
only
if
you
continue
to
hold
them
through
the
distribution
date.
See
"The
Spin-Off
—Trading
Prior
to
the
Record
Date."
Q:
Will I receive physical certificates representing shares of CH Parent common stock following the distribution?
A:
No.
In
the
distribution,
no
physical
certificates
representing
shares
of
our
company's
common
stock
will
be
delivered
to
stockholders.
Instead,
Liberty,
with
the
assistance
of
Computershare,
the
distribution
agent,
will
electronically
distribute
shares
of
our
company's
common
stock
in
bookentry
form
to
you
or
your
bank
or
brokerage
firm
on
your
behalf.
If
you
are
a
record
holder
of
Liberty
Ventures
common
stock
on
the
record
date
and
you
continue
to
hold
such
shares
through
the
distribution
date,
Computershare
will
mail
you
a
book-entry
account
statement
that
reflects
your
shares
of
our
company's
common
stock
following
the
distribution
date.
If
you
are
a
beneficial
owner
of
Liberty
Ventures
common
stock
(but
not
a
record
holder)
on
the
record
date
and
you
continue
to
hold
such
shares
through
the
distribution
date,
your
bank
or
brokerage
firm
will
credit
your
account
with
the
shares
of
our
company's
common
stock
that
you
are
entitled
to
receive
on
the
distribution
date.
Q:
Will the number of shares of Liberty Ventures common stock or QVC Group common stock I own change as a result of the Spin-Off?
A:
No.
The
number
of
shares
of
any
series
of
Liberty
common
stock
that
you
own
will
not
change
as
a
result
of
the
Spin-Off.
Q:
A:
What are the material U.S. federal income tax consequences of the Spin-Off?
The
Spin-Off
is
conditioned
upon
the
receipt
by
Liberty
of
the
opinion
of
Baker
Botts,
in
form
and
substance
reasonably
acceptable
to
Liberty,
to
the
effect
that
the
Spin-Off
will
qualify
as
a
tax-free
transaction
under
Section
355
of
the
Code
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock)
and
that,
for
U.S.
federal
income
tax
purposes,
(i)
no
gain
or
loss
will
be
recognized
by
Liberty
upon
the
distribution
of
our
common
stock
in
the
Spin-Off,
and
(ii)
no
gain
or
loss
will
be
recognized
by,
and
no
amount
will
be
included
in
the
income
of,
holders
of
Liberty
Ventures
common
stock
upon
the
receipt
of
shares
of
our
common
stock
in
the
Spin-Off
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock).
The
receipt
of
the
opinion
may
not
be
waived
by
the
Liberty
board
of
directors.
For
more
information
regarding
the
opinion
of
Baker
Botts
and
the
potential
tax
consequences
of
the
Spin-Off
to
you,
please
see
"Material
U.S.
Federal
Income
Tax
Consequences
of
the
Spin-Off"
and
"Risk
Factors—Factors
Relating
to
the
Spin-Off—The
Spin-Off
could
result
in
a
significant
tax
liability
to
Liberty
and
its
stockholders"
and
"Risk
Factors—Factors
Relating
to
the
Spin-Off—We
may
have
a
significant
indemnity
obligation
to
Liberty,
which
is
not
limited
in
amount
or
subject
to
any
cap,
if
the
Spin-Off
is
treated
as
a
taxable
transaction."
6
Table
of
Contents
Q:
A:
Q:
A:
Q:
A:
How will the Spin-Off affect my tax basis in Liberty Ventures common stock?
A
stockholder
who
receives
shares
of
our
common
stock
in
the
Spin-Off
will
have
an
aggregate
tax
basis
in
its
shares
of
Liberty
Ventures
common
stock
and
shares
of
our
common
stock
(including
any
fractional
shares
to
which
such
holder
was
entitled,
but
for
which
cash
was
received
in
lieu
of
such
fractional
shares)
immediately
after
the
Spin-Off
equal
to
the
aggregate
tax
basis
of
the
Liberty
Ventures
common
stock
that
the
stockholder
held
immediately
before
the
Spin-Off,
allocated
between
such
shares
of
Liberty
Ventures
common
stock
and
shares
of
our
common
stock
in
proportion
to
their
relative
fair
market
values.
See
"Material
U.S.
Federal
Income
Tax
Consequences
of
the
Spin-Off"
for
a
more
complete
description
of
the
effects
of
the
Spin-Off
on
your
tax
basis.
Does CH Parent intend to pay cash dividends?
No.
We
currently
intend
to
retain
future
earnings,
if
any,
following
the
Spin-Off
to
finance
the
expansion
of
our
business.
As
a
result,
we
do
not
expect
to
pay
any
cash
dividends
in
the
foreseeable
future.
All
decisions
regarding
the
payment
of
dividends
by
our
company
will
be
made
by
our
board
of
directors,
from
time
to
time,
in
accordance
with
applicable
law.
Where will CH Parent common stock trade?
Currently,
there
is
no
public
market
for
our
common
stock.
Subject
to
the
consummation
of
the
Spin-Off,
we
expect
to
list
our
Series
A
common
stock
and
Series
C
common
stock
on
the
Nasdaq
Global
Select
Market
under
the
symbols
"CHUBA"
and
"CHUBK,"
respectively.
Although
no
assurance
can
be
given,
we
currently
expect
that
our
Series
B
common
stock
will
be
quoted
on
the
OTC
Markets
under
the
symbol
"CHUBB."
We
expect
that
our
common
stock
will
begin
trading
or
quotation
on
the
first
trading
day
following
the
distribution
date.
We
cannot
predict
the
trading
or
quotation
prices
for
our
common
stock
when
such
trading
begins.
Q:
What costs and risks were considered by the board of directors of Liberty in determining whether to effect the Spin-Off?
A:
Liberty's
board
of
directors
considered
a
number
of
costs
and
risks
associated
with
the
Spin-Off,
including:
•
after
the
Spin-Off,
the
Liberty
Ventures
common
stock
and
our
company's
common
stock
will
have
smaller
market
capitalizations
than
the
current
market
capitalization
of
the
Liberty
Ventures
common
stock,
and
their
stock
prices
may
be
more
volatile
than
the
Liberty
Ventures
common
stock
price
prior
to
the
Spin-Off.
The
combined
market
values
of
the
Liberty
Ventures
common
stock
and
our
company's
common
stock
may
be
lower
than
the
market
value
of
Liberty
Ventures
common
stock
prior
to
the
Spin-Off;
•
the
risk
of
being
unable
to
achieve
the
benefits
expected
from
the
Spin-Off;
•
the
loss
of
synergies
from
operating
as
one
company;
•
the
potential
disruption
to
the
businesses
of
Liberty;
•
the
substantial
costs
of
effecting
the
Spin-Off,
and
of
continued
compliance
with
legal
and
other
requirements
applicable
to
two
separate
public
reporting
companies;
and
•
the
potential
tax
liabilities
that
could
arise
from
the
Spin-Off.
Liberty's
board
of
directors
concluded
that
the
potential
benefits
of
the
Spin-Off
outweighed
its
potential
costs.
The
Liberty
board
of
directors
did
not
consider
alternatives
to
the
Spin-Off
due
to
the
fact
that
the
only
business
and
assets
to
be
held
by
CH
Parent
following
the
Spin-Off
will
be
those
of
CommerceHub.
Please
see
"The
Spin-Off—Reasons
for
the
Spin-Off"
for
more
information
regarding
the
costs
and
risks
associated
with
the
SpinOff.
7
Table
of
Contents
Q:
A:
Q:
A:
Q:
A:
Q:
A:
What will happen to the listing of Liberty common stock?
The
Series
A
and
Series
B
Liberty
Ventures
common
stock
and
Series
A
and
Series
B
QVC
Group
common
stock
will
continue
to
trade
on
the
Nasdaq
Global
Select
Market
following
the
Spin-Off.
Will holders of Liberty Ventures common stock have appraisal rights in connection with the Spin-Off?
No.
Holders
of
Liberty
Ventures
common
stock
are
not
entitled
to
appraisal
rights
in
connection
with
the
Spin-Off.
Who is the distribution agent for the Spin-Off?
The
distribution
agent
for
the
Spin-Off
is
Computershare
Trust
Company,
N.A.,
250
Royall
Street,
Canton,
MA
02021,
telephone:
(866)
367-6355.
Whom can I contact for more information?
If
you
have
questions
relating
to
the
mechanics
of
the
distribution,
you
should
contact
the
distribution
agent.
Before
the
Spin-Off,
if
you
have
questions
relating
to
the
Spin-Off,
you
should
contact
the
office
of
Investor
Relations
of
Liberty,
12300
Liberty
Blvd.,
Englewood,
CO
80112,
telephone:
(720)
875-5408.
Pursuant
to
a
services
agreement
to
be
entered
into
between
our
company
and
Liberty
Media,
Liberty
Media
will
provide
our
company
with
investor
relations
assistance
for
a
period
following
the
Spin-Off.
Accordingly,
if
you
have
questions
relating
to
our
company
following
the
Spin-Off,
you
should
contact
the
office
of
Investor
Relations
of
Liberty
Media,
12300
Liberty
Blvd.,
Englewood,
Colorado
80112,
telephone:
(877)
772-1518.
8
Table
of
Contents
RISK FACTORS
An investment in our common stock involves risks. You should consider carefully the risks described below together with all of the other information included
in this prospectus in evaluating our company and our common stock. Any of the following risks, if realized, could have a material adverse effect on the value of our
common stock. The risks described below and elsewhere in this prospectus are not the only ones that relate to our business, our capitalization or the Spin-Off. The
risks described below are those we consider the most material. However, there may be other unknown or unpredictable economic, business, competitive, regulatory
or other factors that also could have material adverse effects on our business. Past financial performance may not be a reliable indicator of future performance
and historical trends should not be used to anticipate results or trends in future periods. If any of the events below were to occur, our business, prospects, financial
condition, results of operations and/or cash flows could be materially adversely affected. This prospectus contains forward-looking statements that contain risks
and uncertainties. Please refer to the section entitled "Cautionary Statements Concerning Forward-Looking Statements" on page 33 of this prospectus in
connection with your consideration of the risk factors and other important factors that may affect future results described below.
For purposes of these risk factors, unless the context otherwise indicates, we have assumed that the Spin-Off has occurred.
Factors Relating to Our Corporate History and Structure
The consolidated financial information of our company included in this prospectus is not necessarily representative of our company's future financial
position, future results of operations or future cash flows, nor does it reflect what our company's financial position, results of operations or cash flows would
have been as a stand-alone publicly traded company during the periods presented.
Because
the
historical
consolidated
financial
information
of
our
company
included
in
this
prospectus
includes
the
results
of
the
historical
CommerceHub
business,
as
conducted
by
Liberty
prior
to
the
Spin-Off,
it
is
not
representative
of
CH
Parent's
future
financial
position,
future
results
of
operations
or
future
cash
flows,
nor
does
it
reflect
what
CH
Parent's
financial
position,
results
of
operations
or
cash
flows
would
have
been
as
a
stand-alone
publicly
traded
company,
pursuing
independent
strategies,
during
the
periods
presented.
Factors Relating to Our Business
We are dependent upon consumers' continued willingness to use the internet and other currently available technology for commerce. A downturn in the
e-commerce market, or failure of the e-commerce market to grow or to grow as rapidly as we expect, could adversely affect the demand for our e-commerce
solutions.
Our
success
depends
upon
the
general
public's
continued
willingness
to
use
the
internet,
whether
through
a
computer,
smart
phone,
tablet
or
other
internetenabled
device,
as
a
means
to
purchase
goods
and
conduct
and
research
commercial
transactions.
The
internet
must
continue
to
be
accepted
and
widely
used
for
selling
merchandise
for
our
existing
customers
and
potential
customers
to
be
willing
to
subscribe
to
our
solutions.
As
e-commerce
continues
to
evolve,
regulation
by
federal,
state
or
foreign
agencies
may
increase.
Any
regulation
imposing
greater
fees
for
internet
use
or
restricting
information
exchanged
over
the
internet
could
result
in
a
decline
in
the
use
of
the
internet,
which
could
harm
our
business.
If
consumers
became
unwilling
or
less
willing
to
use
the
internet
or
other
current
technology
for
commerce
for
any
reason,
or
if
we
fail
to
adapt
to
technology
changes
or
industry
standards,
our
business
could
be
materially
adversely
affected.
In
addition,
if
consumer
utilization
of
e-commerce
channels
experiences
a
downturn,
does
not
grow
or
grows
more
slowly
than
we
expect,
demand
for
our
solutions
would
be
adversely
affected,
our
9
Table
of
Contents
revenue
would
be
negatively
impacted
and
our
ability
to
pursue
our
growth
strategy
would
be
compromised.
Our business is substantially dependent upon the continued acceptance of software-as-a-service (SaaS) solutions as a viable option for providing
information technology services. A rejection, reluctance or inability of the marketplace to utilize SaaS solutions could cause our revenue to decline and impair
our ability to become profitable.
We
derive,
and
expect
to
continue
to
derive,
a
substantial
amount
of
our
revenue
from
the
sale
of
our
solutions
and
related
revenue
sources,
which
are
delivered
under
a
SaaS
or
SaaS-plus
model.
As
a
result,
continued
widespread
use
and
acceptance
of
this
business
model
is
critical
to
our
future
growth
and
success.
With
the
increasing
concerns
around
cybersecurity
and
access
to
data,
some
companies
are
predisposed
to
maintaining
control
of
their
information
technology
systems
and
infrastructure,
and
there
may
be
increased
resistance
from
our
customers
to
accessing
software
functionality
that
involves
transmission
of
their
sensitive
data
through
a
service
provided
by
a
third
party.
In
addition,
customers
may
seek
to
build
and
utilize
in-house
software
and
service
solutions
for
their
e-commerce
programs
where
they
believe
they
can
do
so
more
effectively
or
where
they
seek
to
reduce
long-term
dependence
on
third-party
services
for
these
programs.
Existing
and
new
market
participants
may
also
introduce
new
types
of
solutions
and
different
approaches
to
enable
organizations
to
address
their
needs.
If
the
market
for
our
SaaS
solutions
fails
to
grow
or
grows
more
slowly
than
we
currently
anticipate,
demand
for
our
solutions
and
our
revenue,
gross
margin
and
other
operating
results
could
be
negatively
impacted.
Consolidation or simplification of the e-commerce industry could diminish demand for our solutions.
The
e-commerce
industry
is
currently
a
complex
and
fragmented
industry,
and
our
solutions
are
designed
to
help
customers
navigate
these
disparate
online
channels.
Although
the
number
and
variety
of
online
channels
available
to
retailers
and
manufacturers
have
been
increasing,
at
the
same
time
the
share
of
online
sales
made
through
a
small
number
of
larger
channels,
particularly
Amazon,
has
also
been
increasing.
If
the
trend
toward
consolidation
around
a
few
large
online
channels
accelerates,
the
difficulties
faced
by
retailers
and
manufacturers
could
decline.
This
may
allow
more
companies
to
maintain
these
solutions
in-house
or
through
on-premises
software
solutions
they
manage.
If
our
solutions
become
less
important
to
retailers
and
manufacturers,
this
may
reduce
demand
for
our
solutions
and
cause
our
sales
and
opportunities
for
growth
to
decline.
Government and industry regulation of the internet is evolving and could directly restrict our business or indirectly affect our business by limiting the
growth of e-commerce. Unfavorable changes in government regulation or our failure to comply with such regulations could cause our solutions to become less
attractive, reduce the number of transactions processed through our platform, cause our revenue to decline and otherwise harm our business and operating
results.
As
e-commerce
evolves,
federal,
state
and
foreign
agencies
have
adopted
and
could
in
the
future
adopt
regulations
covering
issues
that
affect
our
business
and
e-commerce
in
general.
Government
regulations
could
limit
the
market
for
our
products
and
services
or
impose
burdensome
requirements
that
render
our
business
unprofitable.
For
example,
although
current
U.S.
Supreme
Court
decisions
restrict
the
imposition
of
obligations
to
collect
state
and
local
sales
taxes
with
respect
to
remote
sales,
an
increasing
number
of
states
have
considered
or
adopted
laws
that
attempt
to
require
out-of-state
retailers
to
collect
sales
taxes
on
their
behalf.
In
addition,
legislation
currently
being
considered
by
the
U.S.
Senate
and
the
U.S.
House
of
Representatives,
called
the
Marketplace
Fairness
Act,
would
override
the
Supreme
Court
rulings
and
enable
states
to
require
that
our
online
retailer
customers
collect
sales
tax
from
the
states'
residents.
This
is
a
rapidly
evolving
area
and
we
cannot
predict
whether
this
or
other
similar
legislation
will
ultimately
be
adopted
or
what
form
it
might
take
if
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adopted.
If
the
states
or
Congress
are
successful
in
these
attempts
to
require
our
online
retailer
customers
to
collect
state
or
local
sales
taxes
on
out-of-state
purchases,
this
could
cause
e-commerce
to
decline,
which
would,
in
turn,
hurt
the
business
of
our
customers,
and
potentially
make
our
solutions
and
services
less
attractive
and
cause
the
number
of
transactions
processed
through
our
platform,
and
ultimately
our
revenue,
to
decline.
Similar
issues
exist
outside
of
the
United
States,
where
the
application
of
value-added
tax
or
other
indirect
taxes
on
online
retailers
and
companies
like
ours
that
facilitate
e-commerce
is
uncertain
and
evolving.
Although
many
regulations
might
not
apply
to
our
business
directly,
we
expect
that
laws
regulating
the
solicitation,
collection
or
processing
of
personal
and
consumer
information
could
affect
our
customers'
(or
our)
ability
to
use
and
share
data,
potentially
reducing
demand
for
our
solutions
and
services.
Moreover,
if
future
laws
and
regulations
limit
or
overly
burden
our
customers'
ability
to
use
and
share
consumer
data
or
our
ability
to
store,
process
and
share
data
with
our
customers
over
the
internet,
demand
for
our
solutions
could
decrease,
our
costs
could
increase,
our
profits
may
decline
and
our
results
of
operations
and
financial
condition
could
be
harmed.
In
addition,
taxation
of
services
provided
over
the
internet
or
other
charges
imposed
by
government
agencies
or
by
private
organizations
for
accessing
the
internet
may
also
be
imposed.
Any
regulation
imposing
greater
fees
for
internet
usage
or
the
services
we
provide
or
restricting
information
exchanged
over
the
internet
could
result
in
a
decline
in
the
use
and
viability
of
internet-based
services,
including
ours,
which
could
harm
our
business
and
operating
results.
Our business is dependent on our ability to maintain and scale our technical infrastructure. Failure to adequately manage our growth could adversely
affect our customers' satisfaction with our solutions and have a negative impact on our business and operating results.
As
our
customer
base
and
the
amount
and
types
of
information
shared
on
our
platform
continue
to
grow,
we
must
be
able
to
increase
our
technical
infrastructure,
including
network
capacity
and
computing
power,
to
satisfy
the
growing
needs
of
our
customers.
If
we
fail
to
effectively
scale
and
grow
our
technical
infrastructure
to
accommodate
these
increased
demands,
our
reputation
could
be
negatively
affected.
We
have
experienced,
and
may
continue
to
experience,
significant
growth
in
our
business.
Our
growth
has
placed,
and
may
continue
to
place,
a
significant
strain
on
our
managerial,
administrative,
operational,
financial
and
other
resources.
We
intend
to
expand
our
overall
business,
customer
base,
headcount
and
operations
both
domestically
and
internationally,
with
no
assurance
that
our
business
or
revenue
will
continue
to
grow.
We
have
also
experienced
significant
growth
in
the
number
of
users,
transactions
and
data
that
our
infrastructure
supports.
We
seek
to
maintain
adequate
excess
capacity
in
our
infrastructure
to
be
sufficiently
flexible
and
scalable
to
meet
the
needs
of
all
of
our
customers.
We
also
seek
to
maintain
excess
capacity
to
facilitate
the
rapid
provision
of
new
customer
deployments
and
the
expansion
of
existing
customer
deployments
and
to
handle
spikes
in
usage.
However,
the
provision
of
new
network
infrastructure
requires
significant
lead
time.
If
we
do
not
accurately
predict
our
infrastructure
capacity
requirements,
particularly
during
periods
of
increased
traffic,
or
if
customer
traffic
patterns
significantly
change,
our
customers
could
experience
service
outages
that
may
subject
us
to
financial
penalties
and
financial
liabilities
and
result
in
customer
losses.
If
our
cloud
network
infrastructure
capacity
fails
to
keep
pace
with
increased
sales
and
customer
expansion,
customers
may
experience
delays
as
we
seek
to
obtain
additional
capacity,
which
could
harm
our
reputation
and
adversely
affect
our
revenue
growth.
Our
future
success
will
depend,
in
part,
upon
the
ability
of
our
senior
management
to
manage
growth
effectively.
If
we
do
not
effectively
manage
our
growth,
the
quality
of
our
solutions
and
services
may
suffer,
which
could
negatively
affect
our
reputation
and
demand
for
our
solutions,
which
in
turn
would
negatively
impact
our
business
and
operating
results.
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We use a limited number of data centers to deliver a significant portion of our services. Any disruption of service at these facilities could harm our
business.
We
manage
our
services
and
serve
our
customers
from
a
limited
number
of
data
center
facilities.
We
engineer
and
architect
the
computer
and
storage
systems
upon
which
our
platform
runs,
and
own
and
operate
our
primary
data
center
in
Albany,
New
York.
We
also
lease
redundant
(or
back-up)
data
center
colocation
facilities
in
Albany,
New
York
and
greater
Chicago,
Illinois,
and
we
do
not
control
the
physical
operation
of
these
back-up
facilities.
The
owners
of
these
back-up
data
facilities
have
no
obligation
to
renew
their
lease
agreements
with
us
on
commercially
reasonable
terms,
or
at
all.
If
we
are
unable
to
renew
these
agreements
on
commercially
reasonable
terms,
we
may
be
required
to
locate
alternative
back-up
facilities,
and
we
may
incur
significant
costs
and
temporary
loss
of
high-availability
or
disaster
recovery
services
in
connection
with
doing
so.
Any
interruptions
of
service,
operational
failures
or
security
breaches,
errors,
defects,
disruptions
or
other
performance
problems
with
our
services
could
harm
our
reputation
and
may
damage
our
customers'
businesses.
Interruptions
in
our
services
might
reduce
our
revenue,
subject
us
to
potential
liability
and
cause
customers
to
terminate
their
subscriptions
or
harm
our
renewal
rates.
The
data
centers
are
vulnerable
to
damage
or
interruption
from
human
error,
intentional
bad
acts,
earthquakes,
hurricanes,
floods,
fires,
war,
terrorist
attacks,
labor
strikes,
health
epidemics,
power
losses,
hardware
failures,
systems
failures,
telecommunications
failures,
cyber
attacks
and
similar
events.
The
occurrence
of
a
natural
disaster
or
an
act
of
terrorism,
vandalism
or
other
misconduct,
a
decision
to
close
the
facilities
without
adequate
notice
or
other
unanticipated
problems
could
result
in
lengthy
interruptions
in
the
availability
of
our
solutions
or
impair
their
functionality.
Because
we
operate
a
multi-tenant
SaaS
environment
shared
by
many
large
customers,
such
an
event,
if
it
occurred,
would
not
be
confined
to
a
single
customer
or
small
number
of
customers,
but
instead
would
impact
a
significant
portion
of
our
customer
base
collectively.
Our
business,
growth
prospects
and
operating
results
would
also
be
harmed
if
our
customers
and
potential
customers
are
not
confident
that
our
solutions
are
reliable.
We plan to expand our use of third-party cloud-based offerings to deliver a portion of our services. Any disruption of service at these third-party providers
could harm our business.
We
are
moving
portions
of
our
service
offerings
away
from
traditional
data
centers
to
cloud-based
offerings
provided
by
third-party
providers.
These
offerings
have
defined
service
boundaries
in
which
they
operate,
and
we
have
minimal,
if
any,
ability
to
manage
how
those
services
are
provided.
The
services
and
features
provided
by
these
third-party
providers
may
not
continue
to
be
available
to
us
on
commercially
reasonable
terms,
or
at
all.
If
we
are
unable
to
maintain
the
right
to
use
these
services
or
are
unable
to
upgrade
our
arrangements
with
these
providers
to
accommodate
the
scalability
of
our
business,
our
customers
could
experience
delays
or
be
unable
to
access
features
within
our
solutions
until
we
can
obtain
and
integrate
a
functionally
equivalent
replacement
technology.
Any
available
alternatives
could
be
more
difficult
or
costly
than
currently
available
third
party-offerings.
In
addition,
integration
of
such
alternatives
into
our
platform
could
require
significant
work
and
substantial
time
and
resources.
Any
delays
or
failures
associated
with
integrating
such
alternatives
into
our
platform
could
injure
our
reputation
with
customers
and
potential
customers,
which
would
result
in
an
adverse
effect
on
our
business,
results
of
operations
and
financial
condition.
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Table
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We rely in part on a pricing model under which transaction-based fees we receive from customers vary based on the volume of transactions that those
customers process through our platform. Declines in the number of transactions that our customers process through our services, or the elimination of a large
demand channel on which these transactions are conducted, could adversely affect our financial results.
We
rely
on
relationships
with
demand
channels
(which
may
include
retailer
internet
websites,
media-based
shopping
networks,
on-line
marketplaces,
search
engines
and
other
platforms
through
which
goods
are
sold
to
consumers)
to
generate
revenue
from
sellers
and,
in
many
cases,
the
demand
channels
directly.
A
significant
portion
of
our
revenue
is
derived
from
e-commerce
orders
processed
through
our
solution
between
a
seller
and
a
demand
channel.
Historical
annual
growth
rates
will
vary
from
year
to
year
based
on
individual
demand
channel
trends,
including
the
addition
or
attrition
of
individual
demand
channels.
When
a
demand
channel
customer
leaves
our
platform,
this
also
results
in
the
loss
of
revenue
from
other
customers
that
have
trading
partner
connections
associated
with
that
particular
demand
channel.
Consequently,
the
loss
of
a
large
demand
channel
would
adversely
affect
our
revenue
and
growth.
Service
outages
at
our
demand
channel
customers
or
other
on-line
channels
on
which
our
customers
rely
could
prevent,
or
severely
disrupt,
the
ability
for
consumers
to
make
purchases
on
those
demand
channels.
In
such
a
scenario
the
order
volume
and
associated
transaction
fee
revenue
we
would
have
anticipated
receiving
from
those
demand
channels
would
decrease
significantly,
or
cease
altogether.
Some
of
our
customers
and
the
demand
channels
they
utilize
have
experienced
financial
difficulties
in
the
past.
Insolvency,
credit
problems
or
other
financial
difficulties
confronting
our
customers
and
the
demand
channels
they
utilize
could
expose
us
to
financial
risk.
Additionally,
if
our
customers
reduce
the
volume
or
size
of
the
e-commerce
sales
they
process
or
generate
through
our
platform,
for
example,
as
a
result
of
declines
in
our
customers'
overall
sales
or
greater
reliance
on
fulfillment
methods
that
do
not
utilize
our
services,
our
revenue,
operating
results,
and
financial
condition
could
be
adversely
affected.
We derive a portion of our revenue from retailers choosing drop-ship delivery as a way to expand the assortment of products they offer to consumers. If
more retailers elect not to rely on drop-ship delivery as a means to expand their product assortments, demand for our solutions could decline, which in turn
could cause our revenue and operating results to be negatively impacted.
We
derive,
and
expect
to
continue
to
derive,
a
substantial
amount
of
our
revenue
from
the
sale
of
our
solutions
to
enable
retailers
to
increase
product
offerings
through
drop-ship
solutions
in
which
products
ship
directly
from
a
manufacturer
or
distributor.
While
the
market
trend
has
been
to
increase
the
use
of
drop-ship
solutions
as
a
means
to
offer
more
products
without
assuming
associated
inventory
risk,
use
of
drop-ship
delivery
requires
retailers
to
entrust
order
fulfillment
and
delivery
of
products
to
the
network
of
third-party
suppliers
that
ship
on
the
retailer's
behalf.
If
more
retailers
elect
instead
to
expand
their
own
warehouses
and
inventory
to
assume
greater
control
over
order
fulfillment,
rather
than
employing
drop-shipping
solutions,
or
if
other
methods
of
fulfillment
emerge
that
are
perceived
as
more
effective
than
drop-shipping,
demand
for
our
solutions
could
decline,
which
would
cause
our
revenue
and
other
operating
results
to
be
negatively
impacted.
Our lengthy sales and implementation cycles make it difficult to predict our future revenue and cause variability in our operating results.
Our
sales
cycle
can
vary
substantially
from
customer
to
customer,
depending
on
the
size
and
complexity
of
the
opportunity.
A
number
of
factors
influence
the
length
and
variability
of
our
sales
and
implementation
cycles,
including,
for
example:
•
the
need
to
educate
potential
customers
about
the
uses
and
benefits
of
our
solutions;
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Table
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•
the
commitment
customers
make
in
their
agreements
with
us;
•
the
discretionary
nature
of
potential
customers'
purchasing
and
budget
cycles
and
decisions;
•
the
competitive
nature
of
potential
customers'
evaluation
and
purchasing
processes;
•
evolving
e-commerce
needs
and
functionality
demands
of
potential
customers;
•
announcements
or
planned
introductions
of
new
products
by
us
or
our
competitors;
•
lengthy
purchasing
approval
processes
of
potential
customers;
and
•
the
complexity
of
the
implementations
and
integrations
with
customer
and
third-party
systems.
In
addition,
with
larger
enterprise
customers,
we
face
greater
costs,
longer
sales
cycles
and
less
predictability
in
completing
some
of
our
sales.
The
customer's
decision
to
use
our
service
may
be
an
enterprise-wide
decision
and,
if
so,
these
types
of
sales
would
require
us
to
provide
greater
levels
of
education
regarding
the
use
and
benefits
of
our
solutions.
Lengthy
sales
and
implementation
cycles
make
it
difficult
to
predict
the
quarter
in
which
revenue
from
a
new
customer
may
first
be
recognized.
Further,
our
potential
customers
frequently
need
to
obtain
approvals
from
multiple
decision
makers
before
making
purchase
decisions.
Delays
in
our
sales
or
implementation
cycles
could
cause
significant
variability
in
our
revenue
and
operating
results
for
any
particular
period.
If we are unable to retain our existing customers, our revenue and results of operations would be adversely affected.
Our
customers
have
no
obligation
to
renew
their
subscriptions
after
their
subscription
period
expires,
and
these
subscriptions
may
not
be
renewed
on
the
same
or
on
more
profitable
terms.
As
a
result,
our
ability
to
grow
depends
in
part
on
subscription
renewals
and
our
ability
to
meet
or
exceed
our
customers'
expectations.
In
addition,
many
of
our
contracts
are
non-exclusive
and
revenue
is
based
on
the
volume
of
transactions
the
customer
completes
using
our
platform.
It
is
possible
that
our
customers
could
send
fewer
transactions
through
our
platform
at
any
time
during
the
contract
term,
resulting
in
lower
revenue
to
us.
We
may
not
be
able
to
accurately
predict
future
trends
in
customer
renewals,
and
our
customers'
renewal
rates
may
decline
or
fluctuate
because
of
several
factors,
including
the
cost
of
our
services,
dissatisfaction
with
our
services,
the
cost
of
services
offered
by
our
competitors
and
reductions
in
our
customers'
spending
levels.
If
our
customers
do
not
renew
their
subscriptions,
renew
on
less
favorable
terms,
complete
fewer
transactions
or
fail
to
grow
their
business
using
our
platform,
or
do
not
purchase
additional
offerings
to
complement
their
existing
services,
our
revenue
may
grow
more
slowly
than
expected
or
decline,
and
our
profitability
and
gross
margins
may
be
adversely
affected.
Our business and revenue may be impacted by the seasonality of our customers' businesses.
The
e-commerce
marketplace
is
affected
by
the
same
seasonality
as
the
traditional
brick-and-mortar
marketplace.
Many
of
our
customers
typically
realize
a
significant
portion
of
their
sales
in
the
fourth
quarter
of
each
calendar
year.
Our
customer
base
is
diversified
among
different
retail
segments,
including
general
merchandise,
home
improvement,
office
supplies,
toys,
electronics,
furniture
and
perishables.
As
such,
our
revenue
does
not
closely
track
seasonality
trends
for
any
one
specific
retail
segment.
Although
the
customers
that
we
currently
serve
do
not
all
experience
the
same
seasonal
variation
and
some
customers
may
have
seasonal
peaks
that
occur
in
periods
other
than
the
fourth
quarter,
the
seasonality
of
our
customers'
businesses
may
become
more
concentrated
as
we
continue
to
expand
our
solutions
to
more
customers.
If
our
customer
base
changes
to
include
more
customers
that
experience
more
concentrated
seasonal
variation,
our
revenue
may
fluctuate
significantly
among
quarters.
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If we fail to develop our brand in a cost-effective manner, our business may suffer.
We
believe
that
developing
and
maintaining
awareness
of
our
brand
in
a
cost-effective
manner
is
critical
to
achieving
widespread
acceptance
of
our
existing
and
future
solutions
and
is
an
important
element
in
attracting
new
customers.
Furthermore,
we
believe
that
the
importance
of
brand
recognition
will
increase
as
competition
in
our
market
increases.
Successful
promotion
of
our
brand
will
depend
largely
on
the
effectiveness
of
our
marketing
efforts
and
on
our
ability
to
provide
reliable
and
useful
services
at
competitive
prices.
Brand
promotion
activities
may
not
yield
increased
revenue,
and
even
if
they
do,
any
increased
revenue
may
not
offset
the
expenses
we
incur
in
building
our
brand.
If
we
fail
to
successfully
promote
and
maintain
our
brand,
or
incur
substantial
expenses
in
an
unsuccessful
attempt
to
promote
and
maintain
our
brand,
we
may
fail
to
attract
enough
new
customers
or
retain
our
existing
customers
to
the
extent
necessary
to
realize
a
sufficient
return
on
our
brand-building
efforts,
and
our
business
could
suffer.
We may not be able to compete successfully against current and future competitors.
The
market
for
e-commerce
solutions,
applications
and
services
is
very
competitive.
While
no
single
competitor
currently
offers
all
of
the
solutions
that
we
offer,
we
do
have
competitors
with
longer
operating
histories,
larger
customer
bases
and
greater
financial,
technical,
marketing
and
other
resources
than
we
have.
Increased
competition
may
result
in
reduced
pricing
for
our
solutions,
longer
sales
cycles
or
a
decrease
in
our
market
share,
any
of
which
could
negatively
affect
our
revenue
and
future
operating
results
and
our
ability
to
grow
our
business.
A
number
of
competitive
factors
could
cause
us
to
lose
potential
sales
or
to
sell
our
solutions
at
lower
prices
or
at
reduced
margins,
including,
among
others:
•
Current
and
potential
customers
may
choose
to
develop
applications,
or
continue
using
applications
developed,
in-house,
rather
than
pay
for
our
solutions;
•
Marketplaces
and
other
demand
channels,
which
typically
offer
software
tools,
often
for
free,
that
allow
retailers
and
manufacturers
to
connect
to
them,
may
decide
to
compete
more
vigorously
with
us
or
make
it
easier
for
our
customers
to
self-service
their
omni-channel
strategy,
rather
than
relying
on
our
offerings
to
assist
their
efforts;
•
Competitors
may
adopt
more
aggressive
pricing
policies
and
offer
more
attractive
sales
terms,
adapt
more
quickly
to
new
technologies
and
changes
in
customer
requirements,
and
devote
greater
resources
to
the
promotion
and
sale
of
their
products
and
services
than
we
can;
•
Current
and
potential
competitors
may
establish
cooperative
relationships
among
themselves
or
with
third
parties
to
enhance
their
products
and
expand
their
markets,
and
consolidation
in
our
industry
is
likely
to
intensify;
•
New
competitors
or
alliances
among
competitors
may
emerge
and
rapidly
acquire
significant
market
share;
•
Current
and
potential
competitors
may
offer
technology
or
services
that
address
one
or
more
e-commerce
needs
at
a
lower
price
point
or
with
greater
depth
than
our
solutions
and
may
be
able
to
devote
greater
resources
to
those
solutions
than
we
can;
and
•
Software
vendors
could
bundle
e-commerce
solutions
with
other
solutions
or
offer
such
products
and
services
at
a
lower
price
as
part
of
a
larger
product
sale.
In
addition,
if
one
or
more
of
our
competitors
were
to
merge
or
partner
with
another
of
our
competitors,
this
could
adversely
affect
our
ability
to
compete
effectively.
Our
competitors
may
also
establish
or
strengthen
cooperative
relationships
with
our
current
or
future
strategic
partners
or
other
15
Table
of
Contents
parties
with
whom
we
or
our
customers
or
prospects
have
relationships,
thereby
limiting
our
ability
to
promote
our
solutions.
Disruptions
in
our
business
caused
by
these
events
could
reduce
our
revenue.
Competition
in
our
industry
may
intensify
as
our
competitors
raise
additional
capital
and
enter
into
business
combinations
or
alliances
and
as
established
companies
in
other
market
segments
or
geographic
markets
expand
into
our
market
segments
or
geographic
markets.
If
we
cannot
compete
successfully
against
our
competitors,
our
business,
results
of
operations
and
financial
condition
could
be
adversely
affected.
Our growth depends in part on the success of our strategic relationships with third parties.
We
anticipate
that
we
will
continue
to
depend
on
our
relationships
with
various
third
parties,
including
marketplaces
and
other
technology
providers,
in
order
to
grow
our
business.
Identifying,
negotiating
and
documenting
relationships
with
third
parties
requires
significant
time
and
resources,
as
does
integrating
thirdparty
content
and
technology
with
our
solutions.
If
the
third-party
content
or
technology
integrated
with
our
solutions
is
not
well
received
by
our
customers,
our
brand
and
reputation
could
be
negatively
affected.
Our
agreements
with
third-party
business
partners
are
typically
non-exclusive
and
do
not
prohibit
them
from
working
with
our
competitors
or
from
offering
competing
services.
If
and
to
the
extent
that
any
of
these
third
parties
compete
with
us,
it
could
hurt
our
growth
prospects.
In
addition,
a
significant
portion
of
the
transactions
that
our
customers
process
through
our
platform
is
derived
from
merchandise
sold
on
marketplaces
with
which
we
have
strategic
relationships.
In
many
cases,
these
marketplaces,
and
the
other
channels
with
which
our
solutions
are
integrated,
have
no
obligation
to
do
business
with
us
or
to
allow
us
or
our
customers
access
to
their
systems,
and
they
may
decide
at
any
time
and
for
any
reason
to
significantly
curtail
or
inhibit
our
ability
to
integrate
our
solutions
with
their
channels.
Additionally,
these
marketplaces
may
decide
to
make
significant
changes
to
their
respective
business
models,
policies,
systems
or
plans,
and
those
changes
could
impair
or
inhibit
our
customers'
ability
to
use
our
solutions
to
sell
their
products
on
those
channels,
or
may
adversely
affect
the
number
of
transactions
that
our
customers
can
sell
on
those
channels
or
reduce
the
desirability
of
selling
on
those
channels.
Further,
these
marketplaces
could
decide
to
compete
with
us.
Any
of
these
results
could
cause
our
customers
to
reevaluate
the
value
of
our
products
and
services
and
potentially
terminate
their
relationships
with
us,
which
could
significantly
reduce
our
revenue.
If
we
are
unsuccessful
in
establishing
or
maintaining
our
relationships
with
certain
of
these
third
parties,
our
ability
to
compete
in
the
marketplace
or
to
grow
our
revenue
could
be
impaired
and
our
operating
results
would
suffer.
Even
if
we
are
successful,
we
cannot
assure
our
stockholders
that
these
relationships
will
result
in
improved
operating
results.
The e-commerce market changes rapidly, and our inability to respond to changes in a timely manner could have a material adverse effect on our revenues
and profitability.
The
e-commerce
market
can
change
rapidly
in
multiple
ways
through
frequent
new
product
and
service
introductions,
frequent
changes
in
rules,
specifications
and
other
requirements
and
evolving
industry
standards.
Our
ability
to
attract
new
customers
and
retain
and
increase
revenue
from
existing
customers
is
dependent
on
our
ability
to
understand
the
changes
that
are
affecting
the
e-commerce
marketplace
and
to
adapt
our
solutions
at
a
rapid
pace
to
address
those
changing
market
conditions.
To
achieve
market
acceptance
for
our
solutions,
we
must
effectively
anticipate
and
offer
solutions
that
meet
changing
customer
demands
and
third-party
requirements
in
a
timely
manner.
Customers
and
the
e-commerce
channels
that
they
utilize
may
require
features
and
capabilities
that
our
current
solutions
do
not
have.
If
we
fail
to
develop
solutions
that
satisfy
customer
preferences
in
a
timely
and
cost-effective
manner,
our
ability
to
renew
our
contracts
with
existing
customers
and
our
ability
to
create
or
increase
demand
for
our
solutions
will
be
impaired.
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Table
of
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We
may
experience
difficulties
with
software
development,
industry
standards,
design
or
marketing
that
could
delay
or
prevent
our
development,
introduction
or
implementation
of
new
solutions
and
enhancements.
The
introduction
of
new
solutions
by
competitors,
the
emergence
of
new
industry
standards
or
the
development
of
entirely
new
technologies
to
replace
existing
offerings
could
render
our
existing
or
future
solutions
obsolete.
Additionally,
as
the
e-commerce
industry
continues
to
evolve
and
becomes
more
fragmented,
new
demand
channels
and
new
technologies
will
emerge
to
offer
consumers
new
ways
to
purchase
products.
We
monitor
these
new
demand
channels
and
technologies
and
attempt
to
predict
which
channels
are
likely
to
be
successful
to
select
projects
we
anticipate
will
generate
a
positive
return
on
our
development
investment.
Our
customers
may
expect
us
to
support
a
broader
array
of
demand
channels
than
may
be
commercially
feasible,
especially
emerging
channels
that
are
considered
likely
to
be
successful
by
popular
opinion,
the
media,
and
other
industry
experts.
We
may
therefore
be
compelled
to
invest
heavily
in
development
resources
to
enhance
our
offerings
to
support
new
channels
that
fail
to
attract
consumer
usage,
take
an
unexpectedly
long
time
to
attract
consumer
usage,
or
are
successful
for
our
customers
and
consumers
but
are
disproportionately
costly
for
us
to
maintain
and
support.
We
may
devote
resources
to
advancements
that
are
ultimately
unsuccessful,
at
the
expense
of
other
projects
that
may
be
more
successful,
incurring
significant
opportunity
cost
to
do
so.
Further,
if
we
were
to
deploy
significant
resources
to
particular
platforms
that
ultimately
failed
to
attract
market
participants
or
materialize
as
anticipated,
we
may
incur
costs
that
we
may
never
recover.
If
we
fail
to
realize
returns
on
such
development
initiatives,
or
if
our
customers
require
that
we
service
technologies
that
are
too
costly
to
maintain,
this
could
have
an
adverse
effect
on
our
business,
results
of
operations
and
financial
condition.
If
we
are
unable
to
successfully
develop
or
acquire
new
capabilities
and
functionality,
enhance
our
existing
solutions
to
anticipate
and
meet
customer
preferences
and
rapidly
evolving
industry
requirements
or
sell
our
solutions
into
new
markets,
our
revenues
and
profitability
would
be
adversely
affected.
We may experience service failures or interruptions due to defects in the hardware, software, infrastructure, third-party components or processes that
comprise our existing or new solutions, any of which could adversely affect our business.
Our
solutions
are
complex
and
may
contain
undetected
defects
in
the
hardware,
software,
infrastructure,
third-party
components
or
processes
that
are
part
of
such
solutions.
If
these
defects
lead
to
service
failures,
we
could
experience
delays
or
lost
revenue,
diversion
of
software
engineering
resources,
material
nonmonetary
concessions,
negative
media
attention
or
increased
service
costs
as
a
result
of
performance
claims
during
the
period
required
to
correct
the
cause
of
any
such
defects.
We
cannot
be
certain
that
defects
will
not
be
found
in
new
solutions
or
upgraded
solutions,
resulting
in
loss
of,
or
delay
in,
market
acceptance,
which
could
have
an
adverse
effect
on
our
business,
results
of
operations
and
financial
condition.
Our
solutions
are
designed
to
automate
various
order
fulfillment
and
product
listing
functions
across
multiple
online
channels
for
large
volumes
of
our
customers'
sales,
as
well
as
to
ensure
that
their
sales
comply
with
the
policies
of
each
channel,
and
sometimes
to
dynamically
determine
or
communicate
product
pricing
at
any
given
moment.
In
the
event
that
our
solutions
do
not
function
properly,
errors
could
occur,
including
that
our
customers
might
sell
more
inventory
than
they
have
in
stock,
make
sales
that
violate
channel
policies
or
underprice
or
overprice
their
offerings.
Overselling
their
inventory
could
force
our
customers
to
cancel
orders
at
rates
that
violate
channel
policies.
Underpricing
could
result
in
lost
revenue
or
material
losses
to
our
customers
and
overpricing
could
result
in
lost
sales.
Any
of
these
results
or
other
errors
could
reduce
demand
for
our
solutions
and
hurt
our
business
reputation.
17
Table
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Contents
Any
defect
in,
or
disruption
to,
our
solutions
or
any
error
in
execution
could
cause
our
customers
to
seek
recourse
against
us
for
losses
or
cancel
their
contracts
with
us,
discourage
potential
customers
from
joining
our
network
and
harm
our
reputation.
Although
most
of
our
contracts
with
our
customers
limit
our
liability
for
these
defects,
disruptions
or
errors,
we
nonetheless
could
be
subject
to
litigation
for
actual
or
alleged
losses
to
our
customers'
businesses.
Where
a
particular
defect
is
replicated
across
multiple
large
customers
(as
may
conceivably
occur
in
the
context
of
a
multi-tenant
SaaS
hosting
environment),
individual
contractual
liability
caps
may
be
aggregated
across
multiple
claimants
to
create
a
much
larger
exposure.
Defending
a
lawsuit,
regardless
of
its
merit,
could
be
costly
and
divert
management's
attention
and
could
cause
our
business
to
suffer.
The
insurers
under
our
existing
liability
insurance
policies
could
deny
coverage
of
claims
resulting
from
an
error
or
defect
in
our
technology
or
a
resulting
disruption
in
our
solutions,
or
our
existing
liability
insurance
might
not
be
adequate
to
cover
all
of
the
damages
and
other
costs
of
such
a
claim.
Moreover,
we
cannot
assure
you
that
our
current
liability
insurance
coverage
will
continue
to
be
available
to
us
on
acceptable
terms
or
at
all.
The
successful
assertion
against
us
of
one
or
more
large
claims
that
exceeds
our
insurance
coverage,
or
the
occurrence
of
changes
in
our
liability
insurance
policy,
including
an
increase
in
premiums
or
imposition
of
large
deductible
or
co-insurance
requirements,
could
have
an
adverse
effect
on
our
business,
financial
condition
and
operating
results.
Cybersecurity incidents could harm our business and negatively impact our financial results.
Our
business
involves
the
collection
and
use
of
confidential
and
otherwise
sensitive
information
of
our
customers
and
their
trading
partners,
including,
for
example,
customer
shipping
information
and
purchasing
habits.
The
collection
and
use
of
this
information
sometimes
requires
our
access
to
our
customers'
information
systems,
as
well
as
to
systems
operated
by
our
third-party
technology
providers.
We
serve
as
a
conduit
for
transmitting
information
between
our
customers
and
their
trading
partners,
as
well
as
the
third-party
platforms
they
use
for
e-commerce
transactions.
In
addition,
given
our
critical
role
as
a
service
provider
to
the
retail
industry,
we
believe
that
we
are
an
attractive
target
for
such
attacks.
If
third
parties
seek
to
gain
unauthorized
access
to
our
system
as
a
means
to
access
systems
operated
by
our
customers
or
our
third-party
providers,
this
would
impair
our
customers'
trust
in
our
security
practices.
We
cannot
assure
you
that
our
efforts
to
prevent
unauthorized
access
to
or
use
of
information
we
process
or
control
will
always
be
successful.
Our
security
measures
may
be
breached
as
a
result
of
third-party
action,
including
intentional
misconduct
by
computer
hackers,
employee
error
or
misconduct,
malfeasance
or
otherwise,
and
may
result
in
one
or
more
third
parties
obtaining
unauthorized
access
to
our
customers'
data
or
our
data,
including
our
intellectual
property
and
other
confidential
or
other
sensitive
information,
or
our
IT
systems.
Additionally,
we
may
be
subject
to
social
engineering
or
other
tactics
that
attempt
to
fraudulently
induce
employees
or
customers
into
disclosing
sensitive
information
such
as
user
names,
passwords
or
other
information
in
order
to
gain
access
to
our
customers'
data
or
our
data
or
IT
systems.
Because
the
techniques
used
to
obtain
unauthorized
access,
or
to
sabotage
systems,
change
frequently
and
generally
are
not
recognized
until
launched
against
a
target,
we
may
be
unable
to
anticipate
these
techniques
or
to
implement
adequate
preventative
measures.
Malicious
parties
may
also
conduct
attacks
designed
to
temporarily
deny
customers
access
to
our
services
or
our
customers'
websites.
If
our
information
security
efforts
are
compromised,
or
if
we
fail
to
detect
and
appropriately
respond
to
a
data
security
breach,
we
could
be
subject
to
legal
claims,
including
shareholder
derivative
suits,
class
actions
or
other
direct
claims
by
customers
or
other
injured
parties
and
governmental
action.
A
data
security
breach
may
also
adversely
affect
our
reputation,
increase
our
insurance
costs
or
result
in
loss
of
coverage,
and
we
may
need
to
incur
other
significant
costs
to
protect
against
information
security
breaches
in
the
future,
each
of
which
could
adversely
impact
our
financial
condition,
results
of
operations
and
growth
prospects.
In
addition,
because
of
the
critical
nature
of
data
security,
any
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perceived
breach
of
our
security
measures
or
harm
to
our
reputation
could
cause
existing
or
potential
customers
not
to
use
our
solutions.
In
addition,
our
customers'
or
our
partners'
online
and
other
sales
may
be
significantly
impacted
by
cybersecurity
incidents.
For
example,
our
customers
or
partners
may
experience
"denial-of-service"
type
attacks
that
could
make
all
or
portions
of
such
customers'
or
partners'
websites
unavailable
for
periods
of
time.
Because
a
significant
portion
of
our
revenue
is
derived
from
transactions
effected
on
(or
through)
our
customers'
and
partners'
websites,
operational
disruptions
such
as
these
could
cause
our
revenue
to
decline.
As our customers continue to scrutinize and refine their own data security practices, the security and confidentiality obligations they seek to impose on
their SaaS and e-commerce providers are becoming increasingly onerous. Failure to meet expectations may hurt our business.
Many
of
our
customers
and
potential
customers
are
prominent
merchants
and
retailers
that
process
large
volumes
of
sensitive
consumer
and
business
data.
As
such,
they
are
increasingly
targeted
for
cybersecurity
attacks.
As
highly
publicized
cybersecurity
incidents
within
the
retail
and
consumer
goods
sector
are
occurring
with
greater
frequency,
our
customers
and
potential
customers
are
increasingly
seeking
to
shift
these
risks
by
pursuing
more
onerous
contractual
terms
in
their
agreements.
This
may
include
requests
for
contractual
commitments
to
burdensome
security
procedures,
reporting,
notification
and
audit
rights,
additional
warranties,
guarantees
and
other
contractual
assurances,
indemnification
provisions,
specialized
remedies
and
liability
limitation
exclusions.
Our
customers
may
also
seek
to
require
our
adherence
to
customer-specific
operational
protocols
and
procedures
that
may
compromise
our
ability
to
operate
our
business
efficiently
or
that
may
be
unworkable.
Such
obligations
require
that
we
continue
to
enhance
our
security
programs
and
incur
increased
compliance
costs
to
provide
current
and
potential
customers
with
protections
they
now
expect.
Such
requirements
also
make
it
more
difficult
to
obtain
new
customers
as
we
experience
longer
sales
cycles
to
negotiate
mutually
acceptable
terms
and
increase
the
cost
and
complexity
of
our
compliance
procedures.
If
we
are
unsuccessful
in
our
attempts
to
negotiate
acceptable
outcomes
or
meet
expectations
in
this
area,
this
could
also
lead
to
customer
erosion
or
impede
our
ability
to
grow
our
sales
and
attract
new
customers.
Our business is subject to a variety of U.S. and foreign laws and regulations that are continuously evolving, including those related to privacy, data
security and data protection due to our collection, processing and use of personal information and other user data.
We
are
or
may
become
subject
to
a
variety
of
laws
and
regulations
in
the
United
States
and
abroad
that
involve
matters
central
to
our
business,
including
laws
and
regulations
regarding
privacy,
data
protection,
data
security,
data
retention,
consumer
protection,
advertising,
electronic
commerce,
intellectual
property,
manufacturing,
anti-bribery
and
anti-corruption,
and
economic
or
other
trade
prohibitions
or
sanctions.
These
laws
and
regulations
are
continuously
evolving
and
developing.
The
scope
and
interpretation
of
the
laws
that
are
or
may
be
applicable
to
us
are
often
uncertain
and
may
be
conflicting,
particularly
with
respect
to
foreign
laws.
In
particular,
there
are
numerous
U.S.
federal,
state,
and
local
laws
and
regulations
and
foreign
laws
and
regulations
regarding
privacy
and
the
collection,
sharing,
use,
processing,
disclosure,
and
protection
of
personal
information
and
other
user
data,
the
scope
of
which
is
changing,
subject
to
differing
interpretations,
and
is
inconsistent
among
different
jurisdictions.
We
strive
to
comply
with
all
applicable
laws,
policies,
legal
obligations,
and
industry
codes
of
conduct
relating
to
privacy,
data
security,
and
data
protection.
However,
given
that
the
scope,
interpretation,
and
application
of
these
laws
and
regulations
are
often
uncertain
and
may
be
conflicting,
it
is
possible
that
these
obligations
may
be
interpreted
and
applied
in
a
manner
that
is
inconsistent
from
one
jurisdiction
to
another
and
may
conflict
with
other
rules
or
our
practices.
Any
failure
or
perceived
failure
to
comply
with
our
privacy
or
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security
policies
or
privacy-related
legal
obligations
by
us
or
third-party
service
providers,
or
any
compromise
of
security
that
results
in
the
unauthorized
release
or
transfer
of
personally
identifiable
information
or
other
user
data,
may
result
in
governmental
enforcement
actions,
litigation,
or
negative
publicity,
and
could
have
an
adverse
effect
on
our
brand
and
operating
results.
We are subject to disparate and complex regulatory and contractual restrictions regarding our rights to use data that we process or produce through our
systems. If we fail to fully understand or comply with these restrictions, we may be subject to liability and increased compliance costs, which may harm our
business and negatively impact our financial results.
We
are
subject
to
complex
and
differing
regulatory
and
contractual
restrictions
governing
our
use
of
data
that
we
process
or
produce
through
our
systems.
This
includes
contractual
provisions
with
our
customers,
our
vendors
and
other
third
parties
we
work
with,
as
well
as
our
privacy
policy
and
other
internal
policies
and
applicable
privacy
and
data
security
legislation
to
which
we
are
subject.
We
rely
on
data
we
process
and
information
derived
from
it
to
provide
services
to
customers,
develop
new
offerings
and,
where
appropriate
and
permissible,
to
report
on
industry
trends
and
elsewhere
in
our
marketing
efforts.
Although
we
monitor
these
restrictions
and
have
procedures
in
place
to
maintain
compliance
with
these
requirements,
there
can
be
no
assurance
that
our
compliance
efforts
will
always
be
effective
to
ensure
compliance,
and
third
parties
may
seek
to
assert
claims
that
our
use
of
such
data
in
a
particular
manner
is
unauthorized.
Future
litigation
may
be
necessary
to
defend
ourselves
or
to
determine
the
scope,
enforceability
and
validity
of
such
restrictions
or
to
establish
our
proprietary
rights.
Claimants
may
have
substantially
greater
resources
than
we
do
and
may
be
able
to
sustain
the
costs
of
complex
litigation
to
a
greater
degree
and
for
longer
periods
of
time
than
we
could.
Regardless
of
whether
such
claims
have
any
merit,
these
claims
are
time-consuming
and
costly
to
evaluate
and
defend
and
could:
•
hurt
our
reputation;
•
adversely
affect
our
relationships
with
our
current
or
future
customers;
•
cause
delays
or
stoppages
in
providing
our
services
or
developing
new
services;
•
divert
management's
attention
and
resources;
•
require
technology
changes
to
our
software
or
business
practices
that
would
cause
us
to
incur
substantial
costs;
•
subject
us
to
significant
liabilities;
and
•
require
us
to
cease
some
or
all
of
our
activities.
In
addition
to
liability
for
monetary
damages
against
us,
which
may
be
unlimited
by
contract
or
regulation
and
which
may
include
attorneys'
fees
or
governmental
fines,
we
may
be
prohibited
from
operating
portions
of
our
business
or
operating
in
jurisdictions
that
are
dependent
on
obtaining
such
data
use
rights
unless
we
obtain
licenses
from,
and
pay
royalties
to,
the
holders
of
such
rights,
which
may
not
be
available
on
commercially
favorable
terms,
or
at
all.
If
we
are
required
to
make
substantial
payments
or
undertake
any
such
other
actions
as
a
result
of
misappropriation
claims
against
us
or
any
obligation
to
indemnify
our
customers
or
other
third
parties
for
such
claims,
such
payments
or
costs
could
have
a
material
adverse
effect
upon
our
business
and
financial
results.
We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could
impair our business.
We
regard
the
protection
of
our
intellectual
property,
which
includes
trade
secrets,
copyrights,
trademarks
and
domain
names,
as
critical
to
our
success.
We
strive
to
protect
our
intellectual
property
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rights
by
relying
on
federal,
state
and
common
law
rights,
as
well
as
contractual
restrictions.
We
enter
into
confidentiality
and
invention
assignment
agreements
with
our
employees
and
contractors,
and
confidentiality
agreements
with
parties
with
whom
we
conduct
business
in
order
to
limit
access
to,
and
disclosure
and
use
of,
our
proprietary
information.
However,
these
contractual
arrangements
and
the
other
steps
we
have
taken
to
protect
our
intellectual
property
may
not
prevent
the
misappropriation
of
our
proprietary
information
or
deter
independent
development
of
similar
technologies
by
others.
We
have
sought
protection
for
some
of
our
technologies
and
currently
have
registered
trademarks
in
the
CommerceHub
name
and
several
of
our
product
names.
We
also
have
copyright
protection
with
respect
to
our
software
code
and
protect
trade
secrets
through
non-disclosure
agreements
and
employee
confidentiality
training.
Effective
intellectual
property
protection
is
expensive
to
develop
and
maintain,
both
in
terms
of
initial
and
ongoing
registration
requirements
and
the
costs
of
defending
our
rights.
We
may
be
required
to
protect
our
intellectual
property
in
an
increasing
number
of
domestic
and
foreign
jurisdictions,
a
process
that
is
expensive
and
may
not
be
successful
or
which
we
may
not
pursue
in
every
location.
We
may,
over
time,
increase
our
investment
in
protecting
our
intellectual
property
through
additional
means,
including
patent
and
other
filings
which
could
be
expensive
and
time-consuming.
Despite
our
efforts
to
protect
our
proprietary
rights,
unauthorized
parties
may
attempt
to
copy
aspects
of
our
products
or
to
obtain
and
use
information
that
we
regard
as
proprietary.
Monitoring
unauthorized
use
of
our
intellectual
property
is
difficult
and
costly,
and
our
efforts
to
protect
our
proprietary
rights
may
not
be
adequate
to
prevent
misappropriation
of
our
intellectual
property.
Further,
we
may
not
be
able
to
detect
unauthorized
use
of,
or
take
appropriate
steps
to
enforce,
our
intellectual
property
rights.
Litigation
may
be
necessary
in
the
future
to
enforce
our
intellectual
property
rights,
to
protect
our
trade
secrets,
to
determine
the
validity
and
scope
of
the
proprietary
rights
of
others
or
to
defend
against
claims
of
infringement
or
invalidity.
Such
litigation
could
be
costly,
time-consuming
and
distracting
to
management,
result
in
a
diversion
of
resources,
the
impairment
or
loss
of
portions
of
our
intellectual
property
and
have
a
material
adverse
effect
on
our
business,
operating
results
and
financial
condition.
Furthermore,
our
efforts
to
enforce
our
intellectual
property
rights
may
be
met
with
defenses,
counterclaims
and
countersuits
attacking
the
validity
and
enforceability
of
our
intellectual
property
rights.
These
steps
may
be
inadequate
to
protect
our
intellectual
property.
We
will
not
be
able
to
protect
our
intellectual
property
if
we
are
unable
to
enforce
our
rights
or
if
we
do
not
detect
unauthorized
use
of
our
intellectual
property.
Despite
our
precautions,
it
may
be
possible
for
unauthorized
third
parties
to
copy
our
solutions
and
use
information
that
we
regard
as
proprietary
to
create
products
and
services
that
compete
with
ours.
Some
license
provisions
protecting
against
unauthorized
use,
copying,
transfer
and
disclosure
of
our
licensed
solutions
may
be
unenforceable
under
the
laws
of
certain
jurisdictions
and
foreign
countries.
Further,
the
laws
of
some
countries
do
not
protect
proprietary
rights
to
the
same
extent
as
the
laws
of
the
United
States.
To
the
extent
we
expand
our
international
activities,
our
exposure
to
unauthorized
copying
and
use
of
our
solutions
and
proprietary
information
may
increase.
There
can
be
no
assurance
that
our
means
of
protecting
our
proprietary
rights
will
be
adequate
or
that
our
competitors
will
not
independently
develop
similar
technology.
If
we
fail
to
meaningfully
protect
our
intellectual
property,
then
our
business,
brand,
operating
results
and
financial
condition
could
be
materially
harmed.
We have expanded, and may expand in the future, by acquiring or investing in other companies, which may divert our management's attention, result in
dilution to our stockholders and consume significant resources.
Our
business
strategy
has
included,
and
may
include
in
the
future,
acquiring
complementary
services,
solutions,
technologies
or
businesses.
For
example,
in
January
2015,
we
acquired
Mercent
Corporation
(
Mercent )
in
order
to
expand
our
demand
channel
offerings
and
capabilities.
We
also
have
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entered
into,
and
may
enter
into
in
the
future,
relationships
with
other
businesses
to
expand
our
service
offerings,
which
could
involve
preferred
or
exclusive
licenses,
additional
channels
of
distribution,
discount
pricing
or
investments
in
other
companies.
Negotiating
these
transactions
can
be
time-consuming,
difficult
and
expensive,
and
our
ability
to
close
these
transactions
may
often
be
subject
to
conditions
or
approvals
that
are
beyond
our
control.
Consequently,
these
transactions,
even
if
undertaken
and
announced,
may
not
close.
Current
or
future
acquisitions,
investments
or
new
business
relationships
may
result
in
unforeseen
operating
difficulties
and
expenditures.
In
particular,
we
may
encounter
difficulties
assimilating
or
integrating
the
businesses,
technologies,
products,
personnel
or
operations
of
the
acquired
companies,
particularly
if
the
key
personnel
of
the
acquired
company
choose
not
to
work
for
us,
the
company's
software
is
not
easily
adapted
to
work
with
ours
or
we
have
difficulty
retaining
the
customers
or
partners
of
any
acquired
business
due
to
changes
in
management
or
otherwise.
Acquisitions
may
also
disrupt
our
business,
divert
our
resources
and
require
significant
management
attention
that
would
otherwise
be
available
for
development
of
our
business.
Moreover,
the
anticipated
benefits
of
any
acquisition,
investment
or
business
relationship
may
not
be
realized
or
we
may
be
exposed
to
unknown
liabilities.
Any
acquisition
or
investment
may
require
us
to
use
significant
amounts
of
cash,
issue
potentially
dilutive
equity
securities
or
incur
indebtedness
(which
could
be
on
terms
unfavorable
to
us
or
that
we
could
be
unable
to
repay).
In
addition,
acquisitions
involve
numerous
risks,
any
of
which
could
harm
our
business,
including:
•
difficulties
in
integrating
the
operations,
technologies,
services
and
personnel
of
acquired
businesses,
especially
if
those
businesses
operate
outside
of
our
core
competency
of
providing
e-commerce
SaaS
and
SaaS-plus
solutions;
•
cultural
challenges
associated
with
integrating
employees
from
acquired
businesses
into
our
organization;
•
ineffectiveness
or
incompatibility
of
acquired
technologies
or
services;
•
failure
to
successfully
further
develop
the
acquired
technology
in
order
to
recoup
our
investment;
•
potential
loss
of
key
employees
of
acquired
businesses;
•
inability
to
maintain
the
key
business
relationships
and
the
reputations
of
acquired
businesses;
•
diversion
of
management's
attention
from
other
business
concerns;
•
litigation
for
activities
of
acquired
businesses,
including
claims
from
terminated
employees,
customers,
former
stockholders
or
other
third
parties;
•
in
the
case
of
foreign
acquisitions,
the
need
to
integrate
operations
across
different
cultures
and
languages
and
to
address
the
particular
economic,
currency,
political
and
regulatory
risks
associated
with
specific
countries;
•
costs
necessary
to
establish
and
maintain
effective
internal
controls
or
other
procedures
and
policies
for
acquired
businesses;
•
increased
fixed
costs;
and
•
adverse
tax
consequences,
substantial
depreciation
or
deferred
compensation
charges.
Any
of
these
risks
could
harm
our
business
and
operating
results.
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Our long-term success depends, in part, on our ability to expand the sales of our e-commerce solutions to customers located outside of the United States,
and thus our business is susceptible to risks associated with international sales and operations.
Outside
of
the
United
States,
we
currently
maintain
offices
and
have
sales
personnel
in
the
United
Kingdom,
and
service
customers
in
Canada.
As
part
of
our
long-term
strategy
we
intend
to
continue
to
expand
our
international
operations.
Any
international
expansion
efforts
that
we
may
undertake
may
not
be
successful.
In
addition,
conducting
international
operations
in
new
markets
will
require
considerable
management
attention
and
resources,
is
subject
to
the
particular
challenges
of
supporting
a
rapidly
growing
business
in
an
environment
of
multiple
languages,
cultures,
customs,
taxation
systems,
alternative
dispute
systems,
regulatory
systems
and
commercial
infrastructures,
and
will
subject
us
to
additional
risks
that
we
have
not
generally
faced
in
the
United
States,
including
risks
associated
with:
•
disparate
government
regulations
from
multiple
nations
relating
to
e-commerce
and
other
services,
electronic
devices
and
competition,
and
restrictive
governmental
actions
(such
as
trade
protection
measures,
including
export
duties
and
quotas
and
custom
duties
and
tariffs),
nationalization
and
restrictions
on
foreign
ownership;
•
limited
fulfillment
and
technology
infrastructure;
•
lower
levels
of
consumer
spending
and
fewer
opportunities
for
growth
compared
to
the
U.S.;
•
localization
of
our
solutions,
including
translation
into
foreign
languages
and
adaptation
for
regulatory
requirements
and
local
practices;
•
lack
of
familiarity,
and
the
burdens
of
complying,
with
applicable
foreign
laws
and
legal
practices;
•
unexpected
changes
in
regulatory
requirements,
taxes,
trade
laws,
tariffs,
export
quotas,
custom
duties
or
other
trade
restrictions;
•
differing
technology
standards;
•
longer
accounts
receivable
payment
cycles
and
difficulties
in
collecting
accounts
receivable;
•
difficulties
in
managing
and
staffing
international
operations
and
differing
employer/employee
relationships,
including
recruiting
and
retaining
employees
in
foreign
countries;
•
fluctuations
in
exchange
rates
that
may
increase
the
volatility
of
our
foreign
based
revenue;
•
compliance
with
the
laws
of
numerous
foreign
taxing
jurisdictions
in
which
we
conduct
business,
potential
double
taxation
of
our
international
earnings
and
potentially
adverse
tax
consequences,
including
the
complexities
of
foreign
value
added
tax
(or
other
tax)
systems
or
due
to
changes
in
applicable
U.S.
and
foreign
tax
laws,
and
restrictions
on
the
repatriation
of
earnings;
•
increased
costs
to
establish
and
maintain
effective
controls
at
foreign
locations;
the
greater
potential
for
corruption
and
bribery
and
compliance
with
anti-bribery
and
anti-corruption
laws;
•
uncertain
political
and
economic
climates;
•
reduced
or
varied
protection
for
intellectual
property
rights
in
some
countries;
and
•
overall
higher
costs
of
doing
business
internationally
These
factors
may
cause
our
international
costs
of
doing
business
to
exceed
our
comparable
domestic
costs.
Any
negative
impact
from
our
international
business
efforts
could
negatively
impact
our
business,
results
of
operations
and
financial
condition
as
a
whole.
Further,
there
is
no
guarantee
that
the
financial
performance
of
our
operations
in
international
markets
will
be
similar
to
our
historical
operations
in
the
United
States
and
Canada.
A
variety
of
factors,
including
different
pricing
models
and
23
Table
of
Contents
costs
related
to
building
out
additional
operational
infrastructure
in
international
markets,
could
result
in
lower
gross
margins,
operating
margins,
or
cash
flow.
The loss of key personnel, including our Chief Executive Officer, or an inability to attract and retain highly skilled personnel may adversely affect our
business and limit our ability to implement our business plan successfully.
Our
future
success
is
dependent,
in
large
part,
upon
our
ability
to
attract
and
retain
highly
qualified
managerial,
technical
and
sales
personnel.
We
face
intense
competition
for
qualified
individuals
from
numerous
technology
and
e-commerce
companies,
which
may
be
able
to
offer
more
competitive
compensation
packages.
Our
headquarters
have
been
located
in
Albany,
New
York
since
1997
and,
although
we
have
been
successful
in
attracting
and
retaining
high-quality
managerial,
technical
and
sales
personnel,
the
pool
of
available
local
talent
with
the
specialized
skills
required
for
our
business
is
smaller
than
in
larger
cities,
and
we
may
struggle
to
find
adequate
replacements
if
any
of
our
key
personnel
were
to
leave.
Although
we
also
have
operations
Seattle,
Washington,
the
competition
for
talent
in
Seattle
is
intense
due
to
the
increasing
number
of
other
technology
and
e-commerce
companies
with
a
large
or
growing
presence
in
Seattle,
and
we
cannot
be
certain
we
can
attract,
assimilate
or
retain
such
personnel
in
the
future
in
such
a
competitive
environment.
The
replacement
of
any
key
employee
likely
would
involve
significant
time
and
costs,
and
the
loss
of
any
key
employee
may
significantly
delay
or
prevent
the
achievement
of
our
business
objectives.
Our
inability
to
attract
and
retain
such
personnel
could
have
an
adverse
effect
on
our
business,
results
of
operations
and
financial
condition.
Conditions in the global economy, the markets we serve and the financial markets may adversely affect our business, results of operations and financial
condition.
Our
business
is
sensitive
to
general
economic
conditions.
Since
2008
the
effects
of
the
global
financial
crisis
have
adversely
impacted
the
global
economy.
Slower
global
economic
growth,
the
credit
market
crisis
and
European
debt
crisis,
uncertainty
relating
to
the
Euro,
high
levels
of
unemployment
globally,
reduced
levels
of
capital
expenditures,
changes
in
government
fiscal
and
monetary
policies,
government
deficit
reduction
and
budget
negotiation
dynamics,
sequestration,
other
austerity
measures
and
other
challenges
affecting
the
global
economy
adversely
affect
us
and
our
customers,
including
having
the
effect
of:
•
reducing
demand
for
our
products
and
services
and
limiting
the
financing
available
to
our
customers,
resulting
in
longer
sales
cycles
and
slower
adoption
of
new
technologies;
•
increasing
the
difficulty
in
collecting
accounts
receivable;
•
increasing
price
competition
in
the
markets
we
serve;
•
increasing
the
risk
that
we
could
be
required
to
record
charges
relating
to
restructuring
costs
or
the
impairment
of
assets;
and
•
increasing
the
risk
that
counterparties
to
our
contractual
arrangements
will
become
insolvent
or
otherwise
unable
to
fulfill
their
contractual
obligations
which,
in
addition
to
increasing
the
risks
identified
above,
could
result
in
preference
actions
against
us.
Improvement
in
the
global
economy
remains
uneven
and
uncertain.
If
slower
growth
in
the
global
economy
or
in
any
of
the
markets
we
serve
continues
for
a
significant
period,
if
there
is
significant
deterioration
in
the
global
economy
or
such
markets
or
if
improvements
in
the
global
economy
do
not
benefit
the
markets
we
serve,
our
business,
results
of
operations
and
financial
condition
could
be
adversely
affected.
24
Table
of
Contents
Factors Relating to the Spin-Off
The Spin-Off could result in a significant tax liability to Liberty and its stockholders.
It
is
a
condition
to
the
Spin-Off
that
Liberty
receive
the
opinion
of
Baker
Botts,
in
form
and
substance
reasonably
acceptable
to
Liberty,
to
the
effect
that,
for
U.S.
federal
income
tax
purposes,
the
Spin-Off
will
qualify
as
a
tax-free
transaction
to
Liberty
and
its
stockholders
under
Section
355
of
the
Code
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares).
The
opinion
of
Baker
Botts
will
be
based
on
the
law
in
effect
as
of
the
date
of
the
Spin-Off
and
will
rely
upon
certain
assumptions,
as
well
as
statements,
representations
and
certain
undertakings
made
by
officers
of
Liberty
and
CH
Parent
and
John
C.
Malone.
These
assumptions,
statements,
representations
and
undertakings
are
expected
to
relate
to,
among
other
things,
Liberty's
business
reasons
for
engaging
in
the
Spin-Off,
the
conduct
of
certain
business
activities
by
Liberty
and
CH
Parent,
and
the
plans
and
intentions
of
Liberty
and
CH
Parent
to
continue
conducting
those
business
activities
and
not
to
materially
modify
their
ownership
or
capital
structure
following
the
Spin-Off.
If
any
of
those
statements,
representations
or
assumptions
is
incorrect
or
untrue
in
any
material
respect
or
any
of
those
undertakings
is
not
complied
with,
or
if
the
facts
upon
which
the
opinion
is
based
are
materially
different
from
the
facts
that
prevail
at
the
time
of
the
SpinOff,
the
conclusions
reached
in
such
opinion
could
be
adversely
affected.
Liberty
does
not
intend
to
seek
a
ruling
from
the
IRS
as
to
the
U.S.
federal
income
tax
treatment
of
the
Spin-Off.
The
opinion
of
Baker
Botts
will
not
be
binding
on
the
IRS
or
a
court,
and
there
can
be
no
assurance
that
the
IRS
will
not
challenge
the
conclusions
reached
in
the
opinion
or
that
a
court
would
not
sustain
such
a
challenge.
Even
if
the
Spin-Off
otherwise
qualifies
under
Section
355
of
the
Code,
the
Spin-Off
would
result
in
a
significant
U.S.
federal
income
tax
liability
to
Liberty
(but
not
to
Liberty
stockholders)
under
Section
355(e)
of
the
Code
if
one
or
more
persons
acquire,
directly
or
indirectly,
a
50-percent
or
greater
interest
(measured
by
vote
or
value)
in
the
stock
of
Liberty
or
in
the
stock
of
CH
Parent
(excluding,
for
this
purpose,
the
acquisition
of
CH
Parent
common
stock
by
Liberty
stockholders
in
the
Spin-Off)
as
part
of
a
plan
or
series
of
related
transactions
that
includes
the
Spin-Off.
Any
acquisition
of
the
stock
of
Liberty
or
CH
Parent
(or
any
predecessor
or
successor
corporation)
within
two
years
before
or
after
the
Spin-Off
would
be
presumed
to
be
part
of
a
plan
that
includes
the
Spin-Off,
although
the
parties
may
be
able
to
rebut
that
presumption
under
certain
circumstances.
The
process
for
determining
whether
an
acquisition
is
part
of
a
plan
under
these
rules
is
complex,
inherently
factual
in
nature
and
subject
to
a
comprehensive
analysis
of
the
facts
and
circumstances
of
the
particular
case.
Notwithstanding
the
opinion
of
Baker
Botts
described
above,
Liberty
or
CH
Parent
might
inadvertently
cause
or
permit
a
prohibited
change
in
ownership
of
Liberty
or
CH
Parent,
thereby
triggering
tax
liability
to
Liberty,
which
could
have
a
material
adverse
effect.
If,
for
any
reason,
it
is
subsequently
determined
that
the
Spin-Off
does
not
qualify
for
tax-free
treatment
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock),
Liberty
and/or
its
stockholders
could
incur
significant
tax
liabilities
determined
in
the
manner
described
in
"Material
U.S.
Federal
Income
Tax
Consequences
of
the
Spin-Off."
As
described
further
under
"Certain
Relationships
and
Related
Party
Transactions—Relationships
between
CH
Parent
and
Liberty
and/or
Liberty
Media—Tax
Sharing
Agreement,"
in
certain
circumstances,
CH
Parent
will
be
required
to
indemnify
Liberty,
its
subsidiaries,
and
certain
related
persons
for
taxes
and
losses
resulting
from
the
Spin-Off.
For
a
more
complete
discussion
of
the
opinion
of
Baker
Botts
and
the
material
U.S.
federal
income
tax
consequences
of
the
Spin-Off
to
Liberty
and
its
stockholders,
please
see
"Material
U.S.
Federal
Income
Tax
Consequences
of
the
Spin-Off."
25
Table
of
Contents
We may have a significant indemnity obligation to Liberty, which is not limited in amount or subject to any cap, if the Spin-Off is treated as a taxable
transaction.
Pursuant
to
the
tax
sharing
agreement
that
we
will
enter
into
with
Liberty
in
connection
with
the
Spin-Off
(the
tax sharing agreement ),
we
will
be
required
to
indemnify
Liberty,
its
subsidiaries
and
certain
related
persons
for
taxes
and
losses
resulting
from
the
failure
of
the
Spin-Off
to
qualify
as
a
tax-free
transaction
under
Section
355
of
the
Code
to
the
extent
that
such
taxes
and
losses
(i)
result
primarily
from,
individually
or
in
the
aggregate,
the
breach
of
certain
covenants
made
by
our
company
(applicable
to
actions
or
failures
to
act
by
CH
Parent
and
its
subsidiaries
following
the
completion
of
the
Spin-Off)
or
(ii)
result
from
the
application
of
Section
355(e)
of
the
Code
to
the
Spin-Off
as
a
result
of
the
treatment
of
the
Spin-Off
as
part
of
a
plan
(or
series
of
related
transactions)
pursuant
to
which
one
or
more
persons
acquire,
directly
or
indirectly,
a
50-percent
or
greater
interest
(measured
by
vote
or
value)
in
the
stock
of
CH
Parent
(or
any
predecessor
or
successor
corporation).
Our
indemnification
obligations
to
Liberty,
its
subsidiaries
and
certain
related
persons
will
not
be
limited
in
amount
or
subject
to
any
cap.
If
we
are
required
to
indemnify
Liberty,
its
subsidiaries
or
such
related
persons
under
the
circumstances
set
forth
in
the
tax
sharing
agreement,
we
may
be
subject
to
substantial
liabilities,
which
could
materially
adversely
affect
our
financial
position.
For
a
more
detailed
discussion
of
the
terms
of
the
tax
sharing
agreement,
please
see
"Certain
Relationships
and
Related
Party
Transactions—Relationships
between
CH
Parent
and
Liberty
and/or
Liberty
Media—Tax
Sharing
Agreement."
We may determine to forgo certain transactions in order to avoid the risk of incurring significant tax-related liabilities.
Under
the
tax
sharing
agreement,
we
will
covenant
not
to
take
any
action,
or
fail
to
take
any
action,
following
the
Spin-Off,
which
action
or
failure
to
act
is
inconsistent
with
the
Spin-Off
qualifying
for
tax-free
treatment
under
Section
355
of
the
Code.
Further,
the
tax
sharing
agreement
will
require
that
we
generally
indemnify
Liberty
for
any
taxes
or
losses
incurred
by
Liberty
(or
its
subsidiaries)
resulting
from
breaches
of
such
covenants
or
resulting
from
the
application
of
Section
355(e)
of
the
Code
to
the
Spin-Off
as
a
result
of
the
treatment
of
the
Spin-Off
as
part
of
a
plan
(or
series
of
related
transactions)
pursuant
to
which
one
or
more
persons
acquire,
directly
or
indirectly,
a
50-percent
or
greater
interest
(measured
by
vote
or
value)
in
the
stock
of
our
company
(or
any
predecessor
or
successor
corporation).
Generally,
under
Section
355(e)
of
the
Code,
an
acquisition
of
the
stock
of
our
company
will
be
presumed
to
be
part
of
a
plan
(or
series
of
related
transactions)
with
the
Spin-Off
if
such
acquisition
occurs
within
two
years
before
or
after
the
Spin-Off
(or
relates
to
an
acquisition
during
the
two-year
period
prior
the
Spin-Off
of
the
Liberty
Ventures
common
stock
with
respect
to
which
our
stock
was
distributed).
This
presumption,
however,
may
be
rebutted
based
upon
an
analysis
of
the
facts
and
circumstances
related
to
the
acquisition
and
the
Spin-Off,
including
a
weighing
of
certain
plan
and
non-plan
factors
set
forth
in
Treasury
regulations
promulgated
under
Section
355(e)
of
the
Code.
Further,
these
Treasury
regulations
establish
certain
safe
harbors
under
which
an
acquisition
will
not
be
considered
to
be
part
of
a
plan
(or
series
of
related
transactions)
with
the
Spin-Off
for
purposes
of
Section
355(e)
of
the
Code.
The
application
of
such
safe
harbors
generally
depends
on
factors
such
as
the
timing,
form,
and
relative
size
of
the
acquisition,
as
well
as,
in
some
cases,
the
identity
of
the
parties
involved
in
the
acquisition.
After
taking
such
safe
harbors,
facts
and
circumstances,
and
the
tax
sharing
agreement's
restrictions
on
our
actions
into
account,
we
might
determine
to
forgo
certain
transactions
that
might
otherwise
be
advantageous
if
such
transactions
would
be
inconsistent
with
the
Spin-Off's
qualification
under
Section
355
of
the
Code,
including
as
a
result
of
the
application
of
Section
355(e)
of
the
Code
to
the
Spin-Off.
In
particular,
we
might
determine
to
continue
to
operate
certain
of
our
business
operations
for
the
foreseeable
future
even
if
a
sale
or
discontinuance
of
such
business
might
otherwise
be
advantageous.
26
Table
of
Contents
Moreover,
in
light
of
the
requirements
of
Section
355(e)
of
the
Code,
we
might
determine
to
forgo
certain
transactions,
including
share
repurchases,
stock
issuances,
certain
asset
dispositions
and
other
strategic
transactions,
for
some
period
of
time
following
the
Spin-Off.
In
addition,
our
indemnity
obligation
under
the
tax
sharing
agreement
might
discourage,
delay
or
prevent
our
entering
into
a
change
of
control
transaction
for
some
period
of
time
following
the
Spin-Off.
We may incur material costs as a result of our separation from Liberty.
We
will
incur
costs
and
expenses
not
previously
incurred
as
a
result
of
our
separation
from
Liberty.
These
increased
costs
and
expenses
may
arise
from
various
sources,
including
financial
reporting,
costs
associated
with
complying
with
the
federal
securities
laws
(including
compliance
with
the
Sarbanes-Oxley
Act
of
2002),
tax
administration
and
human
resources-related
functions.
Although
Liberty
Media
will
continue
to
provide
certain
of
these
services
for
us
under
the
services
agreement,
we
cannot
assure
you
that
the
services
agreement
will
continue
or
that
these
costs
will
not
be
material
to
our
business.
Prior to the Spin-Off, we will not have been an independent public company and we may be unable to make, on a timely or cost-effective basis, the
changes necessary to operate as an independent public company.
Prior
to
the
Spin-Off,
our
business
was
operated
by
Liberty
as
part
of
its
broader
corporate
organization,
rather
than
as
an
independent
company.
Liberty's
senior
management
oversaw
the
strategic
direction
of
our
businesses
and
Liberty
(directly
and
through
its
services
agreement
with
Liberty
Media)
performed
various
corporate
functions
for
us,
including,
but
not
limited
to:
•
selected
human
resources
related
functions;
•
tax
administration;
•
selected
legal
functions
(including
compliance
with
the
Sarbanes-Oxley
Act
of
2002),
as
well
as
external
reporting;
and
•
treasury
administration,
investor
relations
and
internal
audit
functions.
Following
the
Spin-Off,
neither
Liberty
nor
Liberty
Media
will
have
any
obligation
to
provide
these
functions
to
us
other
than
those
services
that
will
be
provided
by
Liberty
Media
pursuant
to
the
services
agreement
between
us
and
Liberty
Media.
If,
once
our
services
agreement
terminates,
we
do
not
have
in
place
our
own
systems
and
business
functions,
we
do
not
have
agreements
with
other
providers
of
these
services
or
we
are
not
able
to
make
these
changes
cost
effectively,
we
may
not
be
able
to
operate
our
business
effectively
and
our
profitability
may
decline.
If
Liberty
Media
does
not
continue
to
perform
the
services
to
be
provided
to
us
under
the
services
agreement,
we
may
not
be
able
to
operate
our
business
effectively
after
the
Spin-Off.
We may not realize the potential benefits from the Spin-Off in the near term or at all.
In
this
prospectus,
we
have
described
anticipated
strategic
and
financial
benefits
we
expect
to
realize
as
a
result
of
our
separation
from
Liberty.
See
"The
SpinOff—Reasons
for
the
Spin-Off."
In
particular,
we
believe
that
the
Spin-Off
will
better
position
us
to
take
advantage
of
business
opportunities,
strategic
alliances
and
other
acquisitions
through
CH
Parent's
enhanced
acquisition
currency,
as
well
as
provide
our
management
team
with
greater
flexibility
and
independence
in
making
commercial
decisions
that
benefit
our
company.
We
also
expect
the
Spin-Off
to
enable
CH
Parent
to
provide
its
employees
with
more
attractive
equity
incentive
awards.
However,
no
assurance
can
be
given
that
the
market
will
react
favorably
to
the
Spin-Off
or
that
the
current
discount
applied
by
the
market
to
the
Liberty
Ventures
common
stock
will
not
be
applied
to
CH
Parent's
common
stock,
thereby
causing
CH
Parent's
equity
to
not
be
as
attractive
to
its
employees
and
any
potential
acquisition
counterparties.
In
addition,
no
assurance
can
be
given
that
any
investment,
acquisition
or
other
strategic
opportunities
will
become
available
following
the
Spin-Off
on
terms
that
CH
Parent
finds
27
Table
of
Contents
favorable
or
at
all.
Given
the
added
costs
associated
with
the
completion
of
the
Spin-Off,
including
the
separate
accounting,
legal
and
other
compliance
costs
of
being
a
separate
public
company,
our
failure
to
realize
the
anticipated
benefits
of
the
Spin-Off
in
the
near
term
or
at
all
could
adversely
affect
our
company.
Our inter-company agreements are being negotiated while we are a subsidiary of Liberty.
We
are
entering
into
a
number
of
inter-company
agreements
covering
matters
such
as
tax
sharing
and
our
responsibility
for
certain
liabilities
previously
undertaken
by
Liberty
for
our
business.
In
addition,
we
are
entering
into
a
services
agreement
with
Liberty
Media
pursuant
to
which
Liberty
Media
will
provide
to
us
certain
management,
administrative,
financial,
treasury,
accounting,
tax,
legal
and
other
services,
for
which
we
will
reimburse
them
on
a
fixed-fee
basis.
The
terms
of
these
inter-company
agreements
(specifically
the
reorganization
and
tax
sharing
agreements)
are
being
established
while
we
are
a
subsidiary
of
Liberty
and,
therefore,
may
not
be
the
result
of
arms'-length
negotiations.
Although
we
believe
that
the
negotiations
with
Liberty
Media
regarding
the
services
agreement
will
be
at
arms'-length,
the
persons
negotiating
on
behalf
of
Liberty
Media
also
serve
as
officers
of
Liberty,
as
described
above.
We
believe
that
the
terms
of
these
inter-company
agreements
are
commercially
reasonable
and
fair
to
all
parties
under
the
circumstances;
however,
conflicts
could
arise
in
the
interpretation
or
any
extension
or
renegotiation
of
the
foregoing
agreements
after
the
Spin-Off.
See
"Certain
Relationships
and
Related
Party
Transactions."
Liberty's board of directors may abandon the Spin-Off at any time, and its board of directors may determine to amend the terms of any agreement we
enter into relating to the Spin-Off.
No
assurance
can
be
given
that
the
Spin-Off
will
occur,
or
if
it
occurs
that
it
will
occur
on
the
terms
described
in
this
prospectus.
In
addition
to
the
conditions
to
the
Spin-Off
described
herein
(certain
of
which
may
be
waived
by
the
Liberty
board
of
directors
in
its
sole
discretion),
the
Liberty
board
of
directors
may
abandon
the
Spin-Off
at
any
time
prior
to
the
distribution
date
for
any
reason
or
for
no
reason.
In
addition,
the
agreements
to
be
entered
into
by
CH
Parent
with
Liberty
in
connection
with
the
Spin-Off
(including
the
reorganization
agreement
and
the
tax
sharing
agreement)
may
be
amended
or
modified
prior
to
the
distribution
date
in
the
sole
discretion
of
Liberty.
If
any
condition
to
the
Spin-Off
is
waived
or
if
any
material
amendments
or
modifications
are
made
to
the
terms
of
the
Spin-Off
or
to
any
of
our
ancillary
agreements
prior
to
the
Spin-Off,
Liberty
intends
to
promptly
issue
a
press
release
and
file
a
Current
Report
on
Form
8-K
informing
the
market
of
the
substance
of
such
waiver,
amendment
or
modification.
Factors Relating to our Common Stock and the Securities Market
We cannot be certain that an active trading market will develop or be sustained after the Spin-Off, and, following the Spin-Off, our stock price may
fluctuate significantly.
There
can
be
no
assurance
that
an
active
trading
market
will
develop
or
be
sustained
for
our
common
stock
after
the
Spin-Off.
We
cannot
predict
the
prices
at
which
any
series
of
our
common
stock
may
trade
after
the
Spin-Off,
the
effect
of
the
Spin-Off
on
the
trading
prices
of
the
Liberty
Ventures
common
stock
or
whether
the
market
value
of
the
shares
of
our
common
stock
and
the
shares
of
the
corresponding
series
of
the
Liberty
Ventures
common
stock
held
by
a
stockholder
after
the
Spin-Off
will
be
less
than,
equal
to
or
greater
than
the
market
value
of
a
share
of
the
corresponding
series
of
Liberty
Ventures
common
stock
held
by
such
stockholder
prior
to
the
Spin-Off.
The
market
price
of
our
common
stock
may
fluctuate
significantly
due
to
a
number
of
factors,
some
of
which
may
be
beyond
our
control,
including:
•
actual
or
anticipated
fluctuations
in
our
operating
results;
28
Table
of
Contents
•
changes
in
earnings
estimates
by
securities
analysts
or
our
ability
to
meet
those
estimates;
•
the
operating
and
stock
price
performance
of
comparable
companies;
and
•
domestic
and
foreign
economic
conditions.
Transactions in our common stock by our directors, officers and employees could depress the market price of our common stock.
Following
the
Spin-Off,
our
directors,
officers
and
employees
will
own
shares
of,
and
equity
incentive
awards
with
respect
to,
our
common
stock.
Sales
of
or
other
transactions
relating
to
shares
of
our
common
stock
by
our
directors,
officers
or
employees
could
cause
a
perception
in
the
marketplace
that
our
stock
price
has
peaked
or
that
adverse
events
or
trends
have
occurred
or
may
be
occurring
at
our
company.
This
perception
can
result
notwithstanding
any
personal
financial
motivation
for
these
insider
transactions.
As
a
result,
insider
transactions
could
depress
the
market
price
for
shares
of
one
or
more
series
of
our
common
stock.
In
addition,
in
connection
with
the
Spin-Off,
outstanding
equity
incentive
awards
with
respect
to
CommerceHub's
existing
common
stock
will
be
converted
into
options
to
acquire
shares
of
our
Series
C
common
stock.
Some
of
these
awards
have
fully
vested,
while
others
remain
subject
to
vesting
conditions.
We
cannot
predict
the
frequency
or
magnitude
of
any
option
exercises.
Following
the
Spin-Off,
we
will
implement
a
broker-assisted
option
settlement
program,
which
will
allow
our
optionholders
to
exercise
their
awards
through
open
market
sales
of
shares
to
settle
the
exercise
price
and/or
tax
withholding
obligations.
Concentrated
periods
during
which
optionholders
exercise
and
sell
their
shares
could
adversely
affect
the
price
of
any
series
of
our
stock.
If, following the Spin-Off, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over
financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.
Section
404
of
the
Sarbanes-Oxley
Act
of
2002
requires
any
company
subject
to
the
reporting
requirements
of
the
U.S.
securities
laws
to
do
a
comprehensive
evaluation
of
its
and
its
consolidated
subsidiaries'
internal
control
over
financial
reporting.
To
comply
with
this
statute,
we
will
be
required
to
document
and
test
our
internal
control
procedures,
and
our
management
will
be
required
to
assess
and
issue
a
report
concerning
our
internal
control
over
financial
reporting.
Our
independent
auditors
are
not
required
to
express
an
opinion
as
to
the
effectiveness
of
our
internal
control
over
financial
reporting
until
after
we
are
no
longer
an
"emerging
growth
company."
At
such
time,
however,
our
independent
auditors
may
issue
a
report
that
is
adverse
in
the
event
it
is
not
satisfied
with
the
level
at
which
our
internal
control
over
financial
reporting
is
documented,
designed
or
operating.
Additionally,
the
lack
of
a
report
from
our
independent
auditors
may
result
in
unsuccessful
internal
controls
until
such
a
report
is
obtained.
Our
compliance
with
Section
404
of
the
Sarbanes-Oxley
Act
will
first
be
tested
in
connection
with
the
filing
of
our
Annual
Report
on
Form
10-K
for
the
fiscal
year
ending
December
31,
2017
(assuming
we
are
no
longer
an
"emerging
growth
company"
at
such
time).
The
rules
governing
the
standards
that
must
be
met
for
management
to
assess
our
internal
control
over
financial
reporting
are
complex
and
require
significant
documentation,
testing
and
possible
remediation
to
meet
the
detailed
standards
under
the
rules.
See
"—We
have
not
performed
an
evaluation
of
our
internal
control
over
financial
reporting."
During
the
course
of
its
future
testing,
our
management
may
identify
material
weaknesses
or
deficiencies
which
may
not
be
remedied
in
time
to
meet
the
deadline
imposed
by
the
Sarbanes-Oxley
Act.
If
our
management
cannot
favorably
assess
the
effectiveness
of
our
internal
control
over
financial
reporting
or
our
auditors
identify
material
weaknesses
in
our
internal
controls,
in
each
case,
as
of
the
applicable
time
at
which
such
controls
are
required
to
be
tested,
investor
confidence
in
our
financial
results
may
weaken,
and
our
stock
price
may
suffer.
29
Table
of
Contents
We have not performed an evaluation of our internal control over financial reporting.
Internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
in
accordance
with
U.S.
GAAP.
We
have
identified
a
material
weakness
in
our
internal
control
over
financial
reporting
relating
to
the
processes
and
controls
to
properly
identify
and
account
for
transactions
of
a
complex
and
non-routine
nature.
We
are
taking
active
steps
towards
fully
remediating
the
material
weakness
through
support
from
Liberty
and
the
hiring
of
appropriate
individuals,
including
a
Chief
Accounting
Officer,
whose
employment
with
our
company
commenced
in
May
2016
and
who
is
responsible
for
identifying
the
staffing
and
resource
needs
of
our
company
required
to
remediate
the
material
weakness.
While
we
are
working
to
remediate
the
material
weakness
as
quickly
and
efficiently
as
possible,
at
this
time
we
cannot
provide
an
estimate
of
costs
expected
to
be
incurred
in
connection
with
implementing
this
remediation
plan,
nor
can
we
provide
an
estimate
of
the
time
it
will
take
to
complete
this
remediation
plan.
We
do,
however,
intend
to
remediate
fully
this
material
weakness
prior
to
CommerceHub
becoming
subject
to
the
compliance
and
reporting
requirements
of
Section
404
of
the
Sarbanes-Oxley
Act
of
2002.
We
are
currently
in
the
process
of
reviewing,
documenting
and
testing
our
internal
control
over
financial
reporting.
We
have
not
performed
an
evaluation
of
our
internal
control
over
financial
reporting,
such
as
required
by
Section
404
of
the
Sarbanes-Oxley
Act
of
2002,
nor
have
we
engaged
an
independent
registered
public
accounting
firm
to
perform
an
audit
of
our
internal
control
over
financial
reporting
as
of
any
balance
sheet
date
or
for
any
period
reported
in
our
financial
statements.
We qualify as an emerging growth company, and any decision on our part to comply with certain reduced reporting and disclosure requirements
applicable to emerging growth companies could make our common stock less attractive to investors.
We
are
an
emerging
growth
company,
and,
for
as
long
as
we
continue
to
be
an
emerging
growth
company,
we
currently
intend
to
take
advantage
of
exemptions
from
various
reporting
requirements
applicable
to
other
public
companies
but
not
to
emerging
growth
companies,
including,
but
not
limited
to,
not
being
required
to
have
our
independent
registered
public
accounting
firm
audit
our
internal
control
over
financial
reporting
under
Section
404
of
the
SarbanesOxley
Act,
reduced
disclosure
obligations
regarding
executive
compensation
in
our
registration
statements,
periodic
reports
and
proxy
statements,
and
exemptions
from
the
requirements
of
holding
a
nonbinding
advisory
vote
on
executive
compensation
and
stockholder
approval
of
any
golden
parachute
payments
not
previously
approved.
We
will
cease
to
be
an
emerging
growth
company
upon
the
earliest
of:
(i)
the
end
of
the
fiscal
year
following
the
fifth
anniversary
of
the
Spin-Off;
(ii)
the
first
fiscal
year
after
our
annual
gross
revenue
is
$1.0
billion
or
more;
(iii)
the
date
on
which
we
have,
during
the
previous
three-year
period,
issued
more
than
$1.0
billion
in
non-convertible
debt
securities;
or
(iv)
the
end
of
any
fiscal
year
in
which
the
market
value
of
our
common
stock
held
by
nonaffiliates
exceeds
$700
million
as
of
the
end
of
the
second
quarter
of
that
fiscal
year.
We
cannot
predict
whether
investors
will
find
our
common
stock
less
attractive
if
we
choose
to
rely
on
these
exemptions
while
we
are
an
emerging
growth
company.
If
some
investors
find
our
common
stock
less
attractive
as
a
result
of
any
choices
to
reduce
future
disclosure,
there
may
be
a
less
active
trading
market
for
our
common
stock
and
the
price
of
our
common
stock
may
be
more
volatile.
Under
the
JOBS
Act,
emerging
growth
companies
can
also
delay
adopting
new
or
revised
accounting
standards
until
such
time
as
those
standards
apply
to
private
companies.
We
have
irrevocably
elected
not
to
avail
ourselves
of
this
accommodation
allowing
for
delayed
adoption
of
new
or
revised
accounting
standards,
and,
we
are
therefore
subject
to
the
same
new
or
revised
accounting
standards
as
other
public
companies
that
are
not
emerging
growth
companies.
30
Table
of
Contents
It may be difficult for a third party to acquire us, even if doing so may be beneficial to our stockholders.
Certain
provisions
of
our
certificate
of
incorporation
and
bylaws
may
discourage,
delay
or
prevent
a
change
in
control
of
our
company
that
a
stockholder
may
consider
favorable.
These
provisions
include
the
following:
•
authorizing
a
capital
structure
with
multiple
series
of
common
stock:
a
Series
B
that
entitles
the
holders
to
ten
votes
per
share,
a
Series
A
that
entitles
the
holders
to
one
vote
per
share
and
a
Series
C
that,
except
as
otherwise
required
by
applicable
law,
entitles
the
holders
to
no
voting
rights;
•
authorizing
the
issuance
of
"blank
check"
preferred
stock,
which
could
be
issued
by
our
board
of
directors
to
increase
the
number
of
outstanding
shares
and
thwart
a
takeover
attempt;
•
classifying
our
board
of
directors
with
staggered
three-year
terms,
which
may
lengthen
the
time
required
to
gain
control
of
our
board
of
directors;
•
limiting
who
may
call
special
meetings
of
stockholders;
•
prohibiting
stockholder
action
by
written
consent,
thereby
requiring
all
stockholder
actions
to
be
taken
at
a
meeting
of
the
stockholders;
•
establishing
advance
notice
requirements
for
nominations
of
candidates
for
election
to
our
board
of
directors
or
for
proposing
matters
that
can
be
acted
upon
by
stockholders
at
stockholder
meetings;
•
requiring
stockholder
approval
by
holders
of
at
least
80%
of
our
voting
power
or
the
approval
by
at
least
75%
of
our
board
of
directors
with
respect
to
certain
extraordinary
matters,
such
as
a
merger
or
consolidation
of
our
company,
a
sale
of
all
or
substantially
all
of
our
assets
or
an
amendment
to
our
certificate
of
incorporation;
and
•
the
existence
of
authorized
and
unissued
stock
which
would
allow
our
board
of
directors
to
issue
shares
to
persons
friendly
to
current
management,
thereby
protecting
the
continuity
of
its
management,
or
which
could
be
used
to
dilute
the
stock
ownership
of
persons
seeking
to
obtain
control
of
us.
After the Spin-Off, we may be controlled by one principal stockholder.
John
C.
Malone
currently
beneficially
owns
shares
of
Liberty
Ventures
common
stock
representing
approximately
33%
of
the
aggregate
voting
power
of
the
outstanding
shares
of
Liberty
Ventures
common
stock
as
of
April
30,
2016.
Following
the
consummation
of
the
Spin-Off,
Mr.
Malone
is
expected
to
beneficially
own
shares
of
our
common
stock
representing
less
than
1%
of
CH
Parent's
Series
A
common
stock,
approximately
94.3%
of
CH
Parent's
Series
B
common
stock,
approximately
5.4%
of
CH
Parent's
Series
C
common
stock
and
approximately
33%
of
CH
Parent's
voting
power,
based
upon
the
distribution
ratios
for
the
SpinOff
and
his
beneficial
ownership
of
LVNTA
and
LVNTB
as
of
April
30,
2016.
Mr.
Malone's
rights
to
vote
or
dispose
of
his
equity
interest
in
CH
Parent
will
not
be
subject
to
any
restrictions
in
favor
of
CH
Parent
other
than
as
may
be
required
by
applicable
law.
See
"Security
Ownership
of
Certain
Beneficial
Owners
and
Management—Security
Ownership
of
Certain
Beneficial
Owners."
Holders of a single series of our common stock may not have any remedies if an action by our board of directors has an adverse effect on only that series
of our common stock.
Principles
of
Delaware
law
and
the
provisions
of
our
certificate
of
incorporation
may
protect
decisions
of
our
board
of
directors
that
have
a
disparate
impact
upon
holders
of
any
single
series
of
our
common
stock.
Under
Delaware
law,
the
board
of
directors
has
a
duty
to
act
with
due
care
and
in
31
Table
of
Contents
the
best
interests
of
all
of
our
stockholders,
including
the
holders
of
all
series
of
our
common
stock.
Principles
of
Delaware
law
established
in
cases
involving
differing
treatment
of
multiple
classes
or
series
of
stock
provide
that
a
board
of
directors
owes
an
equal
duty
to
all
common
stockholders
regardless
of
class
or
series
and
does
not
have
separate
or
additional
duties
to
any
group
of
stockholders.
As
a
result,
in
some
circumstances,
our
directors
may
be
required
to
make
a
decision
that
is
viewed
as
adverse
to
the
holders
of
one
series
of
our
common
stock.
Under
the
principles
of
Delaware
law
and
the
business
judgment
rule,
holders
may
not
be
able
to
successfully
challenge
decisions
that
they
believe
have
a
disparate
impact
upon
the
holders
of
one
series
of
our
stock
if
our
board
of
directors
is
disinterested
and
independent
with
respect
to
the
action
taken,
is
adequately
informed
with
respect
to
the
action
taken
and
acts
in
good
faith
and
in
the
honest
belief
that
the
board
is
acting
in
the
best
interest
of
all
of
our
stockholders.
Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that
may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors,
officers or other employees.
Our
bylaws
provide
that,
unless
we
consent
in
writing
to
an
alternative
forum,
the
Court
of
Chancery
of
the
State
of
Delaware
(or,
if
the
Court
of
Chancery
does
not
have
jurisdiction,
any
state
or
federal
court
located
within
the
State
of
Delaware)
shall
be
the
sole
and
exclusive
forum
for
substantially
all
disputes
between
us
(including
our
directors,
officers,
employees,
and
agents)
and
our
stockholders,
including,
among
others,
any
action
asserting
claims
for
breach
of
fiduciary
duty,
claims
arising
pursuant
to
the
General
Corporation
Law
of
the
State
of
Delaware,
and
claims
governed
by
the
internal
affairs
doctrine.
Any
person
purchasing
or
otherwise
acquiring
any
interest
in
any
shares
of
our
capital
stock
shall
be
deemed
to
have
notice
of
and
to
have
consented
to
this
provision
of
our
bylaws.
This
choice-of-forum
provision
may
limit
our
stockholders'
ability
to
bring
a
claim
in
a
judicial
forum
that
it
finds
favorable
for
disputes
with
us
or
our
directors,
officers
or
other
employees,
which
may
discourage
such
lawsuits.
Alternatively,
if
a
court
were
to
find
this
provision
of
our
bylaws
inapplicable
or
unenforceable
with
respect
to
one
or
more
of
the
specified
types
of
actions
or
proceedings,
we
may
incur
additional
costs
associated
with
resolving
such
matters
in
other
jurisdictions.
32
Table
of
Contents
CAUTIONARY STATEMENTS CONCERNING FORWARD LOOKING STATEMENTS
Certain
statements
in
this
prospectus
and
in
the
documents
incorporated
by
reference
herein
constitute
forward-looking
statements,
including
certain
statements
relating
to
the
business
strategies,
market
potential
and
future
financial
performance
of
our
company
and
our
subsidiaries,
and
other
matters.
In
particular,
information
included
under
"The
Spin-Off,"
"Risk
Factors,"
"Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations,"
"Description
of
our
Business"
and
"Financial
Statements"
contain
forward-looking
statements.
Forward-looking
statements
inherently
involve
many
risks
and
uncertainties
that
could
cause
actual
results
to
differ
materially
from
those
projected
in
these
statements.
Where,
in
any
forward-looking
statement,
we
express
an
expectation
or
belief
as
to
future
results
or
events,
such
expectation
or
belief
is
expressed
in
good
faith
and
believed
to
have
a
reasonable
basis,
but
such
statements
necessarily
involve
risks
and
uncertainties
and
there
can
be
no
assurance
that
the
expectation
or
belief
will
result
or
be
achieved
or
accomplished.
In
addition
to
the
risk
factors
described
herein
under
the
headings
"Risk
Factors,"
the
following
include
some
but
not
all
of
the
factors
that
could
cause
actual
results
or
events
to
differ
materially
from
those
anticipated:
•
customer
demand
for
products
and
services
and
the
ability
of
our
company
to
adapt
to
changes
in
demand;
•
competitor
responses
to
products
and
services;
•
the
levels
of
online
traffic
to
our
customer's
websites
and
their
ability
to
convert
visitors
into
customers;
•
the
growth
of
the
e-commerce
industry
and
the
SaaS
enterprise
application
software
market
in
general
and
particularly
in
our
markets;
•
the
growth
of
non-traditional
e-commerce
devices
and
platforms,
including
mobile
devices
and
social
networking
applications;
•
the
achievement
of
advances
in
and
expansion
of
our
platform
and
our
solutions;
•
our
ability
to
predict
future
commerce
trends
and
technology;
•
the
impact
of
changes
in
search
engine
algorithms
and
dynamics
or
search
engine
disintermediation;
•
changes
to
technologies
used
in
our
platform
or
new
versions
or
upgrades
of
operating
systems
and
internet
browsers
impacting
the
process
by
which
merchants
and
customers
interface
with
our
platform;
•
uncertainties
inherent
in
the
development
and
integration
of
new
business
lines
and
business
strategies;
•
our
future
financial
performance,
including
availability,
terms
and
deployment
of
capital;
•
our
ability
to
successfully
integrate
and
recognize
anticipated
efficiencies
and
benefits
from
the
businesses
we
acquire;
•
the
ability
of
suppliers
and
vendors
to
deliver
products,
equipment,
software
and
services;
•
availability
of
qualified
personnel;
•
changes
in,
or
failure
or
inability
to
comply
with,
government
regulations,
including,
without
limitation,
adverse
outcomes
from
regulatory
proceedings;
•
changes
in
the
nature
of
key
strategic
relationships
with
partners
and
vendors;
33
Table
of
Contents
•
general
economic
and
business
conditions
and
industry
trends
including
the
current
economic
downturn;
•
consumer
spending
levels,
including
the
availability
and
amount
of
individual
consumer
debt;
•
costs
related
to
the
maintenance
and
enhancement
of
brand
awareness
by
our
subsidiaries;
•
advertising
spending
levels;
•
rapid
technological
changes;
•
the
regulatory
and
competitive
environment
of
the
industries
in
which
our
company
operates;
and
•
fluctuations
in
foreign
currency
exchange
rates
and
threatened
terrorist
attacks,
political
and
economic
unrest
in
international
markets
and
ongoing
military
action
around
the
world.
These
forward-looking
statements
and
such
risks,
uncertainties
and
other
factors
speak
only
as
of
the
date
of
this
prospectus,
and
we
expressly
disclaim
any
obligation
or
undertaking
to
disseminate
any
updates
or
revisions
to
any
forward-looking
statement
contained
herein,
to
reflect
any
change
in
our
expectations
with
regard
thereto,
or
any
other
change
in
events,
conditions
or
circumstances
on
which
any
such
statement
is
based.
When
considering
such
forward-looking
statements,
you
should
keep
in
mind
the
factors
described
in
"Risk
Factors"
and
other
cautionary
statements
contained
or
incorporated
in
this
document.
Such
risk
factors
and
statements
describe
circumstances
which
could
cause
actual
results
to
differ
materially
from
those
contained
in
any
forward-looking
statement.
34
Table
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Contents
THE SPIN-OFF
Background for the Spin-Off
The
board
of
directors
of
Liberty
periodically
reviews
with
management
the
strategic
goals
and
prospects
of
its
various
businesses,
equity
affiliates
and
other
investments.
In
2012,
Liberty
recapitalized
its
common
stock
into
two
new
tracking
stocks:
the
Interactive
Group
(which,
in
2015,
was
renamed
the
QVC
Group)
and
the
Ventures
Group,
for
the
purpose
of
creating
greater
transparency
for
the
assets
and
liabilities
attributed
to
each
group,
among
other
reasons.
Our
company
is
currently
attributed
to
the
Ventures
Group,
having
previously
been
attributed
to
the
QVC
Group.
The
QVC
Group
common
stock
and
Liberty
Ventures
common
stock
are
intended
to
track
and
reflect
the
economic
performance
of
the
QVC
Group
and
the
Ventures
Group,
respectively.
Tracking
stock
is
a
type
of
common
stock
that
the
issuing
company
intends
to
reflect
or
"track"
the
economic
performance
of
a
particular
business
or
"group,"
rather
than
the
economic
performance
of
the
company
as
a
whole.
While
the
QVC
Group
and
the
Ventures
Group
have
separate
collections
of
businesses,
assets
and
liabilities
attributed
to
them,
no
group
is
a
separate
legal
entity
and
therefore
no
group
can
own
assets,
issue
securities
or
enter
into
legally
binding
agreements.
Holders
of
tracking
stocks
have
no
direct
claim
to
the
group's
assets
and
are
not
represented
by
separate
boards
of
directors.
Instead,
holders
of
tracking
stock
are
stockholders
of
the
parent
corporation,
with
a
single
board
of
directors
and
subject
to
all
of
the
risks
and
liabilities
of
the
parent
corporation.
The
Ventures
Group
is
comprised
primarily
of
Liberty's
operating
subsidiaries
Bodybuilding
and
CommerceHub
and
Liberty's
interests
in
Expedia,
FTD,
Interval
and
LendingTree,
along
with
investments
in
TWX,
Liberty
Broadband
and
Charter,
cash,
certain
liabilities
related
to
exchangeable
debentures
of
Liberty
LLC
and
certain
deferred
tax
liabilities.
The
QVC
Group
is
primarily
focused
on
Liberty's
merchandise-focused
televised-shopping
programs,
internet
and
mobile
application
businesses
and
has
attributed
to
it
Liberty's
operating
subsidiaries
QVC
and
zulily,
and
Liberty's
interest
in
HSN,
along
with
cash
and
certain
liabilities
that
reside
with
QVC
and
the
other
attributed
entities,
as
well
as
outstanding
senior
notes
and
one
series
of
Liberty
LLC's
exchangeable
debentures
and
certain
deferred
tax
liabilities.
At
present,
Liberty
intends
to
pursue
a
plan
to
split-off
a
newly
formed
company,
Liberty
Expedia
Holdings,
Inc.,
comprised
of,
among
other
things,
its
entire
ownership
interest
in
Expedia
and
its
subsidiary
Bodybuilding.
In
the
event
such
split-off
occurs,
Liberty's
interest
in
Expedia
and
Bodybuilding
will
no
longer
be
attributed
to
the
Ventures
Group.
Similarly,
upon
completion
of
the
Spin-Off,
CommerceHub
will
no
longer
be
attributed
to
the
Ventures
Group.
Although
the
public
markets
have
responded
favorably
to
these
two
tracking
stocks,
Liberty
believes
that
the
public
markets
continue
to
apply
a
meaningful
discount
to
the
underlying
value
of
the
businesses
and
assets
attributed
to
the
Ventures
Group
in
establishing
the
trading
value
of
the
Liberty
Ventures
common
stock
due
to
the
interrelationships
of
the
businesses
of
Liberty,
the
multiple
layers
of
financial
reporting
and
uncertainty
with
respect
to
the
allocation
of
corporate
opportunities
and
capital
resources
among
Liberty's
tracking
stock
groups.
Accordingly,
in
the
fall
of
2015,
the
Liberty
board
of
directors
determined
to
pursue
the
Spin-Off,
as
described
in
more
detail
below.
Our
company
is
currently
a
subsidiary
of
Liberty.
Following
the
Spin-Off,
our
principal
business,
assets
and
liabilities
will
consist
of
CommerceHub
(such
business
and
assets,
as
well
as
any
related
liabilities,
the
CH Parent Assets and Liabilities ).
To
accomplish
the
Spin-Off,
following
the
internal
restructuring
as
described
below,
Liberty
will
effect
the
distribution,
whereby
holders
of
LVNTA
and
LVNTB
will
receive,
by
means
of
a
dividend,
shares
of
our
Series
A
common
stock
and
Series
C
common
stock,
and
shares
of
our
Series
B
common
stock
and
Series
C
common
stock,
respectively.
Holders
of
QVCA
and
QVCB
will
not
receive
shares
of
our
common
stock
in
the
Spin-Off.
Following
the
Spin-Off,
Liberty
will
cease
to
own
any
equity
interest
in
our
company,
and
we
will
be
an
independent
publicly
traded
company.
No
vote
of
Liberty's
stockholders
is
required
or
being
sought
in
connection
with
the
Spin-Off,
and
holders
of
Liberty
Ventures
common
stock
will
have
no
appraisal
rights
in
connection
with
the
Spin-Off.
35
Table
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Contents
Reasons for the Spin-Off
In
determining
to
approve
the
Spin-Off,
Liberty
believed
that
the
Spin-Off
would
result
in
the
creation
of
stockholder
value
because
it
believed
the
aggregate
trading
value
of
our
common
stock
and
the
Liberty
Ventures
common
stock
would
exceed
the
aggregate
trading
value
of
the
Liberty
Ventures
common
stock
in
the
absence
of
the
Spin-Off,
although
there
can
be
no
assurance
that
this
will
occur.
The
Liberty
board
of
directors
took
into
account
a
number
of
factors
in
approving
the
Spin-Off,
including
the
following:
•
The
creation
of
a
more
traditional,
asset-backed
security
in
our
common
stock
is
expected
to
provide
greater
transparency
for
investors
with
respect
to
our
business,
resulting
in
more
focus
and
attention
by
the
investment
community
on
our
business
and
better
highlighting
our
value.
•
The
Spin-Off
is
expected
to
provide
greater
flexibility
and
independence
for
our
management
team
to
make
quick
and
decisive
commercial
decisions
that
would
benefit
our
company,
as
our
company's
management
team
is
currently
required
to
gain
approval
from
Liberty
for
key
strategic
decisions.
•
The
Spin-Off
is
expected
to
provide
our
company
with
a
more
attractive
equity
currency
to
use
to
fund
strategic
acquisitions
and
opportunities.
We
believe
that
our
independent,
publicly
traded
stock
following
the
Spin-Off
should
be
more
efficiently
valued
as
compared
to
the
value
the
market
currently
assigns
to
our
company
as
a
subsidiary
of
Liberty.
Further,
we
believe
that
the
reduced
complexity
of
our
capital
structure
following
the
Spin-Off,
as
compared
to
Liberty,
as
well
as
our
ability
to
offer
a
pure-play
equity
currency,
will
allow
us
to
make
more
competitive
acquisition
offers,
consisting
of
consideration
that
is
more
attractive
to
target
stockholders.
•
The
Spin-Off
is
expected
to
enhance
the
ability
of
our
company
to
more
effectively
tailor
our
employee
benefit
plans
and
retention
programs,
including
by
converting
our
cash-settled
equity
awards
into
stock-settled
equity
awards,
which
will
allow
us
to
preserve
capital
to
grow
our
business
and
avoid
liquidity
issues.
In
addition,
we
believe
the
issuance
of
our
independent,
publicly
traded,
and
more
efficiently
priced
equity
securities
following
the
Spin-Off
will
be
more
attractive
to
our
management
and
employees
and
less
dilutive
to
our
stockholders.
Liberty
also
expects
that
its
outstanding
equity
awards
with
respect
to
Liberty
Ventures
common
stock
will
become
more
valuable
and
attractive
following
the
Spin-Off
as
a
result
of
the
expected
increase
in
the
aggregate
trading
price
of
the
Liberty
Ventures
common
stock
and
our
common
stock,
thereby
becoming
a
more
effective
tool
in
incentivizing
and
retaining
its
management
and
employees.
The
Liberty
board
of
directors
also
considered
a
number
of
costs
and
risks
associated
with
the
Spin-Off
in
approving
the
Spin-Off,
including
the
following:
•
after
the
Spin-Off,
the
Liberty
Ventures
common
stock
and
our
company
will
each
have
smaller
individual
market
capitalizations
than
the
current
market
capitalization
of
the
Liberty
Ventures
common
stock,
and
their
trading
prices
may
be
more
volatile
than
the
Liberty
Ventures
tracking
stock
price
was
prior
to
the
Spin-Off.
The
board
also
considered
the
possibility
that
the
combined
market
values
of
the
separate
stocks
may
be
lower
than
the
market
value
of
the
Liberty
Ventures
common
stock
prior
to
the
Spin-Off;
•
the
risk
of
being
unable
to
achieve
the
benefits
expected
from
the
Spin-Off;
•
the
loss
of
synergies
from
operating
as
one
company,
particularly
with
respect
to
administrative
and
support
functions;
•
the
potential
disruption
of
the
businesses
of
Liberty
and
CommerceHub,
as
their
management
and
employees
devote
time
and
resources
to
completing
the
Spin-Off;
36
Table
of
Contents
•
the
substantial
costs
of
effecting
the
Spin-Off
and
continued
compliance
with
legal
and
other
requirements
applicable
to
two
separate
public
reporting
companies;
and
•
the
potential
tax
liabilities
that
could
arise
from
the
Spin-Off,
including
the
possibility
that
the
IRS
could
successfully
assert
that
the
Spin-Off
is
taxable
to
holders
of
Liberty
Ventures
common
stock
and/or
to
Liberty.
In
the
event
such
tax
liabilities
were
to
arise,
our
company's
potential
indemnity
obligation
to
Liberty
is
not
subject
to
a
cap.
Liberty's
board
of
directors
evaluated
the
costs
and
benefits
of
the
transaction
as
a
whole
and
did
not
find
it
necessary
to
assign
relative
weights
to
the
specific
factors
considered.
Liberty's
board
of
directors
concluded,
however,
that
the
potential
benefits
of
the
Spin-Off
outweighed
its
potential
costs,
and
that
separating
our
company
from
Liberty
in
the
form
of
a
distribution
to
Liberty's
stockholders
that
is
generally
tax-free
is
appropriate,
advisable
and
in
the
best
interests
of
Liberty
and
its
stockholders.
Internal Restructuring
Prior
to
the
Spin-Off,
Liberty
will
effect
an
internal
restructuring
resulting
in
CommerceHub
becoming
a
wholly
owned
subsidiary
of
our
company
(the
internal restructuring ).
As
a
result
of
the
internal
restructuring,
upon
the
effective
time
of
the
Spin-Off,
less
than
1%
of
the
shares
of
our
Series
C
common
stock
will
be
held
by
former
minority
holders
of
CommerceHub
(the
CommerceHub minority holders ),
providing
liquidity
to
such
minority
holders,
as
we
expect
that
shares
of
our
Series
C
common
stock
will
trade
on
the
Nasdaq
Global
Select
Market
following
completion
of
the
Spin-Off
as
described
in
more
detail
above.
Liberty
currently
estimates
that
an
exchange
ratio
of
approximately
2.2
will
be
used
in
the
internal
restructuring.
The
definitive
ratio
will
be
determined
immediately
prior
to
the
completion
of
the
Spin-Off
by
taking
into
account
the
number
of
shares
of
our
common
stock
to
be
distributed
to
holders
of
Liberty
Ventures
common
stock
in
the
Spin-Off
and
the
CommerceHub
minority
holder's
equity
interest
in
CommerceHub
prior
to
the
internal
restructuring,
such
that
each
CommerceHub
minority
holder
will
receive
a
number
of
shares
of
our
Series
C
common
stock
that
provides
such
CommerceHub
minority
holder
with
the
same
percentage
equity
interest
in
CH
Parent
following
the
internal
restructuring
as
it
held
in
CommerceHub
prior
to
the
internal
restructuring.
Interests of Certain Persons
In
connection
with
the
Spin-Off,
the
executive
officers
and
directors
of
Liberty
will
receive
adjustments
to
their
stock
incentive
awards
with
respect
to
Liberty
Ventures
common
stock
and
stock
incentive
awards
with
respect
to
CH
Parent
common
stock.
See
"—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards"
below
for
more
information.
The
executive
officers
of
CH
Parent
are
entitled
to
indemnification
with
respect
to
actions
taken
by
them
in
connection
with
the
Spin-Off
under
the
organizational
documents
of
CH
Parent,
as
well
as
customary
indemnification
agreements
to
which
CH
Parent
and
these
persons
will
be
parties.
The
Liberty
board
of
directors
was
aware
of
these
interests
and
considered
them
when
it
approved
the
Spin-Off.
Conditions to the Spin-Off
Liberty's
board
of
directors
has
reserved
the
right,
in
its
sole
discretion,
to
amend,
modify,
delay
or
abandon
the
Spin-Off
and
the
related
transactions
at
any
time
prior
to
the
distribution
date.
In
addition,
the
completion
of
the
Spin-Off
and
related
transactions
are
subject
to
the
satisfaction
(as
37
Table
of
Contents
determined
by
the
Liberty
board
of
directors
in
its
sole
discretion)
of
the
following
conditions,
certain
of
which
may
be
waived
by
the
Liberty
board
of
directors
in
its
sole
discretion:
(1)
receipt
of
the
opinion
of
Baker
Botts,
in
form
and
substance
reasonably
acceptable
to
Liberty,
to
the
effect
that
the
Spin-Off
will
qualify
as
a
taxfree
transaction
under
Section
355
of
the
Code
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock),
and
that
for
U.S.
federal
income
tax
purposes,
(a)
no
gain
or
loss
will
be
recognized
by
Liberty
upon
the
distribution
of
our
common
stock
in
the
Spin-Off,
and
(b)
no
gain
or
loss
will
be
recognized
by,
and
no
amount
will
be
included
in
the
income
of,
holders
of
Liberty
Ventures
common
stock
upon
the
receipt
of
shares
of
our
common
stock
in
the
Spin-Off
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock);
(2)
the
effectiveness
under
the
Securities
Act
of
the
Registration
Statement
on
Form
S-1,
of
which
this
prospectus
forms
a
part,
and
the
effectiveness
of
the
registration
of
the
CH
Parent
common
stock
under
Section
12(b)
of
the
Exchange
Act;
(3)
the
approval
of
Nasdaq
for
the
listing
of
our
Series
A
and
Series
C
common
stock;
and
(4)
the
receipt
of
any
material
regulatory
or
contractual
consents
or
approvals
that
the
Liberty
board
of
directors
determines
to
obtain.
The
first,
second
and
third
conditions
set
forth
above
are
non-waivable.
The
Liberty
board
of
directors
may,
however,
waive
the
fourth
condition
set
forth
above.
In
the
event
the
Liberty
board
of
directors
waives
a
material
condition
to
the
Spin-Off,
Liberty
intends
to
promptly
issue
a
press
release
and
file
a
Current
Report
on
Form
8-K
to
report
such
event.
Manner of Effecting the Spin-Off
Liberty
is
effecting
the
Spin-Off
by
distribution
to
holders
of
its
Liberty
Ventures
common
stock
as
a
dividend:
(i)
0.1
of
a
share
of
our
Series
A
common
stock
and
0.2
of
a
share
of
our
Series
C
common
stock
for
each
whole
share
of
LVNTA,
and
(ii)
0.1
of
a
share
of
our
Series
B
common
stock
and
0.2
of
a
share
of
our
Series
C
common
stock
for
each
whole
share
of
LVNTB,
in
each
case,
held
by
such
stockholder
as
of
the
record
date.
Cash
will
be
paid
in
lieu
of
fractional
shares.
Following
the
record
date
and
prior
to
the
distribution
date,
Liberty
will
deliver
all
of
the
issued
and
outstanding
shares
of
our
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock
to
be
distributed
in
the
Spin-Off
to
the
distribution
agent.
If
you
own
Liberty
Ventures
common
stock
as
of
the
close
of
business
on
the
record
date
and
you
continue
to
hold
such
shares
through
the
distribution
date,
the
shares
of
our
company's
common
stock
that
you
are
entitled
to
receive
in
the
Spin-Off
will
be
issued
electronically
in
book-entry
form,
as
of
the
distribution
date,
to
you
or
to
your
bank
or
brokerage
firm
on
your
behalf,
which
we
expect
to
occur
within
one
business
day
of
the
distribution
date
to
allow
the
distribution
agent
to
effect
the
distribution
of
shares.
Registration
in
book-entry
form
refers
to
a
method
of
recording
stock
ownership
when
no
physical
share
certificates
are
issued
to
stockholders,
as
is
the
case
in
the
Spin-Off.
Please
note
that
if
any
stockholder
of
Liberty
Ventures
common
stock
sells
shares
of
LVNTA
or
LVNTB
before
the
record
date,
so
that
such
stockholder
is
not
the
record
holder
on
the
record
date,
the
buyer
of
those
shares,
and
not
the
seller,
will
become
entitled
to
receive
the
shares
of
our
common
stock
issuable
in
respect
of
the
shares
sold.
If
you
are
a
holder
of
shares
of
Liberty
Ventures
common
stock
on
the
record
date,
you
will
be
entitled
to
receive
the
shares
of
our
company's
common
stock
issuable
in
respect
of
those
shares
sold
only
if
you
continue
to
hold
them
through
the
distribution
date.
See
"—Trading
Prior
to
the
Record
Date"
below
for
more
information.
On
the
distribution
date,
pursuant
to
the
reorganization
agreement
to
be
entered
into
between
our
company
and
Liberty,
our
company
will
be
spun
off
from
Liberty
and
will
become
an
independent
publicly
traded
company.
If
you
are
a
record
holder
of
Liberty
Ventures
common
stock
on
the
record
date
and
you
continue
to
hold
such
shares
through
the
distribution
date,
38
Table
of
Contents
Computershare
will
mail
you
a
book-entry
account
statement
that
reflects
your
shares
of
our
company's
common
stock
following
the
distribution
date.
If
you
are
a
beneficial
owner
of
Liberty
Ventures
common
stock
(but
not
a
record
holder)
on
the
record
date
and
you
continue
to
hold
such
shares
through
the
distribution
date,
your
bank
or
brokerage
firm
will
credit
your
account
with
the
shares
of
our
company's
common
stock
that
you
are
entitled
to
receive
on
the
distribution
date.
Stockholders
of
Liberty
are
not
being
asked
to
take
any
action
in
connection
with
the
Spin-Off.
No
stockholder
approval
of
the
Spin-Off
is
required
or
being
sought.
Neither
Liberty
nor
our
company
is
asking
you
for
a
proxy,
and
you
are
requested
not
to
send
us
a
proxy.
You
are
not
required
to
pay
any
consideration,
give
up
any
portion
of
your
Liberty
Ventures
common
stock
or
take
any
other
action
to
receive
shares
of
our
common
stock
in
the
Spin-Off.
Effect of the Spin-Off on Outstanding Liberty Ventures Incentive Awards
Options
to
purchase
shares
of
Liberty
Ventures
common
stock,
restricted
stock
units
with
respect
to
shares
of
Liberty
Ventures
common
stock
and
restricted
shares
of
Liberty
Ventures
common
stock
have
been
granted
to
various
directors,
officers
and
employees
and
consultants
of
Liberty
and
certain
of
its
subsidiaries
pursuant
to
the
various
stock
incentive
plans
administered
by
the
Liberty
board
of
directors
or
the
compensation
committee
thereof.
Below
is
a
description
of
the
effect
of
the
Spin-Off
on
these
outstanding
equity
awards.
Option Awards
Each
holder
of
an
outstanding
option
to
purchase
shares
of
Liberty
Ventures
common
stock
on
the
record
date
(an
original Ventures option award )
who
is
a
member
of
the
Liberty
board
of
directors
or
an
officer
of
Liberty
holding
the
position
of
Vice
President
or
above
will
receive
(i)
an
option
to
purchase
shares
of
the
corresponding
series
of
our
common
stock
and
an
option
to
purchase
shares
of
our
Series
C
common
stock
(such
new
option
awards,
new CH Parent option
awards )
and
(ii)
an
adjustment
to
the
exercise
price
of
and
the
number
of
shares
subject
to
the
original
Ventures
option
award
(as
so
adjusted,
an
adjusted
Ventures option award ).
The
exercise
prices
of
and
the
number
of
shares
subject
to
the
new
CH
Parent
option
awards
and
the
related
adjusted
Ventures
option
award
will
be
determined
based
on
the
exercise
price
of
and
the
number
of
shares
subject
to
the
original
Ventures
option
award,
the
distribution
ratios
being
used
in
the
Spin-Off,
the
pre-Spin-Off
trading
price
of
Liberty
Ventures
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
Liberty
Ventures
common
stock
over
the
three-consecutive
trading
days
immediately
preceding
the
Spin-Off)
and
the
relative
post-Spin-Off
trading
prices
of
Liberty
Ventures
common
stock
and
CH
Parent
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
common
stock
over
the
three-consecutive
trading
days
beginning
on
the
first
trading
day
following
the
Spin-Off
on
which
both
the
Liberty
Ventures
common
stock
and
the
CH
Parent
common
stock
trade
in
the
"regular
way"
(meaning
once
the
common
stock
trades
using
a
standard
settlement
cycle)),
such
that
the
pre-Spin-Off
intrinsic
value
of
the
original
Ventures
option
award
is
allocated
between
the
new
CH
Parent
option
awards
and
the
adjusted
Ventures
option
award.
All
other
holders
of
original
Ventures
option
awards
will
not
receive
any
new
CH
Parent
option
awards
as
a
result
of
the
distribution.
Rather,
his
or
her
original
Ventures
option
award
will
instead
be
adjusted
so
as
to
preserve
the
pre-Spin-Off
intrinsic
value
of
the
original
Ventures
option
award
based
on
the
exercise
price
of
and
number
of
shares
subject
to
such
original
Ventures
option
award,
the
distribution
ratios
being
used
in
the
Spin-Off,
the
pre-Spin-Off
trading
price
of
Liberty
Ventures
common
stock
and
the
post-Spin-Off
trading
price
of
Liberty
Ventures
common
stock
(determined
as
described
above).
Except
as
described
above,
all
other
terms
of
an
adjusted
Ventures
option
award
and
the
new
CH
Parent
option
awards
(including,
for
example,
the
vesting
terms
thereof)
will,
in
all
material
respects,
be
39
Table
of
Contents
the
same
as
those
of
the
corresponding
original
Ventures
option
award.
The
terms
of
the
adjusted
Ventures
option
awards
will
be
determined
and
the
new
CH
Parent
option
awards
will
be
issued
as
soon
as
practicable
following
the
determination
of
the
pre-
and
post-Spin-Off
trading
prices
of
Liberty
Ventures
common
stock
and
CH
Parent
common
stock,
as
applicable.
Restricted Stock Units
Each
holder
of
a
restricted
stock
unit
with
respect
to
shares
of
Series
A
or
Series
B
Liberty
Ventures
common
stock
(an
original Ventures restricted stock
unit award )
on
the
record
date
will
receive
in
the
distribution
restricted
stock
units
with
respect
to
shares
of
CH
Parent
common
stock,
such
that
a
holder
will
receive
(i)
0.1
of
a
restricted
stock
unit
of
the
corresponding
series
of
CH
Parent
common
stock
and
(ii)
0.2
of
a
restricted
stock
unit
of
Series
C
common
stock
of
CH
Parent
(such
new
restricted
stock
units
with
respect
to
CH
Parent
common
stock,
new CH Parent restricted stock units )
for
each
restricted
stock
unit
with
respect
to
shares
of
Liberty
Ventures
common
stock
held
by
them
as
of
the
distribution
record
date,
with
cash
paid
in
lieu
of
fractional
new
CH
Parent
restricted
stock
units.
Except
as
described
above,
all
new
CH
Parent
restricted
stock
units
(including,
for
example,
the
vesting
terms
thereof)
will,
in
all
material
respects,
be
the
same
as
those
of
the
corresponding
original
Ventures
restricted
stock
unit
award.
Restricted Stock Awards
Each
holder
of
a
restricted
stock
award
with
respect
to
shares
of
Series
A
or
Series
B
Liberty
Ventures
common
stock
(an
original Ventures restricted stock
award )
will
receive
in
the
distribution
(i)
0.1
of
a
restricted
share
of
the
corresponding
series
of
CH
Parent
common
stock
and
(ii)
0.2
of
a
restricted
share
of
Series
C
common
stock
of
CH
Parent
(such
new
restricted
stock
awards
with
respect
to
CH
Parent
common
stock,
new CH Parent restricted stock awards )
for
each
restricted
share
of
Liberty
Ventures
common
stock
held
by
them
as
of
the
distribution
record
date,
with
cash
paid
in
lieu
of
fractional
new
CH
Parent
restricted
stock
awards.
Except
as
described
above,
all
new
CH
Parent
restricted
stock
awards
(including,
for
example,
the
vesting
terms
thereof)
will,
in
all
material
respects,
be
the
same
as
those
of
the
corresponding
original
Ventures
restricted
stock
award.
Prior
to
the
record
date,
each
holder
of
an
original
Ventures
restricted
stock
unit
award
who
is
an
officer
of
Liberty
holding
the
position
of
Vice
President
or
above
had
his
or
her
original
Ventures
restricted
stock
unit
awards
converted
into
restricted
stock
awards
with
respect
to
shares
of
the
corresponding
series
of
Liberty
Ventures
common
stock.
As
a
result,
in
the
Spin-Off,
such
restricted
stock
awards
will
be
treated
in
the
same
manner
as
original
Ventures
restricted
stock
awards
as
described
above.
Transitional Stock Adjustment Plan
All
of
the
new
CH
Parent
option
awards,
new
CH
Parent
restricted
stock
units
and
new
CH
Parent
restricted
stock
awards
will
be
issued
pursuant
to
the
CH
Parent
Transitional
Stock
Adjustment
Plan
(the
transitional plan ),
a
copy
of
which
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
The
transitional
plan
will
govern
the
terms
and
conditions
of
the
foregoing
CH
Parent
incentive
awards
but
will
not
be
used
to
make
any
grants
following
the
Spin-Off.
Effect of the Spin-Off on Outstanding CommerceHub Incentive Awards
Prior
to
the
completion
of
the
internal
restructuring
and
the
Spin-Off,
certain
individuals,
including
employees
and
officers
of
CommerceHub,
hold
equity
incentive
awards
with
respect
to
shares
of
the
existing
CommerceHub
common
stock.
As
a
result
of
the
Spin-Off,
such
equity
incentive
awards
will
be
adjusted,
such
that
each
holder
of
an
option
award
or
a
stock
appreciation
right
with
respect
to
shares
of
CommerceHub
common
stock
will
receive
an
option
award
with
respect
to
shares
of
our
Series
C
40
Table
of
Contents
common
stock,
with
the
exercise
price
and
number
of
shares
subject
to
such
new
option
awards
based
on
the
exercise
price
of
and
number
of
shares
subject
to
the
original
option
or
original
stock
appreciation
right
and
the
exchange
ratio
to
be
used
in
the
internal
restructuring
with
respect
to
the
CommerceHub
minority
holders.
Unlike
the
original
awards
with
respect
to
shares
of
existing
CommerceHub
common
stock,
which
were
settleable
in
cash
pursuant
to
a
liquidity
program
that
is
being
terminated
upon
completion
of
the
Spin-Off,
these
new
option
awards
will
be
settleable
only
in
shares
of
CH
Parent
common
stock.
Except
as
described
above,
these
new
option
awards
(including,
for
example,
the
vesting
terms
thereof)
will,
in
all
material
respects,
be
the
same
as
those
of
the
corresponding
original
award
with
respect
to
shares
of
existing
CommerceHub
common
stock.
Additionally,
the
Spin-Off
is
a
restructuring
event
which
would
result
in
a
modification
of
the
terms
and
conditions
of
the
outstanding
equity
awards
upon
the
Spin-Off.
As
the
fair
value
of
the
modified
awards
immediately
after
the
Spin-Off
is
not
known,
CH
Parent
cannot
estimate
the
incremental
compensation
expense
that
may
be
recorded
in
conjunction
with
the
modification.
However
the
amount
of
additional
compensation,
if
any,
is
not
anticipated
to
be
material.
Legacy Stock Appreciation Rights Plan
All
of
the
new
option
awards
with
respect
to
our
Series
C
common
stock
that
will
be
issued
to
holders
of
stock
appreciation
rights
relating
to
CommerceHub
common
stock
as
a
result
of
the
Spin-Off
will
be
issued
pursuant
to
the
CH
Parent
Legacy
Stock
Appreciation
Rights
Plan
(the
legacy SAR plan ),
rather
than
the
transitional
plan.
A
copy
of
the
legacy
SAR
plan
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
The
legacy
SAR
plan
will
govern
the
terms
and
conditions
of
these
new
option
awards
but
will
not
be
used
to
make
any
grants
following
the
Spin-Off.
Material U.S. Federal Income Tax Consequences of the Spin-Off
The
following
discussion
is
a
summary
of
the
material
U.S.
federal
income
tax
consequences
of
the
Spin-Off
to
holders
of
Liberty
Ventures
common
stock.
This
discussion
is
based
on
the
Code,
applicable
Treasury
regulations,
judicial
authority,
and
administrative
rulings
and
practice,
all
as
in
effect
as
of
the
date
of
this
prospectus.
Such
authorities
are
subject
to
change
or
differing
interpretations
at
any
time,
possibly
with
retroactive
effect.
This
discussion
is
limited
to
holders
of
Liberty
Ventures
common
stock
that
are
U.S.
holders,
as
defined
below,
and
that
hold
their
shares
of
Liberty
Ventures
common
stock
as
capital
assets,
within
the
meaning
of
Section
1221
of
the
Code.
Further,
this
discussion
does
not
discuss
all
tax
considerations
that
may
be
relevant
to
holders
of
Liberty
Ventures
common
stock
in
light
of
their
particular
circumstances,
nor
does
it
address
any
tax
consequences
to
holders
of
Liberty
Ventures
common
stock
subject
to
special
treatment
under
the
U.S.
federal
income
tax
laws,
such
as
tax-exempt
entities,
partnerships
(including
entities
or
arrangements
treated
as
partnerships
for
U.S.
federal
income
tax
purposes),
persons
who
acquired
such
shares
of
Liberty
Ventures
common
stock
pursuant
to
the
exercise
of
employee
stock
options
or
otherwise
as
compensation,
financial
institutions,
insurance
companies,
dealers
or
traders
in
securities,
and
persons
who
hold
their
shares
of
Liberty
Ventures
common
stock
as
part
of
a
straddle,
hedge,
conversion,
constructive
sale,
wash
sale,
synthetic
security,
integrated
investment,
or
other
risk-reduction
transaction
for
U.S.
federal
income
tax
purposes.
This
discussion
does
not
address
any
U.S.
federal
estate,
gift,
or
other
non-income
tax
consequences
or
any
state,
local,
or
foreign
tax
consequences.
Holders of Liberty Ventures common stock are urged to consult with their tax advisors as to the specific tax consequences of the Spin-Off to them in
light of their particular circumstances.
For
purposes
of
this
section,
a
U.S.
holder
is
a
beneficial
owner
of
Liberty
Ventures
common
stock
that
is,
for
U.S.
federal
income
tax
purposes:
•
an
individual
who
is
a
citizen
or
a
resident
of
the
United
States;
41
Table
of
Contents
•
a
corporation,
or
other
entity
taxable
as
a
corporation
for
U.S.
federal
income
tax
purposes,
created
or
organized
under
the
laws
of
the
U.S.
or
any
state
or
political
subdivision
thereof;
•
an
estate,
the
income
of
which
is
subject
to
U.S.
federal
income
taxation
regardless
of
its
source;
or
•
a
trust,
if
(i)
a
court
within
the
U.S.
is
able
to
exercise
primary
jurisdiction
over
its
administration
and
one
or
more
U.S.
persons
have
the
authority
to
control
all
of
its
substantial
decisions,
or
(ii)
it
has
a
valid
election
in
place
under
applicable
Treasury
regulations
to
be
treated
as
a
U.S.
person.
If
a
partnership
(including
any
entity
or
arrangement
treated
as
a
partnership
for
U.S.
federal
income
tax
purposes)
holds
shares
of
Liberty
Ventures
common
stock,
the
tax
treatment
of
a
partner
in
the
partnership
will
generally
depend
upon
the
status
of
the
partner
and
the
activities
of
the
partnership.
A
partner
in
a
partnership
holding
shares
of
Liberty
Ventures
common
stock
should
consult
its
tax
advisor
regarding
the
tax
consequences
of
the
Spin-Off.
U.S. Federal Income Tax Treatment of the Spin-Off
The
completion
of
the
Spin-Off
is
conditioned
upon
the
receipt
by
Liberty
of
the
opinion
of
Baker
Botts,
in
form
and
substance
reasonably
acceptable
to
Liberty
and
dated
as
of
the
date
of
the
Spin-Off,
to
the
effect
that,
for
U.S.
federal
income
tax
purposes,
the
Spin-Off
will
qualify
as
a
tax-free
transaction
under
Section
355
of
the
Code
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock).
The
receipt
of
the
opinion
may
not
be
waived
by
the
Liberty
board
of
directors
as
a
condition
to
the
Spin-Off.
The
opinion
of
Baker
Botts
will
be
based
on
the
law
in
effect
as
of
the
date
of
the
Spin-Off
and
will
rely
on
certain
assumptions,
as
well
as
statements,
representations
and
certain
undertakings
made
by
officers
of
Liberty
and
CH
Parent
and
John
C.
Malone.
These
assumptions,
statements,
representations
and
undertakings
are
expected
to
relate
to,
among
other
things,
Liberty's
business
reasons
for
engaging
in
the
Spin-Off,
the
conduct
of
certain
business
activities
by
Liberty
and
CH
Parent,
and
the
current
plans
and
intentions
of
Liberty
and
CH
Parent
to
continue
conducting
those
business
activities
and
not
to
materially
modify
their
ownership
or
capital
structure
following
the
Spin-Off.
If
any
of
those
statements,
representations
or
assumptions
is
incorrect
or
untrue
in
any
material
respect
or
any
of
those
undertakings
is
not
complied
with,
or
if
the
facts
upon
which
the
opinion
is
based
are
materially
different
from
the
facts
that
prevail
at
the
time
of
the
Spin-Off,
the
conclusions
reached
in
such
opinion
could
be
adversely
affected.
Liberty
does
not
intend
to
seek
a
ruling
from
the
IRS
as
to
the
U.S.
federal
income
tax
treatment
of
the
Spin-Off.
The
opinion
of
Baker
Botts
will
not
be
binding
on
the
IRS
or
a
court,
and
there
can
be
no
assurance
that
the
IRS
will
not
challenge
the
conclusions
reached
in
the
opinion
or
that
a
court
would
not
sustain
such
a
challenge.
Assuming
that
the
Spin-Off
qualifies
as
a
transaction
described
under
Section
355
of
the
Code,
then:
•
no
gain
or
loss
will
be
recognized
by
Liberty
upon
the
distribution
of
our
common
stock
to
holders
of
Liberty
Ventures
common
stock
in
the
SpinOff;
•
except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock,
no
gain
or
loss
will
be
recognized
by,
and
no
amount
will
be
included
in
the
income
of,
holders
of
Liberty
Ventures
common
stock
upon
the
receipt
of
shares
of
our
common
stock
pursuant
to
the
Spin-Off;
42
Table
of
Contents
•
a
stockholder
who
receives
shares
of
our
common
stock
in
the
Spin-Off
will
have
an
aggregate
tax
basis
in
its
shares
of
Liberty
Ventures
common
stock
and
shares
of
our
common
stock
(including
any
fractional
shares
to
which
such
holder
was
entitled,
but
for
which
cash
was
received
in
lieu
of
such
fractional
shares)
immediately
after
the
Spin-Off
equal
to
the
aggregate
tax
basis
of
the
Liberty
Ventures
common
stock
that
the
stockholder
held
immediately
before
the
Spin-Off,
allocated
between
such
shares
of
Liberty
Ventures
common
stock
and
shares
of
our
common
stock
in
proportion
to
their
relative
fair
market
values;
and
•
the
holding
period
of
the
shares
of
our
common
stock
received
in
the
Spin-Off
by
a
holder
of
Liberty
Ventures
common
stock
will
include
the
holding
period
of
its
shares
of
Liberty
Ventures
common
stock.
Stockholders
who
have
acquired
different
blocks
of
Liberty
Ventures
common
stock
at
different
times
or
at
different
prices
should
consult
their
tax
advisors
regarding
the
allocation
of
their
aggregate
tax
basis
among,
and
the
holding
period
of,
the
shares
of
our
common
stock
received
with
respect
to
such
blocks
of
Liberty
Ventures
common
stock.
If
a
stockholder
receives
cash
in
lieu
of
fractional
shares
of
our
common
stock,
the
stockholder
will
be
treated
as
receiving
such
fractional
shares
in
the
SpinOff
and
then
selling
such
fractional
shares
for
the
amount
of
cash
received.
The
sale
will
generally
result
in
the
recognition
of
capital
gain
or
loss
for
U.S.
federal
income
tax
purposes,
measured
by
the
difference
between
the
amount
of
cash
received
for
the
fractional
shares
and
the
stockholder's
tax
basis
in
the
fractional
shares
(determined
as
described
above).
If
the
Spin-Off
does
not
qualify
under
Section
355
of
the
Code,
Liberty
would
generally
be
subject
to
tax
as
if
it
sold
the
shares
of
our
common
stock
distributed
in
the
Spin-Off
in
a
taxable
transaction.
Liberty
would
recognize
taxable
gain
in
an
amount
equal
to
the
excess
of
(i)
the
total
fair
market
value
of
the
shares
of
our
common
stock
distributed
in
the
Spin-Off
over
(ii)
Liberty's
aggregate
tax
basis
in
such
shares
of
our
common
stock.
A
stockholder
who
receives
shares
of
our
common
stock
in
the
Spin-Off
would
be
treated
as
receiving
a
taxable
distribution
in
an
amount
equal
to
the
total
fair
market
value
of
such
shares
of
our
common
stock
(including
any
fractional
shares
deemed
to
be
received
by
the
stockholder).
In
general,
the
distribution
would
be
taxable
as
a
dividend
(which
may
be
taxable
for
individual
U.S.
holders
at
favorable
rates
applicable
to
qualified
dividends,
if
certain
holding
period
and
other
requirements
are
met)
to
the
extent
of
the
stockholder's
share
of
Liberty's
current
and
accumulated
earnings
and
profits
(as
determined
under
U.S.
federal
income
tax
principles).
Any
amount
of
the
distribution
in
excess
of
the
holder's
share
of
Liberty's
current
and
accumulated
earnings
and
profits
(as
determined
under
U.S.
federal
income
tax
principles)
would
be
treated
first
as
a
non-taxable
return
of
capital
to
the
extent,
generally,
of
the
stockholder's
tax
basis
in
its
shares
of
Liberty
Ventures
common
stock
with
respect
to
which
the
distribution
is
received,
with
any
remaining
amount
taxed
as
capital
gain.
A
stockholder
would
have
a
tax
basis
in
its
shares
of
our
common
stock
immediately
after
the
Spin-Off
equal
to
their
fair
market
value.
Certain
stockholders
may
be
subject
to
special
rules
governing
taxable
distributions,
such
as
those
that
relate
to
the
dividends
received
deduction
and
extraordinary
dividends.
Even
if
the
Spin-Off
otherwise
qualifies
under
Section
355
of
the
Code,
the
Spin-Off
would
result
in
a
significant
U.S.
federal
income
tax
liability
to
Liberty
(but
not
to
Liberty
stockholders)
under
Section
355(e)
of
the
Code
if
one
or
more
persons
acquire,
directly
or
indirectly,
a
50-percent
or
greater
interest
(measured
by
vote
or
value)
in
the
stock
of
Liberty
or
in
the
stock
of
CH
Parent
(excluding,
for
this
purpose,
the
acquisition
of
CH
Parent
common
stock
by
Liberty
stockholders
in
the
Spin-Off)
as
part
of
a
plan
or
series
of
related
transactions
that
includes
the
Spin-Off.
Any
acquisition
of
the
stock
of
Liberty
or
CH
Parent
(or
any
predecessor
or
successor
corporation)
within
two
years
before
or
after
the
Spin-Off
(other
than
an
excluded
acquisition
described
in
the
preceding
sentence)
would
be
presumed
to
be
part
of
a
plan
that
includes
the
Spin-Off,
although
the
parties
may
be
able
to
43
Table
of
Contents
rebut
that
presumption
under
certain
circumstances.
The
process
for
determining
whether
an
acquisition
is
part
of
a
plan
under
these
rules
is
complex,
inherently
factual
in
nature,
and
subject
to
a
comprehensive
analysis
of
the
facts
and
circumstances
of
the
particular
case.
Notwithstanding
the
opinion
of
Baker
Botts
described
above,
Liberty
or
CH
Parent
might
inadvertently
cause
or
permit
a
prohibited
change
in
the
ownership
of
Liberty
or
CH
Parent
to
occur.
If
the
Spin-Off
were
determined
to
be
taxable
to
Liberty
under
Section
355(e)
of
the
Code,
Liberty
would
recognize
taxable
gain
in
an
amount
equal
to
the
excess
of
(i)
the
total
fair
market
value
of
the
shares
of
our
common
stock
distributed
in
the
Spin-Off
over
(ii)
Liberty's
aggregate
tax
basis
in
such
shares
of
our
common
stock.
Pursuant
to
the
tax
sharing
agreement,
we
will
be
required
to
indemnify
Liberty,
its
subsidiaries,
and
certain
related
persons
for
taxes
and
losses
resulting
from
the
failure
of
the
Spin-Off
to
qualify
as
a
tax-free
transaction
under
Section
355
of
the
Code
to
the
extent
that
such
taxes
and
losses
(i)
result
primarily
from,
individually
or
in
the
aggregate,
the
breach
of
certain
covenants
made
by
CH
Parent
(applicable
to
actions
or
failures
to
act
by
CH
Parent
and
its
subsidiaries
following
the
completion
of
the
Spin-Off),
or
(ii)
result
from
the
application
of
Section
355(e)
of
the
Code
to
the
Spin-Off
as
a
result
of
the
treatment
of
the
SpinOff
as
part
of
a
plan
(or
series
of
related
transactions)
pursuant
to
which
one
or
more
persons
acquire,
directly
or
indirectly,
a
50-percent
or
greater
interest
(measured
by
vote
or
value)
in
the
stock
of
CH
Parent
(or
any
predecessor
or
successor
corporation).
For
a
more
detailed
discussion
of
the
terms
of
the
tax
sharing
agreement,
please
see
"Certain
Relationships
and
Related
Party
Transactions—Relationships
between
CH
Parent
and
Liberty
and/or
Liberty
Media—Tax
Sharing
Agreement."
Information Reporting and Backup Withholding
Under
applicable
U.S.
Treasury
regulations,
each
holder
of
Liberty
Ventures
common
stock
who,
immediately
before
the
Spin-Off,
owns
at
least
5
percent
(measured
by
vote
or
value)
of
the
total
outstanding
common
stock
of
Liberty
must
attach
to
such
holder's
U.S.
federal
income
tax
return
for
the
year
in
which
the
Spin-Off
occurs
a
statement
setting
forth
certain
information
relating
to
the
Spin-Off.
In
addition,
all
holders
of
Liberty
Ventures
common
stock
are
required
to
retain
permanent
records
relating
to
the
amount,
basis
and
fair
market
value
of
our
common
stock
that
they
receive
in
the
Spin-Off
and
to
make
those
records
available
to
the
IRS
on
request.
A
stockholder
may
be
subject
to
backup
withholding
(currently
imposed
at
a
rate
of
28%)
to
the
extent
of
any
cash
received
in
lieu
of
fractional
shares
of
our
common
stock
pursuant
to
the
Spin-Off,
unless
the
stockholder
provides
its
correct
taxpayer
identification
number
and
complies
with
applicable
certification
procedures
or
otherwise
establishes
an
exemption.
In
addition,
a
stockholder
who
receives
cash
in
lieu
of
fractional
shares
of
our
common
stock
and
fails
to
provide
its
correct
taxpayer
identification
number
or
other
adequate
basis
for
exemption
may
be
subject
to
certain
penalties
imposed
by
the
IRS.
Backup
withholding
is
not
an
additional
tax.
Any
amounts
withheld
under
the
backup
withholding
rules
will
generally
be
allowed
as
a
credit
against
a
stockholder's
U.S.
federal
income
tax
liability,
provided
that
certain
required
information
is
furnished
to
the
IRS
on
a
timely
basis.
Net Investment Income
A
3.8%
tax
is
imposed
on
the
net
investment
income
of
certain
U.S.
citizens
and
resident
aliens
and
on
the
undistributed
net
investment
income
of
certain
estates
and
trusts.
Among
other
items,
net
investment
income
would
generally
include
any
capital
gain
recognized
by
a
stockholder
as
a
result
of
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock
pursuant
to
the
Spin-Off
(net
of
certain
capital
losses).
44
Table
of
Contents
Conduct of the Business of CommerceHub and the Ventures Group if the Spin-Off is Not Completed
If
the
Spin-Off
is
not
completed,
Liberty
intends
to
continue
to
conduct
the
business
of
the
Ventures
Group
substantially
in
the
same
manner
as
it
is
operated
today,
and
CommerceHub
and
Liberty
intend
for
the
business
of
CommerceHub
to
be
conducted
in
substantially
the
same
manner
as
it
is
operated
today.
From
time
to
time,
Liberty
will
evaluate
and
review
its
business
operations,
properties,
dividend
policy
and
capitalization,
and
make
such
changes
as
are
deemed
appropriate,
and
continue
to
seek
to
identify
strategic
alternatives
to
maximize
stockholder
value.
In
addition,
it
is
anticipated
that
Liberty
will
continue
to
pursue
its
plan
to
split-off
a
newly
formed
company
comprised
of,
among
other
things,
its
entire
ownership
interest
in
Expedia
and
its
subsidiary
Bodybuilding
whether
or
not
the
Spin-Off
is
completed.
Amount and Source of Funds and Financing of the Transaction; Expenses
It
is
expected
that
Liberty
will
incur
an
aggregate
of
approximately
$4.575
million
in
expenses
in
connection
with
the
Spin-Off,
comprised
of:
•
approximately
$1
million
of
printing
and
mailing
expenses
associated
with
this
prospectus;
•
approximately
$1.5
million
in
legal
fees
and
expenses;
•
approximately
$1
million
in
accounting
fees
and
expenses;
•
approximately
$75,000
in
SEC
filing
fees;
and
•
approximately
$1
million
in
other
miscellaneous
expenses.
These
expenses
will
be
paid
by
Liberty
from
its
existing
cash
balances.
These
fees
and
expenses,
however,
do
not
include
the
payment
of
cash
in
lieu
of
the
issuance
of
fractional
shares
of
our
common
stock.
Computershare,
as
our
company's
transfer
agent,
will
aggregate
all
fractional
shares
into
whole
shares
and
sell
the
whole
shares
at
prevailing
market
prices
on
behalf
of
those
holders
who
would
have
been
entitled
to
receive
a
fractional
share.
The
transfer
agent
will
determine,
in
its
sole
discretion,
when,
how
and
through
which
broker-dealers
such
sales
will
be
made
without
any
influence
by
us.
We
anticipate
that
these
sales
will
occur
as
soon
as
practicable
after
the
Spin-Off
is
completed.
Neither
we
nor
the
transfer
agent
will
guarantee
any
minimum
sale
price
for
any
fractional
shares.
Accounting Treatment
The
Spin-Off
will
be
accounted
for
at
historical
cost
due
to
the
fact
that
our
common
stock
is
to
be
distributed
pro
rata
to
holders
of
Liberty
Ventures
common
stock.
No Appraisal Rights
Under
the
General
Corporation
Law
of
the
State
of
Delaware
(
DGCL ),
holders
of
Liberty
Ventures
common
stock
will
not
have
appraisal
rights
in
connection
with
the
Spin-Off.
Results of the Spin-Off
Immediately
following
the
Spin-Off,
we
expect
to
have
outstanding
approximately
13,506,200
shares
of
our
Series
A
common
stock,
710,400
shares
of
our
Series
B
common
stock
and
28,542,500
shares
of
Series
C
common
stock,
based
upon
(i)
the
number
of
shares
of
LVNTA
and
LVNTB,
respectively,
outstanding
as
of
April
30,
2016
and
(ii)
the
number
of
shares
of
our
Series
C
common
stock
that
we
expect
to
issue
in
connection
with
the
internal
restructuring.
Immediately
following
the
Spin-Off,
we
expect
to
have
approximately
1,330
holders
of
record
of
our
Series
A
common
stock,
80
holders
of
record
of
our
Series
B
common
stock
and
1,410
holders
of
45
Table
of
Contents
record
of
our
Series
C
common
stock,
based
upon
(i)
the
number
of
holders
of
record
of
LVNTA
and
LVNTB,
respectively,
as
of
April
30,
2016
(which
amount
does
not
include
the
number
of
stockholders
whose
shares
are
held
of
record
by
banks,
brokerage
houses
or
other
institutions,
but
includes
each
such
institution
as
one
stockholder)
and
(ii)
the
number
of
CommerceHub
minority
holders
receiving
shares
of
our
Series
C
common
stock
in
connection
with
the
internal
restructuring.
Listing and Trading of our Common Stock
On
the
date
of
this
prospectus,
we
are
a
wholly
owned
subsidiary
of
Liberty.
Accordingly,
there
is
no
public
market
for
our
common
stock.
We
expect
to
list
our
Series
A
common
stock
and
Series
C
common
stock
on
the
Nasdaq
Global
Select
Market
under
the
symbols
"CHUBA"
and
"CHUBK,"
respectively.
Although
no
assurance
can
be
given,
we
currently
expect
that
our
Series
B
common
stock
will
be
quoted
on
the
OTC
Markets
under
the
symbol
"CHUBB."
Neither
we
nor
Liberty
can
assure
you
as
to
the
trading
or
quoted
price
of
any
series
of
our
common
stock
after
the
Spin-Off.
The
approval
of
Nasdaq
for
the
listing
of
our
Series
A
common
stock
and
our
Series
C
common
stock
is
a
condition
to
the
Spin-Off,
which
may
not
be
waived
by
the
Liberty
board
of
directors.
Stock Transfer Agent and Registrar
Computershare
Trust
Company,
N.A.
is
the
transfer
agent
and
registrar
for
all
series
of
CH
Parent
common
stock,
as
well
as
all
series
of
Liberty
common
stock,
including
the
Liberty
Ventures
common
stock.
Trading Prior to the Record Date
Prior
to
the
record
date,
Liberty
Ventures
common
stock
will
continue
to
trade
on
the
Nasdaq
Global
Select
Market
in
the
regular
way.
During
this
time,
shares
of
LVNTA
and
LVNTB
that
trade
in
the
regular
way
will
trade
with
an
entitlement
to
receive
shares
of
the
same
series
of
our
common
stock
distributable
in
the
Spin-Off.
Therefore,
if
you
own
shares
of
either
LVNTA
or
LVNTB
common
stock
and
sell
those
shares
prior
to
the
record
date,
so
that
you
are
not
the
record
holder
of
such
shares
on
the
record
date,
you
will
also
be
selling
the
shares
of
our
common
stock
that
would
have
been
distributed
to
you
in
the
Spin-Off
with
respect
to
the
shares
of
LVNTA
or
LVNTB
common
stock
you
sell.
However,
because
it
is
expected
that
the
"ex-dividend"
date
for
the
Spin-Off
will
be
the
first
trading
date
following
the
distribution
date,
if
you
are
a
holder
of
shares
of
LVNTA
or
LVNTB
on
the
record
date,
you
will
be
entitled
to
receive
the
shares
of
our
company's
common
stock
issuable
in
respect
of
those
shares
only
if
you
continue
to
hold
them
through
the
distribution
date.
If
you
are
a
holder
of
shares
of
LVNTA
or
LVNTB
on
the
record
date
but
sell
them
between
the
record
date
and
the
distribution
date,
you
will
not
be
entitled
to
receive
the
shares
of
our
company's
common
stock
issuable
in
respect
of
those
shares
sold.
On
the
first
day
of
trading
following
the
distribution
date,
we
expect
that
shares
of
our
Series
A
common
stock
and
Series
C
common
stock
will
begin
trading
under
the
symbols
"CHUBA"
and
"CHUBK,"
respectively.
Although
no
assurance
can
be
given,
we
currently
expect
that
our
Series
B
common
stock
will
be
quoted
on
the
OTC
Markets
under
the
symbol
"CHUBB."
Reasons for Furnishing this Prospectus
This
prospectus
is
being
furnished
solely
to
provide
information
to
Liberty
Ventures
stockholders
who
will
receive
shares
of
our
common
stock
in
the
SpinOff.
We
believe
that
the
information
contained
in
this
prospectus
is
accurate
as
of
the
date
set
forth
on
the
cover
page
of
this
prospectus.
Changes
to
the
information
contained
in
this
prospectus
may
occur
after
that
date,
and
neither
our
company
nor
Liberty
undertakes
any
obligation
to
update
the
information
except
in
the
normal
course
of
our
respective
public
disclosure
obligations
and
practices
or
as
required
by
law.
46
Table
of
Contents
CAPITALIZATION
The
following
table
sets
forth
(i)
CommerceHub's
historical
capitalization
as
of
March
31,
2016
and
(ii)
CommerceHub's
adjusted
capitalization
assuming
the
Spin-Off
was
effective
on
March
31,
2016.
The
historical
financial
statements
for
CommerceHub
are
included
in
the
registration
statement
of
which
this
prospectus
forms
a
part.
The
table
below
should
be
read
in
conjunction
with
CommerceHub's
historical
financial
statements,
including
the
notes
thereto.
March 31, 2016
Historical
As Adjusted
(amounts in thousands)
Assets
Cash
and
cash
equivalents(1)
Note
Receivable—Parent(2)
Liabilities
Share-based
compensation
liability(2)(3)
Debt
New
Credit
Facility(2)(4)
Equity
Common
stock
Additional
paid-in
capital(5)
Parent's
investment(5)
Retained
earnings
Total
Equity
Total
capitalization
(1)
(2)
$
$
22,987
36,273
98,814
—
—
—
22,858
2,159
25,017
25,017
20,000
—
—
50,000
426
31,986
—
2,159
34,571
84,571
Excludes
any
cash
to
be
paid
to
CH
Parent
by
Liberty
in
connection
with
the
Spin-Off
with
regard
to
the
new
CH
Parent
option
awards
(as
described
above
in
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards.").
Cash
and
cash
equivalents
for
working
capital
needs
at
the
time
of
the
Spin-Off
is
expected
to
be
$20
million.
The
following
is
a
reconciliation
of
the
cash
inflows
and
outflows
expected
prior
to
filing:
Historical
cash
and
cash
equivalents
balance
(March
31,
2016)
Repayment
of
Note
Receivable—Parent
Borrowing
under
funding
agreement
$
22,987
36,273
28,600
Share-based
compensation
payments
(April
1,
2016
through
June
1,
2016)
Tax
benefits
realized
under
tax
sharing
agreement
with
Parent
for
share-based
compensation
Borrowing
under
new
credit
facility
(80,600)
8,500
50,000
Repayment
of
borrowing
under
funding
agreement
(28,600)
Estimated
dividend
As
Adjusted
cash
and
cash
equivalents
balance
(17,160)
$ 20,000
As
a
result
of
share-based
payment
award
exercises
during
the
period
from
April
1,
2016
to
June
1,
2016,
the
company
expects
to
make
payments
of
approximately
$80.6
million,
reducing
the
share-based
compensation
liability
prior
to
the
Spin-Off.
To
fund
these
payments,
in
addition
to
existing
cash
balances
and
cash
flow
from
operations,
the
company
utilized
a
repayment
of
the
Note
Receivable—Parent
and
borrowed
additional
funds
(approximately
$28.6
million)
under
a
funding
agreement
with
Liberty
(see
note
8
to
the
CH
Parent
consolidated
financial
statements).
It
is
expected
that
at
the
time
of
the
Spin-Off,
the
amount
outstanding
under
the
funding
agreement
will
be
paid
using
47
Table
of
Contents
amounts
borrowed
on
the
new
credit
facility.
The
remaining
share-based
compensation
liability
will
be
contributed
to
equity
at
the
time
of
Spin-Off
as
the
awards
will
become
equity
awards
once
the
company
has
the
ability
to
settle
the
options
in
CH
Parent
common
stock.
Additionally,
the
Spin-Off
is
a
restructuring
event
which
would
result
in
a
modification
of
the
terms
and
conditions
of
the
outstanding
equity
awards
upon
the
Spin-Off.
As
the
fair
value
of
the
modified
awards
immediately
after
the
Spin-Off
is
not
known,
CH
Parent
cannot
estimate
the
incremental
compensation
expense
that
may
be
recorded
in
conjunction
with
the
modification.
However
the
amount
of
additional
compensation,
if
any,
is
not
anticipated
to
be
material.
(3)
Outstanding
share-based
compensation
awards
will
be
converted
into
options
to
acquire
shares
of
Series
C
common
stock
of
CH
Parent,
upon
completion
of
the
Spin-Off,
using
the
same
exchange
ratio
as
will
be
used
to
convert
the
existing
outstanding
shares
of
CommerceHub
held
by
the
CommerceHub
minority
holders
into
shares
of
Series
C
common
stock
of
CH
Parent
pursuant
to
the
internal
restructuring.
The
liability
of
outstanding
awards
will
be
considered
contributed
equity
at
that
time.
Excluding
the
equity
award
exercises
through
June
1,
2016
discussed
above
in
note
2,
and
assuming
an
exchange
ratio
of
approximately
2.2,
which
is
the
estimated
exchange
ratio
for
the
internal
restructuring,
there
would
be
outstanding
options
to
acquire
approximately
2.8
million
shares
of
Series
C
common
stock
of
CH
Parent,
excluding
(i)
new
CH
Parent
option
awards
to
be
held
by
holders
of
original
Ventures
option
awards
and
new
CH
Parent
restricted
stock
units
to
be
held
by
holders
of
original
Ventures
restricted
stock
unit
awards
in
each
case,
following
the
adjustment
of
their
equity
awards
in
connection
with
the
Spin-Off,
and
(ii)
the
impact
of
Francis
Poore's
new
employment
arrangement.
See
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards"
and
"Executive
Compensation—Executive
Compensation
Arrangements—Francis
Poore—June
2016
Employment
Arrangement."
In
connection
with
the
issuance
of
new
CH
Parent
equity
awards
to
the
holders
of
original
Ventures
equity
awards
described
above,
Liberty
will
make
a
one-time
cash
payment
intended
to
compensate
CommerceHub
for
the
dilution
associated
with
the
issuance
of
these
new
CH
Parent
equity
awards.
(4)
In
connection
with
the
Spin-Off,
the
company
entered
into
a
credit
facility
as
more
fully
described
in
"Description
of
Certain
Indebtedness."
It
is
expected
that
prior
to
the
Spin-Off,
the
company
(the
existing
CommerceHub
operating
entity)
will
draw
on
this
new
credit
facility
in
order
to
repay
the
amount
outstanding
under
the
funding
agreement
with
Liberty
and
issue
a
dividend
to
existing
shareholders
such
that
$50
million
will
be
outstanding
on
the
new
credit
facility
at
the
time
of
the
Spin-Off.
As
a
result,
based
on
the
expected
initial
borrowing
of
approximately
$50
million
and
current
market
interest
rates,
the
company
expects
to
incur
approximately
$1.3
million
of
annual
interest
expense
in
connection
with
this
new
credit
facility.
(5)
This
table
assumes
that
approximately
42.6
million
shares
of
CH
Parent
stock
will
be
issued
at
the
Spin-Off
date.
The
following
is
a
reconciliation
of
the
inflows
and
outflows
to
Parent's
investment
and
additional
paid-in
capital
prior
to
Spin-Off:
Historical
Parent's
investment
(March
31,
2016)
Common
stock
issued
(par
value)
Remaining
share-based
compensation
liability
Tax
benefits
realized
under
tax
sharing
agreement
with
Parent
for
share-based
compensation
Estimated
dividend
As
Adjusted
Additional
paid-in
capital
balance
48
$
22,858
(426)
18,214
8,500
(17,160)
$ 31,986
Table
of
Contents
SELECTED FINANCIAL DATA
The
following
tables
present
selected
consolidated
financial
statement
information
of
CommerceHub.
The
selected
historical
information
relating
to
CommerceHub's
financial
condition
and
results
of
operations
is
presented
for
the
three
months
ended
March
31,
2016
and
for
each
of
the
years
ended
December
31,
2015
and
2014.
The
financial
data
for
the
three
months
ended
March
31,
2016
and
for
the
years
ended
December
31,
2015
and
2014
has
been
derived
from
CommerceHub's
unaudited
condensed
consolidated
financial
statements
and
audited
consolidated
financial
statements,
respectively,
for
the
respective
periods.
The
data
should
be
read
in
conjunction
with
CommerceHub's
consolidated
financial
statements
and
"Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations"
included
in
this
prospectus.
March 31,
2016
Summary Balance Sheet Data:
Cash
and
cash
equivalents
Note
receivable—Parent
Goodwill
Software
and
deferred
costs,
net
Deferred
tax
assets,
net
Total
assets
Deferred
revenue
Share-based
compensation
liability
Total
equity
December 31,
2015
amounts in thousands
2014
$ 22,987
19,337
26,385
$ 36,273
36,107
35,507
$ 21,410
21,410
9,020
$ 13,345
12,145
7,973
$ 41,196
38,825
22,956
$ 158,102
153,800
120,401
$ 12,240
12,022
9,779
$ 98,814
96,213
61,570
$ 25,017
26,933
32,115
Three Months ended
March 31,
2016
Summary Statement of Operations Data:
Revenue
Income
(loss)
from
operations
Interest
income
Income
tax
expense
(benefit)
Earnings
(loss)
attributable
to
CommerceHub,
Inc.
stockholders
Unaudited
Pro
Forma
earnings
(loss)
attributable
to
CommerceHub,
Inc.
stockholders
per
common
share:
$
49
$ 22,090
$ (3,026)
$
166
$
(870)
$ (1,990)
(0.05)
Years ended
December 31,
2015
2015
amounts in thousands,
except per share amounts
2014
18,791
87,614
65,761
(2,063) (6,948) 6,595
137
600
657
(501) (1,881) 2,945
(1,425) (5,051) 3,723
(0.03) (0.12) 0.09
Table
of
Contents
DESCRIPTION OF OUR BUSINESS
Overview
We
provide
a
cloud-based
e-commerce
fulfillment
and
marketing
software
platform
of
integrated
supply,
demand
and
delivery
solutions
for
large
retailers,
online
marketplaces
and
digital
marketing
channels
(collectively,
demand channels ),
and
consumer
brands,
manufacturers
and
distributors
(collectively,
suppliers
).
Our
software
platform
acts
as
a
hub
that
allows
trading
partners—our
customers—to
conduct
omni-channel
commercial
relationships
in
consumer
and
businessto-business
e-commerce
markets.
Approximately
9,500
trading
partners
have
access
to
our
platform
daily
to
exchange
critical
information
with
each
other,
including
orders,
invoices,
product
information
and
other
electronic
documents.
Collectively,
our
trading
partner
customers
constitute
a
vibrant
network
of
the
largest
retailers,
marketplaces
and
brands
in
North
America
that
use
our
platform
to
interact
with
one
another
to
more
efficiently
manage
and
orchestrate
sophisticated
supply-chain
strategies
across
thousands
of
trading
partners
and
physical
distribution
facilities.
We
estimate
that,
in
2015,
our
customers
used
CommerceHub
to
enable
approximately
$11.6
billion
in
order
volume
and
total
economic
value
of
goods
(gross
merchandise
value,
or
GMV ).
We
estimate
that
in
2014,
our
customers
used
CommerceHub
to
enable
approximately
$8.8
billion
in
GMV.
As
described
in
more
detail
below
under
"—Revenue,"
the
majority
of
our
revenue
is
derived
from
usage
fees
that
are
based
on
the
volume
of
activity
our
customers
achieve
through
our
platform
and
from
recurring
subscription
fees.
The
value
of
our
trading
partner
network
continues
to
grow
over
time
as
more
partners
are
added.
For
example,
a
retailer
or
online
marketplace
that
wishes
to
do
business
with
any
of
the
suppliers
on
our
network
need
only
integrate
their
information
system
with
CommerceHub
once
to
gain
the
ability
to
send
orders
to
any
of
these
suppliers.
Conversely,
a
supplier
that
wishes
to
do
business
with
multiple
retailers
on
our
platform
need
only
integrate
their
own
system
to
CommerceHub
once
through
an
initial
integration
that
can
then
be
further
configured
to
connect
the
supplier
to
other
retailers
on
the
platform.
Our
existing
volume
of
retailer,
marketplace
and
supplier
customers
constitute
a
critical
mass
of
many
of
the
most
important
players
in
North
American
e-commerce.
This
has
helped
our
company
achieve
a
meaningful
network
effect,
whereby
new
suppliers
are
attracted
to
our
network
because
of
our
retailer
and
marketplace
customers,
and
new
retailer
and
marketplace
customers
are
attracted
by
our
ability
to
facilitate
their
interaction
with
thousands
of
potential
suppliers.
This
network
effect
has
allowed
us
to
grow
our
business
with
a
comparatively
low
cost
of
customer
acquisition.
CommerceHub
was
founded
because
online
retailers
have,
since
the
beginning
of
e-commerce,
faced
significant
difficulties
providing
their
customers
with
a
large
assortment
of
products
for
sale
online.
The
difficulties
were
both
financial
and
operational.
For
example,
buying
products
from
suppliers
and
holding
them
in
inventory
requires
a
significant
amount
of
financial
capital.
Similarly,
operating
warehouses
that
receive
and
prepare
orders
for
shipment
is
expensive
and
difficult.
CommerceHub
helps
solve
these
problems
by
providing
a
platform
where
retailers
and
suppliers
can
more
easily
exchange
electronic
information
and
by
enabling
suppliers
to
process
and
ship
customer
orders
on
retailers'
behalf.
Through
CommerceHub's
platform,
retailers
are
able
to
leverage
the
"virtual
inventory"
provided
by
a
network
of
suppliers
without
losing
control
over
the
fulfillment
process,
and
suppliers
are
able
to
unlock
new
sources
of
demand
for
their
products.
We
have
continued
to
enhance
our
software
platform
and
introduce
new
solutions
that
we
believe
position
us
well
for
the
further
evolution
of
e-commerce.
As
e-commerce
continues
to
take
a
larger
share
of
overall
retail
sales,
consumers
have
embraced
online
marketplaces
such
as
Amazon,
eBay
and
Jet,
which
provide
a
broad
selection
of
products
that
are
sold
and
fulfilled
by
third-party
retailers.
Coinciding
with
the
trend
toward
larger
product
assortments,
digital
advertising
platforms
such
as
Facebook,
Google
and
Pinterest
have
put
the
speed
and
power
of
e-commerce
in
the
palm
of
consumers'
hands
through
applications
on
mobile
devices.
At
the
same
time,
consumer
expectations
have
increased
to
the
point
where
fast
and
free
or
nearly-free
delivery
has
become
the
norm.
50
Table
of
Contents
Our
solutions
unite
supply,
demand
and
delivery
and
provide
our
customers
with
a
single
platform
to
source
and
market
the
products
consumers
desire
and
to
have
those
products
delivered
more
rapidly
to
the
consumer's
doorstep.
Specifically,
we
provide
our
customers
with
the
following
solutions:
•
Supply
Solutions
:
enable
retailers
to
expand
their
product
offerings
without
the
economic
and
logistical
limitations
or
risks
typically
associated
with
carrying
physical
inventory;
•
Demand
Solutions
:
provide
retailers
and
suppliers
with
a
single
platform
to
gain
greater
access
to
shopper
demand
through
a
single
connection
to
retail
channels,
marketplaces,
paid
search,
social
and
advertising
channels;
and
•
Delivery
Solutions
:
facilitate
rapid,
cost-efficient,
on-time
delivery
with
greater
control
of,
and
visibility
into,
the
consumer
experience
by
leveraging
our
solutions
to
allow
our
customers
to
coordinate
more
effectively
with
delivery
providers.
Through
our
Supply
Solutions,
retailers
and
online
marketplaces
gain
the
ability
to
sell
a
broad
selection
of
products
without
the
cost
of
buying,
storing
and
shipping
inventory
from
warehouses
by
leveraging
our
network
of
approximately
9,500
drop-ship
capable
suppliers
and
third-party
marketplace
sellers
that
receive
orders
from
demand
channels
and
ship
products
directly
to
consumers.
Our
Demand
Solutions
provide
access
and
management
capability
for
the
largest
and
most
important
e-commerce
channels
in
North
America.
CommerceHub's
platform
allows
sellers
such
as
consumer
brands,
distributors
and
manufacturers
to
sell
through
major
retailers
as
well
as
leading
online
marketplaces,
such
as
Amazon,
eBay
and
Jet.
In
addition,
companies
that
sell
directly
to
consumers
through
their
own
websites
can
use
CommerceHub
to
place
advertisements,
list
products
for
sale
and
promote
awareness
of
their
products
on
Google
Shopping,
Yahoo
Shopping,
Pinterest,
Facebook,
comparison
shopping
engines
and
other
e-commerce
marketing
channels.
Our
Delivery
Solutions
enable
more
rapid
delivery
through
more
efficient
use
of
national,
regional,
local
and
specialty
carriers.
For
example,
our
solution
for
enhanced
delivery
experience
allows
retailers
to
automatically
and
cost
effectively
adjust
carrier
service
levels
to
meet
consumer
delivery
promise
dates.
To
help
reduce
delivery
times,
our
network
of
third-party
logistics
partners
helps
retailers
and
sellers
distribute
inventory
to
locations
that
are
closer
to
a
wider
distribution
of
consumers,
thus
reducing
their
delivery
cost
while
simultaneously
enabling
consumers
to
receive
their
products
quickly.
We
seek
to
grow
our
business
by:
•
continuing
to
grow
overall
usage
by
our
customers,
including
the
GMV
and
orders
processed
through
our
platform;
51
Table
of
Contents
•
expanding
the
number
of
retailer-to-supplier
connections
within
our
existing
customer
base;
•
leveraging
our
expansive
trading
partner
network
of
retail
customers
to
attract
new
suppliers,
and
our
expansive
network
of
suppliers
to
attract
new
retail
and
marketplace
customers;
•
enabling
our
existing
customers
to
more
easily
sell
their
product
assortments
through
newly
emerging
e-commerce
channels,
such
as
social
networks
and
mobile
platforms;
•
expanding
our
offerings
and
retail
customer
base
to
new
geographic
markets
outside
of
the
United
States
and
Canada;
•
partnering
with
selected
customers
and
prospective
customers,
including
consumer
brands,
who
are
relatively
new
to
direct-to-consumer
selling
to
further
develop
their
e-commerce
capabilities
through
our
Supply,
Demand,
and
Delivery
Solutions;
and
•
continuing
to
develop,
cross-sell,
and
up-sell
new
and
innovate
e-commerce
solutions
and
features
that
help
our
customers
capture
a
larger
share
of
the
growing
e-commerce
market.
Our
company
was
founded
in
1997
by
Frank
Poore
and
Richard
Jones,
and
was
acquired
by
QK
Holdings,
Inc.
in
August
2006
and
later
by
Liberty
in
May
2010.
Our Role as Strategic Partner to Retailers and their Suppliers
CommerceHub
is
generally
viewed
as
a
"mission
critical"
partner
to
our
retailer
and
supplier
customers.
We
believe
our
solutions
directly
address
the
most
important
issues
facing
companies
that
are
selling
online
today.
Retailers
and
brands
that
sell
direct-to-consumer
face
a
challenging
market
environment
characterized
by
flat
to
declining
retail
store
sales,
more
demanding
consumer
expectations
in
terms
of
product
availability
and
delivery,
and
the
proliferation
of
emerging
search
and
social
e-commerce
channels
to
convert
sales.
CommerceHub's
platform
and
solutions
enable
our
customers
to
meet
these
market
challenges
and
more
efficiently
grow
their
online
sales
as
a
percentage
of
their
overall
business.
We
believe
that
there
are
several
elements
of
our
business
that
have
enabled
us
to
generate
significant
value
for
our
demand
channel
and
supplier
customers.
We
have
a
long
history
of
successfully
helping
our
customers
reduce
the
overall
complexity
of
their
relationships
to
help
grow
their
revenue
through
e-commerce.
We
believe
that
our
solutions
help
our
customers
grow
their
online
sales
by
facilitating
more
rapid
fulfillment
of
consumer
orders
and
allowing
them
to
capture
more
consumer
demand
through
marketplaces
and
digital
advertising
channels.
Many
of
our
customers
use
our
Supply
Solutions
to
enable
a
large
percentage
of
their
overall
online
sales.
Our
Demand
Solutions
provide
our
customers
with
a
valuable
means
for
attracting
profitable
consumer
traffic
to
their
websites.
We
believe
that
this
combination
of
"supply"
(enabling
the
fulfillment
of
consumer
orders
through
a
network
of
suppliers)
with
"demand"
(connecting
suppliers
and
retailers
to
consumer
demand
by
facilitating
access
to
online
marketing
channels)
is
unique
in
the
industry
and
provides
us
with
a
compelling
platform
to
continue
to
successfully
grow
our
business.
Because
our
solutions
play
a
critical
role
in
helping
our
customers
manage
a
complex
array
of
business
relationships
in
a
highly
competitive
retail
environment,
we
have
benefited
from
strong
loyalty
and
enduring,
long-term
relationships
with
our
customers.
In
addition,
we
believe
we
are
becoming
an
increasingly
strategic
partner
to
our
overall
set
of
trading
partner
customers
as
we
become
increasingly
integrated
into
their
systems
and
go-to-market
efforts,
as
the
amount
of
business
conducted
through
our
platform
increases,
and
as
more
retailers
and
suppliers
connect
centrally
into
the
CommerceHub
platform.
Further
enhancing
the
value
of
our
platform
are
value-added
capabilities
that
we
continue
to
add
to
our
platform
for
the
benefit
of
our
customers.
Most
of
the
new
features
we
add
to
our
platform
are
developed
based
on
feedback
we
receive
from
our
customers
regarding
challenges
they
face
in
52
Table
of
Contents
e-commerce.
For
example,
the
following
capabilities
solve
unique
issues
related
to
virtual
inventory
fulfillment,
including:
•
managing
high
drop-ship
order
volumes
with
multiple
parties:
each
consumer
order
must
be
managed
with
at
least
one
third
party
that
fulfills
the
order
on
the
seller's
behalf,
which
is
more
complex
than
traditional
direct
fulfillment,
a
complexity
that
increases
exponentially
when
scaled
across
large
retailer
transaction
volumes;
•
retail
branding
requirements:
retailers
frequently
desire
that
the
multi-party
drop-ship
fulfillment
process
be
invisible
to
the
consumer,
which
requires
that
third-party
suppliers
include
retailer-branded
packing
slips
and
other
materials
in
shipments
to
consumers;
and
•
insight,
analytics
and
proactive
error
resolution:
retailers
must
monitor
and
track
a
high
volume
of
drop-ship
orders
and
identify
shipments
that
are
at
risk
of
missing
the
consumer's
delivery
promise
date.
Our Industry
E-commerce
has
grown
significantly
over
the
last
several
years
as
consumers
have
increasingly
shifted
their
retail
purchases
from
traditional
"brick-andmortar"
stores
to
online
stores
and
marketplaces.
This
growth
has
been
due
to
a
number
of
factors,
including:
•
the
availability
of
a
broader
selection
of
merchandise
online;
•
consumer
convenience
and
ease
of
use;
•
more
competitive
and
transparent
pricing;
•
increased
functionality
and
reliability
of
e-commerce
websites;
•
the
emergence
of
mobile-connected
devices
and
specialized
websites;
and
•
the
proliferation
of
online
distribution
channels.
As
a
result
of
these
factors,
consumers
today
have
more
options
to
discover,
research
and
purchase
products
online.
Although
these
e-commerce
growth
drivers
create
significant
opportunity
for
retailers
and
brand
manufacturers,
they
also
create
additional
complexities
and
challenges.
Retailers
and
brand
manufacturers
seeking
new
avenues
to
expand
their
online
sales
must
manage
product
data,
transactions
and
delivery
promises
across
hundreds
of
highly
fragmented
online
channels
with
different
requirements
for
conducting
business,
varying
data
attributes,
evolving
business
models
and
competitive
pressure
to
increase
the
pace
of
innovation.
In
addition
to
the
shift
toward
e-commerce
retailing,
the
organic
growth
of
the
economy
and
consumer
spending
provide
an
additional
tailwind.
In
this
environment,
well-run
brick-and-mortar
retailers
have
increasingly
focused
on
optimizing
the
interplay
between
their
physical
and
online
storefronts.
This
"omnichannel"
approach
allows
customers
to
shop
and
interact
between
channels
in
a
more
fluid
manner.
This,
in
turn,
allows
shoppers
to
buy
a
product
online,
but
pick
it
up
in-store,
retailers
to
fulfill
online
orders
through
in-store
delivery
by
using
their
stores
as
warehouses,
and
shoppers
to
return
a
product
purchased
online
to
an
in-store
location.
An
omni-channel
strategy
allows
a
retailer
to
position
its
physical
storefront
not
as
a
balance
sheet
liability,
but
rather
as
part
of
a
platform
to
provide
consumers
with
a
more
consistent,
convenient
and
effortless
retail
experience,
regardless
of
how
they
choose
to
engage
the
retailer.
As
a
result
of
its
success,
we
believe
that
omni-channel
strategies
now
represent
a
more
significant
component
of
all
retailers'
revenue
mix.
Growth
in
e-commerce
spending
has
consistently
outpaced
overall
growth
in
retail
sales,
a
trend
that
is
expected
to
continue.
Based
on
data
from
the
U.S.
Department
of
Commerce,
e-commerce
spending
in
the
U.S.
has
grown
at
a
compound
annual
rate
of
approximately
15%
since
2010,
exceeding
$342
billion
in
2015
when
it
amounted
to
approximately
7.3%
of
all
retail
sales.
During
the
same
period
total
non-inflation
adjusted
retail
sales,
offline
and
online,
grew
at
a
compounded
annual
rate
of
53
Table
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Contents
approximately
4.28%.
According
to
eMarketer,
in
2015
worldwide
retail
sales
(which
includes
in-store
and
e-commerce
purchases)
were
predicted
to
surpass
$22
trillion,
and
retail
e-commerce
sales
would
account
for
7.4%
of
the
total
worldwide
retail
market,
or
approximately
$1.7
trillion.
By
2019,
eMarketer
predicted
that
worldwide
e-commerce
sales
would
grow
to
approximately
$3.6
trillion,
but
that
retail
e-commerce
would
represent
only
12.8%
of
retail
sales.
(©
November
2015
eMarketer
Inc.,
All
Rights
Reserved.)
According
to
estimates
from
eMarketer,
retail
e-commerce
sales
in
the
U.S.
alone
could
reach
approximately
$600
billion
by
2019.
(©
June
2016
eMarketer
Inc.,
All
Rights
Reserved.)
E-commerce Fulfillment Industry Background
The
e-commerce
fulfillment
industry
enables
thousands
of
retailers
around
the
world
to
transact
and
grow
their
relationships
with
tens
of
thousands
of
suppliers.
Additional
participants
in
this
market
include
third-party
logistics
providers,
parcel
carriers
and
other
delivery
companies,
fulfillment
and
warehousing
providers
and
sourcing
companies.
Supply
chain
management
involves
communicating
data
about
the
goods
themselves,
data
related
to
the
exchange
of
goods
among
these
trading
partners,
and
information
about
the
many
thousands
of
companies
who
are
members
of
the
supply
chain
community.
At
virtually
every
stage
of
the
supply
chain
there
are
inefficient,
labor-intensive
processes
between
trading
partners
(
e.g. ,
retailers
and
their
suppliers
or
sellers
and
the
online
marketplaces
on
which
the
sellers
list
their
goods
for
sale)
with
administrative
and
communication
requirements,
such
as
the
exchange
of
product
information
between
trading
partners
for
the
purpose
of
listing
products
for
sale
and
verifying
the
status
of
goods
before
shipment,
while
in
transit
and
upon
delivery,
to
ensure
that
consumers
receive
the
products
they
ordered
by
the
date
promised.
Mistakes
made
during
these
processes
negatively
impact
trading
partners
and
their
businesses,
either
through
penalties
that
counter-parties
impose,
or
through
poor
consumer
experiences
that
discourage
future
purchases.
E-commerce
fulfillment
solutions
must
address
trading
partners'
needs
for
integration,
collaboration,
connectivity,
visibility
and
data
analytics
to
improve
the
speed,
accuracy
and
efficiency
with
which
goods
are
ordered
and
supplied.
The
industry
initially
focused
on
electronically
connecting
retailers
and
suppliers
over
the
internet
to
avoid
costly
and
error-prone
manual,
paper
and
fax-based
communication
processes.
The
next
evolution
included
automating
and
streamlining
these
fulfillment
transactions
between
retailers,
suppliers
and
others
in
the
supply
chain,
ensuring
orders
were
placed
accurately
and
quickly
and
that
goods
were
delivered
on
time
and
in
accordance
with
the
retailer's
requirements.
As
familiarity
and
acceptance
of
cloud-based
services
continues
to
accelerate,
we
believe
companies,
both
large
and
small,
will
continue
to
turn
to
cloud-based
solutions
such
as
ours
for
their
supply
chain
integration
needs,
as
opposed
to
traditional
on-premise
software
deployment.
Traditional Solutions
Traditional
e-commerce
fulfillment
solutions
(ranging
from
non-automated
paper
or
fax
solutions
to
electronic
solutions)
that
are
implemented
using
onpremise
licensed
software
tend
to
focus
primarily
on
fulfillment
automation
within
a
single
facility
and
among
a
small
network
of
trading
partners.
On-premise
licensed
software
provides
connectivity
between
only
one
organization
and
its
trading
partners
and
typically
requires
significant
time
and
technical
expertise
to
configure,
deploy
and
maintain,
and
to
accommodate
new
trading
partners
added
to
the
network.
Providers
of
on-premise
licensed
software
primarily
link
retailers
and
suppliers
through
the
Electronic
Data
Interchange
(
EDI )
protocol
that
enables
the
structured
electronic
transmission
of
data
between
organizations.
Because
of
set-up
and
maintenance
costs,
technical
complexity
and
a
growing
volume
of
requirements
from
retailers,
the
traditional
software
model
is
not
well-suited
for
many
retailers
and
suppliers,
especially
where
the
network
includes
small
and
medium-sized
suppliers
with
smaller
information
technology
budgets.
54
Table
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Additionally,
the
traditional
approach
to
supply
chain
automation
involves
a
system
architecture
made
up
of
many
point-to-point
connections
between
retailers
and
their
suppliers.
These
multiple
connections
are
inherently
error-prone
and
can
be
difficult
to
adapt
to
changing
requirements
and
market
circumstances.
For
instance,
if
there
is
a
broad
trend
in
the
market
that
many
members
of
a
retailing
segment
would
like
to
adopt,
a
supplier
would
be
faced
with
a
series
of
enhancements,
on
a
one-by-one
basis,
to
the
collection
of
connections
they
have
with
their
retailers.
Lacking
flexibility
and
adaptability,
traditional
approaches
do
not
have
the
architectural
capabilities
necessary
for
retailers
and
suppliers
to
maximize
the
opportunities
presented
by
the
rapid
evolution
of
market
trends.
Expansion of Product Assortments
While
online
retailing
has
removed
the
shelf-space
constraints
placed
on
retailers
wanting
to
offer
a
large
product
assortment
to
consumers,
it
has
not
removed
the
physical
and
operational
constraints
of
storing
products
in
inventory
and
providing
the
capability
to
quickly
ship
products
to
consumers
when
they
are
ordered.
In
fact,
the
ability
to
offer
massive
numbers
of
products
for
sale
online
has
put
more
pressure
on
retailers
to
invest
in
additional
warehouse
and
distribution
operations
and
to
increase
financial
capital
investments
to
purchase
and
maintain
larger
inventories
of
goods
for
sale.
As
an
alternative
to
expensive
infrastructure
investment,
retailers
looking
to
increase
the
number
of
products
they
offer
often
turn
to
third-party
fulfillment
mechanisms,
specifically
drop-ship
fulfillment,
to
offer
a
wider
array
of
product
assortments
through
virtual
inventory,
without
expanding
distribution
center
capacity
or
increasing
financial
investment
in
inventory.
With
drop-shipping,
a
retailer
or
online
marketplace
seller
is
able
to
take
a
consumer's
order
and
provide
it
to
a
supplier
that
then
delivers
the
product
directly
to
the
consumer.
The
consumer
perceives
that
the
product
was
received
directly
from
the
retailer,
even
though
the
retailer
never
held
the
ordered
item
in
inventory.
Retailers
impose
their
own
specifications
on
their
trading
partners
for
electronically
communicating
their
supply
chain
information.
These
specifications
set
the
standards
for
transmitting
and
acknowledging
invoices,
inventory
reporting,
purchase
orders
and
shipping
notices.
Suppliers
that
transact
with
multiple
retailers
need
to
accommodate
different
specifications
unique
to
each
retailer,
which
often
vary
based
on
a
retailer's
size,
industry
and
technological
capabilities.
Suppliers
that
fail
to
comply
with
a
retail
partner's
specifications
risk
errors
with
processing
orders
and
compliance
fines.
Such
recurring
performance
issues
may
cause
a
retailer
to
discontinue
its
relationship
with
a
supplier.
As
a
result,
suppliers
are
increasingly
seeking
out
solutions
to
help
them
manage
these
challenges
and
improve
their
service
levels
with
the
retailers
they
supply.
Before
retailers
and
suppliers
are
able
to
exchange
electronic
files
for
order
fulfillment,
they
must
first
exchange
data
related
to
the
supplier's
products.
Additionally,
the
retailer
must
transform
the
supplier-provided
product
data
into
a
format
that
the
retailer's
online
storefront
supports
and
enhance
the
data
in
a
way
that
makes
the
product
appear
more
compelling
to
consumers.
This
enhancement
includes
rewriting
product
titles
and
descriptions,
creating
additional
data
attributes
that
describe
the
products
and
manipulating
product
images
to
conform
to
the
retailer's
standards.
All
of
this
work
falls
under
the
responsibility
of
individual
retailer
and
supplier
employees,
who
frequently
rely
on
general
purpose
software
and
tools,
such
as
email
and
spreadsheets,
to
accomplish
these
tasks.
This
results
in
labor-intensive
and
error-prone
processes
with
no
activity
tracking
or
management
capabilities.
The
inefficiency
of
this
process
directly
impacts
a
retailer's
financial
performance
by
increasing
the
amount
of
time
and
resources
required
to
list
products
for
sale
online,
or
by
reducing
the
number
of
products
a
retailer
is
able
to
carry
online
due
to
capacity
constraints
resulting
from
the
manual
tasks.
A
similar
exercise
takes
place
in
the
context
of
an
online
marketplace,
where
sellers
must
list
products
for
sale
and
describe
them
in
a
manner
that
conforms
to
the
marketplace's
requirements.
Driving Demand
E-commerce
is
a
large
and
global
market
that
continues
to
expand
as
retailers
and
manufacturers
continue
to
increase
their
online
sales.
However,
it
is
also
an
increasingly
complex
and
fragmented
55
Table
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Contents
market
due
to
the
hundreds
of
channels
available
to
retailers
and
manufacturers
and
the
rapid
pace
of
change
and
innovation
across
those
channels.
Historically,
a
retailer
or
manufacturer
might
have
simply
established
an
online
storefront
and
used
a
basic
paid
search
program
to
drive
traffic
to
its
website.
Today,
in
order
to
gain
consumers'
attention
in
a
more
crowded
and
competitive
online
marketplace,
many
retailers
and
an
increasing
number
of
manufacturers
sell
their
merchandise
through
multiple
online
channels
(often
referred
to
as
an
"omni-channel"
marketing
strategy),
each
with
its
own
rules,
requirements
and
specifications.
In
addition,
retailers
and
manufacturers
often
seek
to
sell
their
products
in
multiple
countries,
each
with
its
own
local
consumer
preferences
and
behaviors.
The
fragmentation
and
increasing
complexity
of
e-commerce
channels
is
placing
greater
demands
on
retailers
and
consumer
brands
that
seek
to
grow
their
online
sales.
These
retailers
and
brands
need
omni-channel
solutions
that
enable
them
to
easily
integrate
their
product
offerings
and
inventory
across
multiple
online
channels.
Traditional
solutions,
however,
typically
suffer
from
several
limitations.
In-house
solutions
are
often
costly,
slow
to
implement
and
difficult
to
keep
current.
External
solutions
are
often
too
narrowly
tailored
or
aimed
at
helping
retailers
and
manufacturers
manage
a
single
online
channel
or
single
category
of
channels
rather
than
multiple
platforms
in
a
unified
approach.
Delivering Products
From
the
consumer's
perspective,
an
e-commerce
transaction
is
not
complete
until
the
ordered
products
arrive
at
their
doorstep.
There
is
room
for
error
in
even
the
simplest
fulfillment
process
where
a
retailer
is
operating
a
single
distribution
facility
with
a
small
inventory
of
products.
The
complexity
of
having
a
large
network
of
third-party
drop-ship
suppliers
significantly
increases
the
management
complexity
and
likelihood
of
error.
Instead
of
managing
a
single
distribution
facility,
a
retailer
must
ensure
that
hundreds,
and
potentially
thousands,
of
third-party
suppliers
are
shipping
the
correct
product
to
the
correct
consumer
address
and
that
the
product
will
arrive
at
the
consumer's
doorstep
by
the
date
the
retailer
promised.
Every
e-commerce
order
must
be
split
into
its
component
"line
items"
and
transmitted
to
the
relevant
supplier,
which
must
then
select
the
appropriate
carrier
service
level
to
meet
the
delivery
promise
date.
Without
management
of
the
process
across
suppliers,
the
retailer
risks
uncontrolled
costs
as
each
supplier
makes
their
own
shipping
decisions
and
then
charges
back
to
the
retailer
the
cost
of
delivery.
However,
the
consequences
of
poor
supplier
network
performance
are
even
more
significant,
as
the
consumer
will
blame
the
retailer
for
any
fulfillment
problems
caused
by
the
third-party
supplier,
thus
damaging
the
customer's
perception
of
the
retailer's
brand.
CommerceHub Solutions and Capabilities
Our
solutions
help
retailers,
consumer
brands,
manufacturers,
distributors
and
other
market
participants
reduce
the
complexity
of
selling
products
through
online
sales
channels,
including
by
sourcing
through
multiple
suppliers,
selling
on
emerging
online
sales
channels
and
delivering
products
to
consumers.
Beyond
the
cloud-based
software
required
to
build
and
operate
successful
e-commerce
strategies,
our
solutions
are
provided
to
our
customers
with
highly
targeted
services
that
help
our
customers
rapidly
adopt
our
solutions
and
maximize
the
utility
they
achieve
through
our
solutions.
By
combining
our
software
with
value-added
services,
we
enable
easier
adoption
of
the
most
effective
strategies
and
tactics
for
product
merchandising,
online
marketing
and
product
delivery.
Our
solutions
are:
Supply Solutions : Assortment Expansion through Drop-Ship Fulfillment. The
core
solution
used
by
our
retailer
customers
allows
retailers
to
communicate
electronically
with
their
drop-ship
suppliers
through
a
single,
integrated
connection.
Through
this
"virtual
inventory"
solution,
retailers
are
able
to
link
their
order
management
systems
(
OMS )
to
each
supplier's
system
to
exchange
order
processing
data
in
compliant
formats,
allowing
for
better
order
and
inventory
coordination.
By
using
our
software,
retailers
are
able
to
communicate
orders
to
their
suppliers,
view
data
indicating
the
inventory
quantity
each
supplier
has
available,
receive
updates
regarding
the
shipment
of
orders,
view
reports
that
describe
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each
supplier's
fulfillment
performance
and
receive
notifications
when
exceptions
in
the
fulfillment
process
occur.
Suppliers
are
able
to
receive
and
manage
orders
from
multiple
retailers
through
a
web-based
application
(or
a
system-to-system
connection
for
high-volume
suppliers)
and
print
retailer-branded
packing
slips
for
inclusion
in
shipments
to
consumers,
as
well
as
comply
with
each
retailer's
exacting
requirements
without
needing
to
understand
the
retailer's
underlying
technical
protocols.
Retailers
using
our
assortment
expansion
solution
are
able
to
compete
more
effectively
in
the
market
through
the
operation,
at
scale,
of
various
delivery
strategies,
including
drop-shipping,
ship-to-store,
in-store
special
orders
and
optimized
delivery.
Our
assortment
expansion
solutions
include
the
following
capabilities:
•
Distributed Inventory Management —Our
inventory
management
capability
allows
retailers
to
receive
aggregated
and
geographically-enabled
inventory
data
feeds
from
a
large
network
of
suppliers.
Instead
of
manually
receiving
and
processing
individual
inventory
feeds
separately
for
each
of
their
suppliers,
our
inventory
management
capability
aggregates
disparate
inventory
data
files
and
provides
the
resulting
output
to
the
retailer
in
a
transformed
file
format
that
can
be
imported
directly
into
the
retailer's
inventory
management
software
to
provide
an
updated
view
of
the
products
available
for
sale
from
its
suppliers.
Including
geographic
location
information
in
the
inventory
data
feed
enables
retailers
to
select
more
efficient
and
cost-effective
delivery
methods,
enabling
product
shipment
from
warehouses
that
are
closer
to
the
delivery
destination.
•
Compliance Management —Our
compliance
management
capability
tracks
supplier
delivery
performance,
which
is
then
aggregated
and
presented
to
the
retailer
in
the
form
of
performance
reports
and
supplier
"scorecards"
that
provide
a
snapshot
of
each
supplier's
fulfillment
performance
to
help
our
retailer
customers
better
manage
and
assess
the
performance
of
their
supplier
network,
and
helps
suppliers
improve
performance
to
increase
their
volume
of
business
with
the
retailer.
Retailers
can
also
use
this
enhanced
visibility
to
identify
trends
and
address
systemic
issues
across
their
supplier
network
to
improve
the
consumer
experience
by
increasing
the
pace
and
accuracy
of
order
fulfilment.
•
Returns Management —Our
returns
management
capability
helps
retailers
manage
the
process
of
accepting
returns
from
consumers.
•
LTL and Special Order Management— Our
"Less-Than-Truckload"
(
LTL )
and
special
order
capabilities
provide
management
and
visibility
to
facilitate
the
fulfillment
of
complex
orders
that
require
the
coordination
of
several
parties,
including
delivery
agents
and
installers.
•
Product Content Collection, Management, and Syndication —Our
product
content
capabilities
enable
retailers
to
automate
the
process
of
communicating
their
product
content
specifications
to
suppliers
and
allow
suppliers
to
more
efficiently
upload
their
product
catalog
into
CommerceHub's
cloud-based
environment
in
a
format
that
is
consistent
with
the
retailer's
requirements,
thereby
reducing
the
time
and
effort
required
for
retailers
to
list
new
products
for
sale.
Through
our
cloud-based
software,
the
retailer
is
able
to
efficiently
collect
and
manipulate
product
content
so
that
it
meets
the
retailer's
specifications,
and
then
export
the
compliant
content
to
its
website
to
expedite
the
process
of
adding
products
to
their
assortment.
Demand Solutions : Consumer Demand Generation. Our
consumer
demand
generation
solutions
allow
sellers
(retailers
and
consumer
brands)
to
upload
their
entire
product
catalog
to
our
platform,
and
then
transform
and
syndicate
that
product
catalog
to
hundreds
of
e-commerce
marketing
channels.
In
contrast
to
competing
solutions,
our
solution
acts
as
the
single
source
"master
catalog"
for
a
seller's
entire
product
offering
with
the
capability
to
transform
product
data
into
a
format
that
is
tailored
to
each
marketing
channel's
unique
requirements.
Instead
of
the
time-consuming
process
of
managing
point-to-point
integrations
with
online
marketing
channels,
sellers
can
upload
their
catalog
once
and
then
create
content
rules
that
transform
and
map
the
product
data
in
a
way
that
is
optimized
for
each
channel.
Our
consumer
demand
generation
solutions
facilitate
multiple
revenue
enhancing
strategies
for
retailers
and
consumer
brands,
including
e-commerce
marketing
on
significant
digital
advertising
channels,
selling
on
major
online
marketplaces
and
promotion
of
products
through
emerging
social
networks,
such
as
Facebook
and
Pinterest.
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Table
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Our
consumer
demand
generation
solutions
include
the
following
capabilities:
•
Cross-Channel Optimization for Marketplaces —Our
channel
optimization
capabilities
for
marketplaces
provide
the
ability
for
retailers
and
brands
to
sell
through
online
marketplaces
such
as
Amazon,
eBay
and
Jet
while
maintaining
compliance
with
each
marketplace's
technical
requirements.
Sellers
list
the
products
they
have
for
sale
and
provide
price
and
inventory
updates
to
the
marketplace
on
an
ongoing
basis.
When
consumers
buy
products,
our
cloud-based
software
downloads
the
orders
from
the
marketplaces
and
transmits
them
to
the
seller
for
fulfillment.
•
Cross-Channel Optimization for Digital Advertising —Our
channel
optimization
capabilities
for
digital
advertising
manages
the
listing
and
configuration
of
product
advertisements
on
a
variety
of
different
e-commerce
marketing
channels,
including
Google
Product
Listing
Ads,
Yahoo
Gemini
and
Connexity
(including
Price
Grabber
and
Shopzilla),
as
well
as
social
networks,
such
as
Facebook
and
Pinterest.
Leveraging
the
data
provided
by
the
core
master
catalog
capability
of
our
demand
generation
solution,
the
digital
advertising
capability
gives
sellers
the
ability
to
optimize
performance
on
supported
e-commerce
marketing
channels
by
simplifying
the
process
of
managing
a
large
number
of
online
advertisement
campaigns
per
channel.
A
seller
that
wants
to
create
and
manage
hundreds
of
online
advertisement
campaigns
on
Google
Product
Ads
can
significantly
reduce
their
workload
through
one
process,
managed
through
our
software,
which
uses
content
rules
to
replicate
campaign
configuration
across
hundreds
of
campaigns.
In
January
2015,
we
completed
our
acquisition
of
Mercent,
which
is
now
integrated
as
a
component
of
our
overall
Demand
Solutions
offering
described
above.
Delivery Solutions : Enhanced Delivery Experience. Our
solutions
for
enhanced
delivery
experience
help
retailers
and
suppliers
improve
the
efficiency
of
their
consumer
delivery
networks
through
the
application
of
algorithms
that
optimize
shipping
decisions
and
more
effectively
allocate
physical
product
inventory
across
fulfillment
locations.
Our
solutions
for
enhanced
delivery
experience
include
the
following
capabilities:
•
Shipping Optimization —Our
shipping
optimization
capability
allows
retailers
to
use
efficient
algorithms
to
make
shipping
decisions
that
help
our
retailer
customers
reduce
costs
and
delivery
times
and
meet
consumer
promise
dates.
For
example,
retailers
can
use
our
solutions
to
automatically
downgrade
a
shipment
from
the
two-day
priority
service
level
to
the
more
cost-effective
ground
service
level
if
shipment
via
ground
will
meet
the
consumer's
delivery
promise
date.
Alternatively,
a
retailer
can
upgrade
the
service
level
of
shipments
that
are
at
risk
of
arriving
to
the
consumer
late,
based
on
the
geographic
location
of
the
consumer,
the
supplier
shipping
the
product
and
the
date
by
which
the
consumer
was
promised
delivery.
•
Integrated third-party logistics providers ( 3PLs ) —Our
integrated
3PL
capability
allows
retailers
and
suppliers
to
partner
and
place
physical
inventory
with
third-party
logistics
providers
that
provide
access
to
warehouses
located
closer
to
a
broader
distribution
of
consumers.
The
integrated
3PLs
are
then
able
to
act
as
suppliers
to
the
retailer
(or
supplier)
and
ship
products
to
consumers
that
are
located
near
the
3PL's
facility,
which
reduces
delivery
costs
and
increases
the
speed
at
which
the
consumer
receives
their
order.
Our Services
In
addition
to
our
cloud-based
software,
we
provide
our
customers
with
access
to
the
following
services
to
help
them
maximize
the
benefits
of
our
technology:
•
Supplier Onboarding —We
provide
each
supplier
with
onboarding
services,
whereby
our
personnel
assist
with
activating
and
connecting
large
volumes
of
suppliers
and
sellers
of
any
size
with
any
58
Table
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supported
retailer
or
online
e-commerce
channel
using
our
proprietary
streamlined
and
scalable
processes.
•
Performance Marketing — CommerceHub
provides
e-commerce
marketing
services
to
select
customers
where
our
personnel
use
our
system
tools
and
automated
processes
to
manage
many
aspects
of
digital
marketing
on
behalf
of
our
customers,
including
campaign
management,
bid
management
and
data
quality
enhancement,
allowing
customers
to
outsource
this
expertise
and
focus
their
internal
personnel
on
growing
their
businesses.
Revenue
The
majority
of
our
revenue
is
derived
from
usage
fees
that
are
based
on
the
volume
of
activity
our
customers
achieve
through
our
platform
and
from
recurring
subscription
fees.
The
remaining
portion
of
our
revenue
comes
from
services
we
provide
to
new
and
existing
customers,
including
highly
targeted
services
that
are
focused
on
helping
our
customers
quickly
adopt
our
solutions
and
maximize
their
utility.
Usage
revenue
is
derived
primarily
from
fees
charged
to
retailers
and
suppliers
for
their
use
of
our
platform
to
conduct
business
with
their
trading
partners.
Currently,
these
usage
fees
are
primarily
influenced
by
the
volume
of
customer
orders
related
to
our
Supply
Solutions
that
are
processed
through
our
platform.
Usage
revenue
also
consists
of
fees
for
activity
related
to
inventory
management,
third-party
communication
and
fees
related
to
the
volume
of
online
sales
our
customers
achieve
on
certain
demand
channels.
A
customer's
recurring
subscription
fee
is
based
on
several
factors,
including
the
number
and
type
of
trading
partners
(
e.g. ,
online
retailers)
that
a
customer
is
connected
to
through
our
platform,
the
number
and
type
of
demand
channels
(
e.g. ,
marketplaces,
digital
advertising
channels
and
social
networks)
a
customer
accesses
through
our
platform,
and
the
adoption
of
certain
available
feature
upgrades
that
further
enhance
the
functionality
of
our
platform.
Total
recurring
subscription
revenue
grows
as
new
trading
partner
customers
join
the
platform,
as
those
trading
partners
connect
and
create
relationships
with
other
trading
partners,
and
as
our
customers
adopt
new
features
and
upgrades
that
we
make
available.
Our
revenue
is
currently
generated
primarily
from
the
United
States
and
Canada.
Regulatory Matters
U.S. and Foreign Law and Regulation
Various
laws
and
regulations
in
the
U.S.
and
foreign
countries
apply,
both
directly
and
indirectly,
to
our
online
commerce
business.
For
example,
U.S.
and
foreign
laws
and
regulations
regarding
privacy,
online
commerce
and
communications,
taxation,
intellectual
property
and
the
provision
of
goods
and
services
through
the
Internet
may
affect
our
business.
U.S.
and
foreign
laws
and
regulations
are
subject
to
the
actions
of
U.S.
and
foreign
governments
at
the
national,
state,
regional
and
local
levels,
and
to
interpretation
by
U.S.
and
foreign
courts.
The
application
of
U.S.
and
foreign
laws
and
regulations
to
our
business
therefore
is
uncertain
and
subject
to
change.
Data Privacy and Security
We
are
subject
to
laws
governing
the
collection,
use,
retention,
security
and
transfer
of
personally-identifiable
information
about
our
customers.
The
enactment,
interpretation
and
application
of
user
data
protection
and
privacy
laws
are
in
a
state
of
flux,
and
the
interpretation
and
application
of
such
laws
may
vary
from
country
to
country.
For
example,
on
December
15,
2015,
the
European
Commission,
the
European
Parliament
and
the
Council
of
the
European
Union
(
Council )
reached
agreement
on
new
data
laws
that
give
consumers
additional
rights
and
impose
additional
restrictions
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Table
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and
penalties
on
companies
for
illegal
collection
and
misuse
of
personal
information.
The
European
Parliament
and
the
Council
adopted
the
new
laws
in
April
2016,
with
the
laws
to
take
effect
two
years
later.
Further,
on
October
6,
2015,
the
Court
of
Justice
of
the
European
Union
invalidated
the
"Safe
Harbor
Framework,"
which
had
allowed
companies
to
collect
and
process
personal
data
in
European
Union
nations
for
use
in
the
U.S.
European
Union
and
U.S.
authorities
announced
on
February
2,
2016
that
they
had
reached
agreement
on
a
new
data
transfer
framework
called
the
EU-U.S.
Privacy
Shield.
The
EU-U.S.
Privacy
Shield
likely
will
receive
formal
approval
in
the
European
Union
in
July
2016.
The
European
Union
and
the
U.S.
must
implement
the
new
framework,
which
may
be
subject
to
legal
challenge.
In
the
U.S.,
the
Federal
Trade
Commission
has
proposed
a
privacy
policy
framework,
and
legislation
is
pending
in
Congress
that
would
require
organizations
that
suffer
a
breach
of
security
related
to
personal
information
to
provide
notice
of
such
breach.
Many
states
have
adopted
laws
requiring
notification
to
users
when
there
is
a
security
breach
affecting
personal
data,
such
as
California's
Information
Practices
Act.
Complying
with
these
different
national
and
state
privacy
requirements
may
cause
our
business
to
incur
substantial
costs.
In
addition,
online
commerce
businesses
such
as
ours
have
and
post
on
their
websites
privacy
policies
and
practices
regarding
the
collection,
use
and
disclosure
of
user
data.
A
failure
to
comply
with
such
posted
privacy
policies
or
with
the
regulatory
requirements
of
federal,
state
or
foreign
privacy
laws
could
result
in
proceedings
or
actions
by
governmental
agencies
or
others
(such
as
class
action
litigation)
which
could
adversely
affect
our
business.
Technical
violations
of
certain
privacy
laws
can
result
in
significant
penalties,
including
statutory
penalties.
In
2012,
the
Federal
Communications
Commission
(
FCC )
amended
its
regulations
under
the
Telephone
Consumer
Protection
Act
(
TCPA ),
which
could
subject
our
business
to
increased
liability
for
certain
telephonic
communications
with
customers,
including
but
not
limited
to
text
messages
to
mobile
phones.
Under
the
TCPA,
plaintiffs
may
seek
actual
monetary
loss
or
statutory
damages
of
$500
per
violation,
whichever
is
greater,
and
courts
may
treble
such
damage
awards
for
willful
or
knowing
violations.
Data
collection,
privacy
and
security
are
growing
public
concerns.
Congress
and
individual
states
and
foreign
legislative
bodies
may
consider
additional
online
privacy
legislation.
Online Commerce
Our
business
also
must
comply
with
other
federal
and
state
laws
and
regulations
regarding
online
communications
and
commerce
to
the
extent
applicable
to
our
business.
For
example,
the
Children's
Online
Privacy
Protection
Act
prohibits
web
sites
from
collecting
personally
identifiable
information
online
from
children
under
age
13
without
parental
consent
and
imposes
a
number
of
operational
requirements.
Certain
email
activities
are
subject
to
the
Controlling
the
Assault
of
NonSolicited
Pornography
and
Marketing
Act
of
2003,
commonly
known
as
the
CAN-SPAM
Act.
The
CAN-SPAM
Act
regulates
the
sending
of
unsolicited
commercial
email
by
requiring
the
email
sender,
among
other
things,
to
comply
with
specific
disclosure
requirements
and
to
provide
an
"opt-out"
mechanism
for
recipients.
Both
of
these
laws
include
statutory
penalties
for
non-compliance.
The
Digital
Millennium
Copyright
Act
limits,
but
does
not
eliminate,
liability
for
listing
or
linking
to
third-party
websites
that
may
include
content
that
infringes
on
copyrights
or
other
rights
so
long
as
our
business
complies
with
the
statutory
requirements.
Various
states
also
have
adopted
laws
regulating
certain
aspects
of
Internet
communications.
On
February
24,
2016,
the
President
signed
legislation
that
permanently
extends
the
moratorium
on
state
and
local
taxes
on
Internet
access
and
commerce.
Additional
Internet-related
laws
and
regulations
adopted
in
the
future
may
cover
issues
such
as
defamatory
speech,
copyright
infringement,
pricing
and
characteristics
and
quality
of
products
and
services.
Such
additional
laws
or
regulations
may
slow
the
growth
of
e-commerce
services
and
the
Internet,
which
could
in
turn
cause
a
decline
in
the
demand
for
our
customers'
online
commerce
business,
and
increase
our
cost
(or
our
customers'
cost)
of
doing
business
or
otherwise
have
an
adverse
60
Table
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effect
on
our
business,
operating
results
and
financial
conditions.
Moreover,
the
applicability
of
existing
laws
governing
issues
such
as
property
ownership,
libel,
personal
privacy
and
taxation
to
commercial
online
services
and
the
Internet
is
uncertain
and
could
expose
our
business
to
substantial
liability.
On
February
26,
2015,
the
FCC
adopted
rules
in
its
open
Internet
proceeding
that
could
restrict
the
ability
of
broadband
providers
to
block
or
otherwise
disadvantage
our
business.
Among
other
things,
the
open
Internet
rules
prohibit
Internet
service
providers
from:
(1)
blocking
access
to,
or
impairing
or
degrading,
legal
content,
applications,
services
or
non-harmful
devices;
and
(2)
favoring
selected
Internet
traffic.
On
June
14,
2016,
the
United
States
Court
of
Appeals
for
the
District
of
Columbia
Circuit
denied
petitions
for
review
filed
by
several
broadband
providers
challenging
the
new
open
Internet
rules.
Proposed Changes in Law and Regulation
The
regulation
of
Internet
services
and
access,
privacy,
data
protection,
e-commerce
and
related
matters
is
subject
to
the
political
process
and
has
been
in
constant
flux
over
the
past
decade.
Further
material
changes
in
the
law
and
regulatory
requirements
must
be
anticipated,
and
there
can
be
no
assurance
that
our
business
will
not
be
adversely
affected
by
future
legislation,
regulation
or
deregulation.
Intellectual Property
We
rely
on
a
combination
of
trademarks,
copyrights,
domain
names,
trade
dress
and
trade
secrets
to
protect
our
proprietary
technology,
our
software
code,
our
performance
data
and
our
brand.
Certain
of
our
intellectual
property
rights
have
been
acquired
through
third-party
licenses
and
agreements.
We
protect
our
intellectual
property
by
relying
on
confidentiality
procedures
and
contractual
provisions,
as
well
as
on
international,
national,
state
and
common
law
rights.
In
addition,
we
enter
into
confidentiality
and
invention
assignment
agreements
with
employees
and
contractors
and
confidentiality
agreements
with
other
third
parties.
We
protect
our
brands
through
trademark
registration
of
our
core
brands,
maintenance
of
our
trademark
portfolio,
contractual
trademark
rights
protection
and
reliance
on
common
law
trademark
rights.
We
also
register
copyrights
and
domain
names
as
necessary.
Competition
We
compete
primarily
with
other
SaaS
providers
servicing
the
e-commerce
industry.
However,
the
competitive
dynamics
of
our
market
are
unpredictable
because
it
is
fragmented
and
rapidly
evolving.
Due
to
the
nature
of
our
business
and
the
variety
of
products
we
offer,
we
do
not
believe
there
is
any
particular
competitor
or
small
group
of
competitors
that
compete
with
our
business
as
a
whole.
Rather,
our
competitors
vary
by
our
solutions
and
offerings.
Our
Supply
Solutions
compete
with
similar
offerings
from
VendorNet
(which
is
owned
by
eBay
Enterprise)
and
SPS
Commerce,
Inc.
in
North
America
and
VirtualStock
and
Kewill,
among
others,
in
Europe.
In
addition,
our
Supply
Solutions
also
face
competition
from
in-house
developed
solutions
used
by
retailers
that
choose
to
build
and
maintain
their
own
proprietary
integrations
to
online
channels,
using
a
combination
of
order
management,
custom
written
software
and
value-added
networks.
Our
Demand
Solutions
have
competitors
in
a
highly
fragmented
market,
including
ChannelAdvisor
Corporation,
Merchant
Advantage
and
various
advertising
and
digital
marketing
agencies.
We
believe
that
there
are
several
factors
unique
to
our
business
that
differentiate
our
solutions
in
the
competitive
marketplace,
including:
•
the
network
effect
of
our
existing
connections
and
relationships
with
a
diverse
group
of
leading
online
channels,
including
retailers,
manufacturers,
3PLs
and
other
trading
partners;
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Table
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•
our
history
of
long-term
relationships
with
a
blue-chip
retailer
customer
base
and
our
deep
experience
successfully
serving
and
contributing
to
the
growth
of
large
retailers,
which
engenders
trust
in
our
capabilities
as
prospective
retailers
and
suppliers
consider
engaging
our
services;
•
the
breadth
of
our
platform's
existing
integrations
and
support
for
a
wide
variety
of
online
demand
generation
channels,
including
retailers,
marketplaces
and
digital
advertising
platforms;
•
our
focus
on
data-quality
software
and
services
to
structure
product
data
in
an
optimized
format
for
each
online
channel;
•
a
history
of
establishing
and
maintaining
reliable
integration
connections
with
our
trading
partners;
•
a
proven,
scalable
technology
with
easy
to
use
and
accessible
software
and
services;
•
our
brand
recognition
and
reputation
in
the
markets
in
which
we
operate;
and
•
the
reliability
and
performance
of
our
cloud-based
software.
Properties
Our
company
leases
approximately
49,500
square
feet
in
Albany,
New
York
to
house
our
corporate
headquarters,
executive
offices
and
data
retention
functions.
We
also
lease
approximately
25,000
square
feet
in
Seattle,
Washington
and
shared
office
facilities
in
London,
England
to
house
additional
executive
offices.
Our
data
center
is
located
in
our
offices
in
Albany,
New
York.
Additionally,
we
have
co-location
arrangements
with
third-party
data
center
providers
with
respect
to
servers
we
own
and
maintain
at
their
facilities
in
Albany,
New
York
and
Chicago,
Illinois
to
house
back-up
data
center
facilities
capable
of
continuing
our
operations
in
the
event
of
a
disruption
at
our
corporate
headquarters.
Employees
CH
Parent
(on
a
nonconsolidated
basis)
currently
does
not
have
any
corporate
employees.
We
anticipate
that,
subsequent
to
the
Spin-Off,
certain
existing
executive
officers
of
CommerceHub
will
serve
as
our
company's
initial
executive
officers
and
Liberty
Media
will
provide
CH
Parent
with
certain
transitional
services
pursuant
to
a
services
agreement.
See
"Management"
and
"Certain
Relationships
and
Related
Party
Transactions—Relationships
between
CH
Parent
and
Liberty
and/or
Liberty
Media—Services
Agreements."
As
of
December
31,
2015,
CommerceHub
had
approximately
331
full
time
and
part-time
employees.
None
of
these
employees
were
represented
by
a
labor
union
or
covered
by
a
collective
bargaining
agreement.
We
believe
that
our
employee
relations
are
good.
Legal Proceedings
From
time
to
time,
we
may
become
involved
in
various
lawsuits
and
legal
proceedings
which
arise
in
the
ordinary
course
of
business.
However,
litigation
is
subject
to
inherent
uncertainties,
and
an
adverse
result
in
these
or
other
matters
may
arise
from
time
to
time
that
may
harm
our
business.
We
are
currently
not
aware
of
any
such
legal
proceedings
or
claims
that
we
believe
will
have,
individually
or
in
the
aggregate,
a
material
adverse
effect
on
our
business,
financial
condition
or
operating
results.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following
discussion
and
analysis
provides
information
concerning
our
results
of
operations
and
financial
condition.
This
discussion
should
be
read
in
conjunction
with
our
accompanying
consolidated
financial
statements
and
the
notes
thereto.
Overview
We
are
a
cloud-based
e-commerce
fulfillment
and
marketing
software
platform
provider
of
integrated
supply,
demand
and
delivery
solutions
for
large
retailers,
online
marketplaces
and
digital
marketing
channels
(collectively,
"demand
channels"),
and
consumer
brands,
manufacturers,
distributors
and
other
market
participants
(collectively,
"suppliers").
Our
software
platform
allows
trading
partners—our
customers—to
sell
more
products
online,
promote
products
through
retailers,
marketplaces
and
digital
advertising
channels,
and
deliver
products
to
consumers
quickly.
Approximately
9,500
trading
partners
have
access
to
our
platform
daily
to
exchange
critical
information
with
each
other,
including
orders,
invoices,
product
information
and
other
electronic
documents.
Collectively,
our
trading
partner
customers
constitute
a
vibrant
network
of
the
largest
retailers,
marketplaces
and
brands
in
North
America.
We
sell
access
to
our
integrated
supply,
demand
and
delivery
solutions.
These
solutions
leverage
our
trading
partner
platform
and
include
capabilities
that
enable
virtual
inventory
(or
"drop-ship")
fulfillment,
e-commerce
marketing
and
consumer
demand
generation
(
e.g. ,
the
syndication
of
seller
product
listings
to
relevant
e-commerce
channels),
and
shipping
and
delivery
management.
Through
our
solutions
we
help
our
customers
solve
many
of
the
most
critical
problems
in
today's
e-commerce
market.
Our
customers
use
our
platform
and
solutions
to
expand
the
breadth
of
their
product
assortment
so
they
can
offer
the
products
consumers
want
by
assisting
our
customers
to
market
those
products
on
marketplaces,
search
engines,
and
emerging
e-commerce
channels
such
as
Facebook
and
Pinterest.
In
addition,
because
no
e-commerce
transaction
is
complete
until
the
consumer
has
received
the
product
they
ordered,
we
help
our
customers
orchestrate
rapid
and
cost-effective
delivery
of
products.
We
built
our
company
by
first
focusing
on
our
Supply
Solutions,
which
enable
retailers
to
sell
more
products
through
the
"virtual
inventory"
provided
by
an
integrated
network
of
drop-ship
suppliers.
In
January
2015,
we
acquired
Seattle-based
Mercent
to
extend
the
reach
of
our
platform
to
marketplaces,
search
engines,
and
other
emerging
e-commerce
channels,
such
as
social
networks.
When
combined
with
our
Delivery
Solutions
(which
help
our
customers
provide
more
rapid
and
cost-effective
delivery),
our
company
serves
as
a
critical
partner
to
retailers
and
suppliers
who
are
focused
on
growing
their
business.
Our
solutions
unite
supply,
demand
and
delivery
and
provide
our
customers
with
a
single
platform
to
source
and
market
the
products
consumers
desire
and
to
have
those
products
delivered
more
rapidly
to
the
consumer's
doorstep.
Specifically,
we
provide
the
following
solutions:
•
Supply
Solutions
:
enable
retailers
to
expand
their
product
offerings
without
the
economic
and
logistical
limitations
or
risks
typically
associated
with
carrying
physical
inventory;
•
Demand
Solutions
:
provide
retailers
and
suppliers
with
a
single
platform
to
gain
greater
access
to
shopper
demand
through
a
single
connection
to
retail
channels,
marketplaces,
paid
search,
social
and
advertising
channels;
and
•
Delivery
Solutions
:
facilitate
rapid,
cost-efficient,
on-time
delivery
with
greater
control
of,
and
visibility
into,
the
consumer
experience
by
leveraging
our
solutions
to
allow
our
customers
to
coordinate
more
effectively
with
delivery
providers.
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CommerceHub's
platform
exhibits
significant
network
effects
by
connecting
leading
online
retailers
to
our
approximately
9,500
suppliers
to
enable
order
fulfillment
and
the
generation
of
consumer
demand
through
leading
digital
advertising
platforms.
Our
expanding
number
of
retail
trading
partners
makes
it
more
attractive
for
additional
suppliers
to
join
our
platform,
and
the
more
suppliers
we
have
on
the
platform
the
more
attractive
CommerceHub
will
be
to
additional
retailers.
This
network
effect
provides
powerful
incentives
for
additional
customers
to
join
our
platform,
which
we
believe
has
produced
a
comparatively
low
customer
acquisition
cost.
Each
retailer/supplier
relationship
is
a
"connection"
through
our
platform
that,
in
many
cases,
generates
recurring
subscription
fees
from
both
the
retailer
and
supplier,
in
addition
to
usage
fees
related
to
the
trading
partner
activity
between
the
retailer
and
supplier.
Examples
of
usage
fees
include
fees
related
to
the
processing
of
orders
and
the
exchange
of
inventory
information
and
product
information.
The
combination
of
top-line
revenue
growth,
favorable
gross
margins
associated
with
our
cloud-based
platform
and
low
cost
of
customer
acquisition
have
provided
a
history
of
positive
operating
cash
flow
and
profitability,
as
measured
by
adjusted
EBITDA.
The
majority
of
our
revenue
is
derived
from
usage
fees
that
are
based
on
the
volume
of
activity
our
customers
achieve
through
our
platform,
as
well
as
recurring
subscription
fees.
The
remaining
portion
of
our
revenue
comes
from
services
we
provide
to
new
and
existing
customers,
including
highly
targeted
services
that
are
focused
on
helping
our
customers
quickly
adopt
our
solutions
and
then
maximize
their
utility.
Key Financial Terms and Metrics
Total Usage Revenue. Usage
revenue
is
derived
primarily
from
fees
charged
to
retailers
and
suppliers
for
their
use
of
our
platform
to
conduct
business
with
their
trading
partners.
These
usage
fees
are
primarily
influenced
by
the
volume
of
customer
orders
related
to
our
Supply
Solutions
that
are
processed
through
our
platform.
Usage
revenue
also
consists
of
fees
for
activity
related
to
inventory
management
and
third-party
communication
and
variable
fees
related
to
the
amount
of
online
sales
our
customers
achieve
on
our
platform
and
solutions
that
are
above
minimum
volume
requirements.
Total
usage
revenue
grows
as
new
trading
partners
are
added
to
the
platform,
current
trading
partners
connect
and
create
relationships
with
other
trading
partners,
and
the
overall
volume
of
goods
purchased
online
through
our
retailers
and
supported
demand
channels
increases.
We
track
and
measure
total
usage
revenue
because
it
measures
the
value
that
our
customers
receive
through
their
adoption
of
our
platform.
Total Number of Customers. Our
customer
base
is
comprised
of
trading
partners,
which
include
both
retailers
and
suppliers.
We
calculate
the
total
number
of
customers
by
counting
the
total
number
of
all
active
customers
at
the
close
of
a
given
period.
We
define
"active
customers"
as
customers
that
are
currently
subscribed
to
our
platform,
have
an
agreement
with
us
currently
in
effect,
are
generating
revenue,
and
are
paying
us
a
fee
for
our
platform
service.
Total Recurring Subscription Revenue. A
customer's
recurring
subscription
fee
is
based
on
several
factors,
including
the
number
and
type
of
trading
partners
(online
retailers)
that
a
customer
is
connected
to
through
our
platform,
the
number
and
type
of
demand
channels
(marketplace,
digital
advertising
channel
or
social
network)
a
customer
accesses
through
our
platform
and
the
adoption
of
certain
available
feature
upgrades
that
further
enhance
the
functionality
of
our
platform.
Subscription
fees
are
charged
on
a
stand-alone
basis
or
in
association
with
a
minimum
usage
level
required
to
be
maintained
by
a
customer
in
connection
with
our
Demand
Solutions.
Total
recurring
subscription
revenue
grows
as
new
trading
partner
customers
join
the
platform,
as
those
trading
partners
connect
and
create
relationships
with
other
trading
partners
and
as
our
customers
adopt
new
features
and
upgrades
that
we
make
available.
We
track
and
measure
total
recurring
subscription
revenue
because
it
represents
the
size
of
our
platform
in
terms
of
total
trading
64
Table
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partner
customers
and
relationships
between
those
customers,
and
the
scope
of
their
engagement
with
us
in
terms
of
their
adoption
of
available
feature
upgrades.
Adjusted EBITDA. We
measure
our
profitability
through
Adjusted
EBITDA,
which
is
a
non-GAAP
measure
of
financial
performance.
We
calculate
Adjusted
EBITDA
as
net
income
or
loss,
plus
depreciation
of
property
and
equipment
and
amortization
of
capitalized
software
costs
and
intangible
assets,
interest
expense,
interest
income,
income
tax
expense,
share-based
compensation
expense,
and
other
adjustments.
Our
management
considers
Adjusted
EBITDA
in
reviewing
our
financial
performance
because
we
feel
it
is
a
relevant
measure
of
the
overall
efficiency
of
our
business
model,
whereby
our
platform
provides
a
mechanism
for
retailers
and
suppliers
to
engage
in
long-term
business
relationships
without
the
burden
of
supply-chain
complexity.
Seasonality
CommerceHub's
customer
base
is
diversified
among
different
retail
segments,
including
general
merchandise,
home
improvement,
office
supplies,
toys,
electronics,
furniture
and
perishables.
As
such,
our
revenue
does
not
closely
track
the
seasonality
trend
for
any
one
specific
retail
segment.
Historically,
the
percentage
of
our
annual
revenue
has
been
relatively
uniform
over
the
first
three
quarters
of
the
year
with
approximately
34%
of
our
annual
revenue
being
generated
in
the
fourth
quarter.
Domestic vs. Foreign Revenue Streams
CommerceHub
generates
substantially
all
of
its
revenue
in
North
America
(United
States
and
Canada).
On
August
6,
2014,
we
established
an
office
in
the
United
Kingdom
to
pursue
the
overseas
market,
but
to
date
have
not
generated
significant
revenue
from
operations
outside
of
North
America.
Cost of Revenue
Cost
of
revenue
primarily
consists
of
personnel
costs
including
salaries,
bonuses,
payroll
taxes,
benefit
costs
and
share-based
payments
for
our
teams
supporting
customer
set-up
and
onboarding,
customer
service,
application
support
and
performance
marketing.
The
company
capitalizes
the
cost
of
acquired
software,
payroll
and
payroll-related
costs
incurred
in
developing
and
enhancing
our
solutions
and
related
product
offerings,
such
as
internal
tools
used
by
our
operations
teams.
Amortization
expense
related
to
these
costs
are
included
in
cost
of
revenue.
Additionally,
facility
costs
for
the
company's
data
centers,
expenses
attributable
to
credit
card
processing,
communication
service
charges
and
depreciation
expense
related
to
computer
equipment
directly
associated
with
generating
revenue
are
captured
in
cost
of
revenue.
Sales & Marketing Expenses
Sales
and
marketing
expense
consists
of
personnel
expenses,
including
salaries,
commissions,
benefits,
share-based
compensation
and
bonuses
for
sales,
client
management
and
marketing
employees.
Other
costs
associated
with
sales
and
marketing
include
expenses
incurred
related
to
corporate
marketing,
including
brand
awareness
and
trade
shows.
We
utilize
a
field
sales
approach
working
from
strategically
selected
locations
throughout
the
country.
Much
of
our
marketing
effort
is
focused
on
thought
leadership,
as
our
marketing
team
engages
with
media
and
other
industry
influencers
to
publish
and
present
on
topics
relevant
to
CommerceHub's
solutions
in
trade
publications
and
relevant
industry
conferences.
Our
client
management
expenses
are
attributable
to
our
client
executive
organization
whose
primary
role
is
to
oversee
and
develop
deep
relationships
with
our
customers
and
which
is
responsible
for
strategic
account
management
and
coordination
of
cross-selling
opportunities.
65
Table
of
Contents
Research & Development Expense
Research
and
development
expense
consists
of
personnel
costs,
including
salaries
and
benefits,
share-based
compensation
expense
and
bonuses
for
employees
engaged
in
the
design,
development,
testing
and
maintenance
of
our
solutions.
Also
included
are
fees
paid
to
third-party
firms
who
assist
in
the
development
of
our
product
solutions.
General & Administrative Expenses
General
and
administrative
expenses
consist
primarily
of
personnel
costs,
including
salaries
and
benefits,
share-based
compensation
expense
and
bonus,
and
is
related
to
overhead
costs,
including
executive
leadership,
finance,
legal,
information
technology,
and
human
resource
functions,
as
well
as
professional
service
and
other
fees
related
to
legal,
tax,
accounting
and
internal
audit
services
and
other
costs
including
facilities
fees
and
bad
debt
expense.
Commencing
in
2016,
we
expect
increases
to
general
and
administrative
expenses
relating
to
resources
required
to
support
the
Spin-Off
and
anticipated
cost
increases
related
to
public
company
compliance
costs,
anticipated
to
be
in
the
range
of
an
incremental
$3
million
to
$5
million
per
year.
Executive Summary
Financial
Information
for
Three
Months
Ended
March
31,
2016
Compared
to
2015
(amounts
in
thousands):
Three Months Ended
March 31,
2016
Revenue
Cost
of
revenue
Gross
Profit
Operating
Expenses:
Sales
and
Marketing
Research
and
Development
General
and
Administrative
Income
(loss)
from
operations
Other
income
(expense):
Interest
income
Income
(loss)
before
income
taxes
Income
Tax
Expense
(benefit)
Net
income
(loss)
Adjusted
EBITDA:
Net
income
(loss)
Depreciation
and
amortization
Interest
income
Income
tax
expense
(benefit)
Share-based
compensation
expense
Adjusted
EBITDA
66
$
$
$
$
22,090
6,194
15,896
3,589
4,870
10,463
(3,026)
166
(2,860)
(870)
(1,990)
(1,990)
2,304
(166)
(870)
10,037
9,315
Change
2015
18,791
4,525
14,266
2,440
3,609
10,280
(2,063)
137
(1,926)
(501)
(1,425)
(1,425)
1,801
(137)
(501)
8,617
8,355
$
3,299
1,669
1,630
1,149
1,261
183
(963)
29
(934)
(369)
(565)
(565)
503
(29)
369
1,420
960
%
18%
37%
11%
47%
35%
2%
47%
21%
48%
74%
40%
40%
28%
21%
74%
16%
11%
Table
of
Contents
Revenue. The
table
below
displays
the
components
of
our
total
revenue
for
the
three
months
ended
March
31
(in
thousands):
Change
2016
Revenue:
Usage
Recurring
subscription
Non-recurring
services
Total
Revenue
2015
$
%
$ 14,296
$ 12,055
$ 2,241
19%
6,364
5,834
530
9%
1,430
902
528
59%
$ 22,090
$ 18,791
$ 3,299
18%
Our
revenue
increased
$3.3
million,
or
18%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
This
increase
was
attributable
to
a
$2.2
million,
or
19%,
increase
in
our
usage
revenue,
a
$0.5
million,
or
9%,
increase
in
our
recurring
subscription
revenue,
and
a
$0.5
million,
or
59%,
increase
in
our
non-recurring
services.
Usage
revenue
represented
65%
and
64%
of
our
total
revenue
for
the
three
months
ended
March
31,
2016
and
2015,
respectively.
The
increase
in
our
usage
revenue
was
mainly
driven
by
a
14%
increase
in
the
volume
of
customer
orders
processed
through
our
platform
during
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year,
with
the
remaining
increase
being
attributable
to
incremental
revenue
related
to
our
other
solutions
charged
on
a
per
usage
basis.
Recurring
subscription
revenue
represented
29%
and
31%
of
our
total
revenue
for
the
three
months
ended
March
31,
2016
and
2015,
respectively.
The
growth
in
our
recurring
subscription
revenue
was
driven
by
an
8%
increase
in
our
number
of
customers
to
9,619
at
March
31,
2016
from
8,897
at
March
31,
2015.
Revenue
generated
from
non-recurring
services,
which
represented
6%
and
5%
of
our
total
revenue
for
the
three
months
ended
March
31,
2016
and
2015,
respectively,
increased
$0.5
million,
or
59%.
This
increase
was
driven
by
higher
customer
set-up
fee
revenue
as
a
result
of
an
increase
in
the
number
of
supplier
connections.
Cost of Revenue. Cost
of
revenue
increased
$1.7
million,
or
37%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
in
cost
of
revenue
for
the
three
month
period
in
2016
was
due
to
higher
personnel-related
costs
of
approximately
$0.7
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$0.3
million
compared
to
the
same
period
in
2015.
We
also
had
increases
in
capitalized
software
amortization
expense
of
approximately
$0.6
million
due
to
an
increase
in
software
development.
Sales and marketing expenses. Sales
and
marketing
expense
increased
$1.1
million,
or
47%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
in
sales
and
marketing
expenses
was
due
to
the
expansion
of
our
sales
team
in
addition
to
the
expansion
of
our
marketing
personnel
to
enhance
our
product
and
business-to-business
marketing
efforts,
which
resulted
in
higher
personnel-related
costs
of
approximately
$0.4
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$0.3
million.
Commission
expense
to
our
sales
team
increased
approximately
$0.4
million
in
2016
due
to
sales
increases
collectively.
Research and development expenses. Research
and
development
expenses
increased
$1.3
million,
or
35%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
was
due
to
the
expansion
of
the
development
team
to
support
continued
investment
towards
improvements
to
our
platform,
which
resulted
in
higher
personnel-related
costs
of
approximately
$0.9
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$0.3
million.
67
Table
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General and administrative expenses. General
and
administrative
expense
increased
$0.2
million,
or
2%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
was
due
to
additional
share-based
compensation
expense
resulting
from
fair
value
adjustments
of
approximately
$1.0
million
and
increased
software
licenses
and
computer
maintenance
expenses
of
approximately
$0.3
million.
Other
factors
associated
with
the
expense
increase
include
investor
relations
expenses
associated
with
the
Spin-Off
and
recruiting
fees
of
approximately
$0.1
million
each.
This
is
offset
by
a
reduction
of
approximately
$0.9
million
which
was
driven
by
personnel-related
costs.
Other income. Other
income
increased
approximately
21%
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
This
was
primarily
attributable
to
an
increase
in
interest
earned
from
the
intercompany
promissory
note
between
the
company
and
Liberty.
Subsequent
to
March
31,
2016,
Liberty
repaid
the
intercompany
promissory
note,
including
accrued
interest,
and
the
company
borrowed
$28.6
million
from
Liberty
pursuant
to
this
agreement
in
order
to
fund
share-based
payment
award
exercises.
Interest
on
this
intercompany
note
accrues
at
a
rate
of
LIBOR
+1%.
It
is
expected
that
at
the
time
of
the
Spin-Off,
the
amount
outstanding
under
the
funding
agreement
with
Liberty
will
be
repaid
using
amounts
borrowed
on
a
new
credit
facility
(see
"Description
of
Certain
Indebtedness").
As
a
result,
based
on
the
initial
borrowing
(expected
to
be
approximately
$50
million)
and
the
market
interest
rate
at
the
time
of
borrowing,
the
company
expects
to
incur
approximately
$1.3
million
of
annual
interest
expense
in
connection
with
this
new
credit
facility.
Income tax benefit. Income
tax
benefit
increased
$0.4
million
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
in
the
income
tax
benefit
is
primarily
due
to
higher
pretax
book
loss
during
the
current
period.
For
each
period,
actual
income
tax
benefit
differed
from
the
amounts
computed
by
applying
the
U.S.
Federal
income
tax
rate
of
35%
to
income
(loss)
before
income
taxes
due
primarily
to
state
and
local
income
tax,
net
of
Federal
income
tax
benefits.
For
the
three
months
ended
March
31,
2016,
the
difference
between
actual
income
tax
expense
and
the
computed
tax
is
driven
primarily
by
market
adjustments
for
stock
options
exercised
under
the
company's
share-based
compensation
program.
Adjusted EBITDA. Adjusted
EBITDA
increased
approximately
$1.0
million,
or
12%,
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
increase
in
Adjusted
EBITDA
was
primarily
due
to
additional
operating
income
(excluding
depreciation,
amortization,
and
sharebased
compensation
expenses)
generated
over
that
period.
The
change
in
share-based
compensation
expense
was
attributable
primarily
to
the
increase
in
the
valuation
of
the
company
and
the
increase
in
the
number
of
share-based
awards
vesting
over
the
period,
offset
slightly
by
exercises
and
terminations
of
share-based
awards.
68
Table
of
Contents
Executive Summary
Financial
Information
for
2015
Compared
to
2014
Fiscal
Year
(amounts
in
thousands):
Year Ended
December 31,
2015
Change
2014
$
%
Revenue
Cost
of
revenue
Gross
profit
Operating
expenses:
Sales
and
marketing
Research
and
development
General
and
administrative
Income
(loss)
from
operations
Other
income
(expenses):
Interest
income
Income
(loss)
before
income
taxes
Income
tax
expense
(benefit)
Net
income
(loss)
$
$
87,614
22,406
65,208
11,742
16,304
44,110
(6,948)
600
(6,348)
(1,881)
(4,467)
65,761
13,097
52,664
6,370
9,966
29,733
6,595
657
7,252
2,945
4,307
21,853
9,309
12,544
5,372
6,338
14,377
(13,543)
(57)
(13,600)
(4,826)
(8,774)
Adjusted
EBITDA:
Net
income
(loss)
Depreciation
and
amortization
Interest
income
Income
tax
expense
(benefit)
Share-based
compensation
expense
Adjusted
EBITDA
$
$
(4,467)
7,794
(600)
(1,881)
42,150
42,996
4,307
4,417
(657)
2,945
28,356
39,368
(8,774)
3,377
57
(4,826)
13,794
3,628
33%
71%
24%
84%
64%
48%
NM
–9%
NM
NM
NM
NM
76%
–9%
NM
49%
9%
Revenue .
The
table
below
displays
the
components
of
our
total
revenue
for
the
years
ended
December
31
(in
thousands):
Change
2015
Revenue
Usage
Recurring
subscription
Non-recurring
services
Total
Revenue
2014
$
%
$ 59,585
$ 45,018
$ 14,567
32%
23,636
15,966
7,670
48%
4,393
4,777
(384) –8%
$ 87,614
$ 65,761
$ 21,853
33%
Our
revenue
increased
$21.9
million,
or
33%,
for
the
year
ended
December
31,
2015,
as
compared
to
the
same
period
in
the
prior
year.
This
increase
was
attributable
to
a
$14.6
million,
or
32%,
increase
in
our
usage
revenue,
and
a
$7.7
million,
or
48%,
increase
in
our
recurring
subscription
revenue.
The
acquisition
of
the
Mercent
business
contributed
16
percentage
points
to
the
overall
revenue
growth
during
the
year.
Usage
revenue
represented
68%
of
our
total
revenue
for
each
of
the
years
ended
December
31,
2015
and
2014.
The
increase
in
our
usage
revenue
was
driven
by
a
20%
increase
in
the
volume
of
customer
orders
processed
through
our
platform
over
the
year
ended
December
31,
2015,
with
the
remaining
increase
being
attributable
to
incremental
revenue
related
to
our
other
solutions
charged
on
a
per
usage
basis.
69
Table
of
Contents
Recurring
subscription
revenue
represented
27%
and
24%
of
our
total
revenue
for
the
years
ended
December
31,
2015
and
2014,
respectively.
The
growth
in
our
recurring
subscription
revenue
was
driven
by
an
11%
increase
in
our
number
of
customers
to
9,559
at
December
31,
2015
from
8,599
at
December
31,
2014.
Revenue
generated
from
non-recurring
services,
which
represented
5%
and
7%
of
our
total
revenue
for
the
year
ended
December
31,
2015
and
2014,
respectively,
decreased
$0.4
million,
or
8%.
This
decline
was
driven
by
lower
customer
set-up
fee
revenue
as
a
result
of
an
increase
in
the
estimated
average
expected
life
used
for
the
revenue
recognition
time
period
of
deferred
vendor
set-up
fees.
Cost of Revenue. Cost
of
revenue
increased
$9.3
million,
or
71%,
for
the
year
ended
December
31,
2015.
The
increase
in
cost
of
revenue
in
2015
was
due
to
the
activities
associated
with
the
Mercent
acquisition
of
approximately
$6.9
million
and
the
amortization
associated
with
the
intangible
assets
acquired
in
the
transaction
of
approximately
$1.1
million.
We
also
increased
the
number
of
employees
in
our
customer
service
and
other
operational
functions
to
support
the
growth
of
the
company,
which
resulted
in
higher
personnel-related
costs
of
approximately
$1.4
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$0.6
million.
The
expense
increase
was
partially
offset
by
adjustments
for
allowance
of
state
sales
and
use
tax
of
approximately
$0.8
million.
Sales and marketing expenses. Sales
and
marketing
expense
increased
$5.4
million,
or
84%,
for
the
year
ended
December
31,
2015.
The
increase
in
sales
and
marketing
expenses
was
due
to
the
expansion
of
our
sales
team
in
addition
to
the
expansion
of
our
marketing
personnel
to
enhance
our
product
and
business-tobusiness
marketing
efforts,
which
resulted
in
higher
personnel-related
costs
of
$3.0
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$0.3
million.
Commission
expense
to
our
sales
team
increased
approximately
$0.7
million
in
2015
due
to
the
continued
sales
increases.
Research and development expenses. Research
and
development
expenses
increased
$6.3
million,
or
64%,
for
the
year
ended
December
31,
2015.
The
increase
was
due
to
the
expansion
of
the
development
team
to
support
continued
investment
towards
improvements
to
our
platform,
which
resulted
in
higher
personnel-related
costs
of
approximately
$1.8
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$2.7
million.
Also,
the
additional
personnel
associated
with
the
acquisition
of
the
Mercent
business
resulted
in
approximately
$1.8
million
of
the
increase
in
research
and
development
expenses.
General and administrative expenses. General
and
administrative
expense
increased
$14.4
million,
or
48%,
for
the
year
ended
December
31,
2015.
The
increase
was
due
to
an
increase
in
personnel
to
support
the
company
in
the
areas
of
finance,
billing,
information
technology,
human
resources
and
corporate
development
and
additions
to
our
executive
level
team,
which
resulted
in
higher
personnel-related
costs
of
$1.5
million
and
additional
share-based
compensation
expense
due
to
fair
value
adjustments
of
approximately
$7.9
million.
The
increase
was
also
due
to
the
activities
associated
with
the
Mercent
acquisition
of
approximately
$3.5
million
and
the
amortization
associated
with
the
intangible
assets
acquired
in
the
transaction
of
$1.0
million.
Other income. Other
income
decreased
approximately
9%
for
the
year
ended
December
31,
2015
from
the
year
ended
December
31,
2014.
This
was
primarily
attributable
to
a
decrease
in
interest
earned
from
the
intercompany
promissory
note
between
the
company
and
Liberty.
Subsequent
to
December
31,
2015,
Liberty
repaid
the
intercompany
promissory
note,
including
accrued
interest,
and
the
company
borrowed
$28.6
million
from
Liberty
pursuant
to
this
agreement
in
order
to
fund
share-based
payment
award
exercises.
Interest
on
this
intercompany
note
accrues
at
a
rate
of
LIBOR
+1%.
It
is
expected
that
at
the
time
of
the
SpinOff,
the
amount
outstanding
under
the
funding
agreement
with
Liberty
will
be
repaid
using
amounts
borrowed
on
a
new
credit
facility
(see
"Description
of
70
Table
of
Contents
Certain
Indebtedness").
As
a
result,
based
on
the
initial
borrowing
(expected
to
be
approximately
$50
million)
and
the
market
interest
rate
at
the
time
of
borrowing,
the
company
expects
to
incur
approximately
$1.3
million
of
annual
interest
expense
in
connection
with
this
new
credit
facility.
Income tax benefit. Income
tax
benefit
increased
$4.8
million
for
the
year
ended
December
31,
2015,
as
compared
to
the
prior
period.
The
decrease
of
income
taxes
is
primarily
due
to
lower
pretax
book
income.
For
each
period,
actual
income
tax
may
differ
from
the
amounts
computed
by
applying
the
U.S.
Federal
income
tax
rate
of
35%
to
pretax
income
is
driven
primarily
by
state
and
local
income
tax,
net
of
Federal
income
tax
benefits.
For
the
year
ended
December
31,
2015,
the
difference
between
actual
income
tax
expense
and
the
computed
tax
is
driven
primarily
by
market
adjustments
for
stock
option
exercised
under
our
sharebased
compensation
program.
For
further
explanation
regarding
our
income
taxes
refer
to
Note
11
of
the
notes
to
our
audited
consolidated
financial
statements.
Adjusted EBITDA .
Adjusted
EBITDA
increased
$3.6
million,
or
9%,
for
the
year
ended
December
31,
2015.
The
increase
in
Adjusted
EBITDA
was
primarily
due
to
additional
operating
income
(excluding
depreciation,
amortization
and
share-based
compensation
expenses)
generated
over
that
period,
which
was
partially
offset
by
increased
expenses
from
the
Mercent
acquisition.
The
change
in
share-based
compensation
expense
was
attributable
primarily
to
the
increase
in
the
valuation
of
the
company
and
the
increase
in
the
number
of
shares
vesting
over
the
period,
offset
slightly
by
exercises
and
terminations
of
share-based
awards.
Liquidity and Capital Resources.
Historically,
the
cash
we
generate
from
operations
has
been
sufficient
to
fund
our
working
capital
requirements
and
capital
expenditures.
Currently,
cash
flow
from
operations
includes
payments
made
to
employees
under
our
share-based
compensation
liquidity
program.
Subsequent
to
the
Spin-Off,
we
anticipate
that
we
will
settle
share-based
arrangements
using
shares
of
our
equity
that
will
be
issuable
under
stock
plans
that
are
expected
to
be
in
place
at
the
time
of
the
Spin-Off.
During
June
2016,
CommerceHub
established
a
secured
revolving
credit
facility
for
the
settlement
of
share-based
payment
awards
prior
to
the
Spin-Off
and
to
support
future
growth
initiatives.
See
"Description
of
Indebtedness"
for
details
regarding
the
new
credit
facility.
As
a
result
of
share-based
payment
award
exercises
during
the
period
from
April
1,
2016
to
June
1,
2016,
as
discussed
in
note
12
to
the
accompanying
unaudited
condensed
consolidated
financial
statements,
the
company
expects
to
make
payments
of
approximately
$80.6
million,
reducing
the
share-based
compensation
liability
prior
to
the
Spin-Off.
To
fund
these
payments,
in
addition
to
existing
cash
balances
and
cash
from
operations,
the
company
expects
to
borrow
on
a
new
credit
facility
described
in
"Description
of
Certain
Indebtedness."
Additionally,
the
company
expects
to
use
funds
from
the
repayment
of
the
intercompany
funding
arrangement
described
in
note
8
to
the
accompanying
unaudited
condensed
consolidated
financial
statements.
Three Months Ended
March, 31
2016
Net
cash
provided
by
(used
in):
Operating
activities
Investing
activities
Financing
activities
71
2015
$
(in thousands)
Change
%
$ 8,072
4,029
4,043
100%
$ (4,474) (23,119) 18,645
–81%
$
52
—
52
NM
Table
of
Contents
Cash Flow from Operating Activities
Net
cash
provided
by
operating
activities
increased
$4.0
million
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year.
The
company's
net
loss,
excluding
the
changes
in
non-cash
expenses,
including
depreciation,
amortization
and
stock-based
compensation,
contributed
$2.1
million,
with
an
additional
$1.9
million
improvement
in
net
working
capital
changes.
Cash Flow from Investing Activities
Cash
flow
used
in
investing
activities
decreased
approximately
$18.6
million
for
the
three
months
ended
March
31,
2016,
as
compared
to
the
same
period
in
the
prior
year,
due
to
the
use
of
cash
of
approximately
$20.3
million
for
the
acquisition
of
Mercent
during
the
first
quarter
of
2015.
This
was
offset
by
additional
capitalized
software
of
$1.1
million
and
property
and
equipment
purchases
of
$0.5
million,
as
compared
to
the
same
period
in
the
prior
year.
Cash Flow from Financing Activities
Cash
flow
provided
by
financing
activities
was
$52
thousand
for
the
three
months
ended
March
31,
2016
due
to
redemption
and
repurchase
of
options
and
shares
issued
pursuant
to
option
exercises
under
the
Liquidity
Program
and
payments
associated
with
the
exercise
of
awards
under
our
share-based
compensation
programs,
which
did
not
occur
in
the
prior
year
period.
Related Party Transactions
Intercompany
Promissory
Note
In
August
2012,
we
executed
a
two-year
promissory
note
as
a
lender
to
Liberty.
The
agreed
interest
rate
is
based
on
the
one-year
LIBOR
rate
plus
150
basis
points
as
determined
on
each
anniversary
of
the
note's
effective
date.
In
August
2014,
both
parties
agreed
to
extend
the
note
for
an
additional
two-year
period
and
to
amend
the
interest
rate
to
the
one-year
LIBOR
rate
plus
100
basis
points.
Liberty
intends
to
repay
all
principal
and
interest
due
to
the
company
prior
to
the
SpinOff.
As
of
March
31,
2016
and
December
31,
2015,
the
balance
due
from
Liberty
was
$36.3
million
and
$36.1
million,
respectively.
Subsequent
to
March
31,
2016,
amounts
outstanding
pursuant
to
this
agreement,
including
accumulated
interest,
were
repaid
to
the
company
by
Liberty.
Agreement
with
QVC
CommerceHub
provides
our
solutions
to
an
affiliate
company,
QVC,
which
is
a
wholly
owned
subsidiary
of
Liberty.
For
the
three
months
ended
March
31,
2016
and
2015,
revenue
from
fees
paid
by
QVC,
together
with
revenue
from
fees
paid
by
QVC's
suppliers,
collectively
accounted
for
approximately
8%
of
our
total
revenue.
For
the
years
ended
December
31,
2015
and
2014,
revenue
from
fees
paid
by
QVC,
together
with
revenue
from
fees
paid
by
QVC's
suppliers,
collectively
accounted
for
approximately
8%
and
10%
of
our
total
revenue,
respectively.
Critical Accounting Policies and Estimates
The
preparation
of
our
financial
statements
in
conformity
with
generally
accepted
accounting
principles
in
the
United
States
("GAAP")
requires
us
to
make
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets
and
liabilities
at
the
date
of
the
financial
statements
and
the
reported
amounts
of
revenue
and
expenses
during
the
reporting
period.
Listed
below
are
the
accounting
policies
and
estimates
that
we
believe
are
critical
to
our
financial
statements
due
to
the
degree
of
uncertainty
regarding
the
estimates
or
assumptions
involved
and
the
magnitude
of
the
asset,
liability,
revenue
or
expense
reported.
72
Table
of
Contents
Revenue
Recognition
The
company
generates
revenue
through
delivery
of
the
company's
e-commerce
fulfillment
and
marketing
software
platform,
which
is
primarily
represented
by
subscription
and
usage
fees
from
retailers
and
suppliers,
associated
activation
set-up
fees
for
retailers
and
suppliers
and
professional
services
related
to
customer
solution
enhancements
delivered
during
the
term
of
the
retailer
subscriptions.
The
company
utilizes
its
technology
and
personnel
to
deliver
its
service
solutions
to
customers
on
an
on-demand
basis.
The
company
follows
Financial
Accounting
Standards
Board
("FASB")
guidance
set
forth
in
Accounting
Standards
Codification
("ASC")
Topic
985-605-05
related
to
Hosting
Arrangements
and
ASC
Topic
605-25
related
to
Revenue
Arrangements
with
Multiple
Deliverables.
The
company
recognizes
revenue
when
all
of
the
following
conditions
are
met:
there
is
persuasive
evidence
of
an
arrangement,
the
services
have
been
delivered
to
the
customer,
the
collection
of
the
related
fees
is
reasonably
assured
and
the
amount
of
the
related
fees
is
fixed
and
determinable.
In
most
instances,
revenue
from
new
customer
acquisition
is
generated
under
sales
agreements
with
multiple
elements,
comprised
of
subscription
fees,
usage
fees
and
related
activation
set-up
fees
that
allow
retailers
and
suppliers
to
access
the
company's
solutions.
Customers
do
not
have
the
contractual
right
to
take
possession
of
the
company's
cloud
software.
The
company
evaluates
each
element
in
a
multiple-element
arrangement
to
determine
whether
it
represents
a
separate
unit
of
accounting.
An
element
constitutes
a
separate
unit
of
accounting
when
the
delivered
item
has
stand-alone
value
and
delivery
of
the
undelivered
element
is
probable
and
within
the
company's
control.
Subscription
fees
are
charged
on
a
stand-alone
basis
or
in
association
with
a
minimum
usage
level
required
to
be
maintained
by
a
customer
in
connection
with
our
Demand
Solutions.
The
company
recognizes
subscription
fees
as
revenue
in
the
period
in
which
such
subscription
fee
is
earned.
Usage
fees
are
comprised
of
fees
charged
to
customers
based
on
the
level
of
a
customer's
utilization
of
our
solutions.
Usage
fee
revenues
are
generated
primarily
from
customer
orders,
content
services,
inventory
management
and
third-party
communication
services.
The
company
recognizes
usage
fee
revenue
in
the
period
in
which
such
usage
is
earned.
Set-up
fees
provide
access
to
the
company's
on-demand
service
solution
through
production
launch
and
are
billed
during
the
implementation
phase
and
recorded
as
deferred
revenue
until
a
customer's
subscription
period
has
commenced.
On
a
limited
basis,
during
a
customer's
subscription
term,
the
company
provides
professional
services
to
enhance
the
customer's
on-demand
service
solution.
Set-up
fees
and
professional
services
related
to
customer
solution
enhancements
do
not
have
stand-alone
value
because
they
are
only
sold
in
conjunction
with
a
subscription
to
our
on-demand
solutions,
they
are
only
sold
by
the
company,
a
customer
could
not
resell
them,
and
they
do
not
represent
the
culmination
of
a
separate
earnings
process.
Set-up
fees
without
stand-alone
value
are
recognized
ratably
over
the
longer
of
the
life
of
the
agreement
or
the
expected
customer
life,
which
is
currently
estimated
between
48
and
76
months
based
on
the
customer
type
and
solution
for
which
the
set-up
fee
is
associated.
The
company
recognizes
revenue
for
fees
billed
for
solution
enhancement
services
over
the
estimated
remaining
customer
life.
The
company
evaluates
the
length
of
the
amortization
period
based
on
our
experience
with
customer
contract
renewals
and
consideration
of
the
period
over
which
those
customers
will
benefit
from
the
related
offerings.
Deferred
revenue
primarily
consists
of
the
unearned
portion
of
set-up
fees.
73
Table
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Software
and
Deferred
Costs
Software
and
deferred
costs
consists
of
the
cost
of
software
that
is
acquired
or
internally
developed
and
integration
costs
as
follows:
Software Costs: The
company
capitalizes
the
cost
of
acquired
software,
payroll
and
payroll-related
costs
and
third-party
consulting
fees
incurred
in
developing
and
enhancing
the
company's
platform
and
related
product
offerings
as
internal
use
software.
Software
costs
are
amortized
over
two
to
three
years,
which
is
the
company's
estimate
of
the
average
useful
life
of
acquired
and
internally
developed
software.
We
continue
to
evaluate
the
useful
life
of
capitalized
software
and
it
is
possible
that,
in
the
future,
the
period
over
which
such
software
costs
are
amortized
may
be
adjusted.
Any
change
in
our
estimate
of
the
useful
life
of
capitalized
software
will
affect
our
future
results
of
operations.
Integration Costs: The
company
defers
payroll
and
payroll-related
costs
incurred
in
setting
up
and
integrating
new
demand
channels
and
suppliers
onto
our
platform.
Integration
costs
are
amortized
on
a
straight-line
basis
over
the
expected
life
of
the
customer
contract,
generally
48
to
76
months.
We
continue
to
evaluate
the
expected
life
of
our
customer
relationships
and
it
is
possible
that,
in
the
future,
the
period
over
which
such
integration
costs
are
recognized
may
be
adjusted.
Any
change
in
our
estimate
of
the
customer
relationship
life
will
affect
our
future
results
of
operations.
Share-based
Compensation
Stock Options
From
the
periods
1999
through
2010,
CommerceHub
granted
non-qualified
stock
options
to
its
employees
and
directors
at
the
grant
date
fair
value.
These
options
typically
vested
25%
each
year
over
the
first
four
years
and
have
a
contractual
expiration
date
of
ten
years.
Stock Option Liquidity Program
During
2006,
CommerceHub
adopted
a
stock
option
liquidity
program
(the
"Liquidity
Program")
for
eligible
holders
of
stock
options
and
certain
eligible
common
shares
(shares
issued
as
a
result
of
an
option
exercise).
The
Liquidity
Program
provides
eligible
option
holders
and
stockholders
the
ability
to
cancel
their
vested
options
or
sell
their
eligible
common
shares
in
exchange
for
cash
payment.
Cash
consideration
for
the
purchase
and
cancellation
of
tendered
stock
options
is
based
on
the
fair
value
of
CommerceHub's
underlying
common
stock
on
the
liquidity
election
date,
less
the
stock
option
exercise
price.
The
company
expects
to
terminate
the
Liquidity
Program
upon
the
effectiveness
of
the
Spin-Off.
Stock Appreciation Rights Program
Since
2010,
CommerceHub
has
awarded
stock
appreciation
rights
("SARs")
at
the
fair
value
of
CommerceHub's
common
stock
on
the
date
of
grant.
All
participants
are
eligible
to
tender
their
vested
SARs
under
the
program
and,
prior
to
the
Spin-Off,
upon
exercise
the
participant
is
entitled
to
receive
a
cash
payment
in
an
amount
equal
to
the
difference
between
the
SAR
grant
price
and
the
then
current
fair
value.
After
the
Spin-Off,
it
is
expected
that
participants
will
receive
options
of
CommerceHub,
Inc.
Series
C
common
stock,
resulting
in
the
same
value
pre-
and
post-
Spin-Off.
Estimating the Fair Value of Common Stock
The
fair
value
of
shares
granted
under
CommerceHub's
stock
option
and
SAR
plans,
in
addition
to
the
value
used
to
estimate
the
stock-based
compensation
liability
and
related
expense
each
period
and
upon
an
option
holder
or
stockholder
liquidity
election
under
the
Liquidity
Program,
is
based
on
CommerceHub's
best
estimate
of
CommerceHub's
underlying
common
stock
price.
With
the
assistance
74
Table
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Contents
of
an
independent
third-party
advisory
firm,
CommerceHub
estimates
the
value
of
common
stock
through
a
combination
of
three
different
approaches:
•
Market
Multiple
Approach
•
Guideline
Transaction
Approach
•
Discounted
Cash
Flow
("DCF")
Approach
The
Market
Multiple
Approach
involves
the
capitalization
of
revenue
and
earnings
before
interest,
taxes,
depreciation
and
amortization,
and
option
expense.
Multiples
are
determined
through
an
analysis
of
certain
publicly
traded
companies,
selected
on
a
basis
of
operational
and
economic
similarity
with
the
principal
business
and
operational
revenue
model
of
CommerceHub.
Multiples
are
calculated
for
the
comparative
companies
based
upon
their
trading
prices.
The
risk
analysis
incorporates
quantitative
and
qualitative
risk
factors,
which
relate
to,
among
other
things,
the
nature
of
the
industry
in
which
CommerceHub
and
the
other
comparative
companies
are
engaged,
relative
size,
profitability
and
growth
rates.
The
Guideline
Transaction
Approach
is
similar
to
the
Market
Multiple
Approach
in
that
it
involves
a
consideration
of
multiples
of
revenue
and
Adjusted
EBITDA.
However,
multiples
used
for
this
approach
were
determined
through
the
analysis
of
transactions
involving
controlling
interests
in
companies
with
operations
similar
to
CommerceHub's
business.
Internally
prepared
financial
projections
are
used
to
develop
the
DCF
Approach,
a
valuation
method
that
estimates
the
present
value
of
the
projected
cash
flows
to
be
generated
from
the
business.
In
the
DCF
Approach,
a
discount
rate,
reflecting
all
risks
of
ownership
and
associated
risks
of
realizing
the
stream
of
projected
future
cash
flows,
is
applied
to
the
stream
of
projected
cash
flows.
Estimating Stock Option and SAR Values
With
the
assistance
of
an
independent
third-party
advisory
firm,
the
company
estimates
the
fair
value
of
stock
options
and
SARs
granted
at
each
financial
statement
reporting
date
using
a
Black-Scholes
option-pricing
model
("Black-Scholes
model").
The
Black-Scholes
model
incorporates
assumptions
to
value
stockbased
awards,
including
the
risk-free
rate
of
return,
expected
term,
volatility
and
dividend
yield.
We
utilize
a
single
risk-free
interest
rate
over
the
expected
term
of
each
grant.
The
company
estimates
the
risk-free
interest
rate
based
on
the
constant
maturity
U.S.
Treasury
yield
curve
as
of
the
date
of
the
valuation
for
the
expected
term
of
the
stock
option
or
SAR
award
granted.
Our
assumption
for
the
expected
term
of
stock
option
and
SAR
awards
is
6.25
years,
based
on
historical
exercise
data.
For
those
options
and
SARs
that
have
been
outstanding
for
more
than
6.25
years
as
of
the
valuation
date,
we
estimate
the
life
of
such
awards
to
be
10
years.
We
estimate
the
volatility
of
our
common
stock
by
analyzing
both
the
historical
and
implied
volatilities
of
comparable
publicly
traded
companies
(the
same
peer
group
used
in
the
Market
Multiple
Approach
in
determining
CommerceHub's
common
stock
share
value).
Our
expected
dividend
yield
is
zero,
as
CommerceHub
has
not
paid
any
dividends
on
our
common
stock
to
date
and
does
not
expect
to
pay
dividends
in
the
foreseeable
future.
Stock
compensation
expense
is
recorded
at
the
fair
value
(as
described
above)
relative
to
the
grant
date
of
the
respective
stock
option
or
SARs
award
multiplied
by
the
percentage
of
the
requisite
service
period
completed
to
date
less
total
compensation
cost
previously
recognized.
After
the
requisite
service
period
is
complete,
compensation
cost
is
remeasured
based
on
the
fair
value
(as
described
above)
of
the
entire
award
at
each
consolidated
balance
sheet
date
until
the
award
is
exercised.
The
assumptions
used
in
calculating
the
fair
value
of
stock-based
compensation
awards
represent
management's
best
estimates.
However,
the
estimates
used
involve
inherent
uncertainties
and
the
75
Table
of
Contents
application
of
management
judgment.
As
a
result,
if
factors
change
and
we
use
different
assumptions,
our
stock-based
compensation
expense
could
be
materially
different
in
the
future.
Goodwill
&
Intangible
Assets
We
account
for
acquired
businesses
using
the
acquisition
method
of
accounting,
which
requires
that
assets
acquired
and
liabilities
assumed
be
recognized
at
their
estimated
fair
values
as
of
the
acquisition
date.
Transaction
and
integration
costs
are
expensed
as
incurred.
Any
excess
of
the
acquisition
price
over
the
estimated
fair
value
of
individually
identifiable
net
assets
acquired
is
recorded
as
goodwill.
Assets
acquired
may
also
include
identifiable
intangible
assets,
such
as
subscriber
relationships,
which
are
recognized
separately
from
goodwill.
Significant
estimates
and
assumptions
are
required
to
value
assets
acquired
and
liabilities
assumed
at
the
acquisition
date,
as
well
as
contingent
consideration,
where
applicable.
These
estimates
are
inherently
uncertain
and
subject
to
refinement
and
typically
include
the
calculation
of
an
appropriate
discount
rate
and
projection
of
the
cash
flows
associated
with
each
acquired
asset.
As
a
result,
during
the
measurement
period,
which
may
be
up
to
one
year
from
the
acquisition
date,
we
may
record
adjustments
to
the
assets
acquired
and
liabilities
assumed
with
the
corresponding
offset
to
goodwill.
In
addition,
deferred
tax
assets,
deferred
tax
liabilities,
uncertain
tax
positions
and
tax-related
valuation
allowances
assumed
in
connection
with
a
business
combination
are
initially
estimated
as
of
the
acquisition
date.
We
reevaluate
these
items
periodically
based
upon
facts
and
circumstances
that
existed
as
of
the
acquisition
date
and
any
adjustments
to
its
preliminary
estimates
are
recorded
to
goodwill
if
identified
within
the
measurement
period.
Upon
the
conclusion
of
the
measurement
period
or
final
determination
of
the
values
of
assets
acquired
or
liabilities
assumed,
whichever
comes
first,
any
subsequent
adjustments
are
recorded
to
the
consolidated
statements
of
operations.
During
September
2015,
the
FASB
issued
new
accounting
guidance
regarding
purchase
accounting
adjustments
made
after
the
measurement
period.
The
amendment
requires
an
entity
to
present
separately
on
the
face
of
the
income
statement
or
disclose
in
the
notes
the
portion
of
the
amount
recorded
in
current
period
earnings
by
line
item
that
would
have
been
recorded
in
previous
reporting
periods
if
the
adjustment
to
the
estimated
amounts
had
been
recognized
as
of
the
acquisition
date.
This
guidance
is
effective
for
public
company
financial
statements
issued
for
fiscal
years
beginning
after
December
15,
2015.
We
review
goodwill
for
impairment
annually
on
October
1
and
more
frequently
if
events
or
changes
in
circumstances
indicate
that
the
asset
might
be
impaired.
Entities
have
the
option
to
perform
a
qualitative
assessment
to
determine
whether
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount
prior
to
performing
the
two
step
goodwill
impairment
test,
as
described
below.
If
this
is
the
case,
the
two
step
goodwill
impairment
test
is
required.
In
evaluating
goodwill
on
a
qualitative
basis,
management
reviews
the
company's
financial
performance
and
evaluates
other
factors
as
identified
in
the
relevant
accounting
guidance
to
determine
whether
it
is
more
likely
than
not
that
an
indicated
impairment
exists
for
our
single
reporting
unit.
The
company
considers
whether
there
are
any
negative
macroenomic
conditions,
industry
specific
conditions,
market
changes,
increased
competition,
increased
costs
in
doing
business,
management
challenges,
the
legal
environment
and
how
these
factors
might
impact
company-specific
performance
in
future
periods.
If
it
is
more
likely
than
not
that
the
fair
value
of
a
reporting
is
greater
than
its
carrying
amount,
the
two
step
goodwill
impairment
test
is
not
required.
If
the
two
step
goodwill
impairment
test
is
required,
the
fair
value
of
the
reporting
unit
is
compared
with
its
carrying
amount
(including
goodwill).
If
the
fair
value
of
the
reporting
unit
is
less
than
its
carrying
amount,
an
indication
of
goodwill
impairment
exists
for
the
reporting
unit
and
the
entity
must
perform
step
two
of
the
impairment
test.
Under
step
two,
an
impairment
loss
is
recognized
for
any
excess
of
the
carrying
amount
of
the
reporting
unit's
goodwill
over
the
implied
fair
value
of
that
goodwill.
The
implied
fair
value
of
goodwill
is
determined
by
allocating
the
fair
value
of
the
reporting
unit
in
a
manner
similar
to
a
purchase
price
allocation
and
the
residual
fair
value
after
this
allocation
is
the
implied
fair
value
of
the
reporting
unit
goodwill.
Fair
value
76
Table
of
Contents
of
the
reporting
unit
is
determined
using
a
discounted
cash
flow
analysis.
If
the
fair
value
of
the
reporting
unit
exceeds
its
carrying
amount,
step
two
does
not
need
to
be
performed.
Additionally,
we
review
the
recoverability
of
our
long-lived
assets
upon
the
occurrence
of
certain
triggering
events.
If
the
carrying
value
of
our
long-lived
assets
exceeds
their
undiscounted
cash
flows,
we
are
required
to
write
down
the
carrying
value
to
fair
value.
Any
such
writedown
is
included
in
impairment
of
long-lived
assets
in
our
consolidated
statement
of
operations.
A
high
degree
of
judgment
is
required
to
estimate
the
fair
value
of
our
long-lived
assets.
We
may
use
quoted
market
prices,
prices
for
similar
assets,
present
value
techniques
and
other
valuation
techniques
to
prepare
these
estimates.
We
may
need
to
make
estimates
of
future
cash
flows
and
discount
rates
as
well
as
other
assumptions
in
order
to
implement
these
valuation
techniques.
Due
to
the
high
degree
of
judgment
involved
in
our
estimation
techniques,
any
value
ultimately
derived
from
our
long-lived
assets
may
differ
from
our
estimate
of
fair
value.
For
the
years
ended
December
31,
2015
and
2014,
the
company
performed
a
qualitative
assessment
of
goodwill
and
determined
that
it
was
not
more
likely
than
not
that
the
fair
value
of
our
single
reporting
unit
was
less
than
the
carrying
amount.
Additionally,
no
triggering
events
were
identified
during
the
interim
periods.
Accordingly,
no
impairment
losses
were
recorded
in
2015
or
2014.
Income
Taxes
We
record
income
taxes
under
the
asset
and
liability
method.
Deferred
tax
assets
and
liabilities
reflect
our
estimate
of
the
future
tax
consequences
of
temporary
differences
between
the
carrying
amounts
of
assets
and
liabilities
and
their
respective
tax
bases,
as
well
as
for
operating
loss
and
tax
credit
carryforwards.
We
determine
deferred
income
taxes
based
on
the
differences
in
accounting
methods
and
timing
between
financial
statement
and
income
tax
reporting.
Accordingly,
we
determine
the
deferred
tax
asset
or
liability
for
each
temporary
difference
based
on
the
enacted
tax
rates
expected
to
be
in
effect
when
we
realize
the
underlying
items
of
income
and
expense.
We
consider
all
relevant
factors
when
assessing
the
likelihood
of
future
realization
of
our
deferred
tax
assets,
including
our
recent
earnings
experience
by
jurisdiction,
expectations
of
future
taxable
income
and
the
carry
forward
periods
available
to
us
for
tax
reporting
purposes,
as
well
as
assessing
available
tax
planning
strategies.
We
may
establish
a
valuation
allowance
to
reduce
deferred
tax
assets
to
the
amount
we
believe
is
more
likely
than
not
to
be
realized.
This
process
requires
management
to
make
judgments
regarding
the
timing
and
probability
of
the
ultimate
tax
impact
of
the
various
agreements
and
transactions
to
which
we
are
party.
Due
to
inherent
complexities
arising
from
the
nature
of
our
business,
future
changes
in
income
tax
law,
tax
sharing
agreements
or
variances
between
our
actual
and
anticipated
operating
results,
actual
income
taxes
may
materially
vary
from
these
estimates
and
could
have
a
significant
impact
on
our
financial
position.
We
record
liabilities
to
address
uncertain
tax
positions
we
have
taken
in
previously
filed
tax
returns
or
that
we
expect
to
take
in
a
future
tax
return.
The
determination
for
required
liabilities
is
based
upon
an
analysis
of
each
individual
tax
position,
taking
into
consideration
whether
it
is
more
likely
than
not
that
our
tax
position,
based
on
technical
merits,
will
be
sustained
upon
examination.
For
those
positions
for
which
we
conclude
it
is
more
likely
than
not
it
will
be
sustained,
we
recognize
the
largest
amount
of
tax
benefit
that
is
greater
than
50%
likely
of
being
realized
upon
ultimate
settlement
with
the
taxing
authority.
The
difference
between
the
amount
recognized
and
the
total
tax
position
is
recorded
as
a
liability.
The
ultimate
resolution
of
these
tax
positions
may
be
greater
or
less
than
the
liabilities
recorded.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Revolving Credit Facility
In
connection
with
the
Spin-Off,
our
wholly-owned
subsidiary,
Commerce
Technologies,
LLC
(the
Borrower ),
will
become
the
borrower
under
a
credit
agreement
providing
for
a
five-year
senior
secured
revolving
credit
facility
(the
Revolving Credit Facility )
in
an
aggregate
principal
amount
of
$125
million,
with
a
letter
of
credit
subfacility
in
an
amount
of
$10
million
and
a
swingline
subfacility
in
an
amount
of
$10
million.
Proceeds
of
the
revolving
loans
and
letters
of
credit
under
the
Revolving
Credit
Facility
will
be
used
for
working
capital
needs
and
general
corporate
purposes
of
CH
Parent,
the
Borrower
and
its
restricted
subsidiaries.
The
Revolving
Credit
Facility
closed
on
June
28,
2016,
and
Commerce
Technologies,
Inc.
is
currently
the
borrower
under
the
Revolving
Credit
Facility.
All
obligations
under
the
credit
agreement
and
obligations
under
certain
hedging
agreements
and
cash
management
arrangements
are
required
to
be
(i)
guaranteed
by
each
of
the
Borrower's
direct
and
indirect,
existing
and
future,
material
wholly-owned
domestic
restricted
subsidiaries
and,
upon
consummation
of
the
Spin-Off,
CH
Parent,
and
(ii)
secured
by
substantially
all
of
each
guarantor's
present
and
after-acquired
personal
property,
subject
to
certain
exceptions.
In
addition,
the
credit
agreement
contains
an
accordion
feature
that
will
allow
the
Borrower,
subject
to
the
satisfaction
of
certain
conditions,
including
the
receipt
of
increased
commitments
from
existing
lenders
or
new
commitments
from
new
lenders,
to
incur
new
term
loan
commitments
or
to
increase
the
amount
of
the
commitments
under
the
Revolving
Credit
Facility,
in
an
aggregate
principal
amount
not
to
exceed
$50
million.
Borrowings
under
the
Revolving
Credit
Facility
will
bear
interest,
at
our
option,
at
either
(i)
a
reserve-adjusted
LIBOR
rate,
plus
a
margin
ranging
between
1.75%
to
2.25%
per
annum,
depending
on
our
consolidated
total
net
leverage
ratio,
or
(ii)
the
base
rate,
which
is
calculated
as
the
greatest
of
(1)
the
prime
rate,
(2)
the
federal
funds
effective
rate
plus
0.50%
and
(3)
the
one
month
LIBOR
Rate
plus
1.00%,
plus
a
margin
ranging
between
0.75%
to
1.25%
per
annum,
depending
on
our
consolidated
total
net
leverage
ratio.
The
unused
portion
of
our
Revolving
Credit
Facility
is
subject
to
a
commitment
fee
ranging
between
0.25%
to
0.50%,
depending
on
our
consolidated
total
net
leverage
ratio.
The
Revolving
Credit
Facility
contains
certain
affirmative
and
negative
covenants
that
we
consider
usual
and
customary
for
an
agreement
of
this
type.
Such
covenants,
subject
to
exceptions,
limit
our
ability
and
the
ability
of
our
restricted
subsidiaries
to,
among
other
things:
•
incur
additional
indebtedness
and
guarantee
indebtedness;
•
pay
dividends
or
make
other
distributions
or
repurchase
or
redeem
our
capital
stock;
•
prepay,
redeem
or
repurchase
subordinated
indebtedness
or
modify
the
agreements
relating
thereto;
•
make
loans,
investments
and
acquisitions;
•
sell,
transfer
or
otherwise
dispose
of
assets;
•
create
or
incur
liens;
•
enter
into
certain
types
of
transactions
with
affiliates;
•
enter
into
agreements
restricting
certain
of
our
restricted
subsidiaries'
ability
to
pay
dividends;
•
consolidate,
merge
or
sell
all
or
substantially
all
of
our
assets;
and
•
create
unrestricted
subsidiaries.
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In
addition,
the
Revolving
Credit
Facility
contains
financial
covenants
that
will
require
us
to
maintain
a
maximum
consolidated
total
net
leverage
ratio
of
3.00
to
1.00
and
a
minimum
consolidated
interest
coverage
ratio
of
3.00
to
1.00.
The
repayment
of
borrowings
under
the
Revolving
Credit
Facility
is
subject
to
acceleration
upon
the
occurrence
of
certain
events
of
default
that
we
consider
usual
and
customary
for
an
agreement
of
this
type,
including
payment
defaults,
breaches
of
representations
and
warranties,
covenant
defaults,
cross-defaults
and
cross-acceleration
to
material
indebtedness,
certain
events
of
bankruptcy,
certain
events
under
ERISA,
material
judgments,
actual
or
asserted
failure
of
material
provisions
of
the
loan
documents
to
be
in
full
force
and
effect
or
the
failure
of
the
security
documents
to
create
a
valid
and
perfected
security
interest
in
any
material
portion
of
the
collateral,
and
change
of
control.
The
administrative
agent
and
certain
of
the
parties
to
the
Revolving
Credit
Facility
and
certain
of
their
respective
affiliates
have
performed
in
the
past,
and
may
perform
in
the
future,
banking,
investment
banking
or
other
advisory
services
for
us
and
our
affiliates
from
time
to
time
for
which
they
have
received,
or
will
receive,
customary
fees
and
expenses.
This
summary
is
qualified
by
reference
to
the
full
text
of
the
Revolving
Credit
Facility,
which
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
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MANAGEMENT
Directors
The
following
sets
forth
certain
information
concerning
the
persons
who
are
expected
to
serve
as
the
initial
directors
of
our
company
immediately
following
the
Spin-Off,
including
their
ages,
directorships
held
and
a
description
of
their
business
experience,
including,
in
the
case
of
Messrs.
Baer,
Hollingsworth
and
Wendling,
current
positions
held
with
Liberty.
Mr.
Baer
currently
serves
as
Chief
Legal
Officer
and
an
executive
officer
of
Liberty,
Mr.
Hollingsworth
currently
serves
as
a
Senior
Vice
President
of
Liberty
and
Mr.
Wendling
currently
serves
as
a
Senior
Vice
President
and
Controller
of
Liberty,
and
it
is
expected
that
each
will
continue
to
serve
in
their
respective
roles
at
Liberty
immediately
following
the
Spin-Off.
No
assurance
can
be
given,
however,
as
to
whether
these
directors
will
continue
to
serve
on
our
company's
board
following
the
expiration
of
their
respective
terms,
as
their
re-election
will
be
subject
to
the
approval
of
our
company's
stockholders.
Name
Position and Experience
Richard N. Baer
Age:
59
Chairman
of
the
Board
and
a
director
of
CH
Parent.
Professional Background: Mr.
Baer
has
served
as
Chief
Legal
Officer
of
Liberty,
Liberty
Media,
Liberty
TripAdvisor
Holdings,
Inc.
(
Liberty TripAdvisor )
and
Liberty
Broadband
Corporation
(
Liberty Broadband )
since
January
2016.
He
previously
served
as
Senior
Vice
President
and
General
Counsel
of
Liberty
and
Liberty
Media
from
January
2013
to
December
2015,
Liberty
TripAdvisor
from
July
2013
to
December
2015
and
Liberty
Broadband
from
June
2014
to
December
2015.
Previously,
Mr.
Baer
served
as
Executive
Vice
President
and
Chief
Legal
Officer
of
UnitedHealth
Group
Incorporated
from
May
2011
to
December
2012.
He
served
as
Executive
Vice
President
and
General
Counsel
of
Qwest
Communications
International
Inc.
from
December
2002
to
April
2011
and
Chief
Administrative
Officer
from
August
2008
to
April
2011.
Other Public Company Directorships: None.
Board Membership Qualifications: Mr.
Baer
brings
to
our
board
significant
legal
and
operational
experience
based
on
his
previous
and
present
senior
leadership
positions
at
various
public
companies,
including
Liberty,
which
operates
and
owns
interests
in
a
broad
range
of
digital
commerce
businesses.
He
provides
our
board
with
a
critical
executive
leadership
perspective
on
the
operations
and
management
of,
as
well
as
legal
insight
into,
large
public
companies
and
risk
management
principles.
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Name
Position and Experience
Francis Poore
Age:
49
Other Public Company Directorships: None.
Board Membership Qualifications: As
the
founder
of
CommerceHub,
Mr.
Poore
brings
extensive
industry
experience
to
our
company's
board
and
a
vital
perspective
on
its
business,
history
and
culture.
The
knowledge
and
experience
Mr.
Poore
has
gained
through
his
years
with
the
company
and
in
this
complex
and
rapidly
changing
industry
contributes
to
our
evaluation
of
technological
initiatives
and
challenges
and
strengthens
our
board's
collective
qualifications,
skills
and
attributes.
Mark Cattini
Age:
54
A
director
of
CH
Parent.
Professional Background: Mr.
Cattini
has
served
as
President
and
Chief
Executive
Officer
of
Autotask
Corporation,
a
provider
of
IT
management
solutions,
since
November
2010.
Other Public Company Directorships: None.
Board Membership Qualifications: Mr.
Cattini
brings
more
than
25
years
of
senior
management
and
leadership
of
solutions
providers
experience
to
our
board.
The
expansion
and
growth
experienced
by
Autotask
Corporation
under
Mr.
Cattini's
leadership
enable
Mr.
Cattini
to
assist
our
board
in
evaluating
strategic
opportunities
for
growth
at
CH
Parent.
David Goldhill
Age:
55
A
director
of
CH
Parent.
Professional Background :
Mr.
Goldhill
has
served
as
President
and
Chief
Executive
Officer
of
Game
Show
Network,
LLC
(
GSN )
since
August
2007.
Other Public Company Directorships: None.
Board Membership Qualifications: Mr.
Goldhill
offers
our
board
financial
and
operational
experience
stemming
from
his
leadership
positions
over
the
years
at
GSN
and
other
private
companies.
His
creativity
and
keen
business
sense
will
assist
our
board
in
evaluating
and
developing
new
expansion
and
strategic
opportunities.
Chief
Executive
Officer
and
President
and
a
director
of
CH
Parent.
Professional Background: Mr.
Poore
has
served
as
Chief
Executive
Officer
and
President
of
CommerceHub
since
January
2013.
He
previously
served
as
Chief
Strategist
from
January
2011
to
January
2013
and
Chief
Executive
Officer
and
President
of
CommerceHub
from
September
1997
to
August
2006.
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Name
Position and Experience
Chad Hollingsworth
Age:
40
A
director
of
CH
Parent.
Professional Background: Mr.
Hollingsworth
has
served
as
Senior
Vice
President
of
Liberty
and
Liberty
Media
since
January
2016
and
previously
served
as
a
Vice
President
of
Liberty
and
Liberty
Media
from
December
2011
to
December
2015.
He
has
served
as
a
Senior
Vice
President
of
each
of
Liberty
TripAdvisor
and
Liberty
Broadband
since
January
2016,
having
previously
served
as
a
Vice
President
at
each
company
from
August
2014
to
December
2015
and
November
2014
to
December
2015,
respectively.
He
also
has
held
various
other
positions
with
certain
of
these
companies
and
their
predecessors
since
January
2007.
Other Public Company Directorships: Mr.
Hollingsworth
has
served
as
a
director
of
Interval
Leisure
Group,
Inc.
since
February
2015.
Board Membership Qualifications: Mr.
Hollingsworth
provides
our
board
with
a
strong
perspective
on
transaction
and
structuring
opportunities,
strategic
advisory
work
and
venture
capital
investment
evaluation.
His
keen
understanding
of
market
trends
and
equity
analysis,
combined
with
his
deal
management
skills
are
vital
assets
to
our
board
and
CH
Parent.
Michael P. Huseby
Age:
61
A
director
of
CH
Parent.
Professional Background: Mr.
Huseby
served
as
Chief
Executive
Officer
of
Barnes
&
Noble,
Inc.
(
Barnes & Noble )
from
January
2014
to
August
2015,
as
President
from
July
2013
to
January
2014
and
as
Chief
Financial
Officer
from
March
2012
to
July
2013.
He
was
appointed
Chief
Executive
Officer
of
NOOK
Media
LLC,
a
Barnes
&
Noble
subsidiary,
in
July
2013.
Previously,
he
served
as
Executive
Vice
President
and
Chief
Financial
Officer
of
Cablevision
Systems
Corporation
from
August
2004
to
June
2011,
and
prior
thereto
served
as
Executive
Vice
President
and
Chief
Financial
Officer
of
Charter
Communications
Inc.
He
also
served
as
a
Global
Equity
Partner
of
Arthur
Andersen
for
over
20
years.
Other Public Company Directorships: Mr.
Huseby
has
served
as
Executive
Chairman
and
a
director
of
Barnes
&
Noble
Education,
Inc.
since
August
2015.
He
previously
served
as
a
director
of
Charter
Communications,
Inc.
from
May
2013
to
May
2016
and
Barnes
&
Noble
from
July
2013
to
August
2015.
Board Membership Qualifications: Mr.
Huseby
provides
our
board
with
extensive
executive
and
financial
experience
gained
through
his
over
30
years
in
senior
management
positions
with
various
public
companies
and
as
a
partner
with
Arthur
Andersen.
His
professional
expertise
and
executive
leadership
perspective
on
the
operation
and
management
of
public
companies
in
both
the
retail
and
technology
space
provides
our
board
with
valued
strategic
insights.
82
Table
of
Contents
Name
Position and Experience
Betsy L. Morgan
Age:
47
A
director
of
CH
Parent.
Professional Background: Ms.
Morgan
has
served
as
Executive
in
Residence
of
LionTree,
LLC
since
February
2016.
She
previously
served
as
President
and
Chief
Executive
Officer
of
TheBlaze
Inc.
from
January
2011
to
July
2015.
She
served
as
Chief
Executive
Officer
of
The
Huffington
Post
from
October
2007
to
June
2009.
Prior
to
joining
The
Huffington
Post,
Ms.
Morgan
served
in
various
positions
at
CBS.
Other Public Company Directorships: Ms.
Morgan
served
as
a
director
of
CTPartners
Executive
Search
Inc.
from
December
2010
to
October
2015.
Board Membership Qualifications: Our
board
benefits
from
Ms.
Morgan's
unique
perspective
provided
by
her
knowledge
and
experience
gained
from
service
on
the
boards
of
various
private
companies
and
her
leadership
roles
in
various
businesses,
particularly
service
businesses.
Additionally,
her
marketing
skills,
experiences
on
both
private
and
public
company
boards,
social
media
savvy
and
strategic
and
creative
problem-solving
capabilities
strengthen
our
board.
Luis Ubiñas
Age:
53
A
director
of
CH
Parent.
Professional Background: Mr.
Ubiñas
has
served
as
the
President
of
the
Board
of
Trustees
of
the
Pan
American
Development
Foundation
since
May
2015,
having
previously
served
as
a
member
of
the
Advisory
Committee
of
the
United
Nations
Fund
for
International
Partnerships.
He
served
as
President
of
the
Ford
Foundation
from
January
2008
to
September
2013.
Prior
to
joining
the
Ford
Foundation,
Mr.
Ubiñas
spent
18
years
with
McKinsey
&
Company,
where
he
held
various
positions.
Mr.
Ubiñas
also
serves
on
the
boards
of
several
non-profit
organizations.
Other Public Company Directorships: Mr.
Ubiñas
served
as
a
director
of
Valassis
Communications,
Inc.
from
November
2012
to
February
2014.
He
has
served
as
a
director
of
Electronic
Arts
Inc.
since
November
2010.
Board Membership Qualifications: Mr.
Ubiñas
brings
to
our
board
experience
in
business
management
and
operations
gained
through
his
work
with
the
Ford
Foundation.
His
background
and
expertise
assist
the
board
in
evaluating
strategic
acquisition
opportunities
and
developing
financial
strategies
for
our
company.
83
Table
of
Contents
Name
Position and Experience
Brian Wendling
Age:
43
A
director
of
CH
Parent.
Professional Background: Mr.
Wendling
has
served
as
a
Senior
Vice
President
and
Chief
Financial
Officer
of
Liberty
TripAdvisor
since
January
2016,
having
previously
served
as
Vice
President
and
Controller
from
August
2014
to
December
2015.
He
also
has
served
as
Senior
Vice
President
and
Controller
of
Liberty
Media,
Liberty
and
Liberty
Broadband
since
January
2016.
He
previously
served
as
Vice
President
and
Controller
of
Liberty
Media
(including
its
predecessor)
from
November
2011
to
December
2015,
Liberty
from
November
2011
to
December
2015
and
Liberty
Broadband
from
October
2014
to
December
2015.
Prior
thereto,
Mr.
Wendling
held
various
positions
with
Liberty
Media
and
Liberty
Interactive
and
their
predecessors
since
1999.
Other Public Company Directorships: None.
Board Membership Qualifications: Mr.
Wendling
has
significant
executive
and
financial
experience
gained
through
his
service
with
Liberty
and
Liberty
Media.
Mr.
Wendling
brings
a
valuable
perspective
to
our
company's
board
of
directors,
focused
in
particular
on
the
area
of
public
company
accounting,
and
he
is
an
important
resource
with
respect
to
the
management
and
operations
of
large
public
companies.
Executive Officers
The
following
sets
forth
certain
information
concerning
the
persons
(other
than
Mr.
Poore,
who
is
also
expected
to
serve
as
a
director
of
our
company
and
is
described
above)
who
are
the
existing
executive
officers
of
CommerceHub
and
who
are
expected
to
serve
as
our
company's
initial
executive
officers
immediately
following
the
Spin-Off,
including
their
ages
and
a
description
of
their
business
experience,
including
positions
held
with
CommerceHub.
Name
Mark Greenquist
Age:
57
Positions
Chief
Financial
Officer
and
Treasurer
of
CH
Parent.
Chief
Financial
Officer
of
CommerceHub
since
June
2016.
Chief
Financial
Officer
of
Sonus
Networks,
Inc.
from
November
2013
to
June
2016.
Chief
Financial
Officer
at
Siemens
Enterprise
Communications
Limited
(now
Unify)
from
May
2013
to
October
2013.
President
and
Chief
Executive
Officer
of
Telcordia
Technologies,
Inc.
from
May
2007
to
August
2012
and
Senior
Vice
President
and
Chief
Financial
Officer
from
July
2005
to
May
2007.
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Name
Positions
John Hinkle
Age:
50
Chief
Information
Officer
and
Chief
Information
Security
Officer
of
CH
Parent.
Chief
Information
Officer
and
Chief
Information
Security
Officer
of
CommerceHub
since
April
2015,
Executive
Vice
President,
Production
Systems
from
July
2013
to
April
2015.
At
January
2011,
Mr.
Hinkle
held
the
position
of
Chief
Information
Officer
and
Senior
Vice
President,
North
American
Operations,
Take-Two
Interactive
Software,
Inc.,
which
he
held
until
July
2013.
Richard Jones
Age:
47
Chief
Technology
Officer
and
Executive
Vice
President,
Operations
of
CH
Parent.
Chief
Technology
Officer
and
Executive
Vice
President,
Operations
of
CommerceHub
since
January
2013,
Chief
Tactician
from
January
2011
to
December
2012.
Bill Kong
Age:
43
Executive
Vice
President,
Products
and
Services
of
CH
Parent.
Executive
Vice
President,
Products
and
Services
of
CommerceHub
since
May
2016.
Chief
Digital
Marketing
Officer
of
Sears
Holdings
Corporation
from
February
2015
to
April
2016.
General
Manager
of
Drugstore.com
and
VisionDirect.com
from
May
2010
to
February
2015.
Mike Trimarchi
Age:
36
Chief
Accounting
Officer
of
CH
Parent.
Chief
Accounting
Officer
of
CommerceHub
since
May
2016.
Interim
Chief
Financial
Officer
of
AngioDynamics,
Inc.
from
November
2015
to
May
2016,
Vice
President
and
Global
Controller
from
August
2014
to
November
2015,
Director,
Corporate
FP&A
from
July
2013
to
August
2014.
Vice
President,
Corporate
FP&A
of
Vistaprint
N.V.
from
January
2013
to
July
2013,
Senior
Director,
Corporate
FP&A
from
April
2012
to
December
2012.
At
January
2011,
Mr.
Trimarchi
held
the
position
of
Global
Controller
at
Vistaprint,
which
he
continued
to
hold
until
April
2012.
Douglas Wolfson
Age:
45
General
Counsel
and
Secretary
of
CH
Parent.
Vice
President
and
General
Counsel
of
CommerceHub
since
March
2014,
Secretary
since
October
2014.
Associate
General
Counsel,
Infor
Global
Solutions
from
March
2006
to
March
2014.
Associate
General
Counsel,
Geac
Computer
Corporation
from
August
2004
to
March
2006.
Our
company's
executive
officers
will
serve
in
such
capacities
until
the
first
annual
meeting
of
our
board
of
directors,
or
until
their
respective
successors
have
been
duly
elected
and
have
been
qualified,
or
until
their
earlier
death,
resignation,
disqualification
or
removal
from
office.
Director Independence
It
will
be
our
company's
policy
that
a
majority
of
the
members
of
our
board
of
directors
will
be
independent
of
our
management.
For
a
director
to
be
deemed
independent,
our
company's
board
of
directors
must
affirmatively
determine
that
the
director
has
no
direct
or
indirect
material
relationship
85
Table
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with
the
company.
To
assist
our
company's
board
of
directors
in
determining
which
of
its
directors
will
qualify
as
independent,
the
independent
directors
of
our
board
of
directors
serving
the
functions
of
a
nominating
committee
(see
below)
are
expected
to
follow
the
Corporate
Governance
Rules
of
the
Nasdaq
Stock
Market
on
the
criteria
for
director
independence.
In
accordance
with
these
criteria,
it
is
expected
that
our
company's
board
of
directors
will
determine
that
each
of
Ms.
Morgan
and
Messrs.
Cattini,
Goldhill,
Huseby
and
Ubiñas
qualifies
as
an
independent
director
of
our
company.
Board Composition
The
board
of
directors
of
our
company
will
be
comprised
of
directors
with
a
broad
range
of
backgrounds
and
skill
sets,
including
in
media
and
telecommunications,
technology,
journalism,
auditing
and
financial
engineering.
Detailed
information
on
our
company's
policies
with
respect
to
board
candidates
will
be
available
following
the
completion
of
the
Spin-Off.
The
following
directors
will
serve
in
the
following
classes
upon
completion
of
the
Spin-Off:
Class I
Class II
Mark
Cattini
David
Goldhill
Chad
Hollingsworth
Class III
Richard
N.
Baer
Michael
P.
Huseby
Brian
Wendling
Betsy
L.
Morgan
Francis
Poore
Luis
Ubiñas
Committees of the Board
It
is
expected
that
our
company's
board
of
directors
will
form
the
following
committees:
audit
committee,
compensation
committee
and
executive
committee,
which
will
have
comparable
responsibilities
to
the
corresponding
committees
of
Liberty's
board.
We
currently
expect
that
our
company's
board
of
directors
will
not
form
a
standing
nominating
committee;
rather,
the
functions
of
such
a
committee
will
be
performed
by
the
independent
directors
of
our
board
of
directors
in
accordance
with
the
rules
and
regulations
of
the
Nasdaq
Stock
Market.
It
is
currently
contemplated
that
the
following
persons
will
serve
on
the
following
committees
upon
completion
of
the
Spin-Off:
Executive
Committee
Richard
N.
Baer
Chad
Hollingsworth
Francis
Poore
Compensation
Committee
Betsy
L.
Morgan
(Chairman)
Mark
Cattini
Michael
P.
Huseby
Audit
Committee
Michael
P.
Huseby
(Chairman)
David
Goldhill
Luis
Ubiñas
In
addition,
it
is
currently
contemplated
that
Michael
P.
Huseby
will
be
designated
an
"audit
committee
financial
expert"
for
purposes
of
the
Exchange
Act
and
the
rules
and
regulations
of
Nasdaq.
Compensation Committee Interlocks and Insider Participation
Our
company's
board
of
directors
does
not
currently
have
a
compensation
committee.
It
is
expected
that
no
member
of
our
company's
compensation
committee
(once
formed)
will
be
or
will
have
been,
during
2015,
an
officer
or
employee
of
our
company
or
Liberty,
or
will
have
engaged
in
any
related
party
transaction
in
which
our
company
or
Liberty
was
a
participant.
It
is
expected
that
no
interlocking
relationship
will
exist
between
our
company's
board
and
its
compensation
committee
and
the
board
of
directors
or
compensation
committee
of
any
other
company.
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Table
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EXECUTIVE COMPENSATION
This
section
sets
forth
information
relating
to
compensation
paid
by
our
company
to
the
following
persons
(who
we
collectively
refer
to
as
our
named
executive officers ):
•
Francis
Poore,
our
President
and
Chief
Executive
Officer;
•
Bob
Marro,
our
former
Chief
Financial
Officer;
and
•
Eric
Best,
our
Chief
Strategy
Officer.
For
purposes
of
the
following
discussion,
references
to
our
company
and
the
named
executive
officers
listed
above
relate
to
our
operating
subsidiary
CommerceHub
and
certain
of
its
executive
officers
and
not
CH
Parent
or
its
executive
officers,
unless
otherwise
noted.
Summary Compensation Table
Name and
Principal Position
(as of 12/31/15)
Francis Poore
President
and
Chief
Executive
Officer
Bob Marro(4)
Chief
Financial
Officer
Eric Best
Chief
Strategy
Officer
Year
2015
2014
2015
2014
2015
2014
Salary
($)
Bonus
($)
Stock
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Option
Awards
($)(1)
All Other
Compensation
($)(2)(3)
—
—
—
—
—
—
165,973
197,340
248,968
218,938
—
—
—
1,224,000
—
—
99,499
92,997
15,951
1,588,418
12,723
324,658
224,170
—
—
—
—
—
68,738
—
12,075
—
587,520
—
15,951
12,723
Total ($)
369,048
354,775
550,972
564,838
892,503
—
(1)
Reflects
the
grant
date
fair
value
of
stock
appreciation
rights
(
SARs )
awarded
to
Mr.
Marro
and
Mr.
Best,
which
have
been
computed
in
accordance
with
FASB
ASC
Topic
718,
but
(pursuant
to
SEC
regulations)
without
reduction
for
estimated
forfeitures.
For
a
description
of
the
assumptions
applied
in
these
calculations,
see
Note
3
of
the
Notes
to
our
Consolidated
Financial
Statements
for
the
year
ended
December
31,
2015
included
in
this
prospectus.
(2)
We
are
a
participating
employer
in
the
Liberty
Interactive
401(k)
Savings
Plan,
which
provides
employees
with
an
opportunity
to
save
for
retirement.
The
Liberty
Interactive
401(k)
Savings
Plan
participants
may
contribute
up
to
75%
of
their
eligible
compensation
on
a
pre-tax
basis
to
the
plan
(subject
to
specified
maximums
and
IRS
limits),
and
we
contributed
a
matching
contribution
based
on
the
participants'
contributions
as
set
forth
in
the
plan.
Participant
contributions
to
the
Liberty
Interactive
401(k)
Savings
Plan
are
fully
vested
upon
contribution.
Generally,
participants
acquire
a
vested
right
in
our
matching
contributions
as
follows:
Years of Service
Vesting Percentage
Less
than
1
1
or
more
but
fewer
than
2
2
or
more
87
0%
50%
100%
Table
of
Contents
Included
in
this
column,
with
respect
to
each
named
executive
officer
are
the
following
matching
contributions
made
by
our
company
to
the
Liberty
Interactive
401(k)
Savings
Plan
in
2015
and
2014:
2015
Amount ($)
Name
Francis
Poore
Bob
Marro
Eric
Best
15,900
15,900
12,075
2014
Amount ($)
12,669
12,669
—
With
respect
to
these
matching
contributions,
all
of
our
named
executive
officers
are
fully
vested.
(3)
Included
in
this
column
are
the
following
life
insurance
premiums
paid
on
behalf
of
each
of
the
named
executive
officers
during
2015
and
2014:
2015
Amount ($)
Name
Francis
Poore
Bob
Marro
Eric
Best
(4)
51
51
—
2014
Amount ($)
53
53
—
Effective
June
4,
2016,
Mr.
Marro
transitioned
to
a
non-officer
role
at
our
company
and
is
no
longer
our
Chief
Financial
Officer.
Executive Compensation Arrangements
We
have
entered
into
employment
agreements
with
all
of
our
named
executive
officers.
These
agreements
provide
for
at-will
employment
and
generally
include
the
named
executive
officer's
initial
base
salary,
an
indication
of
eligibility
for
an
annual
cash
bonus
and
equity
awards.
These
employment
arrangements
are
described
below.
Francis Poore
On
December
23,
2010,
we
entered
into
an
employment
agreement
with
Francis
Poore
that
established
his
initial
compensation
with
our
company,
including
his
annual
bonus
target
of
50%
of
base
salary,
and
provided
for
certain
post-employment
compensation
and
benefits
upon
his
termination.
Effective
January
10,
2013,
Mr.
Poore's
employment
agreement
was
amended
in
connection
with
his
promotion
to
President
and
Chief
Executive
Officer
of
our
company
(as
so
amended,
the
Amended CEO Agreement ).
The
Amended
CEO
Agreement
extends
the
initial
term
of
Mr.
Poore's
original
employment
agreement
from
January
10,
2015
to
January
10,
2017
and
provides
that
this
term
would
expire
on
that
date
if
we
or
Mr.
Poore
provide
a
notice
of
termination
at
least
60
days
before
January
10,
2017.
The
Amended
CEO
Agreement
also
(i)
provides
for
an
initial
base
salary
of
$345,000,
subject
to
annual
review
by
our
board
of
directors
and
which
has
since
increased
to
$369,048
for
2015,
(ii)
modifies
the
revenue
and
operational
milestones
with
respect
to
vesting
of
the
SARs
granted
to
Mr.
Poore
on
January
14,
2011
and
(iii)
makes
other
clarifying
changes
to
the
post-employment
payment
provisions
in
the
original
agreement.
The
other
terms
of
Mr.
Poore's
original
agreement
remain
unchanged.
Mr.
Poore's
original
employment
agreement,
as
amended
by
the
Amended
CEO
Agreement,
provides
for
post-employment
compensation
and
benefits,
which
are
described
in
"—Post-Employment
Compensation
and
Benefits."
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June
2016
Employment
Arrangement
On
June
25,
2016,
Liberty's
compensation
committee
approved
a
new
compensation
arrangement
with
Mr.
Poore
which
was
memorialized
in
a
definitive
employment
agreement
between
CommerceHub
and
Mr.
Poore,
dated
effective
as
of
June
28,
2016.
As
discussed
above,
the
Amended
CEO
Agreement
would
have
expired
on
January
10,
2017
if
we
or
Mr.
Poore
had
provided
a
notice
of
termination
at
least
60
days
before
such
date.
Regardless
of
whether
the
Spin-Off
is
completed,
we
wished
to
retain
Mr.
Poore's
service
as
our
President
and
Chief
Executive
Officer
beyond
January
10,
2017
and
began
negotiating
a
new
employment
arrangement
to
incent
Mr.
Poore
to
remain
with
our
company.
In
addition,
consistent
with
our
compensation
philosophy,
we
believed
that
a
new
grant
of
equity
would
be
instrumental
to
retaining
Mr.
Poore's
services
on
a
long-term
basis.
The
arrangement
provides
for
a
four
year
employment
term
(the
Employment Period ),
with
an
annual
base
salary
of
$400,000,
and
an
annual
target
cash
bonus
equal
to
100%
of
the
applicable
year's
base
salary.
The
arrangement
also
provides
for
other
customary
benefits
and
terms.
In
connection
with
the
approval
of
his
compensation
arrangement,
Mr.
Poore
was
granted
the
Multi-Year
Awards
described
below.
The
new
employment
arrangement
provides
that
if
Mr.
Poore
is
terminated
for
cause
(as
defined
in
the
definitive
employment
agreement)
he
will
be
entitled
to
his
accrued
unpaid
base
salary,
accrued
unused
paid
time
off,
unpaid
expense
reimbursement,
amounts
accrued
under
our
employee
benefit
plans
and
programs
as
of
the
date
of
termination
which
are
required
under
the
terms
of
such
plans
to
be
paid
to
Mr.
Poore
notwithstanding
his
termination,
and
any
other
amounts
due
under
applicable
law
(the
Standard Entitlements ).
Mr.
Poore
will
also
receive
the
Standard
Entitlements
if
he
terminates
his
employment
without
good
reason
(as
defined
in
the
definitive
employment
agreement).
If
during
the
Employment
Period
Mr.
Poore
is
terminated
without
cause
or
resigns
for
good
reason,
he
is
entitled
to:
(i)
the
Standard
Entitlements,
(ii)
a
salary
continuation
severance
payment
equal
to
two
times
his
annual
base
salary,
to
be
paid
in
24
equal
payroll
installments,
(iii)
an
additional
lump
sum
severance
payment
equal
to
a
pro
rata
portion
of
his
annual
base
salary
based
on
the
number
of
days
he
was
employed
during
the
year
of
termination
(the
Additional
Payment ),
(iv)
any
annual
cash
bonus
that
has
been
declared
as
of
the
date
of
the
termination
with
respect
to
the
prior
calendar
year
and
which
has
not
yet
been
paid
(the
Unpaid Bonus ),
(v)
the
applicable
premium
required
for
COBRA
continuation
coverage
for
Mr.
Poore
and
his
spouse
and
eligible
dependents
(as
applicable),
until
the
first
anniversary
of
the
date
of
termination,
and
(vi)
continued
participation
in
any
life
insurance
plan
(if
permitted
under
such
plan)
until
the
first
anniversary
of
the
date
of
termination.
If
Mr.
Poore's
employment
terminates
during
the
Employment
Period
due
to
death
or
disability
(as
defined
in
the
definitive
employment
agreement),
he
is
entitled
to
the
Standard
Entitlements,
the
Unpaid
Bonus,
a
lump-sum
severance
payment
equal
to
one
times
his
annual
base
salary
and
the
Additional
Payment.
If
Mr.
Poore
remains
employed
through
the
Employment
Period
and
his
employment
then
ends
for
any
reason,
he
is
entitled
to
the
Standard
Entitlements,
and,
unless
such
termination
is
for
cause,
the
Unpaid
Bonus
and
the
Additional
Payment
for
calendar
year
2020.
As
a
condition
to
Mr.
Poore's
receipt
of
any
severance
payments
or
benefits
following
his
termination
(aside
from
the
Standard
Entitlements),
as
well
as
to
any
acceleration
of
vesting
or
extension
of
exercise
periods
for
the
Multi-Year
Awards
described
below,
Mr.
Poore
must
execute
a
severance
agreement
and
general
release
in
accordance
with
the
procedures
set
forth
in
his
definitive
employment
agreement.
Mr.
Poore's
receipt
and
retention
of
severance
benefits
is
also
conditioned
on
his
compliance
with
the
post-termination
non-compete,
non-disclosure
and
non-interference
restrictions
in
his
definitive
employment
agreement.
89
Table
of
Contents
Multi-Year
Awards
In
connection
with
the
approval
of
Mr.
Poore's
new
compensation
arrangement,
the
compensation
committee
also
approved
a
one-time
grant
of
1,057,048
Stock
Appreciation
Rights
to
Mr.
Poore
pursuant
to
the
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan,
which
will
have
an
initial
exercise
price
of
$35.64
per
SAR
(the
Multi-Year Awards ),
and
a
Black-Scholes
value
of
approximately
$12.2
million.
25%
of
the
Multi-Year
Awards
will
vest
on
the
first
anniversary
of
the
grant
date
(the
First Vesting Date ),
with
1/36
of
the
number
of
remaining
unvested
Multi-Year
Awards
after
giving
effect
to
the
First
Vesting
Date
vesting
on
each
monthly
anniversary
of
the
First
Vesting
Date,
in
each
case
subject
to
Mr.
Poore
being
employed
on
the
applicable
vesting
date.
The
Multi-Year
Awards
have
a
term
of
ten
years.
In
connection
with
the
Spin-Off,
the
Stock
Appreciation
Rights
granted
pursuant
to
the
Multi-Year
Awards
will
be
converted
into
options
to
acquire
shares
of
our
Series
C
common
stock.
If
Mr.
Poore
is
terminated
for
cause,
all
of
his
unvested
Multi-Year
Awards
will
terminate
immediately,
and
his
vested
Multi-Year
Awards
will
remain
exercisable
for
90
days
following
the
date
of
such
termination,
but
in
no
event
past
the
original
Multi-Year
Award
term.
If
Mr.
Poore
terminates
his
employment
without
good
reason
during
the
Employment
Period,
all
of
his
unvested
Multi-Year
Awards
will
terminate
immediately,
and
his
vested
Multi-Year
Awards
will
remain
exercisable
for
120
days
following
the
date
of
such
termination,
but
in
no
event
past
the
original
Multi-Year
Award
term.
If
during
the
Employment
Period
Mr.
Poore
is
terminated
without
cause
or
resigns
for
good
reason,
a
pro
rata
portion
of
his
unvested
Multi-Year
Awards
will
accelerate
and
vest
based
on
the
number
of
days
elapsed
in
the
vesting
period
for
such
awards
as
of
the
date
of
termination
plus
548
calendar
days
(not
to
exceed
the
total
number
of
unvested
Multi-Year
Awards
at
such
time);
provided,
that
if
such
termination
occurs
within
90
days
prior
to,
or
18
months
following,
a
change
in
control
(as
defined
in
the
definitive
employment
agreement),
all
of
his
unvested
Multi-Year
Awards
will
accelerate
and
vest.
Upon
a
termination
without
cause
or
for
good
reason
during
the
Employment
Period,
all
of
Mr.
Poore's
vested
Multi-Year
Awards
(including
any
awards
that
accelerated
in
connection
with
such
termination)
will
remain
exercisable
for
2
years
following
the
date
of
such
termination,
but
in
no
event
past
the
original
Multi-Year
Award
term.
If
Mr.
Poore's
employment
terminates
due
to
death
or
disability
during
the
Employment
Period,
all
of
his
unvested
Multi-Year
Awards
will
accelerate
and
vest,
and
all
of
his
vested
Multi-Year
Awards
(after
giving
effect
to
such
acceleration)
will
remain
exercisable
for
2
years
following
the
date
of
termination,
but
in
no
event
past
the
original
Multi-Year
Award
term.
If
Mr.
Poore
remains
employed
through
the
Employment
Period
and
his
employment
then
ends,
his
vested
Multi-Year
Awards
will
remain
exercisable
for
one
year
following
the
date
of
such
termination,
or
in
the
case
of
a
termination
for
cause,
for
90
days
following
the
date
of
such
termination,
but
in
no
event
past
the
original
Multi-Year
Award
term.
If
a
change
in
control
occurs
at
any
time
during
the
Employment
Period
(aside
from
a
change
in
control
in
which
Mr.
Poore's
employment
is
terminated
without
cause
or
for
good
reason
within
90
days
preceding
or
concurrently
with
such
change
in
control)
and,
following
such
transaction,
the
Multi-Year
Awards
do
not
continue
to
be
outstanding
and
the
applicable
plan
committee
has
not
taken
equitable
action
to
replace
the
Multi-Year
Awards
with
equivalent
new
awards
or
have
the
successor
entity
assume
the
Multi-Year
Awards
(the
Award Conditions ),
all
of
Mr.
Poore's
outstanding
unvested
Multi-Year
Awards
will
accelerate
and
vest
immediately
prior
to
the
closing
of
the
change
in
control
transaction.
In
addition,
even
if
the
Award
Conditions
are
met
so
that
vesting
of
the
outstanding
Multi-Year
Awards
would
not
otherwise
be
accelerated,
if
a
change
in
control
occurs
within
the
first
year
following
the
Spin-Off
(aside
from
a
change
in
control
in
which
Mr.
Poore's
employment
is
terminated
without
cause
or
for
good
reason
within
90
days
preceding
or
concurrently
with
such
change
in
control),
37.5%
of
the
Multi-Year
Awards,
less
the
amount
of
any
Multi-Year
Awards
that
have
90
Table
of
Contents
previously
vested
or
that
otherwise
vest
in
connection
with
such
change
in
control,
will
accelerate
and
vest,
and
be
exercisable
immediately
prior
to
the
closing
of
the
change
in
control
transaction.
Bob Marro
Mr.
Marro
joined
our
company
as
Chief
Financial
Officer
in
February
2007.
We
entered
into
an
employment
agreement,
dated
February
21,
2007,
with
Mr.
Marro
(the
CFO Agreement )
that
set
the
terms
of
his
employment
as
our
Chief
Financial
Officer.
The
CFO
Agreement
provides
for
a
term
that
can
be
automatically
extended
for
consecutive
one-year
periods
after
the
expiration
of
the
initial
term
on
February
21,
2011,
unless
we
or
Mr.
Marro
provides
a
notice
of
termination
at
least
60
days
before
February
21
of
each
year.
The
CFO
Agreement
also
provides
that
Mr.
Marro's
base
salary
is
subject
to
annual
review
by
the
board
of
directors,
and
for
2015,
Mr.
Marro's
base
salary
increased
from
$218,938
to
$248,968.
Mr.
Marro
also
received
a
grant
of
160,000
stock
options
pursuant
to
the
CFO
Agreement.
On
January
29,
2015,
Mr.
Marro
received
an
award
of
150,000
SARs
that
vests
in
four
equal
tranches
on
each
of
the
first
four
anniversaries
of
January
29,
2015,
the
grant
date.
These
SARs
have
a
base
price
of
$23.43,
which
was
the
fair
market
value
of
our
common
stock
on
the
grant
date.
When
exercised,
the
SARs
may
only
be
settled
in
cash
in
an
amount
equal
to
the
excess
of
the
fair
market
value
of
our
stock
on
the
date
of
exercise
over
the
base
price
of
the
SAR.
Mr.
Marro
is
also
eligible
for
an
annual
cash
bonus,
with
a
target
bonus
of
40%
of
base
salary.
The
terms
of
our
2015
bonus
program
are
described
in
"—2015
Bonus
Program."
The
CFO
Agreement
provides
for
post-employment
compensation
and
benefits,
which
are
described
in
"—Post-Employment
Compensation
and
Benefits."
In
connection
with
his
transition
from
the
Chief
Financial
Officer
role
in
June
2016
and
his
contemplated
departure
from
our
company
in
November
2016,
we
entered
into
a
Release
and
Separation
Agreement
with
Mr.
Marro
(the
Separation Agreement )
that
is
described
in
"—Post-Employment
Compensation
and
Benefits."
Eric Best
Mr.
Best
joined
our
company
as
Chief
Marketing
Officer
in
January
2015
in
connection
with
our
acquisition
of
Mercent
Corporation,
and
he
is
now
our
Chief
Strategy
Officer.
We
entered
into
an
amended
and
restated
employment
agreement,
dated
January
8,
2015,
with
Mr.
Best
(the
CSO Agreement )
to
set
the
terms
of
his
employment
in
that
position.
The
agreement
provides
for
an
initial
term
commencing
on
January
8,
2015
through
January
31,
2017.
The
CSO
Agreement
provides
for
(i)
an
initial
base
salary
of
$230,000,
(ii)
an
annual
bonus
target
equal
to
40%
of
base
salary,
subject
to
achievement
of
milestones
established
by
management,
and
(iii)
reimbursements
for
membership
in
local
business
organizations
to
promote
our
company's
growth
and
other
business
objectives.
The
CSO
Agreement
also
provides
for
an
award
of
72,000
SARs
that
would
vest
upon
achievement
of
certain
revenue
goals
determined
by
our
board
of
directors.
These
SARs
have
a
base
price
of
$23.43,
which
was
the
fair
market
value
of
our
common
stock
on
January
29,
2015,
the
grant
date.
When
exercised,
the
SARs
may
only
be
settled
in
cash
in
an
amount
equal
to
the
difference
between
the
base
price
of
the
SAR
and
the
fair
market
value
of
our
stock
on
the
date
of
exercise.
As
of
December
31,
2015,
none
of
these
SARs
had
vested.
The
SARs
will
expire
on
January
28,
2025.
The
CSO
Agreement
provides
for
post-employment
compensation
and
benefits,
which
are
described
in
"—Post-Employment
Compensation
and
Benefits."
2015 Bonus Program
For
2015,
we
adopted
an
annual,
performance-based
cash
bonus
program
for
our
employees,
including
each
of
our
named
executive
officers.
The
program
was
adopted
and
approved
by
our
board
of
directors
in
April
2015.
Pursuant
to
the
program,
each
participant
is
assigned
a
target
annual
bonus
award
equal
to
a
percentage
of
the
employee's
annual
base
salary
which
percentage
is
based
on
the
applicable
employee's
position
and
responsibilities.
91
Table
of
Contents
Funding
for
the
2015
bonus
program
is
subject
to
our
achievement
of
EBITDA,
EBITDA
margin
and
unlevered
free
cash
flow
goals
for
2015
as
determined
by
our
board
of
directors.
If
these
goals
were
not
met,
no
bonus
payments
would
be
made
to
the
participants.
EBITDA
was
defined
as
net
income
plus
interest
expense
less
interest
income,
income
taxes,
depreciation,
software
amortization
and
stock
compensation
expense.
EBITDA
margin
was
defined
as
EBITDA
divided
by
revenue,
in
each
case
for
fiscal
year
2015.
Unlevered
free
cash
flow
was
defined
as
total
cash
flow
excluding
cash
flow
from
financing
activities,
cash
from
stock
compensation
payouts
and
extraordinary
events,
such
as
our
2015
acquisition
of
Mercent.
In
March
2016,
after
applying
certain
adjustments
to
the
methodology
for
how
the
EBITDA,
EBITDA
margin
and
unlevered
free
cash
flow
goals
would
be
calculated,
the
compensation
committee
of
our
board
of
directors
determined
that
the
EBITDA,
EBITDA
margin
and
unlevered
free
cash
flow
goals
for
2015
were
met.
In
addition,
the
named
executive
officers'
bonus
payments
are
based
upon
our
achievement
of
certain
revenue
growth
goals,
with
threshold
revenue
growth
of
30%
resulting
in
a
bonus
payment
of
25%
of
the
named
executive
officer's
target
bonus
amount
and
maximum
revenue
growth
of
45%
resulting
in
a
bonus
payment
of
125%
of
the
named
executive
officer's
target
bonus
amount.
After
determining
the
extent
to
which
bonuses
have
been
earned
with
respect
to
achievement
of
the
revenue
growth
goals,
the
named
executive
officers'
bonus
payments
may
then
be
adjusted
up
or
down
at
the
discretion
of
the
chief
executive
officer
and/or
the
board
of
directors.
Our
board
of
directors
and
Liberty
determined
not
to
adjust
Mr.
Poore's
2015
bonus
and
approved
a
payment
of
90%
of
his
target
bonus.
Mr.
Marro's
2015
bonus
payment
was
adjusted
upward
from
90%
to
100%
of
his
target
bonus
and
Mr.
Best's
2015
bonus
payment
was
adjusted
downward
from
90%
to
75%
of
his
target
bonus
based,
in
each
case,
on
the
named
executive
officer's
achievement
of
the
discretionary
management
performance
goals
assigned
to
them
by
Mr.
Poore.
The
amounts
paid
with
respect
to
2015
performance
are
included
in
the
"Summary
Compensation
Table"
above.
Equity Incentive Plans
1999 Stock Option Plan (As Amended and Restated Effective February 13, 2002)
We
adopted,
and
our
stockholders
approved,
the
1999
Stock
Option
Plan
on
September
16,
1999,
which
was
then
amended
and
restated,
effective
February
13,
2002
(the
1999 Plan ).
The
1999
Plan
provided
for
the
grant
of
incentive
stock
options
and
non-qualified
stock
options.
The
1999
Plan
was
administered
by
a
stock
option
committee
comprised
of
three
members
appointed
by
our
board
of
directors.
The
1999
Plan
expired
according
to
its
terms
on
September
15,
2009,
and
as
a
result
no
further
grants
are
permitted
under
this
plan.
However,
outstanding
stock
option
awards
remain
exercisable
until
the
expiration
dates
specified
in
their
respective
award
agreements
and
also
remain
subject
to
anti-dilution
and
other
adjustment
provisions
in
the
1999
Plan.
2010 Stock Appreciation Rights Plan
The
2010
Stock
Appreciation
Rights
Plan
was
adopted,
effective
April
22,
2010
(the
2010 Plan ),
and
has
a
ten-year
term
expiring
on
April
22,
2020.
The
2010
Plan
is
administered
by
a
committee
comprised
of
three
members
appointed
by
our
board
of
directors,
which
has
authority
to
grant
SARs
to
eligible
persons
and
to
determine
the
terms
and
conditions
under
which
any
grants
are
made.
The
maximum
number
of
shares
of
our
common
stock
with
respect
to
which
awards
may
be
issued
under
the
2010
Plan
is
6,000,000,
subject
to
anti-dilution
and
other
adjustment
provisions
in
the
2010
Plan,
and
which
includes
the
common
shares
previously
authorized
for
issuance
and
available
under
the
1999
Plan.
SARs
granted
under
the
2010
Plan
have
a
10-year
term
and
may
only
be
settled
in
cash
for
an
amount
equal
to
the
excess
of
the
fair
market
value
of
our
stock
on
the
exercise
date
over
the
base
price
of
the
SAR.
92
Table
of
Contents
Outstanding Equity Awards at Fiscal Year-End
The
following
table
contains
information
regarding
unexercised
stock
options
and
stock
appreciation
rights
which
were
outstanding
as
of
December
31,
2015
and
held
by
the
named
executive
officers.
Number of
securities
underlying
unexercised
options (#)
Exercisable
(b)
Name
(a)
Option awards
Equity incentive
plan awards:
Number of
securities
underlying
unexercised
unearned
options (#)
(d)
Number of
securities
underlying
unexercised
options (#)
Unexercisable
(c)
Francis Poore
Option award
05/20/2009
award
100,000
—
SAR awards
08/27/2010
award
01/14/2011
award
50,000
1,600,000
—
—
Bob Marro
Option awards
02/22/2007
award
01/01/2008
award
01/12/2009
award
135,000
25,000
30,000
—
—
—
SAR awards
04/22/2010
award
02/25/2011
award
03/21/2012
award
01/29/2015
award
25,000
20,000
15,000
—
Eric Best
SAR award
01/29/2015
award
—
—
5,000(2)
150,000(2)
—
—
—
Option
exercise
price ($)
(e)
Option
expiration date
(f)
3.81
05/20/2019
4.72
5.79
08/27/2020
01/14/2021
—
—
—
3.36
3.45
3.81
02/20/2017
12/31/2017
01/11/2019
—
—
—
—
4.72
5.86
7.77
23.43
04/21/2020
02/25/2021
03/21/2022
01/29/2025
23.43
01/28/2025
—
350,000(1)
72,000(3)
(1)
Mr.
Poore's
unvested
SARs
are
comprised
of
a
single
remaining
tranche
that
is
subject
to
our
achievement
of
a
trailing
12-month
revenue
goal.
The
SARs
reflected
in
column
(b)
vested
previously
and
became
exercisable
upon
our
achievement
of
certain
trailing
12-month
revenue
goals
and
the
satisfaction
of
all
operational
milestones
set
forth
in
Mr.
Poore's
award
agreement.
During
2015,
a
trailing
12-month
revenue
goal
for
a
tranche
of
Mr.
Poore's
January
14,
2011
SAR
award
was
met,
resulting
in
the
vesting
of
350,000
SARs.
(2)
Each
of
Mr.
Marro's
SAR
awards
were
scheduled
to
vest
in
four
equal
tranches
on
each
of
the
first
four
anniversaries
of
their
respective
grant
dates.
Pursuant
to
the
Separation
Agreement,
a
portion
of
Mr.
Marro's
January
29,
2015
SAR
award
was
forfeited
as
described
in
"—
Post-Employment
Compensation
and
Benefits."
(3)
Mr.
Best's
unvested
SARs
are
comprised
of
four
equal
tranches
each
of
which
is
subject
to
our
achievement
of
certain
trailing
12-month
revenue
goals.
As
of
December
31,
2015,
none
of
these
SARs
had
vested.
93
Table
of
Contents
Post-Employment Compensation and Benefits
Francis Poore
Mr.
Poore's
original
employment
agreement
and
the
CEO
Agreement
provide
for
certain
payments
and
benefits,
as
well
as
for
continued
exercisability
of
his
SARs,
if
his
employment
is
terminated
or
if
a
change
in
control
occurs.
The
following
discussion
summarizes
the
post-employment
compensation
and
benefits
to
which
Mr.
Poore
would
have
been
entitled
as
of
December
31,
2015
under
the
Amended
CEO
Agreement.
For
a
discussion
of
Mr.
Poore's
post-employment
compensation
and
benefits
under
the
terms
of
the
June
2016
employment
arrangement,
see
"—Executive
Compensation
Arrangements—Francis
Poore—June
2016
Employment
Arrangement."
If
Mr.
Poore's
employment
is
terminated
by
us
for
cause
(as
defined
in
Mr.
Poore's
original
employment
agreement)
or
if
Mr.
Poore
resigns
and
such
resignation
is
not
a
resignation
in
good
standing
(as
defined
in
his
original
employment
agreement),
he
will
be
entitled
to
any
accrued
salary
through
the
date
of
termination,
unpaid
expenses
and
accrued
but
unused
vacation,
and
he
will
forfeit
the
annual
cash
bonus
for
the
year
in
which
the
termination
occurs.
In
the
event
of
a
termination
for
cause,
the
1999
Plan
provides
that
any
outstanding
options
held
by
Mr.
Poore
will
be
forfeited
upon
termination.
If
Mr.
Poore's
employment
is
terminated
due
to
his
death,
disability
or
resignation
in
good
standing,
he
will
be
entitled
to
any
accrued
salary
through
the
date
of
death,
disability
or
resignation
in
good
standing,
unpaid
expenses
and
accrued
but
unused
vacation,
and
he
will
forfeit
the
annual
cash
bonus
for
the
year
in
which
his
death,
disability
or
resignation
with
good
standing
occurs.
In
addition,
any
SARs
that
are
vested
as
of
the
date
of
termination
will
remain
exercisable
until
the
earlier
of
(i)
the
first
anniversary
of
his
death,
disability
or
resignation
in
good
standing
and
(ii)
the
expiration
date
of
any
such
SARs.
In
the
event
of
a
termination
due
to
disability,
the
1999
Plan
provides
that
any
options
that
were
exercisable
as
of
the
date
of
termination,
or
to
any
greater
extent
permitted
by
the
1999
Plan
committee,
in
its
discretion,
will
remain
exercisable
until
the
earlier
of
(i)
the
expiration
date
for
the
stock
option
award
and
(ii)
twelve
months
after
the
termination
date.
Under
the
1999
Plan,
in
the
event
of
a
termination
of
employment
due
to
death
prior
to
the
award's
expiration
date,
any
options
that
were
exercisable
as
of
the
date
of
death,
or
to
any
greater
extent
permitted
by
the
1999
Plan
committee,
in
its
discretion,
will
remain
exercisable
until
the
earlier
of
(i)
the
expiration
date
for
the
stock
options
and
(ii)
three
months
after
Mr.
Poore's
death.
If
Mr.
Poore's
employment
is
terminated
by
us
for
reasons
other
than
cause,
death
or
disability
or
if
such
termination
constitutes
a
constructive
termination
without
cause,
Mr.
Poore
will
be
entitled
to
(i)
accrued
salary
through
the
date
of
termination,
(ii)
a
lump
sum
payment
equal
to
the
present
value
of
24
months
of
base
salary
(based
on
a
discount
using
the
applicable
federal
rate
for
short-term
obligations
for
the
month
in
which
his
termination
occurs),
(iii)
vested
benefits,
(iv)
continued
coverage
under
our
medical,
hospitalization
and
dental
plans
through
our
payment
of
COBRA
costs
through
the
earlier
of
(x)
the
first
anniversary
of
his
date
of
termination
and
(y)
the
date
upon
which
he
receives
equivalent
coverage
from
a
subsequent
employer,
(v)
continued
participation
in
our
life
insurance
coverage
plans
until
(x)
the
first
anniversary
of
his
date
of
termination
and
(y)
the
date
upon
which
he
receives
equivalent
coverage
from
a
subsequent
employer,
(vi)
accrued
but
unused
vacation
and
(vii)
unpaid
expenses.
In
addition,
any
SARs
that
are
vested
as
of
the
date
of
termination
will
remain
exercisable
until
the
earlier
of
(i)
the
first
anniversary
of
his
date
of
termination
and
(ii)
the
expiration
date
of
any
such
SARs.
Mr.
Poore
will
also
forfeit
the
annual
cash
bonus
for
the
year
in
which
the
termination
occurs.
Under
the
1999
Plan,
in
the
event
of
a
termination
of
employment
other
than
for
cause
(as
defined
in
the
1999
Plan)
prior
to
the
award's
expiration
date,
any
options
that
were
exercisable
as
of
the
date
of
termination,
or
to
any
greater
extent
permitted
by
the
1999
Plan
committee,
in
its
discretion,
will
remain
exercisable
until
the
earlier
of
(i)
the
expiration
date
for
the
stock
options
and
(ii)
three
months
after
the
termination.
94
Table
of
Contents
If
Mr.
Poore's
employment
is
terminated
following
a
change
in
control
(as
defined
in
his
original
employment
agreement),
he
will
be
entitled
to
the
same
benefits
as
if
his
employment
had
been
terminated
without
cause
described
in
the
foregoing
paragraph,
except
that
he
will
receive
lump
sum
payment
equal
to
24
months
of
salary,
rather
than
the
discounted
present
value
of
such
amount.
Bob Marro
The
CFO
Agreement
provided
for
certain
payments
and
benefits,
as
well
as
for
continued
exercisability
of
Mr.
Marro's
stock
options,
if
his
employment
is
terminated.
Under
the
CFO
Agreement,
if
Mr.
Marro's
employment
was
terminated
by
us
for
cause
(as
defined
in
the
CFO
Agreement),
he
would
have
been
entitled
to
any
accrued
salary
through
the
date
of
termination,
as
well
as
any
unpaid
expenses.
If
Mr.
Marro's
employment
was
terminated
due
to
his
death
or
disability,
he
would
have
been
entitled
to
any
accrued
salary
through
the
date
of
his
death
or
disability,
as
well
as
any
unpaid
expenses.
In
addition,
the
CFO
Agreement
provided
that,
to
the
extent
permitted
under
the
1999
Plan,
any
stock
options
that
are
vested
as
of
the
date
of
his
death
or
disability
would
remain
exercisable
until
the
earlier
of
(i)
the
second
anniversary
of
his
death
or
disability
or
(ii)
the
expiration
date
of
any
such
stock
options.
If
Mr.
Marro's
employment
was
terminated
by
us
for
reasons
other
than
cause,
death
or
disability
or
if
such
termination
constituted
a
constructive
termination
without
cause
(as
defined
in
the
CFO
Agreement),
Mr.
Marro
would
have
been
entitled
to
his
accrued
salary
through
the
date
of
termination
and
a
lump
sum
payment
equal
to
the
present
value
of
12
months
of
base
salary
(based
on
a
discount
using
the
applicable
federal
rate
for
short-term
obligations
for
the
month
in
which
his
termination
occurs).
In
addition,
to
the
extent
permitted
under
the
1999
Plan,
any
stock
options
that
were
vested
as
of
the
date
of
his
death
or
disability
would
remain
exercisable
until
the
earlier
of
(i)
the
second
anniversary
of
his
termination
or
(ii)
the
expiration
date
of
any
such
stock
options.
If
Mr.
Marro's
employment
was
terminated
without
cause
within
one
year
following
a
change
in
control
(as
defined
in
the
CFO
Agreement),
he
would
have
been
entitled
to
the
same
benefits
as
if
his
employment
had
been
terminated
without
cause
described
in
the
foregoing
paragraph,
except
that
he
would
have
received
lump
sum
payment
equal
to
one
year
of
salary
rather
than
the
discounted
present
value
of
such
amount.
With
respect
to
Mr.
Marro's
SAR
grants,
the
2010
Plan
provides
that
any
unexpired,
vested
SARs
would
remain
exercisable
for
three
months
after
Mr.
Marro's
termination
of
employment
without
cause
(as
defined
in
the
2010
Plan)
or
by
reason
of
death,
disability
or
retirement.
If
Mr.
Marro's
employment
was
terminated
for
any
other
reason,
Mr.
Marro's
SARs
would
be
forfeited.
We
and
Mr.
Marro
entered
into
the
Separation
Agreement
in
connection
with
his
transition
from
the
Chief
Financial
Officer
role
in
June
2016
and
his
contemplated
departure
from
our
company
in
November
2016.
During
the
transition
period
between
June
2016
and
November
2016,
Mr.
Marro
will
continue
to
receive
his
current
salary
and
benefits
until
November
30,
2016
or
the
date
of
his
earlier
termination.
In
consideration
of
the
payments
and
benefits
described
below,
Mr.
Marro
is
no
longer
eligible
to
receive
a
bonus
for
the
2016
calendar
year.
In
addition,
Mr.
Marro
also
forfeited
112,500
of
the
150,000
SARs
previously
granted
to
him
on
January
29,
2015.
If
we
employ
Mr.
Marro
through
the
end
of
the
transition
period
or
if
we
terminate
his
employment
earlier
without
just
cause
(as
defined
in
the
Separation
Agreement),
he
will
be
entitled
to
a
lump
sum
cash
payment
of
$728,275.
If
Mr.
Marro's
employment
is
terminated
without
cause
within
three
months
of
the
effective
date
of
the
Separation
Agreement
(as
defined
in
the
Separation
Agreement),
he
will
receive
an
additional
lump
sum
payment
equal
to
the
base
salary
that
he
would
have
received
between
his
date
of
termination
and
the
end
of
the
third
month
after
the
Separation
95
Table
of
Contents
Agreement's
effective
date.
In
addition,
Mr.
Marro
will
receive
a
lump
sum
payment
equal
to
$108,160
multiplied
by
a
fraction,
the
numerator
of
which
is
the
greater
of
(i)
the
number
of
days
between
January
1,
2016
and
his
date
of
termination
and
(ii)
244
days,
and
the
denominator
of
which
is
366
days.
If
Mr.
Marro
timely
elects
COBRA
continuation
coverage,
we
will
pay
the
applicable
COBRA
premium
for
18
months
following
his
termination
without
just
cause
the
expiration
of
the
transition
period
on
November
30,
2016
or,
if
his
employment
is
extended
beyond
the
transition
period,
the
date
of
his
termination
after
such
period.
The
foregoing
payments
and
benefits
are
subject
to
Mr.
Marro's
execution
of
a
release
of
claims
in
favor
of
our
company.
Eric Best
If
Mr.
Best's
employment
is
terminated
for
cause
(as
defined
in
the
CSO
Agreement)
or
due
to
his
death
or
disability,
he
will
be
entitled
to
any
accrued
salary
through
the
date
of
his
termination,
death
or
disability,
as
well
as
any
unpaid
expenses.
If
Mr.
Best's
employment
is
terminated
by
us
for
reasons
other
than
cause,
death
or
disability
or
if
Mr.
Best
terminates
his
employment
for
good
reason,
(as
defined
in
the
CSO
Agreement),
he
will
be
entitled
to
(i)
any
accrued
salary
through
the
date
of
termination,
(ii)
a
salary
continuation
payment
equal
to
six
months
of
base
salary,
as
well
as
any
unpaid
expenses.
With
respect
to
Mr.
Best's
outstanding
SAR
grant,
the
2010
Plan
provides
that
any
unexpired,
vested
SARs
will
remain
exercisable
for
90
days
after
Mr.
Best's
termination
of
employment
without
cause
(as
defined
in
the
2010
Plan)
or
by
reason
of
death,
disability
or
retirement.
If
Mr.
Best's
employment
is
terminated
for
any
other
reason,
Mr.
Best's
SARs
would
be
forfeited.
Director Compensation
None
of
our
directors
received
any
compensation
for
serving
as
directors
of
our
company
during
2015.
We
do
not
currently
have
a
formal
policy
with
respect
to
compensation
payable
to
our
non-employee
directors
for
service
as
directors.
CH Parent Equity Incentive Plans
CommerceHub, Inc. 2016 Omnibus Incentive Plan
In
connection
with
the
Spin-Off,
CH
Parent
will
adopt
the
CommerceHub,
Inc.
2016
Omnibus
Incentive
Plan
(the
incentive plan ).
The
incentive
plan
is
designed
to
provide
additional
remuneration
to
officers,
employees,
nonemployee
directors
and
independent
contractors
for
service
to
CH
Parent
and
to
encourage
those
persons'
investment
in
CH
Parent.
Non-qualified
stock
options,
SARs,
restricted
shares,
restricted
stock
units,
cash
awards,
performance
awards
or
any
combination
of
the
foregoing
may
be
granted
under
the
incentive
plan
(collectively,
awards ).
The
maximum
number
of
shares
of
CH
Parent
common
stock
with
respect
to
which
awards
may
be
granted
is
13,200,000,
subject
to
anti-dilution
and
other
adjustment
provisions
of
the
incentive
plan.
In
addition,
such
number
of
shares
available
for
issuance
will
be
increased
on
the
first
day
of
every
calendar
year
beginning
in
2017
in
an
amount
equal
to
(i)
5%
of
the
outstanding
shares
of
CH
Parent
common
stock
on
the
last
day
of
the
immediately
preceding
calendar
year
or
(ii)
such
number
of
shares
of
CH
Parent
common
stock
determined
by
the
board
of
directors.
With
limited
exceptions,
under
the
incentive
plan,
no
person
may
be
granted
in
any
calendar
year
awards
covering
more
than
3
million
shares
of
CH
Parent
common
stock,
subject
to
anti-dilution
and
other
adjustment
provisions
of
the
incentive
plan.
In
addition,
no
nonemployee
director
may
be
granted
during
any
calendar
year
awards
having
a
value
(as
determined
on
the
grant
date
of
such
award)
in
excess
of
$1
million,
increased
to
$2
million
in
connection
with
such
nonemployee
director's
initial
year
of
service
on
the
board
of
directors
of
CH
Parent.
Shares
of
96
Table
of
Contents
CH
Parent
common
stock
issuable
pursuant
to
awards
will
be
made
available
from
either
authorized
but
unissued
shares
or
shares
that
have
been
issued
but
reacquired
by
CH
Parent.
The
incentive
plan
will
be
administered
by
the
compensation
committee
with
regard
to
all
awards
granted
under
the
incentive
plan
(other
than
awards
granted
to
the
nonemployee
directors),
and
the
compensation
committee
will
have
full
power
and
authority
to
determine
the
terms
and
conditions
of
such
awards.
The
incentive
plan
will
be
administered
by
the
full
board
of
directors
with
regard
to
all
awards
granted
under
the
incentive
plan
to
nonemployee
directors,
and
the
full
board
of
directors
will
have
full
power
and
authority
to
determine
the
terms
and
conditions
of
such
awards.
CommerceHub, Inc. Transitional Stock Adjustment Plan
At
the
time
of
the
Spin-Off,
CH
Parent
will
also
have
awards
outstanding
under
the
transitional
plan
as
described
under
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards."
Legacy SAR Plan
At
the
time
of
the
Spin-Off,
CH
Parent
will
also
have
awards
outstanding
under
the
legacy
SAR
plan
as
described
under
"The
Spin-Off—Effect
of
the
SpinOff
on
Outstanding
CommerceHub
Incentive
Awards."
Equity Compensation Plan Information
At
the
time
of
the
Spin-Off,
CH
Parent
will
have
five
equity
compensation
plans,
four
of
which
are
listed
below.
The
only
plan
under
which
awards
will
not
be
outstanding
immediately
following
the
Spin-Off
is
the
incentive
plan.
The
following
table
reflects
the
awards
that
would
have
been
outstanding
as
of
December
31,
2015
assuming
that
(i)
the
Spin-Off
had
occurred
on
that
date,
(ii)
the
treatment
of
the
outstanding
Liberty
Ventures
incentive
awards
described
under
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards"
and
(iii)
the
treatment
of
outstanding
CommerceHub
stock
appreciation
rights
as
described
in
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
CommerceHub
Incentive
Awards."
97
Table
of
Contents
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights (a)(1)
Plan Category
Equity compensation plans approved by security holders: None
Equity compensation plans not approved by security holders: (1)
CommerceHub, Inc. 2016 Omnibus Incentive Plan
Series
A
Series
B
Series
C
CommerceHub, Inc. Transitional Stock Adjustment Plan
Series
A
Series
B
Series
C
CommerceHub, Inc. Legacy Stock Appreciation Rights Plan
Series
A
Series
B
Series
C
CommerceHub, Inc. 2016 Employee Stock Purchase Plan
Series
A
Series
B
Series
C
Total
Series
A
Series
B
Series
C
0
0
0
358,561
157,003
1,031,191
—
—
7,890,245
—
—
—
358,561
157,003
8,921,436
Number of
securities available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))(2)
Weighted
average
exercise price
of outstanding
options,
warrants and
rights
$
$
$
$
N/A
N/A
N/A
10.20
16.78
12.21
N/A
N/A
4.17
N/A
N/A
N/A
13,200,000(3)
0
0
900,000(4)
14,100,000
(1)
Each
plan
will
be
approved
by
Liberty
in
its
capacity
as
the
sole
stockholder
of
CH
Parent
prior
to
the
Spin-Off.
Following
the
Spin-Off,
CH
Parent
will
seek
stockholder
approval
of
the
incentive
plan
at
its
first
annual
meeting
of
stockholders.
(2)
The
incentive
plan
and
the
transitional
plan
permit
grants
of,
or
with
respect
to,
shares
of
any
series
of
CH
Parent
common
stock,
subject
to
a
single
aggregate
limit.
The
legacy
SAR
plan
only
permits
grants
with
respect
to
shares
of
our
Series
C
common
stock.
(3)
Subject
to
increase,
as
described
under
"Executive
Compensation—CommerceHub,
Inc.
2016
Omnibus
Incentive
Plan."
(4)
Represents
shares
available
for
issuance
under
our
Employee
Stock
Purchase
Plan,
a
stock
purchase
plan
meeting
the
requirements
of
Section
423
of
the
Code.
98
Table
of
Contents
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
Prior
to
the
Spin-Off,
all
of
the
outstanding
capital
stock
of
our
company
will
be
owned
by
Liberty
and
the
CommerceHub
minority
holders.
The
following
table
sets
forth
information,
to
the
extent
known
by
Liberty
or
ascertainable
from
public
filings,
with
respect
to
the
estimated
beneficial
ownership
of
each
person
or
entity
(other
than
certain
persons
who
will
serve
as
directors
or
executive
officers
of
our
company,
whose
ownership
information
follows)
who
is
expected
to
beneficially
own
more
than
five
percent
of
the
outstanding
shares
of
any
series
of
our
company's
common
stock,
assuming
that
the
distribution
had
occurred
at
5:00
p.m.,
New
York
City
time,
on
April
30,
2016.
The
percentage
voting
power
for
each
holder
is
presented
on
an
aggregate
basis
for
all
series
of
our
company's
common
stock
held
by
such
holder.
The
security
ownership
information
for
our
company's
common
stock
has
been
estimated
based
upon
the
distribution
ratio
of
(i)
0.1
of
a
share
of
Series
A
common
stock
and
0.2
of
a
share
of
Series
C
common
stock
to
holders
of
a
share
of
LVNTA
and
(ii)
0.1
of
a
share
of
Series
B
common
stock
and
0.2
of
a
share
of
Series
C
common
stock
to
holders
of
a
share
of
LVNTB
and
outstanding
stock
information
for
Liberty's
common
stock
as
of
April
30,
2016,
and,
in
the
case
of
percentage
ownership
information,
has
been
estimated
based
upon
13,506,197
shares
of
our
company's
Series
A
common
stock,
710,360
shares
of
our
company's
Series
B
common
stock
and
28,433,115
shares
of
our
company's
Series
C
common
stock
estimated
to
have
been
issued
to
holders
of
LVNTA
and
LVNTB
in
the
distribution
assuming
that
the
distribution
had
occurred
at
5:00
p.m.,
New
York
City
time,
on
April
30,
2016.
So
far
as
is
known
to
CH
Parent,
the
persons
indicated
below
would
have
sole
voting
power
with
respect
to
the
shares
estimated
to
be
owned
by
them,
except
as
otherwise
stated
in
the
footnotes
to
the
table.
Amount and
Nature of
Beneficial
Ownership
Title of
Series
Name and Address of Beneficial Owner
John
C.
Malone
c/o
Liberty
Interactive
Corporation
12300
Liberty
Boulevard
Englewood,
CO
80112
The
Vanguard
Group
100
Vanguard
Blvd.
Malvern,
PA
19355
CHUBA CHUBK CHUBA CHUBK FPR
Partners
LLC
199
Fremont
Street,
Suite
2500
San
Francisco,
CA
94105-2261
CHUBA
CHUBB
CHUBK
Percent
of Series
(%)
103,965(1)(2)
670,196(1)(3)(4)
1,548,322(1)(2)(3)(4)
773,040(5)
1,546,080(5)
1,345,660(6)
2,691,320(6)
*
94.3
5.4
Voting
Power
(%)
33.0
5.7
5.4
3.8
10.0
9.5
6.5
*
Less
than
one
percent
(1)
Includes
13,207
CHUBA
shares,
20,641
CHUBB
shares
and
67,696
CHUBK
shares
held
by
Mr.
Malone's
wife,
Mrs.
Leslie
Malone,
as
to
which
shares
Mr.
Malone
has
disclaimed
beneficial
ownership.
(2)
Includes
(i)
68,357
shares
of
CHUBA
and
136,715
shares
of
CHUBK
pledged
to
Fidelity
Brokerage
Services,
LLC
(
Fidelity )
in
connection
with
a
margin
loan
facility
extended
by
Fidelity
and
(ii)
19,600
shares
of
CHUBA
and
39,200
shares
of
CHUBK
pledged
to
Merrill
Lynch,
Pierce,
99
Table
of
Contents
Fenner
&
Smith
Incorporated
(
Merrill Lynch )
in
connection
with
a
loan
facility
extended
by
Merrill
Lynch.
(3)
Includes
11,113
shares
of
CHUBB
and
22,227
shares
of
CHUBK
held
by
two
trusts
which
are
managed
by
an
independent
trustee,
of
which
the
beneficiaries
are
Mr.
Malone's
adult
children
and
in
which
Mr.
Malone
has
no
pecuniary
interest.
Mr.
Malone
retains
the
right
to
substitute
assets
held
by
the
trusts
and
has
disclaimed
beneficial
ownership
of
the
shares
held
by
the
trusts.
(4)
In
February
1998,
in
connection
with
the
settlement
of
certain
legal
proceedings
relative
to
the
Estate
of
Bob
Magness,
the
late
founder
and
former
Chairman
of
the
Board
of
Tele-Communications,
Inc.
(
TCI ),
TCI
entered
into
a
call
agreement
with
Mr.
Malone
and
Mr.
Malone's
wife.
In
connection
with
the
acquisition
by
AT&T
Corp.
of
TCI,
TCI
assigned
to
Liberty's
predecessor
its
rights
under
this
call
agreement.
Liberty
has
since
succeeded
to
these
rights.
As
a
result,
Liberty
has
the
right,
under
certain
circumstances,
to
acquire
LVNTB
shares
owned
by
the
Malones.
The
call
agreement
also
prohibits
the
Malones
from
disposing
of
their
LVNTB
shares,
except
for
certain
exempt
transfers
(such
as
transfers
to
related
parties
or
public
sales
of
up
to
an
aggregate
of
5%
of
their
shares
of
LVNTB
after
conversion
to
shares
of
LVNTA)
and
except
for
transfers
made
in
compliance
with
Liberty's
call
rights.
The
call
agreement
will
not
apply
to
the
CHUBB
shares
received
by
Mr.
Malone
and
his
wife
in
connection
with
the
Spin-Off.
(5)
Based
on
Form
13F,
dated
May
13,
2016,
filed
by
The
Vanguard
Group
(
Vanguard )
with
respect
to
shares
of
Liberty,
which
states
that
Vanguard
has
sole
investment
discretion
over
7,623,013
LVNTA
shares,
shared
investment
discretion
over
107,387
LVNTA
shares,
shared
voting
power
over
12,926
LVNTA
shares
and
sole
voting
power
over
103,461
LVNTA
shares.
(6)
Based
on
Form
13F,
dated
May
13,
2016,
and
Amendment
No.
3
to
Schedule
13G,
dated
February
16,
2016,
jointly
filed
by
FPR
Partners,
LLC
(
FPR Partners )
with
respect
to
shares
of
Liberty,
which
state
that
FPR
Partners
has
sole
investment
discretion
and
sole
voting
power
over
13,456,602
LVNTA
shares.
Security Ownership of Management
The
following
table
sets
forth
information
with
respect
to
the
estimated
beneficial
ownership
by
our
named
executive
officers,
each
person
who
is
expected
to
serve
as
an
executive
officer
or
director
of
our
company
and
all
of
such
persons
as
a
group
of
shares
of
our
company's
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock,
assuming
that
the
distribution
had
occurred
at
5:00
p.m.,
New
York
City
time,
on
April
30,
2016.
The
percentage
voting
power
is
presented
on
an
aggregate
basis
for
all
series
of
our
company's
common
stock.
The
security
ownership
information
for
our
company's
common
stock
has
been
estimated
based
upon
the
distribution
ratio
of
(i)
0.1
of
a
share
of
Series
A
common
stock
and
0.2
of
a
share
of
Series
C
common
stock
to
holders
of
a
share
of
LVNTA
and
(ii)
0.1
of
a
share
of
Series
B
common
stock
and
0.2
of
a
share
of
Series
C
common
stock
to
holders
of
a
share
of
LVNTB
and
outstanding
stock
information
for
Liberty's
common
stock
as
of
April
30,
2016,
and,
in
the
case
of
percentage
ownership
information,
has
been
estimated
based
upon
13,506,197
shares
of
our
company's
Series
A
common
stock,
710,360
shares
of
our
company's
Series
B
common
stock
and
28,433,115
shares
of
our
company's
Series
C
common
stock
estimated
to
have
been
issued
in
the
distribution
assuming
that
the
distribution
had
occurred
at
5:00
p.m.,
New
York
City
time,
on
April
30,
2016.
Shares
of
restricted
stock
that
will
be
issued
pursuant
to
the
transitional
plan
are
included
in
the
outstanding
share
numbers
provided
throughout
this
prospectus.
However,
because
of
the
difficulty
in
determining
in
advance
the
precise
effect
of
the
distribution
on
outstanding
option
awards
and
restricted
stock
units
with
respect
to
shares
of
LVNTA
and
LVNTB
and
equity
incentive
awards
with
respect
to
shares
of
existing
CommerceHub
common
stock
for
the
individuals
set
forth
below
(see
"The
100
Table
of
Contents
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards"
and
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
CommerceHub
Incentive
Awards"
for
more
information),
for
purposes
of
the
following
presentation,
we
have
not
included
beneficial
ownership
information
with
respect
to
any
new
option
awards
or
restricted
stock
units
with
respect
to
shares
of
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock
that
may
be
received
by
the
individuals
for
whom
beneficial
ownership
information
is
presented
below.
In
addition,
we
have
not
included
restricted
shares
of
our
Series
A,
Series
B
or
Series
C
common
stock
to
be
received
by
certain
of
our
directors
following
the
conversion
of
their
original
Ventures
restricted
stock
unit
awards
into
restricted
stock
awards
with
respect
to
shares
of
the
corresponding
series
of
Liberty
Ventures
common
stock.
See
"The
Spin-Off—Effect
of
the
Spin-Off
on
Outstanding
Liberty
Ventures
Incentive
Awards—Restricted
Stock
Awards."
For
purposes
of
the
following
presentation,
beneficial
ownership
of
shares
of
our
company's
Series
B
common
stock,
though
convertible
on
a
one-for-one
basis
into
shares
of
our
company's
Series
A
common
stock,
is
reported
as
beneficial
ownership
of
Series
B
common
stock,
and
not
as
beneficial
ownership
of
Series
A
common
stock,
but
the
voting
power
of
the
Series
A
common
stock
and
Series
B
common
stock
has
been
aggregated.
The
number
of
shares
indicated
as
owned
by
the
following
persons
includes
interests
in
shares
that
would
have
been
held
by
the
Liberty
Media
401(k)
plan
as
of
April
30,
2016.
The
shares
held
by
the
trustee
of
the
Liberty
Media
401(k)
Savings
Plan
for
the
benefit
of
these
persons
are
voted
as
directed
by
such
persons.
So
far
as
is
known
to
CH
Parent,
the
persons
indicated
below
would
have
sole
voting
power
with
respect
to
the
shares
estimated
to
be
owned
by
them,
except
as
otherwise
stated
in
the
notes
to
the
table.
Title of
Class
Name of Beneficial Owner
Richard
N.
Baer
Chairman
of
the
Board
Francis
Poore
Chief
Executive
Officer,
President
and
Director
Mark
Cattini
Director
David
Goldhill
Director
Chad
Hollingsworth
Director
Michael
P.
Huseby
Director
CHUBA CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK 101
Amount and
Nature of
Beneficial
Ownership
(In thousands)
1(1)
—
2(1)
—
—
—
—
—
—
—
—
—
**(1)(2)
—
1(1)(2)
—
—
—
Percent of
Class (%)
*
—
*
—
—
—
—
—
—
—
—
—
*
*
—
—
—
Voting
Power (%)
*
—
—
—
*
—
Table
of
Contents
Title of
Class
Name of Beneficial Owner
Betsy
L.
Morgan
Director
Luis
Ubiñas
Director
Brian
Wendling
Director
Eric
Best
Chief
Strategy
Officer
Mark
Greenquist
Chief
Financial
Officer
and
Treasurer
John
Hinkle
Chief
Information
Officer
and
Chief
Information
Security
Officer
Richard
Jones
Chief
Technology
Officer
and
Executive
Vice
President,
Operations
Bill
Kong
Executive
Vice
President,
Products
and
Services
Bob
Marro
Former
Chief
Financial
Officer
Mike
Trimarchi
Chief
Accounting
Officer
Douglas
Wolfson
General
Counsel
and
Secretary
All
directors
and
executive
officers
as
a
group
(17
persons)
*
Less
than
one
percent
**
Less
than
1,000
shares
CHUBA CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA
CHUBB CHUBK CHUBA CHUBB CHUBK 102
Amount and
Nature of
Beneficial
Ownership
(In thousands)
—
—
—
—
—
—
2
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—(3)
—
—
—
—
—
—
4(1)(2)
—
7(1)(2)
Percent of
Class (%)
—
—
—
—
—
—
*
*
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
*
—
*
Voting
Power (%)
—
—
*
—
—
—
—
—
—
—
—
*
Table
of
Contents
(1)
Includes
restricted
shares,
none
of
which
have
vested,
as
follows:
CHUBA
Richard
N.
Baer
Chad
Hollingsworth
Total
1,097
313
1,410
CHUBK
2,195
626
2,821
(2)
Includes
44
CHUBA
shares
and
89
CHUBK
shares
held
in
the
Liberty
Media
401(k)
Savings
Plan.
(3)
Excludes
shares
of
CHUBK
that
would
have
been
received
upon
conversion
of
shares
of
existing
CommerceHub
common
stock
which
were
sold
in
June
2016.
Change of Control
Other
than
as
contemplated
by
the
Spin-Off,
we
know
of
no
arrangements,
including
any
pledge
by
any
person
of
its
securities,
the
operation
of
which
may
at
a
subsequent
date
result
in
a
change
in
control
of
our
company.
For
more
information
about
the
Spin-Off,
please
see
"The
Spin-Off."
103
Table
of
Contents
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We
expect
that
our
board
of
directors
will
adopt
a
formal
written
policy
for
the
review,
approval
or
ratification
of
any
transactions
or
arrangements
involving
related
parties.
All
of
our
directors,
executive
officers
and
employees
will
be
subject
to
the
policy
and
will
be
asked
to
promptly
report
any
such
related
party
transaction.
No
related
party
transaction
will
be
effected
without
the
approval
of
the
independent
committee
of
the
board
designated
by
the
board
to
address
such
actual
or
potential
conflicts.
Directors
will
be
asked
to
recuse
themselves
from
any
discussion
or
decision
by
the
board
or
a
board
committee
that
involves
or
affects
their
personal,
business
or
professional
interests.
Relationship Between CH Parent and QVC
QVC
is
a
wholly
owned
subsidiary
of
Liberty.
CommerceHub
is
currently
a
party
to
commercial
agreements
and
arrangements
with
QVC
pursuant
to
which
CommerceHub
provides
various
solutions
and
services
to
QVC.
The
terms
of
these
agreements
are
generally
comparable
to
those
with
other
similar
trading
partner
customers,
subject
to
limited
exceptions.
For
the
years
ended
December
31,
2015
and
2014,
QVC
accounted
for
approximately
8%
and
10%
of
total
revenue,
respectively.
At
December
31,
2015
and
March
31,
2016,
there
were
892
suppliers
and
899
suppliers,
respectively,
utilizing
the
CommerceHub
Solutions
to
transact
a
portion
of
their
business
with
QVC.
The
company
had
receivables
relating
to
ordinary
business
with
QVC
of
approximately
$511
thousand
and
$158
thousand
at
December
31,
2015
and
2014,
respectively
and
$550
thousand
at
March
31,
2016.
Please
also
see
discussions
regarding
our
relationship
with
QVC
included
under
"Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations."
Following
the
Spin-Off,
the
agreements
with
QVC
will
continue
to
be
held
by
CommerceHub,
which
will
be
a
wholly
owned
subsidiary
of
CH
Parent.
As
described
below,
Liberty
and
CH
Parent
will
operate
independently,
and
neither
will
have
any
ownership
interest
in
the
other
following
the
Spin-Off,
and
CH
Parent
and
Liberty
and/or
Liberty
Media
(or
their
respective
subsidiaries)
will
enter
into
certain
agreements
to
govern
ongoing
relationships
after,
and
provide
for
an
orderly
transition
in
connection
with,
the
Spin-Off.
Relationships Between CH Parent and Liberty and/or Liberty Media
Following
the
Spin-Off,
Liberty
and
CH
Parent
will
operate
independently,
and
neither
will
have
any
ownership
interest
in
the
other.
In
order
to
govern
certain
of
the
ongoing
relationships
between
Liberty
and/or
Liberty
Media
(or
their
respective
subsidiaries),
on
the
one
hand,
and
CH
Parent,
on
the
other
hand,
after
the
Spin-Off
and
to
provide
mechanisms
for
an
orderly
transition,
Liberty
and/or
Liberty
Media
(or
their
respective
subsidiaries),
on
the
one
hand,
and
CH
Parent,
on
the
other
hand,
are
entering
into
certain
agreements,
the
terms
of
which
are
summarized
below.
In
addition
to
the
agreements
described
below,
Liberty
and/or
Liberty
Media
(or
their
respective
subsidiaries)
may
enter
into,
from
time
to
time,
agreements
and
arrangements
with
CH
Parent
and
certain
of
its
related
entities,
in
connection
with,
and
in
the
ordinary
course
of,
its
business.
Reorganization Agreement
Prior
to
the
effective
time
of
the
Spin-Off,
CH
Parent
will
enter
into
a
reorganization
agreement
with
Liberty
(the
reorganization agreement )
to
provide
for,
among
other
things,
the
principal
corporate
transactions
(including
the
internal
restructuring)
required
to
effect
the
Spin-Off,
certain
conditions
to
the
Spin-Off
and
provisions
governing
the
relationship
between
CH
Parent
and
Liberty
with
respect
to
and
resulting
from
the
Spin-Off.
The
reorganization
agreement
will
provide
that,
prior
to
the
distribution
date,
Liberty
will
transfer
to
CH
Parent,
or
cause
its
other
subsidiaries
to
transfer
to
CH
Parent,
directly
or
indirectly,
the
CH
104
Table
of
Contents
Parent
Assets
and
Liabilities.
The
reorganization
agreement
will
also
provide
for
mutual
indemnification
obligations,
which
are
designed
to
make
CH
Parent
financially
responsible
for
substantially
all
of
the
liabilities
that
may
exist
relating
to
the
business
included
in
CH
Parent
at
the
time
of
the
Spin-Off
together
with
certain
other
specified
liabilities,
as
well
as
for
all
liabilities
incurred
by
CH
Parent
after
the
Spin-Off,
and
to
make
Liberty
financially
responsible
for
all
potential
liabilities
of
CH
Parent
which
are
not
related
to
CH
Parent's
business,
including,
for
example,
any
liabilities
arising
as
a
result
of
CH
Parent
having
been
a
subsidiary
of
Liberty,
together
with
certain
other
specified
liabilities.
These
indemnification
obligations
exclude
any
matters
relating
to
taxes.
For
a
description
of
the
allocation
of
tax-related
obligations,
please
see
"—Tax
Sharing
Agreement"
below.
In
addition,
the
reorganization
agreement
will
provide
for
each
of
CH
Parent
and
Liberty
to
preserve
the
confidentiality
of
all
confidential
or
proprietary
information
of
the
other
party
for
five
years
following
the
Spin-Off,
subject
to
customary
exceptions,
including
disclosures
required
by
law,
court
order
or
government
regulation.
The
reorganization
agreement
may
be
terminated
and
the
Spin-Off
may
be
abandoned,
at
any
time
prior
to
the
distribution
date,
by
and
in
the
sole
discretion
of
the
Liberty
board
of
directors.
In
such
event,
Liberty
will
have
no
liability
to
any
person
under
the
reorganization
agreement
or
any
obligation
to
effect
the
SpinOff.
For
additional
information,
please
see
the
full
text
of
the
reorganization
agreements,
a
form
of
which
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
Tax Sharing Agreement
Prior
to
the
effective
time
of
the
Spin-Off,
CH
Parent
will
enter
into
a
tax
sharing
agreement
with
Liberty
that
governs
Liberty's
and
CH
Parent's
respective
rights,
responsibilities
and
obligations
with
respect
to
taxes
and
tax
benefits,
the
filing
of
tax
returns,
the
control
of
audits
and
other
tax
matters.
References
in
this
summary
(i)
to
the
terms
"tax"
or
"taxes"
mean
U.S.
federal,
state,
local
and
foreign
taxes
as
well
as
any
interest,
penalties,
additions
to
tax
or
additional
amounts
in
respect
of
such
taxes,
(ii)
to
the
term
"Tax-related
losses"
refer
to
certain
losses
arising
from
the
failure
of
the
Spin-Off
and
related
restructuring
transactions
to
be
tax-free
(with
certain
limited
exceptions),
and
(iii)
to
the
term
"compensatory
equity
interests"
refer
to
options,
stock
appreciation
rights,
restricted
stock,
stock
units
or
other
rights
with
respect
to
Liberty
stock
or
CH
Parent
stock
that
are
granted
on
or
prior
to
the
Spin-Off
date
by
Liberty,
CH
Parent
or
any
of
their
respective
subsidiaries
in
connection
with
employee,
independent
contractor
or
director
compensation
or
other
employee
benefits.
In
addition,
references
to
the
"CH
Parent
group"
mean,
with
respect
to
any
tax
year
(or
portion
thereof)
ending
at
or
before
the
effective
time
of
the
Spin-Off,
CH
Parent
and
each
of
its
subsidiaries
at
the
effective
time
of
the
Spin-Off,
and
with
respect
to
any
tax
year
(or
portion
thereof)
beginning
after
the
effective
time
of
the
Spin-Off,
CH
Parent
and
its
subsidiaries
during
such
tax
year
(or
portion
thereof);
and
references
to
the
"Liberty
group"
mean,
with
respect
to
any
tax
year
(or
portion
thereof),
Liberty
and
its
subsidiaries,
other
than
any
person
that
is
a
member
of
the
CH
Parent
group,
during
such
tax
year
(or
portion
thereof).
CH
Parent
and
certain
of
its
eligible
subsidiaries
(at
the
time
of
the
Spin-Off)
currently
join
with
Liberty
in
the
filing
of
a
consolidated
return
for
U.S.
federal
income
tax
purposes
and
also
join
with
Liberty
in
the
filing
of
certain
consolidated,
combined,
and
unitary
returns
for
state,
local,
and
foreign
tax
purposes.
However,
generally
for
tax
periods
beginning
after
the
Spin-Off,
CH
Parent
and
the
members
of
the
CH
Parent
group
will
not
join
with
Liberty
in
the
filing
of
federal,
state,
local
or
foreign
consolidated,
combined
or
unitary
tax
returns.
105
Table
of
Contents
Under
the
tax
sharing
agreement,
except
as
described
below,
(i)
Liberty
will
be
allocated
all
taxes
attributable
to
the
members
of
the
Liberty
group,
and
all
taxes
attributable
to
the
members
of
the
CH
Parent
group
for
a
pre-Spin-Off
period,
that
are
reported
on
any
consolidated,
combined
or
unitary
tax
return
that
includes
one
or
more
members
of
the
Liberty
group
and
one
or
more
members
of
the
CH
Parent
group,
and
(ii)
each
of
Liberty
and
CH
Parent
will
be
allocated
all
taxes
attributable
to
the
members
of
its
respective
group
that
are
reported
on
any
tax
return
(including
any
consolidated,
combined
or
unitary
tax
return)
that
includes
only
the
members
of
its
respective
group.
Special
rules
apply,
however,
as
follows:
•
Liberty
will
be
allocated
any
taxes
and
Tax-related
losses
that
result
from
the
Spin-Off
and
related
restructuring
transactions,
except
that
CH
Parent
will
be
allocated
any
such
taxes
or
Tax-related
losses
that
(i)
result
primarily
from,
individually
or
in
the
aggregate,
a
breach
by
CH
Parent
of
any
of
its
covenants
relating
to
the
Spin-Off
or
related
restructuring
transactions
as
described
below,
or
(ii)
result
from
Section
355(e)
of
the
Code
applying
to
the
Spin-Off
as
a
result
of
the
Spin-Off
being
part
of
a
plan
(or
series
of
related
transactions)
pursuant
to
which
one
or
more
persons
acquire
a
50percent
or
greater
interest
in
the
stock
of
CH
Parent
(or
any
predecessor
or
successor
corporation);
and
•
Liberty
and
CH
Parent
will
each
be
allocated
50
percent
of
any
transfer
taxes
arising
from
the
Spin-Off
and
related
restructuring
transactions.
Liberty
will
be
responsible
for
preparing
and
filing
all
tax
returns
which
include
one
or
more
members
of
the
Liberty
group
and
one
or
more
members
of
the
CH
Parent
group.
In
addition
to
the
foregoing,
each
of
Liberty
and
CH
Parent
will
be
responsible
for
preparing
and
filing
any
tax
returns
that
include
only
members
of
its
respective
group.
On
any
tax
return
that
CH
Parent
is
responsible
for
filing,
CH
Parent
and
the
members
of
the
CH
Parent
group
will
be
required
to
allocate
tax
items
between
any
tax
returns
for
which
CH
Parent
is
responsible
and
any
related
tax
return
for
which
Liberty
is
responsible
that
are
filed
with
respect
to
the
same
tax
year
in
a
manner
that
is
consistent
with
the
reporting
of
such
tax
items
on
the
tax
return
prepared
by
Liberty.
All
tax
returns
will
be
required
to
be
filed
by
the
parties
in
a
manner
consistent
with
the
tax
opinion
obtained
in
connection
with
the
Spin-Off.
Further,
under
the
tax
sharing
agreement,
amended
tax
returns
with
respect
to
the
CH
Parent
group
may
only
be
filed
by
the
party
responsible
for
filing
the
original
tax
return.
The
consent
of
CH
Parent
will
be
required
with
respect
to
the
filing
of
any
amended
tax
return
by
Liberty
that
affects
only
one
or
more
members
of
the
CH
Parent
group
following
the
Spin-Off
and
is
likely
to
increase
the
taxes
or
indemnity
obligations
of
CH
Parent
in
any
taxable
period
beginning
after
the
Spin-Off
by
more
than
a
de minimis amount,
and
the
consent
of
Liberty
will
be
required
with
respect
to
the
filing
of
any
amended
tax
return
by
CH
Parent
that
is
likely
to
increase
the
taxes
or
indemnity
obligations
of
Liberty
by
more
than
a
de minimis amount
(unless
CH
Parent
otherwise
agrees
to
pay
such
incremental
taxes
or
obligations).
To
the
extent
permitted
by
applicable
law,
income
tax
deductions
with
respect
to
the
issuance,
exercise,
vesting
or
settlement
after
the
date
of
the
Spin-Off
of
any
compensatory
equity
interests
will
be
required
to
be
claimed:
(i)
in
the
case
of
any
active
officer
or
employee,
solely
by
the
group
that
employs
such
person
at
the
time
of
such
issuance,
exercise,
vesting
or
settlement
(as
applicable),
(ii)
in
the
case
of
any
former
officer
or
employee,
solely
by
the
group
that
was
the
last
to
employ
such
person,
and
(iii)
in
the
case
of
a
director
or
former
director
(who
is
not
an
officer
or
employee
or
former
officer
or
employee),
solely
by
the
Liberty
group
if
such
person
was,
at
any
time
before
or
after
the
Spin-Off,
a
director
of
any
member
of
the
Liberty
group,
and
in
any
other
case,
solely
by
the
CH
Parent
group.
For
purposes
of
the
foregoing,
an
officer
or
employee
of
Liberty
or
a
member
of
its
group
during
any
tax
year
(or
portion
thereof)
shall
exclusively
be
considered
to
be
employed
by
Liberty
or
the
applicable
member
of
its
group
during
such
tax
year
(or
portion
thereof).
The
party
whose
group
is
allocated
the
foregoing
income
tax
deductions
(the
employing
party)
will
be
required
to
satisfy
all
applicable
tax
reporting
obligations
and
satisfy
all
liabilities
for
taxes
imposed
in
connection
106
Table
of
Contents
with
such
compensatory
equity
interests;
however,
if
the
corporation
that
is
the
issuer
or
the
obligor
under
the
applicable
compensatory
equity
interest
is
a
member
of
a
different
group
than
the
employing
party,
such
issuing
corporation
will
be
required
to
remit
to
the
employing
party
the
amount
required
to
be
withheld
in
respect
of
any
withholding
taxes
upon
settlement
of
such
compensatory
equity
interest.
Generally,
each
of
Liberty
and
CH
Parent
will
be
entitled
to
any
refunds,
credits,
or
offsets
relating
to
taxes
allocated
to
and
paid
by
its
respective
group
under
the
tax
sharing
agreement.
If
CH
Parent
requests
in
writing
that
Liberty
obtain
a
refund,
credit
or
offset
of
taxes
with
respect
to
the
carryback
of
any
tax
attribute
of
CH
Parent
or
the
members
of
its
group
to
a
pre-Spin-Off
tax
period,
Liberty
will
be
required
to
take
reasonable
measures
to
obtain
a
refund,
credit
or
offset
of
taxes
with
respect
to
such
carryback;
however,
CH
Parent
will
only
be
entitled
to
such
refund,
credit
or
offset
of
taxes
attributable
on
a
last
dollar
basis
to
such
carryback,
and
such
amount
will
be
net
of
any
out-of-pocket
costs,
expenses,
or
increase
in
taxes
incurred
by
Liberty
with
respect
to
the
receipt
or
accrual
thereof.
Each
of
Liberty
and
CH
Parent
will
generally
have
the
authority
to
respond
to
and
control
all
tax
proceedings,
including
tax
audits,
involving
any
taxes
reported
on
tax
returns
for
which
it
is
responsible
for
preparing
and
filing,
and
the
other
company
will
have
the
right
to
participate,
at
its
own
cost
and
expense,
in
such
tax
proceedings
to
the
extent
such
proceedings
could
result
in
a
tax
liability
for
which
such
other
company
may
be
liable
under
the
tax
sharing
agreement.
Notwithstanding
the
foregoing,
Liberty
and
CH
Parent
will
have
the
authority
to
jointly
control
all
proceedings,
including
tax
proceedings,
involving
any
taxes
or
Tax-related
losses
arising
from
the
Spin-Off
or
related
restructuring
transactions.
The
tax
sharing
agreement
will
further
provide
for
the
exchange
of
information
for
tax
matters
(and
confidentiality
protections
related
to
such
exchanged
information),
the
retention
of
records
that
may
affect
the
tax
liabilities
of
the
parties
to
the
agreement,
and
cooperation
between
Liberty
and
CH
Parent
with
respect
to
tax
matters.
To
the
extent
permitted
by
applicable
tax
law,
CH
Parent
and
Liberty
will
treat
any
payments
made
under
the
tax
sharing
agreement
as
a
capital
contribution
or
distribution
(as
applicable)
immediately
prior
to
the
Spin-Off.
However,
if
any
indemnity
payment
causes,
directly
or
indirectly,
an
increase
in
the
taxable
income
of
the
recipient
(or
its
group),
the
payor's
payment
obligation
must
be
grossed
up
to
take
into
account
the
taxes
owed
by
the
recipient
(or
its
group).
Payments
that
are
not
made
within
the
time
period
prescribed
by
the
tax
sharing
agreement
will
bear
interest
until
they
are
made.
Finally,
each
of
Liberty
and
CH
Parent
will
be
restricted
by
certain
covenants
related
to
the
Spin-Off
and
related
restructuring
transactions.
These
restrictive
covenants
will
require
that
neither
Liberty,
CH
Parent
nor
any
member
of
their
respective
groups
take,
or
fail
to
take,
any
action
following
the
Spin-Off
if
such
action,
or
failure
to
act:
•
would
be
inconsistent
with
or
prohibit
certain
of
the
internal
restructuring
transactions
related
to
the
Spin-Off
from
qualifying
for
tax-free
treatment
for
U.S.
federal
income
tax
purposes
to
Liberty
and
its
subsidiaries;
•
would
be
inconsistent
with
or
prohibit
the
Spin-Off
from
qualifying
as
a
tax-free
transaction
under
Section
355
of
the
Code
to
Liberty,
its
subsidiaries
and
the
holders
of
Liberty
Ventures
common
stock
(except
with
respect
to
the
receipt
of
cash
in
lieu
of
fractional
shares
of
our
common
stock);
or
•
would
be
inconsistent
with,
or
otherwise
cause
any
person
to
be
in
breach
of,
any
representation,
covenant,
or
material
statement
made
in
connection
with
the
tax
opinion
delivered
to
Liberty
relating
to
the
qualification
of
the
Spin-Off
as
a
transaction
described
under
Section
355
of
the
Code.
Further,
each
party
will
be
restricted
from
taking
any
position
for
tax
purposes
that
is
inconsistent
with
the
tax
opinion
obtained
in
connection
with
the
SpinOff.
107
Table
of
Contents
The
parties
must
indemnify
each
other
for
taxes
and
losses
allocated
to
them
under
the
tax
sharing
agreement
and
for
taxes
and
losses
arising
from
a
breach
by
them
of
their
respective
covenants
and
obligations
under
the
tax
sharing
agreement.
Notwithstanding
the
tax
sharing
agreement,
under
U.S.
Treasury
Regulations,
each
member
of
a
consolidated
group
is
severally
liable
for
the
U.S.
federal
income
tax
liability
of
each
other
member
of
the
consolidated
group.
Accordingly,
with
respect
to
periods
prior
to
the
Spin-Off
in
which
CH
Parent
(or
its
subsidiaries)
have
been
included
in
Liberty's
consolidated
group
or
another
company's
consolidated
group,
CH
Parent
(or
its
subsidiaries)
could
be
liable
to
the
U.S.
government
for
any
U.S.
federal
income
tax
liability
incurred,
but
not
discharged,
by
any
other
member
of
such
consolidated
group.
However,
if
any
such
liability
were
imposed,
CH
Parent
would
generally
be
entitled
to
be
indemnified
by
Liberty
for
tax
liabilities
allocated
to
Liberty
under
the
tax
sharing
agreement.
For
additional
information,
please
see
the
full
text
of
the
tax
sharing
agreement,
a
form
of
which
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S1
of
which
this
prospectus
forms
a
part.
Services Agreement
Liberty
is
currently
a
party
to
a
services
agreement
with
Liberty
Media
under
which
Liberty
Media
provides
Liberty
with
certain
specified
services.
Similarly,
in
connection
with
the
Spin-Off,
CH
Parent
will
enter
into
a
services
agreement
with
Liberty
Media
(the
services agreement ),
pursuant
to
which,
following
the
Spin-Off,
Liberty
Media
will
provide
CH
Parent
with
specified
services,
including:
•
other
services
typically
performed
by
Liberty
Media's
legal,
investor
relations,
tax,
accounting,
and
internal
audit
departments;
and
•
such
other
services
as
Liberty
Media
may
obtain
from
its
officers,
employees
and
consultants
in
the
management
of
its
own
operations
that
CH
Parent
may
from
time
to
time
request
or
require.
CH
Parent
will
pay
Liberty
Media
an
agreed-upon
services
fee
under
the
services
agreement.
CH
Parent
will
also
reimburse
Liberty
Media
for
direct
out-ofpocket
costs
incurred
by
Liberty
Media
for
third-party
services
provided
to
CH
Parent.
Liberty
Media
and
CH
Parent
will
evaluate
all
charges
for
reasonableness
quarterly
and
make
adjustments
to
these
charges
as
the
parties
mutually
agree
upon.
The
fees
payable
to
Liberty
Media
for
the
first
year
of
the
services
agreement
are
not
expected
to
exceed
approximately
$300,000.
The
services
agreement
will
continue
in
effect
until
the
close
of
business
on
the
third
anniversary
of
the
Spin-Off,
unless
earlier
terminated
(1)
by
CH
Parent
at
any
time
on
at
least
30
days'
prior
written
notice,
(2)
by
Liberty
Media
at
any
time
on
at
least
six
months'
prior
written
notice,
(3)
by
Liberty
Media
upon
written
notice
to
CH
Parent
following
a
change
in
control
or
certain
bankruptcy
or
insolvency-related
events
affecting
CH
Parent
or
(4)
by
CH
Parent,
upon
written
notice
to
Liberty
Media,
following
certain
changes
in
control
of
Liberty
Media
or
Liberty
Media
being
the
subject
of
certain
bankruptcy
or
insolvency-related
events.
For
additional
information,
please
see
the
full
text
of
the
services
agreement,
a
form
of
which
is
filed
as
an
exhibit
to
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
108
Table
of
Contents
DESCRIPTION OF OUR CAPITAL STOCK
The
following
information
reflects
our
certificate
of
incorporation
(our
charter )
and
bylaws
as
we
expect
them
to
be
in
effect
at
the
time
of
the
Spin-Off.
Authorized Capital Stock
Our
authorized
capital
stock
will
consist
of
one
hundred
seventy
four
million
five
hundred
thousand
(174,500,000)
shares,
of
which
one
hundred
twenty
four
million
five
hundred
thousand
(124,500,000)
shares
will
be
designated
common
stock,
par
value
$0.01
per
share,
and
fifty
million
(50,000,000)
shares
will
be
designated
preferred
stock,
par
value
$0.01
per
share.
Our
common
stock
will
be
divided
into
three
series.
We
will
have
forty
million
(40,000,000)
shares
of
Series
A
common
stock,
one
million
five
hundred
thousand
(1,500,000)
shares
of
Series
B
common
stock
and
eighty
three
million
(83,000,000)
shares
of
Series
C
common
stock
authorized.
Immediately
following
the
Spin-Off,
we
expect
to
have
approximately
13,506,200
shares
of
our
Series
A
common
stock,
approximately
710,400
shares
of
our
Series
B
common
stock
and
approximately
28,542,500
shares
of
our
Series
C
common
stock
outstanding,
based
upon
(i)
the
number
of
shares
of
LVNTA
and
LVNTB
outstanding
on
April
30,
2016
and
(ii)
the
number
of
shares
of
our
Series
C
common
stock
issued
to
CommerceHub
minority
holders
in
connection
with
the
internal
restructuring.
Our Common Stock
The
holders
of
our
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock
have
equal
rights,
powers
and
privileges,
except
as
otherwise
described
below.
Voting Rights
The
holders
of
our
Series
A
common
stock
will
be
entitled
to
one
vote
for
each
share
held,
and
the
holders
of
our
Series
B
common
stock
will
be
entitled
to
ten
votes
for
each
share
held,
on
all
matters
voted
on
by
our
stockholders,
including
elections
of
directors.
The
holders
of
our
Series
C
common
stock
will
not
be
entitled
to
any
voting
rights,
except
as
required
by
Delaware
law.
When
the
vote
or
consent
of
holders
of
our
Series
C
common
stock
is
required
by
Delaware
law,
the
holders
of
our
Series
C
common
stock
will
be
entitled
to
1/100th
of
a
vote
for
each
share
held.
Our
charter
does
not
provide
for
cumulative
voting
in
the
election
of
directors.
Dividends
Subject
to
any
preferential
rights
of
any
outstanding
series
of
our
preferred
stock
created
by
our
board
from
time
to
time,
the
holders
of
our
common
stock
will
be
entitled
to
such
dividends
as
may
be
declared
from
time
to
time
by
our
board
of
directors
from
funds
available
therefor.
Except
as
otherwise
described
under
"—
Distributions,"
whenever
a
dividend
is
paid
to
the
holders
of
one
of
our
series
of
common
stock,
we
will
also
pay
to
the
holders
of
the
other
series
of
our
common
stock
an
equal
per
share
dividend.
For
a
more
complete
discussion
of
our
dividend
policy,
please
see
"—Dividend
Policy."
Conversion
Each
share
of
our
Series
B
common
stock
is
convertible,
at
the
option
of
the
holder,
into
one
share
of
our
Series
A
common
stock.
Our
Series
A
common
stock
and
Series
C
common
stock
are
not
convertible
into
shares
of
any
other
series
of
our
common
stock.
109
Table
of
Contents
Distributions
Subject
to
the
exception
provided
below,
distributions
made
in
shares
of
our
Series
A
common
stock,
our
Series
B
common
stock,
our
Series
C
common
stock
or
any
other
security
with
respect
to
our
Series
A
common
stock,
Series
B
common
stock
or
our
Series
C
common
stock
may
be
declared
and
paid
only
as
follows:
•
a
share
distribution
(1)
consisting
of
shares
of
our
Series
C
common
stock
(or
securities
convertible
therefor)
to
holders
of
our
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock,
on
an
equal
per
share
basis;
or
(2)
consisting
of
(x)
shares
of
our
Series
A
common
stock
(or
securities
convertible
into
Series
A
common
stock
other
than,
for
the
avoidance
of
doubt,
shares
of
our
Series
B
common
stock)
to
holders
of
our
Series
A
common
stock,
on
an
equal
per
share
basis,
(y)
shares
of
our
Series
B
common
stock
(or
securities
convertible
into
Series
B
common
stock)
to
holders
of
our
Series
B
common
stock,
on
an
equal
per
share
basis,
and
(z)
shares
of
our
Series
C
common
stock
(or
securities
convertible
into
Series
C
common
stock)
to
holders
of
our
Series
C
common
stock,
on
an
equal
per
share
basis;
or
•
a
share
distribution
consisting
of
any
class
or
series
of
securities
of
our
company
or
any
other
person,
other
than
our
Series
A
common
stock,
Series
B
common
stock
or
Series
C
common
stock
(or
securities
convertible
therefor)
on
the
basis
of
a
distribution
of
(1)
identical
securities,
on
an
equal
per
share
basis,
to
holders
of
our
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock;
or
(2)
separate
classes
or
series
of
securities,
on
an
equal
per
share
basis,
to
holders
of
each
such
shares
of
our
common
stock;
or
(3)
a
separate
class
or
series
of
securities
to
the
holders
of
one
or
more
series
of
our
common
stock
and,
on
an
equal
per
share
basis,
a
different
class
or
series
of
securities
to
the
holders
of
all
other
series
of
our
common
stock,
provided
that,
in
the
case
of
(2)
or
(3)
above,
the
securities
so
distributed
do
not
differ
in
any
respect
other
than
their
relative
voting
rights
and
related
differences
in
designation,
conversion,
redemption
and
share
distribution
provisions,
with
the
holders
of
shares
of
Series
B
common
stock
receiving
securities
of
the
class
or
series
having
the
highest
relative
voting
rights
and
the
holders
of
shares
of
each
other
series
of
our
common
stock
receiving
securities
of
the
class
or
series
having
lesser
relative
voting
rights,
and
provided
further
that,
if
different
classes
or
series
of
securities
are
being
distributed
to
holders
of
our
Series
A
common
stock
and
Series
C
common
stock,
then
such
securities
shall
be
distributed
either
as
determined
by
our
board
of
directors
or
such
that
the
relative
voting
rights
of
the
securities
of
the
class
or
series
of
securities
to
be
received
by
the
holders
of
our
Series
A
common
stock
and
Series
C
common
stock
correspond,
to
the
extent
practicable,
to
the
relative
voting
rights
of
each
such
series
of
our
common
stock.
Reclassification
We
may
not
reclassify,
subdivide
or
combine
any
series
of
our
common
stock
without
reclassifying,
subdividing
or
combining
the
other
series
of
our
common
stock,
on
an
equal
per
share
basis.
Liquidation and Dissolution
In
the
event
of
our
liquidation,
dissolution
or
winding
up,
after
payment
or
provision
for
payment
of
our
debts
and
liabilities
and
subject
to
the
prior
payment
in
full
of
any
preferential
amounts
to
which
our
preferred
stock
holders
may
be
entitled,
the
holders
of
our
Series
A
common
stock,
Series
B
common
stock
and
Series
C
common
stock
will
share
equally,
on
a
share
for
share
basis,
in
our
assets
remaining
for
distribution
to
the
holders
of
our
common
stock.
110
Table
of
Contents
Our Preferred Stock
Our
charter
authorizes
our
board
of
directors
to
establish
one
or
more
series
of
our
preferred
stock
and
to
determine,
with
respect
to
any
series
of
our
preferred
stock,
the
terms
and
rights
of
the
series,
including:
•
the
designation
of
the
series;
•
the
number
of
authorized
shares
of
the
series,
which
number
our
board
may
subsequently
increase
or
decrease
but
not
below
the
number
of
such
shares
of
such
series
preferred
stock
then
outstanding;
•
the
dividend
rate
or
amounts,
if
any,
payable
on
the
shares
and,
in
the
case
of
cumulative
dividends,
the
date
or
dates
from
which
dividends
on
all
shares
of
the
series
will
be
cumulative
and
the
relative
preferences
or
rights
of
priority
or
participation
with
respect
to
such
dividends;
•
the
rights
of
the
series
in
the
event
of
our
voluntary
or
involuntary
liquidation,
dissolution
or
winding
up
and
the
relative
preferences
or
rights
of
priority
of
payment;
•
the
rights,
if
any,
of
holders
of
the
series
to
convert
into
or
exchange
for
other
classes
or
series
of
stock
or
indebtedness
and
the
terms
and
conditions
of
any
such
conversion
or
exchange,
including
provision
for
adjustments
within
the
discretion
of
our
board;
•
the
voting
rights,
if
any,
of
the
holders
of
the
series;
•
the
terms
and
conditions,
if
any,
for
us
to
purchase
or
redeem
the
shares
of
the
series;
and
•
any
other
relative
rights,
preferences
and
limitations
of
the
series.
We
believe
that
the
ability
of
our
board
of
directors
to
issue
one
or
more
series
of
our
preferred
stock
will
provide
us
with
flexibility
in
structuring
possible
future
financings
and
acquisitions,
and
in
meeting
other
corporate
needs
that
might
arise.
The
authorized
shares
of
our
preferred
stock,
as
well
as
shares
of
our
common
stock,
will
be
available
for
issuance
without
further
action
by
our
stockholders,
unless
such
action
is
required
by
applicable
law
or
the
rules
of
any
stock
exchange
or
automatic
quotation
system
on
which
our
securities
may
be
listed
or
traded.
Although
we
have
no
intention
at
the
present
time
of
doing
so,
our
company
could
issue
a
series
of
preferred
stock
that
could,
depending
on
the
terms
of
such
series,
impede
the
completion
of
a
merger,
tender
offer
or
other
takeover
attempt.
Our
board
of
directors
will
make
any
determination
to
issue
such
shares
based
upon
its
judgment
as
to
the
best
interests
of
our
stockholders.
Our
board
of
directors,
in
so
acting,
could
issue
preferred
stock
having
terms
that
could
discourage
an
acquisition
attempt
through
which
an
acquirer
may
be
able
to
change
the
composition
of
our
board
of
directors,
including
a
tender
offer
or
other
transaction
that
some,
or
a
majority,
of
our
stockholders
might
believe
to
be
in
their
best
interests
or
in
which
stockholders
might
receive
a
premium
for
their
stock
over
the
thencurrent
market
price
of
the
stock.
Dividend Policy
We
presently
intend
to
retain
future
earnings,
if
any,
to
finance
the
expansion
of
our
business.
Therefore,
following
the
Spin-Off,
we
do
not
expect
to
pay
any
cash
dividends
in
the
foreseeable
future.
All
decisions
regarding
the
payment
of
dividends
by
our
company
will
be
made
by
our
board
of
directors,
from
time
to
time,
in
accordance
with
applicable
law
after
taking
into
account
various
factors,
including
our
financial
condition,
operating
results,
current
and
anticipated
cash
needs,
plans
for
expansion
and
possible
loan
covenants
which
may
restrict
or
prohibit
our
payment
of
dividends.
111
Table
of
Contents
Other Provisions of our Charter and Bylaws
Board of Directors
Our
charter
provides
that,
subject
to
any
rights
of
the
holders
of
any
series
of
preferred
stock
to
elect
additional
directors,
the
number
of
our
directors
will
not
be
less
than
three
and
the
exact
number
will
be
fixed
from
time
to
time
by
a
resolution
of
our
board.
The
members
of
our
board,
other
than
those
who
may
be
elected
by
holders
of
any
preferred
stock,
will
be
divided
into
three
classes.
Each
class
consists,
as
nearly
as
possible,
of
a
number
of
directors
equal
to
one-third
of
the
then
authorized
number
of
board
members.
The
term
of
office
of
our
Class
I
directors
expires
at
the
annual
meeting
of
our
stockholders
in
2017.
The
term
of
office
of
our
Class
II
directors
expires
at
the
annual
meeting
of
our
stockholders
in
2018.
The
term
of
office
of
our
Class
III
directors
expires
at
the
annual
meeting
of
our
stockholders
in
2019.
At
each
annual
meeting
of
our
stockholders,
the
successors
of
that
class
of
directors
whose
term
expires
at
that
meeting
will
be
elected
to
hold
office
for
a
term
expiring
at
the
annual
meeting
of
our
stockholders
held
in
the
third
year
following
the
year
of
their
election.
The
directors
of
each
class
will
hold
office
until
their
respective
successors
are
elected
and
qualified
or
until
such
director's
earlier
death,
resignation
or
removal.
Our
charter
provides
that,
subject
to
the
rights
of
the
holders
of
any
series
of
our
preferred
stock,
directors
may
be
removed
from
office
only
for
cause
upon
the
affirmative
vote
of
the
holders
of
at
least
a
majority
of
the
aggregate
voting
power
of
our
outstanding
capital
stock
entitled
to
vote
on
such
matter
voting
together
as
a
single
class.
Our
charter
provides
that,
subject
to
the
rights
of
the
holders
of
any
series
of
our
preferred
stock,
vacancies
on
our
board
resulting
from
death,
resignation,
removal,
disqualification
or
other
cause,
and
newly
created
directorships
resulting
from
any
increase
in
the
number
of
directors
on
our
board,
will
be
filled
only
by
the
affirmative
vote
of
a
majority
of
the
remaining
directors
then
in
office
(even
though
less
than
a
quorum)
or
by
the
sole
remaining
director.
Any
director
so
elected
shall
hold
office
for
the
remainder
of
the
full
term
of
the
class
of
directors
in
which
the
vacancy
occurred
or
to
which
the
new
directorship
is
assigned,
and
until
that
director's
successor
will
have
been
elected
and
qualified
or
until
such
director's
earlier
death,
resignation
or
removal.
No
decrease
in
the
number
of
directors
constituting
our
board
will
shorten
the
term
of
any
incumbent
director,
except
as
may
be
provided
in
any
certificate
of
designation
with
respect
to
a
series
of
our
preferred
stock
with
respect
to
any
additional
director
elected
by
the
holders
of
that
series
of
our
preferred
stock.
These
provisions
would
preclude
a
third
party
from
removing
incumbent
directors
and
simultaneously
gaining
control
of
our
board
by
filling
the
vacancies
created
by
removal
with
its
own
nominees.
Under
the
classified
board
provisions
described
above,
it
would
take
at
least
two
elections
of
directors
for
any
individual
or
group
to
gain
control
of
our
board.
Accordingly,
these
provisions
could
discourage
a
third
party
from
initiating
a
proxy
contest,
making
a
tender
offer
or
otherwise
attempting
to
gain
control
of
us.
Limitation on Liability and Indemnification
To
the
fullest
extent
permitted
by
Delaware
law,
our
directors
are
not
liable
to
our
company
or
any
of
its
stockholders
for
monetary
damages
for
breaches
of
fiduciary
duties
as
a
director.
In
addition,
our
company
indemnifies,
to
the
fullest
extent
permitted
by
applicable
law,
any
person
involved
in
any
suit
or
action
by
reason
of
the
fact
that
such
person
is
a
director
or
officer
of
our
company
or,
at
our
request,
a
director,
officer,
employee
or
agent
of
another
corporation
or
entity,
against
all
liability,
loss
and
expenses
incurred
by
such
person.
We
will
pay
the
expenses
of
a
director
or
officer
in
defending
any
proceeding
in
advance
of
its
final
disposition,
provided
that
such
payment
is
made
upon
receipt
of
an
undertaking
by
the
director
or
officer
to
repay
all
amounts
advanced
if
it
should
be
ultimately
determined
that
the
director
or
officer
is
not
entitled
to
indemnification.
See
Item
14
"Indemnification
112
Table
of
Contents
of
Directors
and
Officers"
in
Part
II
of
the
Registration
Statement
on
Form
S-1
of
which
this
prospectus
forms
a
part.
No Stockholder Action by Written Consent; Special Meetings
Our
charter
provides
that,
except
as
provided
in
the
terms
of
any
series
of
preferred
stock,
any
action
required
to
be
taken
or
which
may
be
taken
at
any
annual
or
special
meeting
of
the
stockholders
may
not
be
taken
without
a
meeting
and
may
not
be
effected
by
any
consent
in
writing
by
such
holders.
Except
as
otherwise
required
by
law
and
subject
to
the
rights
of
the
holders
of
any
series
of
our
preferred
stock,
special
meetings
of
our
stockholders
for
any
purpose
or
purposes
may
be
called
only
by
our
Secretary
(i)
upon
the
written
request
of
the
holders
of
not
less
than
66
2
/
3
%
of
the
total
voting
power
of
the
then
outstanding
shares
of
our
Series
A
common
stock,
Series
B
common
stock
and,
if
applicable,
our
preferred
stock,
entitled
to
vote
thereon
or
(ii)
at
the
request
of
at
least
75%
of
the
members
of
our
board
of
directors
then
in
office.
Advance Notice Procedures
Our
bylaws
establish
an
advance
notice
procedure
for
stockholders
to
make
nominations
of
candidates
for
election
as
directors
or
to
bring
other
business
before
an
annual
meeting
of
our
stockholders.
All
nominations
by
stockholders
or
other
business
to
be
properly
brought
before
a
meeting
of
stockholders
will
be
made
pursuant
to
timely
notice
in
proper
written
form
to
our
company's
Secretary.
To
be
timely,
a
stockholder's
notice
will
be
given
to
our
company's
Secretary
at
our
company's
offices
as
follows:
(1)
with
respect
to
an
annual
meeting
of
our
stockholders
that
is
called
for
a
date
within
30
days
before
or
after
the
anniversary
date
of
the
immediately
preceding
annual
meeting
of
our
stockholders,
such
notice
must
be
given
no
earlier
than
the
close
of
business
on
the
90th
day
and
no
later
than
the
close
of
business
on
the
60th
day
prior
to
the
meeting
date;
(2)
with
respect
to
an
annual
meeting
of
our
stockholders
that
is
called
for
a
date
not
within
30
days
before
or
after
the
anniversary
date
of
the
immediately
preceding
annual
meeting
of
our
stockholders,
such
notice
must
be
given
no
later
than
the
close
of
business
on
the
10th
day
following
the
day
on
which
our
company
first
provides
notice
of
or
publicly
announces
the
date
of
the
current
annual
meeting,
whichever
occurs
first;
and
(3)
with
respect
to
an
election
to
be
held
at
a
special
meeting
of
our
stockholders,
such
notice
must
be
given
no
earlier
than
the
close
of
business
on
the
90th
day
prior
to
such
special
meeting
and
no
later
than
the
close
of
business
on
the
60th
day
prior
to
such
special
meeting
or
the
10th
day
following
the
day
on
which
public
announcement
is
first
made
of
the
date
of
the
special
meeting
and
of
the
proposed
nominees.
The
public
announcement
of
an
adjournment
or
postponement
of
a
meeting
of
our
stockholders
does
not
commence
a
new
time
period
(or
extend
any
time
period)
for
the
giving
of
any
such
stockholder
notice.
However,
if
the
number
of
directors
to
be
elected
to
our
board
at
any
meeting
is
increased,
and
we
do
not
make
a
public
announcement
naming
all
of
the
nominees
for
director
or
specifying
the
size
of
the
increased
board
at
least
100
days
prior
to
the
anniversary
date
of
the
immediately
preceding
annual
meeting,
a
stockholder's
notice
will
also
be
considered
timely,
but
only
with
respect
to
nominees
for
any
new
positions
created
by
such
increase,
if
it
is
delivered
to
our
company's
Secretary
at
our
offices
not
later
than
the
close
of
business
on
the
10th
day
following
the
day
on
which
we
first
made
the
relevant
public
announcement.
For
purposes
of
the
first
annual
meeting
of
stockholders
to
be
held
in
2017,
the
first
anniversary
date
will
be
deemed
to
be
August
23,
2017.
113
Table
of
Contents
Amendments
Our
charter
provides
that,
subject
to
the
rights
of
the
holders
of
any
series
of
our
preferred
stock,
the
affirmative
vote
of
the
holders
of
at
least
66
2
/
3
%
of
the
aggregate
voting
power
of
our
outstanding
capital
stock
entitled
to
vote
on
such
matter,
voting
together
as
a
single
class,
is
required
to
adopt,
amend
or
repeal
any
provision
of
our
charter
or
to
add
or
insert
any
provision
in
our
charter,
provided that
the
foregoing
enhanced
voting
requirement
will
not
apply
to
any
adoption,
amendment,
repeal,
addition
or
insertion
(1)
as
to
which
Delaware
law
does
not
require
the
consent
of
our
stockholders
or
(2)
which
has
been
approved
by
at
least
75%
of
the
members
of
our
board
then
in
office.
Our
charter
further
provides
that
the
affirmative
vote
of
the
holders
of
at
least
66
2
/
3
%
of
the
aggregate
voting
power
of
our
outstanding
capital
stock
entitled
to
vote
on
such
matter,
voting
together
as
a
single
class,
is
required
to
adopt,
amend
or
repeal
any
provision
of
our
bylaws,
provided
that
the
board
of
directors
may
adopt,
amend
or
repeal
the
bylaws
by
the
affirmative
vote
of
not
less
than
75%
of
the
members
of
our
board
then
in
office.
Supermajority Voting Provisions
In
addition
to
the
supermajority
voting
provisions
discussed
under
"—Amendments"
above,
our
charter
provides
that,
subject
to
the
rights
of
the
holders
of
any
series
of
our
preferred
stock,
the
affirmative
vote
of
the
holders
of
at
least
66
2
/
3
%
of
the
aggregate
voting
power
of
our
outstanding
capital
stock
entitled
to
vote
on
such
matter,
voting
together
as
a
single
class,
is
required
for:
•
the
merger
or
consolidation
of
our
company
with
or
into
any
other
corporation,
provided,
that
the
foregoing
voting
provision
will
not
apply
to
any
such
merger
or
consolidation
(1)
as
to
which
the
laws
of
the
State
of
Delaware,
as
then
in
effect,
do
not
require
the
consent
of
our
stockholders,
or
(2)
that
at
least
75%
of
the
members
of
our
board
of
directors
then
in
office
have
approved;
•
the
sale,
lease
or
exchange
of
all,
or
substantially
all,
of
our
assets,
provided,
that
the
foregoing
voting
provisions
will
not
apply
to
any
such
sale,
lease
or
exchange
that
at
least
75%
of
the
members
of
our
board
of
directors
then
in
office
have
approved;
or
•
our
dissolution,
provided,
that
the
foregoing
voting
provision
will
not
apply
to
such
dissolution
if
at
least
75%
of
the
members
of
our
board
of
directors
then
in
office
have
approved
such
dissolution.
Exclusive Forum
Our
bylaws
provide
that,
unless
we
consent
in
writing
to
an
alternative
forum
and
subject
to
limited
exception,
the
Court
of
Chancery
of
the
State
of
Delaware
(or,
if
the
Court
of
Chancery
does
not
have
jurisdiction,
any
state
or
federal
court
located
within
the
State
of
Delaware)
shall
be
the
sole
and
exclusive
forum
for
substantially
all
disputes
between
us
(including
our
directors,
officers,
employees,
and
agents)
and
our
stockholders,
including,
among
others,
any
action
asserting
claims
for
breach
of
fiduciary
duty,
claims
arising
pursuant
to
the
DGCL,
and
claims
governed
by
the
internal
affairs
doctrine.
Section 203 of the Delaware General Corporation Law
Section
203
of
the
DGCL
prohibits
certain
transactions
between
a
Delaware
corporation
and
an
"interested
stockholder."
An
"interested
stockholder"
for
this
purpose
generally
is
a
stockholder
who
is
directly
or
indirectly
a
beneficial
owner
of
15%
or
more
of
the
outstanding
voting
power
of
a
Delaware
corporation.
This
provision
prohibits
certain
business
combinations
between
an
interested
stockholder
including
certain
related
persons
and
a
corporation
for
a
period
of
three
years
after
the
date
on
which
the
stockholder
became
an
interested
stockholder,
unless:
(1)
prior
to
the
time
that
a
stockholder
114
Table
of
Contents
became
an
interested
stockholder,
either
the
business
combination
or
the
transaction
which
resulted
in
the
stockholder
becoming
an
interested
stockholder
is
approved
by
the
corporation's
board
of
directors,
(2)
the
interested
stockholder
acquired
at
least
85%
of
the
voting
power
of
the
corporation
in
the
transaction
in
which
the
stockholder
became
an
interested
stockholder,
or
(3)
the
business
combination
is
approved
by
a
majority
of
the
board
of
directors
and
the
affirmative
vote
of
the
holders
of
66
2
/
3
%
of
the
outstanding
voting
power
of
the
shares
not
owned
by
the
interested
stockholder
at
or
subsequent
to
the
time
that
the
stockholder
became
an
interested
stockholder.
CH
Parent
is
subject
to
Section
203.
Transfer Agent and Registrar
Computershare
Trust
Company,
N.A.
will
be
the
transfer
agent
and
registrar
for
our
common
stock:
Computershare
Trust
Company,
N.A.
250
Royall
Street
Canton,
MA
02121
115
Table
of
Contents
LEGAL MATTERS
Legal
matters
relating
to
the
validity
of
the
securities
to
be
issued
in
the
Spin-Off
will
be
passed
upon
by
Baker
Botts
L.L.P.
Legal
matters
relating
to
the
material
U.S.
federal
income
tax
consequences
of
the
Spin-Off
will
be
passed
upon
by
Baker
Botts
L.L.P.
116
Table
of
Contents
EXPERTS
The
consolidated
financial
statements
of
CommerceHub,
Inc.
and
subsidiaries
as
of
December
31,
2015
and
2014,
and
for
the
years
then
ended,
have
been
included
herein
and
in
the
registration
statement
in
reliance
upon
the
report
of
KPMG
LLP,
independent
registered
public
accounting
firm,
appearing
elsewhere
herein,
and
upon
the
authority
of
said
firm
as
experts
in
accounting
and
auditing.
117
Table
of
Contents
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
expect
that
the
audit
committee
of
Liberty's
board
of
directors
will
select
KPMG
LLP
as
our
independent
registered
public
accounting
firm
for
the
year
ending
December
31,
2016.
118
Table
of
Contents
WHERE YOU CAN FIND MORE INFORMATION
We
have
filed
a
Registration
Statement
on
Form
S-1
with
the
SEC
under
the
Securities
Act
with
respect
to
the
shares
of
our
common
stock
being
distributed
to
holders
of
Liberty
Ventures
common
stock
in
the
Spin-Off
as
contemplated
by
this
prospectus.
This
prospectus
is
a
part
of,
and
does
not
contain
all
of
the
information
set
forth
in,
the
registration
statement
and
the
exhibits
and
schedules
to
the
registration
statement.
For
further
information
with
respect
to
our
company
and
our
common
stock,
please
refer
to
the
registration
statement,
including
its
exhibits
and
schedules.
Statements
made
in
this
prospectus
relating
to
any
contract
or
other
document
are
not
necessarily
complete,
and
you
should
refer
to
the
exhibits
attached
to
the
registration
statement
for
copies
of
the
actual
contract
or
document.
Upon
the
effectiveness
of
the
Registration
Statement
on
Form
S-1,
of
which
this
prospectus
forms
a
part,
we
will
become
subject
to
the
information
and
reporting
requirements
of
the
Exchange
Act
and,
in
accordance
with
the
Exchange
Act,
we
will
file
periodic
reports,
proxy
statements
and
other
information
with
the
SEC.
You
may
read
and
copy
any
document
that
CH
Parent
files
with
the
SEC,
including
the
Registration
Statement
on
Form
S-1,
including
its
exhibits
and
schedules,
at
the
Public
Reference
Room
of
the
SEC
at
100
F
Street,
N.E.,
Washington,
D.C.
20549.
You
may
obtain
information
on
the
operation
of
the
Public
Reference
Room
by
calling
the
SEC
at
(800)
SEC-0330.
You
may
also
inspect
such
filings
on
the
Internet
website
maintained
by
the
SEC
at
www.sec.gov.
Information
contained
on
any
website
referenced
in
this
prospectus
is
not
incorporated
by
reference
in
this
prospectus.
You
may
request
a
copy
of
any
of
our
filings
with
the
SEC
at
no
cost,
by
writing
or
telephoning
the
office
of:
Investor
Relations
Liberty
Interactive
Corporation
12300
Liberty
Blvd.
Englewood,
Colorado
80112
Telephone:
(720)
875-5408
We
intend
to
furnish
holders
of
our
common
stock
with
annual
reports
containing
consolidated
financial
statements
prepared
in
accordance
with
U.S.
generally
accepted
accounting
principles
and
audited
and
reported
on,
with
an
opinion
expressed,
by
an
independent
public
accounting
firm.
For
additional
information
regarding
Liberty
and
its
subsidiaries,
you
may
read
and
copy
Liberty's
periodic
reports,
proxy
statements
and
other
information
publicly
filed
by
Liberty
at
the
SEC's
Public
Reference
Room
or
on
the
SEC's
website,
and
you
may
contact
Liberty
at
the
contact
information
set
forth
therein.
You
may
request
a
copy
of
any
of
Liberty's
filings
with
the
SEC
at
no
cost,
by
writing
or
telephoning
the
office
of:
Investor
Relations
Liberty
Interactive
Corporation
12300
Liberty
Blvd.
Englewood,
Colorado
80112
Telephone:
(720)
875-5408
Before
the
Spin-Off,
if
you
have
questions
relating
to
the
Spin-Off,
you
should
contact
the
office
of
Investor
Relations
of
Liberty
at
the
address
and
telephone
number
above.
Pursuant
to
a
services
agreement
to
be
entered
into
between
our
company
and
Liberty
Media,
Liberty
Media
will
provide
CH
Parent
with
investor
relations
assistance
for
a
period
following
the
Spin-Off.
Accordingly,
if
you
have
questions
relating
to
CH
Parent
following
the
Spin-Off,
you
should
119
Table
of
Contents
contact
the
office
of
Investor
Relations
of
Liberty
Media
at
the
following
address
and
telephone
number:
Investor
Relations
Liberty
Media
Corporation
12300
Liberty
Blvd.
Englewood,
Colorado
80112
Telephone:
(877)
772-1518
You
should
rely
only
on
the
information
contained
in
this
prospectus
or
to
which
we
have
referred
you.
We
have
not
authorized
any
person
to
provide
you
with
different
information
or
to
make
any
representation
not
contained
in
this
prospectus.
120
Table
of
Contents
COMMERCEHUB, INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31,
2016
Assets
Current
assets:
Cash
and
cash
equivalents
Accounts
receivable,
net
of
allowances
of
approximately
$223
and
$239
at
March
31,
2016
and
December
31,
2015,
respectively
Prepaid
expenses
Total
current
assets
Software
and
deferred
costs,
net
(note
9)
Property
and
equipment,
net
Intangibles,
net
(note
10)
Goodwill
Note
receivable—Parent
(note
8)
Deferred
income
taxes
Total
assets
Liabilities and Equity
Current
liabilities:
Accounts
payable
and
accrued
expenses
Accrued
payroll
and
related
expenses
Due
to
Parent
Deferred
revenue
Share-based
compensation
liability
(note
11)
Total
current
liabilities
Deferred
revenue,
long-term
Share-based
compensation
liability,
long-term
(note
11)
Total
liabilities
Equity:
Parent
investment
Retained
earnings
Total
equity
Total
liabilities
and
equity
$
$
$
$
See
accompanying
notes
to
condensed
consolidated
financial
statements.
F-1
December 31,
2015
22,987
11,835
1,457
36,279
13,345
8,286
1,313
21,410
36,273
41,196
158,102
6,018
6,644
9,369
4,810
96,801
123,642
7,430
2,013
133,085
22,858
2,159
25,017
158,102
19,337
16,472
1,048
36,857
12,145
6,706
1,750
21,410
36,107
38,825
153,800
3,982
5,538
9,112
4,490
94,427
117,549
7,532
1,786
126,867
22,784
4,149
26,933
153,800
Table
of
Contents
COMMERCEHUB, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months
Ended March 31,
2016
2015
Revenue
(including
$550
and
$644
of
related
party
revenue
(note
8))
Cost
of
revenue
Gross
profit
$ 22,090
18,791
6,194
4,525
15,896
14,266
Operating
expenses:
Sales
and
marketing
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
3,589
4,870
10,463
18,922
(3,026)
2,440
3,609
10,280
16,329
(2,063)
Other
income:
Interest
income
Total
other
income
Loss
before
income
taxes
166
166
(2,860)
137
137
(1,926)
Income
tax
benefit
Net
loss
Net
loss
attributable
to
CommerceHub,
Inc.
stockholders
Pro
forma
net
loss
attributable
to
CommerceHub,
Inc.
stockholders
per
share
(note
5):
(870) (501)
(1,990) (1,425)
$ (1,990) (1,425)
$ (0.05) (0.03)
See
accompanying
notes
to
condensed
consolidated
financial
statements.
F-2
Table
of
Contents
COMMERCEHUB, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months
Ended March 31,
2016
2015
Cash
flows
from
operating
activities:
Net
loss
Adjustments
to
reconcile
net
loss
to
net
cash
provided
by
operating
activities:
Depreciation
and
amortization
Deferred
tax
benefit
Bad
debt
expense
Share-based
compensation
expense
Interest
income
paid
in-kind
Change
in
operating
assets
and
liabilities
that
provide
(use)
cash,
net
of
effects
of
acquisition:
Accounts
receivable
Prepaid
expenses
Deferred
costs
Deferred
revenue
Accounts
payable
and
accrued
expenses
Accrued
payroll
and
related
expenses
Share-based
compensation
liability
payments
Due
to
Parent
Net
cash
provided
by
operating
activities
Cash
flows
from
investing
activities:
Purchases
of
property
and
equipment
Additions
to
capitalized
software
Acquisition
of
Mercent,
net
of
cash
acquired
Net
cash
used
in
investing
activities
Cash
flows
from
financing
activities:
Cash
received
from
exercise
of
stock
options
Net
cash
provided
by
financing
activities
Net
increase
(decrease)
in
cash
and
cash
equivalents
Cash
and
cash
equivalents,
beginning
of
period
Cash
and
cash
equivalents,
end
of
period
19,337
26,385
$ 22,987
7,295
See
accompanying
notes
to
condensed
consolidated
financial
statements.
F-3
$
(1,990)
2,323
(2,371)
33
10,037
(166)
4,604
(409)
(192)
218
2,058
1,106
(7,436)
257
8,072
(2,291)
(2,183)
—
(4,474)
52
52
3,650
(1,425)
1,801
(3,457)
87
8,617
(137)
5,495
(265)
(272)
488
(338)
1,717
(1,870)
(6,412)
4,029
(1,795)
(1,099)
(20,225)
(23,119)
—
—
(19,090)
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
During
November
2015,
the
board
of
directors
of
Liberty
Interactive
Corporation
("Liberty"
or
"Parent")
authorized
a
plan
to
distribute
to
the
stockholders
of
Liberty
shares
of
CommerceHub,
Inc.,
a
newly
formed
entity
that,
pursuant
to
an
internal
restructuring,
will
become
the
parent
of
Commerce
Technologies,
LLC,
a
Delaware
limited
liability
company
(currently
Commerce
Technologies,
Inc.
(d/b/a
CommerceHub)
a
New
York
corporation).
The
transaction
will
be
effected
as
a
pro-rata
dividend
of
shares
of
CommerceHub,
Inc.
to
the
holders
of
Liberty's
Series
A
and
Series
B
Liberty
Ventures
common
stock
(the
"CommerceHub
SpinOff").
The
CommerceHub
Spin-Off
is
intended
to
be
tax-free
and
is
expected
to
be
accounted
for
at
historical
cost
due
to
the
pro
rata
nature
of
the
distribution
to
holders
of
Liberty
Ventures
common
stock.
The
accompanying
unaudited
condensed
consolidated
financial
statements
include
the
accounts
of
CommerceHub,
Inc.
and
its
subsidiaries.
These
financial
statements
refer
to
our
company,
together
with
its
wholly-owned
subsidiaries
(including
Commerce
Technologies,
Inc.
(d/b/a
CommerceHub)),
as
"CommerceHub,"
"the
Company,"
"us,"
"we"
and
"our"
in
the
notes
to
these
financial
statements.
All
intercompany
accounts
and
transactions
have
been
eliminated
in
the
condensed
consolidated
financial
statements,
which
have
been
prepared
in
conformity
with
U.S.
generally
accepted
accounting
principles
("GAAP")
for
interim
financial
information.
Accordingly,
these
condensed
consolidated
financial
statements
do
not
include
all
of
the
information
and
notes
required
by
GAAP.
We
have
included
all
normal
recurring
adjustments
considered
necessary
to
give
a
fair
statement
of
our
financial
position,
results
of
operations
and
cash
flows
for
the
interim
periods
shown.
Operating
results
for
these
interim
periods
are
not
necessarily
indicative
of
the
results
to
be
expected
for
the
full
year.
The
December
31,
2015
condensed
consolidated
balance
sheet
data
was
derived
from
our
audited
financial
statements
at
that
date.
For
further
information,
refer
to
the
consolidated
financial
statements
and
accompanying
notes
for
the
year
ended
December
31,
2015.
(2) Description of Business
CommerceHub
operates
as
a
single
segment
and
specializes
in
the
electronic
integration
of
supply
chains
for
e-commerce
fulfillment.
CommerceHub's
solutions
unite
supply,
demand,
and
delivery
and
provides
our
consumers,
consisting
of
retailers
and
suppliers,
with
a
single
platform
to
source
and
market
the
products
consumers
desire
and
to
have
those
products
delivered
more
rapidly
to
the
consumer's
doorstep.
Our
platform
consists
of
the
following
solutions:
•
Supply
Solutions—enable
retailers
to
expand
their
product
offerings
without
the
economic
logistical
limitations
or
risks
typically
associated
with
carrying
physical
inventory.
•
Demand
Solutions—provide
retailers
and
suppliers
with
a
single
platform
to
gain
greater
access
to
shopper
demand
through
a
single
connection
to
retail
channels,
marketplaces,
paid
search,
social
and
advertising
channels;
and
•
Delivery
Solutions—facilitate
rapid,
cost-efficient,
on-time
delivery
with
greater
control
of,
and
visibility
into,
the
consumer
experience
by
leveraging
our
solutions
to
allow
customers
to
coordinate
more
effectively
with
delivery
providers.
The
Company,
based
in
upstate
New
York,
was
founded
in
1997.
Additionally,
the
Company
serves
its
customers
and
users
from
its
hosting
facility,
located
at
its
headquarters
in
Albany,
New
York.
F-4
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(2) Description of Business (Continued)
On
January
8,
2015,
CommerceHub
acquired
Mercent
Corporation
("Mercent"),
an
e-commerce
marketing
solutions
company
headquartered
in
Seattle,
Washington.
This
strategic
acquisition
expanded
the
range
of
our
supported
demand
channels
available
to
CommerceHub's
consumers
to
include
major
on-line
marketplaces
(e.g.
Amazon,
eBay),
shopping
engines
(e.g.
Google,
PLA),
and
search
engines
(e.g.
Google,
Bing).
The
acquisition
also
provided
CommerceHub
with
value-added
product
and
services
that
enable
our
customers
to
more
effectively
sell
on
these
channels.
Spin-off from Liberty Interactive Corporation
Following
the
CommerceHub
Spin-Off,
CommerceHub
will
operate
as
a
separate,
publicly
traded
company,
and
neither
Liberty
nor
CommerceHub
will
have
any
stock
ownership,
beneficial
or
otherwise,
in
the
other.
In
connection
with
the
CommerceHub
Spin-Off,
CommerceHub
expects
to
enter
into
certain
agreements
with
Liberty
and/or
Liberty
Media
Corporation
("Liberty
Media")
including
the
reorganization
agreement,
the
services
agreement
and
the
tax
sharing
agreement
in
order
to
govern
certain
of
the
ongoing
relationships
between
the
companies
after
the
CommerceHub
Spin-Off
and
to
provide
for
an
orderly
transition.
The
reorganization
agreement
will
provide
for,
among
other
things,
the
principal
corporate
transactions
(including
the
internal
restructuring)
required
to
effect
the
CommerceHub
Spin-Off,
certain
conditions
to
the
CommerceHub
Spin-Off
and
provisions
governing
the
relationship
between
CommerceHub
and
Liberty
with
respect
to
and
resulting
from
the
CommerceHub
Spin-Off.
The
tax
sharing
agreement
will
provide
for
the
allocation
and
indemnification
of
tax
liabilities
and
benefits
between
Liberty
and
CommerceHub
and
other
agreements
related
to
tax
matters.
Pursuant
to
the
services
agreement,
Liberty
Media
will
provide
CommerceHub
with
general
and
administrative
services
including
legal,
tax,
accounting,
treasury
and
investor
relations
support
related
to
necessary
public
company
functions.
CommerceHub
will
reimburse
Liberty
Media
for
direct,
out-of
pocket
expenses
incurred
by
Liberty
Media
in
providing
these
services
and
CommerceHub
will
pay
a
services
fee
to
Liberty
Media
under
the
services
agreement
that
will
be
negotiated
quarterly.
Liberty
Media
and
CommerceHub
will
evaluate
all
charges
for
reasonableness
quarterly
and
make
adjustments
to
these
charges
as
the
parties
mutually
agree
upon.
(3) Significant Accounting Policies
During
the
three
months
ended
March
31,
2016,
there
were
no
material
changes
in
our
significant
accounting
policies.
See
Note
3
to
the
consolidated
financial
statements
for
the
year
ended
December
31,
2015
included
in
our
Registration
Statement
on
Form
S-1
as
filed
with
the
Securities
and
Exchange
Commission,
for
additional
information
regarding
our
significant
accounting
policies.
(4) Recent Accounting Pronouncements
In
May
2014,
the
FASB
issued
Accounting
Standards
Update
(ASU)
No.
2014-09,
"Revenue
from
Contracts
with
Customers
(Topic
606)
("ASU
2014-09").
This
topic
provides
for
five
principles
which
should
be
followed
to
determine
the
appropriate
amount
and
timing
of
revenue
recognition
for
the
transfer
of
goods
and
services
to
customers.
The
principles
in
ASU
2014-09
should
be
applied
to
all
contracts
with
customers
regardless
of
industry.
The
amendments
in
ASU
201409
are
effective
for
fiscal
years,
and
interim
periods
within
those
years
beginning
after
December
15,
2016,
with
two
F-5
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(4) Recent Accounting Pronouncements (Continued)
transition
methods
of
adoption
allowed.
Early
adoption
for
reporting
periods
prior
to
December
15,
2016
is
not
permitted.
In
March
2015,
the
FASB
voted
to
defer
the
effective
date
by
one
year,
but
allow
adoption
as
of
the
original
adoption
date.
In
May
2016
FASB
issued
Accounting
Standards
Update
(ASU)
No.
2016-08,
"Revenue
from
Contracts
with
Customers"
(Topic
606)
Principal versus Agent Considerations, (Reporting Revenue Gross versus Net) .
This
was
to
further
clarify
the
implementation
guidance
on
principal
versus
agent
considerations
in
the
previously
issued
ASU
No.
2014-09.
ASU
2016-08
has
no
impact
on
the
adoption
date
of
the
previously
issued
update.
We
are
evaluating
the
financial
statement
impacts
of
the
guidance
in
ASU
2014-09
and
determining
which
transition
method
we
will
utilize.
In
September
2015,
FASB
issued
ASU
No.
2015-16,
"Simplifying
the
Accounting
for
Measurement-Period
Adjustments"
("ASU
2015-16").
This
standard
requires
an
acquirer
to
recognize
adjustments
to
provisional
amounts
that
are
identified
during
the
measurement
period
in
the
reporting
period
in
which
the
adjustment
amounts
are
determined.
ASU
2015-16
also
requires
separate
presentation
on
the
face
of
the
income
statement,
or
disclosure
in
the
notes,
of
the
amount
recorded
in
current-period
earnings
by
line
item
that
would
have
been
recorded
in
previous
reporting
periods
if
the
adjustment
to
the
provisional
amount
has
been
recognized
as
of
the
acquisition
date.
ASU
2015-16
is
effective
for
annual
reporting
periods
beginning
after
December
15,
2015,
including
interim
periods
within
those
fiscal
years.
This
ASU
did
not
have
a
material
impact
on
the
consolidated
financial
statements.
In
February
2016,
FASB
issued
ASU
No.
2016-02
"Leases"
(Topic
842)
("ASU
2016-02").
This
topic
provides
that
a
lessee
should
recognize
the
assets
and
liabilities
that
arise
from
leases.
Topic
842
requires
an
entity
to
separate
the
lease
components
from
the
nonlease
components
in
a
contract.
This
ASU
intended
to
improve
financial
reporting
about
leasing
transactions.
ASU
2016-02
is
effective
for
fiscal
years
beginning
after
December
15,
2018.
The
Company
is
evaluating
the
financial
statement
impact
this
update
will
have
on
the
consolidated
financial
statements.
In
March
2016,
FASB
issued
ASU
No.
2016-09,
Improvements to Employee Share-Based Payment Accounting ("ASU
2016-09"),
which
is
intended
to
improve
the
accounting
for
share-based
payment
transactions
as
part
of
the
FASB's
simplification
initiative.
ASU
2016-09
changed
the
aspects
of
the
accounting
for
share-based
payment
award
transactions,
including:
(1)
accounting
for
income
taxes;
(2)
classification
of
excess
tax
benefits
on
the
statement
of
cash
flows;
(3)
forfeitures;
(4)
minimum
statutory
tax
withholding
requirements;
(5)
classification
of
employee
taxes
paid
on
the
statement
of
cash
flows
when
an
employer
withholds
shares
for
tax-withholding
purposes.
The
ASU
is
effective
for
fiscal
years
beginning
after
December
15,
2016,
and
interim
periods
within
those
years.
Early
adoption
is
permitted
in
any
interim
or
annual
period
provided
that
the
entire
ASU
is
adopted.
The
Company
is
evaluating
the
financial
statement
impact
this
update
will
have
on
the
consolidated
financial
statements.
(5) Unaudited Pro Forma Earnings Per Share
Unaudited
pro
forma
earnings
(loss)
per
common
share
for
all
periods
presented
is
computed
by
dividing
net
earnings
(loss)
for
the
respective
period
by
42,642,950
common
shares,
which
is
the
aggregate
number
of
shares
of
CommerceHub,
Inc.
Series
A,
Series
B
and
Series
C
common
stock
that
would
have
been
issued
if
the
CommerceHub
Spin-Off
had
occurred
on
March
31,
2016,
assuming
a
1-for-10
distribution
ratio
on
Series
A
and
Series
B
common
stock
for
every
share
of
Series
A
or
B
F-6
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(5) Unaudited Pro Forma Earnings Per Share (Continued)
Liberty
Ventures
common
stock
outstanding
and
1-for-5
distribution
ratio
on
Series
C
common
stock
for
every
share
of
Series
A
or
B
Liberty
Ventures
common
stock
outstanding.
(6) Acquisition of Mercent Corporation
On
January
8,
2015,
the
Company
acquired
100%
of
the
equity
of
Mercent,
an
online
marketing
technology
and
service
company
that
helps
merchants
optimize
performance
across
online
channels,
for
total
cash
consideration
of
approximately
$20.2
million.
During
the
three-month
period
ended
March
31,
2015,
the
Company
incurred
transaction
related
costs
of
approximately
$166
thousand,
which
are
included
in
general
and
administrative
expenses.
No
additional
cost
was
incurred
in
the
period
ended
March
31,
2016.
Under
the
acquisition
method
of
accounting,
the
Company
allocated
the
purchase
price
to
the
identifiable
assets
and
liabilities
based
on
their
estimated
fair
value.
The
allocation
of
the
Mercent
purchase
consideration
to
the
assets
acquired
and
liabilities
assumed
was
as
follows
(in
thousands):
Cash
Accounts
receivable
Prepaid
expenses
Property
and
equipment
Customer
relationships
Capitalized
software
Deferred
tax
asset
Goodwill
Acounts
payable
and
accrued
expenses
Deferred
revenue
$
41
2,559
87
336
2,000
1,500
3,580
12,390
(2,015)
(212)
$ 20,266
Methodologies
used
in
valuing
the
intangible
assets
include,
but
are
not
limited
to,
multiple
period
excess
earnings
method
for
developed
technology
and
customer
relationships.
The
excess
of
the
purchase
price
over
the
total
net
identifiable
assets
has
been
recorded
as
goodwill,
which
includes
synergies
expected
from
the
expanded
service
capabilities
and
the
value
of
the
assembled
work
force
in
accordance
with
GAAP.
For
federal
income
tax
purposes,
the
transaction
is
treated
as
a
stock
acquisition.
The
goodwill
resulting
from
this
transaction
is
not
expected
to
be
deductible
for
tax
purposes.
Mercent's
results
of
operations
have
been
included
in
the
Company's
consolidated
results
since
the
acquisition
date.
(7) Concentrations of Significant Customers and Credit Risk
The
Company's
revenue
model
is
based
on
retailer
and
supplier
program
relationships
whereby
many
supplier
transactions
may
be
attributable
to
a
single
retailer.
Significant
customer
concentrations
contemplate
the
total
program
revenues
(retailers
and
related
suppliers)
and
receivables
generated
by
these
customers.
For
the
three-month
period
ended
March
31,
2016,
only
one
customer
accounted
for
F-7
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(7) Concentrations of Significant Customers and Credit Risk (Continued)
more
than
10%
of
total
revenue.
For
the
three-month
period
ended
March
31,
2015,
two
customers
accounted
for
more
than
10%
each
of
total
revenue.
The
Company
had
receivables
from
these
customers
of
approximately
$999
thousand
at
March
31,
2016.
No
customer
represented
more
than
10%
of
accounts
receivable
at
March
31,
2016.
(8) Related Party Transactions
(a) Transactions with QVC
For
the
three-month
periods
ended
March
31,
2016
and
2015,
QVC,
Inc.
("QVC")
accounted
for
approximately
2%
and
3%
of
total
revenue,
respectively.
At
March
31,
2016,
there
were
approximately
899
suppliers
utilizing
the
CommerceHub
Solutions
to
transact
a
portion
of
their
business
with
QVC.
The
Company
had
receivables
relating
to
ordinary
business
with
QVC
of
approximately
$1.0
million
and
$511
thousand
at
March
31,
2016
and
December
31,
2015,
respectively.
(b) Transactions with Parent
To
assist
the
Company
in
meeting
its
financial
obligations
under
the
Liquidity
Program
(note
11),
the
Company
executed
a
funding
agreement
with
the
Company's
Parent.
Under
the
funding
agreement,
the
Parent
has
agreed
to
loan
the
Company
cash
at
current
market
interest
rates,
or
make
additional
equity
investments
in
common
stock,
in
amounts
sufficient
to
fulfill
its
obligations
under
the
Liquidity
Program.
There
were
no
amounts
due
to
Liberty
under
this
funding
arrangement
at
March
31,
2016
and
December
31,
2015.
Refer
to
note
12
for
a
discussion
of
share-based
payment
activity
subsequent
to
the
balance
sheet
date.
In
August
2012,
the
Company
advanced
Liberty
$19.0
million
under
a
master
promissory
note.
The
Company
advanced
an
additional
$9.0
million
and
$6.0
million
to
Liberty
under
the
same
note
and
terms
in
March
2013
and
December
2013,
respectively.
The
note
bears
interest
at
LIBOR
plus
1.0%
(1.84%
at
March
31,
2016).
Interest
shall
be
paid
in
cash
or
compounded,
at
the
election
of
Liberty,
on
an
annual
basis.
Accrued
interest
receivable,
included
within
Note
Receivable—Parent
on
the
accompanying
condensed
consolidated
balance
sheets,
was
$2.3
million
and
$2.1
million
at
March
31,
2016
and
December
31,
2015,
respectively.
Subsequent
to
March
31,
2016,
Liberty
repaid
the
total
amount
of
the
note
outstanding,
including
accumulated
interest,
to
the
Company
and
the
Company
borrowed
$28.6
million
from
Liberty
under
the
intercompany
funding
agreement
(note
12).
The
Company
also
has
a
tax
sharing
arrangement
with
Liberty.
Under
this
arrangement,
the
Parent
will
pay
taxes
on
behalf
of
the
Company
to
the
taxing
authority
and
then
the
Company
will
reimburse
the
Parent
for
the
taxes
paid.
F-8
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(9) Software and Deferred Costs
Software
and
deferred
costs
are
comprised
of
the
following
(in
thousands)
at
March
31,
2016
and
December
31,
2015:
March 31,
2016
Software
costs
Less
accumulated
amortization
Software
costs,
net
December 31,
2015
$ 43,303
$
(35,106) $
8,197
$
41,120
(33,931)
7,189
March 31,
2016
Integration
costs
Less
accumulated
amortization
Integration
costs,
net
December 31,
2015
$ 19,472
$
(14,324) $
5,148
$
18,831
(13,875)
4,956
Amortization
expense
related
to
software
costs
was
approximately
$1.2
million
and
$725
thousand
for
the
three-month
periods
ended
March
31,
2016
and
2015,
respectively.
Amortization
expense
related
to
integration
costs
was
approximately
$449
thousand
and
$321
thousand
for
the
three-month
periods
ended
March
31,
2016
and
2015,
respectively.
Future
amortization
expense
of
software
and
integration
costs
is
expected
to
be
as
follows
for
the
years
ended
December
31(in
thousands):
Remainder
of
2016
2017
2018
2019
2020
Thereafter
$ 4,672
5,093
2,399
730
271
180
$ 13,345
(10) Intangible Assets
Intangibles
assets
acquired
as
of
March
31,
2016
are
as
follows
(in
thousands):
Weighted Average
Life (Years)
Developed
technology
Customer
relationships
Total
Gross Carrying
Amount
2
$
2
2
$
Accumulated
Amortization
1,500
$
2,000
3,500
$
Net Book
Value
937
$
1,250
2,187
$
563
750
1,313
Amortization
expense
related
to
intangible
assets
was
approximately
$437
thousand
for
each
of
the
three-month
periods
ended
March
31,
2016
and
2015.
Future
estimated
amortization
expense
for
intangible
assets
as
of
March
31,
2016
is
$1,313.
The
entire
expense
will
be
recognized
throughout
the
remainder
of
2016.
F-9
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(11) Share-Based Awards
The
Company's
share-based
awards
consist
of
the
stock
options
and
stock
appreciation
rights.
The
Company
grants,
to
certain
of
its
employees,
board
members
and
consultants,
stock
options
and
stock
appreciation
rights
("SARs")
to
purchase
shares
of
its
common
stock.
The
Company
measures
the
cost
of
employee
services
received
in
exchange
for
a
liability
classified
award
based
on
the
current
fair
value
of
the
award,
and
remeasures
the
fair
value
of
the
award
at
each
reporting
date.
All
of
the
Company's
share-based
awards
are
classified
as
liability
awards
as
of
March
31,
2016
and
December
31,
2015,
as
the
SARs
will
be
settled
in
cash
and
the
stock
options
can
be
settled
in
cash
at
the
option
of
the
holder
under
the
Liquidity
Program
as
discussed
below.
Included
in
the
accompanying
condensed
consolidated
statements
of
operations
are
the
following
amounts
of
share-based
compensation
for
the
three-month
periods
ended
March
31,
2016
and
2015
(amounts
in
thousands):
Three Months
Ended March 31,
2016
2015
Cost
of
revenue
Sales
and
marketing
Research
and
development
General
and
administrative
504
984
1,860
6,689
$ 10,037
191
721
1,575
6,130
$ 8,617
The
Company
estimates
the
fair
value
of
the
stock
options
and
SARs
granted
using
a
Black-Scholes
pricing
model.
The
estimation
of
stock
awards
that
will
ultimately
vest
requires
judgment,
and
to
the
extent
actual
results
differ
from
the
Company's
estimates,
such
amounts
are
recorded
as
an
adjustment
in
the
period
estimates
are
revised.
In
valuing
share-based
awards,
significant
judgment
is
required
in
determining
the
fair
value
of
the
Company's
stock,
the
expected
volatility
of
common
stock
and
the
expected
term
individuals
will
hold
their
share-based
awards
prior
to
exercising.
Expected
volatility
of
the
stock
is
based
on
the
Company's
peer
group
in
the
industry
in
which
the
Company
does
business
because
the
Company
does
not
have
sufficient
historical
volatility
data
for
its
own
stock.
The
expected
term
of
the
options
is
based
on
evaluations
of
historical
and
expected
future
employee
exercise
behavior.
Additionally,
the
Black-Scholes
pricing
model
requires
the
input
of
other
subjective
assumptions,
including
the
risk-free
interest
rate
and
dividend
yield.
The
risk-free
interest
rate
assumption
is
based
upon
observed
interest
rates
for
constant
maturity
U.S.
Treasury
securities
consistent
with
the
expected
term
of
the
Company's
share-based
awards.
The
Company
assumed
a
zero
dividend
yield
based
on
historical
and
expected
dividends.
1999 Plan
During
1999,
the
Company
adopted
an
incentive
and
nonqualified
stock
option
plan
(the
"1999
Plan").
The
1999
Plan
authorized
grants
of
options
to
purchase
up
to
4,000,000
shares
of
authorized
but
unissued
common
stock.
Generally,
the
options
vest
over
a
period
of
four
years
and
expire
10
years
from
the
date
of
grant.
At
March
31,
2016
no
shares
of
common
stock
are
available
for
future
grants
under
the
1999
Plan,
as
the
plan
expired
in
September
2009.
F-10
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(11) Share-Based Awards (Continued)
Liquidity Program
During
2006,
the
Compensation
Committee
adopted
a
stock
option
liquidity
program
(the
"Liquidity
Program")
for
eligible
holders
of
stock
options
and
certain
eligible
common
shares
(shares
issued
as
a
result
of
an
option
exercise).
The
Liquidity
Program
provides
eligible
option
holders
and
stockholders
the
ability
to
cancel
their
vested
options
or
sell
their
eligible
common
shares
in
exchange
for
cash
payment.
Eligible
option
holders
and
stockholders
have
the
opportunity
to
tender
eligible
options
or
shares
at
any
time
during
the
year
except
for
when
valuations
are
being
performed.
Cash
consideration
for
the
purchase
and
cancellation
of
tendered
stock
options
is
based
on
the
fair
value
of
the
Company's
underlying
common
stock
less
the
option
exercise
price.
The
Company
made
total
cash
payments
of
approximately
$6.1
million
and
$627
thousand
in
exchange
for
the
cancellation
of
204,050
and
31,500
stock
options
under
this
program
during
the
three-month
periods
ended
March
31,
2016
and
2015,
respectively.
Cash
consideration
for
tendered
eligible
common
shares
is
based
upon
the
fair
value
of
the
common
shares.
There
were
129,425
common
shares,
eligible
for
the
holders
to
require
the
Company
to
purchase,
issued
and
outstanding
at
March
31,
2016.
To
assist
the
Company
in
meeting
its
financial
obligation
under
the
Liquidity
Program,
the
Company
executed
a
funding
agreement
with
Liberty.
Under
the
funding
agreement,
Liberty
has
agreed
to
loan
the
Company
cash
at
current
market
interest
rates
or
make
additional
equity
investments
in
common
shares,
such
that
the
cash
provided
to
the
Company
provides
sufficient
funds
to
fulfill
its
obligation
under
the
Liquidity
Program.
There
were
no
amounts
due
to
Liberty
under
this
funding
arrangement
at
March
31,
2016
or
December
31,
2015.
During
2010,
the
Company
instituted
the
2010
Stock
Appreciation
Rights
Plan
(the
"SAR
Plan").
Pursuant
to
the
SAR
Plan,
a
committee
appointed
by
the
Company's
Board
of
Directors
may
grant
SARs
to
employees,
board
members
and
consultants
of
the
Company.
The
SAR
Plan
authorized
grants
of
up
to
6
million
units,
which
includes
and
is
not
in
addition
to
shares
previously
authorized
for
issue
under
the
1999
Plan
discussed
above.
The
SARs
vest
over
a
period
of
four
years
and
expire
10
years
from
the
date
of
grant.
The
Company
made
total
cash
payments
of
approximately
$1.4
million
and
$1.2
million
during
the
three-month
periods
ended
March
31,
2016
and
2015,
respectively,
to
settle
exercised
SARs.
Refer
to
note
12
for
a
discussion
of
share-based
payment
activity
subsequent
to
the
balance
sheet
date.
F-11
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(11) Share-Based Awards (Continued)
The
following
tables
summarize
the
share-based
award
activity
during
the
three-month
period
ended
March
31,
2016:
Number of
Options
Outstanding,
January
1,
2016
Exercised
Tendered*
Outstanding
and
exercisable
at
March
31,
2016
*
Weighted
average
exercise
price
495,781
$
(15,500) $
(204,050) $
276,231
$
3.52
3.34
3.31
3.69
1999 Plan
Weighted
average
remaining
contractual life
(in years)
2.6
Aggregate
intrinsic value
(in thousands)
$
8,826
Tendered
stock
options
under
the
1999
Plan
represents
eligible
stock
options
exchanged
for
cash
under
the
Liquidity
Program.
Number of
SARs
Outstanding,
January
1,
2016
Granted
Exercised
Outstanding
at
March
31,
2016
Exercisable
at
March
31,
2016
Weighted
average
exercise
price
3,586,475
$
21,000
$
(75,625) $
3,531,850
$
2,537,038
$
9.16
33.12
15.23
9.17
6.72
SAR Plan
Weighted
average
remaining
contractual life
(in years)
5.6
5.0
Aggregate
intrinsic value
(in thousands)
$
$
92,816
73,380
As
of
March
31,
2016,
unrecognized
compensation
cost
related
to
SARs
was
approximately
$5.6
million
and
is
expected
to
be
recognized
over
a
weighted
average
remaining
vesting
period
of
approximately
2.4
years.
As
a
result
of
the
termination
of
the
Liquidity
Program
upon
the
anticipated
CommerceHub
Spin-Off,
the
outstanding
options
and
SARs
will
no
longer
be
able
to
be
settled
in
cash,
which
would
result
in
the
change
in
classification
of
the
awards
from
liability
to
equity
awards.
Additionally,
the
Spin-Off
is
a
restructuring
event
which
would
result
in
a
modification
of
the
terms
and
conditions
of
the
outstanding
equity
awards
upon
the
CommerceHub
Spin-Off.
As
the
fair
value
of
the
modified
awards
immediately
after
the
Spin-Off
is
not
known,
the
Company
cannot
estimate
the
incremental
compensation
expense
that
may
be
recorded
in
conjunction
with
the
modification.
However,
the
amount
of
additional
compensation,
if
any,
is
not
anticipated
to
be
material.
Liberty Interactive Plans
Liberty
has
granted
to
certain
directors,
officers,
employees
and
consultants
of
Liberty
stock
options
to
purchase
shares
of
Liberty
Ventures
common
stock
pursuant
to
applicable
incentive
plans
in
place
at
Liberty.
Each
holder
of
an
outstanding
option
to
purchase
shares
of
Liberty
Ventures
common
stock
on
the
record
date
(an
"original
Ventures
option
award")
who
is
a
member
of
the
Liberty
board
F-12
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(11) Share-Based Awards (Continued)
of
directors
or
an
officer
of
Liberty
holding
the
position
of
Vice
President
or
above
will
receive
(i)
an
option
to
purchase
shares
of
the
corresponding
series
of
Company
common
stock
and
an
option
to
purchase
shares
of
Series
C
Company
common
stock
(such
new
option
awards,
"new
Company
option
awards")
and
(ii)
an
adjustment
to
the
exercise
price
and
number
of
shares
subject
to
the
original
Ventures
option
award
(as
so
adjusted,
an
"adjusted
Ventures
option
award").
The
exercise
prices
of
and
number
of
shares
subject
to
the
new
Company
option
awards
and
the
related
adjusted
Ventures
option
award
will
be
determined
based
on
the
exercise
price
and
number
of
shares
subject
to
the
original
Ventures
option
award,
the
distribution
ratios
being
used
in
the
CommerceHub
Spin-Off,
the
preCommerceHub
Spin-Off
trading
price
of
Liberty
Ventures
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
Liberty
Ventures
common
stock
over
the
three-consecutive
trading
days
immediately
preceding
the
CommerceHub
Spin-Off)
and
the
relative
post-CommerceHub
Spin-Off
trading
prices
of
Liberty
Ventures
common
stock
and
Company
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
common
stock
over
the
three
consecutive
trading
days
beginning
on
the
first
trading
day
following
the
CommerceHub
Spin-Off
on
which
both
the
Liberty
Ventures
common
stock
and
the
Company
common
stock
trade
in
the
"regular
way"
(meaning
once
the
common
stock
trades
using
a
standard
settlement
cycle)),
such
that
the
pre-CommerceHub
Spin-Off
value
of
the
original
Ventures
option
award
is
allocated
between
the
new
Company
option
awards
and
the
adjusted
Ventures
option
award.
Except
as
described
above,
all
other
terms
of
an
adjusted
Ventures
option
award
and
the
new
Company
option
awards
(including,
for
example,
the
vesting
terms
thereof)
will
in
all
material
respects,
be
the
same
as
those
of
the
corresponding
original
Ventures
option
award.
The
terms
of
the
adjusted
Ventures
option
award
will
be
determined
and
the
new
Company
option
awards
will
be
granted
as
soon
as
practicable
following
the
determination
of
the
pre-
and
postCommerceHub
Spin-Off
trading
prices
of
Liberty
Ventures
and
Company
common
stock,
as
applicable.
Liberty
had
outstanding
approximately
3.6
million
Liberty
Ventures
Series
A
and
1.7
million
Liberty
Ventures
Series
B
options
at
March
31,
2016
with
a
weighted
average
exercise
price
of
$23.42
and
$38.08
per
share,
respectively.
Approximately
2.8
million
and
116
thousand
of
those
options,
respectively,
were
exercisable
at
March
31,
2016
with
a
weighted
average
exercise
price
of
$19.44
and
$42.33
per
share,
respectively.
Substantially
all
of
Liberty's
outstanding
and
exercisable
options
relate
to
employees
of
Liberty
who
will
receive
CommerceHub
options
in
the
Spin-Off.
The
compensation
expense
relating
to
these
employees
of
Liberty,
who
will
remain
employees
of
Liberty
upon
the
SpinOff,
will
continue
to
be
recorded
at
Liberty.
(12) Subsequent Events
During
the
period
from
April
1,
2016
to
June
1,
2016,
approximately
220,000
stock
options
and
approximately
2,426,000
SAR
awards
with
an
aggregate
estimated
fair
value
of
approximately
$80.6
million
were
exercised.
These
exercises
have
been
or
will
be
settled
through
a
combination
of
existing
cash
balances,
cash
flow
from
operations,
repayments
against
the
intercompany
promissory
note
receivable
(note
8),
and
borrowings
under
the
funding
agreement
as
described
in
note
8.
The
Company
has
borrowed
$28.6
million
under
the
funding
agreement
subsequent
to
March
31,
2016
to
facilitate
the
settlement
of
the
aforementioned
options
and
awards
exercised.
Interest
on
this
intercompany
note
accrues
at
a
rate
of
LIBOR
+1%.
It
is
expected
that
at
the
time
of
the
Spin-Off,
the
amount
outstanding
under
the
funding
agreement
with
Liberty
will
be
repaid
using
amounts
borrowed
on
a
new
credit
facility
(see
"Description
of
Certain
Indebtedness").
As
a
result,
based
on
the
initial
borrowing
F-13
Table
of
Contents
COMMERCEHUB, INC.
Notes to Condensed Consolidated Financial Statements (Continued)
(unaudited)
(12) Subsequent Events (Continued)
(expected
to
be
approximately
$50
million)
and
the
market
interest
rate
at
the
time
of
borrowing,
the
company
expects
to
incur
approximately
$1.3
million
of
annual
interest
expense
in
connection
with
this
new
credit
facility.
Effective
June
16,
2016,
Mark
Greenquist
was
appointed
Chief
Financial
Officer
of
the
Company.
In
June,
we
entered
into
a
Release
and
Separation
Agreement
with
Bob
Marro,
whereby
he
transitioned
to
a
non-officer
role
at
our
company
effective
June
4,
2016.
The
Release
and
Separation
Agreement
provides
for
Mr.
Marro's
employment
to
continue
with
the
Company
through
November
2016
(unless
extended).
On
June
25,
2016,
Liberty's
compensation
committee
approved
a
new
compensation
arrangement
with
the
company's
CEO
which
was
memorialized
in
a
definitive
employment
agreement
between
CommerceHub
and
Mr.
Poore,
dated
effective
as
of
June
28,
2016.
As
discussed
above,
the
Amended
CEO
Agreement
would
have
expired
on
January
10,
2017
if
we
or
Mr.
Poore
had
provided
a
notice
of
termination
at
least
60
days
before
such
date.
Regardless
of
whether
the
SpinOff
is
completed,
we
wished
to
retain
Mr.
Poore's
service
as
our
President
and
Chief
Executive
Officer
beyond
January
10,
2017
and
began
negotiating
a
new
employment
arrangement
to
incent
Mr.
Poore
to
remain
with
our
company.
In
addition,
consistent
with
our
compensation
philosophy,
we
believed
that
a
new
grant
of
equity
would
be
instrumental
to
retaining
Mr.
Poore's
services
on
a
long-term
basis.
The
arrangement
provides
for
a
four
year
employment
term,
with
an
annual
base
salary
of
$400,000,
and
an
annual
target
cash
bonus
equal
to
100%
of
the
applicable
year's
base
salary.
The
arrangement
also
provides
for
other
customary
benefits
and
terms.
In
connection
with
the
approval
of
his
compensation
arrangement,
the
CEO
was
granted
the
Multi-Year
Awards
(defined
below).
The
CEO
would
be
entitled
to
certain
severance
payments
and
benefits,
as
well
as
accelerated
vesting
of
the
Multi-Year
Awards,
upon
a
termination
without
cause
or
his
resignation
for
good
reason
(each
as
defined
in
the
definitive
employment
agreement).
In
connection
with
the
approval
of
the
CEO's
new
compensation
arrangement,
the
compensation
committee
also
approved
a
one-time
grant
of
1,057,048
Stock
Appreciation
Rights
to
the
CEO
pursuant
to
the
company's
SAR
Plan,
which
will
have
an
initial
exercise
price
of
$35.64
per
SAR
(the
"Multi-Year
Awards"),
and
a
Black-Scholes
value
of
approximately
$12.2
million.
25%
of
the
Multi-Year
Awards
will
vest
on
the
first
anniversary
of
the
grant
date
(the
"First
Vesting
Date"),
with
1/36
of
the
number
of
remaining
unvested
Multi-Year
Awards
after
giving
effect
to
the
First
Vesting
Date
vesting
on
each
monthly
anniversary
of
the
First
Vesting
Date,
in
each
case
subject
to
the
CEO
being
employed
on
the
applicable
vesting
date.
The
Multi-Year
Awards
have
a
term
of
ten
years.
In
connection
with
the
Spin-Off,
the
SARs
granted
pursuant
to
the
Multi-Year
Awards
will
be
converted
into
options
to
acquire
shares
of
CH
Parent
Series
C
common
stock.
If
a
change
in
control
occurs
at
any
time
during
the
Employment
Period
(aside
from
a
change
in
control
in
which
the
CEO's
employment
is
terminated
without
cause
or
for
good
reason
as
described
above),
vesting
of
the
CEO's
Multi-Year
Award
may
be
accelerated
if
certain
conditions
set
forth
in
the
definitive
employment
agreement
are
met.
F-14
Table
of
Contents
Report of Independent Registered Public Accounting Firm
The
Board
of
Directors
and
Stockholders
CommerceHub,
Inc.
We
have
audited
the
accompanying
consolidated
balance
sheets
of
CommerceHub,
Inc.
and
subsidiaries
(the
Company)
(as
defined
in
note
1)
as
of
December
31,
2015
and
2014,
and
the
related
consolidated
statements
of
operations,
equity,
and
cash
flows
for
each
of
the
years
then
ended.
These
consolidated
financial
statements
are
the
responsibility
of
the
Company's
management.
Our
responsibility
is
to
express
an
opinion
on
these
consolidated
financial
statements
based
on
our
audits.
We
conducted
our
audits
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement.
An
audit
includes
examining,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
financial
statements.
An
audit
also
includes
assessing
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
financial
statement
presentation.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinion.
In
our
opinion,
the
consolidated
financial
statements
referred
to
above
present
fairly,
in
all
material
respects,
the
financial
position
of
CommerceHub,
Inc.
and
subsidiaries
as
of
December
31,
2015
and
2014,
and
the
results
of
their
operations
and
their
cash
flows
for
each
of
the
years
then
ended,
in
conformity
with
U.S.
generally
accepted
accounting
principles.
/s/
KPMG
LLP
Albany,
New
York
March
31,
2016
F-15
Table
of
Contents
COMMERCEHUB, INC.
Consolidated Balance Sheets
December 31, 2015 and 2014
(in thousands, except share and per share data)
2015
2014
Assets
Current
assets:
Cash
and
cash
equivalents
Accounts
receivable,
net
of
allowances
of
approximately
$239
and
$233
at
December
31,
2015
and
2014,
respectively
(notes
3
and
7)
Prepaid
expenses
Total
current
assets
$
19,337
26,385
16,472
1,048
36,857
13,578
921
40,884
Software
and
deferred
costs,
net
(note
8)
Property
and
equipment,
net
(note
9)
Intangibles,
net
(note
6)
Goodwill
(note
6)
Note
receivable—Parent
(note
7)
Deferred
income
taxes
(note
11)
Total
assets
Liabilities and Equity
12,145
7,973
6,706
4,061
1,750
—
21,410
9,020
36,107
35,507
38,825
22,956
$ 153,800
120,401
Current
liabilities:
Accounts
payable
and
accrued
expenses
Accrued
payroll
and
related
expenses
Due
to
Parent
(notes
7
and
11)
Deferred
revenue
(note
10)
Share-based
compensation
liability
(note
12)
Total
current
liabilities
$
3,982
5,538
9,112
4,490
94,427
117,549
Deferred
revenue,
long-term
(note
10)
Share-based
compensation
liability,
long
term
(note
12)
Total
liabilities
Equity:
Parent
investment
Retained
earnings
Total
equity
Total
liabilities
and
equity
7,532
5,173
1,786
5,967
126,867
88,286
22,784
22,915
4,149
9,200
26,933
32,115
$ 153,800
120,401
See
accompanying
notes
to
consolidated
financial
statements.
F-16
3,861
3,441
9,635
4,606
55,603
77,146
Table
of
Contents
COMMERCEHUB, INC.
Consolidated Statements of Operations
Years ended December 31, 2015 and 2014
(in thousands, except share and per share data)
2015
2014
Revenue
(including
$6,653
and
$6,461
of
related
party
revenue
(note
7))
Cost
of
revenue
Gross
profit
$ 87,614
65,761
22,406
13,097
65,208
52,664
Operating
expenses:
Sales
and
marketing
Research
and
development
General
and
administrative
Total
operating
expenses
Income
(loss)
from
operations
11,742
16,304
44,110
72,156
(6,948)
6,370
9,966
29,733
46,069
6,595
Other
income
(expense):
Interest
income
Total
other
income
Income
(loss)
before
income
taxes
600
600
(6,348)
657
657
7,252
Income
tax
expense
(benefit)
Net
income
(loss)
(1,881) (4,467) 2,945
4,307
Preferred
stock
dividends
Net
earnings
(loss)
attributable
to
CommerceHub,
Inc.
stockholders
Unaudited
pro
forma
net
earnings
(loss)
attributable
to
CommerceHub,
Inc.
stockholders
per
share
(note
3)
584
$ (5,051) 584
3,723
See
accompanying
notes
to
consolidated
financial
statements.
F-17
$
(0.12) 0.09
Table
of
Contents
COMMERCEHUB, INC.
Consolidated Statements of Equity
Years ended December 31, 2015 and 2014
(in thousands)
Parent's
investment
Balance
at
January
1,
2014
Issuance
of
common
stock
for
exercised
options
Repurchase
of
outstanding
shares
Cash
dividends
paid
Net
income
(loss)
Balance
at
December
31,
2014
Issuance
of
common
stock
for
exercised
options
Repurchase
of
outstanding
shares
Cash
dividends
paid
Net
income
(loss)
Balance
at
December
31,
2015
$
$
$
See
accompanying
notes
to
consolidated
financial
statements.
F-18
23,443
52
(580)
—
—
22,915
33
(164)
—
—
22,784
Retained
earnings
5,477
—
—
(584) 4,307
9,200
—
—
(584) (4,467) 4,149
Total
equity
28,920
52
(580)
(584)
4,307
32,115
33
(164)
(584)
(4,467)
26,933
Table
of
Contents
COMMERCEHUB, INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2015 and 2014
(in thousands)
2015
2014
Cash
flows
from
operating
activities:
Net
income
(loss)
Adjustments
to
reconcile
net
income
(loss)
to
net
cash
provided
by
operating
activities:
Depreciation
and
amortization
Deferred
tax
benefit
Bad
debt
expense
Share-based
compensation
expense
Interest
income
paid
in-kind
Change
in
operating
assets
and
liabilities
that
provide
(use)
cash,
net
of
effects
of
acquisition:
Accounts
receivable
Prepaid
expenses
Deferred
costs
Deferred
revenue
Accounts
payable
and
accrued
expenses
Accrued
payroll
and
related
expenses
Share-based
compensation
liability
payments
Due
to
Parent
Net
cash
provided
by
operating
activities
Cash
flows
from
investing
activities:
Purchases
of
property
and
equipment
Additions
to
capitalized
software
Acquisition
of
Mercent,
net
of
cash
acquired
Net
cash
used
in
investing
activities
Cash
flows
from
financing
activities:
Purchase
of
treasury
stock
Cash
received
from
exercise
of
stock
options
Cash
dividends
paid
Net
cash
used
in
financing
activities
Net
increase
(decrease)
in
cash
and
cash
equivalents
$ (4,467) 4,307
7,794
4,417
(12,289) (9,929)
481
596
42,150
28,356
(600) (657)
(816) (4,058)
(40) (278)
(1,094) (536)
2,031
1,234
(2,683) 1,439
2,097
194
(7,507) (7,036)
(523) 1,400
24,534
19,449
(4,158) (2,129)
(6,484) (2,986)
(20,225) —
(30,867) (5,115)
(164) (580)
33
52
(584) (584)
(715) (1,112)
(7,048) 13,222
Cash
and
cash
equivalents,
beginning
of
year
Cash
and
cash
equivalents,
end
of
year
Supplemental
disclosures
of
cash
flow
information
Cash
paid
for
income
taxes
$
$
See
accompanying
notes
to
consolidated
financial
statements.
F-19
26,385
19,337
11,723
13,163
26,385
10,336
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements
December 31, 2015 and 2014
(1) Basis of Presentation
During
November
2015,
the
board
of
directors
of
Liberty
Interactive
Corporation
("Liberty")
authorized
a
plan
to
distribute
to
the
stockholders
of
Liberty
shares
of
CommerceHub,
Inc.,
a
newly
formed
entity
that,
pursuant
to
an
internal
restructuring,
will
become
the
parent
of
Commerce
Technologies,
LLC,
a
Delaware
limited
liability
company
(currently
Commerce
Technologies,
Inc.
(d/b/a
CommerceHub)
a
New
York
corporation).
The
transaction
will
be
effected
as
a
pro-rata
dividend
of
shares
of
CommerceHub,
Inc.
to
the
holders
of
Liberty's
Series
A
and
Series
B
Liberty
Ventures
common
stock
(the
"CommerceHub
SpinOff").
The
CommerceHub
Spin-Off
is
intended
to
be
tax-free
and
is
expected
to
be
accounted
for
at
historical
cost
due
to
the
pro
rata
nature
of
the
distribution
to
holders
of
Liberty
Ventures
common
stock.
The
accompanying
consolidated
financial
statements
of
CommerceHub,
Inc.
have
been
prepared
in
accordance
with
generally
accepted
accounting
principles
in
the
United
States
(GAAP)
and
represent
the
historical
financial
information
of
Commerce
Technologies,
Inc.
and
its
wholly
owned
subsidiary.
These
financial
statements
refer
to
our
company,
together
with
its
wholly
owned
subsidiaries
(including
Commerce
Technologies,
Inc.
(d/b/a
CommerceHub)),
as
"CommerceHub,"
"the
Company,"
"us,"
"we"
and
"our"
in
the
notes
to
the
consolidated
financial
statements.
All
significant
intercompany
accounts
and
transactions
have
been
eliminated
in
the
consolidated
financial
statements.
(2) Description of Business
CommerceHub
operates
as
a
single
segment
and
specializes
in
the
electronic
integration
of
supply
chains
for
e-commerce
fulfillment.
CommerceHub's
solutions
unite
supply,
demand,
and
delivery
and
provides
our
consumers,
consisting
of
retailers
and
suppliers,
with
a
single
platform
to
source
and
market
the
products
consumers
desire
and
to
have
those
products
delivered
more
rapidly
to
the
consumer's
doorstep.
Our
platform
consists
of
the
following
solutions:
•
Supply
Solutions—enable
retailers
to
expand
their
product
offerings
without
the
economic
logistical
limitations
or
risks
typically
associated
with
carrying
physical
inventory.
•
Demand
Solutions—provide
retailers
and
suppliers
with
a
single
platform
to
gain
greater
access
to
shopper
demand
through
a
single
connection
to
retail
channels,
marketplaces,
paid
search,
social
and
advertising
channels;
and
•
Delivery
Solutions—facilitate
rapid,
cost-efficient,
on-time
delivery
with
greater
control
of,
and
visibility
into,
the
consumer
experience
by
leveraging
our
solutions
to
allow
customers
to
coordinate
more
effectively
with
delivery
providers.
The
Company,
based
in
upstate
New
York,
was
founded
in
1997.
Additionally,
the
Company
serves
its
customers
and
users
from
its
hosting
facility,
located
at
its
headquarters
in
Albany,
New
York.
On
January
8,
2015,
CommerceHub
acquired
Mercent
Corporation
("Mercent"),
an
e-commerce
marketing
solutions
company
headquartered
in
Seattle,
Washington.
This
strategic
acquisition
expanded
the
range
of
our
supported
demand
channels
available
to
CommerceHub's
consumers
to
include
major
on-line
marketplaces
(i.e.,
Amazon,
eBay),
shopping
engines
(i.e.
Google,
PLA),
and
search
engines
(i.e.
Google,
Bing).
The
acquisition
also
provided
CommerceHub
with
value-added
product
and
services
that
enable
our
customers
to
more
effectively
sell
on
these
channels.
F-20
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(2) Description of Business (Continued)
Spin-Off from Liberty Interactive Corporation
Following
the
CommerceHub
Spin-Off,
CommerceHub
will
operate
as
a
separate,
publicly
traded
company,
and
neither
Liberty
nor
CommerceHub
will
have
any
stock
ownership,
beneficial
or
otherwise,
in
the
other.
In
connection
with
the
CommerceHub
Spin-Off,
CommerceHub
expects
to
enter
into
certain
agreements
with
Liberty
and/or
Liberty
Media
Corporation
("Liberty
Media")
including
the
reorganization
agreement,
the
services
agreement
and
the
tax
sharing
agreement
in
order
to
govern
certain
of
the
ongoing
relationships
between
the
companies
after
the
CommerceHub
Spin-Off
and
to
provide
for
an
orderly
transition.
The
reorganization
agreement
will
provide
for,
among
other
things,
the
principal
corporate
transactions
(including
the
internal
restructuring)
required
to
effect
the
CommerceHub
Spin-Off,
certain
conditions
to
the
CommerceHub
Spin-Off
and
provisions
governing
the
relationship
between
CommerceHub
and
Liberty
with
respect
to
and
resulting
from
the
CommerceHub
Spin-Off.
The
tax
sharing
agreement
will
provide
for
the
allocation
and
indemnification
of
tax
liabilities
and
benefits
between
Liberty
and
CommerceHub
and
other
agreements
related
to
tax
matters.
Pursuant
to
the
services
agreement,
Liberty
Media
will
provide
CommerceHub
with
general
and
administrative
services
including
legal,
tax,
accounting,
treasury
and
investor
relations
support.
CommerceHub
will
reimburse
Liberty
Media
for
direct,
out-of
pocket
expenses
incurred
by
Liberty
Media
in
providing
these
services
and
CommerceHub
will
pay
a
services
fee
to
Liberty
Media
under
the
services
agreement
that
will
be
negotiated
quarterly.
Liberty
Media
and
CommerceHub
will
evaluate
all
charges
for
reasonableness
quarterly
and
make
adjustments
to
these
charges
as
the
parties
mutually
agree
upon.
(3) Significant Accounting Policies
(a) Cash and Cash Equivalents
The
Company
considers
all
highly
liquid
securities
with
original
maturities
of
90
days
or
less
to
be
cash
equivalents.
Cash
equivalents
at
both
December
31,
2015
and
2014
consist
principally
of
interest
bearing
money
market
accounts.
All
of
the
Company's
cash
and
cash
equivalents
are
held
at
financial
institutions
in
the
U.S.
that
management
believes
to
be
of
high
credit
quality
and
may
at
times
exceed
insured
limits.
(b) Accounts Receivable and Allowance for Doubtful Accounts
Credit
is
granted
in
the
normal
course
of
business
without
collateral.
Accounts
receivable
are
stated
net
of
allowances
for
doubtful
accounts,
which
represent
estimated
losses
resulting
from
the
inability
of
certain
customers
to
make
the
required
payments.
When
determining
the
allowances
for
doubtful
accounts,
we
take
several
factors
into
consideration,
including
the
overall
composition
of
the
accounts
receivable
aging,
our
prior
history
of
accounts
receivable
write-offs,
the
type
of
customers
and
our
experience
with
specific
customers.
We
write
off
accounts
receivable
when
they
are
determined
to
be
uncollectible.
Changes
in
the
allowances
for
doubtful
accounts
are
recorded
as
bad
debt
expense
and
are
included
in
general
and
administrative
expense
in
our
consolidated
statements
of
operations.
F-21
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
The
allowance
for
doubtful
accounts
activity,
included
in
accounts
receivable,
net,
was
as
follows
(in
thousands):
2015
Balances,
January
1
Provision
for
doubtful
accounts
Write-offs
Balances,
December
31
2014
$ 233
$ 1,131
481
596
(475) (1,494)
$ 239
$
233
(c) Property and Equipment
Property
and
equipment
are
stated
at
cost.
Equipment
under
capital
leases
are
stated
at
the
present
value
of
minimum
lease
payments.
Depreciation
is
computed
using
the
straight-line
method
over
the
estimated
useful
lives
of
the
individual
assets.
Leasehold
improvements
are
amortized
on
a
straight-line
basis
over
the
shorter
of
the
lease
term
or
estimated
useful
life
of
the
asset.
The
Company
provides
for
depreciation
of
property
and
equipment
over
the
following
estimated
useful
lives:
Computer
equipment
Furniture
and
fixtures
Leasehold
improvements
3
to
5
years
5
years
lesser
of
remaining
lease
term
or
estimated
useful
life
Repairs
and
maintenance
costs
are
expensed
as
incurred.
(d) Software and Deferred Costs
Software
and
deferred
costs
consists
of
software
that
is
acquired
or
internally
developed,
and
integration
costs
as
follows:
Software Costs: The
Company
capitalizes
the
cost
of
acquired
software
and
payroll,
payroll-related
costs
and
third-party
consulting
fees
incurred
in
developing
and
enhancing
CommerceHub
Solutions
and
related
product
offerings
as
internal
use
software.
Software
costs
are
amortized
on
a
straight-line
basis
over
two
to
three
years.
Amortization
of
capitalized
software
costs
is
included
in
cost
of
revenue
within
the
consolidated
statements
of
operations.
Payroll
and
benefits
associated
with
internally
developed
software
capitalized
during
the
years
ended
December
31,
2015
and
2014
approximated
$6.5
million
and
$3.0
million,
respectively.
Integration Costs: As
subsequently
discussed
in
these
notes,
the
Company
defers
set-up
and
integration
fees
received
from
retailers
and
suppliers
on
the
CommerceHub
solutions.
In
accordance
with
the
applicable
guidance
the
Company
also
defers
the
direct
payroll
and
payroll
related
costs
incurred
for
the
set-up
integration
and
activation
activities
for
these
customers.
Such
deferred
integration
costs
are
amortized
over
the
expected
life
of
the
subscription
contracts
once
production
has
launched,
which
is
generally
over
48
to
76
months.
Amortization
of
capitalized
integration
costs
is
included
in
cost
of
revenue
within
the
consolidated
statements
of
operations.
Payroll
and
benefits,
associated
with
integration
of
new
retailers
and
suppliers,
capitalized
during
the
years
ended
December
31,
2015
and
2014
approximated
$2.6
million
and
$2.2
million,
respectively.
F-22
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
(e) Goodwill
Goodwill
is
an
asset
representing
the
future
economic
benefits
arising
from
other
assets
acquired
in
a
business
combination
that
are
not
individually
identified
and
separately
recognized.
Goodwill
is
reviewed
for
impairment
at
least
annually.
GAAP
provides
an
entity
the
option
to
perform
a
qualitative
assessment
to
determine
whether
it
is
more-likely-than-not
that
the
fair
value
of
a
reporting
unit
is
less
than
its
carrying
amount
prior
to
performing
the
two-step
goodwill
impairment
test.
If
this
is
the
case,
the
two-step
goodwill
impairment
test
is
required.
If
it
is
more-likely-than-not
that
the
fair
value
of
a
reporting
unit
is
greater
than
its
carrying
amount,
the
two-step
goodwill
impairment
test
is
not
required.
The
Company
performs
its
annual
impairment
review
of
goodwill
at
October
1,
and
when
a
triggering
event
is
determined
to
have
occurred
between
annual
impairment
tests.
For
the
years
ended
December
31,
2015
and
2014,
the
Company
performed
a
qualitative
assessment
of
goodwill
for
its
single
reporting
unit,
and
determined
that
it
is
not
more
likely
than
not
that
the
fair
value
of
its
reporting
unit
is
less
than
the
carrying
amount.
Accordingly,
no
impairment
loss
was
recorded
in
2015
nor
2014.
(f)
Revenue Recognition
The
Company
generates
revenue
through
delivery
of
the
Company's
e-commerce
fulfillment
and
marketing
software
platform,
which
is
primarily
represented
by
subscription
and
usage
fees
from
retailers
and
suppliers,
associated
activation
set-up
fees
for
retailers
and
suppliers,
and
professional
services
related
to
customer
solution
enhancements
delivered
during
the
term
of
the
retailer
subscriptions.
The
Company
utilizes
its
technology
and
personnel
to
deliver
its
service
solution
to
customers
on
an
on-demand
basis.
The
Company
follows
Financial
Accounting
Standards
Board
("FASB")
guidance
set
forth
in
Accounting
Standards
Codification
("ASC")
Subtopic
985-60505
related
to
Hosting Arrangements and
ASC
Subtopic
605-25
related
to
Revenue Arrangements with Multiple Deliverables .
The
Company
recognizes
revenue
when
all
of
the
following
conditions
are
met:
there
is
persuasive
evidence
of
an
arrangement,
the
services
have
been
delivered
to
the
customer,
the
collection
of
the
related
fees
is
reasonably
assured
and
the
amount
of
the
related
fees
is
fixed
and
determinable.
In
most
instances,
revenue
from
new
customer
acquisition
is
generated
under
sales
agreements
with
multiple
elements,
and
includes
subscription
fees,
usage
fees,
and
related
activation
set-up
fees
that
allow
retailers
and
suppliers
to
access
the
Company's
solutions.
Customers
do
not
have
the
contractual
right
to
take
possession
of
the
Company's
solutions.
The
Company
evaluates
each
element
in
a
multiple-element
arrangement
to
determine
whether
it
represents
a
separate
unit
of
accounting.
An
element
constitutes
a
separate
unit
of
accounting
when
the
delivered
item
has
standalone
value
and
delivery
of
the
undelivered
element
is
probable
and
within
the
Company's
control.
Subscription
fees
are
charged
on
a
stand-alone
basis
or
in
association
with
a
minimum
usage
level
required
to
be
maintained
by
a
customer
in
connection
with
our
Demand
Solutions.
The
Company
recognizes
subscription
fees
as
revenue
in
the
period
in
which
such
subscription
is
earned.
Usage
fees
are
comprised
of
fees
charged
to
customers
based
on
the
level
of
a
customer's
utilization
of
our
F-23
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
solutions.
Usage
fee
revenues
are
generated
primarily
from
customer
orders,
content
services,
inventory
management
and
third-party
communication
services.
The
Company
recognizes
usage
fee
revenue
in
the
period
in
which
such
usage
fee
is
earned.
Set-up
fees
provide
access
to
the
Company's
on-demand
service
solution
through
production
launch
and
are
billed
during
the
implementation
phase
and
recorded
as
deferred
revenue
until
a
customer's
subscription
period
has
commenced.
On
a
limited
basis,
during
a
retailer's
subscription
term,
the
Company
provides
professional
services
to
enhance
the
retailer's
on-demand
service
solution.
Set-up
fees
and
professional
services
related
to
customer
solution
enhancements
do
not
have
stand-alone
value
because
they
are
only
sold
in
conjunction
with
a
subscription
to
our
on-demand
solutions,
they
are
only
sold
by
the
Company,
a
customer
could
not
resell
it,
and
they
do
not
represent
the
culmination
of
a
separate
earnings
process.
Set-up
fees
without
stand-alone
value
are
recognized
ratably
over
the
longer
of
the
life
of
the
agreement
or
the
expected
customer
life,
currently
estimated
between
48
and
76
months
based
on
the
customer
type
and
solution
for
which
the
set-up
fee
is
associated.
The
Company
recognizes
revenue
for
fees
billed
for
solution
enhancement
services
over
the
estimated
remaining
customer
life.
The
Company
evaluates
the
length
of
the
amortization
period
based
on
our
experience
with
customer
contract
renewals
and
consideration
of
the
period
over
which
those
customers
will
benefit
from
the
related
offerings.
Deferred
revenue
primarily
consists
of
the
unearned
portion
of
retailer
and
supplier
set-up
fees.
Reimbursable
costs
received
for
out-of-pocket
expenses
are
recorded
as
revenue
and
cost
of
revenue
in
the
consolidated
statements
of
operations.
(g) Cost of Revenue
Cost
of
revenue
primarily
consists
of
personnel
and
related
costs,
including
salaries,
bonuses,
payroll
taxes,
benefit
costs
and
share-based
payments
for
employees
supporting
customer
setup
and
onboarding,
customer
service,
application
support
and
performance
marketing.
Also
included
as
cost
of
revenue
are
facility
costs
for
the
Company's
data
centers,
electronic
data
interchange
services
and
other
communication
charges,
expenses
attributable
to
credit
card
processing,
depreciation
expense
related
to
computer
equipment
directly
associated
with
generating
revenue,
and
amortization
of
software
and
integration
costs.
(h) Sales and Marketing
Selling
and
marketing
expense
primarily
consists
of
personnel
expenses,
including
salaries,
commissions,
benefits,
share-based
compensation
and
bonuses
for
sales,
client
management
and
marketing
employees.
Other
costs
associated
with
sales
and
marketing
include
expenses
incurred
related
to
branding
and
trade
shows.
The
Company
incurs
advertising
expense
consisting
of
promotions
and
public
relations
to
promote
our
services.
Advertising
is
expensed
as
incurred
and
was
$314
thousand
and
$295
thousand
for
the
years
ended
December
31,
2015
and
2014,
respectively.
(i) Research and Development
Research
and
development
expenses
consist
primarily
of
certain
technology
and
content
expenses,
including
personnel
and
overhead
expenses
which
include
salaries
and
benefits,
share-based
F-24
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
compensation
expense
and
bonuses
for
employees
and
contractors
engaged
in
the
design,
development,
testing
and
maintenance
of
our
solutions.
(j) General and Administrative
General
and
administrative
expenses
consist
primarily
of
personnel
and
related
overhead
costs,
including
executive
leadership,
finance,
legal
and
human
resource
functions
and
share-based
compensation,
as
well
as
professional
service
and
other
fees
related
to
legal,
tax,
audit
and
accounting
services,
and
other
costs
including
facilities
fees
and
bad
debt
expense.
(k) Share-based Compensation
Share-based
awards
exchanged
for
employee
services
are
recorded
as
expense,
on
a
straight-line
basis,
at
the
estimated
fair
value
of
these
awards
over
the
requisite
employee
service
period.
GAAP
generally
requires
companies
to
measure
the
cost
of
employee
services
received
in
exchange
for
an
award
of
share-based
payments
based
upon
the
grant-date
fair
value
of
the
award,
and
to
recognize
that
cost
over
the
period
during
which
the
employee
is
required
to
provide
service
(usually
the
vesting
period
of
the
award
or
period
of
expected
performance).
GAAP
also
requires
companies
to
measure
the
cost
of
employee
services
received
in
exchange
for
an
award
classified
as
a
liability
instrument
based
upon
the
current
fair
value
of
the
award,
and
to
re-measure
the
value
of
the
award
at
each
reporting
date.
The
Company's
share-based
awards
include
stock
options
and
stock
appreciation
rights
("SARS").
The
Company
estimates
the
fair
value
of
the
stock
options
and
SARS
granted
using
a
Black-Scholes
pricing
model.
The
estimation
of
stock
awards
that
will
ultimately
vest
requires
judgment,
and
to
the
extent
actual
results
differ
from
the
Company's
estimates,
such
amounts
are
recorded
as
an
adjustment
in
the
period
estimates
are
revised.
In
valuing
share-based
awards,
significant
judgment
is
required
in
determining
the
fair
value
of
the
Company's
stock,
the
expected
volatility
of
common
stock
and
the
expected
term
individuals
will
hold
their
share-based
awards
prior
to
exercising.
Expected
volatility
of
the
stock
is
based
on
the
Company's
peer
group
in
the
industry
in
which
the
Company
does
business
because
the
Company
does
not
have
sufficient
historical
volatility
data
for
its
own
stock.
The
expected
term
of
the
options
is
based
on
evaluations
of
historical
and
expected
future
employee
exercise
behavior.
Additionally,
the
Black-Scholes
pricing
model
requires
the
input
of
other
subjective
assumptions,
including
the
risk-free
interest
rate
and
dividend
yield.
The
risk-free
interest
rate
assumption
is
based
upon
observed
interest
rates
for
constant
maturity
U.S.
Treasury
securities
consistent
with
the
term
of
the
Company's
share-based
awards.
The
Company
assumed
a
zero
dividend
yield
based
on
historical
and
expected
dividends.
F-25
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
The
following
table
summarizes
the
assumptions
used
for
estimating
the
fair
value
of
share-based
awards
granted
for
the
years
ended
December
31:
2015
Risk-free
interest
rate
Expected
term
(years)
Expected
volatility
Dividend
yield
Weighted
average
grant
date
fair
value
2014
0.14%
-
1.76% 0.1
-
6.0
30%
-
32% —
$24.95
0.20%
-
0.34%
0.3
-
6.0
27%
-
34%
—
$18.48
Included
in
the
accompanying
consolidated
statements
of
operations
are
the
following
amounts
of
share-based
compensation
(amounts
in
thousands)
for
the
years
ended
December
31:
2015
Cost
of
revenue
Sales
and
marketing
Research
and
development
General
and
administrative
2014
$ 2,361
1,432
4,098
2,682
7,229
4,249
28,462
19,993
$ 42,150
28,356
All
of
the
Company's
share-based
awards
are
classified
as
liability
awards
as
of
December
31,
2015
and
2014,
and
are
included
as
a
share-based
compensation
liability
on
the
accompanying
consolidated
balance
sheets.
The
long-term
portion
of
the
share-based
compensation
liability
represents
the
amount
of
the
unvested
portion
of
the
awards
issued
that
will
not
vest
within
the
next
twelve
months.
(l) Impairment of Long-Lived Assets
Long-lived
assets,
such
as
property,
plant,
and
equipment,
and
other
assets
subject
to
amortization,
are
reviewed
for
impairment
whenever
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
of
an
asset
may
not
be
recoverable.
If
circumstances
require
a
long-lived
asset
or
asset
group
be
tested
for
possible
impairment,
the
Company
first
compares
undiscounted
cash
flows
expected
to
be
generated
by
that
asset
or
asset
group
to
its
carrying
value.
If
the
carrying
value
of
the
long-lived
asset
or
asset
group
is
not
recoverable
on
an
undiscounted
cash
flow
basis,
an
impairment
is
recognized
to
the
extent
that
the
carrying
value
exceeds
its
fair
value.
Fair
value
may
be
determined
through
various
valuation
techniques
including
discounted
cash
flow
models,
quoted
market
values
and
independent
third
party
appraisals,
as
considered
necessary.
(m) Income Taxes
Deferred
tax
assets
and
liabilities
are
recognized
for
the
future
tax
consequences
attributable
to
differences
between
the
consolidated
financial
statement
carrying
amounts
of
existing
assets
and
liabilities
and
their
respective
tax
bases
and
operating
loss
and
tax
credit
carry-forwards.
Deferred
tax
assets
and
liabilities
are
measured
using
enacted
tax
rates
expected
to
apply
to
taxable
income
in
the
years
in
which
those
temporary
differences
are
expected
to
be
recovered
or
settled.
The
effect
on
deferred
tax
assets
and
liabilities
of
a
change
in
tax
rates
is
recognized
in
the
period
that
includes
the
F-26
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
enactment
date.
A
tax
valuation
allowance
is
established,
as
needed,
to
reduce
deferred
tax
assets
to
the
amount
expected
to
be
realized.
In
the
event
it
becomes
more
likely
than
not
that
some
or
all
of
the
deferred
tax
asset
allowances
will
not
be
needed,
the
valuation
allowance
will
be
adjusted.
In
November
2015,
the
FASB
issued
new
accounting
guidance
to
simplify
the
presentation
of
deferred
income
taxes.
The
new
guidance
requires
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
balance
sheet
and
permits
the
use
of
either
a
retrospective
or
prospective
transition
method.
This
guidance
is
effective
for
fiscal
years,
and
interim
periods
within
those
fiscal
years,
beginning
after
December
15,
2015,
with
early
application
permitted.
The
Company
has
early
adopted
this
guidance
using
the
retrospective
transition
method.
This
new
guidance
affected
the
consolidated
balance
sheet
presentation,
but
did
not
affect
the
Company's
consolidated
results
of
operations
or
cash
flows.
The
Company's
taxable
income
was
included
in
the
consolidated
federal
income
tax
return
of
Liberty's
parent
corporation
during
the
periods
presented.
Federal
income
taxes
were
paid
or
refunded
pursuant
to
the
terms
of
a
tax
sharing
agreement
under
which
taxes
approximate
the
amount
that
would
have
been
computed
on
a
separate
company
basis.
The
tax
provision
included
in
these
financial
statements
has
been
prepared
on
a
stand-alone
basis,
as
if
CommerceHub
was
not
part
of
the
consolidated
Liberty
group.
Accordingly,
the
effective
tax
rate
of
the
Company
in
the
future
years
could
vary
from
its
historical
effective
tax
rates
depending
on
the
future
legal
structure
of
CommercHub
and
related
tax
elections.
In
the
ordinary
course
of
business
there
is
inherent
uncertainty
in
quantifying
our
income
tax
positions.
We
assess
our
income
tax
positions
and
record
tax
benefits
for
all
years
subject
to
examination
based
upon
management's
evaluation
of
the
facts,
circumstances,
and
information
available
at
the
reporting
date.
For
those
tax
positions
where
it
is
more
likely
than
not
that
a
tax
benefit
will
be
sustained,
we
have
determined
the
amount
of
the
tax
benefit
to
be
recognized
by
estimating
the
largest
amount
of
tax
benefit
that
has
a
greater
than
50%
likelihood
of
being
realized
upon
ultimate
settlement
with
a
taxing
authority
that
has
full
knowledge
of
all
relevant
information.
For
those
income
tax
positions
where
it
is
not
more-likely-than-not
that
a
tax
benefit
will
be
sustained,
no
tax
benefit
has
been
recognized
in
the
financial
statements.
Where
applicable,
associated
interest
and
penalties
have
also
been
recognized.
We
recognize
accrued
interest
and
penalties
related
to
unrecognized
tax
benefits
as
a
component
of
income
tax
expense.
The
Company's
tax
returns
for
the
years
ended
December
31,
2012
and
later
remain
subject
to
examination
by
the
IRS
and
various
state
authorities.
(n) Use of Estimates
The
preparation
of
consolidated
financial
statements
in
conformity
with
GAAP
requires
management
to
make
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets
and
liabilities
and
disclosure
of
contingent
assets
and
liabilities
at
the
date
of
consolidated
financial
statements,
and
the
reported
amounts
of
revenue
and
expenses
during
the
period.
Significant
items
subject
to
such
estimates
and
assumptions
include
valuation
allowances
for
receivables
and
deferred
income
tax
assets,
deferred
revenue
recognition,
capitalization
and
amortization
of
software
and
integration
costs,
and
the
valuation
of
the
Company's
common
stock
used
in
determining
the
sharebased
award
liability
and
compensation
expense.
Actual
results
could
differ
from
those
estimates.
F-27
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(3) Significant Accounting Policies (Continued)
(o) Unaudited Pro Forma Earnings Per Share
Unaudited
pro
forma
earnings
(loss)
per
common
share
for
all
periods
presented
is
computed
by
dividing
net
earnings
(loss)
for
the
respective
period
by
42,616,073
common
shares,
which
is
the
aggregate
number
of
shares
of
CommerceHub,
Inc.
Series
A,
Series
B
and
Series
C
common
stock
that
would
have
been
issued
if
the
CommerceHub
Spin-Off
had
occurred
on
December
31,
2015,
assuming
a
1-for-10
distribution
ratio
on
Series
A
and
Series
B
common
stock
for
every
share
of
Series
A
or
B
Liberty
Ventures
common
stock
outstanding
and
1-for-5
distribution
ratio
on
Series
C
common
stock
for
every
share
of
Series
A
or
B
Liberty
Ventures
common
stock
outstanding.
(p) Recent Accounting Pronouncements
In
May
2014,
the
FASB
issued
Accounting
Standards
Update
(ASU)
No.
2014-09,
"Revenue
from
Contracts
with
Customers
(Topic
606)
("ASU
2014-09").
This
topic
provides
for
five
principles
which
should
be
followed
to
determine
the
appropriate
amount
and
timing
of
revenue
recognition
for
the
transfer
of
goods
and
services
to
customers.
The
principles
in
this
ASU
2014-09
should
be
applied
to
all
contracts
with
customers
regardless
of
industry.
The
amendments
in
ASU
2014-09
are
effective
for
fiscal
years,
and
interim
periods
within
those
years
beginning
after
December
15,
2016,
with
two
transition
methods
of
adoption
allowed.
Early
adoption
for
reporting
periods
prior
to
December
15,
2016
is
not
permitted.
In
March
2015,
the
FASB
voted
to
defer
the
effective
date
by
one
year,
but
allow
adoption
as
of
the
original
adoption
date.
In
May
2016
FASB
issued
Accounting
Standards
Update
(ASU)
No.
2016-08,
"Revenue
from
Contracts
with
Customers"
(Topic
606)
Principal versus Agent Considerations, (Reporting Revenue Gross versus Net) .
This
was
to
further
clarify
the
implementation
guidance
on
principal
versus
agent
considerations
in
the
previously
issued
ASU
No.
2014-09.
ASU
2016-08
has
no
impact
on
the
adoption
date
of
the
previously
issued
update.
We
are
evaluating
the
financial
statement
impacts
of
the
guidance
in
ASU
2014-09
and
determining
which
transition
method
we
will
utilize.
In
September
2015,
FASB
issued
Accounting
Standards
Update
No.
2015-16,
"Simplifying
the
Accounting
for
Measurement-Period
Adjustments"
("ASU
2015-16").
This
standard
requires
an
acquirer
to
recognize
adjustments
to
provisional
amounts
that
are
identified
during
the
measurement
period
in
the
reporting
period
in
which
the
adjustment
amounts
are
determined.
ASU
2015-16
also
requires
separate
presentation
on
the
face
of
the
income
statement,
or
disclosure
in
the
notes,
of
the
amount
recorded
in
current-period
earnings
by
line
item
that
would
have
been
recorded
in
previous
reporting
periods
if
the
adjustment
to
the
provisional
amount
has
been
recognized
as
of
the
acquisition
date.
ASU
2015-16
is
effective
for
annual
reporting
periods
beginning
after
December
15,
2015,
including
interim
periods
within
those
fiscal
years.
The
Company
does
not
believe
that
this
will
have
material
impact
on
its
consolidated
financial
statements.
In
February
2016,
FASB
issued
Accounting
Standards
Update
(ASU)
No.
2016-02
"Leases"
(Topic
842)
("ASU
2016-02").
This
topic
provides
that
a
lessee
should
recognize
the
assets
and
liabilities
that
arise
from
leases.
Topic
842
requires
an
entity
to
separate
the
lease
components
from
the
nonlease
components
in
a
contract.
This
Accounting
Standards
Update
(ASU)
intended
to
improve
financial
reporting
about
leasing
transactions.
ASU
2016-02
is
effective
for
fiscal
years
beginning
after
December
15,
2018.
The
Company
is
evaluating
the
financial
statement
impact
this
update
will
have
on
the
consolidated
financial
statements.
F-28
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(4) Concentrations of Significant Customers and Credit Risk
The
Company's
revenue
model
is
based
on
retailer
and
supplier
program
relationships
whereby
many
supplier
transactions
may
be
attributable
to
a
single
retailer.
Significant
customer
concentrations
contemplate
the
total
program
revenues
(retailers
and
related
suppliers)
and
receivables
generated
by
these
customers.
For
the
year
ended
December
31,
2015,
three
customers
accounted
for
12%,
10%
and
8%,
respectively,
of
total
revenue.
For
the
year
ended
December
31,
2014,
three
customers
accounted
for
13%,
10%,
and
10%,
respectively,
of
total
revenue.
The
Company
had
receivables
from
these
three
customers
of
approximately
$1.9
million
and
$1.7
million
at
December
31,
2015
and
2014,
respectively.
No
customer
represented
more
than
10%
of
accounts
receivable
at
December
31,
2015
and
2014.
(5) Acquisition of Mercent Corporation
On
January
8,
2015,
the
Company
acquired
100%
of
the
equity
of
Mercent,
an
online
marketing
technology
and
service
company
that
helps
merchants
optimize
performance
across
online
channels,
for
total
cash
consideration
of
approximately
$20.2
million.
During
the
years
ended
December
31,
2015
and
2014,
the
Company
incurred
transaction
related
costs
of
$166
thousand
and
$358
thousand,
respectively,
which
are
included
in
general
and
administrative
expenses.
Under
the
acquisition
method
of
accounting,
the
Company
allocated
the
purchase
price
to
the
identifiable
assets
and
liabilities
based
on
their
estimated
fair
value.
The
allocation
of
the
Mercent
purchase
consideration
to
the
assets
acquired
and
liabilities
assumed
was
as
follows
(in
thousands):
Cash
Accounts
receivable
Prepaid
expenses
Property
and
equipment
Customer
relationships
Developed
technology
Deferred
tax
asset
Goodwill
Accounts
payable
and
accrued
expenses
Deferred
revenue
$
41
2,559
87
336
2,000
1,500
3,580
12,390
(2,015)
(212)
$ 20,266
Methodologies
used
in
valuing
the
intangible
assets
include,
but
are
not
limited
to,
multiple
period
excess
earnings
method
for
developed
technology
and
customer
relationships.
The
excess
of
the
purchase
price
over
the
total
net
identifiable
assets
has
been
recorded
as
goodwill,
which
includes
synergies
expected
from
the
expanded
service
capabilities
and
the
value
of
the
assembled
work
force
in
accordance
with
GAAP.
For
federal
income
tax
purposes,
the
transaction
is
treated
as
a
stock
acquisition.
The
goodwill
resulting
from
this
transaction
is
not
expected
to
be
deductible
for
tax
purposes.
Mercent's
results
of
operations
have
been
included
in
the
Company's
consolidated
results
since
the
acquisition
date.
F-29
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(6) Goodwill and Purchased Intangible Assets
Goodwill—Changes
in
the
carrying
amount
of
goodwill
during
the
year
ended
December
31,
2015
are
as
follows
(in
thousands):
Balance,
December
31,
2014
Additions
Balance
December
31,
2015
$ 9,020
12,390
$ 21,410
The
addition
to
goodwill
during
the
year
ended
December
31,
2015
is
related
to
the
acquisition
of
Mercent
in
January
2015.
Purchased
Intangibles
Assets—Intangible
assets
acquired
as
of
December
31,
2015
are
as
follows
(in
thousand):
Weighted
Average
Life (Years)
Developed
technology
Customer
relationships
Total
Gross
Carrying
Amount
2
$
2
2
$
1,500
2,000
3,500
Accumulated
Amortization
Net Book
Value
750
1,000
1,750
750
1,000
1,750
The
Company
had
no
intangible
assets
as
of
December
31,
2014.
Amortization
expense
related
to
acquired
intangible
assets
was
$1.8
million
for
the
year-ended
December
31,
2015.
Future
estimated
amortization
expense
for
acquired
intangible
assets
as
of
December
31,
2015
are
as
follows
(in
thousands):
2016
Total
$ 1,750
$ 1,750
(7) Related Party Transactions
(a)
Transactions with QVC
For
the
years
ended
December
31,
2015
and
2014,
QVC,
Inc.
("QVC"),
a
wholly-owned
subsidiary
of
Liberty,
accounted
for
approximately
8%
and
10%
of
total
revenue,
respectively.
At
December
31,
2015,
there
were
892
suppliers
utilizing
the
CommerceHub
Solutions
to
transact
a
portion
of
their
business
with
QVC.
The
Company
had
receivables
relating
to
ordinary
business
with
QVC
of
approximately
$511
thousand
and
$158
thousand
at
December
31,
2015
and
2014,
respectively.
(b)
Transactions with Parent
To
assist
the
Company
in
meeting
its
financial
obligations
under
the
Liquidity
Program
(note
12),
the
Company
executed
a
funding
agreement
with
Liberty.
Under
the
funding
agreement,
Liberty
has
agreed
to
loan
the
Company
cash
at
current
market
interest
rates,
or
make
additional
equity
investments
in
common
stock,
in
amounts
sufficient
to
fulfill
its
obligations
under
the
Liquidity
Program.
There
were
no
amounts
due
to
Liberty
under
this
funding
arrangement
at
December
31,
2015
and
2014.
F-30
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(7) Related Party Transactions (Continued)
In
August
2012,
the
Company
advanced
Liberty
$19.0
million
under
a
master
promissory
note.
The
Company
advanced
an
additional
$9.0
million
and
$6.0
million
to
Liberty
under
the
same
note
and
terms
in
March
2013
and
December
2013,
respectively.
The
note
bears
interest
at
LIBOR
plus
1.5%
(1.55%
at
December
31,
2015).
Interest
shall
be
paid
in
cash
or
compounded,
at
the
election
of
Liberty,
on
an
annual
basis.
Accrued
interest
receivable,
included
within
Note
receivable—Parent
on
the
accompanying
consolidated
balance
sheets,
was
$2.1
million
and
$1.5
million
at
December
31,
2015
and
2014,
respectively.
The
unpaid
interest
and
principal
amount
of
the
loan
is
due
in
August
2016.
The
Company
also
has
a
tax
sharing
arrangement
with
Liberty
as
described
in
the
income
taxes
section
of
note
3
and
income
taxes
payable
are
presented
as
Due
to
Parent
on
the
accompanying
consolidated
balance
sheets.
(8) Software and Deferred Costs
Software
and
deferred
costs
are
comprised
of
the
following
(in
thousands)
at
December
31:
2015
2014
Software
costs
Less
accumulated
amortization
Software
costs,
net
$ 41,120
34,636
(33,931) (30,525)
$
7,189
4,111
Integration
costs
Less
accumulated
amortization
Integration
costs,
net
$ 18,831
16,262
(13,875) (12,400)
$
4,956
3,862
2015
2014
Amortization
expense
related
to
software
costs
was
approximately
$3.4
million
and
$2.6
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
Amortization
expense
related
to
integration
costs
was
approximately
$1.5
million
and
$1.6
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
Future
amortization
expense
of
software
and
integration
costs
is
expected
to
be
as
follows
for
the
years
ending
December
31
(in
thousands):
2016
2017
2018
2019
2020
Thereafter
F-31
$ 5,409
4,122
1,739
542
223
110
$ 12,145
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(9) Property and Equipment
Property
and
equipment
consist
of
the
following
(in
thousands)
at
December
31:
2015
Computer
equipment
Furniture
and
fixtures
Leasehold
improvements
Equipment
under
capital
leases
Total
Less
accumulated
depreciation
and
amortization
Property
and
equipment,
net
2014
$ 13,344
9,698
1,383
748
2,271
1,258
46
46
17,044
11,750
(10,338) (7,689)
$
6,706
4,061
Depreciation
and
amortization
of
property
and
equipment
totaled
approximately
$2.6
million
and
$1.8
million
during
the
years
ended
December
31,
2015
and
2014,
respectively.
(10) Deferred Revenue
Deferred
revenue
is
made
up
of
software
as
a
service
("SaaS")
based
recurring
revenue
(deferred
service
fees)
and
other
deferred
revenue
related
to
professional
services
and
customer
set-up
fees.
Service
fees
for
recurring
revenue
is
typically
recognized
with
a
one
month
deferral
based
on
timing
of
billings.
Deferred
professional
service
fees
associated
with
customer
set-up
integration
services
and
enhancement
services
are
recognized
over
the
longer
of
the
customer
contract
period
or
expected
life
of
the
customer,
which
is
typically
48
to
76
months.
Deferred
revenue
associated
with
professional
services
and
setup
fee
revenue
was
approximately
$12.0
million
and
$9.8
million
at
December
31,
2015
and
2014,
respectively.
(11) Income Taxes
The
Company's
taxable
income
was
included
in
the
consolidated
federal
income
tax
return
of
Liberty's
parent
corporation
during
the
periods
presented.
Federal
income
taxes
were
paid
or
refunded
pursuant
to
the
terms
of
a
tax
sharing
agreement
under
which
taxes
approximate
the
amount
that
would
have
been
computed
on
a
separate
company
basis.
The
tax
provision
included
in
these
consolidated
financial
statements
has
been
prepared
on
a
stand-alone
basis,
as
if
CommerceHub
was
not
part
of
the
consolidated
Liberty
group.
Accordingly,
the
effective
tax
rate
of
the
Company
in
the
future
years
could
vary
from
its
historical
effective
tax
rates
depending
on
future
legal
structure
of
CommerceHub
and
related
tax
elections.
There
were
no
uncertain
tax
positions
as
of
December
31,
2015
or
December
31,
2014.
Interest
and
penalties
related
to
unrecognized
tax
benefits
are
recognized
as
a
component
of
income
tax
expense.
There
were
no
accrued
interest
and
penalties
recognized
in
the
balance
sheet
as
of
December
31,
2015
and
December
31,
2014.
F-32
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(11) Income Taxes (Continued)
Liberty
files
income
tax
returns
in
the
US
federal
jurisdiction
and
various
state
jurisdictions.
In
the
normal
course
of
business
Liberty
is
subject
to
examination
by
various
taxing
authorities.
All
tax
years
prior
to
2012
are
closed.
The
IRS
has
completed
its
examination
of
the
2012
-
2013
tax
years;
however,
2012
remains
"open"
until
the
statute
of
limitations
lapses
on
September
15,
2016,
and
2013
remains
"open"
until
the
statute
of
limitations
lapses
on
September
15,
2017.
Liberty's
2014
and
2015
tax
years
are
being
examined
currently
under
the
IRS's
Compliance
Assurance
Process
("CAP")
program.
Income
tax
expense
(benefit)
consists
of
the
following
(in
thousands)
at
December
31:
2015
Current
Federal
State
and
local
Total
current
Deferred
Federal
State
and
local
Total
deferred
Total
tax
expense
(benefit)
2014
$
7,931
9,994
2,477
2,880
10,408
12,874
(9,942) (7,805)
(2,347) (2,124)
(12,289) (9,929)
$ (1,881) 2,945
Income
tax
expense
differed
from
the
amounts
computed
by
applying
the
U.S.
Federal
income
tax
rate
of
35%
to
pretax
income
as
a
result
of
the
following
(in
thousands)
for
the
year
ended
December
31:
2015
Computed
"expected"
tax
expense
Increase
(decrease)
resulting
from:
State
and
local
income
taxes,
net
of
Federal
income
tax
benefit
Impact
of
state
rate
change
on
deferred
taxes
Non-deductible
expenses
Market
adjustment
for
options
exercised
Research
and
Development
tax
credits
Other
F-33
2014
$ (2,222) 2,538
(21) 565
105
(131)
228
—
319
29
(368) —
78
(56)
$ (1,881) 2,945
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(11) Income Taxes (Continued)
The
tax
effects
of
temporary
differences
that
give
rise
to
significant
portions
of
the
deferred
tax
assets
and
deferred
tax
liabilities
are
presented
below
(in
thousands)
at
December
31:
2015
Deferred
tax
assets:
Accounts
receivable,
principally
due
to
allowance
for
doubtful
accounts
Deferred
revenue
Accrued
liabilities
Shared-based
compensation
expense
Net
operating
loss
Other
Total
deferred
tax
assets
Deferred
tax
liabilities:
Software
and
deferred
costs
Property
and
equipment
Total
gross
deferred
tax
liabilities
Net
deferred
tax
asset
2014
$
259
399
2,536
1,749
1,154
973
37,263
23,651
3,953
—
4
—
$ 45,169
26,772
$ 5,581
3,194
763
622
$ 6,344
3,816
$ 38,825
22,956
In
assessing
the
realizability
of
deferred
tax
assets,
management
considers
whether
it
is
more
likely
than
not
that
some
portion
or
all
of
the
deferred
tax
assets
will
not
be
realized.
The
ultimate
realization
of
deferred
tax
assets
is
dependent
upon
the
generation
of
future
taxable
income
during
the
periods
in
which
those
temporary
differences
become
deductible.
Management
considers
the
scheduled
reversal
of
deferred
tax
liabilities,
projected
future
taxable
income,
and
tax
planning
strategies
in
making
this
assessment.
Based
upon
the
level
of
projections
for
future
taxable
income
over
the
periods
in
which
the
deferred
tax
assets
are
deductible,
management
believes
it
is
more
likely
than
not
that
the
Company
will
realize
the
benefits
of
these
deductible
differences.
The
amount
of
the
deferred
tax
asset
considered
realizable,
however,
could
be
reduced
in
the
near
term
if
estimates
of
future
taxable
income
during
the
carryforward
period
are
reduced.
Before
the
imposition
of
IRC
Section
382
limitations
described
below,
at
December
31,
2015,
the
Company
has
unused
federal
net
operating
loss
carryforwards
("NOLs")
of
approximately
$20.1
million
which
were
acquired
as
part
of
the
Mercent
acquisition.
Under
Internal
Revenue
Code
("IRC")
Section
382,
the
use
of
loss
carryforwards
may
be
limited
if
a
change
in
ownership
of
a
company
occurs.
If
it
is
determined
that,
due
to
transactions
involving
Mercent's
shares
owned
by
its
5
percent
or
greater
shareholders,
a
change
of
ownership
has
occurred
under
the
provisions
of
IRC
Section
382,
the
Company's
federal
net
operating
loss
carryforwards
could
be
subject
to
significant
IRC
Section
382
limitations.
Based
on
studies
of
the
changes
in
ownership
of
Mercent,
it
has
been
determined
that
IRC
Section
382
ownership
changes
have
occurred
which
reduce
the
amount
of
NOLs
that
can
be
used
in
future
years.
Approximately
$1.5
million
of
NOLs
are
available
to
be
utilized
each
year
from
2016
to
2019
and
approximately
$0.35
million
of
NOLs
are
available
to
be
utilized
each
year
from
2020
to
2034
F-34
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(11) Income Taxes (Continued)
for
a
total
of
$11.3
million.
Accordingly,
the
Company's
deferred
tax
assets
include
$11.3
million
of
U.S.
net
operating
loss
carryforwards.
The
net
operating
loss
carryforwards
available
at
December
31,
2015,
if
unused
will
expire
at
various
dates
from
2024
through
2034.
(12) Share-Based Awards
(a) 1999 Plan
The
Company's
share-based
awards
consist
of
the
stock
options
and
stock
appreciation
rights.
During
1999,
the
Company
adopted
an
incentive
and
nonqualified
stock
option
plan
(the
"1999
Plan").
All
employees
of
the
Company
were
eligible
for
nonqualified
stock
options.
Additionally,
consultants
and
others
are
eligible
for
nonqualified
stock
options.
The
1999
Plan
authorized
grants
of
options
to
purchase
up
to
4,000,000
shares
of
authorized
but
unissued
common
stock.
Options
on
common
stock
are
awarded
to
employees
at
the
discretion
of
the
Board
of
Directors.
Under
the
plan
document,
the
exercise
price
of
such
stock
options
will
not
be
less
than
100%
of
the
fair
value
per
share
of
common
stock
on
the
date
of
grant.
The
option
price
for
each
grant
was
determined
by
the
Company's
Compensation
Committee
based
on
actual
investment
transactions,
periodic
valuations
and
other
factors.
The
term
of
the
options
granted
pursuant
to
the
1999
Plan
was
generally
10
years
from
the
date
of
grant,
assuming
continuing
employment
with
the
Company.
An
exception
to
the
10
year
life
exists
for
those
individuals
who
own
more
than
10%
of
the
combined
voting
power
of
all
classes
of
stock
of
the
Company.
For
these
individuals,
the
life
may
not
exceed
5
years
and
the
exercise
price
shall
be
set
at
not
less
than
110%
of
the
fair
market
value
per
share
of
common
stock
on
the
date
of
grant.
The
options
granted
pursuant
to
the
1999
Plan
generally
vest
over
a
four
year
period.
Vested
options
may
be
exercised
beginning
on
or
after
the
first
anniversary
of
the
grant
date.
The
1999
Plan
expired
in
September
2009.
However,
all
options
and
other
rights
granted
prior
to
expiration
will
continue
to
be
governed
under
the
terms
of
the
1999
Plan
document.
At
December
31,
2015
and
2014,
no
shares
of
common
stock
are
available
for
future
grants
under
the
1999
Plan
due
to
its
expiration.
(b) Liquidity Program
During
2006,
the
Compensation
Committee
adopted
a
stock
option
liquidity
program
(the
"Liquidity
Program")
for
eligible
holders
of
stock
options
and
certain
eligible
common
shares
(shares
issued
as
a
result
of
an
option
exercise).
The
Liquidity
Program
provides
eligible
option
holders
and
stockholders
the
ability
to
cancel
their
vested
options
or
sell
their
eligible
common
shares
in
exchange
for
cash
payment.
Eligible
option
holders
and
stockholders
have
the
opportunity
to
tender
eligible
options
or
shares
at
any
time
during
the
year
except
for
when
valuations
are
being
performed.
Cash
consideration
for
the
purchase
and
cancellation
of
tendered
stock
options
is
based
on
the
fair
value
of
the
Company's
underlying
common
stock
less
the
option
exercise
price.
The
Company
made
total
cash
payments
of
approximately
$2.2
million
and
$6.8
million
in
exchange
for
the
cancellation
of
97,900
and
362,750
stock
options
under
this
program
during
2015
and
2014,
respectively.
Cash
consideration
for
tendered
eligible
common
shares
is
based
upon
the
fair
value
F-35
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(12) Share-Based Awards (Continued)
of
the
common
shares.
There
were
113,925
and
109,425
common
shares,
eligible
for
the
holders
to
require
the
Company
to
purchase,
issued
and
outstanding
at
December
31,
2015
and
2014,
respectively.
As
of
December
31,
2015
and
2014,
the
Company
has
recorded
a
liability
of
approximately
$17.4
million
and
$14.7
million,
respectively,
related
to
liability
classified
stock-based
compensation
obligations
under
the
Liquidity
Program.
The
liability
includes
approximately
$13.7
million
and
$12.1
million
for
stock
options
and
approximately
$3.7
million
and
$2.6
million
for
eligible
common
shares
at
December
31,
2015
and
2014,
respectively.
For
the
years
ended
December
31,
2015
and
2014,
share-based
payment
compensation
expense
for
awards
under
the
1999
Plan
totaled
approximately
$5.9
million
and
$3.9
million,
respectively.
To
assist
the
Company
in
meeting
its
financial
obligation
under
the
Liquidity
Program,
the
Company
executed
a
funding
agreement
with
Liberty.
Under
the
funding
agreement,
Liberty
has
agreed
to
loan
the
Company
cash
at
current
market
interest
rates
or
make
additional
equity
investments
in
common
shares,
such
that
the
cash
provided
to
the
Company
would
provide
sufficient
funds
to
fulfill
its
obligation
under
the
Liquidity
Program.
The
number
of
options
exercisable
under
the
1999
Plan
was
495,781
and
605,181
as
of
December
31,
2015
and
2014,
respectively,
and
the
weighted
average
exercise
price
of
these
options
was
$3.52
per
share
and
$3.48
per
share,
respectively.
The
following
table
summarizes
the
status
of
the
stock
options
subject
to
the
Liquidity
Program
during
the
years
ended
December
31,
2015
and
2014:
2015
Nonqualified stock
option plan
Weighted
average
Number of
exercise
options
price
Outstanding,
beginning
of
year
Exercised
Tendered*
Outstanding,
end
of
year
*
605,181
$
(11,500) $
(97,900) $
495,781
$
3.48
2.87
3.36
3.52
2014
Nonqualified stock
option plan
Weighted
average
Number of
exercise
options
price
988,931
$
(21,000) $
(362,750) $
605,181
$
3.37
2.42
3.23
3.48
Tendered
stock
options
under
the
1999
Plan
represents
eligible
stock
options
exchanged
for
cash
under
the
Liquidity
Program.
At
December
31,
2015,
the
range
of
exercise
prices
and
weighted
average
remaining
contractual
life
of
the
outstanding
nonqualified
stock
options
was
$2.71
per
share
to
$4.13
per
share
and
2.13
years,
respectively.
At
December
31,
2015,
the
aggregate
intrinsic
value
of
all
stock
options
outstanding
was
approximately
$14.7
million
or
$29.60
per
share.
F-36
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(12) Share-Based Awards (Continued)
(c) Stock Appreciation Rights Plan
Effective
April
22,
2010,
the
Company
instituted
the
2010
Stock
Appreciation
Rights
Plan
(the
"SAR
Plan").
Employees,
board
members
and
consultants
of
the
Company
("Participants")
receive
SARS
under
the
plan
as
granted
by
the
Company's
Compensation
Committee.
The
total
number
of
common
shares
with
respect
to
which
SARS
may
be
issued
under
the
SAR
Plan
is
6.0
million,
which
includes
and
is
not
in
addition
to
common
shares
previously
authorized
for
issue
under
the
aforementioned
1999
Plan.
Compensation
expense
is
recorded
for
the
fair
value
of
the
related
liability
multiplied
by
the
percentage
of
the
requisite
service
period
completed
to
date
less
total
compensation
cost
previously
recognized.
After
the
requisite
service
period
is
complete,
compensation
cost
is
remeasured
based
on
the
fair
value
of
the
award
at
each
consolidated
balance
sheet
date
until
the
award
is
exercised.
Generally,
SARS
are
exercisable
25%
upon
the
first
anniversary
of
the
date
awarded,
an
additional
25%
on
the
second
anniversary,
an
additional
25%
on
the
third
anniversary,
and
the
last
25%
on
the
fourth
anniversary.
The
Company
has
issued
certain
performance-based
SARS
to
a
limited
number
of
employee
executives,
which
vest
based
on
service
and
the
achievement
of
Company
revenue
milestones.
Management
has
determined
that
the
achievement
of
these
milestones
is
considered
to
be
probable,
and
accordingly,
the
associated
share-based
compensation
expense
is
currently
being
recognized
over
the
implicit
service
period
of
approximately
3
years.
Upon
exercise,
the
Participant
shall
receive
payment
for
the
difference
between
the
current
value
of
a
common
share
and
the
exercise
price
for
any
or
all
vested
SARS.
The
Company
made
total
cash
payments
of
approximately
$5.1
million
and
$1.0
million
in
exchange
for
the
cancellation
of
298,500
and
69,450
SARS
under
this
program
during
2015
and
2014,
respectively.
As
of
December
31,
2015
and
2014,
the
Company
has
recorded
a
liability
of
approximately
$78.8
million
and
$46.9
million,
respectively,
related
to
SARS.
For
the
years
ended
December
31,
2015
and
2014,
share-based
payment
compensation
expense
related
to
SARS
totaled
approximately
$36.3
million
and
$24.5
million,
respectively.
The
number
of
rights
exercisable
under
the
SAR
Plan
was
2,472,225
and
2,779,214
as
of
December
31,
2015
and
2014,
respectively,
and
the
weighted
average
exercise
price
of
these
rights
was
$6.26
per
share
and
$7.04
per
share,
respectively.
The
following
table
summarizes
the
status
of
the
stock
appreciation
rights
during
the
years
ended
December
31,
2015
and
2014:
2015
SAR Plan
Weighted
average
Number of
exercise
SARs
price
Outstanding,
beginning
of
year
Granted
Exercised
Forfeited
Outstanding,
end
of
year
F-37
3,547,725
571,250
(298,500)
(234,000)
3,586,475
$
$
$
$
$
7.48
24.95
10.51
20.47
9.16
2014
SAR Plan
Weighted
average
Number of
exercise
SARs
price
3,537,175
$
259,000
$
(69,450) $
(179,000) $
3,547,725
$
6.86
18.51
5.36
12.08
7.48
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(12) Share-Based Awards (Continued)
At
December
31,
2015,
the
range
of
exercise
prices
and
weighted
average
remaining
contractual
life
of
SARS
outstanding
under
the
SAR
plan
was
$4.72
per
share
to
$33.12
per
share
and
5.84
years,
respectively.
At
December
31,
2015,
the
aggregate
intrinsic
value
of
all
stock
appreciation
rights
outstanding
was
$85.9
million
or
$23.95
per
share.
Unrecognized
compensation
cost
related
to
SARS
totaled
approximately
$19.5
million
at
December
31,
2015
and
is
expected
to
be
recognized
over
a
weighted
average
remaining
vesting
period
of
approximately
1.96
years.
As
a
result
of
the
termination
of
the
Liquidity
Program
upon
the
anticipated
CommerceHub
Spin-Off,
the
outstanding
options
and
SARs
will
no
longer
be
able
to
be
settled
in
cash,
which
would
result
in
the
change
in
classification
of
the
awards
from
liability
to
equity
awards.
Additionally,
the
Spin-Off
is
a
restructuring
event
which
would
result
in
a
modification
of
the
terms
and
conditions
of
the
outstanding
equity
awards
upon
the
CommerceHub
Spin-Off.
As
the
fair
value
of
the
modified
awards
immediately
after
the
Spin-Off
is
not
known,
the
Company
cannot
estimate
the
incremental
compensation
expense
that
may
be
recorded
in
conjunction
with
the
modification.
However,
the
amount
of
additional
compensation,
if
any,
is
not
anticipated
to
be
material.
(d) Liberty Interactive Plans
Liberty
has
granted
to
certain
directors,
officers,
employees
and
consultants
of
Liberty
stock
options
to
purchase
shares
of
Liberty
Ventures
common
stock
pursuant
to
applicable
incentive
plans
in
place
at
Liberty.
Each
holder
of
an
outstanding
option
to
purchase
shares
of
Liberty
Ventures
common
stock
on
the
record
date
(an
"original
Ventures
option
award")
who
is
a
member
of
the
Liberty
board
of
directors
or
an
officer
of
Liberty
holding
the
position
of
Vice
President
or
above
will
receive
(i)
an
option
to
purchase
shares
of
the
corresponding
series
of
Company
common
stock
and
an
option
to
purchase
shares
of
Series
C
Company
common
stock
(such
new
option
awards,
"new
Company
option
awards")
and
(ii)
an
adjustment
to
the
exercise
price
and
number
of
shares
subject
to
the
original
Ventures
option
award
(as
so
adjusted,
an
"adjusted
Ventures
option
award").
The
exercise
prices
of
and
number
of
shares
subject
to
the
new
Company
option
awards
and
the
related
adjusted
Ventures
option
award
will
be
determined
based
on
the
exercise
price
and
number
of
shares
subject
to
the
original
Ventures
option
award,
the
distribution
ratios
being
used
in
the
CommerceHub
Spin-Off,
the
pre-CommerceHub
Spin-Off
trading
price
of
Liberty
Ventures
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
Liberty
Ventures
common
stock
over
the
three-consecutive
trading
days
immediately
preceding
the
CommerceHub
Spin-Off)
and
the
relative
post-CommerceHub
Spin-Off
trading
prices
of
Liberty
Ventures
common
stock
and
Company
common
stock
(determined
using
the
volume
weighted
average
price
of
the
applicable
series
of
common
stock
over
the
three
consecutive
trading
days
beginning
on
the
first
trading
day
following
the
CommerceHub
Spin-Off
on
which
both
the
Liberty
Ventures
common
stock
and
the
Company
common
stock
trade
in
the
"regular
way"
(meaning
once
the
common
stock
trades
using
a
standard
settlement
cycle)),
such
that
the
pre-CommerceHub
Spin-Off
value
of
the
original
Ventures
option
award
is
allocated
between
the
new
Company
option
awards
and
the
adjusted
Ventures
option
award.
Except
as
described
above,
all
other
terms
of
an
adjusted
Ventures
option
award
and
the
new
Company
option
awards
(including,
for
example,
the
vesting
terms
thereof)
will
in
all
material
respects,
be
the
same
as
those
of
the
corresponding
original
Ventures
option
award.
The
terms
of
the
adjusted
Ventures
option
award
will
be
determined
and
the
new
Company
option
awards
will
be
granted
as
soon
F-38
Table
of
Contents
COMMERCEHUB, INC.
Notes to Consolidated Financial Statements (Continued)
December 31, 2015 and 2014
(12) Share-Based Awards (Continued)
as
practicable
following
the
determination
of
the
pre-
and
post-CommerceHub
Spin-Off
trading
prices
of
Liberty
Ventures
and
Company
common
stock,
as
applicable.
Liberty
had
outstanding
approximately
3.7
million
Liberty
Ventures
Series
A
and
1.5
million
Liberty
Ventures
Series
B
options
at
December
31,
2015
with
a
weighted
average
exercise
price
of
$23.29
and
$38.04
per
share,
respectively.
Approximately
2.9
million
and
zero
of
those
options,
respectively,
were
exercisable
at
December
31,
2015
with
a
weighted
average
exercise
price
of
$18.97
per
share.
Substantially
all
of
Liberty's
outstanding
and
exercisable
options
relate
to
employees
of
Liberty
who
will
receive
CommerceHub
options
in
the
Spin-Off.
The
compensation
expense
relating
to
these
employees
of
Liberty,
who
will
remain
employees
of
Liberty
upon
the
Spin-Off,
will
continue
to
be
recorded
at
Liberty.
(13) Leases
The
Company
leases
its
corporate
offices
and
primary
operations
facility
under
operating
lease
arrangements
which
expire
in
March
2022.
The
leases
contain
renewal
provisions.
Total
rent
expense
for
the
Company's
office
space
for
the
years
ended
December
31,
2015
and
2014
was
approximately
$1.4
million
and
$641
thousand,
respectively.
On
March
14,
2014,
the
Company
entered
into
a
lease
agreement
for
a
new
corporate
office
headquarters
in
Albany,
New
York.
This
lease
consists
of
approximately
49,500
sq.
ft.,
comprised
of
48,000
sq.
ft.
of
office
space
and
training
space
and
a
1,500
sq.
ft.
data
center.
The
Company
moved
into
the
new
space
during
the
first
quarter
of
2016.
Future
minimum
lease
payments
under
noncancelable
operating
leases
are
as
follows
(in
thousands):
Year
ending
December
31:
2016
2017
2018
2019
2020
Thereafter
F-39
$ 2,011
$ 2,227
$ 2,252
$ 2,277
$ 2,302
$ 2,003
$ 13,072
Table
of
Contents
PART II—INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution
Liberty
has
incurred
approximately
$4.575
million
in
transaction-related
fees
and
costs
in
connection
with
the
Spin-Off.
Additional
unanticipated
costs
may
be
incurred
with
the
operation
of
CH
Parent
as
a
stand-alone
company.
The
following
table
sets
forth
the
costs
and
expenses
payable
by
us
in
connection
with
the
transaction
being
registered.
All
amounts
are
estimates
except
the
registration
fee.
Registration
fee
Printing
and
engraving
expenses
Legal
fees
and
expenses
Accounting
fees
and
expenses
Miscellaneous
TOTAL
Item 14.
$
$
74,603
1,000,000
1,500,000
1,000,000
1,000,000
4,574,603
Indemnification of Directors and Officers
Section
145
of
the
DGCL
provides,
generally,
that
a
corporation
shall
have
the
power
to
indemnify
any
person
who
was
or
is
a
party
or
is
threatened
to
be
made
a
party
to
any
threatened,
pending
or
completed
action,
suit
or
proceeding
(except
actions
by
or
in
the
right
of
the
corporation)
by
reason
of
the
fact
that
such
person
is
or
was
a
director,
officer,
employee
or
agent
of
the
corporation
against
all
expenses,
judgments,
fines
and
amounts
paid
in
settlement
actually
and
reasonably
incurred
by
such
person
in
connection
with
such
action,
suit
or
proceeding
if
such
person
acted
in
good
faith
and
in
a
manner
such
person
reasonably
believed
to
be
in
or
not
opposed
to
the
best
interests
of
the
corporation
and,
with
respect
to
any
criminal
action
or
proceeding,
had
no
reasonable
cause
to
believe
his
or
her
conduct
was
unlawful.
A
corporation
may
similarly
indemnify
such
person
for
expenses
actually
and
reasonably
incurred
by
such
person
in
connection
with
the
defense
or
settlement
of
any
action
or
suit
by
or
in
the
right
of
the
corporation,
provided that
such
person
acted
in
good
faith
and
in
a
manner
he
or
she
reasonably
believed
to
be
in
or
not
opposed
to
the
best
interests
of
the
corporation,
and,
in
the
case
of
claims,
issues
and
matters
as
to
which
such
person
shall
have
been
adjudged
liable
to
the
corporation,
provided that
a
court
shall
have
determined,
upon
application,
that,
despite
the
adjudication
of
liability
but
in
view
of
all
of
the
circumstances
of
the
case,
such
person
is
fairly
and
reasonably
entitled
to
indemnity
for
such
expenses
which
such
court
shall
deem
proper.
Section
102(b)(7)
of
the
DGCL
provides,
generally,
that
the
certificate
of
incorporation
may
contain
a
provision
eliminating
or
limiting
the
personal
liability
of
a
director
to
the
corporation
or
its
stockholders
for
monetary
damages
for
breach
of
fiduciary
duty
as
a
director,
provided that
such
provision
may
not
eliminate
or
limit
the
liability
of
a
director
(i)
for
any
breach
of
the
director's
duty
of
loyalty
to
the
corporation
or
its
stockholders,
(ii)
for
acts
or
omissions
not
in
good
faith
or
which
involve
intentional
misconduct
or
a
knowing
violation
of
law,
(iii)
under
section
174
of
Title
8
of
the
DGCL,
or
(iv)
for
any
transaction
from
which
the
director
derived
an
improper
personal
benefit.
No
such
provision
may
eliminate
or
limit
the
liability
of
a
director
for
any
act
or
omission
occurring
prior
to
the
date
when
such
provision
became
effective.
Article
V,
Section
E
of
the
CH
Parent
charter
will
provide
as
follows:
1.
Limitation On Liability. To
the
fullest
extent
permitted
by
the
DGCL
as
the
same
exists
or
may
hereafter
be
amended,
a
director
of
CH
Parent
will
not
be
liable
to
CH
Parent
or
any
of
its
stockholders
for
monetary
damages
for
breach
of
fiduciary
duty
as
a
director.
Any
repeal
or
modification
of
this
paragraph
1
will
be
prospective
only
and
will
not
adversely
affect
any
limitation,
right
or
protection
of
a
director
of
CH
Parent
existing
at
the
time
of
such
repeal
or
modification.
II-1
Table
of
Contents
2.
Indemnification.
(a)
Right to Indemnification. CH
Parent
will
indemnify,
to
the
fullest
extent
permitted
by
applicable
law
as
it
presently
exists
or
may
hereafter
be
amended,
any
person
who
was
or
is
made
or
is
threatened
to
be
made
a
party
or
is
otherwise
involved
in
any
action,
suit
or
proceeding,
whether
civil,
criminal,
administrative
or
investigative
(a
proceeding )
by
reason
of
the
fact
that
he,
or
a
person
for
whom
he
is
the
legal
representative,
is
or
was
a
director
or
officer
of
CH
Parent
or
is
or
was
serving
at
the
request
of
CH
Parent
as
a
director,
officer,
employee
or
agent
of
another
corporation
or
of
a
partnership,
joint
venture,
trust,
enterprise
or
nonprofit
entity,
including
service
with
respect
to
employee
benefit
plans,
against
all
liability
and
loss
suffered
and
expenses
(including
attorneys'
fees)
incurred
by
such
person.
Such
right
of
indemnification
will
inure
whether
or
not
the
claim
asserted
is
based
on
matters
which
antedate
the
adoption
of
Article
V,
Section
E
of
the
charter.
CH
Parent
will
be
required
to
indemnify
or
make
advances
to
a
person
in
connection
with
a
proceeding
(or
part
thereof)
initiated
by
such
person
only
if
the
proceeding
(or
part
thereof)
was
authorized
by
the
board
of
directors
of
CH
Parent.
(b)
Prepayment of Expenses. CH
Parent
will
pay
the
expenses
(including
attorney's
fees)
incurred
by
a
director
or
officer
in
defending
any
proceeding
in
advance
of
its
final
disposition;
provided,
however,
that
the
payment
of
expenses
incurred
by
a
director
or
officer
in
advance
of
the
final
disposition
of
the
proceeding
will
be
made
only
upon
receipt
of
an
undertaking
by
the
director
or
officer
to
repay
all
amounts
advanced
if
it
should
be
ultimately
determined
that
the
director
or
officer
is
not
entitled
to
be
indemnified
under
this
paragraph
or
otherwise.
(c)
Claims. If
a
claim
for
indemnification
or
payment
of
expenses
under
this
paragraph
is
not
paid
in
full
within
60
days
after
a
written
claim
therefor
has
been
received
by
CH
Parent,
the
claimant
may
file
suit
to
recover
the
unpaid
amount
of
such
claim
and,
if
successful,
will
be
entitled
to
be
paid
the
expense
(including
attorney's
fees)
of
prosecuting
such
claim
to
the
fullest
extent
permitted
by
Delaware
law.
In
any
such
action
CH
Parent
will
have
the
burden
of
proving
that
the
claimant
was
not
entitled
to
the
requested
indemnification
or
payment
of
expenses
under
applicable
law.
(d)
Non-Exclusivity of Rights. The
rights
conferred
on
any
person
by
this
paragraph
will
not
be
exclusive
of
any
other
rights
which
such
person
may
have
or
hereafter
acquire
under
any
statute,
provision
of
the
charter,
the
bylaws
of
CH
Parent,
agreement,
vote
of
stockholders
or
resolution
of
disinterested
directors
or
otherwise.
(e)
Other Indemnification. CH
Parent's
obligation,
if
any,
to
indemnify
any
person
who
was
or
is
serving
at
its
request
as
a
director,
officer,
employee
or
agent
of
another
corporation,
partnership,
joint
venture,
trust,
enterprise
or
nonprofit
entity
will
be
reduced
by
any
amount
such
person
may
collect
as
indemnification
from
such
other
corporation,
partnership,
joint
venture,
trust,
enterprise
or
nonprofit
entity.
3.
Amendment or Repeal. Any
amendment,
modification
or
repeal
of
the
foregoing
provisions
of
Article
V,
Section
E
of
the
charter
will
not
adversely
affect
any
right
or
protection
hereunder
of
any
person
in
respect
of
any
act
or
omission
occurring
prior
to
the
time
of
such
amendment,
modification
or
repeal.
Item 15.
Recent Sales of Unregistered Securities.
None.
Item 16.
(a)
Exhibits and Financial Statement Schedules
Exhibits. The
following
documents
are
filed
as
exhibits
hereto.
II-2
Table
of
Contents
Exhibit
Number
Exhibit Description
2.1
Form
of
Reorganization
Agreement
by
and
between
Liberty
Interactive
Corporation
and
the
Registrant.
3.1
Form
of
Restated
Certificate
of
Incorporation
of
the
Registrant
to
be
in
effect
at
the
time
of
the
Spin-Off.
3.2
Form
of
Bylaws
of
the
Registrant
to
be
in
effect
at
the
time
of
the
Spin-Off.
4.1
Specimen
Certificate
for
shares
of
Series
A
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.2
Specimen
Certificate
for
shares
of
Series
B
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.3
Specimen
Certificate
for
shares
of
Series
C
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.4
Credit
Agreement,
dated
as
of
June
28,
2016,
among
Commerce
Technologies,
Inc.
(to
be
merged
into
Commerce
Technologies,
LLC),
Holdings
party
thereto,
the
Lenders
party
thereto,
JPMorgan
Chase
Bank,
N.A.,
as
Administrative
Agent,
Wells
Fargo
Bank,
National
Association,
SunTrust
Bank
and
KeyBank
National
Association,
as
Co-Syndication
Agents.
5.1
Opinion
of
Baker
Botts
L.L.P.
as
to
the
legality
of
the
securities
being
registered.
8.1
Form
of
Opinion
of
Baker
Botts
L.L.P.
regarding
certain
tax
matters.
10.1
Form
of
CommerceHub,
Inc.
2016
Omnibus
Incentive
Plan.
10.2
Form
of
CommerceHub,
Inc.
Transitional
Stock
Adjustment
Plan.
10.3
Form
of
Tax
Sharing
Agreement
by
and
between
the
Registrant
and
Liberty
Interactive
Corporation.**
10.4
Form
of
Services
Agreement
by
and
between
the
Registrant
and
Liberty
Media
Corporation.
10.5
Form
of
Indemnification
Agreement
by
and
between
the
Registrant
and
its
executive
officers/directors.
10.6
Commerce
Technologies,
Inc.
1999
Stock
Option
Plan
(As
Amended
and
Restated
Effective
February
13,
2002).**
10.7
Form
of
Commerce
Technologies,
Inc.
1999
Stock
Option
Plan
Nonqualified
Stock
Option
Agreement.**
10.8
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan.**
10.9
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
(time
vesting).**
10.10
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
(performance
vesting).**
10.11
Executive
Employment
Agreement,
dated
effective
as
of
June
28,
2016,
by
and
between
Commerce
Technologies,
Inc.
and
Francis
Poore.
10.12
Employment
Agreement,
dated
February
21,
2007,
by
and
between
Commerce
Technologies,
Inc.
and
Bob
Marro.**
II-3
Table
of
Contents
Exhibit
Number
Exhibit Description
10.13
Amended
and
Restated
Employment
Agreement,
dated
January
8,
2015,
by
and
between
Commerce
Technologies,
Inc.
and
Eric
Best.**
10.14
Release
and
Separation
Agreement
by
and
between
Commerce
Technologies,
Inc.
and
Bob
Marro.**
10.15
Offer
Letter,
dated
May
23,
2016,
between
Commerce
Technologies,
Inc.
and
Mark
Greenquist.**
10.16
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan.
10.17
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement.
10.18
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement
for
Francis
Poore
(Relating
to
Conversion
of
Existing
SARs).
10.19
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement
for
Francis
Poore
(Relating
to
Conversion
of
New
SARs).
10.20
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
for
Francis
Poore.
21.1
List
of
Subsidiaries.
23.1
Consent
of
KPMG
LLP.**
24.1
Power
of
Attorney**
**
Previously
filed
II-4
Table
of
Contents
(b)
Financial Statement Schedules.
(b)(1)
Financial
Statements
Included
in
this
Registration
Statement
on
Form
S-1:
CommerceHub, Inc.:
Condensed
Consolidated
Balance
Sheets
(unaudited),
March
31,
2016
and
December
31,
2015
Condensed
Consolidated
Statements
of
Operations
(unaudited),
Three
months
ended
March
31,
2016
and
March
31,
2015
F-1
F-2
F-3
F-4
Condensed
Consolidated
Statements
of
Cash
Flows
(unaudited),
Three
Months
Ended
March
31,
2016
and
March
31,
2015
Notes
to
Condensed
Consolidated
Financial
Statements
(unaudited),
March
31,
2016
Report
of
Independent
Registered
Public
Accounting
Firm
F-15
Consolidated
Balance
Sheets,
December
31,
2015
and
2014
F-16
Consolidated
Statements
of
Operations,
Years
ended
December
31,
2015
and
2014
F-17
Consolidated
Statements
of
Equity,
Years
ended
December
31,
2015
and
2014
F-18
Consolidated
Statements
of
Cash
Flows,
Years
ended
December
31,
2015
and
2014
F-19
Notes
to
Consolidated
Financial
Statements,
December
31,
2015
and
2014
F-20
(b)(2)
Financial
Statement
Schedules
All
schedules
have
been
omitted
because
they
are
not
applicable,
not
material
or
the
required
information
is
set
forth
in
the
financial
statements
or
notes
thereto.
Item 17.
Undertakings
The
undersigned
registrant
hereby
undertakes:
(1)
To
file,
during
any
period
in
which
offers
or
sales
are
being
made,
a
post-effective
amendment
to
this
registration
statement:
(i)
To
include
any
prospectus
required
by
Section
10(a)(3)
of
the
Securities
Act
of
1933;
(ii)
To
reflect
in
the
prospectus
any
facts
or
events
arising
after
the
effective
date
of
the
registration
statement
(or
the
most
recent
post-effective
amendment
thereof)
which,
individually
or
in
the
aggregate,
represent
a
fundamental
change
in
the
information
set
forth
in
the
registration
statement.
Notwithstanding
the
foregoing,
any
increase
or
decrease
in
volume
of
securities
offered
(if
the
total
dollar
value
of
securities
offered
would
not
exceed
that
which
was
registered)
and
any
deviation
from
the
low
or
high
end
of
the
estimated
maximum
offering
range
may
be
reflected
in
the
form
of
prospectus
filed
with
the
Commission
pursuant
to
Rule
424(b)
if,
in
the
aggregate,
the
changes
in
volume
and
price
represent
no
more
than
20
percent
change
in
the
maximum
aggregate
offering
price
set
forth
in
the
"Calculation
of
Registration
Fee"
table
in
the
effective
registration
statement;
(iii)
To
include
any
material
information
with
respect
to
the
plan
of
distribution
not
previously
disclosed
in
the
registration
statement
or
any
material
change
to
such
information
in
the
registration
statement;
II-5
Table
of
Contents
(2)
That,
for
the
purpose
of
determining
any
liability
under
the
Securities
Act
of
1933,
each
such
post-effective
amendment
shall
be
deemed
to
be
a
new
registration
statement
relating
to
the
securities
offered
therein,
and
the
offering
of
such
securities
at
that
time
shall
be
deemed
to
be
the
initial
bona fide offering
thereof;
(3)
To
remove
from
registration
by
means
of
a
post-effective
amendment
any
of
the
securities
being
registered
which
remain
unsold
at
the
termination
of
the
offering.
(4)
That,
for
the
purpose
of
determining
liability
under
the
Securities
Act
of
1933
to
any
purchaser,
each
prospectus
filed
pursuant
to
Rule
424(b)
as
part
of
a
registration
statement
relating
to
an
offering,
other
than
registration
statements
relying
on
Rule
430B
or
other
than
prospectuses
filed
in
reliance
on
Rule
430A,
shall
be
deemed
to
be
part
of
and
included
in
the
registration
statement
as
of
the
date
it
is
first
used
after
effectiveness.
Provided ,
however ,
that
no
statement
made
in
a
registration
statement
or
prospectus
that
is
part
of
the
registration
statement
or
made
in
a
document
incorporated
or
deemed
incorporated
by
reference
into
the
registration
statement
or
prospectus
that
is
part
of
the
registration
statement
will,
as
to
a
purchaser
with
a
time
of
contract
of
sale
prior
to
such
first
use,
supersede
or
modify
any
statement
that
was
made
in
the
registration
statement
or
prospectus
that
was
part
of
the
registration
statement
or
made
in
any
such
document
immediately
prior
to
such
date
of
first
use.
(5)
That,
for
the
purpose
of
determining
liability
of
the
registrant
under
the
Securities
Act
of
1933
to
any
purchaser
in
the
initial
distribution
of
the
securities,
the
undersigned
registrant
undertakes
that
in
a
primary
offering
of
securities
of
the
undersigned
registrant
pursuant
to
this
registration
statement,
regardless
of
the
underwriting
method
used
to
sell
the
securities
to
the
purchaser,
if
the
securities
are
offered
or
sold
to
such
purchaser
by
means
of
any
of
the
following
communications,
the
undersigned
registrant
will
be
a
seller
to
the
purchaser
and
will
be
considered
to
offer
or
sell
such
securities
to
such
purchaser:
(i)
Any
preliminary
prospectus
or
prospectus
of
the
undersigned
registrant
relating
to
the
offering
required
to
be
filed
pursuant
to
Rule
424;
(ii)
Any
free
writing
prospectus
relating
to
the
offering
prepared
by
or
on
behalf
of
the
undersigned
registrant
or
used
or
referred
to
by
the
undersigned
registrant;
(iii)
The
portion
of
any
other
free
writing
prospectus
relating
to
the
offering
containing
material
information
about
the
undersigned
registrant
or
its
securities
provided
by
or
on
behalf
of
the
undersigned
registrant;
and
(iv)
Any
other
communication
that
is
an
offer
in
the
offering
made
by
the
undersigned
registrant
to
the
purchaser.
(6)
Insofar
as
indemnification
for
liabilities
arising
under
the
Securities
Act
of
1933
may
be
permitted
to
directors,
officers
and
controlling
persons
of
the
registrant
pursuant
to
the
foregoing
provisions,
or
otherwise,
the
registrant
has
been
advised
that
in
the
opinion
of
the
Securities
and
Exchange
Commission
such
indemnification
is
against
public
policy
as
expressed
in
the
Act
and
is,
therefore,
unenforceable.
In
the
event
that
a
claim
for
indemnification
against
such
liabilities
(other
than
the
payment
by
the
registrant
of
expenses
incurred
or
paid
by
a
director,
officer
or
controlling
person
of
the
registrant
in
the
successful
defense
of
any
action,
suit
or
proceeding)
is
asserted
by
such
director,
officer
or
controlling
person
in
connection
with
the
securities
being
registered,
the
registrant
will,
unless
in
the
opinion
of
its
counsel
the
matter
has
been
settled
by
controlling
precedent,
submit
to
a
court
of
appropriate
jurisdiction
the
question
whether
such
indemnification
by
it
is
against
public
policy
as
expressed
in
the
Securities
Act
and
will
be
governed
by
the
final
adjudication
of
such
issue.
II-6
Table
of
Contents
SIGNATURES
Pursuant
to
the
requirements
of
the
Securities
Act
of
1933,
the
registrant
has
duly
caused
this
registration
statement
to
be
signed
on
its
behalf
by
the
undersigned,
thereunto
duly
authorized,
in
the
city
of
Englewood,
state
of
Colorado,
on
July
14,
2016.
COMMERCEHUB, INC.
By: /s/
CHRISTOPHER
W.
SHEAN
Name: Christopher
W.
Shean
Title: Chief Financial Officer
Pursuant
to
the
requirements
of
the
Securities
Act
of
1933,
this
registration
statement
has
been
signed
by
the
following
persons
in
the
capacities
and
on
the
dates
indicated.
Signature
*
Gregory
B.
Maffei
/s/
CHRISTOPHER
W.
SHEAN
Title
Date
Director,
President
and
Chief
Executive
Officer
(Principal
Executive
Officer)
Chief
Financial
Officer
(Principal
Financial
and
Principal
Accounting
Officer)
July
14,
2016
July
14,
2016
Christopher
W.
Shean
*
Richard
N.
Baer
*By: /s/
CHRISTOPHER
W.
SHEAN
Director
Christopher
W.
Shean
Attorney-in-Fact
II-7
Table
of
Contents
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
2.1
Form
of
Reorganization
Agreement
by
and
between
Liberty
Interactive
Corporation
and
the
Registrant.
3.1
Form
of
Restated
Certificate
of
Incorporation
of
the
Registrant
to
be
in
effect
at
the
time
of
the
Spin-Off.
3.2
Form
of
Bylaws
of
the
Registrant
to
be
in
effect
at
the
time
of
the
Spin-Off.
4.1
Specimen
Certificate
for
shares
of
Series
A
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.2
Specimen
Certificate
for
shares
of
Series
B
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.3
Specimen
Certificate
for
shares
of
Series
C
Common
Stock,
par
value
$.01
per
share,
of
the
Registrant.**
4.4
Credit
Agreement,
dated
as
of
June
28,
2016,
among
Commerce
Technologies,
Inc.
(to
be
merged
into
Commerce
Technologies,
LLC),
Holdings
party
thereto,
the
Lenders
party
thereto,
JPMorgan
Chase
Bank,
N.A.,
as
Administrative
Agent,
Wells
Fargo
Bank,
National
Association,
SunTrust
Bank
and
KeyBank
National
Association,
as
Co-Syndication
Agents.
5.1
Opinion
of
Baker
Botts
L.L.P.
as
to
the
legality
of
the
securities
being
registered.
8.1
Form
of
Opinion
of
Baker
Botts
L.L.P.
regarding
certain
tax
matters.
10.1
Form
of
CommerceHub,
Inc.
2016
Omnibus
Incentive
Plan.
10.2
Form
of
CommerceHub,
Inc.
Transitional
Stock
Adjustment
Plan.
10.3
Form
of
Tax
Sharing
Agreement
by
and
between
the
Registrant
and
Liberty
Interactive
Corporation.**
10.4
Form
of
Services
Agreement
by
and
between
the
Registrant
and
Liberty
Media
Corporation.
10.5
Form
of
Indemnification
Agreement
by
and
between
the
Registrant
and
its
executive
officers/directors.
10.6
Commerce
Technologies,
Inc.
1999
Stock
Option
Plan
(As
Amended
and
Restated
Effective
February
13,
2002).**
10.7
Form
of
Commerce
Technologies,
Inc.
1999
Stock
Option
Plan
Nonqualified
Stock
Option
Agreement.**
10.8
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan.**
10.9
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
(time
vesting).**
10.10
Form
of
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
(performance
vesting).**
10.11
Executive
Employment
Agreement,
dated
effective
as
of
June
28,
2016,
by
and
between
Commerce
Technologies,
Inc.
and
Francis
Poore.
10.12
Employment
Agreement,
dated
February
21,
2007,
by
and
between
Commerce
Technologies,
Inc.
and
Bob
Marro.**
10.13
Amended
and
Restated
Employment
Agreement,
dated
January
8,
2015,
by
and
between
Commerce
Technologies,
Inc.
and
Eric
Best.**
Table
of
Contents
Exhibit
Number
Exhibit Description
10.14
Release
and
Separation
Agreement
by
and
between
Commerce
Technologies,
Inc.
and
Bob
Marro.**
10.15
Offer
Letter,
dated
May
23,
2016,
between
Commerce
Technologies,
Inc.
and
Mark
Greenquist.**
10.16
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan.
10.17
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement.
10.18
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement
for
Francis
Poore
(Relating
to
Conversion
of
Existing
SARs).
10.19
Form
of
CommerceHub,
Inc.
Legacy
Stock
Appreciation
Rights
Plan
Stock
Option
Agreement
for
Francis
Poore
(Relating
to
Conversion
of
New
SARs).
10.20
Commerce
Technologies,
Inc.
2010
Stock
Appreciation
Rights
Plan
Evidence
of
Stock
Appreciation
Right
for
Francis
Poore.
21.1
List
of
Subsidiaries.
23.1
Consent
of
KPMG
LLP.**
24.1
Power
of
Attorney**
**
Previously
filed
Exhibit 2.1
FORM OF
REORGANIZATION AGREEMENT
between
LIBERTY INTERACTIVE CORPORATION
and
COMMERCEHUB, INC.
Dated as of [ ·
·
], 2016
TABLE OF CONTENTS
ARTICLE I THE RESTRUCTURING
1.1
Restructuring
1.2
Transfer of Spinco Assets and Spinco Business; Assumption of Spinco Liabilities
1.3
Third-Party Consents and Government Approvals
1.4
Further Actions
1.5
Restructuring Documents
1.6
Qualification as Reorganization
ARTICLE II THE DISTRIBUTION
2.1
The Distribution
2.2
Conditions to the Distribution
2.3
Treatment of Outstanding LIC Equity Awards
2.4
Treatment of Outstanding CTI Equity Awards
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Parties
3.2
No Approvals or Notices Required; No Conflict with Instruments
3.3
No Other Reliance
ARTICLE IV COVENANTS
4.1
Cross-Indemnities
4.2
Financing
4.3
Further Assurances
4.4
Specific Performance
4.5
Access to Information
4.6
Confidentiality
4.7
Notices Regarding Transferred Assets
4.8
Treatment Of Payments
ARTICLE V CLOSING
5.1
Closing
5.2
Conditions to Closing
5.3
Deliveries at Closing
ARTICLE VI TERMINATION
6.1
Termination
6.2
Effect of Termination
ARTICLE VII MISCELLANEOUS
7.1
Definitions
7.2
No Third-Party Rights
7.3
Notices
7.4
Entire Agreement
i
Page
2
2
2
3
3
3
3
3
3
4
4
6
6
6
7
7
8
8
11
11
11
12
12
13
13
13
13
14
14
15
15
15
15
15
20
20
20
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
Binding Effect; Assignment
Governing Law; Jurisdiction
Waiver of Jury Trial
Severability
Amendments; Waivers
No Strict Construction; Interpretation
Conflicts with Tax Sharing Agreement
Counterparts
20
21
21
22
22
22
23
23
EXHIBIT A — Form of Services Agreement
EXHIBIT B — Form of Spinco Charter
EXHIBIT C — Form of Tax Sharing Agreement
SCHEDULE 1.1 — Restructuring Plan
ii
REORGANIZATION AGREEMENT
This REORGANIZATION AGREEMENT (together with all Schedules and Exhibits hereto, this “ Agreement ”), dated as of [ ·
], 2016, is entered into
by and between LIBERTY INTERACTIVE CORPORATION , a Delaware corporation (“ LIC ”), and COMMERCEHUB, INC ., a Delaware corporation (“
Spinco ”). Certain capitalized terms used herein have the meanings ascribed thereto in Section 7.1.
RECITALS:
WHEREAS , Spinco is and prior to the Spin-Off (as defined below) will be a Subsidiary of LIC;
WHEREAS , the LIC Board has determined that it is appropriate and in the best interests of LIC and its stockholders to reorganize its assets and liabilities
by means of the Spin-Off (as defined below) of Spinco, the assets and liabilities of which would, as of the Effective Time, consist of LIC’s subsidiary Commerce
Technologies, LLC (f/k/a Commerce Technologies, Inc. (d/b/a CommerceHub)), a New York corporation (“ CTI ”), at the Effective Time (as defined below);
WHEREAS , the parties desire to effect the transactions contemplated by this Agreement, including the Restructuring (as defined below) and the
distribution (the “ Spin-Off ” or the “ Distribution ”), by means of a dividend, of all of the issued and outstanding shares of common stock of Spinco held by LIC to
the holders of record on the Record Date (as defined below) of LIC’s Series A Liberty Ventures common stock, par value $.01 per share (“ LVNTA ”), and
Series B Liberty Ventures common stock, par value $.01 per share (“ LVNTB ” and together with LVNTA, the “ Liberty Ventures Common Stock ”);
WHEREAS, the transactions contemplated by this Agreement, including the Restructuring and the Distribution, have been approved by the LIC Board
and, to the extent applicable, the Spinco Board, and are motivated in whole or substantial part by certain substantial corporate business purposes of LIC and Spinco;
WHEREAS , Step [ ·
] through Step [ ·
] in the Restructuring Plan are collectively intended to qualify as a “reorganization” described in Section 368 of
the Internal Revenue Code of 1986, as amended (the “ Code ”);
WHEREAS , this Agreement constitutes a “plan of reorganization” with respect to Step [ ·
] through Step [ ·
] in the Restructuring Plan within the
meaning of Section 368 of the Code and the Treasury Regulations promulgated thereunder;
WHEREAS , the Spin-Off is intended to qualify as a tax-free transaction under Section 355 of the Code (except with respect to the receipt of cash in lieu
of fractional shares), and is expected to accomplish certain corporate business purposes of LIC and Spinco (which corporate business purposes are substantially
unrelated to U.S. federal tax matters); and
1
WHEREAS , the parties wish to set forth in this Agreement the terms on which, and the conditions subject to which, they intend to implement the
measures referred to above and elsewhere herein.
NOW, THEREFORE , in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the
parties to this Agreement hereby agree as follows:
ARTICLE I THE RESTRUCTURING
1.1 Restructuring .
(a) The parties have taken or will take, and have caused or will cause their respective Subsidiaries to take, all actions that are necessary or
appropriate to implement and accomplish the transactions contemplated by each of the steps set forth in the Restructuring Plan (collectively, the “ Restructuring ”);
provided, that all of such steps shall be completed by no later than the Effective Time.
(b) Step [ ·
] through Step [ ·
] in the Restructuring Plan collectively are intended to be part of the same plan of reorganization, even though there
may be delays between the completion of certain of the transactions.
1.2 Transfer of Spinco Assets and Spinco Business; Assumption of Spinco Liabilities .
On the terms and subject to the conditions of this Agreement, and in furtherance of the Restructuring and the Spin-Off:
(a) LIC, by no later than immediately before the Effective Time, shall cause all of its (or its Subsidiaries’) rights, title and interest in and to all of the
Spinco Assets and the Spinco Business to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to Spinco pursuant to the
Restructuring, and Spinco agrees to accept or cause to be accepted all such rights, title and interest in and to all the Spinco Assets and the Spinco Business. All
Spinco Assets and the Spinco Business are being transferred on an “as is, where is” basis, without any warranty whatsoever on the part of LIC.
(b) LIC, by no later than immediately before the Effective Time, shall cause all of the Spinco Liabilities to be assigned, directly or indirectly, to
Spinco pursuant to the Restructuring, and Spinco agrees to accept, assume, perform, discharge and fulfill all of the Spinco Liabilities in accordance with their
respective terms.
(c) Upon completion of the transactions contemplated by Sections 1.2(a) and (b) above: (i) Spinco will own, directly or indirectly, the Spinco
Business and the Spinco Assets and be subject to the Spinco Liabilities; and (ii) LIC will continue to own, directly or indirectly, the LIC Retained Businesses and
the LIC Retained Assets and continue to be subject to the LIC Retained Liabilities.
2
1.3 Third-Party Consents and Government Approvals . To the extent that either the Distribution or any step in the Restructuring Plan requires a
consent of any third party or a Governmental Authorization, the parties will use commercially reasonable efforts to obtain each such consent and Governmental
Authorization at or prior to the time such consent or Governmental Authorization is required in order to lawfully effect the Distribution and each step in the
Restructuring Plan.
1.4 Further Actions . From and after the Effective Time, upon the reasonable request of a party hereto, each other party hereto will promptly take, or
cause its Subsidiaries to promptly take, all commercially reasonable actions necessary or appropriate to fully accomplish the Restructuring and to give effect to the
transactions provided for in this Agreement, including each step in the Restructuring Plan, in accordance with the purposes hereof.
1.5 Restructuring Documents . All documents and instruments used to effect the Restructuring and otherwise to comply with this Agreement shall
be in form satisfactory to LIC, Spinco and any additional signatories hereto.
1.6 Qualification as Reorganization . For U.S. federal income tax purposes, (1) Step [ ·
] through Step [ ·
] in the Restructuring Plan are generally
intended to be undertaken in a manner so that no gain or loss is recognized (and no income is taken into account) by LIC, Spinco or their respective Subsidiaries,
and (2) the Spin-Off is intended to qualify as a tax-free transaction under Section 355 of the Code (except with respect to the receipt of cash in lieu of fractional
shares).
ARTICLE II THE DISTRIBUTION
2.1 The Distribution .
(a) The LIC Board shall have the authority and right: (i) to declare or refrain from declaring the Distribution; (ii) to establish and change the date
and time of the record date for the Distribution (the “ Record Date ”); (iii) to establish and change the date and time at which the Distribution shall be effective (the
“ Distribution Date ”); and (iv) prior to the Distribution Date, to establish and change the procedures for effecting the Distribution; subject, in all cases, to the
applicable provisions of the DGCL.
(b) On the Distribution Date, subject to the conditions to the Distribution set forth in Section 2.2, LIC shall cause to be distributed to the holders of
record of Liberty Ventures Common Stock on the Record Date, as a dividend, all the issued and outstanding shares of Spinco Common Stock held by LIC on the
basis of (i) 0.1 of a share of Series A Common Stock, par value $.01 per share, of Spinco (“ Spinco Series A Common Stock ”) and 0.2 of a share of Series C
Common Stock, par value $.01 per share, of Spinco ( “ Spinco Series C Common Stock ”) for each share of LVNTA held of record on the Record Date, and (ii) 0.1
of a share of Series B Common Stock, par value $.01 per share, of Spinco (“ Spinco Series B Common Stock ” and together with the Spinco Series A Common
Stock and the Spinco Series C Common Stock, the “ Spinco Common Stock ”) and 0.2 of a share of Spinco Series C Common Stock for each share of LVNTB held
of record on the Record Date.
3
(c) LIC will take such action, if any, as may be necessary or appropriate under applicable state and foreign securities and “blue sky” laws to permit
the Distribution to be effected in compliance, in all material respects, with such laws.
2.2 Conditions to the Distribution . The Distribution is subject to the satisfaction of the following conditions:
(a) the LIC Board, or in the case of determining the Record Date, a committee thereof, shall have taken all necessary corporate action to establish
the Record Date and to declare the dividends in order to effect the Distribution in accordance with the LIC Charter and bylaws and the DGCL;
(b) LIC shall have received the opinion of Baker Botts L.L.P., in form and substance reasonably acceptable to LIC, providing to the effect that the
Spin-Off will qualify as a tax-free transaction under Section 355 of the Code (except with respect to the receipt of cash in lieu of fractional shares), and that for
U.S. federal income tax purposes, (i) no gain or loss will be recognized by LIC upon the distribution of Spinco Common Stock in the Spin-Off, and (ii) no gain or
loss will be recognized by, and no amount will be included in the income of, holders of Liberty Ventures Common Stock upon the receipt of shares of Spinco
Common Stock in the Spin-Off (except with respect to the receipt of cash in lieu of fractional shares);
(c) the Registration Statement on Form S-1 with respect to the registration under the Securities Act of Spinco Common Stock (the “ Registration
Statement ”) shall be effective as of the Distribution Date;
(d) the Spinco Series A Common Stock and Spinco Series C Common Stock shall have been approved for listing on The NASDAQ Stock Market;
and
(e) any other regulatory or contractual approvals that a committee of the Board determines to obtain shall have been so obtained and be in full force
and effect.
The foregoing conditions are for the sole benefit of LIC and shall not in any way limit LIC’s right to amend, modify or terminate this Agreement in
accordance with Section 6.1. The foregoing condition set forth in Section 2.2(e) may be waived by the LIC Board and any determination made by the LIC Board
prior to the Distribution concerning the satisfaction or waiver of any condition set forth in this Section 2.2 shall be final and conclusive.
2.3 Treatment of Outstanding LIC Equity Awards .
(a) Certain current and former employees, non-employee directors and consultants of LIC, the Qualifying Subsidiaries and their respective
Subsidiaries have been granted options, restricted stock units, and restricted shares in respect of LIC Common Stock pursuant to various stock incentive plans of
LIC administered by the LIC Board (collectively, “ Awards ”). LIC and Spinco shall use commercially reasonable efforts to take all actions necessary or
appropriate so that Awards that are outstanding immediately prior to the Effective Time are adjusted as set forth in this Section 2.3.
4
(b) Options . As of the Effective Time, and as determined by the LIC Board pursuant to its authority granted under the applicable stock incentive
plan of LIC, each holder of a Liberty Ventures Option (whether unvested, partially vested or fully vested) (x) who is a member of the LIC Board or an officer of
LIC holding the position of Vice President or above (each such Liberty Ventures Option, an “ Outstanding Liberty Ventures Option ”), will receive (i) an option to
purchase shares of the corresponding series of Spinco Common Stock and an option to purchase shares of Spinco Series C Common Stock (each, a “ Spinco Option
”), and (ii) an adjustment to the exercise price of and the number of shares subject to the Outstanding Liberty Ventures Option (as so adjusted, an “ Adjusted
Liberty Ventures Option ”) such that the pre-Spin-Off intrinsic value of the Outstanding Liberty Ventures Option is allocated between the Spinco Option and the
Adjusted Liberty Ventures Option, and (y) who is any other Person will receive an adjustment to his or her Liberty Ventures Option only and will not be entitled to
receive a Spinco Option.
Except as described herein, all other terms of the Spinco Options and the Adjusted Liberty Ventures Options (including the vesting terms thereof) will, in
all material respects, be the same as those of the corresponding Outstanding Liberty Ventures Options; provided , that the terms and conditions of exercise of the
Spinco Options shall in any event be determined in a manner consistent with Section 409A of the Code.
(c) Restricted Stock Awards . Shares of Liberty Ventures Common Stock that are subject to a restricted stock award granted under a stock incentive
plan of LIC (“ Liberty Ventures Restricted Stock Awards ”) will participate in the Distribution in the same manner as other outstanding shares of Liberty Ventures
Common Stock. Except as described herein, shares of Spinco Common Stock received by such holders of Liberty Ventures Restricted Stock Awards (“ Spinco
Restricted Stock Awards ”) will otherwise be subject, in all material respects, to the same terms and conditions (including the vesting terms thereof) as those
applicable to such shares of Liberty Ventures Restricted Stock Awards immediately prior to the Effective Time.
(d) Restricted Stock Units . As of the Effective Time, and as determined by the LIC Board pursuant to its authority granted under the applicable
stock incentive plan of LIC, each holder of a restricted stock unit with respect to shares of Liberty Ventures Common Stock (“ Liberty Ventures Restricted Stock
Unit Awards ”) will receive a restricted stock unit with respect to the corresponding series of Spinco Common Stock and a restricted stock unit with respect to
Spinco Series C Common Stock (each, a “ Spinco Restricted Stock Unit ”). Except as described herein, Spinco Restricted Stock Units will otherwise be subject, in
all material respects, to the same terms and conditions (including the vesting terms thereof) as those applicable to Liberty Ventures Restricted Stock Unit Awards
immediately prior to the Effective Time.
(e) From and after the Effective Time, Spinco Options, Spinco Restricted Stock Awards and Spinco Restricted Stock Units, regardless of by whom
held, shall be settled by Spinco pursuant to the terms of the Spinco Transitional Plan. The obligation to deliver shares of Spinco Common Stock upon the exercise
of Spinco Options or shares of Spinco Common Stock upon vesting of Spinco Restricted Stock Awards or Spinco Restricted Stock Units shall be the sole
obligation of Spinco, and LIC shall have no Liability in respect thereof.
5
(f) It is intended that the Spinco Transitional Plan be considered, as to any Spinco Option, Spinco Restricted Stock Award or Spinco Restricted
Stock Unit that is issued as part of the adjustment provisions of this Section 2.3, to be a successor plan to the stock incentive plan of LIC pursuant to which the
corresponding Liberty Ventures Option, Liberty Ventures Restricted Stock Award or Liberty Ventures Restricted Stock Unit Award was issued, and Spinco shall
be deemed to have assumed the obligations under the applicable stock incentive plans of LIC to make the adjustments to the Awards set forth in this Section 2.3.
(g) With respect to Awards adjusted and any equity awards issued as a result of such adjustments (collectively, “ Post Spin Awards ”), in each case,
pursuant to this Section 2.3, service after the Effective Time as an employee or non-employee director of, or consultant to, LIC, Spinco, any Qualifying Subsidiary
or any of their respective Subsidiaries shall be treated as service to LIC and Spinco and their respective Subsidiaries for all purposes under such Post Spin Awards
following the Effective Time.
(h) Neither the Effective Time nor any other transaction contemplated by the Restructuring Plan or this Agreement shall be considered a termination
of employment for any employee of LIC, Spinco or any of their respective Subsidiaries for purposes of any Post Spin Award.
(i) Spinco agrees that, on and after the Effective Time, it shall use its reasonable efforts to cause to be effective under the Securities Act, on a
continuous basis, a registration statement on Form S-8 with respect to shares of Spinco Common Stock issuable upon exercise of Spinco Options and vesting of
Spinco Restricted Stock Awards and Spinco Restricted Stock Units.
2.4 Treatment of Outstanding CTI Equity Awards .
(a) Certain individuals, including employees and officers of Spinco, have been granted options and stock appreciation rights in respect of shares of
CTI (the “ CTI Awards ”). LIC and Spinco shall use commercially reasonable efforts to take all actions necessary or appropriate so that the CTI Awards
outstanding immediately prior to the Effective Time are adjusted as set forth in this Section 2.4.
(b) Pursuant to the Restructuring, each holder of a CTI Award will receive an option award with respect to shares of Spinco Series C Common
Stock, with the exercise price and number of shares subject to such new option award to be determined based on the exercise price of and number of shares of
common stock of CTI subject to the CTI Award and the exchange ratio to be used in the internal restructuring as set forth in Step [ ·
·
] in Schedule 1.1.
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Parties . Each party hereto represents and warrants to the other as follows:
(a) Organization and Qualification . Such party is a corporation duly organized, validly existing and in good standing under the laws of the state of
Delaware, has all requisite
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corporate power and authority to own, use, lease or operate its properties and assets, and to conduct the business heretofore conducted by it, and is duly qualified to
do business and is in good standing in each jurisdiction in which the properties owned, used, leased or operated by it or the nature of the business conducted by it
requires such qualification, except in such jurisdictions where the failure to be so qualified and in good standing would not have a material adverse effect on its
business, financial condition or results of operations or its ability to perform its obligations under this Agreement.
(b) Authorization and Validity of Agreement . Such party has all requisite power and authority to execute, deliver and perform its obligations under
this Agreement, the agreements and instruments to which it is to be a party required to effect the Restructuring (the “ Restructuring Agreements ”) and the
agreements to be delivered by it at the Closing pursuant to Section 5.3 (the “ Other Agreements ”). The execution, delivery and performance by such party of this
Agreement, the Restructuring Agreements and the Other Agreements and the consummation by it of the transactions contemplated hereby and thereby have been
duly and validly authorized by the board of directors, managing members or analogous governing body of such party and, to the extent required by law, its
stockholders or members, and no other corporate or other action on its part is necessary to authorize the execution and delivery by such party of this Agreement, the
Restructuring Agreements and the Other Agreements, the performance by it of its obligations hereunder and thereunder and the consummation by it of the
transactions contemplated hereby and thereby. This Agreement has been, and each of the Restructuring Agreements and each of the Other Agreements, when
executed and delivered, will be, duly executed and delivered by such party and each is, or will be, a valid and binding obligation of such party, enforceable in
accordance with its terms.
3.2 No Approvals or Notices Required; No Conflict with Instruments . The execution, delivery and performance by such party of this Agreement,
the Restructuring Agreements and the Other Agreements, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict
with or result in a breach or violation of any of the terms or provisions of, constitute a default under, or result in the creation of any lien, charge or encumbrance
upon any of its assets pursuant to the terms of, the charter or bylaws (or similar formation or governance instruments) of such party, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which it is a party or by which it or any of its assets are bound, or any law, rule, regulation, judgment,
Order or decree of any court or governmental authority having jurisdiction over it or its properties.
3.3 No Other Reliance . In determining to enter into this Agreement, the Restructuring Agreements and the Other Agreements, and to consummate
the transactions contemplated hereby and thereby, such party has not relied on any representation, warranty, promise or agreement other than those expressly
contained herein or therein, and no other representation, warranty, promise or agreement has been made or will be implied. Except as otherwise expressly set forth
herein or in the Restructuring Agreements or the Other Agreements, all Spinco Assets and the Spinco Business are being transferred on an “as is, where is” basis, at
the risk of the transferee, without any warranty whatsoever on the part of the transferor and from and after the Effective Time.
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ARTICLE IV COVENANTS
4.1 Cross-Indemnities .
(a) Spinco hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to
indemnify and hold harmless LIC, its Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors,
trustees, administrators, successors and assigns of any of the foregoing (the “ LIC Indemnified Parties ”) from and against any Losses incurred by the LIC
Indemnified Parties (in their capacities as such) to the extent arising out of or resulting from any of the following:
(i) the conduct of the Spinco Business (whether before or after the Closing);
(ii) the Spinco Assets;
(iii) the Spinco Liabilities (whether incurred before or after the Closing); or
(iv) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of Spinco or any of its Subsidiaries under
this Agreement, any Restructuring Agreement or any Other Agreement.
(b) LIC hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to indemnify
and hold harmless Spinco, its Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors, trustees,
administrators, successors and assigns of any of the foregoing (the “ Spinco Indemnified Parties ”) from and against any Losses incurred by the Spinco Indemnified
Parties (in their capacities as such) to the extent arising out of or resulting from:
(i) the conduct of the LIC Retained Businesses (whether before or after the Closing);
(ii) the LIC Retained Assets;
(iii) the LIC Retained Liabilities (whether incurred before or after the Closing); or
(iv) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of LIC or any of its Subsidiaries (other
than the Spinco Entities) under this Agreement, any Restructuring Agreement or any Other Agreement.
(c) The indemnification provisions set forth in Sections 4.1(a) and (b) shall not apply to: (i) any Losses the responsibility for which is expressly
covered by the Tax Sharing Agreement; (ii) any Losses incurred by any Spinco Entity pursuant to any contractual obligation (other than this Agreement, the
Restructuring Agreements or the Other Agreements) existing on or after the Closing Date between (x) LIC or any of its Subsidiaries or Affiliates, on the one hand,
and (y) Spinco or any of its Subsidiaries or Affiliates, on the other hand; and (iii) any
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Losses incurred by any LIC Entity pursuant to any contractual obligation (other than this Agreement, the Restructuring Agreements or the Other Agreements)
existing on or after the Closing Date between (x) LIC or any of its Subsidiaries or Affiliates, on the one hand, and (y) Spinco or any of its Subsidiaries or Affiliates,
on the other hand.
(d) (i) In connection with any indemnification provided for in this Section 4.1, the party seeking indemnification (the “ Indemnitee ”) will
give the party from which indemnification is sought (the “ Indemnitor ”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee
has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under this Section 4.1, and, if and when known, the facts
constituting the basis for such claim and the projected amount of such Losses (which shall not be conclusive as to the amount of such Losses), in each case in
reasonable detail. Without limiting the generality of the foregoing, in the case of any Action commenced by a third party for which indemnification is being sought
(a “ Third-Party Claim ”), such notice will be given no later than ten business days following receipt by the Indemnitee of written notice of such Third-Party
Claim. Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a
material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third-Party Claim. The Indemnitee will deliver to the
Indemnitor as promptly as practicable, and in any event within five business days after Indemnitee’s receipt, copies of all notices, court papers and other documents
received by the Indemnitee relating to any Third-Party Claim.
(ii) After receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so
elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the
Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice
acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party
Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will
not be unreasonably withheld, conditioned or delayed; provided, however , that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s
consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of
the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee
will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such
Third-Party Claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims). The Indemnitee
may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom,
including participating in the process with respect to the potential settlement or compromise thereof. If the Indemnitee has been advised by its counsel that there
may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor (“ Separate Legal
Defenses ”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of
such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage
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separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided , that, if such Third-Party Claim can be reasonably
separated between those portion(s) for which Separate Legal Defenses are available (“ Separable Claims ”) and those for which no Separate Legal Defenses are
available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle
and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Separable Claims (and, in which case,
the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).
(iii) If, after receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim as to which indemnification is available
hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the Indemnitee timely notice of its
election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including
attorneys fees and costs), it being understood that the Indemnitee’s right to indemnification for such Third-Party Claim shall not be adversely affected by its
assuming the defense of such Third-Party Claim. The Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee; provided , that the
Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor,
which consent will not be unreasonably withheld, conditioned or delayed; provided further , that such consent shall not be required if (i) the Indemnitor had the
right under this Section 4.1 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such
notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control
the defense of the entirety of such Third-Party Claim pursuant to Section 4.1(d)(ii) or (y) the Indemnitor does not have the right to control the defense of any
Separable Claim pursuant to Section 4.1(d)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice
to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does
not seek any relief against the Indemnitor and (C) does not seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of
money damages.
(e) In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages,
however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such
damages; provided , that the foregoing limitations shall not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the
assertion of a Third-Party Claim.
(f) The Indemnitor and the Indemnitee shall use commercially reasonable efforts to avoid production of confidential information, and to cause all
communications among employees, counsel and others representing any party with respect to a Third-Party Claim to be made so as to preserve any applicable
attorney-client or work-product privilege.
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(g) The Indemnitor shall pay all amounts payable pursuant to this Section 4.1 by wire transfer of immediately available funds, promptly following
receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of
indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s
indemnification obligation in which event the Indemnitor shall promptly so notify the Indemnitee. In any event, the Indemnitor shall pay to the Indemnitee, by wire
transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of
the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement
in writing or (b) a court of competent jurisdiction shall have entered a final and non-appealable Order or judgment.
(h) If the indemnification provided for in this Section 4.1 shall, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in
respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor shall contribute to the amount paid or payable by such Indemnitee as
a result of such Losses, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand
and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.
(i) The remedies provided in this Section 4.1 shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against an Indemnitor, subject to Section 4.1(e).
(j) The rights and obligations of the LIC Indemnified Parties and the Spinco Indemnified Persons under this Section 4.1 shall survive the Spin-Off.
(k) For the avoidance of doubt, the provisions of this Section 4.1 are not intended to, and shall not, apply to any Loss, claim or Liability to which the
provisions of the Tax Sharing Agreement are applicable.
(l) To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and
expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Section 4.1.
4.2 Further Assurances . At any time before or after the Closing, each party hereto covenants and agrees to make, execute, acknowledge and deliver
such instruments, agreements, consents, assurances and other documents, and to take all such other commercially reasonable actions, as any other party may
reasonably request and as may reasonably be required in order to carry out the purposes and intent of this Agreement and to implement the terms hereof.
4.3 Specific Performance . Each party hereby acknowledges that the benefits to the other party of the performance by such party of its obligations
under this Agreement are unique and that the other party is willing to enter into this Agreement only in reliance that such party will perform such obligations, and
agrees that monetary damages may not afford an adequate remedy for any failure by such party to perform any of such obligations. Accordingly, each party hereby
agrees that the other party will have the right to enforce the specific performance of such
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party’s obligations hereunder and irrevocably waives any requirement for securing or posting of any bond or other undertaking in connection with the obtaining by
the other party of any injunctive or other equitable relief to enforce their rights hereunder.
4.4 Access to Information .
(a) Each party will provide to the other party, at any time before or after the Distribution Date, upon written request and promptly after the request
therefor (subject in all cases, to any bona fide concerns of attorney-client or work-product privilege that any party may reasonably have and any restrictions
contained in any agreements or contracts to which any party or its Subsidiaries is a party (it being understood that each of LIC and Spinco will use its reasonable
best efforts to provide any such information in a manner that does not result in a violation of a privilege)), any information in its possession or under its control
that the requesting party reasonably needs (i) to comply with reporting, filing or other requirements imposed on the requesting party by a foreign or U.S. federal,
state or local judicial, regulatory or administrative authority having jurisdiction over the requesting party or its Subsidiaries, (ii) to enable the requesting party to
institute or defend against any action, suit or proceeding in any foreign or U.S. federal, state or local court or (iii) to enable the requesting party to implement the
transactions contemplated hereby, including but not limited to performing its obligations under this Agreement, the Restructuring Agreements and the Other
Agreements.
(b) Any information belonging to a party that is provided to another party pursuant to Section 4.4(a) will remain the property of the providing party. The parties agree to cooperate in good faith to take all reasonable efforts to maintain any legal privilege that may attach to any information delivered pursuant to
this Section 4.4 or which otherwise comes into the receiving party’s possession and control pursuant to this Agreement. Nothing contained in this Agreement will
be construed as granting or conferring license or other rights in any such information.
(c) The party requesting any information under this Section 4.4 will reimburse the providing party for the reasonable out of pocket costs, if any, of
creating, gathering and copying such information, to the extent that such costs are incurred for the benefit of the requesting party. No party will have any Liability
to any other party if any information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or is based on an estimate or forecast, is
found to be inaccurate, absent willful misconduct or fraud by the party providing such information.
(d) For the avoidance of doubt, the provisions of this Section 4.4 are not intended to, and shall not, apply to any information relating to matters
governed by the Tax Sharing Agreement, which shall be subject to the provisions thereof in lieu of this Section 4.4.
4.5 Confidentiality . Each party will keep confidential for five years following the Closing Date (or for three years following disclosure to such
party, whichever is longer), and will use reasonable efforts to cause its officers, directors, members, employees, Affiliates and agents to keep confidential during
such period, all Proprietary Information of the other party, in each case to the extent permitted by applicable law.
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(a) “ Proprietary Information ” means any proprietary ideas, plans and information, including information of a technological or business nature, of a
party (in this context, the “ Disclosing Party ”) (including all trade secrets, intellectual property, data, summaries, reports or mailing lists, in whatever form or
medium whatsoever, including oral communications, and however produced or reproduced), that is marked proprietary or confidential, or that bears a marking of
like import, or that the Disclosing Party states is to be considered proprietary or confidential, or that a reasonable and prudent person would consider proprietary or
confidential under the circumstances of its disclosure. Without limiting the foregoing, all information of the types referred to in the immediately preceding sentence
to the extent used by Spinco or the Spinco Business or which constitute Spinco Assets on or prior to the Closing Date will constitute Proprietary Information of
Spinco for purposes of this Section 4.5.
(b) Anything contained herein to the contrary notwithstanding, information of a Disclosing Party will not constitute Proprietary Information (and
the other party (in this context, the “ Receiving Party ”) will have no obligation of confidentiality with respect thereto), to the extent such information: (i) is in the
public domain other than as a result of disclosure made in breach of this Agreement or breach of any other agreement relating to confidentiality between the
Disclosing Party and the Receiving Party; (ii) was lawfully acquired by the Disclosing Party from a third party not bound by a confidentiality obligation; (iii) is
approved for release by prior written authorization of the Disclosing Party, or (iv) is disclosed in order to comply with a judicial Order issued by a court of
competent jurisdiction, or to comply with the laws or regulations of any governmental authority having jurisdiction over the Receiving Party, in which event the
Receiving Party will give prior written notice to the Disclosing Party of such disclosure as soon as or to the extent practicable and will cooperate with the
Disclosing Party in using reasonable efforts to disclose the least amount of such information required and to obtain an appropriate protective Order or equivalent,
and provided that the information will continue to be Proprietary Information to the extent it is covered by a protective Order or equivalent or is not so disclosed.
4.6 Notices Regarding Transferred Assets . Any transferor of an Asset or Liability in the Restructuring that receives a notice or other
communication from any third party, or that otherwise becomes aware of any fact or circumstance, after the Restructuring, relating to such Asset or Liability, will
use commercially reasonable efforts to promptly forward the notice or other communication to the transferee thereof or give notice to such transferee of such fact or
circumstance of which it has become aware. The parties will cause their respective Subsidiaries to comply with this Section 4.6.
4.7 Treatment Of Payments . The parties agree to treat all payments made pursuant to this Agreement in accordance with Section 4.3 of the Tax
Sharing Agreement and to increase or reduce any amount paid hereunder if such payment would have been required to be increased or reduced under such section
if it were a payment made pursuant to the Tax Sharing Agreement.
ARTICLE V CLOSING
5.1 Closing . Unless this Agreement is terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of
Article VI, and subject to the
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satisfaction or waiver of all conditions set forth in each of Sections 2.2 and 5.2, the closing of the Distribution (the “ Closing ”) will take place at the offices of LIC,
at 12300 Liberty Boulevard, Englewood, Colorado, at a mutually acceptable time and date to be determined by LIC (the “ Closing Date ”).
5.2 Conditions to Closing .
(a) The obligations of the parties to complete the transactions provided for herein are conditioned upon the satisfaction or, if applicable, waiver of
the conditions set forth in Section 2.2.
(b) The performance by each party of its obligations hereunder is further conditioned upon:
(i) the performance in all material respects by the other party of its covenants and agreements contained herein to the extent such are
required to be performed at or prior to the Closing; and
(ii) the representations and warranties of the other party being true and complete in all material respects as of the Closing Date with the
same force and effect as if made at and as of the Closing Date.
5.3 Deliveries at Closing .
(a) LIC . At the Closing, LIC will deliver or cause to be delivered to Spinco:
(i) the Tax Sharing Agreement duly executed by an authorized officer of LIC;
(ii) the Services Agreement duly executed by an authorized officer of LMC;
(iii) a secretary’s certificate certifying that the LIC Board has authorized the execution, delivery and performance by LIC of this
Agreement, the Restructuring Agreements and the Other Agreements, which authorization will be in full force and effect at and as of the Closing; and
(iv) such other documents and instruments as Spinco may reasonably request.
(b) Spinco . At the Closing, Spinco will deliver or cause to be delivered to LIC:
(i) the Tax Sharing Agreement duly executed by an authorized officer of Spinco;
(ii) the Services Agreement duly executed by an authorized officer of Spinco;
(iii) a secretary’s certificate certifying that the Spinco Board has authorized the execution, delivery and performance by Spinco of this
Agreement, the Restructuring Agreements and the Other Agreements, which authorizations will be in full force and effect at and as of the Closing; and
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(iv) such other documents and instruments as LIC may reasonably request.
ARTICLE VI TERMINATION
6.1 Termination . This Agreement may be terminated and the transactions contemplated hereby may be amended, modified, supplemented or
abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of LIC without the approval of Spinco. For the avoidance of doubt,
from and after the Effective Time, this Agreement may not be terminated (or any provision hereof modified, amended or waived) without the written agreement of
all the parties.
6.2 Effect of Termination . In the event of any termination of this Agreement in accordance with Section 6.1, this Agreement will immediately
become void and the parties will have no Liability whatsoever to each other with respect to the transactions contemplated hereby.
ARTICLE VII MISCELLANEOUS
7.1 Definitions .
(a) For purposes of this Agreement, the following terms have the corresponding meanings:
“ Action ” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation whether or not commenced, brought,
conducted or heard by or before, or otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.
“ Affiliates ” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such first Person; provided , that, for any purpose hereunder, in each case both before and after the
Effective Time, none of the Persons listed in clause (i), (ii), (iii), (iv), (v) or (vi) shall be deemed to be Affiliates of any Person listed in any other such
clause: (i) LIC taken together with its Subsidiaries and any of their respective Investees, (ii) Spinco taken together with its Subsidiaries and any of their
respective Investees, (iii) LMC taken together with its Subsidiaries and their respective Investees, (iv) Starz taken together with its Subsidiaries and any of
their respective Investees, (v) Liberty TripAdvisor Holdings, Inc. taken together with its Subsidiaries and their respective Investees, and (vi) Liberty
Broadband Corporation taken together with its Subsidiaries and their respective Investees.
“ Assets ” means assets, properties, interests and rights (including goodwill), wherever located, whether real, personal or mixed, tangible or
intangible, movable or immovable, in each case whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto.
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“ Control ” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other
ownership interests, by contract or otherwise and the terms “ Controlling ” and “ Controlled ” have meanings correlative to the foregoing.
“ DGCL ” means the Delaware General Corporation Law.
“ Effective Time ” means the time at which the Distribution will be effective.
“ GAAP ” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.
“ Governmental Authorization ” means any authorization, approval, consent, license, certificate or permit issued, granted, or otherwise made
available under the authority of any court, governmental or regulatory authority, agency, stock exchange, commission or body.
“ Investee ” of any Person means any Person in which such first Person owns or controls an equity or voting interest.
“ LBC ” means Liberty Broadband Corporation.
“ Liabilities ” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or
unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected
in financial statements or disclosed in the notes thereto (other than taxes).
“ LIC Board ” means the Board of Directors of LIC or a duly authorized committee thereof.
“ LIC Charter ” means the Restated Certificate of Incorporation of LIC, as in effect immediately prior to the Distribution Date.
“ LIC Common Stock ” means QVCA, QVCB, LVNTA and LVNTB.
“ LIC Entity ” or “ LIC Entities ” means and includes each of LIC and its Subsidiaries (other than the Spinco Entities), after giving effect to the
Restructuring.
“ LIC Retained Assets ” means all Assets which are held at the Effective Time by LIC.
“ LIC Retained Businesses ” means all businesses which are held at the Effective Time by LIC.
“ LIC Retained Liabilities ” means all Liabilities which are held at the Effective Time by LIC.
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“ Liberty Ventures Option ” means an option to purchase shares of Liberty Ventures Common Stock pursuant to a stock incentive plan of LIC.
“ LMC ” means Liberty Media Corporation.
“ Losses ” means any and all damages, losses, deficiencies, Liabilities, penalties, judgments, settlements, claims, payments, fines, interest, costs
and expenses (including the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto
and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense
thereof or in asserting, preserving or enforcing an Indemnitee’s rights hereunder), whether in connection with a Third-Party Claim or otherwise.
“ LTAH ” means Liberty TripAdvisor Holdings, Inc.
“ Order ” means any order, injunction, judgment, decree or ruling of any court, governmental or regulatory authority, agency, commission or
body.
“ Person ” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other
entity of any kind.
“ QVCA ” means LIC’s Series A QVC Group common stock, par value $.01 per share.
“ QVCB ” means LIC’s Series B QVC Group common stock, par value $.01 per share.
“ Qualifying Subsidiary ” means a former direct or indirect Subsidiary of LIC, any successor of any such former Subsidiary, and the parent
company (directly or indirectly) of any such former Subsidiary or successor, including Spinco, LMC, LTAH, LBC, Ascent Capital Group, Inc., Discovery
Communications, Inc., Liberty Global, Inc. and Starz.
“ Restructuring Plan ” means the Restructuring Plan attached hereto as Schedule 1.1.
“ Securities Act ” means the Securities Act of 1933, as amended, together with all rules and regulations promulgated thereunder.
“ Services Agreement ” means the Services Agreement to be entered into between LMC and Spinco, substantially in the form attached hereto as
Exhibit B .
“ Spinco Assets ” means the Assets of CTI that will be transferred to Spinco pursuant to the Restructuring Plan.
“ Spinco Board ” means the Board of Directors of Spinco or a duly authorized committee thereof.
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“ Spinco Business ” means the Business of CTI that will be transferred to Spinco pursuant to the Restructuring Plan.
“ Spinco Charter ” means the Restated Certificate of Incorporation of Spinco to be filed with the Delaware Secretary of State pursuant to the
Restructuring Plan, substantially in the form attached hereto as Exhibit C.
“ Spinco Entity ” or “ Spinco Entities ” means and includes each of Spinco and its Subsidiaries, after giving effect to the Restructuring.
“ Spinco Liabilities ” means all Liabilities of CTI that will be transferred to Spinco pursuant to the Restructuring Plan.
“ Spinco Common Stock ” means the Series A, Series B and Series C common stock, par value $.01 per share, of Spinco.
“ Spinco Transitional Plan ” means the CommerceHub, Inc. Transitional Stock Adjustment Plan.
“ Subsidiary ” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital
stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or
similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination,
(1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such
partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power
affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such
Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether
or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership
interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person
and/or one or more Subsidiaries of such Person. For purposes of this Agreement, both prior to and after the Effective Time, none of Spinco and its
Subsidiaries shall be deemed to be Subsidiaries of LIC or any of its Subsidiaries.
“ Tax Sharing Agreement ” means the Tax Sharing Agreement to be entered into between LIC and Spinco, substantially in the form attached
hereto as Exhibit D .
(b) As used herein, the following terms will have the meanings set forth in the applicable section of this Agreement set forth below:
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Adjusted Liberty Ventures Option
Agreement
Awards
Closing
Closing Date
Code
CTI
CTI Award
Disclosing Party
Distribution
Distribution Date
Indemnitee
Indemnitor
Liberty Ventures Common Stock
Liberty Ventures Restricted Stock Award
Liberty Ventures Restricted Stock Unit Award
LIC
LIC Indemnified Parties
LVNTA
LVNTB
Outstanding Liberty Ventures Option
Other Agreements
Post Spin Awards
Proprietary Information
Receiving Party
Record Date
Registration Statement
Restructuring
Restructuring Agreements
Separable Claims
Separate Legal Defenses
Spin-Off
Spinco
Spinco Option
Spinco Common Stock
Spinco Indemnified Parties
Spinco Restricted Stock Award
Spinco Restricted Stock Unit
Spinco Series A Common Stock
Spinco Series B Common Stock
Spinco Series C Common Stock
Third-Party Claim
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Section 2.3(b)(ii)
Preamble
Section 2.3(a)
Section 5.1
Section 5.1
Recitals
Recitals
Section 2.4(a)
Section 4.5(a)
Recitals
Section 2.1(a)
Section 4.1(d)(i)
Section 4.1(d)(i)
Recitals
Section 2.3(c)
Section 2.3(d)
Preamble
Section 4.1(a)
Recitals
Recitals
Section 2.3(b)(i)
Section 3.1(b)
Section 2.3(g)
Section 4.5(a)
Section 4.5(b)
Section 2.1(a)
Section 2.2(c)
Section 1.1(a)
Section 3.1(b)
Section 4.1(d)(ii)
Section 4.1(d)(ii)
Recitals
Preamble
Section 2.3(b)(i)
Section 2.1(b)
Section 4.1(b)
Section 2.3(c)
Section 2.3(d)
Section 2.1(b)
Section 2.1(b)
Section 2.1(b)
Section 4.1(d)(i)
7.2 No Third-Party Rights . Except for the indemnification rights of the LIC Indemnified Persons and the Spinco Indemnified Persons pursuant to
Section 4.1, nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective
successors and assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the
parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective
successors and assigns.
7.3 Notices . All notices and other communications hereunder shall be in writing and shall be delivered in person, by facsimile or email (with
confirming copy sent by one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage
prepaid, and shall be deemed given when so delivered in person or by courier, or when sent by facsimile or email (subject to the delivery of such confirmation
copy), or, if mailed, three (3) calendar days after the date of mailing, as follows:
if to any LIC Entity :
Liberty Interactive Corporation
12300 Liberty Boulevard
Englewood, Colorado 80112
Facsimile (720) 875-5401 Email:
Attention: General Counsel
if to any Spinco Entity :
CommerceHub, Inc. 201 Fuller Road, 6th Floor
Albany, New York 12203
Email:
Attention: General Counsel
or to such other address as the party to whom notice is given may have previously furnished to the other party in writing in the manner set forth above.
7.4 Entire Agreement . This Agreement (including the Exhibits and Schedules attached hereto) together with the Restructuring Agreements and the
Other Agreements (including the Tax Sharing Agreement) embodies the entire understanding among the parties relating to the subject matter hereof and thereof
and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement shall
have any right, responsibility or Liability under any such prior agreement or understanding. Any and all prior correspondence, conversations and memoranda are
merged herein and shall be without effect hereon. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made
to induce either party to enter into this Agreement.
7.5 Binding Effect; Assignment . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the
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prior written consent of the other parties; provided , however , that LIC and Spinco may assign their respective rights, interests, duties, liabilities and obligations
under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve LIC or Spinco, as the assignor, of its obligations
hereunder.
7.6 Governing Law; Jurisdiction . This Agreement and the legal relations among the parties hereto will be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Delaware applicable to contracts made and performed wholly therein, without giving effect to any
choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction. Each of the parties hereto irrevocably agrees that
any legal action or proceeding with respect to this Agreement, and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment
in respect of this Agreement, and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and
determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of
Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the parties hereto hereby
irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction
of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than the
aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to
serve in accordance with Section 7.3 and this Section 7.6, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise) and (c) to the fullest extent permitted by applicable law, any claim that (i) the suit, action or proceeding in such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement or the subject matter hereof may not be enforced in or by
such courts. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any
such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.3 shall be deemed effective service of
process on such party.
7.7 Waiver of Jury Trial . EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY
MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH OR RELATING TO THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
21
IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.7.
7.8 Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Upon a determination that any provision of this Agreement is
prohibited or unenforceable in any jurisdiction, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent
possible.
7.9 Amendments; Waivers . Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein, the rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law. Any consent provided under this Agreement must be
in writing, signed by the party against whom enforcement of such consent is sought.
7.10 No Strict Construction; Interpretation .
(a) LIC and Spinco each acknowledge that this Agreement has been prepared jointly by the parties hereto and shall not be strictly
construed against any party hereto.
(b) When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or
supplemented, including
22
(in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references
to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns and references to a
party means a party to this Agreement.
7.11 Conflicts with Tax Sharing Agreement . In the event of a conflict between this Agreement and the Tax Sharing Agreement, the provisions of the
Tax Sharing Agreement shall prevail.
7.12 Counterparts . This Agreement may be executed in two or more identical counterparts, each of which shall be deemed to be an original, and all
of which together shall constitute one and the same agreement. The Agreement may be delivered by facsimile transmission of a signed copy thereof.
23
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
LIBERTY INTERACTIVE CORPORATION
By:
Name:
Title:
COMMERCEHUB, INC.
By:
Name:
Title:
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
List of Omitted Exhibits and Schedules
The following exhibits and schedules to the Reorganization Agreement, dated as of [ ], 2016, by and between Liberty Interactive Corporation and
CommerceHub, Inc. have not been provided herein:
Exhibit A — Form of Services Agreement (See Exhibit 10.4 to Amendment No. 3 to Form S-1 filed herewith)
Exhibit B — Form of Spinco Charter (See Exhibit 3.1 to Amendment No. 3 to Form S-1 filed herewith)
Exhibit C — Form of Tax Sharing Agreement (See Exhibit 10.3 to Amendment No. 2 to Form S-1) (333-2210508)
Schedule 1.1 — Restructuring Plan
The undersigned registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission
upon request.
Exhibit 3.1
FORM OF RESTATED CERTIFICATE OF INCORPORATION
OF
COMMERCEHUB, INC.
COMMERCEHUB, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
(1) The name of the Corporation is CommerceHub, Inc. The original Certificate of Incorporation of the Corporation was filed on
December 30, 2015.
(2) This Restated Certificate of Incorporation restates and amends the Certificate of Incorporation of the Corporation, as
heretofore amended.
(3) This Restated Certificate of Incorporation has been duly adopted in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
(4) Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, the text of the Certificate of
Incorporation is hereby amended and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the corporation is CommerceHub, Inc. (the “ Corporation ”).
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of
New Castle, 19808. The name of its registered agent at such address is the Corporation Service Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of
the State of Delaware (as the same may be amended from time to time, the “ DGCL ”).
ARTICLE IV
AUTHORIZED STOCK
The total number of shares of capital stock which the Corporation will have authority to issue is one hundred seventy four million five hundred thousand
(174,500,000) shares, of which:
(1) one hundred twenty four million five hundred thousand (124,500,000) shares will be of a class designated as Common Stock, par value $0.01
per share (“ Common Stock ”), and such class will be divided into series as follows:
a. forty million (40,000,000) shares of Common Stock will be of a series designated as “Series A Common Stock” (the “ Series A Common Stock
”);
b. one million five hundred thousand (1,500,000) shares of Common Stock will be of a series designated as “Series B Common Stock” (the “
Series B Common Stock ”);
c. eighty three million (83,000,000) shares of Common Stock will be of a series designated as “Series C Common Stock” (the “ Series C Common
Stock ”); and
(2) fifty million (50,000,000) shares will be of a class designated as Preferred Stock, par value $0.01 per share (“ Preferred Stock ”), which are
undesignated as to series and are issuable in accordance with the provisions of Article IV, Section C hereof and the DGCL.
Upon this Restated Certificate of Incorporation (as it may from time to time hereafter be amended or restated, this “ Restated Certificate ”) becoming
effective pursuant to the DGCL (the “ Effective Time ”), all shares of Common Stock, par value $0.01 per share, issued and outstanding immediately prior to the
Effective Time shall automatically be reclassified as (i) X (as defined below) number of shares of the Series A Common Stock, par value $0.01 per share, (ii) Y (as
defined below) number of shares of the Series B Common Stock, par value $0.01 per share, and (iii) Z (as defined below) number of shares of the Series C
Common Stock, par value $0.01 per share, in each case without any action by the holder thereof. As used in this paragraph, “X” means the product, rounded down
to the nearest whole share, of (x) the number of outstanding shares of Liberty Interactive Corporation’s Series A Liberty Ventures Common Stock, par value $0.01
per share (“ LVNTA ”), as of 5:00 p.m., New York City time, on [ ·
], 2016 and (y) 0.1, “Y” means the product, rounded down to the nearest whole share, of
(x) the number of outstanding shares of Liberty Interactive Corporation’s Series B Liberty Ventures Common Stock, par value $0.01 per share (“ LVNTB ”), as of
5:00 p.m., New York City time, on [ ·
], 2016 and (y) 0.1, and “Z” means the product, rounded down to the nearest whole share, of (x) the
2
number of outstanding shares of LVNTA plus the number of outstanding shares of LVNTB, in each case, as of 5:00 p.m., New York City time, on [ ·
], 2016 and
(y) 0.2.
The description of the Common Stock and the Preferred Stock, and the powers, preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, or the method of fixing and establishing the same, are as hereinafter set forth in this Article IV.
SECTION A
CERTAIN DEFINITIONS AND INTERPRETATIONS
Unless the context otherwise requires, the terms defined below will have, for all purposes of this Restated Certificate, the meanings herein specified:
“ Board of Directors ” or “ Board ” means the Board of Directors of the Corporation and, unless the context indicates otherwise, also means, to the extent
permitted by law, any committee thereof authorized, with respect to any particular matter, to exercise the power of the Board of Directors of the Corporation with
respect to such matter.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by agreement, or otherwise. The terms “Controls”, “Controlled” and “Controlling” will have corresponding meanings.
“ Convertible Securities ” means (x) any securities of the Corporation (other than any series of Common Stock) that are directly or indirectly convertible
into or exchangeable for, or that evidence the right to purchase, directly or indirectly, securities of the Corporation or any other Person, whether upon conversion,
exercise, exchange, pursuant to anti-dilution provisions of such securities or otherwise, and (y) any securities of any other Person that are directly or indirectly
convertible into or exchangeable for, or that evidence the right to purchase, directly or indirectly, securities of such Person or any other Person (including the
Corporation), whether upon conversion, exercise, exchange, pursuant to anti-dilution provisions of such securities or otherwise.
“ Person ” means a natural person, corporation, limited liability company, partnership, joint venture, trust, unincorporated association or other legal entity.
“ Series A Convertible Securities ” means Convertible Securities convertible into or exercisable or exchangeable for Series A Common Stock.
“ Series B Convertible Securities ” means Convertible Securities convertible into or exercisable or exchangeable for Series B Common Stock.
“ Series C Convertible Securities ” means Convertible Securities convertible into or exercisable or exchangeable for Series C Common Stock.
3
“ Underlying Securities ” means, with respect to any class or series of Convertible Securities, the class or series of securities into which such class or
series of Convertible Securities are directly or indirectly convertible, or for which such Convertible Securities are directly or indirectly exchangeable, or that such
Convertible Securities evidence the right to purchase or otherwise receive, directly or indirectly.
SECTION B
SERIES A COMMON STOCK, SERIES B COMMON STOCK AND SERIES C COMMON STOCK
Each share of Series A Common Stock, each share of Series B Common Stock and each share of Series C Common Stock will, except as otherwise
provided in this Restated Certificate, be identical in all respects and will have equal rights, powers and privileges.
1. Voting Rights .
Holders of Series A Common Stock will be entitled to one vote for each share of such stock held of record, and holders of Series B Common Stock will be
entitled to ten votes for each share of such stock held of record, on all matters that are submitted to a vote of stockholders of the Corporation (regardless of whether
such holders are voting together with the holders of all Voting Securities (as defined below), or as a separate class with the holders of one or more series of
Common Stock or Preferred Stock, or as a separate series of Common Stock or Preferred Stock, or otherwise). Holders of Series C Common Stock will not be
entitled to any voting powers, except as (and then only to the extent) otherwise required by the laws of the State of Delaware. If a vote or consent of the holders of
Series C Common Stock should at any time be required by the laws of the State of Delaware on any matter, the holders of Series C Common Stock will be entitled
to one-hundredth (1/100) of a vote on such matter for each share of Series C Common Stock held of record.
Except (A) as may otherwise be required by the laws of the State of Delaware, (B) as may otherwise be provided in this Restated Certificate, or (C) as
may otherwise be provided in any Preferred Stock Designation (as defined in Article IV, Section C hereof), the holders of outstanding shares of Series A Common
Stock, the holders of outstanding shares of Series B Common Stock and the holders of outstanding shares of each series of Preferred Stock that is designated as a
Voting Security and is entitled to vote thereon in accordance with the terms of the applicable Preferred Stock Designation, will vote as one class with respect to the
election of directors and with respect to all other matters to be voted on by stockholders of the Corporation (including, without limitation, and irrespective of the
provisions of Section 242(b)(2) of the DGCL, any proposed amendment to this Restated Certificate required to be voted on by the stockholders of the Corporation
that would (x) increase (i) the number of authorized shares of Common Stock or any series thereof, (ii) the number of authorized shares of Preferred Stock or any
series thereof or (iii) the number of authorized shares of any other class or series of capital stock of the Corporation hereafter established or (y) decrease (i) the
number of authorized shares of Common Stock or any series thereof, (ii) the number of authorized shares of Preferred Stock or any series thereof or (iii) the
number of authorized shares of any other class or series of capital stock of the Corporation hereafter established (but, in each case, not below the number of shares
4
of such class or series of capital stock, as the case may be, then outstanding)), and no separate class or series vote or consent of the holders of shares of any class or
series of capital stock of the Corporation will be required for the approval of any such matter.
The term “ Voting Securities ” means the Series A Common Stock, the Series B Common Stock and any series of Preferred Stock which by the terms of
its Preferred Stock Designation is designated as a Voting Security; provided that each such series of Preferred Stock will be entitled to vote together with the other
Voting Securities only as and to the extent expressly provided for in the applicable Preferred Stock Designation.
2. Conversion Rights .
(a) Each share of Series B Common Stock will be convertible, at the option of the holder thereof, into one fully paid and non-assessable
share of Series A Common Stock. Any such conversion may be effected by any holder of Series B Common Stock by surrendering such holder’s certificate or
certificates for the Series B Common Stock to be converted, duly endorsed, at the office of the Corporation or any transfer agent for the Series B Common Stock,
together with a written notice to the Corporation at such office that such holder elects to convert all or a specified number of shares of Series B Common Stock
represented by such certificate or certificates and stating the name or names in which such holder desires the certificate or certificates representing shares of
Series A Common Stock to be issued and, if less than all of the shares of Series B Common Stock represented by one certificate are to be converted, the name or
names in which such holder desires the certificate representing such remaining shares of Series B Common Stock to be issued. If so required by the Corporation,
any certificate representing shares surrendered for conversion in accordance with this Article IV, Section B.2(a) will be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder of such shares or the duly authorized representative of such holder, and will, if required by the last
sentence of Article IV, Section B.2(b) of this Restated Certificate, be accompanied by payment, or evidence of payment, of applicable issue or transfer taxes. Promptly thereafter, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees, a certificate or certificates representing the
number of shares of Series A Common Stock to which such holder will be entitled as herein provided. If less than all of the shares of Series B Common Stock
represented by any one certificate are to be converted, the Corporation will issue and deliver to such holder or such holder’s nominee or nominees a new certificate
representing the shares of Series B Common Stock not converted. Such conversion will be deemed to have been made at the close of business on the date of receipt
by the Corporation or any such transfer agent of the certificate or certificates, notice and, if required, instruments of transfer and payment or evidence of payment of
taxes referred to above, and the person or persons entitled to receive the Series A Common Stock issuable on such conversion will be treated for all purposes as the
record holder or holders of such Series A Common Stock on that date. A number of shares of Series A Common Stock equal to the number of shares of Series B
Common Stock outstanding from time to time will be set aside and reserved for issuance upon conversion of shares of Series B Common Stock. Shares of Series A
Common Stock and shares of Series C Common Stock are not convertible into shares of any other series of Common Stock.
5
(b) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issue
or delivery of certificates representing shares of Series A Common Stock on conversion of shares of Series B Common Stock pursuant to this Article IV,
Section B.2. The Corporation will not, however, be required to pay any tax that may be payable in respect of any issue or delivery of certificates representing any
shares of Series A Common Stock in a name other than that in which the shares of Series B Common Stock so converted were registered and no such issue or
delivery will be made unless and until the Person requesting the same has paid to the Corporation the amount of any such tax or has established to the satisfaction
of the Corporation that such tax has been paid.
3. Dividends .
Whenever a dividend, other than a dividend that constitutes a Share Distribution, is paid to the holders of any series of Common Stock then outstanding,
the Corporation will also pay to the holders of each other series of Common Stock then outstanding an equal dividend per share. Dividends will be payable only as
and when declared by the Board of Directors out of assets of the Corporation legally available therefor. Whenever a Share Distribution is paid to the holders of any
series of Common Stock then outstanding, the Corporation will also pay a Share Distribution to the holders of each other series of Common Stock then outstanding,
as provided in Article IV, Section B.4 below. For purposes of this Article IV, Section B.3 and Article IV, Section B.4 below, a “ Share Distribution ” means a
dividend or distribution (including a distribution made in connection with any stock-split, reclassification, recapitalization, dissolution, winding up or full or partial
liquidation of the Corporation) payable in shares of any class or series of capital stock, Convertible Securities or other securities of the Corporation or any other
Person.
4. Share Distributions .
If at any time a Share Distribution is to be made with respect to any series of Common Stock, such Share Distribution may be declared and paid only as
follows:
(a) a Share Distribution (i) consisting of shares of Series C Common Stock or Series C Convertible Securities may be declared and paid to
holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, on an equal per share basis, or (ii) consisting of (x) shares of Series A
Common Stock or Series A Convertible Securities may be declared and paid to holders of Series A Common Stock, on an equal per share basis, (y) shares of
Series B Common Stock or Series B Convertible Securities may be declared and paid to holders of Series B Common Stock, on an equal per share basis, and
(z) shares of Series C Common Stock or Series C Convertible Securities may be declared and paid to holders of Series C Common Stock, on an equal per share
basis; or
(b) a Share Distribution consisting of any class or series of securities of the Corporation or any other Person, other than Series A Common
Stock, Series B Common Stock or Series C Common Stock (or Series A Convertible Securities, Series B Convertible Securities or Series C Convertible Securities),
may be declared and paid on the basis of a distribution of (i) identical securities, on an
6
equal per share basis, to holders of Series A Common Stock, Series B Common Stock and Series C Common Stock, (ii) separate classes or series of securities, on
an equal per share basis, to the holders of each such series of Common Stock or (iii) a separate class or series of securities to the holders of one or more series of
Common Stock and, on an equal per share basis, a different class or series of securities to the holders of all other series of Common Stock; provided , that , in
connection with a Share Distribution pursuant to clause (ii) or clause (iii), (1) such separate classes or series of securities (and, if the distribution consists of
Convertible Securities, the Underlying Securities) do not differ in any respect other than their relative voting rights (and any related differences in designation,
conversion and share distribution provisions, as applicable), with holders of shares of Series B Common Stock receiving the class or series of securities having (or
convertible into or exercisable or exchangeable for securities having) the highest relative voting rights and the holders of shares of each other series of Common
Stock receiving securities of a class or series having (or convertible into or exercisable or exchangeable for securities having) lesser relative voting rights, in each
case, without regard to whether such rights differ to a greater or lesser extent than the corresponding differences in voting rights (and any related differences in
designation, conversion and share distribution, as applicable) among the Series A Common Stock, the Series B Common Stock and the Series C Common Stock,
and (2) in the event the securities to be received by the holders of shares of Common Stock other than the Series B Common Stock consist of different classes or
series of securities, with each such class or series of securities (or the Underlying Securities into which such class or series is convertible or for which such class or
series is exercisable or exchangeable) differing only with respect to the relative voting rights of such class or series (and any related differences in designation,
conversion and share distribution provisions, as applicable), then such classes or series of securities will be distributed to the holders of each series of Common
Stock (other than the Series B Common Stock) (A) as the Board of Directors determines or (B) such that the relative voting rights (and any related differences in
designation, conversion and share distribution provisions, as applicable) of the class or series of securities (or the Underlying Securities) to be received by the
holders of each series of Common Stock (other than the Series B Common Stock) corresponds to the extent practicable to the relative voting rights (and any related
differences in designation, conversion and share distribution provisions, as applicable) of such series of Common Stock, as compared to the other series of
Common Stock (other than the Series B Common Stock).
5. Reclassification .
The Corporation will not reclassify, subdivide or combine one series of Common Stock without reclassifying, subdividing or combining each other series
of Common Stock, on an equal per share basis. Any such reclassification, subdivision or combination is subject to Article IX of this Restated Certificate.
6. Liquidation and Dissolution .
In the event of a liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the
debts and liabilities of the Corporation and subject to the payment in full of the preferential or other amounts to which any series of Preferred Stock are entitled, the
holders of shares of Series A Common Stock, the holders of shares of Series B Common Stock and the holders of shares of Series C Common Stock will share
equally, on a share for share basis, in the assets of the Corporation remaining for distribution to the holders of Common Stock. Neither the consolidation or merger
of the
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Corporation with or into any other Person or Persons nor the sale, transfer or lease of all or substantially all of the assets of the Corporation will itself be deemed to
be a liquidation, dissolution or winding up of the Corporation within the meaning of this Article IV, Section B.6.
SECTION C
PREFERRED STOCK
The Preferred Stock may be divided and issued in one or more series from time to time, with such powers, designations, preferences and relative,
participating, optional or other rights and qualifications, limitations or restrictions thereof, as will be stated and expressed in a resolution or resolutions providing
for the issue of each such series adopted by the Board of Directors (a “ Preferred Stock Designation ”). The Board of Directors, in the Preferred Stock Designation
with respect to a series of Preferred Stock (a copy of which will be filed as required by law), will, without limitation of the foregoing, fix the following with respect
to such series of Preferred Stock:
(i) the distinctive serial designations and the number of authorized shares of such series, which may be increased or decreased, but not below the
number of shares thereof then outstanding, by a certificate made, signed and filed as required by law (except where otherwise provided in a Preferred Stock
Designation);
(ii) the dividend rate or amounts, if any, for such series, the date or dates from which dividends on all shares of such series will be cumulative, if
dividends on stock of such series will be cumulative, and the relative preferences or rights of priority, if any, or participation, if any, with respect to payment of
dividends on shares of such series;
(iii) the rights of the shares of such series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if
any, and the relative preferences or rights of priority, if any, of payment of shares of such series;
(iv) the right, if any, of the holders of such series to convert or exchange such stock into or for other classes or series of a class of stock or
indebtedness of the Corporation or of another Person, and the terms and conditions of such conversion or exchange, including provision for the adjustment of the
conversion or exchange rate in such events as the Board of Directors may determine;
(v) the voting powers, if any, of the holders of such series, including whether such series will be a Voting Security and, if so designated, the terms
and conditions on which the holders of such series may vote together with the holders of any other class or series of capital stock of the Corporation;
(vi) the terms and conditions, if any, for the Corporation to purchase or redeem shares of such series; and
(vii) any other relative rights, powers, preferences and limitations, if any, of such series.
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The Board of Directors is hereby expressly authorized to exercise its authority with respect to fixing, designating and issuing various series of the
Preferred Stock and determining the powers, designations, preferences and relative, participating, optional or other rights of such series of Preferred Stock, if any,
and the qualifications, restrictions or limitations thereof, if any, to the full extent permitted by applicable law, subject to any stockholder vote that may be required
by this Restated Certificate. All shares of any one series of the Preferred Stock will be alike in every particular. Except to the extent otherwise expressly provided
in the Preferred Stock Designation for a series of Preferred Stock, the holders of shares of such series will have no voting rights except as may be required by the
laws of the State of Delaware. Further, unless otherwise expressly provided in the Preferred Stock Designation for a series of Preferred Stock, no consent or vote of
the holders of shares of Preferred Stock or any series thereof will be required for any amendment to this Restated Certificate that would increase the number of
authorized shares of Preferred Stock or the number of authorized shares of any series thereof or decrease the number of authorized shares of Preferred Stock or the
number of authorized shares of any series thereof (but not below the number of authorized shares of Preferred Stock or such series, as the case may be, then
outstanding).
Except as may be provided by the Board of Directors in a Preferred Stock Designation or by law, shares of any series of Preferred Stock that have been
redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible or exchangeable, have been
converted into or exchanged for shares of stock of any other class or classes will have the status of authorized and unissued shares of Preferred Stock and may be
reissued as a part of the series of which they were originally a part or may be reissued as part of a new series of Preferred Stock to be created by a Preferred Stock
Designation or as part of any other series of Preferred Stock.
ARTICLE V
DIRECTORS
SECTION A
NUMBER OF DIRECTORS
The governing body of the Corporation will be a Board of Directors. Subject to any rights of the holders of any series of Preferred Stock to elect
additional directors, the number of directors will not be less than three (3) and the exact number of directors will be fixed by the Board of Directors by resolution
from time to time. Election of directors need not be by written ballot.
SECTION B
CLASSIFICATION OF THE BOARD
Except as otherwise fixed by or pursuant to the provisions of Article IV hereof relating to the rights of the holders of any series of Preferred Stock to
separately elect additional directors, which additional directors are not required to be classified pursuant to the terms of such series of
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Preferred Stock (the “Preferred Stock Directors”), pursuant to Section 141(d) of the DGCL, the Board of Directors will be divided into three classes: Class I,
Class II and Class III. Each class will consist, as nearly as possible, of a number of directors equal to one-third (1/3) of the number of members of the Board of
Directors (other than the Preferred Stock Directors) authorized as provided in Section A of this Article V. The Board of Directors is authorized to assign members
of the Board of Directors already in office to such classes at the time the classification of the Board of Directors becomes effective pursuant to this Section B of
Article V. The term of office of the initial Class I directors will expire at the annual meeting of stockholders in 2017; the term of office of the initial Class II
directors will expire at the annual meeting of stockholders in 2018; and the term of office of the initial Class III directors will expire at the annual meeting of
stockholders in 2019. At each annual meeting of stockholders the successors of the class of directors whose term expires at that meeting will be elected to hold
office in accordance with this Section B of Article V for a term expiring at the annual meeting of stockholders held in the third year following the year of their
election. The directors of each class will hold office until the expiration of the term of such class and until their respective successors are elected and qualified or
until such director’s earlier death, resignation or removal.
SECTION C
REMOVAL OF DIRECTORS
Subject to the rights of the holders of any series of Preferred Stock, directors may be removed from office only for cause upon the affirmative vote of the
holders of at least a majority of the total voting power of the then outstanding Voting Securities entitled to vote thereon, voting together as a single class.
SECTION D
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
Subject to the rights of holders of any series of Preferred Stock, vacancies on the Board of Directors resulting from death, resignation, removal,
disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on the Board of Directors, will be filled only
by the affirmative vote of a majority of the remaining directors then in office (even though less than a quorum) or by the sole remaining director. Any director
elected in accordance with the preceding sentence will hold office for the remainder of the full term of the class of directors in which the vacancy occurred or to
which the new directorship is apportioned, and until such director’s successor will have been elected and qualified or until such director’s earlier death, resignation
or removal. No decrease in the number of directors constituting the Board of Directors will shorten the term of any incumbent director, except as may be provided
with respect to any additional director elected by the holders of the applicable series of Preferred Stock.
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SECTION E
LIMITATION ON LIABILITY AND INDEMNIFICATION
1. Limitation On Liability.
To the fullest extent permitted by the DGCL as the same exists or may hereafter be amended, a director of the Corporation will not be liable to the
Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this paragraph 1 will be
prospective only and will not adversely affect any limitation, right or protection of a director of the Corporation existing at the time of such repeal or modification.
2. Indemnification.
(a) Right to Indemnification. The Corporation will indemnify, to the fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a “ proceeding ”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or
officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses
(including attorneys’ fees) incurred by such person. Such right of indemnification will inure whether or not the claim asserted is based on matters which antedate
the adoption of this Section E. The Corporation will be required to indemnify or make advances to a person in connection with a proceeding (or part thereof)
initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors.
(b) Prepayment of Expenses. The Corporation will pay the expenses (including attorneys’ fees) incurred by a director or officer in defending any
proceeding in advance of its final disposition; provided , however , that the payment of expenses incurred by a director or officer in advance of the final disposition
of the proceeding will be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined
that the director or officer is not entitled to be indemnified under this paragraph or otherwise.
(c) Claims. If a claim for indemnification or payment of expenses under this paragraph is not paid in full within 60 days after a written claim
therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful, will be entitled to be paid
the expense (including attorney’s fees) of prosecuting such claim to the fullest extent permitted by Delaware law. In any such action the Corporation will have the
burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.
(d) Non-Exclusivity of Rights. The rights conferred on any person by this paragraph will not be exclusive of any other rights which such person
may have or hereafter acquire under
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any statute, provision of this Restated Certificate, the Bylaws, agreement, vote of stockholders or resolution of disinterested directors or otherwise.
(e) Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity will be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust, enterprise or nonprofit entity.
3. Amendment or Repeal .
Any amendment, modification or repeal of the foregoing provisions of this Section E will not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
SECTION F
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the DGCL, the Board of Directors, by action taken by the affirmative vote of not less than
75% of the members of the Board of Directors then in office, is hereby expressly authorized and empowered to adopt, amend or repeal any provision of the Bylaws
of this Corporation.
ARTICLE VI
TERM
The term of existence of this Corporation shall be perpetual.
ARTICLE VII
STOCK NOT ASSESSABLE
The capital stock of this Corporation shall not be assessable. It shall be issued as fully paid, and the private property of the stockholders shall not be liable
for the debts, obligations or liabilities of this Corporation. This Restated Certificate shall not be subject to amendment in this respect.
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ARTICLE VIII
MEETINGS OF STOCKHOLDERS
SECTION A
ANNUAL AND SPECIAL MEETINGS
Subject to the rights of the holders of any series of Preferred Stock, stockholder action may be taken only at an annual or special meeting. Except as
otherwise provided in a Preferred Stock Designation with respect to any series of Preferred Stock or unless otherwise prescribed by law or by another provision of
this Restated Certificate, special meetings of the stockholders of the Corporation, for any purpose or purposes, will only be called by the Secretary of the
Corporation (i) upon the written request of the holders of not less than 66 2 / 3 % of the total voting power of the then outstanding Voting Securities entitled to vote
thereon or (ii) at the request of at least 75% of the members of the Board of Directors then in office.
SECTION B
ACTION WITHOUT A MEETING
No action required to be taken or which may be taken at any annual meeting or special meeting of stockholders may be taken without a meeting, and the
power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied; provided , however , that notwithstanding the
foregoing, holders of any series of Preferred Stock may take action by written consent to the extent provided in a Preferred Stock Designation with respect to such
series.
ARTICLE IX
ACTIONS REQUIRING SUPERMAJORITY STOCKHOLDER VOTE
Subject to the rights of the holders of any series of Preferred Stock, the affirmative vote of the holders of at least 66 2 / 3 % of the total voting power of the
then outstanding Voting Securities entitled to vote thereon, voting together as a single class at a meeting specifically called for such purpose, will be required in
order for the Corporation to take any action to authorize:
(i) the amendment, alteration or repeal of any provision of this Restated Certificate or the addition or insertion of other provisions herein; provided
, however , that this clause (i) will not apply to any such amendment, alteration, repeal, addition or insertion (A) as to which the laws of the State of Delaware, as
then in effect, do not require the consent of this Corporation’s stockholders, or (B) that at least 75% of the members of the Board of Directors then in office have
approved;
(ii) the adoption, amendment or repeal of any provision of the Bylaws of the Corporation; provided , however , that this clause (ii) will not apply to,
and no vote of the
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stockholders of the Corporation will be required to authorize, the adoption, amendment or repeal of any provision of the Bylaws of the Corporation by the Board of
Directors in accordance with the power conferred upon it pursuant to Section F of Article V of this Restated Certificate;
(iii) the merger or consolidation of this Corporation with or into any other corporation (including a merger consummated pursuant to
Section 251(h) of the DGCL and notwithstanding the exception to a vote of the stockholders for such a merger set forth therein); provided , however , that this
clause (iii) will not apply to any such merger or consolidation (A) as to which the laws of the State of Delaware, as then in effect, do not require the consent of this
Corporation’s stockholders (other than Section 251(h) of the DGCL), or (B) that at least 75% of the members of the Board of Directors then in office have
approved;;
(iv) the sale, lease or exchange of all, or substantially all, of the property or assets of the Corporation; provided , however , that this clause (iv) will
not apply to any such sale, lease or exchange that at least 75% of the members of the Board of Directors then in office have approved; or
(v) the dissolution of the Corporation; provided , however , that this clause (v) will not apply to such dissolution if at least 75% of the members of
the Board of Directors then in office have approved such dissolution.
Subject to the foregoing provisions of this Article IX, the Corporation reserves the right at any time, and from time to time, to amend, alter, change or
repeal any provision contained in this Restated Certificate, and other provisions authorized by the laws of the State of Delaware at the time in force may be added
or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors
or any other Persons whomsoever by and pursuant to this Restated Certificate in its present form or as hereafter amended are granted subject to the rights reserved
in this Article IX.
ARTICLE X
CERTAIN BUSINESS OPPORTUNITIES
1. Certain Acknowledgements; Definitions.
In recognition and anticipation that:
(a) directors and officers of the Corporation may serve as directors, officers, employees and agents of any other corporation, company, partnership,
association, firm or other entity, including, without limitation, Subsidiaries and Affiliates of the Corporation (“ Other Entity ”),
(b) the Corporation, directly or indirectly, may engage in the same, similar or related lines of business as those engaged in by any Other Entity and
other business activities that overlap with or compete with those in which such Other Entity may engage,
(c) the Corporation may have an interest in the same areas of business opportunity as any Other Entity, and
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(d) the Corporation may engage in material business transactions with any Other Entity and its Affiliates, including, without limitation, receiving
services from, providing services to or being a significant customer or supplier to such Other Entity and its Affiliates, and that the Corporation and such Other
Entity or one or more of their respective Subsidiaries or Affiliates may benefit from such transactions,
and as a consequence of the foregoing, it is in the best interests of the Corporation that the rights of the Corporation, and the duties of any directors or officers of
the Corporation (including any such persons who are also directors, officers or employees of any Other Entity), be determined and delineated, as set forth herein, in
respect of (x) any transactions between the Corporation and its Subsidiaries or Affiliates, on the one hand, and such Other Entity and its Subsidiaries or Affiliates,
on the other hand, and (y) any potential transactions or matters that may be presented to officers or directors of the Corporation, or of which such officers or
directors may otherwise become aware, which potential transactions or matters may constitute business opportunities of the Corporation or any of its Subsidiaries
or Affiliates.
In recognition of the benefits to be derived by the Corporation through its continued contractual, corporate and business relations with any Other Entity
and of the benefits to be derived by the Corporation by the possible service as directors or officers of the Corporation and its Subsidiaries of persons who may also
serve from time to time as directors, officers or employees of any Other Entity, the provisions of this Article X will, to the fullest extent permitted by law, regulate
and define the conduct of the business and affairs of the Corporation in relation to such Other Entity and its Affiliates, and as such conduct and affairs may involve
such Other Entity’s respective directors, officers or employees, and the powers, rights, duties and liabilities of the Corporation and its officers and directors in
connection therewith and in connection with any potential business opportunities of the Corporation.
Any Person purchasing, receiving or otherwise becoming the owner of any shares of capital stock of the Corporation, or any interest therein, will be
deemed to have notice of and to have consented to the provisions of this Article X. References in this Article X to “directors,” “officers” or “employees” of any
Person will be deemed to include those Persons who hold similar positions or exercise similar powers and authority with respect to any Other Entity that is a
limited liability company, partnership, joint venture or other non-corporate entity.
2. Duties of Directors and Officers Regarding Potential Business Opportunities; No Liability for Certain Acts or Omissions.
If a director or officer of the Corporation is offered, or otherwise acquires knowledge of, a potential transaction or matter that may constitute or present a
business opportunity for the Corporation or any of its Subsidiaries or Affiliates, in which the Corporation could, but for the provisions of this Article X, have an
interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “ Potential Business Opportunity ”):
(a) such director or officer will, to the fullest extent permitted by law, have no duty or obligation to refer such Potential Business Opportunity to the
Corporation, or to refrain from referring such Potential Business Opportunity to any Other Entity, or to give any notice to the Corporation regarding such Potential
Business Opportunity (or any matter related thereto),
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(b) such director or officer will not be liable to the Corporation or any of its Subsidiaries or any of its stockholders, as a director, officer, stockholder
or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation or any of its Subsidiaries, or for referring such Potential Business
Opportunity to any Other Entity, or for any failure to give any notice to or otherwise inform the Corporation or any of its Subsidiaries regarding such Potential
Business Opportunity or any matter relating thereto,
(c) any Other Entity may engage or invest in, independently or with others, any such Potential Business Opportunity,
(d) the Corporation shall not have any right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom,
and
(e) the Corporation shall have no interest or expectancy, and hereby specifically renounces any interest or expectancy, in any such Potential
Business Opportunity,
unless both the following conditions are satisfied: (A) such Potential Business Opportunity was expressly offered to a director or officer of the Corporation solely
in his or her capacity as a director or officer of the Corporation or as a director or officer of any Subsidiary of the Corporation and (B) such opportunity relates to a
line of business in which the Corporation or any of its Subsidiaries is then directly engaged.
3. Amendment of Article X.
No alteration, amendment or repeal, or adoption of any provision inconsistent with, any provision of this Article X will have any effect upon
(a) any agreement between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, that was entered into before the time
of such alteration, amendment or repeal or adoption of any such inconsistent provision (the “ Amendment Time ”), or any transaction entered into in connection
with the performance of any such agreement, whether such transaction is entered into before or after the Amendment Time,
(b) any transaction entered into between the Corporation or an Affiliate thereof and any Other Entity or an Affiliate thereof, before the Amendment
Time,
(c) the allocation of any business opportunity between the Corporation or any Subsidiary or Affiliate thereof and any Other Entity before the
Amendment Time, or
(d) any duty or obligation owed by any director or officer of the Corporation or any Subsidiary of the Corporation (or the absence of any such duty
or obligation) with respect to any Potential Business Opportunity which such director or officer was offered, or of which such director or officer otherwise became
aware, before the Amendment Time (regardless of whether any proceeding relating to any of the above is commenced before or after the Amendment Time).
4. Definitions for Article X
For purposes of this Article X, the following terms have the meanings set forth below:
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“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by,
or is under common Control with such Person.
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by agreement, or otherwise. The terms “Controls”, “Controlled” and “Controlling” will have corresponding meanings.
“ Subsidiary ” when used with respect to any Person, means any other Person (1) of which (x) in the case of a corporation, at least (A) 50% of the equity
or (B) 50% of the voting interests are owned or Controlled, directly or indirectly, by such first Person, by any one or more of its Subsidiaries, or by such first
Person and one or more of its Subsidiaries or (y) in the case of any Person other than a corporation, such first Person, one or more of its Subsidiaries, or such first
Person and one or more of its Subsidiaries (A) owns at least 50% of the equity interests thereof or (B) has the power to elect or direct the election of at least 50% of
the members of the governing body thereof or otherwise has Control over such organization or entity; or (2) that is required to be consolidated with such first
Person for financial reporting purposes under U.S. Generally Accepted Accounting Principles, as in effect from to time.
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IN WITNESS WHEREOF , the undersigned has executed this Restated Certificate of Incorporation this day of , 2016.
COMMERCEHUB, INC.
By:
Name:
Title:
Exhibit 3.2
COMMERCEHUB, INC.
A Delaware Corporation
FORM OF BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting .
An annual meeting of stockholders for the purpose of electing directors and of transacting any other business properly brought before the
meeting pursuant to these Bylaws shall be held each year at such date, time and place, either within or without the State of Delaware or, if so determined by the
Board of Directors in its sole discretion, at no place (but rather by means of remote communication), as may be specified by the Board of Directors in the notice of
meeting.
Section 1.2 Special Meetings .
Except as otherwise provided in the terms of any series of preferred stock or unless otherwise provided by law or by the Certificate of
Incorporation, special meetings of stockholders of the Corporation, for the transaction of such business as may properly come before the meeting, may be called by
the Secretary of the Corporation (the “ Secretary ”) only (i) upon written request received by the Secretary at the principal executive offices of the Corporation by
or on behalf of the holder or holders of record of outstanding shares of capital stock of the Corporation, representing collectively not less than 66 2 / 3 % of the total
voting power of the outstanding capital stock of the Corporation entitled to vote at such meeting or (ii) at the request of not less than 75% of the members of the
Board of Directors then in office. Only such business may be transacted as is specified in the notice of the special meeting. The Board of Directors shall have the
sole power to determine the time, date and place, either within or without the State of Delaware, or, if so determined by the Board of Directors in its sole discretion,
at no place (but rather by means of remote communication), for any special meeting of stockholders (including those properly called by the Secretary in accordance
with Section 1.2(i) hereof). Following such determination, it shall be the duty of the Secretary to cause notice to be given to the stockholders entitled to vote at
such meeting that a meeting will be held at the time, date and place, if any, and in accordance with the record date determined by the Board of Directors.
Section 1.3 Record Date .
In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the
Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) calendar days nor less than ten (10) calendar days before
the date of such meeting. If the Board of Directors so fixes a record date for determining the stockholders entitled to notice of any meeting of stockholders, such
date shall be the record date for determining the stockholders entitled to vote at such meeting, unless the Board of Directors determines, at the time it fixes the
record date for determining the stockholders entitled to notice of such meeting, that a later date on or before the date of the meeting shall be the record date for
determining stockholders entitled to vote at such meeting. In order that the Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) calendar days prior to such action. If
no record date is fixed by the Board of Directors: (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held, and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders
shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting in accordance
with this Section 1.3.
Section 1.4 Notice of Meetings .
Notice of all stockholders meetings, stating the place, if any, date and hour thereof, as well as the record date for determining stockholders
entitled to vote at such meeting (if such record date is different from the record date for determining stockholders entitled to notice of the meeting); the means of
remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting; and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall be delivered by the Corporation in accordance with Section 5.4 of these Bylaws,
applicable law and applicable stock exchange rules and regulations by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President,
the Secretary or an Assistant Secretary, to each stockholder entitled to notice of such meeting, unless otherwise provided by applicable law or the Certificate of
Incorporation, at least ten (10) calendar days but not more than sixty (60) calendar days before the date of the meeting.
Section 1.5 Notice of Stockholder Business .
(a) Annual Meetings of Stockholders .
(1) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before
the meeting. To be properly brought before an annual meeting, nominations for persons for election to the Board of Directors and the
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proposal of business to be considered by the stockholders must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof), or (iii) otherwise properly be requested to be brought before the meeting by a stockholder (x) who complies
with the procedures set forth in this Section 1.5 and (y) who was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different,
on whose behalf such business is proposed or such nomination or nominations made, only if such beneficial owner was the beneficial owner of shares of the
Corporation) both at the time the notice provided for in Section 1.5(a)(2) is delivered to the Secretary and on the record date for the determination of stockholders
entitled to vote at the meeting, and (z) who is entitled to vote at the meeting upon such election of directors or upon such business, as the case may be.
(2) In addition to any other requirements under applicable law and the Corporation’s Certificate of Incorporation, for a
nomination for election to the Board of Directors or the proposal of business to be properly requested to be brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in proper written form to the Secretary and any such proposed business, other than the nominations of persons
for election to the Board of Directors, must constitute a proper matter for stockholder action pursuant to the Certificate of Incorporation, these Bylaws, and
applicable law. To be timely, a stockholder’s notice must be received at the principal executive offices of the Corporation (x) in the case of an annual meeting that
is called for a date that is within thirty (30) calendar days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less
than sixty (60) calendar days nor more than ninety (90) calendar days prior to the meeting and (y) in the case of an annual meeting that is called for a date that is
not within thirty (30) calendar days before or after the anniversary date of the immediately preceding annual meeting, not later than the close of business on the
tenth (10 th ) day following the day on which notice of the date of the meeting was communicated to stockholders or public announcement (as defined below) of the
date of the meeting was made, whichever occurs first. In no event shall the public announcement of an adjournment or postponement of a meeting of stockholders
commence a new time period (or extend any time period) for the giving of a stockholder notice as described herein.
To be in proper written form, such stockholder’s notice to the Secretary must be submitted by a holder of record of stock
entitled to vote on the nomination of directors of the Corporation and shall set forth in writing and describe in fair, accurate, and material detail (A) as to each
person whom the stockholder proposes to nominate for election as a director (a “ nominee ”) (i) all information relating to such nominee that is required to be
disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to and in accordance with
Regulation 14A under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (ii) such nominee’s written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (B) as to any other business that the stockholder proposes to bring before the annual meeting,
(i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the
text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event
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that such business includes a proposal to amend the Bylaws of the Corporation, the language of the proposed amendment), and (iii) any material interest of the
stockholder and beneficial owner, if any, on whose behalf the proposal is made, in such business; and (C) as to such stockholder giving notice and the beneficial
owner or owners, if different, on whose behalf the nomination or proposal is made, and any affiliates or associates (each within the meaning of Rule 12b-2 under
the Exchange Act) of such stockholder or beneficial owner (each a “ Proposing Person ”) (i) the name and address, as they appear on the Corporation’s books, of
such Proposing Person, (ii) the class or series and number of shares of the capital stock of the Corporation that are owned beneficially and of record by such
Proposing Person, (iii) a description of all arrangements or understandings between such Proposing Person and any other person or persons (including their names)
pursuant to which the proposals are to be made by such stockholder, (iv) a representation by each Proposing Person who is a holder of record of stock of the
Corporation (A) that the notice the Proposing Person is giving to the Secretary is being given on behalf of (x) such holder of record and/or (y) if different than such
holder of record, one or more beneficial owners of stock of the Corporation held of record by such holder of record, (B) as to each such beneficial owner, the
number of shares held of record by such holder of record that are beneficially owned by such beneficial owner, with documentary evidence of such beneficial
ownership, and (C) that such holder of record is entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business
or nomination set forth in its notice, (v) a representation (I) whether any such Proposing Person or nominee has received any financial assistance, funding or other
consideration from any other person in respect of the nomination (and the details thereof) (a “ Stockholder Associated Person ”) and (II) whether and the extent to
which any hedging, derivative or other transaction has been entered into with respect to the Corporation within the past six (6) months by, or is in effect with
respect to, such stockholder, any person to be nominated by such stockholder or any Stockholder Associated Person, the effect or intent of which transaction is to
mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such stockholder, nominee or any such
Stockholder Associated Person, and (vi) a representation whether any Proposing Person intends or is part of a group that intends to (I) deliver a proxy statement
and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding voting power required to approve or adopt the proposal or elect the
nominee and/or (II) otherwise solicit proxies from stockholders in support of such proposal, and (vii) any other information relating to such Proposing Person that
would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies in support of such proposal
pursuant to Section 14 of the Exchange Act, and any rules and regulations promulgated thereunder. The foregoing notice requirements of this Section 1.5 shall not
apply to any proposal made pursuant to Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act. A proposal to be made pursuant to Rule 14a-8
(or any successor thereof) promulgated under the Exchange Act shall be deemed satisfied if the stockholder making such proposal complies with the provisions of
Rule 14a-8 and has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 and such stockholder’s
proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require
any proposed nominee to furnish such other information as it may reasonably require to determine (x) the eligibility of such proposed nominee to serve as a director
of the Corporation and (y) whether the nominee would qualify as an “independent director” or “audit committee financial expert” under applicable law,
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securities exchange rule or regulation, or any publicly disclosed corporate governance guideline or committee charter of the Corporation.
(3) Notwithstanding anything in paragraph (a)(2) of this Section 1.5 to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation at an annual meeting is increased and there is no public announcement by the Corporation naming all of the
nominees for director or specifying the size of the increased Board of Directors at least one hundred (100) calendar days prior to the first anniversary date of the
immediately preceding annual meeting, a stockholder’s notice required by this Section 1.5 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of
business on the tenth (10 th ) day following the day on which such public announcement is first made by the Corporation. For purposes of the first annual meeting of
stockholders of the Corporation, the first anniversary date shall be August 23, 2017.
(b) Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the Corporation’s notice of meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder entitled to vote at such meeting who was a stockholder of record of the Corporation
(and, with respect to any beneficial owner, if different, on whose behalf such nomination or nominations are made, only if such beneficial owner was the beneficial
owner of shares of the Corporation) both at the time the notice provided for in paragraph (a)(2) of this Section 1.5 is delivered to the Secretary and on the record
date for the determination of stockholders entitled to vote at the special meeting may nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice meeting the requirements of paragraph (a)(2) of this Section 1.5
(substituting special meeting for annual meeting as applicable) shall be received by the Secretary at the principal executive offices of the Corporation not earlier
than the close of business on the ninetieth (90 th ) day prior to such special meeting and not later than the close of business on the later of the sixtieth (60 th ) day
prior to such special meeting or the tenth (10 th ) day following the day on which public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting; provided, however, that a stockholder may nominate persons for election at a special
meeting only to such directorship(s) as specified in the Corporation’s notice of the meeting. In no event shall the public announcement of an adjournment or
postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
(c) Updating and Supplementing of Stockholder Information . A stockholder providing notice of nominations of persons for election to
the Board of Directors at an annual or special meeting of stockholders or notice of business proposed to be brought before an annual meeting of stockholders shall
further update and supplement such notice so that the information provided or required to be provided in such notice pursuant to paragraph (a)(2) of this Section 1.5
shall be true and correct both as of the record date for the determination of stockholders entitled to notice of the meeting and as of the date that is ten (10) business
days before the
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meeting or any adjournment or postponement thereof, and such updated and supplemental information shall be delivered to, or mailed and received by, the
Secretary at the principal executive offices of the Corporation (a) in the case of information that is required to be updated and supplemented to be true and correct
as of the record date for the determination of stockholders entitled to notice of the meeting, not later than the later of five (5) business days after such record date or
five (5) business days after the public announcement of such record date, and (b) in the case of information that is required to be updated and supplemented to be
true and correct as of ten (10) business days before the meeting or any adjournment or postponement thereof, not later than eight (8) business days before the
meeting or any adjournment or postponement thereof (or if not practicable to provide such updated and supplemental information not later than eight (8) business
days before any adjournment or postponement, on the first practicable date before any such adjournment or postponement).
(d) General .
(1) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.5 shall be eligible to be
elected at an annual or special meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.5. Except as otherwise provided by law,
the chairman of the meeting shall have the power and duty (i) to determine whether a nomination or any business proposed to be brought before the meeting was
made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.5 (including whether the stockholder or beneficial owner, if any,
on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of
such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (a)(2)(C)(vi) of this Section 1.5) and (ii) if any
proposed nomination or proposed business was not made or proposed in compliance with this Section 1.5, to declare that such nomination shall be disregarded or
that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 1.5, if the stockholder (or a qualified representative of
the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present the nomination to the Board of Directors or to
present the proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of
such vote may have been received by the Corporation. For purposes of this Section 1.5, to be considered a qualified representative of the stockholder, a person
must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at
the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic
transmission, at the meeting of stockholders.
(2) For purposes of this Section 1.5, (i) “ public announcement ” shall mean disclosure in a press release reported by a national
news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to the Exchange Act, and (ii) “ business
day ” shall mean any day, other than Saturday, Sunday and any day on
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which banks located in the State of New York are authorized or obligated by applicable law to close.
(3) Notwithstanding the foregoing provisions of this Section 1.5, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.5. Nothing in this Section 1.5 shall be deemed to
affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of
the holders of any series of preferred stock to elect directors pursuant to any applicable provisions of the Corporation’s Certificate of Incorporation.
Section 1.6 Quorum .
Subject to the rights of the holders of any series of preferred stock and except as otherwise provided by law or in the Certificate of Incorporation
or these Bylaws, at any meeting of stockholders, the holders of a majority in total voting power of the outstanding shares of stock entitled to vote at the meeting
shall be present or represented by proxy in order to constitute a quorum for the transaction of any business. The chairman of the meeting shall have the power and
duty to determine whether a quorum is present at any meeting of the stockholders. Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be
entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any subsidiary of the
Corporation to vote stock, including, but not limited to, its own stock, held by it in a fiduciary capacity. In the absence of a quorum, the chairman of the meeting
may adjourn the meeting from time to time in the manner provided in Section 1.7 hereof until a quorum shall be present.
Section 1.7 Adjournment .
Any meeting of stockholders, annual or special, may be adjourned from time to time solely by the chairman of the meeting because of the
absence of a quorum or for any other reason and to reconvene at the same or some other time, date and place, if any, or by means of remote communication. Notice
need not be given of any such adjourned meeting if the time, date and place, if any, and the means of remote communications, if any, thereof are announced at the
meeting at which the adjournment is taken. The chairman of the meeting shall have full power and authority to adjourn a stockholder meeting in his sole discretion
even over stockholder opposition to such adjournment. The stockholders present at a meeting shall not have the authority to adjourn the meeting. If the time, date
and place, if any, thereof, and the means of remote communication, if any, by which the stockholders and the proxy holders may be deemed to be present in person
and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken and the adjournment is for less than thirty (30) calendar days,
no notice need be given of any such adjourned meeting. If the adjournment is for more than thirty (30) calendar days or if after the adjournment a new record date
for determining stockholders entitled to vote at the adjourned meeting is fixed for the adjourned meeting, then notice shall be given to each stockholder entitled to
vote at the meeting. At the adjourned
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meeting, the stockholders may transact any business that might have been transacted at the original meeting.
Section 1.8 Organization .
The Chairman of the Board, or in his absence the Chief Executive Officer, or in their absence the President, or in their absence any Vice
President, shall call to order meetings of stockholders and preside over and act as chairman of such meetings. The Board of Directors or, if the Board fails to act,
the stockholders, may appoint any stockholder, director or officer of the Corporation to act as chairman of any meeting in the absence of the Chairman of the
Board, the Chief Executive Officer, the President and all Vice Presidents. The date and time of the opening and closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be determined by the chairman of the meeting and announced at the meeting. The Board of Directors may adopt by
resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Unless otherwise determined by the Board of
Directors, the chairman of the meeting shall have the exclusive right to determine the order of business and to prescribe other such rules, regulations and procedures
and shall have the authority in his discretion to regulate the conduct of any such meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) rules and procedures for maintaining order at the
meeting and the safety of those present; (ii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly
authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iii) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (iv) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board
of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
The Secretary shall act as secretary of all meetings of stockholders, but, in the absence of the Secretary, the chairman of the meeting may appoint
any other person to act as secretary of the meeting.
Section 1.9 Postponement or Cancellation of Meeting .
Any previously scheduled annual or special meeting of the stockholders may be postponed or canceled by resolution of the Board of Directors
upon public notice given prior to the time previously scheduled for such meeting of stockholders.
Section 1.10 Voting .
Subject to the rights of the holders of any series of preferred stock and except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws and except for the election of directors, at any meeting duly called and held at which a quorum is present, the affirmative vote of a majority of the
combined voting power of the outstanding shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be
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the act of the stockholders. Subject to the rights of the holders of any series of preferred stock, at any meeting duly called and held for the election of directors at
which a quorum is present, directors shall be elected by a plurality of the combined voting power of the outstanding shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors.
Section 1.11 List of Stockholders .
It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of the stock ledger to prepare and make, at least ten
(10) calendar days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the stockholder’s name; provided, however, if the record date for determining the
stockholders entitled to vote at the meeting is fewer than ten (10) calendar days before the meeting date, the list shall reflect the stockholders entitled to vote as of
the tenth (10 th ) calendar day before the meeting date. Nothing contained in this Section 1.11 shall require the Corporation to include electronic mail addresses or
other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period
of at least ten (10) calendar days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to
such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. If the Corporation
determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to
stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list
shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible network, and the information required to
access such list shall be provided with the notice of the meeting. The stock ledger shall be the only evidence of the identity of the stockholders entitled to examine
such list.
Section 1.12 Remote Communications .
For purposes of these Bylaws, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the
Board of Directors may adopt, stockholders and proxyholders may, by means of remote communication:
(a) participate in a meeting of stockholders; and
(b) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by
means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to
vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such
stockholders and proxyholders a reasonable opportunity to participate
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in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially
concurrent with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a
record of such vote or other action shall be maintained by the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office .
(a) Subject to any limitations set forth in the Certificate of Incorporation and to any provision of the Delaware General Corporation Law
relating to the powers or rights conferred upon or reserved to the stockholders or the holders of any class or series of the issued and outstanding stock of the
Corporation, the business and affairs of the Corporation shall be managed, and all corporate powers shall be exercised, by or under the direction of the Board of
Directors. Subject to any rights of the holders of any series of preferred stock to elect additional directors, the Board of Directors shall be comprised of not less
than three (3) members and the exact number will be fixed from time to time by the Board of Directors by resolution adopted by the affirmative vote of not less
than 75% of the members of the Board of Directors then in office. Directors need not be stockholders of the Corporation. The Corporation shall nominate the
persons serving as Chairman of the Board and Chief Executive Officer for election as directors at any meeting at which such persons are subject to election as
directors.
(b) Except as otherwise fixed by the Certificate of Incorporation relating to the rights of the holders of any series of preferred stock to
separately elect additional directors, which additional directors are not required to be classified pursuant to the terms of such series of preferred stock (the
“Preferred Stock Directors”), the Board of Directors shall be divided into three (3) classes: Class I, Class II and Class III. Each class shall consist, as nearly as
possible, of a number of directors equal to one-third (1/3) of the then authorized number of members of the Board of Directors (other than the Preferred Stock
Directors). The term of office of the initial Class I directors shall expire at the annual meeting of stockholders in 2017; the term of office of the initial Class II
directors shall expire at the annual meeting of stockholders in 2018; and the term of office of the initial Class III directors shall expire at the annual meeting of
stockholders in 2019. At each annual meeting of stockholders of the Corporation the successors of the class of directors whose term expires at that meeting shall be
elected to hold office in accordance with Section B of Article V of the Certificate of Incorporaton for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election. The directors of each class will hold office until the expiration of the term of such class and until their respective
successors are elected and qualified or until such director’s earlier death, resignation or removal.
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Section 2.2 Resignations .
Any director of the Corporation, or any member of any committee, may resign at any time by giving notice in writing or by electronic
transmission to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, or the President or Secretary. Any such resignation shall take
effect at the time specified therein or, if the time be not specified therein, then upon receipt thereof. The acceptance of such resignation shall not be necessary to
make it effective unless otherwise stated therein.
Section 2.3 Removal of Directors .
Subject to the rights of the holders of any series of preferred stock, directors may be removed from office only for cause upon the affirmative
vote of the holders of not less than a majority of the total voting power of the then outstanding shares entitled to vote at an election of directors voting together as a
single class.
Section 2.4 Newly Created Directorships and Vacancies .
Subject to the rights of the holders of any series of preferred stock, vacancies on the Board of Directors resulting from death, resignation,
removal, disqualification or other cause, and newly created directorships resulting from any increase in the number of directors on the Board of Directors, shall be
filled only by the affirmative vote of a majority of the remaining directors then in office (even though less than a quorum) or by the sole remaining director. Any
director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred
or to which the new directorship is apportioned, and until such director’s successor shall have been elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent director, except as may be provided in the terms of any series of preferred stock with
respect to any additional director elected by the holders of such series of preferred stock. If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any stockholder may call a special meeting of stockholders in the same manner that the Board of
Directors may call such a meeting, and directors for the unexpired terms may be elected at such special meeting.
Section 2.5 Meetings .
Regular meetings of the Board of Directors shall be held on such dates and at such times and places, within or without the State of Delaware, as
shall from time to time be determined by the Board of Directors, such determination to constitute the only notice of such regular meetings to which any director
shall be entitled. In the absence of any such determination, such meeting shall be held, upon notice to each director in accordance with Section 2.6 of this
Article II, at such times and places, within or without the State of Delaware, as shall be designated in the notice of meeting.
Special meetings of the Board of Directors shall be held at such times and places, if any, within or without the State of Delaware, as shall be
designated in the notice of the meeting in accordance with Section 2.6 hereof. Special meetings of the Board of Directors may be called by the Chairman of the
Board, and shall be called by the Chief Executive Officer,
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President or Secretary upon the written request of not less than 75% of the members of the Board of Directors then in office.
Section 2.6 Notice of Meetings .
The Secretary, or in his absence any other officer of the Corporation, shall give each director notice of the time and place of holding of any
regular meetings (if required) or special meetings of the Board of Directors, in accordance with Section 5.4 of these Bylaws, by mail at least ten (10) calendar days
before the meeting, or by courier service at least three (3) calendar days before the meeting, or by facsimile transmission, electronic mail or other electronic
transmission, or personal service, in each case, at least twenty-four (24) hours before the meeting, unless notice is waived in accordance with Section 5.4 of these
Bylaws. Unless otherwise stated in the notice thereof, any and all business may be transacted at any meeting without specification of such business in the notice.
Section 2.7 Meetings by Conference Telephone or Other Communications .
Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by
means of telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other and
communicate with each other, and such participation in a meeting by such means shall constitute presence in person at such meeting.
Section 2.8 Quorum and Organization of Meetings .
A majority of the total number of members of the Board of Directors as constituted from time to time shall constitute a quorum for the
transaction of business, but, if at any meeting of the Board of Directors (whether or not adjourned from a previous meeting) there shall be less than a quorum
present, a majority of those present may adjourn the meeting to another time, date and place, and the meeting may be held as adjourned without further notice or
waiver. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, a majority of the directors present at any meeting at which a
quorum is present may decide any question brought before such meeting. Meetings shall be presided over by the Chairman of the Board or in his absence by such
other person as the directors may select. The Board of Directors shall keep written minutes of its meetings. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.
The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee to replace absent or disqualified members at any meeting of such committee. If a member
of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting,
whether or not such member or members constitute a quorum, may, by a unanimous vote, appoint another member of the Board of Directors to act at the meeting in
place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the
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Board of Directors passed as aforesaid, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be impressed on all papers that may require it, but no such committee shall have the
power or authority of the Board of Directors in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required
by the laws of the State of Delaware to be submitted to the stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the Corporation. Such
committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless
otherwise specified in the resolution of the Board of Directors designating a committee, at all meetings of such committee a majority of the total number of
members of the committee shall constitute a quorum for the transaction of business, and the vote of a majority of the members of the committee present at any
meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these Bylaws.
Section 2.9 Indemnification .
The Corporation shall indemnify members of the Board of Directors and officers of the Corporation and their respective heirs, personal
representatives and successors in interest for or on account of any action performed on behalf of the Corporation, to the fullest extent permitted by the laws of the
State of Delaware and the Corporation’s Certificate of Incorporation, as now or hereafter in effect.
Section 2.10 Indemnity Undertaking .
To the extent not prohibited by law, the Corporation shall indemnify any person who is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a “ Proceeding ”), whether civil, criminal, administrative or investigative, including, without
limitation, an action by or in the right of the Corporation to procure a judgment in its favor, by reason of the fact that such person, or a person of whom such person
is the legal representative, is or was a director or officer of the Corporation, or is or was serving in any capacity at the request of the Corporation for any other
corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprises (an “ Other Entity ”), against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and expenses (including attorneys’ fees). Persons who are not directors or officers of the
Corporation may be similarly indemnified in respect of service to the Corporation or to an Other Entity at the request of the Corporation to the extent the Board of
Directors at any time specifies that such persons are entitled to the benefits of this Section 2.10. Except as otherwise provided in Section 2.12 hereof, the
Corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) commenced by such person only if the commencement of
such proceeding (or part thereof) by the person was authorized by the Board of Directors.
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Section 2.11 Advancement of Expenses .
The Corporation shall, from time to time, reimburse or advance to any director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys’ fees, incurred in connection with any Proceeding in advance of the final disposition of such
Proceeding; provided, however, that, such expenses incurred by or on behalf of any director or officer or other person may be paid in advance of the final
disposition of a Proceeding only upon receipt by the Corporation of an undertaking, by or on behalf of such director or officer or such person, to repay all amounts
advanced if it shall ultimately be determined by final judicial decision from which there is no further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses. Except as otherwise provided in Section 2.12 hereof, the Corporation shall be required to reimburse or advance
expenses incurred by a person in connection with a proceeding (or part thereof) commenced by such person only if the commencement of such proceeding (or part
thereof) by the person was authorized by the Board of Directors.
Section 2.12 Claims .
If a claim for indemnification or advancement of expenses under this Article II is not paid in full within sixty (60) calendar days after a written
claim therefor by the person seeking indemnification or reimbursement or advancement of expenses has been received by the Corporation, the person may file suit
to recover the unpaid amount of such claim and, if successful, in whole or in part, shall be entitled to be paid the expense (including attorneys’ fees) of prosecuting
such claim to the fullest extent permitted by Delaware law. In any such action the Corporation shall have the burden of proving that the person seeking
indemnification or reimbursement or advancement of expenses is not entitled to the requested indemnification, reimbursement or advancement of expenses under
applicable law.
Section 2.13 Amendment, Modification or Repeal .
Any amendment, modification or repeal of the foregoing provisions of this Article II shall not adversely affect any right or protection hereunder
of any person entitled to indemnification under Section 2.9 hereof in respect of any act or omission occurring prior to the time of such repeal or modification.
Section 2.14 Executive Committee of the Board of Directors .
The Board of Directors, by the affirmative vote of not less than 75% of the members of the Board of Directors then in office, may designate an
executive committee, all of whose members shall be directors, to manage and operate the affairs of the Corporation or particular properties or enterprises of the
Corporation. Subject to the limitations of the law of the State of Delaware and the Certificate of Incorporation, such executive committee shall exercise all powers
and authority of the Board of Directors in the management of the business and affairs of the Corporation including, but not limited to, the power and authority to
authorize the issuance of shares of common or preferred stock. The executive committee shall keep minutes of its meetings and report to the Board of Directors not
less often than quarterly on its activities and
14
shall be responsible to the Board of Directors for the conduct of the enterprises and affairs entrusted to it. Regular meetings of the executive committee, of which
no notice shall be necessary, shall be held at such time, dates and places, if any, as shall be fixed by resolution adopted by the executive committee. Special
meetings of the executive committee shall be called at the request of the Chief Executive Officer or of any member of the executive committee, and shall be held
upon such notice as is required by these Bylaws for special meetings of the Board of Directors, provided that oral notice by telephone or otherwise, or notice by
electronic transmission shall be sufficient if received not later than the day immediately preceding the day of the meeting.
Section 2.15 Other Committees of the Board of Directors .
The Board of Directors may by resolution establish committees other than an executive committee and shall specify with particularity the powers
and duties of any such committee. Subject to the limitations of the laws of the State of Delaware and the Certificate of Incorporation, any such committee shall
exercise all powers and authority specifically granted to it by the Board of Directors, which powers may include the authority to authorize the issuance of shares of
common or preferred stock. Such committees shall serve at the pleasure of the Board of Directors, keep minutes of their meetings and have such names as the
Board of Directors by resolution may determine and shall be responsible to the Board of Directors for the conduct of the enterprises and affairs entrusted to them.
Section 2.16 Directors ’ Compensation .
Directors shall receive such compensation for attendance at any meetings of the Board and any expenses incidental to the performance of their
duties as the Board of Directors shall determine by resolution. Such compensation may be in addition to any compensation received by the members of the Board
of Directors in any other capacity.
Section 2.17 Action Without Meeting .
Nothing contained in these Bylaws shall be deemed to restrict the power of members of the Board of Directors or any committee designated by
the Board of Directors to take any action required or permitted to be taken by them without a meeting; provided, however, that if such action is taken without a
meeting by consent by electronic transmission or transmissions, such electronic transmission or transmissions must either set forth or be submitted with information
from which it can be determined that the electronic transmission or transmissions were authorized by the director.
Section 2.18 Chairman of the Board of Directors .
The Board of Directors shall elect a Chairman of the Board from among the members of the Board of Directors. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of Directors, at which he is present, and perform such other duties and exercise such other powers
as from time to time may be assigned to him by these Bylaws or by the Board of Directors.
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ARTICLE III
OFFICERS
Section 3.1 Executive Officers .
The Board of Directors shall elect from its own number, a Chief Executive Officer and a President. The Board of Directors may also elect such
Vice Presidents as in the opinion of the Board of Directors the business of the Corporation requires, a Treasurer and a Secretary, any of whom may or may not be
directors. The Board of Directors may also elect, from time to time, such other or additional officers as in its opinion are desirable for the conduct of business of
the Corporation and such officers shall hold office at the pleasure of the Board of Directors; provided, however, that the Chief Executive Officer shall not hold any
other office except that the Chief Executive Officer may serve as President.
Section 3.2 Powers and Duties of Officers .
The Chief Executive Officer shall have overall responsibility for the management and direction of the business and affairs of the Corporation and
shall exercise such duties as customarily pertain to the office of chief executive officer and such other duties as may be prescribed from time to time by the Board
of Directors. He shall be the senior officer of the Corporation and in case of the inability or failure of the President to perform his duties, he shall perform the
duties of the President. In the absence or disability of the Chairman of the Board, the Chief Executive Officer shall perform the duties and exercise the powers of
the Chairman of the Board. He may appoint and terminate the appointment or election of officers, agents or employees other than those appointed or elected by the
Board of Directors. He may sign, execute and deliver, in the name of the Corporation, powers of attorney, contracts, bonds and other obligations. The Chief
Executive Officer shall perform such other duties as may be prescribed from time to time by the Board of Directors or these Bylaws.
The President of the Corporation shall be under the direction of the Chief Executive Officer and shall exercise such powers and duties as may be
delegated by the Chief Executive Officer and such other duties as may be prescribed from time to time by the Board of Directors or assigned to him or her by these
Bylaws. The President may sign, execute and deliver, in the name of the Corporation, powers of attorney, contracts, bonds and other obligations.
Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Chief Executive Officer, the President, the
executive committee, if any, or the Board of Directors. A Vice President may sign and execute contracts and other obligations pertaining to the regular course of
his duties which implement policies established by the Board of Directors.
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Unless the Board of Directors otherwise declares by resolution, the Treasurer shall have general custody of all the funds and securities of the
Corporation and general supervision of the collection and disbursement of funds of the Corporation. He shall endorse for collection on behalf of the Corporation
checks, notes and other obligations, and shall deposit the same to the credit of the Corporation in such bank or banks or depository as the Board of Directors may
designate. He may sign, with the Chief Executive Officer, President or such other person or persons as may be designated for the purpose by the Board of
Directors, all bills of exchange or promissory notes of the Corporation. He shall enter or cause to be entered regularly in the books of the Corporation a full and
accurate account of all moneys received and paid by him on account of the Corporation, shall at all reasonable times exhibit his books and accounts to any director
of the Corporation upon application at the office of the Corporation during business hours and, whenever required by the Board of Directors, the Chief Executive
Officer, or the President, shall render a statement of his accounts. He shall perform such other duties as may be prescribed from time to time by the Board of
Directors or by these Bylaws. He may be required to give bond for the faithful performance of his duties in such sum and with such surety as shall be approved by
the Board of Directors. Any Assistant Treasurer shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.
The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors. The Secretary shall cause notice to be
given of meetings of stockholders, of the Board of Directors, and of any committee appointed by the Board of Directors. He shall have custody of the corporate
seal, minutes and records relating to the conduct and acts of the stockholders and Board of Directors, which shall, at all reasonable times, be open to the
examination of any director. The Secretary or any Assistant Secretary may certify the record of proceedings of the meetings of the stockholders or of the Board of
Directors or resolutions adopted at such meetings, may sign or attest certificates, statements or reports required to be filed with governmental bodies or officials,
may sign acknowledgments of instruments, may give notices of meetings and shall perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 3.3 Bank Accounts .
In addition to such bank accounts as may be authorized in the usual manner by resolution of the Board of Directors, the Treasurer, with approval
of the Chief Executive Officer or the President, may authorize such bank accounts to be opened or maintained in the name and on behalf of the Corporation as he
may deem necessary or appropriate, provided payments from such bank accounts are to be made upon and according to the check of the Corporation, which may be
signed jointly or singularly by either the manual or facsimile signature or signatures of such officers or bonded employees of the Corporation as shall be specified
in the written instructions of the Treasurer or Assistant Treasurer of the Corporation with the approval of the Chief Executive Officer or the President of the
Corporation.
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Section 3.4 Proxies; Stock Transfers .
Unless otherwise provided in the Certificate of Incorporation or directed by the Board of Directors, the Chief Executive Officer or the President
or any Vice President or their designees shall have full power and authority on behalf of the Corporation to attend and to vote upon all matters and resolutions at
any meeting of stockholders of any corporation in which this Corporation may hold stock, and may exercise on behalf of this Corporation any and all of the rights
and powers incident to the ownership of such stock at any such meeting, whether regular or special, and at all adjournments thereof, and shall have power and
authority to execute and deliver proxies and consents on behalf of this Corporation in connection with the exercise by this Corporation of the rights and powers
incident to the ownership of such stock, with full power of substitution or revocation. Unless otherwise provided in the Certificate of Incorporation or directed by
the Board of Directors, the Chief Executive Officer or the President or any Vice President or their designees shall have full power and authority on behalf of the
Corporation to transfer, sell or dispose of stock of any corporation in which this Corporation may hold stock.
ARTICLE IV
CAPITAL STOCK
Section 4.1 Share s .
The shares of the Corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by the Chief Executive
Officer or the President and by the Secretary or the Treasurer, and sealed with the seal of the Corporation. Such seal may be a facsimile, engraved or printed. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner thereof a written notice containing
the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware General Corporation Law or a
statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating,
optional or other special rights of each class of stock or series thereof and the qualification, limitations or restrictions of such preferences and/or rights.
Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such an officer, transfer agent or registrar before such certificate is issued, it may be issued by
the Corporation with the same effect as if such officer, transfer agent or registrar had not ceased to hold such position at the time of its issuance.
Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of
the holders of certificates representing stock of the same class and series shall be identical.
Section 4.2 Transfer of Shares .
(a) Upon surrender to the Corporation or the transfer agent of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority
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to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon
its books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares such uncertificated shares shall be cancelled, and the
issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the
books of the Corporation.
(b) The person in whose name shares of stock stand on the books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.
Section 4.3 Lost Certificates .
The Board of Directors or any transfer agent of the Corporation may direct a new certificate or certificates or uncertificated shares representing
stock of the Corporation to be issued in place of any certificate or certificates theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the Board of Directors (or any transfer agent of the Corporation authorized to do so by a resolution of the Board of Directors)
may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal
representative, to give the Corporation a bond in such sum as the Board of Directors (or any transfer agent so authorized) shall direct to indemnify the Corporation
and the transfer agent against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of such new certificates or uncertificated shares, and such requirement may be general or confined to specific instances.
Section 4.4 Transfer Agent and Registrar .
The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates for shares to bear the
manual or facsimile signature or signatures of any of them.
Section 4.5 Regulations .
The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue,
transfer, registration, cancellation and replacement of certificates representing stock of the Corporation or uncertificated shares, which rules and regulations shall
comply in all respects with the rules and regulations of the transfer agent.
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ARTICLE V
GENERAL PROVISIONS
Section 5.1 Offices .
The Corporation shall maintain a registered office in the State of Delaware as required by the laws of the State of Delaware. The Corporation
may also have offices in such other places, either within or without the State of Delaware, as the Board of Directors may from time to time designate or as the
business of the Corporation may require.
Section 5.2 Corporate Seal .
The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization, and the words “Corporate Seal” and
“Delaware.”
Section 5.3 Fiscal Year .
The fiscal year of the Corporation shall be determined by resolution of the Board of Directors.
Section 5.4 Notices and Waivers Thereof .
W henever any notice is required by the laws of the State of Delaware, the Certificate of Incorporation or these Bylaws to be given by the
Corporation to any stockholder, director or officer, such notice, except as otherwise provided by law, may be given personally, or by mail, or, in the case of
directors or officers, or stockholders who consent thereto, by electronic transmission in accordance with applicable law. Any notice given by electronic
transmission shall be deemed to have been given when it shall have been transmitted and any notice given by mail shall be deemed to have been given when
deposited in the United States mail with postage thereon prepaid directed to such stockholder, director, or officer, as the case may be, at such stockholder’s,
director’s, or officer’s, as the case may be, address as it appears in the records of the Corporation. An affidavit of the Secretary or Assistant Secretary or of the
transfer agent or other agent of the Corporation that the notice has been given by personal delivery, by mail, or by a form of electronic transmission shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
Whenever any notice is required to be given by law, the Certificate of Incorporation, or these Bylaws to the person entitled to such notice, a
waiver thereof, in writing signed by the person, or by electronic transmission, whether before or after the meeting or the time stated therein, shall be deemed
equivalent in all respects to such notice to the full extent permitted by law. If such waiver is given by electronic transmission, the electronic transmission must
either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the person waiving notice. In
addition, notice of any meeting of the Board of Directors, or any committee thereof, need not be given to any director if such director shall sign the minutes of such
meeting or attend the meeting, except that if such
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director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully
called or convened, then such director shall not be deemed to have waived notice of such meeting.
Section 5.5 Saving Clause .
These Bylaws are subject to the provisions of the Certificate of Incorporation and applicable law. In the event any provision of these Bylaws is
inconsistent with the Certificate of Incorporation or the corporate laws of the State of Delaware, such provision shall be invalid to the extent only of such conflict,
and such conflict shall not affect the validity of any other provision of these Bylaws.
Section 5.6 Amendments .
In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors, by action taken by the
affirmative vote of not less than 75% of the members of the Board of Directors then in office, is hereby expressly authorized and empowered to adopt, amend or
repeal any provision of the Bylaws of this Corporation.
Subject to the rights of the holders of any series of preferred stock, these Bylaws may be adopted, amended or repealed by the affirmative vote of
the holders of not less than 66 2 / 3 % of the total voting power of the then outstanding capital stock of the Corporation entitled to vote thereon; provided, however,
that this paragraph shall not apply to, and no vote of the stockholders of the Corporation shall be required to authorize, the adoption, amendment or repeal of any
provision of the Bylaws by the Board of Directors in accordance with the preceding paragraph.
Section 5.7 Gender/Number .
As used in these Bylaws, the masculine, feminine, or neuter gender, and the singular and plural number, shall include the other whenever the
context so indicates.
Section 5.8 Electronic Transmission .
For purposes of these Bylaws, “ electronic transmission ” means any form of communication, not directly involving the physical transmission
of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such
recipient through an automated process.
Section 5.9. Exclusive Forum .
Unless the Corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or
proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director or officer or
other employee or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action asserting a claim arising
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pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting
a claim governed by the internal affairs doctrine, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does
not have jurisdiction, any state or federal court located within the State of Delaware), in all cases to the fullest extent permitted by law and subject to the court’s
having personal jurisdiction over the indispensable parties named as defendants.
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Exhibit 4.4
CREDIT AGREEMENT
dated as of
June 28, 2016
among
COMMERCE TECHNOLOGIES, INC.
(to be merged into Commerce Technologies, LLC)
Holdings Party Hereto
The Lenders Party Hereto
JPMORGAN CHASE BANK, N.A.
as Administrative Agent
WELLS FARGO BANK, NATIONAL ASSOCIATION, SUNTRUST BANK and KEYBANK NATIONAL ASSOCIATION as Co-Syndication Agents JPMORGAN CHASE BANK, N.A. as Lead Arranger and Lead Bookrunner
WELLS FARGO BANK, NATIONAL ASSOCIATION, SUNTRUST ROBINSON HUMPHREY, INC. and KEYBANK NATIONAL ASSOCIATION as Co-Lead Arrangers and Co-Bookrunners
Table of Contents
ARTICLE I Definitions
SECTION 1.01.
Defined Terms
SECTION 1.02.
Classification of Loans and Borrowings
SECTION 1.03.
Terms Generally
SECTION 1.04.
Accounting Terms; GAAP; Pro Forma Calculations
SECTION 1.05.
Status of Obligations
ARTICLE II The Credits
SECTION 2.01.
Commitments
SECTION 2.02.
Loans and Borrowings
SECTION 2.03.
Requests for Revolving Borrowings
SECTION 2.04.
Intentionally Omitted
SECTION 2.05.
Swingline Loans
SECTION 2.06.
Letters of Credit
SECTION 2.07.
Funding of Borrowings
SECTION 2.08.
Interest Elections
SECTION 2.09.
Termination and Reduction of Commitments
SECTION 2.10.
Repayment of Loans; Evidence of Debt
SECTION 2.11.
Prepayment of Loans
SECTION 2.12.
Fees
SECTION 2.13.
Interest
SECTION 2.14.
Alternate Rate of Interest
SECTION 2.15.
Increased Costs
SECTION 2.16.
Break Funding Payments
SECTION 2.17.
Taxes
SECTION 2.18.
Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs
SECTION 2.19.
Mitigation Obligations; Replacement of Lenders
SECTION 2.20.
Incremental Facilities
SECTION 2.21.
Defaulting Lenders
ARTICLE III Representations and Warranties
SECTION 3.01.
Organization; Powers; Subsidiaries
SECTION 3.02.
Authorization; Enforceability
SECTION 3.03.
Governmental Approvals; No Conflicts
SECTION 3.04.
Financial Condition; No Material Adverse Change
SECTION 3.05.
Properties
SECTION 3.06.
Litigation and Environmental
SECTION 3.07.
Investment Company Status
SECTION 3.08.
Taxes
SECTION 3.09.
ERISA
SECTION 3.10.
Disclosure
SECTION 3.11.
Federal Reserve Regulations
SECTION 3.12.
Liens
SECTION 3.13.
No Default
SECTION 3.14.
Solvency
SECTION 3.15.
Security Interest in Collateral
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Table of Contents (continued)
SECTION 3.16.
Anti-Corruption Laws and Sanctions
SECTION 3.17.
EEA Financial Institutions
ARTICLE IV Conditions
SECTION 4.01.
Effective Date
SECTION 4.02.
Each Credit Event
SECTION 4.03.
Borrower Assumption
ARTICLE V Affirmative Covenants
SECTION 5.01.
Financial Statements and Other Information
SECTION 5.02.
Notices of Material Events
SECTION 5.03.
Existence; Conduct of Business
SECTION 5.04.
Payment of Obligations
SECTION 5.05.
Maintenance of Properties; Insurance
SECTION 5.06.
Books and Records; Inspection Rights
SECTION 5.07.
Compliance with Laws and Material Contractual Obligations
SECTION 5.08.
Use of Proceeds
SECTION 5.09.
Subsidiary Guarantors; Pledges; Additional Collateral; Further Assurances
SECTION 5.10.
Borrower Replacement Covenant
ARTICLE VI Negative Covenants
SECTION 6.01.
Indebtedness
SECTION 6.02.
Liens
SECTION 6.03.
Fundamental Changes and Asset Sales
SECTION 6.04.
Investments, Loans, Advances, Guarantees and Acquisitions
SECTION 6.05.
Swap Agreements
SECTION 6.06.
Transactions with Affiliates
SECTION 6.07.
Restricted Payments
SECTION 6.08.
Restrictive Agreements
SECTION 6.09.
Subordinated Indebtedness and Amendments to Subordinated Indebtedness Documents
SECTION 6.10.
Sale and Leaseback Transactions
SECTION 6.11.
Financial Covenants
SECTION 6.12.
Designation of Subsidiaries
ARTICLE VII Events of Default
SECTION 7.01.
Events of Default
SECTION 7.02.
Equity Cure Right
ARTICLE VIII The Administrative Agent
ARTICLE IX Miscellaneous
SECTION 9.01.
Notices
SECTION 9.02.
Waivers; Amendments
SECTION 9.03.
Expenses; Indemnity; Damage Waiver
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Table of Contents (continued)
SECTION 9.04.
Successors and Assigns
SECTION 9.05.
Survival
SECTION 9.06.
Counterparts; Integration; Effectiveness; Electronic Execution
SECTION 9.07.
Severability
SECTION 9.08.
Right of Setoff
SECTION 9.09.
Governing Law; Jurisdiction; Consent to Service of Process
SECTION 9.10.
WAIVER OF JURY TRIAL
SECTION 9.11.
Headings
SECTION 9.12.
Confidentiality
SECTION 9.13.
USA PATRIOT Act
SECTION 9.14.
Appointment for Perfection
SECTION 9.15.
Releases of Subsidiary Guarantors
SECTION 9.16.
Interest Rate Limitation
SECTION 9.17.
No Advisory or Fiduciary Responsibility
SECTION 9.18.
Acknowledgment and Consent to Bail-In of EEA Financial Institutions
ARTICLE X Borrower Guarantee
SCHEDULES :
Schedule 2.01A – Commitments
Schedule 2.01B – Letter of Credit Commitments
Schedule 3.01 – Subsidiaries
Schedule 6.01 – Existing Indebtedness
Schedule 6.02 – Existing Liens
Schedule 6.04 – Existing Investments
Schedule 6.06 – Existing Transactions with Affiliates
Schedule 6.08 – Existing Restrictive Agreements
EXHIBITS :
Exhibit A – Form of Assignment and Assumption
Exhibit B – [Intentionally Omitted]
Exhibit C – [Intentionally Omitted]
Exhibit D – [Intentionally Omitted]
Exhibit E – List of Closing Documents
Exhibit F-1 – Form of U.S. Tax Certificate (Foreign Lenders That Are Not Partnerships)
Exhibit F-2 – Form of U.S. Tax Certificate (Foreign Participants That Are Not Partnerships)
Exhibit F-3 – Form of U.S. Tax Certificate (Foreign Participants That Are Partnerships)
Exhibit F-4 – Form of U.S. Tax Certificate (Foreign Lenders That Are Partnerships)
Exhibit G-1 – Form of Borrowing Request
Exhibit G-2 – Form of Interest Election Request
Exhibit H – Form of Note
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CREDIT AGREEMENT (this “ Agreement ”), dated as of June 28, 2016, among COMMERCE TECHNOLOGIES, INC., HOLDINGS from
time to time party hereto that joins this Agreement in accordance with Section 4.03, the LENDERS from time to time party hereto, JPMORGAN CHASE BANK,
N.A., as Administrative Agent, and WELLS FARGO BANK, NATIONAL ASSOCIATION, SUNTRUST BANK and KEYBANK NATIONAL ASSOCIATION,
as Co-Syndication Agents .
WHEREAS, CommerceHub, Inc., a Delaware corporation (“ CH Parent ”), and Commerce Technologies, Inc., a New York corporation (“
Commerce Tech ”), are currently subsidiaries of Liberty Interactive Corporation, a Delaware corporation (“ LIC ”);
WHEREAS, LIC is expected to consummate the Separation (as defined below) pursuant to which (i) a New York corporation formed in
connection with the Separation and which shall be a wholly-owned subsidiary of CH Parent (“ Merger Sub ”) will merge with and into Commerce Tech, with
Commerce Tech being the surviving entity, (ii) Commerce Tech will merge with and into Commerce Technologies, LLC, a Delaware limited liability company and
a wholly-owned subsidiary of CH Parent (“ Commerce LLC ”), with Commerce LLC being the surviving entity and (iii) following the completion of the mergers
described in clauses (i) and (ii) above, CH Parent will become an independent publicly traded company and CH Parent and its subsidiaries will no longer be
subsidiaries of LIC;
WHEREAS, Commerce Tech has requested that the Lenders provide a revolving credit facility prior to the Separation, with Commerce Tech as
the initial Borrower (as defined below);
WHEREAS, upon giving effect to the Mergers, Commerce LLC will, by operation of law, assume (the “ Borrower Assumption ”) the rights and
obligations of Commerce Tech and become the subsequent Borrower under this Agreement in accordance with the terms hereof; and
WHEREAS, the Lenders have indicated their willingness to lend on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises, provisions, covenants and mutual agreements contained herein and other good and
valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms . As used in this Agreement, the following terms have the meanings specified below:
“ ABR ” when used in reference to any Loan or Borrowing, refers to such Loan, or the Loans comprising such Borrowing, bearing interest at a
rate determined by reference to the Alternate Base Rate.
“ Acquisition Holiday ” has the meaning assigned to such term in Section 6.11(a).
“ Adjusted LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
“ Administrative Agent ” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder.
“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or
is Controlled by or is under common Control with the Person specified.
“ Affiliated Persons ” mean, with respect to any specified Permitted Holder which is a natural person, (a) such specified person’s parents, spouse,
siblings, descendants, step children, step grandchildren, nieces and nephews and their respective spouses, (b) the estate, legatees and devisees of such specified
person and each of the persons referred to in clause (a), and (c) any company, partnership, trust, foundation or other entity or investment vehicle created for the
benefit of, or controlled by, any of the persons referred to in clause (a) or (b) or created by any such person for the benefit of any charitable organization or for a
charitable purpose.
“ Agent Party ” has the meaning assigned to such term in Section 9.01(d).
“ Aggregate Commitment ” means the aggregate of the Commitments of all of the Lenders, as reduced or increased from time to time pursuant to
the terms and conditions hereof. As of the Effective Date, the Aggregate Commitment is $125,000,000.
“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB
Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period in Dollars on such day (or if such day is not a Business
Day, the immediately preceding Business Day) plus 1%; provided that the Adjusted LIBO Rate for any day shall be based on the LIBO Rate at approximately
11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate shall
be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBO Rate, respectively.
“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to Holdings, the Borrower or any of its
Subsidiaries from time to time concerning or relating to bribery or corruption.
“ Applicable Percentage ” means, with respect to any Lender, the percentage of the Aggregate Commitment represented by such Lender’s
Commitment; provided that, in the case of Section 2.21 when a Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the Aggregate
Commitment (disregarding any Defaulting Lender’s Commitment) represented by such Lender’s Commitment. If the Commitments have terminated or expired,
the Applicable Percentages shall be determined based upon the Commitments most recently in effect, giving effect to any assignments and to any Lender’s status as
a Defaulting Lender at the time of determination.
“ Applicable Pledge Percentage ” means 100% but 65% in the case of a pledge by Holdings, the Borrower or any Subsidiary Guarantor of its
voting Equity Interests in any CFC or any Domestic DRE.
“ Applicable Rate ” means, for any day, with respect to any Eurodollar Loan or any ABR Loan or with respect to the commitment fees payable
hereunder, as the case may be, the applicable rate
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per annum set forth below under the caption “Eurodollar Spread”, “ABR Spread” or “Commitment Fee Rate”, as the case may be, based upon the Consolidated
Total Leverage Ratio applicable on such date:
Category 1 :
Category 2 :
Consolidated Total Leverage Ratio:
< 1.00 to 1.00
> 1.00 to 1.00 but < 2.50 to 1.00
> 2.50 to 1.00
Eurodollar Spread
1.75%
ABR Spread
0.75%
Commitment Fee Rate
0.25%
2.00%
1.00%
0.375%
Category 3 :
2.25%
1.25%
0.50%
For purposes of the foregoing,
(i) if at any time the Borrower fails to deliver the Financials on or before the date the Financials are due pursuant to Section 5.01, Category
3 shall be deemed applicable for the period commencing three (3) Business Days after the required date of delivery and ending on the date which is three
(3) Business Days after the Financials are actually delivered, after which the Category shall be determined in accordance with the table above as
applicable;
(ii) adjustments, if any, to the Category then in effect shall be effective three (3) Business Days after the Administrative Agent has received
the applicable Compliance Certificate (it being understood and agreed that each change in Category shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the effective date of the next such change); and
(iii) notwithstanding the foregoing, Category 1 shall be deemed to be applicable until the Administrative Agent’s receipt of the applicable
Financials for the Borrower’s first full fiscal quarter commencing on or after the Effective Date and adjustments to the Category then in effect shall
thereafter be effected in accordance with the preceding paragraphs.
“ Approved Fund ” has the meaning assigned to such term in Section 9.04(b).
“ Assignment and Assumption ” means an assignment and assumption agreement entered into by a Lender and an assignee (with the consent of
any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the
Administrative Agent.
“ Assuming Borrower ” means Commerce LLC.
“ Attributable Indebtedness ” means, on any date, in respect of any capital lease or Sale and Leaseback Transaction of any Person, the capitalized
amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.
“ Availability Period ” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
“ Available Revolving Commitment ” means, at any time with respect to any Lender, the Commitment of such Lender then in effect minus the
Revolving Credit Exposure of such Lender at such
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time; it being understood and agreed that any Lender’s Swingline Exposure shall not be deemed to be a component of the Revolving Credit Exposure for purposes
of calculating the commitment fee under Section 2.12(a).
“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any
liability of an EEA Financial Institution.
“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European
Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In
Legislation Schedule.
“ Banking Services ” means each and any of the following bank services provided to Holdings, the Borrower or any Restricted Subsidiary by any
Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, commercial credit cards and purchasing cards), (b) stored
value cards, (c) merchant processing services and (d) treasury management services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, any direct debit scheme or arrangement, overdrafts and interstate depository network services).
“ Banking Services Agreement ” means any agreement entered into by Holdings, the Borrower or any Restricted Subsidiary in connection with
Banking Services.
“ Banking Services Obligations ” means any and all obligations of Holdings, the Borrower or any Restricted Subsidiary, whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions
therefor) in connection with Banking Services.
“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.
“ Bankruptcy Event ” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its
business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest,
or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or
provides such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its
assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by
such Person.
“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America.
“ Borrower ” means (a) prior to the consummation of the Borrower Assumption in accordance with the terms and conditions of Section 4.03,
Commerce Tech and (b) following the consummation of the Borrower Assumption in accordance with the terms and conditions of Section 4.03, the Assuming
Borrower.
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“ Borrower Assumption ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ Borrower Assumption Effective Date ” means the date on which the conditions specified in Section 4.03 are satisfied (or waived in accordance
with Section 9.02).
“ Borrowing ” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar
Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan.
“ Borrowing Request ” means a request by the Borrower for a Revolving Borrowing in accordance with Section 2.03 in the form attached hereto
as Exhibit G-1 .
“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or
required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “ Business Day ” shall also exclude any day on which
banks are not open for dealings in Dollars in the London interbank market.
“ Capital Lease Obligations ” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as
capital lease obligations on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
“ CFC ” means a “controlled foreign corporation” within the meaning of Section 957 of the Code.
“ CFC Debt ” means, with respect to any Person, any Indebtedness or accounts receivable that is owed, or treated as owed for United States
federal income tax purposes, by any CFC to such Person.
“ Change in Control ” means:
(a) prior to the effective time of the Separation :
(i) the acquisition of beneficial ownership, directly or indirectly, by any person or group (for all purposes herein, within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder) other than a Permitted Holder or any group controlled by a
Permitted Holder (such person or group, the “ LIC Transferee ”) of more than 35% of the aggregate voting power of all outstanding classes or series of
LIC’s voting stock (“ LIC Total Voting Power ”), unless either (i) the Permitted Holders and all groups controlled by any Permitted Holder collectively
own a majority of the LIC Total Voting Power or (ii) if the Permitted Holders and all groups controlled by any Permitted Holder, taken as a whole,
beneficially own less than a majority of the LIC Total Voting Power, the LIC Total Voting Power represented by the shares beneficially owned by the
Permitted Holders and all groups controlled by any Permitted Holder collectively exceed the LIC Total Voting Power represented by shares beneficially
owned by LIC Transferee ; or
(ii) LIC ceases to own and control, directly or indirectly, beneficially and of record, at least 90% of the outstanding shares of
voting stock (with equivalent economic interests) of Borrower ; and
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(b) on and after the effective time of the Separation :
(i) the acquisition of beneficial ownership, directly or indirectly, by any person or group (for all purposes herein, within the
meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder) other than a Permitted Holder or any group controlled by a
Permitted Holder (such person or group, the “ Holdco Transferee ”) of more than 35% of the aggregate voting power of all outstanding classes or series of
Holdings’ voting stock (“ Holdco Total Voting Power ”), unless either (i) the Permitted Holders and all groups controlled by any Permitted Holder
collectively own a majority of the Holdco Total Voting Power or (ii) if the Permitted Holders and all groups controlled by any Permitted Holder, taken as
a whole, beneficially own less than a majority of the Holdco Total Voting Power, the Holdco Total Voting Power represented by the shares beneficially
owned by the Permitted Holders and all groups controlled by any Permitted Holder collectively exceed the Holdco Total Voting Power represented by
shares beneficially owned by Holdco Transferee ; or
(ii) any event or transaction, or series of related events or transactions, as a result of which Holdings, directly or indirectly, is the
beneficial owner (for all purposes herein, within the meaning of Section 13(d) of the Exchange Act and the rules promulgated thereunder) of less than
100% of the Borrower’s common equity .
“ Change in Law ” means the occurrence, after the date of this Agreement (or with respect to any Lender, if later, the date on which such Lender
becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority, or (c) the making or issuance of any request,
rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided however , that notwithstanding
anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives
thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the
Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory
authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted, issued or
implemented.
“ Commerce LLC ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ CH Parent ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ CH Parent Guaranty ” means that certain Parent Guaranty, dated as of Borrower Assumption Effective Date (including any and all supplements
thereto), and executed by CH Parent, as amended, restated, supplemented or otherwise modified from time to time.
“ Class ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are
Revolving Loans or Swingline Loans.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Collateral ” means any and all property owned by a Person with respect to which a security interest or Lien in favor of the Administrative
Agent, on behalf of itself and the Secured Parties,
6
to secure the Secured Obligations, has been granted (or purported to be granted) pursuant to any Collateral Document, other than the Excluded Assets.
“ Collateral Documents ” means, collectively, the Security Agreement and all other agreements, instruments and documents executed in
connection with this Agreement that are intended to create, perfect or evidence Liens to secure the Secured Obligations, including, without limitation, all other
security agreements, pledge agreements, notes, guarantees, subordination agreements, pledges, powers of attorney, consents, assignments, financing statements and
all other written matter whether heretofore, now, or hereafter executed by the Borrower or any of its Restricted Subsidiaries or Holdings and delivered to the
Administrative Agent.
“ CommerceHub Separation Agreements ” means the agreements, transactions and arrangements described in the Form S-1 under the section
titled “Certain Relationships and Related Party Transactions.”
“ Commerce Tech ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ Commitment ” means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in
Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit
Exposure hereunder, as such commitment may be (a) reduced or terminated from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to
Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each
Lender’s Commitment is set forth on Schedule 2.01A , or in the Assignment and Assumption or other documentation contemplated hereby pursuant to which such
Lender shall have assumed its Commitment, as applicable.
“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor
statute.
“ Communications ” has the meaning assigned to such term in Section 9.01(d).
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are
franchise Taxes or branch profits Taxes.
“ Consolidated EBITDA ” means, with reference to any period, all calculated for the Holdings (or the Borrower prior to the Mergers, as
applicable) and its Restricted Subsidiaries in accordance with GAAP on a consolidated basis, the total of (x) Consolidated Net Income for such period,
plus (y) without duplication and to the extent deducted from revenues in determining Consolidated Net Income:
(i) Consolidated Interest Expense;
(ii) expense for income taxes paid or accrued;
(iii) depreciation;
(iv) amortization;
7
(v) non-cash losses, charges and expenses (including (A) non-cash compensation charges or expenses relating to stock, stock options or other
equity based awards (including stock appreciation rights plans) and any pension liabilities or the revaluation of any benefit plan obligation and
(B) impairment charges and losses on disposal of tangible and intangible assets);
(vi) extraordinary, unusual or non-recurring losses, charges and expenses;
(vii) cash restructuring charges, business optimization expenses and carve-out related items in an aggregate amount not to exceed $5,000,000 for
any Reference Period;
(vii) unrealized losses due to foreign exchange adjustments;
(viii) costs and expenses in connection with the Transactions;
(ix) expenses or charges related to any equity offering, investment, acquisition, disposition, recapitalization or incurrence of indebtedness, in
each case which is permitted pursuant to the terms and conditions of this Agreement (whether or not consummated), including non-operating or nonrecurring professional fees, costs and expenses related thereto;
(x) earn-out obligations incurred in connection with any permitted acquisition or other investment and paid during the applicable period;
(xi) any costs or expense incurred by Holdings, the Borrower or any of their Restricted Subsidiaries pursuant to any equity or stock plan
(including any stock appreciation rights plan) or stock option plan or any management or employee benefit plan or agreement or any stock subscription or
shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of Holdings or the Borrower or net
cash proceeds of an issuance of equity interest of Holdings or the Borrower (other than Disqualified Equity Interests);
(xii) expected cost savings, operating expense reductions, and synergies (in each case, net of continuing associated expenses) projected by the
Borrower in good faith to be realized as a result of the Transactions within twelve (12) months after the Effective Date, calculated on a pro forma basis as
though such cost savings, operating expense reductions or synergies, as applicable, had been realized on the first day of the applicable period and net of
the amount of actual benefits received during such applicable period from the Transactions; provided that (A) a duly completed certificate signed by a
Financial Officer of the Borrower shall be delivered to the Administrative Agent certifying that such cost savings, operating expense reductions or
synergies, as applicable, are reasonably expected and factually supportable in the good faith judgment of the Borrower, together with reasonably detailed
evidence in support thereof, (B) no cost savings, operating expense reductions or synergies shall be added to the extent duplicative of any expenses or
charges otherwise added to Consolidated EBITDA (including without limitation, pursuant to clause (xiii) below or clause (vii) above), whether through a
pro forma adjustment or otherwise, for the applicable period and (C) the aggregate amount of cost savings, operating expense reductions, and synergies
added back pursuant to this clause (xii) and clause (xiii) below during any Reference Period shall not exceed the greater of (I) 5% of Consolidated
EBITDA (prior to giving effect to such add-backs) and (II) $5,000,000;
(xiii) expected cost savings, operating expense reductions, and synergies (in each case, net of continuing associated expenses) projected by the
Borrower in good faith to be realized as a result of Permitted Acquisitions, dispositions permitted by the terms and conditions of this Agreement, cost
savings initiatives or other similar initiatives within twelve (12) months after
8
such transaction or initiative is consummated, calculated on a pro forma basis as though such cost savings, operating expense reductions or synergies, as
applicable, had been realized on the first day of the applicable period and net of the amount of actual benefits received during such applicable period from
such transaction or initiative; provided that (A) a duly completed certificate signed by a Financial Officer of the Borrower shall be delivered to the
Administrative Agent certifying that such cost savings, operating expense reductions or synergies, as applicable, are reasonably expected and factually
supportable in the good faith judgment of the Borrower, together with reasonably detailed evidence in support thereof, (B) no cost savings, operating
expense reductions or synergies shall be added to the extent duplicative of any expenses or charges otherwise added to Consolidated EBITDA (including
without limitation, pursuant to clause (xii) above or clause (vii) above), whether through a pro forma adjustment or otherwise, for the applicable period
and (C) the aggregate amount of cost savings, operating expense reductions and synergies added back pursuant to this clause (xiii) and clause (xii) above
during any Reference Period shall not exceed the greater of (I) 5% of Consolidated EBITDA (prior to giving effect to such add-backs) and
(II) $5,000,000;
minus (z) to the extent included in Consolidated Net Income:
(1) interest income;
(2) income tax credits and refunds (to the extent not netted from tax expense);
(3) any cash payments made during such period in respect of items described in clause (v) above subsequent to the fiscal quarter in which the
relevant non-cash expenses or losses were incurred;
(4) unrealized gains due to foreign exchange adjustments; and
(5) extraordinary, unusual or non-recurring income or gains realized other than in the ordinary course of business.
For the purposes of calculating Consolidated EBITDA for any Reference Period, (i) if at any time during such Reference Period, Holdings, the Borrower
or any of their Restricted Subsidiaries shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an
amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or
increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, and (ii) if during such Reference Period,
Holdings, the Borrower or any of their Restricted Subsidiaries shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be
calculated after giving effect thereto on a pro forma basis as if such Material Acquisition occurred on the first day of such Reference Period.
“ Consolidated Interest Expense ” means, with reference to any period, the interest expense (including without limitation interest expense under
Capital Lease Obligations that is treated as interest in accordance with GAAP) of Holdings, the Borrower and any of their Restricted Subsidiaries calculated on a
consolidated basis for such period with respect to all outstanding Indebtedness of the Holdings, the Borrower and any of their Restricted Subsidiaries allocable to
such period in accordance with GAAP (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit
and bankers acceptance financing and net costs under interest rate Swap Agreements to the extent such net costs are allocable to such period in accordance with
GAAP).
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“ Consolidated Net Income ” means, with reference to any period, the net income (or loss) of Holdings, the Borrower and any of their Restricted
Subsidiaries calculated in accordance with GAAP on a consolidated basis (without duplication) for such period; provided that there shall be excluded any income
(or loss) of any Person other than Holdings, the Borrower or a Restricted Subsidiary, but any such income so excluded may be included in such period or any later
period to the extent of any cash dividends or distributions actually paid in the relevant period to Holdings or the Borrower or any wholly-owned Restricted
Subsidiary of Holdings or the Borrower.
“ Consolidated Total Assets ” means, as of the date of any determination thereof, total assets of Holdings, the Borrower and any of their
Restricted Subsidiaries calculated in accordance with GAAP on a consolidated basis as of such date.
“ Consolidated Total Funded Debt ” means, as of the date of any determination thereof, an amount equal to the sum of the aggregate amount of
all outstanding Indebtedness of Holdings, the Borrower and any of their Restricted Subsidiaries of the types described in clauses (a), (b) and (c) and, solely with
respect to letters of credit, letters of guaranty and bankers’ acceptances that have been drawn but not yet reimbursed, clauses (d) and (e) of the definition of
“Indebtedness”, in each case, determined on a consolidated basis as of such date in accordance with GAAP.
“ Consolidated Total Leverage Ratio ” has the meaning assigned to such term in Section 6.11(a).
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.
“ Co-Syndication Agent ” means each of Wells Fargo Bank, National Association, SunTrust Bank and KeyBank National Association in their
capacity as co-syndication agent for the credit facility evidenced by this Agreement.
“ Credit Event ” means a Borrowing, the issuance, amendment, renewal or extension of a Letter of Credit, an LC Disbursement or any of the
foregoing.
“ Credit Party ” means the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender.
“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
“ Defaulting Lender ” means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund
any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of
such Lender’s good faith determination that a condition precedent to funding (specifically identified in writing and including the particular default, if any) has not
been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply
with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith
determination that a condition precedent (specifically identified in writing and including the particular default, if any) to funding a Loan under this Agreement
cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has
10
failed, within three (3) Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such
Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding
Letters of Credit and Swingline Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such
Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of (A) a Bankruptcy
Event or (B) a Bail-In Action.
“ Disqualified Competitor ” means (a) entities that are reasonably determined by the Borrower to be competitors of Holdings, the Borrower or
any of their Restricted Subsidiaries and which are specifically identified by the Borrower to the Administrative Agent in writing prior to the Effective Date and
(b) in the case of the foregoing clause (a), any of such entities’ Affiliates to the extent such Affiliates (x)(i) are clearly identifiable as Affiliates of such entities
based solely on the similarity of such Affiliates’ names and such entities’ names and (ii) are not bona fide debt investment funds or (y)(i) upon reasonable notice to
the Administrative Agent, are identified as Affiliates in writing after the Effective Date in a written supplement to the list of “Disqualified Competitors”, which
supplement shall become effective three (3) Business Days after delivery to the Administrative Agent and the Lenders in accordance with Section 9.01, but which
shall not apply retroactively to disqualify any parties that have previously acquired an assignment or participation interest in the Loans and (ii) are not bona fide
debt investment funds. It is understood and agreed that (i) any supplement to the list of Persons that are Disqualified Competitors contemplated by the foregoing
clause (b) shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans (but solely with
respect to such Loans), (ii) the Administrative Agent shall have no responsibility or liability to determine or monitor whether any Lender or potential Lender is a
Disqualified Competitor, (iii) the Borrower’s failure to deliver such list (or supplement thereto) in accordance with Section 9.01 shall render such list (or
supplement) not received and not effective and (iv) “Disqualified Competitor” shall exclude any Person that the Borrower has designated as no longer being a
“Disqualified Competitor” by written notice delivered to the Administrative Agent from time to time in accordance with Section 9.01 .
“ Disqualified Equity Interests ” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interests into
which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely
for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the
holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations
that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity
Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness
or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the Maturity Date.
“ Disregarded Entity ” means any entity treated as disregarded as an entity separate from its owner under Treasury Regulations
Section 301.7701-3.
“ Distribution Transaction ” means any transaction pursuant to which (i) a majority of the equity interests of a Qualified Distribution Transferee
are distributed (whether by redemption, dividend, share distribution, merger or otherwise) to all the holders of one or more classes or series of the common stock of
LIC (“ LIC Holders ”) or CH Parent (“ Parent Holders ”), on a pro rata basis with respect to each such class or series, or such equity interests of such Qualified
Distribution Transferee are made available to be acquired by LIC Holders or Parent Holders (including through any rights offering, exchange offer,
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exercise of subscription rights or other offer made available to LIC Holders or Parent Holders), on a pro rata basis with respect to each such class or series, whether
voluntary or involuntary and (ii) such Qualified Distribution Transferee (x) Guarantees the Secured Obligations pursuant to a guaranty agreement substantially
consistent with the CH Parent Guaranty (with such modifications thereto as may be agreed to by the Administrative Agent in its reasonable discretion), (y) delivers
to the Administrative Agent a joinder to the Security Agreement (in the form contemplated thereby) pursuant to which such Qualified Distribution Transferee
agrees to be bound by the terms and provisions thereof and (z) delivers to the Administrative Agent appropriate corporate resolutions, other corporate
documentation and legal opinions in connection therewith, in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
“ Dollars ” or “ $ ” refers to lawful money of the United States of America.
“ Domestic DRE ” means any Domestic Subsidiary that is a Disregarded Entity if substantially all of its assets consist of the Equity Interests of
one or more CFCs or CFC Debt.
“ Domestic Subsidiary ” means a Subsidiary organized under the laws of the United States of America, any state thereof or the District of
Columbia.
“ DQ List ” has the meaning assigned to such term in Section 9.04(e)(iv).
“ ECP ” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated
thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.
“ EEA Financial Institution ” means (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA
Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any
institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to
consolidated supervision with its parent.
“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“ EEA Resolution Authority ” means any public administrative authority or any Person entrusted with public administrative authority of any
EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“ Effective Date ” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“ Electronic Signature ” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by
a Person with the intent to sign, authenticate or accept such contract or record.
“ Electronic System ” means any electronic system, including e-mail, e-fax, Intralinks ®, ClearPar ® , Debt Domain, Syndtrak and any other
Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent any Issuing Bank and any of their
respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.
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“ Environmental Laws ” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or, to the extent related to exposure to Hazardous Materials, health and safety matters.
“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation,
fines, penalties or indemnities), of the Borrower or any Restricted Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental
Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.
“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests
in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the
foregoing.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that, together with Holdings or the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer
under Section 414 of the Code.
“ ERISA Event ” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the
Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Holdings, the Borrower or any of their respective ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Holdings, the Borrower or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Holdings,
the Borrower or any of their respective ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal of Holdings, the Borrower or any of
their respective ERISA Affiliates from any Plan or Multiemployer Plan; or (g) the receipt by Holdings, the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from Holdings, the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon Holdings, the Borrower or
any of their respective ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
“ EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor
Person), as in effect from time to time.
“ Eurodollar ” when used in reference to any Loan or Borrowing, means that such Loan, or the Loans comprising such Borrowing, bears interest
at a rate determined by reference to the Adjusted LIBO Rate.
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“ Event of Default ” has the meaning assigned to such term in Section 7.01.
“ Excluded Accounts ” has the meaning assigned to such term in the definition of “Excluded Assets”.
“ Excluded Assets ” means: (i) any real property (including any leasehold interests therein and improvements or fixtures relating thereto), (ii) any
“intent-to-use” application for registration of a trademark filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, prior to the filing of a “Statement of
Use” pursuant to Section 1(d) of the Lanham Act of an “Amendment to Allege Use” pursuant to Section 1(c) of the Lanham Act with respect thereto, solely to the
extent, if any, that and solely during the period, if any, in which, the grant of a security interest therein would impair the validity or enforceability of any
registration that issues from such intent-to-use application under applicable federal law, (iii) assets in respect of which pledges and security interests are prohibited
by applicable law, rule or regulation or agreements with any governmental authority (other than to the extent that such prohibition would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408, 9-409 or other applicable provisions of the UCC of any relevant jurisdiction or any other applicable law); provided that,
immediately upon the ineffectiveness, lapse or termination of any such prohibitions, such assets shall automatically cease to constitute Excluded Assets, (iv) margin
stock, (v) assets subject to certificates of title (including motor vehicles (other than motor vehicles subject to certificates of title, provided that perfection of security
interests in such motor vehicles shall be limited to the filing of UCC financing statements), aircraft and aircraft engines), letter of credit rights with a value of less
than $1,000,000 (other than to the extent the security interest in such letter of credit right may be perfected by the filing of UCC financing statements) and
commercial tort claims with a value of less than $1,000,000, (vi) any lease, license, capital lease obligation or other agreement or any property subject to a purchase
money security interest or similar agreement to the extent that a grant of a security interest therein would violate or invalidate such lease, license, capital lease
obligation or agreement or purchase money arrangement or create a right of termination in favor of any other party thereto (other than the Borrower or a Guarantor)
(other than (x) proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC notwithstanding such prohibition, (y) to the
extent that any such term has been waived or (z) to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 or
other applicable provisions of the UCC of any relevant jurisdiction or any other applicable law); provided that, immediately upon the ineffectiveness, lapse or
termination of any such term, such assets shall automatically cease to constitute Excluded Assets, (vii) zero balance accounts, payroll accounts, withholding and
trust accounts, tax accounts, custodial accounts, escrow and other fiduciary accounts and other accounts with an average monthly balance of less than $500,000
(collectively, “ Excluded Accounts ”), (viii) equity interests in any entity other than a wholly-owned Restricted Subsidiary, to the extent not permitted by the terms
of such entity’s organizational or joint venture documents, (ix) (A) equity interests in any Foreign-Owned Domestic Subsidiary or (B) voting equity interests in any
Foreign Subsidiary that is CFC or in any Domestic DRE, in each case, representing in excess of 65% of the voting equity interests in such Foreign Subsidiary or
Domestic DRE, as applicable, (x) any assets of an Unrestricted Subsidiary or Excluded Subsidiary and (xi) those assets as to which the Administrative Agent and
the Borrower reasonably agree that the cost of obtaining such a security interest or perfection thereof are excessive in relation to the benefit to the Lenders of the
security to be afforded thereby; provided that “Excluded Assets” shall not include any proceeds, products, substitutions or replacements of Excluded Assets (unless
such proceeds, products, substitutions or replacements would otherwise constitute Excluded Assets).
“ Excluded Subsidiary ” means (a) any Foreign-Owned Domestic Subsidiary, (b) any Domestic DRE; (c) any Domestic Subsidiary that is
prohibited from guaranteeing the Obligations pursuant to contractual obligations (solely with respect to any Subsidiary acquired after the Effective Date, to the
extent such contractual obligation is in existence at the time of acquisition but not entered
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into in contemplation thereof and, in any such case, other than any contractual obligation in favor of the Borrower or any of its Subsidiaries) or by applicable law or
regulation or if such Subsidiary guaranteeing the Obligations would require governmental (including regulatory) consent, approval, license or authorization (unless
such consent, approval, license or authorization has been obtained) and (d) any Domestic Subsidiary that is not a Wholly-Owned Subsidiary; provided that such
Excluded Subsidiary shall cease to be an Excluded Subsidiary at such time such Subsidiary becomes a Wholly-Owned Subsidiary.
“ Excluded Swap Obligation ” means, with respect to any Loan Party, any Specified Swap Obligation if, and to the extent that, all or a portion of
the Guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Specified Swap Obligation (or any Guarantee thereof) is
or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or
official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an ECP at the time the Guarantee of such Loan Party or the
grant of such security interest becomes or would become effective with respect to such Specified Swap Obligation. If a Specified Swap Obligation arises under a
master agreement governing more than one swap, such exclusion shall apply only to the portion of such Specified Swap Obligation that is attributable to swaps for
which such Guarantee or security interest is or becomes illegal.
“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a
payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office
located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. Federal
withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or
Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan, Letter of Credit or Commitment (other than
pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that,
pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the
applicable interest in a Loan, Letter of Credit or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such
Recipient’s failure to comply with Section 2.17(f) and (d) any U.S. Federal withholding Taxes imposed under FATCA.
“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is
substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement
between a non-U.S. jurisdiction and the United States of America with respect to the foregoing and any fiscal or regulatory legislation, laws or official practices
adopted pursuant to such intergovernmental agreement.
“ Federal Funds Effective Rate ” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by
depositary institutions (as determined in such manner as the NYFRB shall set forth on its public website from time to time) and published on the next succeeding
Business Day by the NYFRB as the federal funds effective rate .
“ Final Release Conditions ” has the meaning assigned to such term in Section 9.15(c).
“ Financial Officer ” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.
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“ Financials ” means the annual or quarterly financial statements, and accompanying certificates and other documents, of Holdings (or the
Borrower prior to the Mergers, as applicable) and its Subsidiaries required to be delivered pursuant to Section 5.01(a) or 5.01(b).
“ First Tier Foreign Subsidiary ” means each Foreign Subsidiary with respect to which any one or more of Holdings, the Borrower and their
Domestic Subsidiaries directly owns or Controls more than 50% of such Foreign Subsidiary’s issued and outstanding Equity Interests.
“ Foreign Lender ” means a Lender that is not a U.S. Person .
“ Foreign-Owned Domestic Subsidiary ” means any Domestic Subsidiary whose Equity Interests are owned directly or indirectly by a CFC.
“ Foreign Subsidiary ” means any Subsidiary which is not a Domestic Subsidiary.
“ Form S-1 ” means the Form S-1 filed by CH Parent with the SEC on March 31, 2016, including all exhibits attached thereto, as amended
pursuant to Form S-1/A filed with the SEC on June 3, 2016, and as may be further amended from time to time in a manner that is not materially adverse to the
Lenders (unless such amendment has been approved by the Administrative Agent in its reasonable discretion).
“ GAAP ” means generally accepted accounting principles in the United States of America.
“ Governmental Authority ” means the government of the United States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to government.
“ Guarantee ” of or by any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly,
and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease
property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working
capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or
other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided , that the
term “Guarantee” shall not include (x) endorsements for collection or deposit in the ordinary course of business and (y) customary and reasonable indemnity
obligations in effect on the Effective Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than
with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness or
other similar monetary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith.
“ Hazardous Materials ” means all explosive or radioactive substances or wastes, hazardous or toxic substances, materials or wastes, including
petroleum or petroleum distillates, asbestos
16
or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, and all other substances or wastes of any nature regulated
pursuant to applicable Environmental Law.
“ Holdings ” means (i) prior to the consummation of the Borrower Assumption in accordance with the terms and conditions of Section 4.03, any
direct parent of the Borrower that becomes a Guarantor pursuant to the terms a guarantee agreement in form and substance reasonably satisfactory to the
Administrative Agent and (ii) following the consummation of the Borrower Assumption in accordance with the terms and conditions of Section 4.03, CH Parent.
“ Impacted Interest Period ” has the meaning assigned to such term in the definition of “LIBO Rate”.
“ Incremental Facility Agreement ” means an Incremental Facility Agreement, in form and substance reasonably satisfactory to the
Administrative Agent, among the Borrower, the Administrative Agent and one or more Incremental Lenders, establishing Incremental Term Loan Commitments of
any Series or Incremental Revolving Commitments and effecting such other amendments hereto and to the other Loan Documents as are contemplated by
Section 2.20.
“ Incremental Lender ” means an Incremental Revolving Lender or an Incremental Term Lender.
“ Incremental Revolving Commitment ” means, with respect to any Lender, the commitment, if any, of such Lender, established pursuant to an
Incremental Facility Agreement and Section 2.20, to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder,
expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Revolving Credit Exposure under such Incremental Facility
Agreement.
“ Incremental Revolving Lender ” means a Lender with an Incremental Revolving Commitment.
“ Incremental Term Lender ” means a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan.
“ Incremental Term Loan Commitment ” means, with respect to any Lender, the commitment, if any, of such Lender, established pursuant an
Incremental Facility Agreement and Section 2.20, to make Incremental Term Loans of any Series hereunder, expressed as an amount representing the maximum
principal amount of the Incremental Term Loans of such Series to be made by such Lender.
“ Incremental Term Loans ” means any term loans made pursuant to Section 2.20(a).
“ Incremental Term Maturity Date ” means, with respect to Incremental Term Loans of any Series, the scheduled date on which such Incremental
Term Loans shall become due and payable in full hereunder, as specified in the applicable Incremental Facility Agreement.
“ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all Capital Lease Obligations of such Person, (d) all obligations, contingent or otherwise,
of such Person as an account party in respect of letters of credit and letters of guaranty, (e) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances, (f) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person,
(g) all obligations of such Person in respect of the deferred purchase price of property or
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services (excluding current accounts payable incurred in the ordinary course of business), (i) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (j) all Guarantees by such Person of Indebtedness of others and (k) all obligations of such Person under Sale and
Leaseback Transactions. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a
general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding the foregoing, in connection with the purchase by Holdings,
the Borrower or any Restricted Subsidiary of any business, the term “Indebtedness” will exclude post-closing payment adjustments or contingent payments to
which the seller may become entitled; provided , that, at the time of closing, the amount of any such contingent payment is not determinable and, to the extent such
contingent payment thereafter becomes fixed and determined, the amount is paid within thirty (30) days thereafter.
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any
obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a) hereof, Other Taxes.
“ Ineligible Institution ” has the meaning assigned to such term in Section 9.04(b).
“ Information Memorandum ” means the Confidential Information Memorandum dated May 2016 relating to the Borrower and the Transactions.
“ Interest Coverage Ratio ” has the meaning assigned to such term in Section 6.11(b).
“ Interest Election Request ” means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08 in
the form attached hereto as Exhibit G-2 .
“ Interest Payment Date ” means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June,
September and December and the Maturity Date, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which
such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and the Maturity Date and (c) with respect to any
Swingline Loan, the day that such Loan is required to be repaid and the Maturity Date.
“ Interest Period ” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or six months (or, if acceptable to the Administrative Agent and each Lender, twelve
months) thereafter, as the Borrower may elect; provided , that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period
shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business
Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made
and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
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“ Interpolated Rate ” means, at any time, for any Interest Period, the rate per annum determined by the Administrative Agent (which
determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBOR
Screen Rate for the longest period (for which the LIBOR Screen Rate is available for the applicable currency) that is shorter than the Impacted Interest Period and
(b) the LIBOR Screen Rate for the shortest period (for which the LIBOR Screen Rate is available for the applicable currency) that exceeds the Impacted Interest
Period, in each case, at such time.
“ IRS ” means the United States Internal Revenue Service.
“ Issuing Bank ” means JPMorgan Chase Bank, N.A. and each other Lender designated by the Borrower as an “Issuing Bank” hereunder that has
agreed to such designation (and is reasonably acceptable to the Administrative Agent), each in its capacity as the issuer of Letters of Credit hereunder, and its
successors in such capacity as provided in Section 2.06(i). Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
“ LC Collateral Account ” has the meaning assigned to such term in Section 2.06(j).
“ LC Disbursement ” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
“ LC Exposure ” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
“ Lender Parent ” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.
“ Lenders ” means the Persons listed on Schedule 2.01A and any other Person that shall have become a Lender hereunder pursuant to
Section 2.20 or pursuant to an Assignment and Assumption or other documentation contemplated hereby, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Assumption or other documentation contemplated hereby. Unless the context otherwise requires, the term “Lenders”
includes the Swingline Lender and the Issuing Banks.
“ Letter of Credit ” means any letter of credit issued pursuant to this Agreement.
“ Letter of Credit Commitment ” means , with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit
hereunder. The initial amount of each Issuing Bank’s Letter of Credit Commitment is set forth on Schedule 2.01B , or if an Issuing Bank has entered into an
Assignment and Assumption, the amount set forth for such Issuing Bank as its Letter of Credit Commitment in the Register maintained by the Administrative
Agent .
“ Liberty Promissory Note ” Liberty Promissory Note” means that certain Master Promissory Note, dated June 1, 2016, between Commerce Tech
and LIC, pursuant to which LIC made a loan to Commerce Tech in the aggregate principal amount of $28,619,937.79.
“ Liberty Successor ” means any entity that is a successor of LIC, including any entity spun or otherwise separated out of LIC (or any similar
successor of any such Liberty Successor) (other
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than, in each case, a Qualified Distribution Transferee); provided that (a) no “person” or group (within the meaning of the Exchange Act and the rules of the SEC
thereunder as in effect on the date hereof), other than the Permitted Holders and all groups in which any Permitted Holder is a member (disregarding for this
purpose clause (b) of the definition of such term), is the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act and the rules of the SEC
thereunder as in effect on the date hereof), directly or indirectly, of more than 50% of the total voting power represented by the issued and outstanding capital stock
of such Liberty Successor, (b) such Liberty Successor is not a Sanctioned Person, (c) the transaction or transactions pursuant to which such Liberty Successor shall
have become such a successor does not violate any Anti-Corruption Laws or Sanctions applicable to such Liberty Successor or any Sanctions applicable to such
Liberty Successor and (d) each of the Administrative Agent and each Lender shall have received all documentation and other information reasonably requested by
it in writing that it reasonably determines is required by United States or foreign bank regulatory authorities under applicable “know your customer” and antimoney laundering rules and regulations, including the Patriot Act, with respect to such Liberty Successor.
“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any applicable Interest Period, the London interbank offered rate as
administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for Dollars for a period equal in length to such
Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on either of such Reuters pages, on any
successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be
selected by the Administrative Agent from time to time in its reasonable discretion (in each case the “ LIBOR Screen Rate ”) at approximately 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period; provided that, if the LIBOR Screen Rate shall be less than zero, such rate shall be
deemed to be zero for the purposes of this Agreement; provided , further , that if a LIBOR Screen Rate shall not be available at such time for such Interest Period
(the “ Impacted Interest Period ”), then the LIBO Rate for such Interest Period shall be the Interpolated Rate; provided, that, if any Interpolated Rate shall be less
than zero, such rate shall be deemed to be zero for the purposes of this Agreement. It is understood and agreed that all of the terms and conditions of this definition
of “LIBO Rate” shall be subject to Section 2.14 .
“ LIBOR Screen Rate ” has the meaning assigned to such term in the definition of “LIBO Rate”.
“ LIC ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing) relating to such asset.
“ Limited Conditionality Acquisition ” means any acquisition by Holdings, the Borrower or any Restricted Subsidiary (a) that is permitted by this
Agreement and (b) for which the Borrower has determined, in good faith, that limited conditionality is reasonably necessary or advisable.
“ Limited Conditionality Acquisition Agreement ” means, with respect to any Limited Conditionality Acquisition, the definitive acquisition
agreement, purchase agreement or similar agreement in respect thereof.
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“ Liquidity ” means, as of the date of any determination thereof, the lesser of (a) the aggregate amount of unrestricted and unencumbered cash
and Permitted Investments maintained by Holdings, the Borrower and their Restricted Subsidiaries as of such date (provided that not more than $4,000,000 of such
cash and Permitted Investments may be attributable to the cash and Permitted Investments of any Restricted Subsidiary that is not a Loan Party that are held in
deposit accounts and/or securities accounts outside of the United States) and (b) $20,000,000.
“ Loan Documents ” means this Agreement, any promissory notes issued pursuant to Section 2.10(e), any Letter of Credit applications and any
agreements between the Borrower and an Issuing Bank regarding such Issuing Bank’s Letter of Credit Commitment or the respective rights and obligations
between the Borrower and such Issuing Bank in connection with the issuance of Letters of Credit , the Collateral Documents, the Subsidiary Guaranty, the CH
Parent Guaranty and all other agreements, instruments, documents and certificates identified in Section 4.01 executed and delivered to, or in favor of, the
Administrative Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices and letter of credit agreements,
now or hereafter executed by or on behalf of any Loan Party, and delivered to the Administrative Agent or any Lender in connection with this Agreement or the
transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the
same may be in effect at any and all times such reference becomes operative.
“ Loan Parties ” means, collectively, Holdings, the Borrower and the Subsidiary Guarantors.
“ Loans ” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“ Material Acquisition ” means any acquisition of property or series of related acquisitions of property that (a) constitutes (i) assets comprising
all or substantially all or any significant portion of a business or operating unit of a business, or (ii) all or substantially all of the common stock or other Equity
Interests of a Person, and (b) involves the payment of consideration by Holdings, the Borrower or any of their Restricted Subsidiaries in excess of $10,000,000.
“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations, property or financial condition of Holdings, the
Borrower and their Restricted Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under this Agreement or any other
Loan Document or (c) the rights or remedies of the Administrative Agent and the Lenders thereunder.
“ Material Disposition ” means any sale, transfer or disposition of property or series of related sales, transfers, or dispositions of property that
yields gross proceeds to Holdings, the Borrower or any of their Restricted Subsidiaries in excess of $10,000,000.
“ Material Domestic Subsidiary ” means each Domestic Subsidiary that is not an Excluded Subsidiary or Unrestricted Subsidiary (i) which, as of
the most recent fiscal quarter of Holdings (or the Borrower prior to the Mergers, as applicable), for the period of four (4) consecutive fiscal quarters then ended, for
which financial statements have been delivered pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be
delivered pursuant to Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)), contributed greater than two and one-half percent
(2.5%) of Consolidated EBITDA for such period or (ii) which contributed greater than two
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and one-half percent (2.5%) of Consolidated Total Assets as of such date; provided that, if at any time the aggregate amount of Consolidated EBITDA or
Consolidated Total Assets attributable to all Domestic Subsidiaries that are not Material Domestic Subsidiaries (or that are not otherwise Subsidiary Guarantors at
such time) exceeds five percent (5%) of Consolidated EBITDA for any such period or five percent (5%) of Consolidated Total Assets as of the end of any such
fiscal quarter, the Borrower (or, in the event the Borrower has failed to do so within ten (10) days, the Administrative Agent) shall designate sufficient Domestic
Subsidiaries (other than Excluded Subsidiaries or Unrestricted Subsidiaries) as “Material Domestic Subsidiaries” to eliminate such excess, and such designated
Subsidiaries shall for all purposes of this Agreement constitute Material Domestic Subsidiaries.
“ Material Foreign Subsidiary ” means each Foreign Subsidiary that is not an Unrestricted Subsidiary (i) which, as of the most recent fiscal
quarter of Holdings (or the Borrower prior to the mergers, as applicable), for the period of four (4) consecutive fiscal quarters then ended, for which financial
statements have been delivered pursuant to Section 5.01(a) or (b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to
Section 5.01(a) or (b), the most recent financial statements referred to in Section 3.04(a)), contributed greater than five percent (5%) of Consolidated EBITDA for
such period or (ii) which contributed greater than five percent (5%) of Consolidated Total Assets as of such date.
“ Material Indebtedness ” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap
Agreements, of any one or more of Holdings, the Borrower and their Restricted Subsidiaries in an aggregate principal amount exceeding $10,000,000. For
purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings, the Borrower or any Restricted Subsidiary in respect of any
Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Restricted
Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
“ Material Subsidiary ” means any Material Domestic Subsidiary or Material Foreign Subsidiary.
“ Maturity Date ” means June 28, 2021.
“ Mergers ” has the meaning assigned to such term in the definition of “Separation.”
“ Merger Sub ” has the meaning assigned to such term in the preliminary statements to this Agreement.
“ Moody’s ” means Moody’s Investors Service, Inc.
“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“ Non-Loan Party Subsidiary ” has the meaning assigned to such term in Section 6.01(c).
“ NYFRB ” means the Federal Reserve Bank of New York.
“ NYFRB Rate ” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank
Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are
published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds
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transaction quoted at 11:00 a.m., New York City time, on such day received by the Administrative Agent from a Federal funds broker of recognized standing
selected by it; provided , further , that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“ Obligations ” means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of Holdings,
the Borrower and their Restricted Subsidiaries to any of the Lenders, the Administrative Agent, any Issuing Bank or any indemnified party, individually or
collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents
or in respect of any of the Loans made or reimbursement or other obligations incurred under any of the Letters of Credit or other instruments at any time evidencing
any thereof.
“ OFAC ” means the Office of Foreign Assets Control of the U.S. Department of the Treasury .
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such
Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan
Document, or sold or assigned an interest in any Loan, Letter of Credit or Loan Document).
“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any
payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or
otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an
assignment made pursuant to Section 2.19).
“ Overnight Bank Funding Rate ” means, for any day, the rate comprised of both overnight federal funds and overnight eurodollar borrowings by
U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the NYFRB as set forth on its public website from time to
time) and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall
commence to publish such composite rate).
“ Participant ” has the meaning assigned to such term in Section 9.04(c).
“ Participant Register ” has the meaning assigned to such term in Section 9.04(c).
“ Patriot Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar
functions.
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“ Permitted Acquisition ” means any acquisition (whether by purchase, merger, consolidation or otherwise) or series of related acquisitions by
Holdings, the Borrower or any Restricted Subsidiary of (i) all or substantially all the assets of or (ii) all or substantially all the Equity Interests in, a Person or
division or line of business of a Person, if, at the time of and immediately after giving effect thereto, (a) no Default has occurred and is continuing or would arise
after giving effect (including giving effect on a pro forma basis) thereto, (b) such Person or division or line of business is engaged in the same or a similar line of
business as Holdings, the Borrower and the Restricted Subsidiaries or business reasonably related, complementary, incidental or ancillary thereto or reasonable
extensions thereof, (c) all actions required to be taken with respect to such acquired or newly formed Restricted Subsidiary under Section 5.09 shall have been
taken, (d) in the case of an acquisition, merger or consolidation involving Holdings, the Borrower or a Restricted Subsidiary, Holdings, the Borrower or such
Restricted Subsidiary is the surviving entity of such merger and/or consolidation and (e) both immediately prior to and after giving effect (including giving effect
on a pro forma basis) to the consummation of such acquisition, the Consolidated Total Leverage Ratio is less than or equal to a ratio equal to (x) the numerator of
the maximum Consolidated Total Leverage Ratio permitted under the first sentence of Section 6.11(a) at such time (for the avoidance of doubt, without giving
effect to any Acquisition Holiday) minus 0.25 to (y) 1.00, and, if the aggregate consideration paid by Holdings, the Borrower or any Restricted Subsidiary in
respect of such acquisition exceeds $10,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer of the Borrower
to such effect, together with all relevant financial information, statements and projections requested by the Administrative Agent.
“ Permitted Asset Swap ” means any transfer of assets of Holdings, the Borrower or any Restricted Subsidiary to any Person (other than an
Affiliate of Holdings, the Borrower or such Restricted Subsidiary) in exchange for assets of such Person if:
(i) such exchange would qualify, whether in part or in full, as a like kind exchange pursuant to Section 1031 of the Code; provided that,
nothing in this definition shall require Holdings, the Borrower or any Restricted Subsidiary to elect that Section 1031 of the Code be applicable to any Permitted
Asset Swap;
(ii) the fair market value of any property or assets received is at least equal to the fair market value of the property or assets so transferred;
(iii) each such Permitted Asset Swap is effected in connection with an investment permitted by Section 6.04; and
(iv) to the extent applicable, any “boot” or other assets received by Holdings, the Borrower or any Restricted Subsidiary is directly related to,
and/or consists of Equity Interests issued by a Person in, a business permitted under Section 6.03(b).
“ Permitted Encumbrances ” means:
(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.04;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than thirty (30) days or are being contested in compliance with Section 5.04;
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(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course of business;
(e) judgment Liens in respect of judgments that do not constitute an Event of Default under Section 7.01(k);
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the
ordinary conduct of business of the Borrower or any Restricted Subsidiary;
(g) Liens in favor of a banking or other financial institution arising as a matter of law or in the ordinary course of business under customary
general terms and conditions encumbering deposits or other funds maintained with a financial institution (including the right of set-off) and that are within
the general parameters customary in the banking industry or arising pursuant to such banking institution’s general terms and conditions;
(h) Liens (i) in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with
the importation of goods in the ordinary course of business and (ii) on specific items of inventory or other goods and proceeds thereof of any Person
securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods in the ordinary course of business; and
(i) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading
accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.
“ Permitted Holder ” means any one or more of (a) LIC or any Qualified Distribution Transferee, or any wholly owned subsidiary of either
Person, (b) a Liberty Successor, (c) John C. Malone, Gregory B. Maffei, Francis Poore or any other executive officer or director of (i) LIC, (ii) the Borrower,
(iii) Holdings or (iv) any Qualified Distribution Transferee, (d) each of the respective Affiliated Persons of the Persons referred to in clause (c) and (e) any Person a
majority of the aggregate voting power of all the outstanding classes or series of the equity securities of which are beneficially owned by any one or more of the
Persons referred to in clauses (a), (b), (c) or (d). For purposes of this definition, “Person” has the meaning given to it for purposes of Section 13(d) of the Exchange
Act or any successor provision.
“ Permitted Investments ” means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
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(b) investments in commercial paper maturing within 360 days from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody’s;
(c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 365 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, (i) any Lender, (ii) any domestic office of any
commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided
profits of not less than $500,000,000 or (iii) any other commercial bank that is approved by the Administrative Agent;
(d) fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria described in clause (c) above at the date of such acquisition;
(e) money market funds that, as of the date of acquisition, (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment
Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000;
(f) in the case of any Foreign Subsidiary, other short-term investments that are analogous to the foregoing, are of comparable credit quality
and are customarily used by companies in the jurisdiction of such Foreign Subsidiary for cash management purposes; and
(h) any other investments permitted by the Borrower’s investment policy as such policy is in effect, and as disclosed to the Administrative
Agent, prior to the Effective Date and as such policy may be amended, restated, supplemented or otherwise modified from time to time with the consent of
the Administrative Agent, not to be unreasonably withheld, conditioned or delayed.
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“ Platform ” means Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system.
“ Pledge Subsidiary ” means (i) each Domestic Subsidiary and (ii) each First Tier Foreign Subsidiary.
“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as
being effective.
“ Qualified Distribution Transferee ” means any direct or indirect subsidiary of LIC or CH Parent that beneficially owns all of LIC’s or CH
Parent’s interest in the Borrower and by reason of a Distribution Transaction ceases to be a subsidiary of LIC or CH Parent.
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“ Qualified Equity Interests ” means any Equity Interests that are not Disqualified Equity Interests.
“ Recipient ” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable.
“ Reference Period ” means any period of four (4) consecutive fiscal quarters.
“ Register ” has the meaning assigned to such term in Section 9.04(b).
“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents,
advisors and representatives of such Person and such Person’s Affiliates.
“ Required Lenders ” means, subject to Section 2.21, at any time, Lenders having Revolving Credit Exposures and unused Commitments
representing more than 50% of the sum of the total Revolving Credit Exposures and unused Commitments at such time.
“ Responsible Officer ” means the Borrower’s chief executive officer, president, general counsel or other chief legal officer, or any Financial
Officer.
“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity
Interests in Holdings, the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in Holdings, the Borrower
or any Restricted Subsidiary or any option, warrant or other right to acquire any such Equity Interests in Holdings, the Borrower or any Restricted Subsidiary.
“ Restricted Subsidiary ” means (i) with respect to Holdings, any Subsidiary of Holdings (including the Borrower) and (ii) with respect to the
Borrower, any Subsidiary of the Borrower, in each case that is not an Unrestricted Subsidiary.
“ Revolving Credit Exposure ” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s
Revolving Loans, its LC Exposure and its Swingline Exposure at such time.
“ Revolving Loan ” means a Loan made pursuant to Section 2.01.
“ S&P ” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.
“ Sale and Leaseback Transaction ” means any sale or other transfer of any property or asset by any Person with the intent to lease such property
or asset as lessee.
“ Sanctioned Country ” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this
Agreement, Crimea, Cuba, Iran, North Korea, Sudan and Syria).
“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S.
Department of State, the United Nations
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Security Council, the European Union, any European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority
with governmental authority over Holdings, the Borrower and their Subsidiaries, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any
Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).
“ Sanctions ” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S.
government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union, any
European Union member state, Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority with governmental authority over Holdings,
the Borrower and their Subsidiaries.
“ SEC ” means the United States Securities and Exchange Commission.
“ Secured Obligations ” means all Obligations, together with all Swap Obligations and Banking Services Obligations owing to one or more
Lenders or their respective Affiliates; provided that the definition of “Secured Obligations” shall not create or include any guarantee by any Loan Party of (or grant
of security interest by any Loan Party to support, as applicable) any Excluded Swap Obligations of such Loan Party for purposes of determining any obligations of
any Loan Party .
“ Secured Parties ” means, collectively, (i) each Lender and each Issuing Bank in respect of its Loans and LC Exposure respectively, (ii) the
Administrative Agent, the Issuing Banks and the Lenders in respect of all other present and future obligations and liabilities of Holdings, the Borrower and each
Restricted Subsidiary of every type and description arising under or in connection with this Agreement or any other Loan Document, (iii) each Lender and Affiliate
of such Lender in respect of Swap Agreements and Banking Services Agreements entered into with such Person by Holdings, the Borrower or any Restricted
Subsidiary, (iv) each indemnified party under Section 9.03 in respect of the obligations and liabilities of the Borrower to such Person hereunder and under the other
Loan Documents, and (v) their respective successors and (in the case of a Lender, permitted) transferees and assigns.
“ Securities Act ” means the United States Securities Act of 1933.
“ Security Agreement ” means that certain Pledge and Security Agreement (including any and all supplements thereto), dated as of the Effective
Date, between the Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, and any other pledge or
security agreement entered into after the date of this Agreement by any other Loan Party (as required by this Agreement or any other Loan Document), as the same
may be amended, restated or otherwise modified from time to time.
“ Separation ” means (a) the series of internal transactions as a result of which (i) Commerce Tech will repay all amounts outstanding under the
Liberty Promissory Note, (ii) Commerce Tech will pay all accrued and unpaid dividends to the holders of Commerce Tech’s preferred stock, (iii) the holders of
Commerce Tech’s preferred stock will convert their shares into the common stock of Commerce Tech and Commerce Tech will pay a dividend to the holders of
Commerce Tech’s common stock, (iv) LIC and its wholly-owned subsidiaries will contribute the common stock of Commerce Tech to Merger Sub, (v) Merger Sub
will merge with and into Commerce Tech, with Commerce Tech being the surviving entity, (vi) Commerce Tech will merge with and into Commerce LLC, with
Commerce LLC being the surviving entity (the mergers described in this clause (v) and clause (vi) above, the “ Mergers ”), and (vii) following the Mergers, LIC
will distribute the shares of the common stock of CH Parent, which will be a Delaware corporation and direct parent of Commerce LLC, to the holders of Liberty
Ventures Group’s common stock and certain minority shareholders of Commerce Tech , in each case, in accordance
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with the Form S-1 and (b) other transactions described in or contemplated by the Form S-1 or the CommerceHub Separation Agreements.
“ Series ” has the meaning assigned to such term in Section 2.20(b).
“ Solvent ” means, in reference to any Person and at any date, (i) the fair value of the assets of such Person, at a fair valuation, will exceed its
debts and liabilities, subordinated, contingent or otherwise; (ii) the present fair saleable value of the property of such Person will be greater than the amount that
will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become
absolute and matured; (iii) such Person will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) such Person will not have unreasonably small capital with which to conduct the business in which it is engaged as such business as
conducted and contemplated on such date.
“ Specified Ancillary Obligations ” means all obligations and liabilities (including interest and fees accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) of Holdings or any of the
Restricted Subsidiaries, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, to the Lenders or any of their Affiliates under any Swap
Agreement or any Banking Services Agreement; provided that the definition of “Specified Ancillary Obligations” shall not create or include any guarantee by any
Loan Party of (or grant of security interest by any Loan Party to support, as applicable) any Excluded Swap Obligations of such Loan Party for purposes of
determining any obligations of any Loan Party.
“ Specified Equity Contribution ” has the meaning assigned to such term in Section 7.02.
“ Specified Swap Obligation ” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or
transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder.
“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D of the Board. Eurodollar Loans shall be deemed
to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D of the Board or any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve percentage.
“ Subordinated Indebtedness ” means any Indebtedness of the Borrower or any Restricted Subsidiary the payment of which is subordinated to
payment of the obligations under the Loan Documents.
“ Subordinated Indebtedness Documents ” means any document, agreement or instrument evidencing any Subordinated Indebtedness or entered
into in connection with any Subordinated Indebtedness.
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“ subsidiary ” means, with respect to any Person (the “ parent ”) at any date, any corporation, limited liability company, partnership, association
or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of
which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled,
by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
“ Subsidiary ” means any subsidiary of Holdings or the Borrower, as the context may imply.
“ Subsidiary Guarantor ” means (i) each Material Domestic Subsidiary that is a party to the Subsidiary Guaranty and (ii) each other Restricted
Subsidiary of Holdings or the Borrower that is a party to the Subsidiary Guaranty, in each case pursuant to the terms and conditions of Section 5.09(a). The
Subsidiary Guarantors on the Effective Date are identified as such in Schedule 3.01 hereto.
“ Subsidiary Guaranty ” means that certain Subsidiary Guaranty dated as of the Effective Date (including any and all supplements thereto) and
executed by each Subsidiary Guarantor, as amended, restated, supplemented or otherwise modified from time to time.
“ Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices
or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or
similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings, the
Borrower or the Restricted Subsidiaries shall be a Swap Agreement.
“ Swap Obligations ” means any and all obligations of Holdings, the Borrower or any Restricted Subsidiary, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under
(a) any and all Swap Agreements permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any such Swap Agreement transaction.
“ Swingline Commitment ” means $10,000,000.
“ Swingline Exposure ” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline
Exposure of any Lender at any time shall be the sum of (a) its Applicable Percentage of the total Swingline Exposure at such time other than with respect to any
Swingline Loans made by such Lender in its capacity as a Swingline Lender and (b) the aggregate principal amount of all Swingline Loans made by such Lender as
a Swingline Lender outstanding at such time (less the amount of participations funded by the other Lenders in such Swingline Loans).
“ Swingline Lender ” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder.
“ Swingline Loan ” means a Loan made pursuant to Section 2.05.
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“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes,
or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to
tax or penalties applicable thereto .
“ Total Revolving Credit Exposure ” means, at any time, the sum of the outstanding principal amount of all Lenders’ Revolving Loans, their LC
Exposure and their Swingline Exposure at such time; provided , that clause (a) of the definition of Swingline Exposure shall only be applicable to the extent
Lenders shall have funded their respective participations in the outstanding Swingline Loans .
“ Transactions ” means the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the
borrowing of Loans and other credit extensions, the use of the proceeds thereof, the issuance of Letters of Credit hereunder, the Separation and the Borrower
Assumption and the payment of fees and expenses in connection with the foregoing and all related transactions.
“ Type ”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are
required to be applied in connection with the issue of perfection of security interests.
“ Unrestricted Subsidiary ” means (a) any Subsidiary that has been designated by the board of directors of Holdings (or the Borrower prior to the
Mergers, as applicable), as an Unrestricted Subsidiary pursuant to Section 6.12 subsequent to the Effective Date (and not subsequently designated as a Restricted
Subsidiary in accordance with such Section) and (b) any Subsidiary of an Unrestricted Subsidiary.
“ U.S. Person ” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“ U.S. Tax Compliance Certificate ” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).
“ Wholly-Owned Subsidiary ” means, with respect to any Person, (i) any corporation whose Equity Interests are at the time owned by such
Person and/or one or more Wholly-Owned Subsidiaries of such Person or (ii) any partnership, limited liability company, association, joint venture or other entity in
which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time (other than in the case of a Foreign
Subsidiary with respect to the preceding clauses (i) and (ii), director’s qualifying shares and/or other nominal amount of shares required to be held by Persons other
than Holdings, the Borrower or any of their Subsidiaries under applicable law).
“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such
EEA Resolution Authority from time to time
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under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation
Schedule.
SECTION 1.02. Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by
Class ( e.g. , a “Revolving Loan”) or by Type ( e.g. , a “Eurodollar Loan”) or by Class and Type ( e.g. , a “Eurodollar Revolving Loan”). Borrowings also may be
classified and referred to by Class ( e.g. , a “Revolving Borrowing”) or by Type ( e.g. , a “Eurodollar Borrowing”) or by Class and Type ( e.g. , a “Eurodollar
Revolving Borrowing”).
SECTION 1.03. Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the
word “shall”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations
thereunder having the force of law or with which affected Persons customarily comply), and all judgments, orders and decrees, of all Governmental Authorities.
Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to
such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such
amendments, restatements, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as
referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference
herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case
of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f)
the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations . (a) Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the
Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in
GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until
such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, (i) in no event
shall a lease obligation that does not constitute a Capital Lease Obligation under GAAP as in effect on the date hereof be treated as a Capital Lease Obligation for
any purpose hereunder and (ii) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to
herein shall be made (I) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Restricted Subsidiary at
“fair value”, as defined therein and (II) without giving effect to any treatment of
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Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or
Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such
Indebtedness shall at all times be valued at the full stated principal amount thereof.
(b) All pro forma computations required to be made hereunder giving effect to any acquisition or disposition, or issuance, incurrence or
assumption of Indebtedness, or other transaction shall in each case be calculated giving pro forma effect thereto (and, in the case of any pro forma computation
made hereunder to determine whether such acquisition or disposition, or issuance, incurrence or assumption of Indebtedness, or other transaction is permitted to be
consummated hereunder, to any other such transaction consummated since the first day of the period covered by any component of such pro forma computation and
on or prior to the date of such computation) as if such transaction had occurred on the first day of the Reference Period ending with the most recent fiscal quarter
for which financial statements shall have been delivered pursuant to Section 5.01(a) or 5.01(b) (or, prior to the delivery of any such financial statements, ending
with the last fiscal quarter included in the financial statements referred to in Section 3.04(a)), and, to the extent applicable, to the historical earnings and cash flows
associated with the assets acquired or disposed of (but without giving effect to any synergies or cost savings other than as otherwise expressly set forth in this
Agreement) and any related incurrence or reduction of Indebtedness, all in accordance with Article 11 of Regulation S-X under the Securities Act. If any
Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).
SECTION 1.05. Status of Obligations . The Secured Obligations are hereby designated as “senior indebtedness” and as “designated senior
indebtedness” and words of similar import under and in respect of any indenture or other agreement or instrument under which such Subordinated Indebtedness is
outstanding and are further given all such other designations as shall be required under the terms of any such Subordinated Indebtedness in order that the Lenders
may have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such
Subordinated Indebtedness.
ARTICLE II
The Credits
SECTION 2.01. Commitments . Subject to the terms and conditions set forth herein, each Lender (severally and not jointly) agrees to
make Revolving Loans to the Borrower in Dollars from time to time during the Availability Period in an aggregate principal amount that will not result in (a) such
Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the Total Revolving Credit Exposures exceeding the Aggregate Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings . (a) Each Revolving Loan (other than a Swingline Loan) shall be made as part of a Borrowing
consisting of Revolving Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender
shall be responsible for any other Lender’s failure to make Loans as required. Any Swingline Loan shall be made in accordance with the procedures set forth in
Section 2.05.
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(b) Subject to Section 2.14, each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower
may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply to
such Affiliate to the same extent as to such Lender); provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not less than $1,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate
amount that is equal to the entire unused balance of the Aggregate Commitment or that is required to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.06(e). Each Swingline Loan shall be in an amount that is an integral multiple of $50,000 and not less than $100,000. Borrowings of
more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of eight (8) Eurodollar
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings . To request a Revolving Borrowing, the Borrower shall notify the Administrative
Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three (3) Business Days before the
date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing;
provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be
given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:
(i) the aggregate principal amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the
definition of the term “Interest Period”; and
(v) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of
Section 2.07.
If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Promptly following receipt of a Borrowing Request in accordance with this
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Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested
Borrowing.
SECTION 2.04. Intentionally Omitted .
SECTION 2.05. Swingline Loans . (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make
Swingline Loans in Dollars to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not
result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Commitment, (ii) the Swingline Lender’s Revolving Credit
Exposure exceeding its Commitment or (iii) the Total Revolving Credit Exposures exceeding the Aggregate Commitment; provided that the Swingline Lender shall
not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by
telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender
of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower at the direction of the Borrower
(which may include by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to
finance the reimbursement of an LC Disbursement as provided in Section 2.06(e), by remittance to the relevant Issuing Bank)) by 3:00 p.m., New York City time,
on the requested date of such Swingline Loan.
(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any
Business Day require the Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify
the aggregate amount of Swingline Loans in which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice
thereof to each Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s
Applicable Percentage of such Swingline Loan or Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans
pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in
Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be
made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of
the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to
the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall
have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall
be repaid to the
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Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The
purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.
(d) The Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced
Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such replacement of the Swingline Lender. At
the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant
to Section 2.13(a). From and after the effective date of any such replacement, (i) the successor Swingline Lender shall have all the rights and obligations of the
replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (ii) references herein to the term “Swingline Lender” shall
be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of a Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and
obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make
additional Swingline Loans.
(e) Subject to the appointment and acceptance of a successor Swingline Lender, the Swingline Lender may resign as a Swingline Lender at
any time upon thirty (30) days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Swingline Lender shall be
replaced in accordance with Section 2.05(d) above.
SECTION 2.06. Letters of Credit . (a) General . Subject to the terms and conditions set forth herein, the Borrower may request the
issuance of Letters of Credit denominated in Dollars as the applicant thereof for the support of its or its Restricted Subsidiaries’ obligations, in a form reasonably
acceptable to the Administrative Agent and the relevant Issuing Bank, at any time and from time to time during the Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement
submitted by the Borrower to, or entered into by the Borrower with, the relevant Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control. Notwithstanding anything herein to the contrary, no Issuing Bank shall have any obligation hereunder to issue, and shall not issue, any
Letter of Credit the proceeds of which would be made available to any Person (i) to fund any activity or business of or with any Sanctioned Person, or in any
country or territory that, at the time of such funding, is the subject of any Sanctions or (ii) in any manner that would result in a violation of any Sanctions by any
party to this Agreement. The Borrower unconditionally and irrevocably agrees that, in connection with any Letter of Credit issued for the support of any Restricted
Subsidiary’s obligations as provided in the first sentence of this paragraph, the Borrower will be fully responsible for the reimbursement of LC Disbursements in
accordance with the terms hereof, the payment of interest thereon and the payment of fees due under Section 2.12(b) to the same extent as if it were the sole
account party in respect of such Letter of Credit (the Borrower hereby irrevocably waiving any defenses that might otherwise be available to it as a guarantor or
surety of the obligations of such a Restricted Subsidiary that is an account party in respect of any such Letter of Credit).
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the relevant Issuing Bank) to the relevant Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension, but in any event no less than three (3) Business Days or such shorter period of time as the
relevant Issuing Bank may agree in a particular instance in its sole discretion) a notice requesting
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the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal
or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or
extend such Letter of Credit. If requested by an Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s standard form in
connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal
or extension (i) the amount of the LC Exposure shall not exceed $10,000,000, (ii) the sum of (x) the aggregate undrawn amount of all outstanding Letters of Credit
issued by any Issuing Bank at such time plus (y) the aggregate amount of all LC Disbursements made by such Issuing Bank that have not yet been reimbursed by or
on behalf of the Borrower at such time shall not exceed such Issuing Bank’s Letter of Credit Commitment and (iii) the Total Revolving Credit Exposures shall not
exceed the Aggregate Commitment. The Borrower may, at any time and from time to time, reduce the Letter of Credit Commitment of any Issuing Bank with the
consent of such Issuing Bank; provided that the Borrower shall not reduce the Letter of Credit Commitment of any Issuing Bank if, after giving effect of such
reduction, the conditions set forth in the immediately preceding clauses (i) through (iii) shall not be satisfied.
(c) Expiration Date . Each Letter of Credit shall expire (or be subject to termination by notice from the relevant Issuing Bank to the
beneficiary thereof) at or prior to the close of business on the earlier of (i) the date one (1) year after the date of the issuance of such Letter of Credit (or, in the case
of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date; provided
that any Letter of Credit with a one-year tenor may contain customary automatic renewal provisions agreed upon by the Borrower and the relevant Issuing Bank
that provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referenced in clause (ii) above), subject to a
right on the part of such Issuing Bank to prevent any such renewal from occurring by giving notice to the beneficiary in advance of any such renewal.
(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the relevant Issuing Bank or the Lenders, the relevant Issuing Bank hereby grants to each Lender, and each Lender hereby acquires
from the relevant Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the relevant Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and
not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement . If the relevant Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall
reimburse such LC Disbursement by paying to the Administrative Agent in Dollars the amount equal to such LC Disbursement, calculated as of the date such
Issuing Bank made such LC Disbursement not later than 12:00 noon, New York City time, on the
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first Business Day immediately following the day that the Borrower receives notice that such LC Disbursement is made; provided that, if such LC Disbursement is
not less than $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.05 that such
payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount of such LC Disbursement and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower
fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the
Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.07 with respect to Loans
made by such Lender (and Section 2.07 shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay
to the relevant Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the
Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to such Issuing Bank or, to the extent that Lenders have made
payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made
by a Lender pursuant to this paragraph to reimburse the relevant Issuing Bank for any LC Disbursement (other than the funding of Revolving Loans or a Swingline
Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.
(f) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever
and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein or herein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iii) any payment by the relevant Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the
terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions
of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative
Agent, the Lenders nor the Issuing Banks, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance
or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding
sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter
of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes
beyond the control of the relevant Issuing Bank; provided that the foregoing shall not be construed to excuse the relevant Issuing Bank from liability to the
Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by
the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when determining
whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of
gross negligence or willful misconduct, or unlawful failure to pay under any Letter of Credit after presentation to such Issuing Bank by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms of such Letter of Credit, on the part of such Issuing Bank (as finally determined by a court of competent
jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents
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presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, each Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept
and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures . Each Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under a Letter of Credit. The relevant Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any
such LC Disbursement.
(h) Interim Interest . If any Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC
Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC
Disbursement is made to but excluding the date that the reimbursement is due and payable, at the rate per annum then applicable to ABR Revolving Loans and such
interest shall be due and payable on the date when such reimbursement is payable; provided that, if the Borrower fails to reimburse such LC Disbursement when
due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the relevant
Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse such Issuing Bank
shall be for the account of such Lender to the extent of such payment.
(i) Replacement of Issuing Bank . (A) Any Issuing Bank may be replaced at any time by written agreement among the Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of
any Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing
Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations
of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be
deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit then outstanding and issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.
(B) Subject to the appointment and acceptance of a successor Issuing Bank, any Issuing Bank may resign as an Issuing Bank at any time
upon thirty days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Issuing Bank shall be replaced in accordance
with Section 2.06(i)(A) above .
(j) Cash Collateralization . If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than
50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the
Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders (the “ LC Collateral Account ”), an amount in cash
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equal to 105% of the amount of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the
occurrence of any Event of Default with respect to the Borrower described in Section 7.01(h) or 7.01(i). Such deposit shall be held by the Administrative Agent as
collateral for the payment and performance of the Secured Obligations. The Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account and the Borrower hereby grants the Administrative Agent a security interest in the LC Collateral Account. Other
than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at
the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the Administrative Agent to reimburse the relevant Issuing Bank for LC Disbursements for which it has not been reimbursed and,
to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity
of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other Secured Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been
cured or waived.
(k) LC Exposure Determination . For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any
document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such
Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.
(l) Issuing Bank Agreements . Each Issuing Bank agrees that, unless otherwise requested by the Administrative Agent, such Issuing Bank
shall report in writing to the Administrative Agent (i) on or prior to each Business Day on which such Issuing Bank expects to issue, amend, renew or extend any
Letter of Credit, the date of such issuance, amendment, renewal or extension, and the aggregate face amount of the Letters of Credit to be issued, amended,
renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension occurred (and whether the amount thereof
changed), it being understood that such Issuing Bank shall not permit any issuance, renewal, extension or amendment resulting in an increase in the amount of any
Letter of Credit to occur without first obtaining written confirmation from the Administrative Agent that it is then permitted under this Agreement, (ii) on each
Business Day on which such Issuing Bank pays any amount in respect of one or more drawings under Letters of Credit, the date of such payment(s) and the amount
of such payment(s), (iii) on any Business Day on which the Borrower fails to reimburse any amount required to be reimbursed to such Issuing Bank on such day,
the date of such failure and the amount and currency of such payment in respect of Letters of Credit and (iv) on any other Business Day, such other information as
the Administrative Agent shall reasonably request.
SECTION 2.07. Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof
solely by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by
it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.05. Except in respect of the provisions of this
Agreement covering the reimbursement of Letters of Credit, the Administrative Agent will make such Loans available to the Borrower by promptly crediting the
funds so received in the aforesaid account of the Administrative Agent to an account of the Borrower maintained with the Administrative Agent in New York City
or Chicago and designated by the Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the
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reimbursement of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the Administrative Agent to the relevant Issuing Bank.
(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing (or in the case
of an ABR Borrowing, prior to 12:00 noon, New York City time, on the date of such Borrowing) that such Lender will not make available to the Administrative
Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance
with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender
has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to
pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is
made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.
SECTION 2.08. Interest Elections . (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in
which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the
time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by
hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by the Borrower. Notwithstanding any contrary provision
herein, this Section shall not be construed to permit the Borrower to elect an Interest Period for Eurodollar Loans that does not comply with Section 2.02(d).
(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
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(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election,
which Interest Period shall be a period contemplated by the definition of the term “Interest Period”.
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month’s duration.
(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof
and of such Lender’s portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Revolving Borrowing prior to the end of
the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Revolving Borrowing
may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR Borrowing
at the end of the Interest Period applicable thereto.
SECTION 2.09. Termination and Reduction of Commitments . (a) Unless previously terminated, the Commitments shall terminate on the
Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (i) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the Total Revolving Credit Exposures would
exceed the Aggregate Commitment.
(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of
this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower
pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.
SECTION 2.10. Repayment of Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay (i) to the
Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date and (ii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Maturity Date and the fifth (5 th ) Business Day after such Swingline Loan is
made; provided that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding.
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(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and
Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each
Lender’s share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any
error therein shall not in any manner affect the Obligations.
(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute
and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in the form
attached hereto as Exhibit H . Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant
to Section 9.04) be represented by one or more promissory notes in such form).
SECTION 2.11. Prepayment of Loans . The Borrower shall have the right at any time and from time to time to prepay any Borrowing in
whole or in part, without penalty or premium (other than break funding payments required by Section 2.16), subject to prior notice in accordance with the
provisions of this Section 2.11(a). The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender)
by written notice (promptly followed by telephonic confirmation of such request) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar
Revolving Borrowing, not later than 11:00 a.m., New York City time, three (3) Business Days before the date of prepayment, (ii) in the case of prepayment of an
ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one (1) Business Day before the date of prepayment or (iii) in the case of prepayment
of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to a Revolving Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that would be permitted in the
case of an advance of a Revolving Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to
the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by (i) accrued interest to the extent required by Section 2.13 and (ii) break
funding payments pursuant to Section 2.16. If at any time the Total Revolving Credit Exposures exceed the Aggregate Commitment, the Borrower shall
immediately repay Borrowings or cash collateralize LC Exposure in an account with the Administrative Agent pursuant to Section 2.06(j), as applicable, in an
aggregate principal amount sufficient to cause the aggregate principal amount of the Total Revolving Credit Exposures to be less than or equal to the Aggregate
Commitment.
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SECTION 2.12. Fees . (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee,
which shall accrue at the applicable Commitment Fee Rate (as specified in the definition of “Applicable Rate”) on the daily average amount of the Available
Revolving Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the
Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 365
days (or 366 days in a leap year) and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans on
the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and
including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to
have any LC Exposure and (ii) to the relevant Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum (or such other
rate per annum as may be mutually agreed upon between the Borrower and the relevant Issuing Bank) on the average daily amount of the LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) attributable to Letters of Credit issued by such Issuing Bank during the period from and
including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as
well as such Issuing Bank’s standard fees and commissions with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment, renewal or
extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March,
June, September and December of each year shall be payable on the third (3 rd ) Business Day following such last day, commencing on the first such date to occur
after the Effective Date; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on
which the Commitments terminate shall be payable on demand. Any other fees payable to any Issuing Bank pursuant to this paragraph shall be payable within ten
(10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately
agreed upon between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to each
Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.13. Interest . (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the
Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower
hereunder is not paid when due, whether at stated maturity,
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upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue
principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other
amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the
Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or
prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount
repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to
the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate or the NYFRB Rate shall be computed on the basis of a year of 365 days (or 366 days
in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate
Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.14. Alternate Rate of Interest . If prior to the commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be conclusive and binding absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that
requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and any such Eurodollar Borrowing
shall, at the election of the Borrower, either (x) be repaid on the last day of the then current Interest Period applicable thereto or (y) converted to an ABR
Borrowing in accordance with Section 2.8 and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR
Borrowing.
SECTION 2.15. Increased Costs . (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan
requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any
such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;
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(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes)
affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein; or
(iii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition
of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits,
reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, continuing, converting into or maintaining any
Loan or of maintaining its obligation to make any such Loan or to increase the cost to such Lender, such Issuing Bank or such other Recipient of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender, such Issuing Bank or such other Recipient
hereunder, whether of principal, interest or otherwise, then the Borrower will pay to such Lender, such Issuing Bank or such other Recipient, as the case may be,
such additional amount or amounts as will compensate such Lender, such Issuing Bank or such other Recipient, as the case may be, for such additional costs
incurred or reduction suffered as reasonably determined by the Administrative Agent, such Lender or such Issuing Bank (which determination shall be made in
good faith (and not on an arbitrary or capricious basis) and generally consistent with similarly situated customers of the Administrative Agent, such Lender or such
Issuing Bank, as applicable, under agreements having provisions similar to this Section 2.15, after consideration of such factors as the Administrative Agent, such
Lender or such Issuing Bank, as applicable, then reasonably determines to be relevant) .
(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the
effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if
any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such
Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for
such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding
company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be,
such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such
reduction suffered as reasonably determined by the Administrative Agent, such Lender or such Issuing Bank (which determination shall be made in good faith (and
not on an arbitrary or capricious basis) and generally consistent with similarly situated customers of the Administrative Agent, such Lender or such Issuing Bank,
as applicable, under agreements having provisions similar to this Section 2.15, after consideration of such factors as the Administrative Agent, such Lender or such
Issuing Bank, as applicable, then reasonably determines to be relevant).
(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing
Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten
(10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to
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compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such
Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s
or such Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.16. Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.11), (b) the
conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any
Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11 and is revoked
in accordance therewith) or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by
the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event
(other than loss of anticipated profits). Such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess,
if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that
would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue
on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in
Dollars of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such
Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.
SECTION 2.17. Taxes . (a) Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under
any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in
the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then
the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant
Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be
increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums
payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been
made.
(b) Payment of Other Taxes by the Borrower . The Borrower shall timely pay to the relevant Governmental Authority in accordance with
applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.
(c) Evidence of Payments . As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to
this Section 2.17, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
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(d) Indemnification by the Loan Parties . The Loan Parties shall indemnify each Recipient, within 10 days after demand therefor, for the
full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid
by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of
such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.
(e) Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand
therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent
for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the
provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are
payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or
liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent
to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the
Lender from any other source against any amount due to the Administrative Agent under this paragraph (e).
(f) Status of Lenders . (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments
made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such
payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as
will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting
requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other
than such documentation set forth in Section 2.17(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion,
execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of
such Lender.
(ii) Without limiting the generality of the foregoing:
(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which
such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), an executed IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax;
(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in
such number of copies as shall
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be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to
payments of interest under any Loan Document, an executed IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption
from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other
applicable payments under any Loan Document, IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or
reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
(2) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, an executed of
IRS Form W-8ECI;
(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section
881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a
“controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) an
executed IRS Form W-8BEN or IRS Form W-8BEN-E; or
(4) to the extent a Foreign Lender is not the beneficial owner, an executed IRS Form W-8IMY, accompanied by IRS Form W-8ECI,
IRS Form W-8BEN or IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3
, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is
a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such
Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct
and indirect partner;
(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in
such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any
other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed,
together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to
determine the withholding or deduction required to be made; and
(D) if a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by
FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those
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contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at
the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such
documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include
any amendments made to FATCA after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
(g) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of
any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall
pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes
giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such
indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in
this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of
which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other
information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(h) Survival. Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or
any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations
under any Loan Document.
(i) Defined Terms . For purposes of this Section 2.17, the term “Lender” includes each Issuing Bank and the term “applicable law”
includes FATCA.
SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs .
(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of
LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, New York City time on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative
Agent, be deemed to have been received on the next
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succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 10 South
Dearborn Street, Chicago, Illinois 60603, except payments to be made directly to any Issuing Bank or Swingline Lender as expressly provided herein and except
that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.
(b) Any proceeds of Collateral received by the Administrative Agent (i) not constituting a specific payment of principal, interest, fees or
other sum payable under the Loan Documents (which shall be applied as specified by the Borrower) or (ii) after an Event of Default has occurred and is continuing
and the Administrative Agent so elects or the Required Lenders so direct, such funds shall be applied ratably first , to pay any fees, indemnities, or expense
reimbursements including amounts then due to the Administrative Agent and the Issuing Banks from the Borrower, second , to pay any fees or expense
reimbursements then due to the Lenders from the Borrower, third , to pay interest then due and payable on the Loans ratably, fourth , to prepay principal on the
Loans and unreimbursed LC Disbursements and any other amounts owing with respect to Banking Services Obligations and Swap Obligations ratably, fifth , to pay
an amount to the Administrative Agent equal to one hundred five percent (105%) of the aggregate undrawn face amount of all outstanding Letters of Credit and the
aggregate amount of any unpaid LC Disbursements, to be held as cash collateral for such Obligations, and sixth , to the payment of any other Secured Obligation
due to the Administrative Agent or any Lender by the Borrower. Notwithstanding the foregoing, amounts received from any Loan Party shall not be applied to any
Excluded Swap Obligation of such Loan Party. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or
unless a Default is in existence, none of the Administrative Agent or any Lender shall apply any payment which it receives to any Eurodollar Loan of a Class,
except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Loan or (b) in the event, and only to the extent, that there are no
outstanding ABR Loans of the same Class and, in any event, the Borrower shall pay the break funding payment required in accordance with Section 2.16. The
Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to
any portion of the Secured Obligations.
(c) At the election of the Administrative Agent, all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable
expenses (including, without limitation, all reimbursement for fees and expenses pursuant to Section 9.03), and other sums payable under the Loan Documents,
may be paid from the proceeds of Borrowings made hereunder whether made following a request by the Borrower pursuant to Section 2.03 or a deemed request as
provided in this Section or may be deducted from any deposit account of the Borrower maintained with the Administrative Agent.
(d) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving
Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared
by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC
Disbursements and Swingline Loans; provided that
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(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations in LC Disbursements and Swingline Loans to any assignee or participant, other than to
the Borrower or any Restricted Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.
(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the
Administrative Agent for the account of the Lenders or the relevant Issuing Bank hereunder that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders or the relevant Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the
Lenders or the relevant Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to
such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.
(f) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or
9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), (i) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender and for the benefit of the Administrative Agent, the Swingline Lender or the Issuing Banks to satisfy such
Lender’s obligations to it under such Section until all such unsatisfied obligations are fully paid and/or (ii) hold any such amounts in a segregated account over
which the Administrative Agent shall have exclusive control as cash collateral for, and application to, any future funding obligations of such Lender under any such
Section; in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 2.15, or the
Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights
and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender
in connection with any such designation or assignment.
(b) If (i) any Lender requests compensation under Section 2.15, (ii) the Borrower is required to pay any Indemnified Taxes or additional
amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17 or (iii) any Lender becomes a Defaulting Lender,
then the Borrower may, at its sole expense and effort, upon notice to such Lender and the
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Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04),
all its interests, rights (other than its existing rights to payments pursuant to Sections 2.15 or 2.17) and obligations under the Loan Documents to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the
prior written consent of the Administrative Agent (and if a Commitment is being assigned, the Issuing Banks and the Swingline Lender), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC
Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
SECTION 2.20. Incremental Facilities .
(a) The Borrower may on one or more occasions, by written notice to the Administrative Agent, request (i) during the Availability Period,
the establishment of Incremental Revolving Commitments and/or (ii) the establishment of Incremental Term Loan Commitments. Each such notice shall specify
(A) the date on which the Borrower proposes that the Incremental Revolving Commitments or the Incremental Term Loan Commitments, as applicable, shall be
effective, which shall be a date not less than ten (10) Business Days (or such shorter period as may be agreed to by the Administrative Agent) after the date on
which such notice is delivered to the Administrative Agent, and (B) the amount of the Incremental Revolving Commitments or Incremental Term Loan
Commitments, as applicable, being requested (it being agreed that (x) any Lender approached to provide any Incremental Revolving Commitment or Incremental
Term Loan Commitment may elect or decline, in its sole discretion, to provide such Incremental Revolving Commitment or Incremental Term Loan Commitment,
(y) any Person that the Borrower proposes to become an Incremental Lender, if such Person is not then a Lender, must be reasonably acceptable to the
Administrative Agent and, in the case of any proposed Incremental Revolving Lender, the Issuing Banks and the Swingline Lender and (z) none of the Persons
described in the foregoing clauses (x) and (y) may be an Ineligible Institution). Notwithstanding anything herein to the contrary, the aggregate amount of all
Incremental Revolving Commitments and Incremental Term Loan Commitments established pursuant to this Section 2.20 shall not exceed $50,000,000 and shall
be in minimum increments of $10,000,000 (or such other lower amount as may be agreed to by the Administrative Agent).
(b) The terms and conditions of any Incremental Revolving Commitment and Revolving Loans and other extensions of credit to be made
thereunder shall be identical to those of the Revolving Commitments and Revolving Loans and other extensions of credit made thereunder (other than with respect
to customary arrangement, upfront and similar fees), and shall be treated as a single Class with such Revolving Commitments and Revolving Loans. The
Incremental Term Loans (i) shall not mature earlier than the Maturity Date (but may have amortization and/or customary prepayments prior to such date), (ii) shall
not contain covenants or events of default applicable to such Incremental Term Loans that are more onerous or more restrictive in any material respect (taken as a
whole), as determined in good faith by the board of directors of Holdings (or the Borrower prior to the Mergers, as applicable), than the covenants applicable to the
Revolving Loans and (iii) shall have the same Guarantees as, and shall rank pari passu or junior to the Liens on the Collateral and in right of payment with, the
Revolving Loans (and in the case of this clause (iii) , to the extent that the related Incremental Facility Agreement
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provides for such Incremental Term Loans to rank junior, such Incremental Term Loans shall be subject to a customary intercreditor agreement in form and
substance reasonably satisfactory to the Administrative Agent); provided that (x) the terms and conditions applicable to any tranche of Incremental Term Loans
maturing after the Maturity Date may provide for material additional or different financial or other covenants applicable only during periods after the Maturity Date
and (y) the Incremental Term Loans may be priced differently (whether in the form of interest rate margin, upfront fees, original issue discount, call protection or
otherwise) than the Revolving Loans. Any Incremental Term Loan Commitments established pursuant to an Incremental Facility Agreement that have identical
terms and conditions, and any Incremental Term Loans made thereunder, shall be designated as a separate series (each a “ Series ”) of Incremental Term Loan
Commitments and Incremental Term Loans for all purposes of this Agreement.
(c) The Incremental Commitments shall be effected pursuant to one or more Incremental Facility Agreements executed and delivered by
the Borrower, each Incremental Lender providing such Incremental Commitments and the Administrative Agent; provided that (other than with respect to the
incurrence of Incremental Term Loans the proceeds of which shall be used to consummate an acquisition permitted by this Agreement for which the Borrower has
determined, in good faith, that limited conditionality is reasonably necessary (any such acquisition, a “ Limited Conditionality Acquisition ”) as to which conditions
(i) through (iii) below shall not apply) no Incremental Commitments shall become effective unless (i) no Event of Default shall have occurred and be continuing on
the date of effectiveness thereof, both immediately prior to and immediately after giving effect (including pro forma effect) to such Incremental Commitments and
the making of Loans and issuance of Letters of Credit thereunder to be made on such date, (ii) the representations and warranties set forth in Article III shall be true
and correct in all material respects prior to, and immediately after giving effect to, such Incremental Commitments, except to the extent any such representations or
warranties are expressly limited to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such
specified earlier date (provided that no materiality qualifier set forth in this subclause (ii) shall be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof), (iii) after giving effect to such Incremental Commitments and the making of Loans and other extensions of
credit thereunder to be made on the date of effectiveness thereof (and (A) assuming, in the case of any Incremental Revolving Commitments to be made on the date
of effectiveness thereof, that such Incremental Revolving Commitments are fully drawn, (B) after giving effect to any permitted pro forma adjustment events and
any permitted repayment of Indebtedness after the beginning of the relevant determination period but prior to or simultaneous with the effectiveness of such
Incremental Commitments and (C) excluding the proceeds of any such Incremental Commitments for purposes of determining Liquidity in the calculation of the
Consolidated Total Leverage Ratio), the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 6.11 (after giving effect to any
then applicable Acquisition Holiday), (iv) the Borrower shall make any payments required to be made pursuant to Section 2.16 in connection with such Incremental
Commitments and the related transactions under this Section, and (v) the other conditions, if any, set forth in the applicable Incremental Facility Agreement are
satisfied; provided further that no Incremental Term Loans in respect of a Limited Conditionality Acquisition shall become effective unless (1) as of the date of
execution of the definitive acquisition documentation in respect of such Limited Conditionality Acquisition (the “ Limited Conditionality Acquisition Agreement ”)
by the parties thereto, no Event of Default shall have occurred and be continuing or would result from entry into the Limited Conditionality Acquisition Agreement,
(2) as of the date of the borrowing of such Incremental Term Loans, no Event of Default under clauses (a), (b), (h) or (i) of Section 7.01 is in existence immediately
before or after giving effect (including on a pro forma basis) to such borrowing and to any concurrent transactions and any substantially concurrent use of proceeds
thereof, (3) the representations and warranties set forth in Article III shall be true and correct in all material respects as of the date of execution of the applicable
Limited Conditionality Acquisition Agreement by the parties thereto, except to the extent any such representations
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or warranties are expressly limited to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such
specified earlier date (provided that no materiality qualifier set forth in this subclause (3) shall be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof), (4) as of the date of the borrowing of such Incremental Term Loans, customary “Sungard” representations
and warranties (with such representations and warranties to be reasonably determined by the Incremental Lenders providing such Incremental Term Loans) shall be
true and correct in all material respects immediately before and after giving effect to the incurrence of such Incremental Term Loans, except to the extent any such
representations or warranties are expressly limited to an earlier date, in which case such representations and warranties shall be true and correct in all material
respects as of such specified earlier date (provided that no materiality qualifier set forth in this subclause (4) shall be applicable to any representations and
warranties that are already qualified by materiality or Material Adverse Effect) and (5) as of the date of execution of the related Limited Conditionality Acquisition
Agreement by the parties thereto, the Borrower shall be in pro forma compliance with the financial covenants set forth in Section 6.11. Each Incremental Facility
Agreement may, without the consent of any Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate,
in the opinion of the Administrative Agent, to give effect to the provisions of this Section and no consent of any Lender (other than the Lenders participating in the
increase or any Incremental Term Loan) shall be required for any increase in Commitments or Incremental Term Loan pursuant to this Section 2.20. On the
effective date of any increase in the Commitments, (i) each relevant Incremental Revolving Lender shall make available to the Administrative Agent such amounts
in immediately available funds as the Administrative Agent shall determine, for the benefit of the other Lenders, as being required in order to cause, after giving
effect to such increase and the use of such amounts to make payments to such other Lenders, each Lender’s portion of the outstanding Revolving Loans of all the
Lenders to equal its Applicable Percentage of such outstanding Revolving Loans, and (ii) the Borrower shall be deemed to have repaid and reborrowed all
outstanding Revolving Loans as of the date of any increase in the Commitments (with such reborrowing to consist of the Types of Revolving Loans, with related
Interest Periods if applicable, specified in a notice delivered by the Borrower, in accordance with the requirements of Section 2.03). The deemed payments made
pursuant to clause (ii) of the immediately preceding sentence shall be accompanied by payment of all accrued interest on the amount prepaid and, in respect of each
Eurodollar Loan, shall be subject to indemnification by the Borrower pursuant to the provisions of Section 2.16 if the deemed payment occurs other than on the last
day of the related Interest Periods. Nothing contained in this Section 2.20 shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender
to increase its Commitment hereunder, or provide Incremental Term Loans, at any time.
(a) Upon the effectiveness of an Incremental Commitment of any Incremental Lender, (i) such Incremental Lender shall be deemed to be a
“Lender” (and a Lender in respect of Commitments and Loans of the applicable Class) hereunder, and henceforth shall be entitled to all the rights of, and benefits
accruing to, Lenders (or Lenders in respect of Commitments and Loans of the applicable Class) hereunder and shall be bound by all agreements,
acknowledgements and other obligations of Lenders (or Lenders in respect of Commitments and Loans of the applicable Class) hereunder and under the other Loan
Documents, and (ii) in the case of any Incremental Revolving Commitment, (A) such Incremental Revolving Commitment shall constitute (or, in the event such
Incremental Lender already has a Revolving Commitment, shall increase) the Revolving Commitment of such Incremental Lender and (B) the total Revolving
Commitments shall be increased by the amount of such Incremental Revolving Commitment, in each case, subject to further increase or reduction from time to
time as set forth in the definition of the term “Revolving Commitment.” For the avoidance of doubt, upon the effectiveness of any Incremental Revolving
Commitment, the Revolving Credit Exposure of the Incremental Revolving Lender holding such Revolving Commitment, and the Applicable Percentage of all the
Lenders, shall automatically be adjusted to give effect thereto.
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(b) On the date of effectiveness of any Incremental Revolving Commitments, each Lender with a Revolving Commitment (immediately
prior to giving effect to such Incremental Revolving Commitments) shall assign to each Incremental Revolving Lender holding such Incremental Revolving
Commitment, and each such Incremental Revolving Lender shall purchase from each such Lender, at the principal amount thereof (together with accrued interest),
such interests in the Loans and participations in Letters of Credit outstanding on such date as shall be necessary in order that, after giving effect to all such
assignments and purchases, such Loans and participations in Letters of Credit will be held by all the Lenders with Revolving Commitments ratably in accordance
with their Applicable Percentages after giving effect to the effectiveness of such Incremental Revolving Commitment.
(c) Subject to the terms and conditions set forth herein and in the applicable Incremental Facility Agreement, each Lender holding an
Incremental Term Loan Commitment of any Series shall make a loan to the Borrower in an amount equal to such Incremental Term Loan Commitment on the date
specified in such Incremental Facility Agreement.
(d) The Administrative Agent shall notify the Lenders promptly upon receipt by the Administrative Agent of any notice from the Borrower
referred to in paragraph (a) above and of the effectiveness of any Incremental Commitments, in each case advising the Lenders of the details thereof and, in the
case of effectiveness of any Incremental Revolving Commitments, of the Applicable Percentages of the Lenders after giving effect thereto and of the assignments
required to be made pursuant to paragraph (e) above.
SECTION 2.21. Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a
Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:
(a) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a);
(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required
Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided
that, except as otherwise provided in Section 9.02, this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other
modification requiring the consent of such Lender or each Lender directly affected thereby;
(c) if any Swingline Exposure or LC Exposure exists at the time such Lender becomes a Defaulting Lender then:
(i) all or any part of the Swingline Exposure and LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting
Lenders in accordance with their respective Applicable Percentages but only to the extent that the sum of all non-Defaulting Lenders’ Revolving Credit
Exposures plus such Defaulting Lender’s Swingline Exposure and LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business
Day following notice by the Administrative Agent (x) first , prepay such Swingline Exposure and (y) second , cash collateralize for the benefit of each
Issuing Bank only the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation
pursuant to clause (i) above) in
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accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;
(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower
shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during
the period such Defaulting Lender’s LC Exposure is cash collateralized;
(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i) above, then the fees payable to the Lenders
pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and
(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii)
above, then, without prejudice to any rights or remedies of any Issuing Bank or any other Lender hereunder, all letter of credit fees otherwise payable
under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the relevant Issuing Bank until and to the extent that such
LC Exposure is reallocated and/or cash collateralized; and
(d) so long as such Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan and no Issuing
Bank shall be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Lender’s then outstanding
LC Exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with
Section 2.21(c), and participating interests in any such newly made Swingline Loan or any newly issued or increased Letter of Credit shall be allocated among nonDefaulting Lenders in a manner consistent with Section 2.21(c)(i) (and such Defaulting Lender shall not participate therein).
If (i) a Bankruptcy Event or Bail-In Action with respect to a Lender Parent shall occur following the date hereof and for so long as such event
shall continue or (ii) the Swingline Lender or the relevant Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one
or more other agreements in which such Lender commits to extend credit, the Swingline Lender shall not be required to fund any Swingline Loan and no Issuing
Bank shall be required to issue, amend or increase any Letter of Credit, unless the Swingline Lender or the relevant Issuing Bank, as the case may be, shall have
entered into arrangements with the Borrower or such Lender, satisfactory to the Swingline Lender or such Issuing Bank, as the case may be, to defease any risk to it
in respect of such Lender hereunder.
The rights and remedies against a Defaulting Lender under this Agreement are in addition to, and cumulative and not in limitation of, all other
rights and remedies that the Borrower may have against such Defaulting Lender with respect to any funding default and that the Administrative Agent or any
Lender may have against such Defaulting Lender with respect to any funding default . In the event that the Administrative Agent, the Borrower, the Swingline
Lender and each Issuing Bank each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then
the Swingline Exposure and LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender
shall purchase at par such of the Loans of the other Lenders (other than Swingline Loans) as the Administrative Agent shall determine may be necessary in order
for such Lender to hold such Loans in accordance with its Applicable Percentage, whereupon such Lender will cease to be a Defaulting Lender and will be a nonDefaulting Lender and any applicable cash collateral shall be promptly returned to the Borrower and any LC
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Exposure and Swingline Exposure of such Lender reallocated pursuant to the requirements above shall be reallocated back to such Lender; provided that no
adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender ;
provided , further , that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to non-Defaulting
Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender .
ARTICLE III
Representations and Warranties
Each of Holdings and the Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers; Subsidiaries . Each of Holdings, the Borrower, its Material Subsidiaries and the other Loan Parties
is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its
business as now conducted and, except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. Schedule 3.01 hereto (as supplemented
from time to time) identifies each Restricted Subsidiary, noting whether such Restricted Subsidiary is a Material Domestic Subsidiary, the jurisdiction of its
incorporation or organization, as the case may be, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned
by Holdings, the Borrower and the other Restricted Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a
description of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Restricted Subsidiary are validly
issued and outstanding and fully paid and nonassessable and all such shares and other equity interests indicated on Schedule 3.01 as owned by Holdings, the
Borrower or another Restricted Subsidiary are owned, beneficially and of record, by Holdings, the Borrower or any Restricted Subsidiary free and clear of all
Liens, other than Liens created under the Loan Documents and Liens permitted under Section 6.02.
SECTION 3.02. Authorization; Enforceability . The execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions contemplated thereby are within each Loan Party’s organizational powers and have been duly
authorized by all necessary organizational actions and, if required, actions by equity holders. The Loan Documents to which each Loan Party is a party have been
duly executed and delivered by such Loan Party and constitute a legal, valid and binding obligation of such Loan Party, enforceable against the Loan Party in
accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts . (a) The Transactions do not require any material consent or approval of,
registration or filing with, or any other action by, any Governmental Authority, except such as have been, or will be by the time required, obtained or made and are,
or will be by the time required, in full force and effect, and except for any filings, registrations, endorsements, notarizations, stampings and/or notifications
necessary to perfect Liens created pursuant to the Loan Documents and (b) the execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions contemplated thereby (i) will not violate in any material respect any applicable material law or
regulation or the charter, by-laws or other organizational documents of any Loan Party or any Material Subsidiary or any material order of any Governmental
Authority binding upon any Loan Party or any of the Material Subsidiaries or its assets, (ii)
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will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any Material Subsidiary or its assets, or give
rise to a right thereunder to require any payment to be made by the Borrower or any Material Subsidiary, except, in the case of this clause (ii), for any such
violations, defaults or rights that would not reasonably be expected to result in a Material Adverse Effect, and (iii) will not result in the creation or imposition of
any Lien on any asset of the Borrower or any Material Subsidiary, other than Liens created under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change . (a) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders equity and cash flows as of and for the fiscal year ended December 31, 2015 reported on by
KPMG LLP, independent public accountants. Such financial statements present fairly, in all material respects, the consolidated financial position and results of
operations and cash flows of the Borrower and its consolidated Restricted Subsidiaries as of such dates and for such periods in accordance with GAAP.
(b) Since December 31, 2015, there has been no material adverse change in the business, operations, property or financial condition of
Holdings, the Borrower and their Restricted Subsidiaries, taken as a whole.
SECTION 3.05. Properties . (a) Except for Liens permitted pursuant to Section 6.02, each of Holdings, the Borrower and the Restricted
Subsidiaries has good title to, or (to the knowledge of the Borrower) valid leasehold interests in, all its real and personal property (other than intellectual property,
which is subject to Section 3.05(b)) material to its business, except as would not reasonably be expected to result in a Material Adverse Effect.
(b) Each of Holdings, the Borrower and their Restricted Subsidiaries owns, or possess the right to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business, and the use thereof by Holdings, the Borrower and such Restricted Subsidiaries does not
infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental . (a) There are no actions, suits or proceedings (including labor matters) by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against Holdings, the Borrower or any of their Restricted
Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or, in a materially adverse manner, the Transactions.
(b) Except with respect to any other matters that, individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect, neither Holdings, the Borrower nor any Restricted Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or
comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability or (iii) has
received written notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.
SECTION 3.07. Investment Company Status . Neither Holdings, the Borrower nor any Restricted Subsidiary is an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.
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SECTION 3.08. Taxes . Each of Holdings, the Borrower and their Restricted Subsidiaries has timely filed or caused to be filed all Tax
returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested
in good faith by appropriate proceedings and for which Holdings, the Borrower or such Restricted Subsidiary, as applicable, has set aside on its books adequate
reserves or (b) to the extent that the failure to do so would not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.09. ERISA . No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. Disclosure . As of the Effective Date, the Borrower has disclosed to the Lenders all agreements, instruments and
corporate or other restrictions to which Holdings, it or any of the Restricted Subsidiaries is subject, and all other matters known to it, that, individually or in the
aggregate, would reasonably be expected to result in a Material Adverse Effect. All written information (including the information set forth in the Information
Memorandum) and all information that is formally presented at a general meeting (which may be a telephonic meeting) of the Lenders, other than statements,
projections, estimates, forecasts and other forward-looking information and information of a general economic or industry-specific nature furnished by or on behalf
of Holdings, the Borrower or any Restricted Subsidiary to the Administrative Agent or any Lender pursuant to or in connection with this Agreement or any other
Loan Document, when taken as a whole and after giving effect to all supplements and updates thereto, does not (when furnished) contain any untrue statement of
material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading (when taken as a whole) in light
of the circumstances under which such statements are made; provided that, with respect to forecasts or projections, the Borrower represents only that such
information was prepared in good faith based upon information and assumptions believed by the Borrower to be reasonable at the time prepared (it being
understood by the Administrative Agent and the Lenders that any such projections are not to be viewed as facts and are subject to significant uncertainties and
contingencies, many of which are beyond the control of Holdings, the Borrower or the Restricted Subsidiaries, that no assurances can be given that such projections
will be realized and that actual results may differ materially from such projections).
SECTION 3.11. Federal Reserve Regulations . No part of the proceeds of any Loan have been used or will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.
SECTION 3.12. Liens . There are no Liens on any of the real or personal properties of the Borrower or any Restricted Subsidiary except
for Liens permitted by Section 6.02.
SECTION 3.13. No Default . No Default or Event of Default has occurred and is continuing.
SECTION 3.14. Solvency .
(a) Immediately after the consummation of the Transactions to occur on the Effective Date, each Holdings, the Borrower and their
Restricted Subsidiaries, taken as a whole, are and will be Solvent.
(b) Holdings and the Borrower do not intend to, nor will they permit any of their Subsidiaries to, and Holdings and the Borrower do not
believe that either of them or any of their Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the
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timing of and amounts of cash to be received by either of them or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.15. Security Interest in Collateral . The Collateral Documents create legal, valid and enforceable Liens on all the Collateral
described therein in favor of the Administrative Agent, for the benefit of the Secured Parties, to the extent intended to be created thereby and (i) when financing
statements and other filings in appropriate form are filed in the offices required by the applicable provision of the Collateral Documents and (ii) upon the taking of
possession or control by the Administrative Agent of such Collateral with respect to which a security interest may be perfected only by possession or control
(which possession or control shall be given to the Administrative Agent to the extent required by the Security Agreement), the Liens created by the Collateral
Documents shall constitute perfected and continuing Liens on the Collateral, securing the Secured Obligations to the extent perfection can be obtained by filing
financing statements or other such filings or taking possession or control, enforceable against the applicable Loan Party and all third parties, in each case subject to
no Liens other than the Liens permitted hereunder.
SECTION 3.16. Anti-Corruption Laws and Sanctions . The Borrower has implemented (or, to the extent the Loan Parties are in the
process of implementing such policies and procedures as of the Effective Date, such implementation process is reasonably satisfactory to the Administrative Agent)
and, once so implemented, maintains in effect policies and procedures designed to ensure compliance by Holdings, the Borrower, its Subsidiaries and their
respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Holdings, the Borrower, its Subsidiaries and their
respective officers and directors and, to the knowledge of the Borrower, its employees and agents while acting in capacity on behalf of the Borrower, are in
compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) Holdings, the Borrower, any Subsidiary or to the knowledge
of Holdings, the Borrower or such Subsidiary any of their respective directors, officers or employees, or (b) to the knowledge of the Borrower, any agent of
Holdings, the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned
Person. No Borrowing or Letter of Credit, use of proceeds or other Transactions will violate any Anti-Corruption Law or applicable Sanctions. The Borrower will
implement (or, to the extent the Loan Parties are in the process of implementing such policies and procedures as of the Effective Date, such implementation process
is reasonably satisfactory to the Administrative Agent) and, once so implemented, maintain and enforce policies and procedures designed to ensure compliance by
Holdings, the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
SECTION 3.17. EEA Financial Institutions . No Loan Party is an EEA Financial Institution.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date . The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit
hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received (i) from each party hereto either (A) a counterpart of this Agreement
signed on behalf of such party or (B) written evidence satisfactory to the Administrative Agent (which may include telecopy or electronic
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transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of the
Loan Documents and such other legal opinions, certificates, documents, instruments and agreements as the Administrative Agent shall reasonably request
in connection with the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel and as further described
in the list of closing documents (other than Part F thereof in respect of the Borrower Assumption) attached as Exhibit E .
(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and
dated the Effective Date) of Baker Botts L.L.P., counsel for the Loan Parties, and covering such other matters relating to the Loan Parties, the Loan
Documents or the transactions contemplated thereby as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsel to
deliver such opinion.
(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of the initial Loan Parties, the authorization of the Loan Documents and the
transactions contemplated thereby and any other legal matters relating to such Loan Parties, the Loan Documents or the transactions contemplated thereby,
all in form and substance reasonably satisfactory to the Administrative Agent and its counsel and as further described in the list of closing documents
(other than Part F thereof in respect of the Borrower Assumption) attached as Exhibit E .
(d) The Administrative Agent shall have received evidence satisfactory to it that any credit facility currently in effect for the Borrower
shall have been terminated and cancelled and all indebtedness thereunder shall have been fully repaid (except to the extent being so repaid with the initial
Revolving Loans) and any and all liens thereunder shall have been terminated.
(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including,
to the extent invoiced at least one (1) Business Day prior to the Effective Date, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.
SECTION 4.02. Each Credit Event . The obligation of each Lender to make a Loan on the occasion of any Borrowing (other than a
conversion or continuation of any Loans), and of the Issuing Banks to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the
following conditions:
(a) The representations and warranties of Holdings and the Borrower set forth in this Agreement shall be true and correct in all material
respects ( provided that any representation or warranty that is qualified by materiality or Material Adverse Effect shall be true and correct in all respects)
on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the
extent any such representations or warranties are expressly limited to an earlier date, in which case such representations and warranties shall be true and
correct in all material respects as of such specified earlier date ( provided that any representation or warranty that is qualified by materiality or Material
Adverse Effect shall be true and correct in all respects).
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(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter
of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.
SECTION 4.03. Borrower Assumption . Substantially concurrently with the effectiveness of the Mergers, the Borrower shall ensure that
each of the following conditions shall be satisfied (or waived in accordance with Section 9.02) in connection with the Borrower Assumption:
(a) The Administrative Agent (or its counsel) shall have received (1) an executed copy of a reaffirmation agreement, in form and substance
reasonably acceptable to the Administrative Agent, pursuant to which the Assuming Borrower shall have ratified and reaffirmed, in its capacity as the
Borrower hereunder, (i) all of its payment and performance obligations, contingent or otherwise, if any, under each of the Loan Documents to which
Commerce Tech, in its capacity as the initial Borrower, was a party and (ii) the Liens on its properties created pursuant to the Loan Documents and
securing the Secured Obligations and (2) an executed copy of a joinder to this Agreement, in form an substance reasonably acceptable to the
Administrative Agent, executed by CH Parent;
(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and
dated the Borrower Assumption Effective Date) of Baker Botts L.L.P., counsel for the Assuming Borrower and CH Parent, substantially consistent with
the opinion delivered on the Effective Date, and covering such other matters relating to the Assuming Borrower, CH Parent, the Loan Documents or the
Transactions as the Administrative Agent shall reasonably request.
(c) The Administrative Agent shall have received such customary documents and certificates as the Administrative Agent or its counsel
may reasonably request relating to the organization, existence and good standing of the Assuming Borrower and CH Parent, the authorization of the
Transactions and any other legal matters relating to the Assuming Borrower and CH Parent, the Loan Documents or the Transactions, all in form and
substance reasonably satisfactory to the Administrative Agent and its counsel and as further described in Part F of the list of closing documents attached as
Exhibit E .
(d) The Administrative Agent shall have received a certificate, dated the Borrower Assumption Effective Date and signed by the President,
a Vice President or a Financial Officer of the Assuming Borrower, certifying (i) that the representations and warranties contained in this Agreement are
true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect shall be
true and correct in all respects) on and as of such date, except to the extent any such representations or warranties are expressly limited to an earlier date,
in which case such representations and warranties shall be true and correct in all material respects as of such specified earlier date (provided that any
representation or warranty that is qualified by materiality or Material Adverse Effect shall be true and correct in all respects) and (ii) that no Default or
Event of Default has occurred and is continuing as of such date.
(e) The Administrative Agent shall have received all customary documentation and other information required by bank regulatory
authorities under applicable “know your customer”
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and anti-money laundering rules and regulations, including the USA PATRIOT Act, for CH Parent and the Assuming Borrower, as is reasonably
requested at least two (2) Business Days prior to the Separation .
The Administrative Agent shall notify the Assuming Borrower and the Lenders of the satisfaction of each of the conditions set forth in this Section 4.03, and such
notice shall be conclusive and binding.
Notwithstanding anything to the contrary herein or in any other Loan Document, CH Parent shall not have any obligation under this Agreement or any other Loan
Document unless and until it becomes a party to this Agreement and the other Loan Documents to which it will become a party in accordance with this Section
4.03.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated (or cash collateralized or backstopped pursuant to arrangements reasonably satisfactory
to the Administrative Agent and the relevant Issuing Bank), in each case, without any pending draw, and all LC Disbursements shall have been reimbursed, each of
Holdings and the Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information . The Borrower will furnish to the Administrative Agent (for distribution to
the Lenders):
(a) within ninety-five (95) days after the end of each fiscal year of Holdings (or the Borrower prior to the Mergers, as applicable), its
audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of
recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of
such audit to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of
Holdings (or the Borrower prior to the Separation, as applicable) and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within fifty (50) days after the end of each of the first three fiscal quarters of each fiscal year of Holdings (or the Borrower prior to the
Mergers, as applicable), its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in
all material respects the financial condition and results of operations of Holdings or the Borrower, as applicable, and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;
(c) not later than the date that is five (5) Business Days after any delivery of financial statements under clause (a) or (b) above, a certificate
of a Financial Officer of Holdings (or the Borrower prior to the Mergers, as applicable) (i) certifying as to whether a Default has
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occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section 6.11, (iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate and (iv) listing each Subsidiary which has changed status from or to a Restricted
Subsidiary, Unrestricted Subsidiary or Subsidiary Guarantor and identifying such Subsidiary as such as of the date of such certificate;
(d) within sixty (60) days after the end of each fiscal year of Holdings (or the Borrower prior to the Mergers, as applicable), a copy of an
annual budget of Holdings (or the Borrower prior to the Mergers, as applicable), for the upcoming fiscal year in form reasonably satisfactory to the
Administrative Agent;
(e) concurrently with any delivery of financial statements under paragraph (a) or (b) above, if there are any Unrestricted Subsidiaries at the
time, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries from such
consolidated financial statements, all certified by one of the Financial Officers of Holdings or the Borrower, as applicable, as presenting fairly in all
material respects the financial condition and results of operations of Holdings (or the Borrower prior to the Mergers, as applicable) and its consolidated
Subsidiaries on a consolidating basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of
footnotes; and
(f) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of
Holdings, the Borrower or any Restricted Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.
Documents required to be delivered pursuant to clauses (a) and (b) of this Section 5.01 may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which such documents are filed for public availability on the SEC’s Electronic Data Gathering and Retrieval
System. Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the compliance
certificates required by clause (c) of this Section 5.01 to the Administrative Agent.
SECTION 5.02. Notices of Material Events . The Borrower will furnish to the Administrative Agent (for distribution to the Lenders)
prompt (and in any event within two (2) Business Days) written notice of the following after a Responsible Officer obtains actual knowledge thereof:
(a) the occurrence of any Default (except to the extent that the Administrative Agent has furnished to the Borrower written notice thereof);
(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or
affecting Holdings, the Borrower or any Restricted Subsidiary thereof that, if adversely determined, would reasonably be expected to result in a Material
Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be
expected to result in a Material Adverse Effect; and
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(d) any other development that results in, or would reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business . Each of Holdings and the Borrower will, and will cause each other Loan Party and each
of the Material Subsidiaries to, do or cause to be done (a) all things necessary to preserve, renew and keep in full force and effect its legal existence and (b) take, or
cause to be taken, all reasonable actions to preserve, renew and keep in full force and effect the rights, qualifications, licenses, permits, privileges, franchises,
governmental authorizations and intellectual property rights material to the conduct of the business of Holdings, the Borrower and the Restricted Subsidiaries taken
as a whole, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except, in the case of this clause (b),
to the extent failure to do so would not reasonably be expected to result in a Material Adverse Effect; provided that, the foregoing shall not prohibit any merger,
consolidation, disposition, liquidation or, dissolution or other transaction permitted under Section 6.03.
SECTION 5.04. Payment of Obligations . Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to,
pay its obligations, including Tax liabilities, that, if not paid, would result in a Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Borrower or such Restricted
Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest
would not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance . Each of Holdings and the Borrower will, and will cause each of its Restricted
Subsidiaries to, (a) keep and maintain all tangible property material to the conduct of its business in good working order and condition, ordinary wear and tear and
casualty excepted and except (i) as otherwise permitted by Section 6.03 or (ii) where the failure to do so would not reasonably be expected to result in a Material
Adverse Effect, and (b) maintain, in all material respects, with carriers reasonably believed by the Borrower to be financially sound and reputable or through
reasonable and adequate self-insurance (i) insurance in such amounts and against such risks and such other hazards, as is customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar locations and (ii) all insurance required pursuant to the Collateral Documents. The
Borrower will furnish to the Administrative Agent, upon any reasonable request of the Administrative Agent, information in reasonable detail as to the insurance so
maintained. The Borrower shall deliver to the Administrative Agent endorsements (x) to all “All Risk” physical damage insurance policies on all of the Loan
Parties’ tangible personal property and assets naming the Administrative Agent as lender loss payee, and (y) to all general liability and other liability policies of the
Loan Parties naming the Administrative Agent an additional insured. In the event Holdings, the Borrower or any of their Subsidiaries at any time or times hereafter
shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part then due and payable relating thereto, then
the Administrative Agent, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Administrative
Agent reasonably deems advisable, it being agreed that the Administrative Agent shall reasonably promptly notify the Borrower of any such action. All sums so
disbursed by the Administrative Agent shall constitute part of the Obligations, payable as provided in this Agreement. The Borrower will furnish to the
Administrative Agent and the Lenders prompt written
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notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any
material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding.
SECTION 5.06. Books and Records; Inspection Rights . Each of Holdings and the Borrower will, and will cause each of the Material
Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity in all material respects with applicable law are made
of all material financial dealings and transactions in relation to its business and activities and, subject to Section 5.01(b), in form permitting financial statements
conforming with GAAP to be derived therefrom. Each of Holdings and the Borrower will, and will cause each of its Restricted Subsidiaries to, permit any
representatives designated by the Administrative Agent, at reasonable times upon reasonable prior written notice, to visit and inspect its properties, to examine and
make extracts from its books and records, including extracts of existing Phase I or Phase II environmental assessment reports, and to discuss its affairs, finances
and condition with its Financial Officers; provided that Holdings, the Borrower or such Restricted Subsidiary is afforded the opportunity to participate in such
discussion, its independent accountants, all at such reasonable times and as often as reasonably requested; provided , further , that, so long as no Event of Default
has occurred and is continuing, the Borrower shall not be required to reimburse the Administrative Agent or any of its representatives for fees, costs and expenses
in connection with the Administrative Agent’s exercise of such rights set forth in this sentence more than one time in any calendar year. The Borrower
acknowledges that, subject to Section 9.12, the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain
reports pertaining to the assets of Holdings, the Borrower and their Restricted Subsidiaries for internal use by the Administrative Agent and the Lenders. Notwithstanding anything to the contrary in this Section 5.06, neither Holdings, the Borrower nor any of their Restricted Subsidiaries will be required to disclose,
permit the inspection, examination or making of extracts, or discussion of, any documents, information or other matter that (i) constitutes non-financial trade
secrets or non-financial proprietary information, (ii) in respect of which disclosure to the Administrative Agent (or any designated representative) is then prohibited
by law, fiduciary duty or any agreement binding on Holdings, the Borrower or any of their Restricted Subsidiaries or (iii) is subject to attorney-client or similar
privilege or constitutes attorney work-product.
SECTION 5.07. Compliance with Laws and Material Contractual Obligations . Each of Holdings and the Borrower will, and will cause
each of its Restricted Subsidiaries to, (i) comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property
(including without limitation Environmental Laws) and (ii) perform its obligations under material agreements to which it is a party, in the case of each of the
foregoing clauses (i) and (ii), except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect. Holdings or the Borrower will implement (or, to the extent the Loan Parties are in the process of implementing such policies and procedures as of the
Effective Date, such implementation process is reasonably satisfactory to the Administrative Agent) and, once so implemented, maintain and enforce policies and
procedures designed to ensure compliance by Holdings, the Borrower, their Restricted Subsidiaries and their respective directors, officers, employees and agents
with Anti-Corruption Laws and applicable Sanctions.
SECTION 5.08. Use of Proceeds . The proceeds of the Loans will be used only for working capital needs and general corporate purposes
of Holdings, the Borrower and their Restricted Subsidiaries (including, without limitation, Permitted Acquisitions and investments permitted by the terms and
conditions of this Agreement, Restricted Payments and payment of costs and expenses in respect of the Transactions). No part of the proceeds of any Loan will be
used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. The
Borrower will not request any Borrowing or Letter of Credit, and the
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Borrower shall not use, and shall procure that Holdings and its Restricted Subsidiaries and its or their respective directors, officers, employees and agents acting on
their behalf shall not use, the proceeds of any Borrowing or Letter of Credit (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment
or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any
activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, business or transaction would be
prohibited by Sanctions if conducted by a corporation incorporated in the United States or in a European Union member state or (iii) in any manner that would
result in the violation of any Sanctions applicable to any party hereto .
SECTION 5.09. Subsidiary Guarantors; Pledges; Additional Collateral; Further Assurances .
(a) As promptly as possible but in any event within sixty (60) days (or such later date as may be agreed upon by the Administrative Agent)
after any Person becomes a Restricted Subsidiary or any Restricted Subsidiary qualifies independently as, or is designated by the Borrower or the Administrative
Agent as, a Material Domestic Subsidiary pursuant to the definition of “Material Domestic Subsidiary”, the Borrower shall provide the Administrative Agent with
written notice thereof and shall cause each such Restricted Subsidiary which also qualifies as a Material Domestic Subsidiary (other than any Excluded Subsidiary)
to deliver to the Administrative Agent a joinder to the Subsidiary Guaranty and the Security Agreement (in each case in the form contemplated thereby) pursuant to
which such Restricted Subsidiary agrees to be bound by the terms and provisions thereof, such Subsidiary Guaranty and the Security Agreement to be accompanied
by appropriate corporate resolutions, other corporate documentation and legal opinions in form and substance reasonably satisfactory to the Administrative Agent
and its counsel. At any time, at its own election, the Borrower may cause any Restricted Subsidiary of Holdings or the Borrower not otherwise required to become
a Subsidiary Guarantor pursuant to the terms of this Agreement to become a Subsidiary Guarantor by delivering to the Administrative Agent a joinder to the
Subsidiary Guaranty and the Security Agreement (in each case in the form contemplated thereby) pursuant to which such Restricted Subsidiary agrees to be bound
by the terms and provisions thereof, such Subsidiary Guaranty and the Security Agreement to be accompanied by appropriate corporate resolutions, other corporate
documentation and legal opinions in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
(b) The Borrower will cause, and will cause each other Loan Party to cause, all of its owned property (whether real, personal, tangible,
intangible, or mixed but excluding Excluded Assets) to be subject at all times to first priority, perfected Liens in favor of the Administrative Agent for the benefit of
the Secured Parties to secure the Secured Obligations in accordance with the terms and conditions of the Collateral Documents, subject in any case to Liens
permitted by Section 6.02. Without limiting the generality of the foregoing, the Borrower will cause the Applicable Pledge Percentage of the issued and
outstanding Equity Interests of each Pledge Sub