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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number: 001-36495
MARKIT LTD.
(Exact name of Registrant as specified in its charter)
Bermuda
(Jurisdiction of incorporation or organization)
4th Floor, Ropemaker Place
25 Ropemaker Street
London, EC2Y 9LY
United Kingdom
(Address of principal executive offices)
Sari Granat
General Counsel
c/o Markit North America, Inc.
620 Eighth Avenue, 35th Floor
New York, NY 10018
(212) 931-4900
(Name, Telephone, E-mail and/or Facsimile number and Address of Contact Person)
Copy to:
Richard D. Truesdell Jr.
Davis Polk & Wardwell LLP
450 Lexington Avenue
New York, NY 10017
Phone: (212) 450-4000
Fax: (212) 701-5800
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Shares, par value $0.01 per share
NASDAQ Global Select Market
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Title of Class
Number of Shares Outstanding
Common shares
176,786,908, excluding 25,219,470 outstanding common shares held by the
Markit Group Holdings Limited Employee Benefit Trust
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes 
No 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. Yes 
No 
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes 
No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) (or for such shorter period that the Registrant was required to file such
reports). Yes 
No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and
large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer 
Accelerated Filer 
Non-accelerated Filer 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP 
International Financial Reporting Standards as issued
Other
by the International Accounting Standards Board 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow. Item 17 
Item 18 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 
No 
Table of Contents
TABLE OF CONTENTS
Page
Introduction
Cautionary Statement Regarding Forward-Looking Statements
1
2
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.
Identity of Directors, Senior Management and Advisers
Offer Statistics and Expected Timetable
Key Information
Information on the Company
Unresolved Staff Comments
Operating and Financial Review and Prospects
Directors, Senior Management and Employees
Major Shareholders and Related Party Transactions
Financial Information
The Offer and Listing
Additional Information
Quantitative and Qualitative Disclosures about Market Risk
Description of Securities Other Than Equity Securities
4
4
4
32
42
42
69
84
89
92
93
114
114
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to the Rights of Security Holders and Use of Proceeds
Controls and Procedures
[Reserved]
Audit Committee Financial Expert
Code of Ethics
Principal Accountant Fees and Services
Exemptions from the Listing Standards for Audit Committees
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Corporate Governance
Mine Safety Disclosure
115
115
115
116
116
116
117
117
117
119
119
119
PART 2
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
PART 3
ITEM 17.
Financial Statements
ITEM 18.
Financial Statements
ITEM 19.
Exhibits
Index to Consolidated Financial Statements
120
120
120
F-1
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Introduction
Unless otherwise indicated or the context otherwise requires, all references in this annual report on Form 20-F (this “annual
report”) to “Markit” or the “company,” “we,” “our,” “ours,” “us” or similar terms refer to Markit Group Holdings Limited and its
subsidiaries prior to the completion of our corporate reorganisation, and Markit Ltd. and its subsidiaries as of the completion of our
corporate reorganisation and thereafter, as described below.
Corporate Reorganisation
Markit Ltd. is a Bermuda exempted company incorporated on January 16, 2014 for the purposes of our initial public offering and to
become the holding company for Markit Group Holdings Limited, our former holding company.
In connection with the completion of our initial public offering on June 24, 2014, we completed a corporate reorganisation and
reclassification of our shares whereby:
–
pursuant to a scheme of arrangement under Part 26 of the English Companies Act 2006 approved by the High Court of
Justice of England and Wales and by our shareholders, shares in Markit Group Holdings Limited were cancelled and
extinguished in exchange for newly issued shares of Markit Ltd., and Markit Group Holdings Limited became a wholly and
directly owned subsidiary of Markit Ltd., with shareholders of Markit Group Holdings Limited becoming shareholders of Markit
Ltd.;
–
all our voting and non-voting common shares were reclassified into a single class of common shares with the same economic
and voting rights;
–
a 10-for-1 share split of our common shares was effected; and
–
our current bye-laws were adopted.
We refer to this reorganisation and reclassification of our shares as our “corporate reorganisation.”
Presentation of Financial Information
We prepare and report our consolidated financial statements in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (the “IASB”).
We historically conducted our business through Markit Group Holdings Limited and its subsidiaries, and therefore our historical
financial statements prior to the closing of our initial public offering presented the results of operations of Markit Group Holdings
Limited. In connection with our initial public offering, we engaged in a corporate reorganisation described under “—Corporate
Reorganisation” pursuant to which Markit Group Holdings Limited became a wholly owned subsidiary of Markit Ltd., a newly
formed holding company with nominal assets and liabilities, which had not conducted any operations prior to our initial public
offering. Markit Ltd.’s financial statements are the same as Markit Group Holdings Limited’s financial statements prior to our initial
public offering, as adjusted for the corporate reorganisation. Following the corporate reorganisation and our initial public offering,
our financial statements present the results of operations of Markit Ltd. and its consolidated subsidiaries.
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We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown
as totals in some tables may not be arithmetic aggregations of the figures that precede them.
Unless otherwise indicated, all references to currency amounts in this annual report are in U.S. dollars.
Market and Industry Data and Forecasts
Certain market data and industry data and forecasts used throughout this annual report were obtained from internal company
surveys, market research, consultant surveys, reports of governmental and international agencies and industry publications and
surveys. Industry publications and third-party research, surveys and reports generally indicate that their information has been
obtained from sources believed to be reliable. We believe the data from third-party sources to be reliable based upon our
management’s knowledge of the industry but have not independently verified such data. In some cases, we do not expressly refer
to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any
paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources,
unless otherwise expressly stated or the context otherwise requires. Our estimates involve risks and uncertainties and are subject
to change based on various factors, including those discussed under “Item 3. Key Information—D. Risk Factors” in this annual
report.
Website and Social Media Disclosure
We use the investor relations section of our website (www.markit.com) and our corporate Twitter account (@Markit) as a routine
channel for distribution of important company information, including news releases, analyst presentations, and financial
information, as a means of disclosing material non-public information and for complying with our disclosure obligations under
Regulation FD. Additionally, we provide notifications of news or announcements as part of our investor relations website. Investors
and others can receive notifications of new information posted on our investor relations website in real time by signing up for email
alerts.
Accordingly, investors should monitor this portion of our website in addition to following press releases, SEC filings and public
conference calls and webcasts. Further, charters for the committees of our Board of Directors and the Corporate Governance
Guidelines and Code of Conduct can be found under the “Governance” section of our website.
None of the information provided on our website, in our press releases, public conference calls and webcasts, or through social
media channels is incorporated into, or deemed to be a part of, this annual report or in any other report or document we file with
the SEC, and any references to our website or our social media channels are intended to be inactive textual references only.
Cautionary Statement Regarding Forward-Looking Statements
This annual report contains statements that constitute forward-looking statements within the meaning of Section 27A of the U.S.
Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the U.S. Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Many of the forward-looking statements contained in this annual report can be identified by the
use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “will” and
“potential,” among others, or the negative of these words.
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Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements
regarding our intent, belief or current expectations. Forward-looking statements are based on management’s beliefs and
assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties,
and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors,
including, but not limited to, those identified under “Item 3. Key Information—D. Risk Factors” in this annual report. These risks
and uncertainties include factors relating to:
–
our operation in highly competitive markets;
–
our inability to develop successful new products and services;
–
any design defects, errors, failures or delays associated with our products or services;
–
declining activity levels in the securities or derivatives markets, weak or declining financial performance of financial market
participants or the failure of market participants;
–
our generation of a significant percentage of our total revenue from financial institutions, some of whom are also our
shareholders;
–
our dependence on third parties for data and information services;
–
consolidation in our end-customer market;
–
the impact of cost-cutting pressures across the financial services industry;
–
our customers becoming more self-sufficient in terms of their needs for our products and services;
–
ongoing antitrust civil investigations and litigation arising from our activities relating to credit default swaps;
–
long selling cycles to secure new contracts that require us to commit significant resources before we receive revenue;
–
our reliance on network systems and the Internet; and
–
other risk factors discussed under “Item 3. Key Information—D. Risk Factors.”
Moreover, new risks emerge, from time to time, as we operate in a very competitive and rapidly changing environment. It is not
possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
You should read this annual report completely and with the understanding that our actual future results may be materially different
from what we expect. We qualify all forward-looking statements by these cautionary statements. Forward-looking statements
speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or
future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to
reflect the occurrence of unanticipated events.
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA
The following selected consolidated historical financial information should be read in conjunction with the sections entitled
“Introduction—Corporate Reorganisation,” “Introduction—Presentation of Financial Information,” and “Item 5. Operating and
Financial Review and Prospects” and the audited consolidated financial statements of Markit Ltd., including the notes thereto,
included elsewhere in this annual report.
The selected consolidated historical financial information presented as of December 31, 2015 and 2014 and for the years ended
December 31, 2015, 2014 and 2013 has been derived from the audited consolidated financial statements of Markit Ltd. included
elsewhere in this annual report. The selected consolidated historical financial information presented as of December 31, 2013,
2012 and 2011 and for the years ended December 31, 2012 and 2011 has been derived from audited consolidated financial
statements of Markit Group Holdings Limited that have not been included elsewhere in this annual report.
All our operations are continuing operations, and we have not proposed or paid dividends in any of the periods presented.
As of and for the year ended December 31,
($ in millions other than share and per share data)
Income statement data:
Revenue
Operating profit
Profit for the period
Profit attributable to equity holders
Earnings per share – basic(1)
Earnings per share – diluted(1)
Weighted average number of shares issued and
outstanding – basic(1)
Weighted average number of shares issued and
outstanding – diluted(1)
Balance sheet data:
Total assets
Total equity / net assets
Share capital
2015
2014
2013
2012
2011
1,113.4
252.3
152.1
152.5
0.85
0.80
1,065.1
243.4
164.1
165.2
0.92
0.90
947.9
230.1
147.0
139.4
0.80
0.79
860.6
224.7
153.1
125.0
0.70
0.69
762.5
229.7
156.2
125.8
0.70
0.69
179,797,425
179,183,880
173,875,980
177,716,240
178,929,210
189,796,719
184,467,540
175,550,760
180,020,120
181,730,830
3,568.3
2,112.5
1.7
3,300.0
2,270.6
1.8
3,096.7
2,055.9
0.2
3,151.3
1,929.7
0.2
2,648.3
2,031.4
0.2
(1) As adjusted retrospectively for all periods presented to give effect to the terms of the corporate reorganisation that was completed prior to
the closing of our initial public offering. See “Introduction—Corporate Reorganisation.”
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B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs,
and as a result, the market price of our common shares could decline.
Risks Related to Our Business
We operate in highly competitive markets and may be adversely affected by this competition.
The markets for our products and services are highly competitive and are subject to rapid technological changes and evolving
customer demands and needs. Many of our principal competitors are established companies that have substantial financial
resources, recognised brands, technological expertise and vast market experience. These competitors sometimes have more
established positions in certain product segments and geographic regions than we do. We also compete with smaller companies,
some of which may be able to adopt new or emerging technologies or address customer requirements more quickly than we can
or offer products as loss leaders. In particular:
–
Our competitors are continuously improving their products and services (such as by adding new content and functionalities),
developing new products and services, and investing in technology to better serve the needs of their existing customers and
to attract new customers;
–
Our competitors continue to acquire additional businesses in key sectors that will allow them to offer a broader array of
products and services;
–
Some of our competitors market some of their products and services as commodities or lower-cost alternatives to our
solutions, which may diminish the relative value of some of our products and services;
–
Some of our competitors combine competing products with complementary products as packaged solutions, which could
pre-empt use of our products or solutions;
–
A number of our competitors may be considering strategic transactions, whereby they acquire, merge with or otherwise
combine with one another or form partnerships with one another, in order to expand or enhance their product and service
offerings and market position;
–
Educating our customers on the intricacies and uses of our products and services could, in certain cases, improve their ability
to offer competing products and services as they look to expand their business models;
–
Some of our current or future products or services could be rendered obsolete as a result of competitive offerings or changes
in regulation or the financial markets;
–
Barriers to entry to create a new product or offer a new service may be low in many cases, and reduced even further through
the use of the Internet as a distribution channel, which has allowed free or relatively inexpensive access to information
sources, leading to the possible emergence of new competitors; and
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–
Implementation of annual price increases from time to time may, in some cases, cause customers to use lower-cost
competitors.
Competition may also require us to reduce the price of some of our products and services or make additional capital investments
that would adversely affect our profit margins or cash flows. For instance, the increase of electronic trading of derivatives has
created pricing and other competitive pressure on our Processing division, and in response we lowered the price points of certain
products. If we are unable or unwilling to do so, or to make other price reductions or such additional capital investments, we may
lose market share and our financial condition or results of operations may be adversely affected. Moreover, our strategic position
in the marketplace and our opportunities to acquire, be acquired or partner with our competitors may be reduced if our competitors
forge deeper or exclusive relationships with one another. We cannot assure anyone that our investments and our relationships
with our partners have been or will be sufficient to maintain or improve our competitive position or that the development of new or
improved technologies, products and services by our competitors will not have a material adverse effect on our business. If we fail
to compete effectively against current or future competitors, our financial condition and results of operations could be adversely
affected.
If we are unable to develop successful new products and services or adapt to rapidly changing
technology, our business could suffer serious harm.
Our industry is characterised by rapidly changing technology, evolving industry standards and changing regulatory requirements.
Our growth and success depend upon our ability to enhance our existing products and services and to develop and introduce new
products and services to keep pace with such changes and developments and to meet changing customer needs.
The process of developing our products and services is complex and may become increasingly complex and expensive in the
future due to the introduction of new platforms, operating systems and technologies. Current areas of significant technological
change include mobility, cloud-based computing, blockchain and the processing and analysing of large amounts of data. Our
ability to keep up with technology and business and regulatory changes is subject to a number of risks, including that:
–
we may find it difficult or costly to update our services and software and to develop new products and services quickly enough
to meet our customers’ needs;
–
we may find it difficult or costly to make some features of our software work effectively and securely over the Internet or with
new or changed operating systems; and
–
we may find it difficult or costly to update our software and services to keep pace with business, evolving industry standards,
regulatory requirements and other developments in the industries in which our customers operate.
If we are unable to develop new products or services, if we are unable to successfully enhance and migrate existing products or
services to new systems or if we are not successful in introducing or obtaining any required regulatory approval or acceptance for
new products or services, we may not be able to grow our business or growth may occur more slowly than we anticipate.
If we experience design defects, errors, failures or delays associated with our products or services
or migration of an existing product or service to a new system, our business could suffer serious
harm.
Despite testing, products and services that we develop, license or distribute may contain errors or defects after release. In
addition, whether we release new products and services or migrate existing products and services to new systems or upgrade
outdated software and infrastructure, our software may contain design defects and errors when first introduced or when major new
updates or enhancements are released. We have also experienced delays in the past while developing and
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introducing new products and services, primarily due to difficulties in licensing data inputs, developing new products or services,
or adapting to particular operating environments. Additionally, in our development of new products and services or updates and
enhancements to our existing products and services, we may make a major design error that causes the product or service to
operate incorrectly or less effectively. Many of our products and services also rely on data and services provided by third-party
providers over which we have no control and may be provided to us with defects, errors or failures. Our customers may also use
our products and services together with their own software, data or products from other companies. As a result, when problems
occur, it might be difficult to identify the source of the problem. If design defects, errors or failures are discovered in our current or
future products or services, we may not be able to correct them in a timely manner, if at all.
The existence of design defects, errors or delays in our products or services that are significant, or are perceived to be significant,
could result in rejection or delay in market acceptance of our products or services, damage to our reputation, loss of revenue, a
lower rate of licence renewals or upgrades, diversion of development resources, product liability claims or regulatory actions, or
increases in service and support costs. We may also need to expend significant capital resources to eliminate or work around
design defects, errors, failures or delays. In each of these ways, our business, financial condition or results of operations could be
materially adversely impacted.
Declining activity levels in the securities, syndicated loan or derivatives markets, weak or declining
financial performance of financial market participants or the failure of market participants could
lower demand for our products and services and could affect our revenues.
Our business is dependent upon the global financial markets as well as the financial health of the participants in those markets
and the general economy. Unfavourable or uncertain economic conditions, economic instability or economic downturns could
cause our customers or prospective customers to cancel, reduce or delay planned expenditures for our products and services, or
impair our customers’ ability to pay for products or services they have purchased. This could adversely affect our financial results
by reducing our revenue.
In addition, a significant proportion of our revenue is variable and depends upon transaction volumes, investment levels (i.e.,
assets under management) or the number of positions we value. Lower activity levels in the financial markets, including lower
transaction volumes, assets under management or positions taken could have a material adverse effect on our financial condition
or results of operations.
We work on product development with, license data inputs for our products and services from, and
generate a significant percentage of our total revenue from financial institutions who are not
contractually obligated to continue to maintain these relationships and who also have similar
involvement with our competitors.
We earn a substantial portion of our revenue from and have worked on new product and service offerings with financial institution
customers, some of whom were or are our shareholders. Many of these financial institution customers also provide us with data,
which is a critical input for our products and services. Cooperation with these financial institution customers has also been
important in the development of many of our products and services. Our financial institution customers have made, and may
continue to make, investments in businesses that directly compete with us. Our customers also trade, and may continue to trade,
on markets operated by our competitors. Reduced engagement from these financial institution customers may cause them to
reduce or discontinue their use of our products and services, their desire to work with us on new product developments or their
willingness to supply data and information services to us. Further, changes in regulation and other market factors may cause
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these financial institutions to cease creating the datasets that are important to our products and services or to cease providing
such datasets to us. The loss of, or a significant reduction in, participation in our products and services by these financial
institution customers may have a material adverse effect on our business, financial condition or results of operations.
We are dependent on third parties for data and information services.
We depend upon data and information services from external sources, including data received from certain competitors,
customers, shareholder financial institutions, and various government and public record services, for information used in certain of
our products and services. In most cases, we do not own the information provided by these external sources, and the participating
organisations could discontinue contributing information to the databases. Our data sources could also increase the price of, or
withdraw, their data or information services for a variety of reasons, or we could become subject to legislative, regulatory, judicial
or contractual restrictions on the use of data, in particular if such data is not collected by the third parties in a way which allows us
to process the data or use it legally.
In addition, our competitors, which in some cases are our suppliers of data and information services, could enter into exclusive
contracts with our existing or other data sources or information service providers, revise the current terms on which they provide
us with data or services, alter or revise the data or services they provide without our knowledge, or cease providing us with data or
services altogether for a variety of reasons, including ceasing or interrupting the provision of such data or services generally or to
us specifically, such as declining to support us given our competing positions. If (i) a substantial number of data sources or certain
key sources were to withdraw or were unable to provide us with their data or information services; (ii) we were to lose access to,
or be precluded from receiving or restricted in using, data or information services due to exclusive contracts among our
competitors, government regulation, or regulatory concerns of our suppliers; (iii) the collection of data were to become
uneconomical or disrupted; (iv) there were concerns about the quality or accuracy of the data or services provided; or (v) we were
unable to arrange for substitute sources of information internally or via another third-party provider, our ability to provide products
and services to our customers could be impacted and our business, reputation, financial condition, operating results and cash flow
could be materially adversely affected.
There may be consolidation in our customer market, which would reduce the use of our products
and services.
Mergers or consolidations among our customers, as a result of increased regulatory pressure or otherwise, could reduce the
number of our customers and potential customers. This could adversely affect our revenue even if these events do not reduce the
activities of the consolidated entities. If our customers merge with or are acquired by other entities that are not our customers, or
entities that use fewer of our products or services, such customers may discontinue or reduce their use of our products and
services. For example, when Bank of America Corporation (together with its affiliates, “Bank of America”) acquired Merrill Lynch,
Pierce, Fenner & Smith Incorporated and its affiliates (“Merrill Lynch”), certain of our agreements with Merrill Lynch related to
various products and services were eventually terminated and consolidated under our historical contracts with Bank of America.
Any such developments could materially and adversely affect our business, financial condition, operating results and cash flow.
The impact of cost-cutting pressures across the industry we serve could lower demand for our
products and services.
Our customers are focused on controlling or reducing spending as a result of the continued financial challenges and market
uncertainty many of them face. Many large financial institutions have initiated,
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and will continue to initiate, reductions in their workforces and have taken, and will continue to take, other measures to control or
contain operational spending. Many of these institutions have also been subject to substantial penalties from regulatory bodies.
Customers within the financial services industry that strive to reduce their operating costs may seek to reduce their spending on
our products and services. Our results of operations could be materially and adversely affected if a large number of smaller
customers or a critical number of larger customers reduce their spending with us.
Alternatively, customers may use other strategies to reduce their overall spending on financial market products and services, such
as by consolidating their spending with fewer vendors, including by selecting other vendors with lower-cost offerings, or by
self-sourcing their need for financial market products and services. If customers elect to consolidate their spending on financial
market products and services with other vendors and not us, if we lose business to lower priced competitors or if customers elect
to self-source their financial market product and service needs, our results of operations could be materially and adversely
affected.
Our customers may become more self-sufficient, which may reduce demand for our products and
services and materially adversely affect our business, financial condition or results of operations.
Our customers may, as some have in the past, internally develop certain products and services as well as functionality contained
in the products and services that they currently obtain from us, including through the formation of consortia. For example, some of
our customers who currently license our valuations data and analytics tools to analyse their portfolios and who do not require an
independent source for these services may develop their own tools to collect data and assess risk, making our products and
services less useful to them. Furthermore, public sources of free or relatively inexpensive information, whether through the
Internet, from governmental and regulatory agencies or from companies and other organisations, have become more readily
available, and this trend is expected to continue. This greater availability of information could further assist our customers in
independently developing certain products and services that we currently provide. To the extent that customers become more
self-sufficient, demand for our products and services may be reduced, which could have a material adverse effect on our
business, financial condition or results of operations.
We are subject to ongoing antitrust civil investigations and litigation arising from activities relating
to credit default swaps and may in the future become subject to further investigations and litigation.
An adverse outcome in these investigations or litigation could result in substantial fines, damages
or penalties and could change how we offer products or services, which could have a material
adverse effect on our business, financial condition or results of operations.
We are subject to antitrust and competition laws and regulations in the countries where we have operations. These laws and
regulations seek to prevent and prohibit anticompetitive activity. We are currently subject to antitrust and competition-related civil
investigations by the Antitrust Division of the U.S. Department of Justice and the Competition Directorate of the European
Commission (the “EC”) as well as a consolidated class action lawsuit in the United States. See “Item 8. Financial Information—A.
Consolidated Statements and Other Financial Information—Legal Proceedings” for a description of these matters. These
investigations and lawsuit involve multiple parties and complex claims that are subject to significant uncertainties and unspecified
penalties or damages. Therefore, we cannot estimate the probability of loss or the extent of our potential liability on a standalone
basis or relative to the potential liability of the other parties to the investigations and lawsuits. Future investigations and lawsuits
relating to credit default swaps and other matters are also possible.
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Depending on the outcome of any pending or future claims or investigations, we may be required to change the way we offer
particular products or services, which could result in material disruptions to and costs incurred by our business, and we may be
subject to substantial fines, penalties, damages or an injunction or other equitable remedies. Pending or future claims or
investigations (regardless of outcome) may also affect how parties interact with us, including the manner or type of data provided
to us and the manner or type of data products and services purchased from us. These pending antitrust and competition-related
claims and investigations, and any future claims and investigations, could also be costly to us in terms of time and expense
incurred defending such claims or investigations. Any of the above impacts, individually or together, could have a material adverse
effect on our business, financial condition or results of operations.
For some of our products and services, we typically face a long selling cycle to secure new
contracts that requires significant resource commitments, resulting in a long lead time before we
receive revenue.
For new products and services and especially for complex products and services, we typically face a long selling cycle to secure
each new contract, and there is generally a long preparation period before we commence providing products and services or
delivering configurable software. For instance, our Analytics service provides a range of enterprise risk management software
solutions, using the latest risk technology to deliver computation speed. The consultative nature of these projects requires our
sales team to actively engage with potential customers through various procurement stages, often requiring many levels of
internal approval, and including various milestone phases such as scoping, planning and proof of concept to reach deal closure,
which typically takes 12 months or more. In addition, some products’ success are dependent on building a network of users, and
may not be profitable while such a network is developing. We can incur significant business development expenses during the
selling cycle and we may not succeed in winning a new customer’s business, in which case we receive no revenue and may
receive no reimbursement for such expenses. Current selling cycle periods have historically lengthened and could lengthen
further, causing us to incur even higher business development expenses with no guarantee of winning a new customer’s
business. Even if we succeed in developing a relationship with a potential new customer, we may not be successful in obtaining
contractual commitments after the selling cycle or in maintaining contractual commitments after the implementation cycle, which
may have a material adverse effect on our business, results of operations and financial condition.
We rely heavily on network systems and the Internet, and any failures or disruptions may adversely
affect our ability to serve our customers.
Most of our products and services are delivered electronically, and our customers rely on our ability to process transactions rapidly
and deliver substantial quantities of data and other services on computer-based networks. Our customers also depend on the
continued capacity, reliability and security of our electronic delivery systems, our websites and the Internet. Our ability to deliver
our products and services electronically may be impaired due to infrastructure or network failures, malicious or defective software,
human error, natural disasters, service outages at third-party Internet providers or increased government regulation. For example,
as a result of Hurricane Sandy in 2012, one of our data centres in New Jersey and part of our office space in New York City were
flooded and unavailable, resulting in several days of reduced operations and substantial costs associated with repairs, relocation
and resource reallocation to ensure continued delivery of our products and services. Further, we receive data inputs from critical
third-party suppliers who are subject to the same delivery risks, such that if any of the foregoing issues affect these suppliers, we
may be impacted as well. Significant growth of our customer base may also strain our systems in the future. Delays in our ability
to deliver our products and services electronically may harm our reputation and result in the loss of customers. In addition, a
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number of our customers entrust us with storing and securing their data and information on our servers. Although we have
disaster recovery plans that include backup facilities for our primary data centres, our systems are not always fully redundant, and
our disaster planning may not always be sufficient or effective. As such, these disruptions may affect our ability to store, handle
and secure such data and information.
From time to time, the speed at which we are required to update market and customer data can increase. This can sometimes
impact product and network performance. Factors that have significantly increased data update rates include high market
volatility, new derivative instruments, increased automatically generated algorithmic and program trading and market
fragmentation, resulting in an increased number of trading and clearing venues. Changes in legislation and regulation pertaining to
market structure and dissemination of market information may also increase data flow rates. There can be no assurance that our
company, our third-party data suppliers and our network providers will be able to accommodate accelerated growth of data
volumes or avoid other failures or interruptions. We currently face significant increases in our use of power and data storage, and
we may experience a shortage of capacity and increased costs associated with such usage. A significant delay or disruption of our
network systems, servers or use of the Internet may have a material adverse effect on our business, results of operations and
financial condition, and our existing insurance coverage may not cover all our losses.
If embargoed data or non-public information relating to our PMI series of indices is inadvertently
disclosed or deliberately misused, our business, financial condition or results of operations could
be materially adversely affected.
We own and administer the Purchasing Managers Index (“PMI”) series of indices, which are monthly economic surveys of
selected companies that provide advance insight into the private sector economy. Among others, central banks use the PMI series
data to help make interest rate decisions and financial analysts use the PMI series data to forecast official economic data. If, prior
to the date of intended release, we are unable to limit access to the PMI series or prevent its unauthorised disclosure, whether
inadvertent or deliberate, our reputation may suffer, which could have a material adverse effect on our business, financial
condition or results of operations. Moreover, we provide the PMI series data under embargo to certain financial information and
news providers. Part of the value to us from doing so is that these news providers are able to analyse and provide commentary on
the data simultaneously with the public release of such data by us. If the embargoed data is inadvertently disclosed or deliberately
misused prior to our authorisation, financial markets could be negatively affected, and any resulting need to change our
procedures around the provision of embargoed data to any third parties may diminish the value of the PMI series to our business.
Fraudulent or unpermitted data access and other security or privacy breaches may negatively
impact our business and harm our reputation.
Many of our products and services involve the storage and transmission of proprietary information and sensitive or confidential
data. Security breaches in our facilities, computer networks, and databases may cause harm to our business and reputation and
result in a loss of customers. Our products, services and systems and our suppliers’ and customers’ systems may be vulnerable to
physical break-ins, computer viruses, attacks by hackers, including denial of service attacks, and other similarly disruptive activity.
Recently, the financial services industry has been targeted for purposes of political protest, activism and fraud, as well as by
foreign state actors and terrorist organisations seeking to disrupt the businesses and financial systems in the countries in which
we operate. Cybersecurity threats are evolving and include, but are not limited to, malicious software, attempts to gain
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unauthorised access to data, information security breaches or employee or contractor error or malfeasance and other electronic
security breaches that could lead to disruptions in systems, unauthorised release or destruction of our or our customers’ or other
parties’ confidential or otherwise protected information and corruption of data. Further, employees of certain companies in the
financial sector have misappropriated trade secrets or stolen source code in the past, and we could be a target for such illegal
acts in the future.
In addition, we rely on a system of internal processes and software controls along with policies, procedures and training to protect
the confidentiality of customer data, such as portfolio data and trading information that may be provided to us or hosted on our
systems. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved
controls, or if we experience difficulties in the implementation of our internal controls, policies or procedures, or if an employee,
consultant or third-party provider purposely circumvents or violates our internal controls, policies or procedures, or if we fail to
adequately address the requirements of our customers’ internal controls, policies or procedures, then unauthorised access to, or
disclosure or misappropriation of, customer data could occur.
Any such security or privacy breach, or unauthorised access, disclosure or misappropriation may adversely affect us in the
following ways:
–
losing sales;
–
deterring customers from using our products or services;
–
affecting our ability to meet customers’ expectations;
–
deterring data suppliers from supplying data to us;
–
harming our reputation;
–
disclosing valuable trade secrets, know-how or other confidential information;
–
exposing us to liability by our customers or regulators;
–
increasing operating expenses to correct problems caused by the breach and to prevent future breaches of a similar nature;
–
breaching terms of agreements;
–
violating certain data privacy or related legislation; or
–
causing inquiry or penalisation from governmental authorities.
Our existing resources and measures to maintain data and information security have not always in the past been, and may not
always in the future be, sufficient or effective. In the past, we have experienced security breaches, unauthorised disclosures and
cyber incidents, as well as occasional system interruptions that have made some of our services or websites unavailable for
limited periods of time. Third-party providers also may experience security breaches and unauthorised disclosures involving the
storage and transmission of proprietary information. Although we expend significant resources and oversight efforts in an attempt
to ensure that we maintain appropriate safeguards with respect to cyber-attacks, there is no guarantee that our systems and
procedures are adequate to protect against all security attacks. If anyone gains improper access to our databases, they may be
able to steal, publish, delete or modify our confidential information or that of a third-party stored or transmitted on our networks.
Any significant failure, compromise, unauthorised access or disclosure,
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cyber-breach or interruption of our systems, including operational services, loss of service from third parties, sabotage, break-ins,
failure of controls, war, terrorist activities, power or coding loss or computer viruses could result in lack of availability, loss of data
integrity, fraud, unauthorised disclosure or other outcomes harmful to our business. Any breach of data, controls or information
security caused by one of these events could also result in unintentional disclosure of, or unauthorised access to, company,
customer, vendor, employee or other confidential data or information that could be material.
We receive important services, software and technologies from third-party providers, and any errors,
failures or disruption in the services or technologies provided by these third parties could harm our
customer relationships or our reputation.
We rely on third-party providers for integral services, software and technologies. These providers include those that provide
services for our principal infrastructure, such as software provided by SunGard, Dell, Microsoft and Symantec, which are key
components to many of our systems, as well as providers of services and technologies that are integral to specific products, such
as the operational services provided by Genpact in our Markit Genpact KYC Services joint venture. Several of these providers are
also our competitors. These services, software and technologies may not continue to be available to us on commercially
reasonable terms, or at all.
Moreover, the satisfactory performance, reliability and availability of such services, software and technologies are critical to our
ability to generate revenues, as well as to our reputation. Any errors, failures to perform, interruptions or delays experienced in
connection with these third-party providers could adversely impact our business, operating results and financial condition. We
have little control over these third-party providers, which increases our vulnerability to errors, failures, interruptions or disruptions
or problems with their services or technologies.
Should the companies providing such services, software and technologies cease providing or supporting, or significantly increase
the cost of services, software and technologies, it would be difficult to replace some or all of such services, software or
technologies, and we may incur significant costs or product development delays until we either develop or, if available, identify,
obtain and integrate, alternative services, software or technology into our systems.
Our use of open source software and third-party software containing open source elements could
result in litigation or impose unanticipated restrictions on our ability to commercialise our products
and services.
We use open source software in our technology, most often as small components within a larger product or service, to augment
algorithms, functionalities or libraries created by Markit, and we may use more open source software in the future. For example,
our Analytics product and certain of our foreign exchange products all use ANTLR, an industry-standard parser for reading,
processing, executing or translating structured text or binary files, which is licensed pursuant to the permissive Berkeley Software
Distribution licence. Open source code is also contained in some third-party software we rely on. We could be subject to suits by
parties claiming breach of the terms of the licence for such open source software. The terms of many open source licences are
ambiguous and have not been interpreted by U.S. or other courts, and these licences could be construed in a manner that
imposes unanticipated conditions or restrictions on our ability to commercialise our products and services. Litigation could be
costly for us to defend, have a negative impact on our operating results and financial condition or require us to devote additional
research and development resources to remove open source elements from or otherwise change our software. In addition, if we
were to combine our proprietary technology with open source software in a certain manner, we could, under certain open source
licences, be required to release the source code of our proprietary software. If we
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inappropriately use open source software, we may also be required to re-engineer our software, license our software on
unfavourable terms or at no cost, discontinue certain products and services or take other remedial actions, any of which could
have a material adverse effect on our business, results of operations or financial condition.
We may face liability for content contained in our products and services.
We may be subject to claims for breach of contract, defamation, libel, copyright or trademark infringement, fraud or negligence,
regulations or other theories of liability, in each case relating to the data, articles, commentary, ratings, information or other
content we collect and distribute in the provision of our products and services. If such data or other content or information that we
distribute has errors, is delayed or has design defects, we could be subject to liability or our reputation could suffer. We could also
be subject to claims based upon the content that is accessible from our corporate website or those websites that we own and
operate through links to other websites. Further, we could be subject to claims that we have misused data inputs provided by
third-party suppliers. Use of our products and services as part of the investment process creates the risk that customers, or the
parties whose assets are managed by our customers, may pursue claims against us for significant amounts. Any such claim, even
if the outcome were to be ultimately favourable to us, could involve a significant commitment of our management, personnel,
financial and other resources and could have a negative impact on our reputation. In addition, such claims and lawsuits, or any
resulting reputational harm, could have a material adverse effect on our financial condition or results of operations.
We depend on world-class personnel to operate and grow our business, and if we do not continue to
recruit, motivate and retain high-quality management and key employees, we may not be able to
execute our business strategies.
The performance of our strategies depends on our ability to continue to recruit, motivate and retain our executive officers and
other key management, sales, marketing, product development and operations personnel across our entire business. Although we
have entered into employment agreements with our executive officers, each of them may terminate their employment with us at
any time. We compete with many businesses that are seeking skilled individuals, including those with advanced technical abilities.
Competition for professionals in our Information, Solutions and Processing divisions can be intense, as other companies seek to
enhance their positions in our market segments. The replacement of any of our key personnel would likely involve significant time
and costs and may significantly delay or prevent the achievement of our business objectives. In addition, we do not carry any “key
person” insurance policies that could offset potential loss of service under applicable circumstances.
A significant amount of the equity interests in our company that were granted to our employees prior to our initial public offering
became fully vested at the time of our initial public offering. As a result, some of our employees may be able to realise substantial
financial gains in connection with the sales of their vested equity interests, which could result in a loss of these employees. We
also intend to continue to use equity incentive awards as a means of retaining senior employees. With respect to option awards, if
our share price does not appreciate above the exercise price at which option awards are granted or there is a significant decline in
our share price relative to the exercise price at which equity awards have been granted or will be granted in the future, the value of
option awards as a retention tool would decline. In addition, any future organisational changes, including the integration of new
acquisitions with our other business units, could cause our employee attrition rate to increase. The loss of the services of key
personnel or our inability to otherwise recruit, motivate or retain qualified personnel could have an adverse effect on our business,
operating results and financial condition.
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We generate a significant percentage of our revenue from recurring fixed fee agreements, and our
ability to maintain existing revenue and to generate higher revenue is dependent in part on
maintaining a high renewal rate.
For the year ended December 31, 2015, we generated 56.1% of our revenue from recurring fixed fees, which are typically
subscription agreements. Although the initial term of our subscription agreements can range from one to five years and many of
them include auto-renewal clauses, with appropriate notice, certain of these arrangements are cancellable. To maintain existing
fixed revenue and to generate higher revenue, we rely on a significant number of our customers renewing their subscriptions with
us or not cancelling their subscriptions. Our revenue could also be adversely impacted if a significant number of our customers
renewed their subscriptions with us but reduced the amount of their spending on those subscriptions.
Our growth and profitability may not be sustained at the same rate as we have experienced in the
past, which could have a material adverse effect on our business, financial condition or results of
operations.
We have experienced significant growth during our operating history. There can be no assurance that we will be able to maintain
the levels of growth and profitability that we have experienced in the past. We seek to achieve our growth objectives by enhancing
our products and services to meet the needs of our customers through organic development, by cross-selling our products and
services across our existing customer base, by acquiring new customers, by entering into strategic partnerships, through
acquisitions and by implementing operational efficiency initiatives. If we are unable to successfully execute on our strategies to
achieve our growth objectives or drive operational efficiencies, our growth rates and profitability could be adversely affected.
Among other things, there can be no assurance that we will be as successful in our expansion efforts as we have been in the past,
or that such efforts will result in growth rates or profit margins comparable to those we have experienced in the past. Any failure to
continue to grow our business, successfully implement operational efficiency initiatives or maintain profitability could have a
material adverse effect on our business, financial condition or results of operations.
If we are unable to manage our operating expenses as anticipated or our operating expenses are
higher than expected, our operating results may fluctuate significantly.
We may experience higher than expected operating costs, including increased personnel costs, occupancy costs, selling and
marketing costs, investments in geographic expansion, communication costs, travel costs, software development costs,
professional fees, costs related to information technology infrastructure and other costs. If operating costs exceed our
expectations and cannot be adjusted accordingly, our anticipated profitability may be reduced and our anticipated results of
operations and financial position may be materially adversely affected.
Our brand and reputation are important company assets and are key to our ability to remain a
trusted source of our products and services.
The integrity of our brand and reputation is key to our ability to remain a trusted source of products and services and to attract and
retain customers. Negative publicity regarding Markit or actual, alleged or perceived issues regarding one of our products or
services could harm our relationships with customers and partners. Failure to protect our brand may adversely impact our
credibility as a trusted supplier of content and may have a negative impact on our business.
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We enter into redistribution arrangements that allow other firms to represent certain of our products and services. It is difficult to
monitor whether such agents’ representation of our products and services is accurate. In the past, certain companies have used
our products and services to attract customers without our permission to do so. Poor representation of our products and services
by our partners or agents, or entities acting without our permission, could have an adverse effect on our reputation and our
business.
Changes in legislation or changes in governmental or quasi-governmental rules, regulations,
directives or standards may decrease demand for our products and services, prevent us from
offering certain products and services or increase our expenses.
Most of our customers operate within a highly regulated environment and must comply with governmental and quasi-governmental
rules, regulations, directives and standards. Over the past few years, the United States, the European Union and other
jurisdictions have introduced new legislation and regulation of financial markets, including the OTC derivatives markets from which
we derive a significant portion of our revenue. For example:
–
Legislation and regulation in the United States such as The Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Dodd-Frank Act”) and in the European Union such as the European Market Infrastructure Regulation (“EMIR”), the
original Markets in Financial Instruments Directive (“MiFID”), the new Markets in Financial Instruments Directive (“MiFID II”)
and the Markets in Financial Instruments Regulation (“MiFIR”) mandate that many OTC derivatives be centrally cleared
through regulated clearinghouses, traded on organised trading venues and reported to trade repositories and, in many cases,
also to the public, and subject market participants to business conduct, risk management, capital, margin and recordkeeping
rules, among other requirements. The final details of technical standards related to implementation of MiFID II/MiFIR may also
reduce demand in Europe for other products and services we offer.
–
New capital rules, including Basel III, the Capital Requirements Directive IV (“CRD IV”) and the Fundamental Review of the
Trading Book (“FRTB”) require higher capital charges for many bank trading activities and mandatory margin requirements for
non-cleared derivatives will apply beginning in 2016.
–
The U.S. Securities and Exchange Commission (“SEC”) has proposed rules for registered investment companies that would
place hard limits on their ability to utilise derivatives which, if finalised, could limit buy-side participation in derivatives markets.
–
A financial transaction tax proposal being discussed in Europe would increase the cost to trade financial instruments.
–
New regulatory regimes around the world, including in the United States and the European Union, have contributed to a shift
towards centralised clearing, exchange or exchange-like trading, and further standardisation in the derivatives markets.
–
New rules promulgated by the U.S. Commodity Futures Trading Commission (the “CFTC”) and the SEC require free, public
dissemination of certain information relating to OTC derivative transactions, including pricing and other trade terms. Similar
public trade reporting regimes are expected in other jurisdictions.
–
International regulators, working through the International Organization of Securities Commissions (“IOSCO”) and supported
by national regulators are prompting the development of a unique product identifier (“UPI”) classification scheme for financial
instruments.
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New legislation, or a significant change in rules, regulations, directives or standards, including those described above, as well as
ones that may in the future be introduced, could impact where and how our customers invest, which could cause some of our
products and services to become obsolete, reduce demand for our products and services or increase our expenses as we modify
our products and services to maintain relevancy. Delays in adapting our products and services to legislative and regulatory
changes could harm our reputation. Also, we may not be as well equipped to respond to changes in legislation or regulation as
some of our competitors or we may become subject to new legislation or regulation with regard to the services we offer which
could cause us to be prohibited from providing certain services or make provision of affected services more expensive. If our
customers reduce their use of our products and services as a result of any of the above, it could have a material adverse effect on
our business, financial condition and results of operations.
We may become subject to increased regulation of our services, including our index, pricing and
processing services.
Our customers rely on many of our products and services to meet their operational, regulatory or compliance needs. As part of
global regulatory reform efforts we may become subject to increased regulation of our services, which could increase our costs
and decrease our profitability. We are currently subject to limited direct regulation around our processing and compression
businesses, which are subject to supervision by the United Kingdom’s Financial Conduct Authority. None of our other businesses
are currently subject to direct regulation. Certain products and services we offer could become subject to direct regulation as a
result of various regulatory initiatives. For example:
–
In December 2015, the European Union agreed on a new regulation of benchmarks in Europe, which is expected to apply
beginning in 2018. It would require benchmark administrators to be authorised and subject to ongoing supervision by EU
regulators, and supervised entities in the European Union may only be able to use benchmarks as a reference in a financial
instrument if the benchmark is provided by an entity authorised in the European Union or a third country deemed equivalent.
Because of the nature of our operations, we may be deemed to be a “benchmark administrator” under these upcoming
regulations and subject to additional direct regulation.
–
The SEC has proposed standards for clearing agency operation and governance under which intermediating organisations,
such as MarkitSERV, that capture trade information and perform an independent comparison of such information for
confirmation purposes could be considered clearing agencies and required to register with the SEC or to seek an exemption
from registration. If any such regulations were implemented and our derivatives processing business was required to register
as a clearing agency with the SEC or to seek an exemption from regulation, we would become subject to significant additional
compliance burdens.
–
In December 2014, IOSCO and the Committee on Payments and Settlement Systems published a final report that establishes
an assessment methodology and provides guidance for regulatory authorities in assessing a financial market infrastructure’s
“critical service providers” against the oversight expectations for such critical service providers described in their 2012 report
on financial market infrastructures. Such guidance includes descriptions of planning, due diligence, third-party selection,
contract negotiation, ongoing monitoring of third-party relationships, oversight and accountability, and documentation and
reporting that financial institutions should consider when outsourcing functions. Certain of our products and services in which
we function as a “third-party service provider” are contractually subject to those regulations and guidance with certain
customers, requiring us to incur significant product structuring and compliance costs to meet required regulations and
guidance. This guidance could also increase regulatory scrutiny of critical service providers and be an impetus for direct
regulation or further heightened standards of critical service providers.
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–
As regulations and legislation over derivatives and other financial instruments in Europe and Asia continue to evolve, our
products and services could become subject to direct regulatory oversight or heightened standards.
–
Existing, new and conflicting legislation and regulation, relating to e-commerce, electronic and mobile communications,
privacy and data protection, outsourcing, anti-money laundering, direct marketing and digital advertising and the use of public
records, and judicial interpretation of such legislation and regulation, may limit our ability to collect, use and effectively
communicate to our customers certain kinds of information. It is difficult to predict how such regulation will affect us directly or
through our customers or suppliers.
Any additional regulation, directly or indirectly, could impact our ability to provide such products and services or impose significant
new regulatory compliance burdens on our business. If were to fail to maintain or otherwise forfeit any required regulatory licenses
or registrations, or if we were otherwise found to be in material non-compliance with applicable regulatory or legislative
requirements, we might not be able to continue offering the products and services or operating the impacted portions of our
business. We could be subject to fines or penalties as well as reputational harm for any violations or non-compliance. Any such
event could have a material adverse effect on our results of operations.
In addition, we expect to continue to innovate to meet the evolving needs of our customers and our business strategy includes the
introduction of new products and services as well as enhancements to existing products and services. To the extent any new
products or services or enhancements would require us to obtain new licenses from regulatory authorities, we may not be able to
secure the required licenses or registrations. If we are not able to secure the required licenses or registrations, we may not be
able to provide one or more of these new services or enhancements, which in turn could result in us not being able to compete as
effectively, or impact our revenue growth rate and could have a material adverse effect on our operations and results of
operations.
If we are unable to successfully identify acquisitions, strategic investments, partnerships or
alliances or we experience integration or other risks resulting from our acquisitions, strategic
investments, partnerships or alliances our financial results may be adversely affected.
Acquisitions have been and continue to be an important part of our growth strategy. We have acquired, and in the future may
acquire or make strategic investments in, complementary businesses, technologies or services or enter into strategic partnerships
or alliances with third parties to enhance our business.
We seek to be a disciplined acquirer, but we may not be successful in identifying suitable acquisition candidates, strategic
investments or partnership or alliance candidates on favourable terms, if at all. Attractive candidates are difficult to identify and
such acquisitions are difficult to complete for a number of reasons, including competition among prospective buyers or partners,
the need in some instances for regulatory approvals, including antitrust clearance, and market conditions changing the availability
of debt or equity financing on commercially acceptable terms. We may not be able to identify and successfully complete
acquisitions on acceptable commercial terms, or at all, or enter into beneficial strategic investments, partnerships or alliances,
which may negatively affect our competitiveness and growth prospects and our ability to scale our operations and business plans
in certain markets.
The success of these types of transactions is also subject to numerous risks, including:
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making incorrect assumptions regarding the future results of acquired businesses, technologies or services or expected cost
reductions or other synergies expected to be realised as a result of acquiring businesses, technologies or services;
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difficulties in integrating operations, technologies, accounting and personnel;
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failure to achieve assumed or anticipated synergies;
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incurring costs in excess of what we anticipate;
–
difficulties in supporting, transitioning and retaining suppliers and customers of our acquired companies or strategic partners;
–
increasing dependencies on strategic partners for revenue, including increased dependency on the revenue that such
partners retain their customers;
–
entering new markets;
–
difficulties in working effectively, collaboratively or efficiently with strategic partner or alliances;
–
diversion of financial and management resources from existing operations;
–
potential loss of key team members;
–
inability to generate sufficient revenue to offset transaction costs;
–
incurring expenses associated with the amortisation or impairment of intangible assets, particularly for intellectual property,
goodwill and other intangible assets;
–
failure to implement or remediate controls, procedures and policies appropriate for a public company at acquired companies
that prior to the acquisition lacked such controls, procedures and policies;
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payment of more than fair market value for an acquired company or assets, particularly those with significant intangible assets
and those whose assets derive value using novel products and/or are involved in niche markets; and
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to the extent we enter into joint ventures and alliances, experiencing difficulties in the development and expansion of the
business of any newly formed ventures, exercising influence over the activities of any ventures in which we do not have a
controlling interest, and encountering potential conflicts with our joint venture or alliance partners.
If any of the above risks are realised, we might fail to achieve the expected benefits or strategic objectives of any acquisition,
strategic investment, partnership or alliance we undertake.
In addition, we may incur earn-out and contingent consideration payments in connection with future acquisitions, which could
result in a higher than expected impact on our future earnings. We may also finance future transactions through debt financing,
including significant draws on our revolving credit facility, the issuance of our equity securities, the use of existing cash, cash
equivalents or investments or a combination of the foregoing. Acquisitions financed with debt could require us to dedicate a
substantial portion of our cash flow to principal and interest payments and could subject us to restrictive covenants. Acquisitions
financed with the issuance of our equity securities would be dilutive to the share value and voting power of existing common
shares, which could affect the market price of our common shares. Future acquisitions financed with our own cash could deplete
the cash and working capital available to fund our operations adequately. Difficulty borrowing funds, selling securities or
generating sufficient cash from operations to finance our activities may have a material adverse effect on our results of operations.
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Our relationships with third-party service providers, including market data vendors, trade order, risk,
accounting and portfolio management service providers and other market participants, may not be
successful or may change, which could adversely affect our results of operations.
We have commercial relationships with third-party service providers whose capabilities complement our own, including market
data vendors, trade order, risk, accounting and portfolio management service providers and other market participants. In some
cases, these providers are also our competitors. A significant portion of our products and services are developed using third-party
service providers’ data or services, or are made available to our customers or are integrated for our customers’ use through
information and technology solutions provided by such third-party service providers. The priorities and objectives of these
providers, particularly those that are our competitors, may differ from ours, which may make us vulnerable to unpredictable price
increases and may cause some service providers not to renew certain agreements. Moreover, providers that are not currently our
competitors, including one or more of our key providers, may become competitors or be acquired by or merge with a competitor in
the future, any of which could reduce our access over time to the information and technology solutions provided by those
companies. As we expand our product and service offerings, whether through organic growth or acquisitions, we may launch
products and services that compete with providers that are not currently our competitors, which could negatively impact our
existing relationships. If we do not obtain the expected benefits from our relationships with third-party service providers or if a
substantial number of our third-party service providers were to withdraw their services, we may be less competitive, our ability to
offer products and services to our customers may be negatively affected, and our results of operations could be adversely
impacted.
In addition, we rely on other third-party service providers for management of our data centres, telecommunications, data
processing, software development and certain human resources functions. If we are unable to sustain commercially acceptable
arrangements with these service providers or find substitutes or alternative sources of service, our business, financial condition or
results of operations could be adversely affected.
Third parties may claim that we infringe upon their intellectual property rights.
We are significantly dependent on technology, processes, methodologies and information, as well as the intellectual property
rights related to them. Companies in our industry, including our competitors and potential competitors, have in recent years
increasingly pursued patent and other intellectual property protection for their data, technologies and business methods. If any
third-party owns a patent or other intellectual property covering any of our data, technologies or business methods, we could be
sued for infringement. We may also misuse data from our third-party suppliers or from other parties outside the terms of our
licences with such suppliers or without the proper licence with such other parties. Furthermore, there is always a risk that third
parties will sue us for infringement or misappropriation of trademarks, copyrights or trade secrets, or otherwise challenge our use
of technology, processes, methodologies or information.
We do not actively monitor third-party patents and patent applications that may be relevant to our technologies or business
methods, and it is not possible for us to detect all potentially relevant patents and patent applications. Since the patent application
process can take several years to complete, there may be currently pending applications, unknown to us, that may later result in
issued patents that cover our products and technologies. As a result, we may infringe existing and future third-party patents of
which we are not aware.
From time to time, we may receive offers to license, notices of claims or threats from third parties alleging infringement or potential
infringement of their intellectual property. The number of these claims may grow as our business expands. We have made and
may make expenditures related to the use of certain intellectual property rights as part of our strategy to manage this risk.
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Responding to claims of infringement, misappropriation or other violation of intellectual property rights, regardless of merit, can
consume valuable time, result in costly litigation and delay certain operations of our business. We may be forced to settle such
claims on unfavourable terms, and there can be no assurance that we would prevail in any litigation or proceeding arising from
such claims if such claims are not settled. We may be required to pay damages and legal expenses, stop providing or using the
affected technologies, processes, methodologies or information, redesign our products and services or enter into royalty and
licensing agreements. There can be no assurance that any royalty or licensing agreements will be made, if at all, on terms that are
commercially acceptable to us. Such litigation or proceedings could result in the loss or compromise of our intellectual property
rights. We have in the past and may also be in the future called upon to defend partners, customers, suppliers or distributors
against such third-party claims under indemnification clauses in our agreements. Any such outcomes could have a material
adverse effect on our business, financial condition and results of operations.
Failure to protect our intellectual property and confidential information adequately, in the United
States and abroad, could adversely affect our business and results of operations.
Our success depends in part on our proprietary technology, processes, methodologies and information. We rely on a combination
of trademark, trade secret, patent, copyright, misappropriation and domain name laws and all other intellectual property laws to
establish, maintain and protect our intellectual property and proprietary rights in such technology, processes, methodologies and
information. These laws are subject to change at any time and could further restrict our ability to protect our intellectual property
and proprietary rights. In addition, the existing laws of certain countries in which we operate may not protect our intellectual
property and proprietary rights to the same extent as do the laws of the United States. Even if we have intellectual property rights,
there is no guarantee that such rights will provide adequate protection of our proprietary technology, processes, methodologies or
information, a competitive advantage to our business or deterrence against infringement, misappropriation or other violations of
our intellectual property by competitors, former employees or other third parties. In addition, third parties may try to challenge,
invalidate or circumvent our rights and protections. For example, future regulatory requirements in relation to the provision of
access, such as MiFIR in Europe which would require owners of benchmark intellectual property to provide open,
non-discriminatory access to benchmark information and licences to trading and clearing venues, may have a negative impact on
our ability to protect and monetise our intellectual property, decreasing its value.
We may be required to spend significant resources to monitor, enforce or protect our intellectual property and proprietary rights.
Despite such efforts, we may not be able to detect unauthorised use of, or take appropriate and timely steps to enforce, our
intellectual property and proprietary rights. Even if we attempt to enforce or protect our intellectual property and proprietary rights
or determine the validity and scope of the proprietary rights of others through litigation or proceedings before the U.S. Patent and
Trademark Office or other governmental authorities or administrative bodies in the United States or abroad, it may require
considerable cost, time and resources to do so, and there is no guarantee that we would be successful in such litigation or
proceedings. In the past, we have sent cease and desist letters to third parties to enforce our trademark rights, but there can be
no guarantee that such actions will be successful. If we fail to enforce our intellectual property or proprietary rights, our competitive
position could suffer. Furthermore, our intellectual property rights may not prevent competitors from independently developing or
securing rights to products or services that are similar to or duplicative of ours, using trademarks that are similar to ours in
different fields of goods and services, reverse engineering our technologies or designing around our patents. Even if we are able
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party trademark owners, such parties may breach the terms of these agreements. Any failure to establish, maintain or protect our
intellectual property or proprietary rights could have a material adverse effect on our business, financial condition or results of
operations.
We further attempt to protect our confidential and proprietary information, trade secrets and know-how by requiring our employees
and consultants to enter into confidentiality and assignment of inventions agreements and third parties, such as customers and
vendors, to enter into non-disclosure agreements. These agreements may not effectively prevent unauthorised use or disclosure
of our confidential or proprietary information, trade secrets, know-how or other intellectual property and may not provide an
adequate remedy in the event of such unauthorised use or disclosure.
Our compliance and risk management methods might not be effective and may result in outcomes
that could adversely affect our reputation, financial condition and operating results.
Our ability to comply with applicable complex and changing laws and rules is largely dependent on our establishment and
maintenance of compliance, surveillance, audit and reporting systems, as well as our ability to attract and retain qualified
compliance and other risk management personnel. As a publicly traded company, we are subject to regulations including the
Dodd-Frank Act and the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”). While we have policies and
procedures to identify, monitor and manage our risks, we cannot assure you that our policies and procedures will always be
effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed. In addition,
some of our risk management methods depend upon evaluation of information regarding markets, customers or other matters that
are publicly available or otherwise accessible by us. That information may not in all cases be accurate, complete, up-to-date or
properly evaluated. In case of non-compliance or alleged non-compliance with applicable laws or regulations, we could be subject
to investigations and proceedings that may be very expensive to defend and may result in substantial penalties or civil lawsuits,
including by customers, for damages which can be significant. Any of these outcomes would adversely affect our reputation,
financial condition and operating results. In extreme cases, these outcomes could adversely affect our ability to continue to
conduct our business. Further, the implementation of new legislation or regulations, such as corporate governance and executive
compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these
areas, or changes in or unfavourable interpretations of existing regulations by courts or regulatory bodies, could require us to incur
significant compliance costs and impede our ability to operate, expand and enhance our products and services as necessary to
remain competitive and grow our business, which could materially and adversely affect our business, financial condition and
results of operations.
Our results of operations could be materially adversely affected by fluctuations in foreign currency
exchange rates.
Although we report our results of operations in U.S. dollars, a portion of our revenue and expenses are denominated in currencies
other than the U.S. dollar. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenue
and expenses, as well as assets and liabilities, into U.S. dollars at exchange rates in effect during or at the end of each reporting
period. Therefore, changes in the value of the U.S. dollar against other currencies will affect our revenue, operating profit and the
value of balance sheet items originally denominated in other currencies. These changes cause our growth in consolidated
earnings stated in U.S. dollars to be higher or lower than our growth in local currency when compared against other periods.
As we continue to leverage our global delivery model, more of our expenses will be incurred in currencies other than those in
which we bill for the related services. An increase in the value of certain
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currencies against the U.S. dollar could increase costs for delivery of services at offshore sites by increasing labour and other
costs that are denominated in local currency. There can be no assurance that our contractual provisions will offset their impact, or
that our currency hedging activities, which are designed to partially offset this impact, will be successful.
Consequently, our results of operations may be materially adversely affected. In addition, our currency hedging activities are
themselves subject to risk. These include risks related to counterparty performance under hedging contracts.
Our global operations expose us to numerous and sometimes conflicting legal and regulatory
requirements, and violation of these regulations could harm our business.
We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse as anti-corruption, import/export
controls, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control
obligations, securities and derivatives regulation, anti-competition, data privacy and labour relations. For example, our operations
in the United States are subject to U.S. laws on these diverse matters, which are different in several respects from the laws of the
United Kingdom and India where we have significant operations. We also have operations in emerging market jurisdictions where
legal systems may be less developed or less familiar to us. Compliance with diverse legal requirements is costly, time-consuming
and requires significant resources. Violations of one or more of these regulations in the conduct of our business could result in
significant fines, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation.
Violations of these regulations in connection with the performance of our obligations to our customers also could result in liability
for significant monetary damages, fines or criminal prosecution, unfavourable publicity and other reputational damage, restrictions
on our ability to process information and allegations by our customers that we have not performed our contractual obligations.
Because of the varying degrees of development of the legal systems of the countries in which we operate, local laws might be
insufficient to protect our rights.
In particular, in many parts of the world, including countries in which we operate or seek to expand, practices in the local business
community may not conform to international business standards and could violate anti-corruption laws or regulations, including the
U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010. Our employees, subcontractors, agents, joint venture partners
and other third parties with which we associate could take actions that violate policies or procedures designed to promote legal
and regulatory compliance or applicable anticorruption laws or regulations. Violations of these laws or regulations by us, our
employees or any of these third parties could subject us to criminal or civil enforcement actions (whether or not we participated or
knew about the actions leading to the violations), including fines or penalties, disgorgement of profits and suspension or
disqualification from work, including U.S. federal contracting, any of which could materially adversely affect our business, including
our results of operations and our reputation.
We have substantial operations and a significant number of employees in India, and we are therefore
subject to regulatory, economic and political uncertainties in India.
We currently have approximately 1,100 employees located in India. The economy of India may differ favourably or unfavourably
from the United Kingdom and United States economies, and our business may be adversely affected by the general economic
conditions and economic and fiscal policy in India, including changes in exchange rates and controls, interest rates and taxation
policies. In particular, in recent years, India’s government has adopted policies that are designed to promote foreign investment,
including significant tax incentives, relaxation of regulatory restrictions, liberalised import
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and export duties and preferential rules on foreign investment and repatriations. These policies may not continue. In addition, we
are subject to risks relating to social stability and political, economic or diplomatic developments affecting India in the future.
A vote by the U.K. electorate in favor of a U.K. exit from the E.U. in a forthcoming in-or-out
referendum could adversely impact our business, results of operations and financial condition.
The U.K. Government has announced that it will hold an in-or-out referendum on the United Kingdom’s membership of the
European Union in June 2016. If the referendum results in a U.K. exit from the E.U. (“Brexit”), a process of negotiation would
determine the future terms of the United Kingdom’s relationship with the European Union. We are headquartered and tax
domiciled in the UK and conduct business in Europe primarily through our U.K. subsidiaries. In the event of Brexit, we would likely
face new regulatory costs and challenges. For example, our U.K. operations could lose their E.U. financial services passport
which provides them the license to operate across borders within the single E.U. market without obtaining local regulatory
approval. Depending on the terms of Brexit, if any, the United Kingdom could also lose access to the single E.U. market and to the
global trade deals negotiated by the European Union on behalf of its members. Such a decline in trade could affect the
attractiveness of the United Kingdom as a global investment centre and, as a result, could have a detrimental impact on U.K.
growth. The uncertainty prior to the referendum could also have a negative impact on the U.K. economy. Although we have an
international customer base, we could be adversely affected by reduced growth and greater volatility in the Pound Sterling and the
U.K. economy. Changes to U.K. immigration policy could likewise occur as a result of Brexit. Although the United Kingdom would
likely retain its diverse pool of talent, London’s role as a global financial centre may decline, particularly if financial institutions shift
their operations to the European Union and the E.U. financial services passport is not maintained. Any of the foregoing factors
could have a material adverse effect on our business, results of operations or financial condition.
Operating globally involves challenges that may adversely affect our ability to grow.
As of December 31, 2015, we had offices in 13 countries, and we expect the number of countries in which we operate to increase
as we seek out growth opportunities in new geographic areas, including emerging markets and developing economies. There are
certain risks inherent in doing business globally which may adversely affect our business and ability to grow. These risks include
difficulties in penetrating new markets because of established and entrenched competitors, difficulties in developing products and
services that are tailored to the needs of local customers, lack of local acceptance or knowledge of our products and services, lack
of recognition of our brands, products or services, unavailability of joint venture partners or local companies for acquisition,
unavailability of local suppliers to support our products and services, instability of international economies and governments,
exposure to adverse government action in countries where we may conduct reporting activities, changes in laws and policies
affecting trade and investment in other jurisdictions, restrictions or limitations on outsourcing contracts or services abroad, and
exposure to varying legal standards, including intellectual property protection laws. Adverse developments in any of these areas
could cause our actual results to differ materially from expected results. Expanding our business into emerging markets and
developing economies may also present additional risks beyond those associated with more developed international markets. In
any emerging markets and developing economies, we may face the risks of working in cash-based economies, dealing with
inconsistent government policies and encountering sudden currency revaluations.
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We may be required to take future impairment charges that would reduce our reported assets and
earnings.
Goodwill and other identifiable intangible assets constitute a substantial portion of our total assets. We are required under IFRS to
test our goodwill and identifiable intangible assets with indefinite lives for impairment on an annual basis. We also are required by
IFRS to perform an interim or periodic review of our goodwill and all identifiable intangible assets if events or changes in
circumstances indicate that impairment may have occurred. Impairment testing requires us to make significant estimates about
our future performance and cash flows, as well as other assumptions. Economic, legal, regulatory, competitive, contractual and
other factors, as well as changes in our share price and market capitalisation, may affect these assumptions. In 2014, we incurred
a $39.8 million impairment charge related to our Analytics and Credit Centre businesses. If future testing indicates that impairment
has occurred relative to current fair values, we may be required to record a non-cash impairment charge in the period the
determination is made. Recognition of an impairment would reduce our reported assets and earnings.
International hostilities, terrorist activities, natural disasters, pandemics and infrastructure
disruptions could prevent us from effectively serving our customers and thus adversely affect our
results of operations.
Acts of terrorist violence, cyber-terrorism, political unrest, armed regional and international hostilities and international responses
to these hostilities, natural disasters, including hurricanes or floods, global health risks or pandemics or the threat of or perceived
potential for these events could have a negative impact on us. These events could adversely affect our customers’ levels of
business activity and precipitate sudden significant changes in regional and global economic conditions and cycles. These events
also pose significant risks to our employees and our physical facilities and operations around the world, whether the facilities are
ours or those of our third-party service providers or customers. By disrupting communications and travel and increasing the
difficulty of obtaining and retaining highly skilled and qualified personnel, these events could make it difficult or impossible for us to
deliver products and services to our customers. Extended disruptions of electricity, other public utilities or network services at our
facilities, as well as system failures at our facilities or otherwise, could also adversely affect our ability to serve our customers. We
may be unable to protect our employees, facilities and systems against all such occurrences. We generally do not have insurance
for losses and interruptions caused by terrorist attacks, conflicts and wars. If these disruptions prevent us from effectively serving
our customers, our results of operations could be adversely affected.
Changes in our rates of taxation, and audits, investigations and tax proceedings could have a
material adverse effect on our results of operations and financial condition.
We are subject to direct and indirect taxes in numerous jurisdictions. We calculate and provide for such taxes in each tax
jurisdiction in which we operate. The amount of tax we pay is subject to our interpretation of applicable tax laws in the jurisdictions
in which we file. We seek to run Markit Ltd. in such a way that it is and remains tax resident in the United Kingdom. We have taken
and will continue to take tax positions based on our interpretation of tax laws, but tax accounting often involves complex matters
and judgment is required in determining our worldwide provision for taxes and other tax liabilities. Although we believe that we
have complied with all applicable tax laws, there can be no assurance that a taxing authority will not have a different interpretation
of the law and assess us with additional taxes.
We are subject to ongoing tax audits in various jurisdictions. Tax authorities have disagreed, and may in the future disagree, with
our judgments. We regularly assess the likely outcomes of these audits to
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determine the appropriateness of our tax liabilities. However, our judgments might not be sustained as a result of these audits,
and the amounts ultimately paid could be different from the amounts previously recorded. In addition, our effective tax rate in the
future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the
valuation of deferred tax assets and liabilities and changes in tax laws. Tax rates in the jurisdictions in which we operate may
change as a result of macroeconomic, political or other factors. Increases in the tax rate in any of the jurisdictions in which we
operate could have a negative impact on our profitability. In addition, changes in tax laws, treaties or regulations, or their
interpretation or enforcement, may be unpredictable, particularly in less developed markets, and could become more stringent,
which could materially adversely affect our tax position. Any of these occurrences could have a material adverse effect on our
results of operations and financial condition.
Our indebtedness could adversely affect our business, financial condition, and results of operations.
Our indebtedness could have significant consequences on our future operations, including:
–
making it more difficult for us to satisfy our indebtedness obligations and our other ongoing business obligations, which may
result in defaults;
–
events of default if we fail to comply with the financial and other covenants contained in the agreements governing our debt
instruments, which could result in all of our indebtedness becoming immediately due and payable or require us to negotiate
an amendment to financial or other covenants that could cause us to incur additional fees and expenses;
–
sensitivity to interest rate increases on our variable rate outstanding indebtedness, which could cause our debt service
obligations to increase significantly;
–
reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general
corporate purposes, and limiting our ability to obtain additional financing for these purposes;
–
limiting our flexibility and increasing our costs in planning for, or reacting to, and increasing our vulnerability to, changes in our
business, the industries in which we operate, and the overall economy;
–
placing us at a competitive disadvantage compared to any of our competitors that have less indebtedness or are less
leveraged; and
–
increasing our vulnerability to the impact of adverse economic and industry conditions.
Our ability to meet our payment and other obligations under our indebtedness instruments depends on our ability to generate
significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and
regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash
flow from operations, or that future borrowings will be available to us under our existing or any future credit facilities or otherwise,
in an amount sufficient to enable us to meet our indebtedness obligations and to fund other liquidity needs. We may incur
substantial additional indebtedness or financing costs, including incurring secured indebtedness and repaying outstanding
indebtedness, for many reasons, including to fund acquisitions. If we add additional indebtedness or other liabilities, the related
risks that we face could increase.
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We are a holding company with no operations and rely on our operating subsidiaries to provide us
with funds necessary to meet our financial obligations.
We are a holding company with no material direct operations. Our principal assets are the ordinary shares of Markit Group
Holdings Limited that we hold. Markit Group Holdings Limited is the parent of Markit Group Limited, which, together with its
subsidiaries, owns substantially all of our operating assets. As a result, we are dependent on loans, dividends and other payments
from our subsidiaries to generate the funds necessary to meet our financial obligations. Our subsidiaries are legally distinct from
us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions. If
we are unable to obtain funds from our subsidiaries, we may be unable to meet our financial obligations.
Certain Risks Relating to Our Common Shares
The market price of our common shares may be influenced by many factors, some of which are
beyond our control.
The market price of our common shares may be influenced by many factors, some of which are beyond our control, including:
–
regulatory or legal developments in the countries in which we or our customers operate;
–
actual or anticipated variations in our operating results;
–
the failure of financial analysts to cover our common shares;
–
changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates, or changes
in the recommendations of any financial analysts that elect to follow our common shares or the shares of our competitors;
–
changes in market valuation of similar companies;
–
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships or joint ventures;
–
introduction of new products, services or technologies by us or our competitors;
–
significant lawsuits or disputes in which we are a party;
–
future sales of our shares by us or our shareholders;
–
general economic, industry and market conditions;
–
additions and departures of key personnel;
–
investor perceptions of us and the financial services industry;
–
failure of any of our products or services to achieve or maintain market acceptance; and
–
the other factors described in this “Item 3. Key Information—D. Risk Factors” section.
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In addition, the stock market in general has experienced substantial price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may
materially harm the market price of our common shares, regardless of our operating performance.
Sales of substantial amounts of our common shares in the public market, or the perception that
these sales may occur, could cause the market price of our shares to decline.
Sales of substantial amounts of our common shares in the public market, or the perception that these sales may occur, could
depress the market price of our common shares and could impair our ability to raise capital through the sale of additional equity
securities. We are unable to predict the effect that sales may have on the prevailing market price of our shares.
Under our memorandum of association and bye-laws that took effect upon completion of our corporate reorganisation, we are
authorised to issue up to 3,000,000,000 common shares, of which 176,786,908 common shares were issued and outstanding as
of December 31, 2015, excluding 25,219,470 issued and outstanding common shares held by the Markit Group Holdings Limited
Employee Benefit Trust. Upon consummation of our initial public offering, we entered into a registration rights and lock-up
agreement with certain of our existing shareholders and with the Canada Pension Plan Investment Board (“CPPIB”). See “Item
7.Major Shareholders and Related Party Transactions—B. Related Party Transactions—Transactions with Related
Parties—Registration Rights Agreement” for a description of the terms of this agreement. Following the expiration of the lock-up
periods set forth in that agreement, these shareholders will have the right to demand that we file a registration statement covering
the offer and sale of their securities under the Securities Act, for as long as each holds unregistered securities. Registration of
these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities
Act. Sales of common shares by these or any other shareholders, including through the exercise of options and the sale of shares
by our employees, could have a material adverse effect on the trading price of our common shares. We cannot predict the size of
future issuances of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of
our common shares.
In addition, in February 2016, General Atlantic entered into a loan agreement pursuant to which it pledged 23,275,970 of our
common shares to secure a $170.0 million loan. If General Atlantic were to default on its obligations under the loan and not timely
post additional collateral, the lender would have the right to sell shares to satisfy General Atlantic’s obligation. Such an event
could cause our share price to decline.
The obligations associated with being a public company require significant resources and
management attention.
Our initial public offering has had a significant transformative effect on us. We incur significant additional legal, accounting, tax (by
virtue of U.K. National Insurance requirements), reporting and other expenses as a result of having publicly traded common
shares. We also incurred costs which we have not incurred previously, including, but not limited to, costs and expenses for
directors’ fees, increased insurance for directors and officers, investor relations and various other costs of a public company.
As a public company, we have also incurred costs associated with corporate governance requirements, including requirements
under the Sarbanes-Oxley Act, as well as rules implemented by the SEC and NASDAQ. We expect these rules and regulations to
continue to increase our legal and financial compliance costs and make some management and corporate governance activities
more time-consuming and costly. These rules and regulations may make it more difficult and more
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expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and
coverage or incur substantially higher costs to obtain the same or similar coverage. This could have an adverse impact on our
ability to recruit a qualified board of directors.
The additional demands associated with being a public company may disrupt regular operations of our business by diverting the
attention of some of our senior management team away from revenue producing activities to management and administrative
oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both
retaining professionals and managing and growing our business. Any of these effects could harm our business, financial condition
or results of operations.
In addition, in connection with the implementation of the necessary procedures and practices related to internal control over
financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the
Sarbanes-Oxley Act for compliance with the requirements of Section 404. Failure to comply with Section 404 could subject us to
regulatory scrutiny and sanctions, impair our ability to raise revenue, cause investors to lose confidence in the accuracy and
completeness of our financial reports and negatively affect our share price.
As a foreign private issuer, we are permitted to, and we do, rely on exemptions from certain
disclosure and corporate governance standards applicable to U.S. issuers. This may be less
favourable to holders of our common shares.
As a foreign private issuer, we are not subject to the same disclosure and procedural requirements as domestic U.S. registrants
under the Exchange Act. For instance, we are not required to prepare and file periodic reports and financial statements with the
SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, we are not subject
to the proxy requirements under Section 14 of the Exchange Act, and we are not generally required to comply with Regulation FD,
which restricts the selective disclosure of material non-public information. In addition, our officers, directors and principal
shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act.
Moreover, we are permitted to disclose compensation information for our executive officers on an aggregate, rather than an
individual, basis because individualised compensation disclosure is not required under Bermuda law. We do, however, intend to
furnish our shareholders with annual reports containing financial statements audited by our independent auditors and to make
available to our shareholders quarterly reports containing unaudited financial information for each of the first three quarters of
each fiscal year.
We are also exempt from certain corporate governance standards applicable to U.S. issuers. For example, Rule 5605 of
NASDAQ’s corporate governance listing rules (the “NASDAQ Rules”) requires listed companies to have, among other things, a
majority of their board members be independent, and to have independent director oversight of executive compensation,
nomination of directors and corporate governance matters. As a foreign private issuer, however, we are permitted to follow
Bermuda practice in lieu of the above requirements, under which there is no requirement that a majority of our directors be
independent. See “Item 16G. Corporate Governance.”
We will lose our foreign private issuer status if we fail to meet the requirements under U.S. securities laws necessary to avoid loss
of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer
may be significantly higher. If we are not a foreign private issuer, we will be required to prepare and report our consolidated
financial statements in accordance with generally accepted accounting principles in the United States rather than IFRS, and that
transition would involve significant cost and time. We would also be required to file periodic reports and registration statements on
U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private
issuer. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S.
domestic
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issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon
exemptions from certain corporate governance requirements on NASDAQ that are available to foreign private issuers.
Insiders continue to have substantial control over us and could limit your ability to influence the
outcome of key transactions, including a change of control.
As of December 31, 2015, our shareholders who own more than 5% of our common shares (and entities affiliated with them) and
our directors and executive officers collectively beneficially own approximately 50.8% of our issued and outstanding common
shares. As a result, these shareholders, if acting together, would be able to influence or control matters requiring approval by our
shareholders, including amendments to our bye-laws, the election of directors and the approval of mergers or other extraordinary
transactions. In addition, they could influence our dividend policy. They may also have interests that differ from yours and may
vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may have the
effect of delaying, preventing or deterring a change of control of our company, could deprive our shareholders of an opportunity to
receive a premium for their common shares as part of a sale of our company and might ultimately affect the market price of our
common shares.
We currently do not anticipate paying any cash dividends.
We currently do not intend to pay any dividends to holders of our common shares. As a result, capital appreciation in the price of
our common shares, if any, will be your only source of gain on an investment in our common shares. The payment of any future
dividends will be determined at the discretion of our Board of Directors in light of conditions then existing, including our earnings,
financial condition and capital requirements, business conditions, corporate law requirements and other factors. See “Item 8.
Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.”
Volatility in our share price could subject us to securities class action litigation.
In the past, securities class action litigation has often been brought against companies following declines in the market price of
their securities. This risk is especially relevant for us because financial services companies have experienced significant share
price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s
attention and resources, which could adversely affect our financial condition or results of operations.
We are a Bermuda company, and it may be difficult for you to enforce judgments against us or our
directors and executive officers.
We are a Bermuda exempted company. As a result, the rights of holders of our common shares are governed by Bermuda law
and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of
shareholders of companies incorporated in other jurisdictions. A number of our directors and some of the named experts referred
to in this annual report are not residents of the United States, and a substantial portion of our assets are located outside the
United States. As a result, it may be difficult for investors to effect service of process on those persons in the United States or to
enforce in the United States judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of
the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including
the
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United States, against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda
against us or our directors or officers under the securities laws of other jurisdictions.
Bermuda law differs from the laws in effect in the United States and may afford less protection to
holders of our common shares.
We are organised under the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981 (the
“Companies Act”), which differs in some material respects from laws typically applicable to U.S. corporations and shareholders,
including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits
and indemnification of directors. Generally, the duties of directors and officers of a Bermuda company are owed to the company
only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company
and may only do so in limited circumstances. Class actions are not available under Bermuda law. The circumstances in which
derivative actions may be available under Bermuda law are substantially more proscribed and less clear than they would be to
shareholders of U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to
commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be
beyond the corporate power of the company or illegal, or would result in the violation of the company’s memorandum of
association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a
fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the
company’s shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some
shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit,
including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any
shareholders by other shareholders or by the company. Additionally, under our bye-laws and as permitted by Bermuda law, each
shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in
the performance of their duties, except for actions involving fraud or dishonesty. In addition, the rights of holders of our common
shares and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or
judicial precedent in existence in jurisdictions in the United States, particularly the State of Delaware. Therefore, holders of our
common shares may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a
jurisdiction within the United States.
We have anti-takeover provisions in our bye-laws that may discourage a change of control.
Our bye-laws contain provisions that could make it more difficult for a third party to acquire us without the consent of our Board of
Directors. These provisions provide for:
–
a classified board of directors with staggered three-year terms;
–
directors only to be removed for cause;
–
restrictions on the time period in which directors may be nominated;
–
our Board of Directors to determine the powers, preferences and rights of our preference shares and to issue the preference
shares without shareholder approval; and
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–
an affirmative vote of 66-2/3% of our voting shares for certain “business combination” transactions which have not been
approved by our Board of Directors.
These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered
beneficial by many shareholders. As a result, shareholders may be limited in their ability to obtain a premium for their shares.
If we are, or were to become, a passive foreign investment company (a “PFIC”) for U.S. federal
income tax purposes, U.S. investors in our common shares would be subject to certain adverse U.S.
federal income tax consequences.
In general, a non-U.S. corporation will be a PFIC for any taxable year if (i) 75% or more of its gross income consists of passive
income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the
production of, passive income. We believe that we were not a PFIC for our 2015 taxable year. However, there can be no
assurance that we will not be considered a PFIC for any taxable year. If we were a PFIC for any taxable year during which a U.S.
investor held common shares, such investor would be subject to certain adverse U.S. federal income tax consequences, such as
ineligibility for any preferred tax rates on capital gains or on actual or deemed dividends, an additional interest charge on certain
taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. If we are
characterised as a PFIC, a U.S. investor may be able to make a “mark-to-market” election with respect to our common shares that
would alleviate some of the adverse consequences of PFIC status. Although U.S. tax rules also permit a U.S. investor to make a
“qualified electing fund” election with respect to the shares of a foreign corporation that is a PFIC if the foreign corporation
provides certain information to its investors, we do not currently intend to provide the information that would be necessary for a
U.S. investor to make a valid “qualified electing fund” election with respect to our common shares. See “Item 10. Additional
Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”
ITEM 4. INFORMATION ON THE COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Markit was founded in 2003 by a group of entrepreneurs with deep experience in the financial services industry with the goal of
increasing transparency in the financial markets. After the successful launch of its first product, the company attracted investments
from global financial institutions, private equity and other investment funds. Since its founding, Markit has grown through organic
product and service development and targeted acquisitions.
Markit Group Holdings Limited was formed on May 9, 2007 pursuant to the laws of England and Wales, as a successor company
to Markit Group Limited. Markit Ltd. was incorporated pursuant to the laws of Bermuda on January 16, 2014 to become the
holding company for Markit Group Holdings Limited. Upon completion of our initial public offering and the related corporate
reorganisation, all the interests in Markit Group Holdings Limited were exchanged for newly issued common shares of Markit Ltd.
and, as a result, Markit Group Holdings Limited became a wholly owned subsidiary of Markit Ltd.
Our principal executive offices are located at 4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
Our telephone number at this address is +44 20 7260 2000. Investors should contact us for any inquiries through the address and
telephone number of our principal executive office. We maintain a website at www.markit.com . Information contained on or
accessible through our website is not a part of this annual report, and the inclusion of our website address in this annual report is
an inactive textual reference only.
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We maintain a registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The telephone
number of our registered office is +1 441 295 5950.
For information on our principal capital expenditures and divestitures since January 1, 2013, see “Item 5. Operating and Financial
Review and Prospects—B. Liquidity and Capital Resources.”
B. BUSINESS OVERVIEW
Company Overview
Markit is a leading global diversified provider of financial information services. Our offerings enhance transparency, reduce risk
and improve operational efficiency in the financial markets. Since we launched our business in 2003, we have become deeply
embedded in the systems and workflows of many of our customers and continue to become increasingly important to our
customers’ operations. We leverage leading technologies and our industry expertise to create innovative products and services
across multiple asset classes and geographies. We provide pricing and reference data, indices, valuation and trading services,
trade processing, enterprise software and managed services. Our end users include front- and back-office professionals, such as
traders, portfolio managers, risk managers, research professionals and other financial markets participants, as well as operations,
compliance and enterprise data managers. We anticipate and are highly responsive to evolving industry needs and work closely
with market participants to develop new products and services.
We have more than 3,500 institutional customers globally, including banks, hedge funds, asset managers, accounting firms,
regulators, corporations, exchanges, clearinghouses, central banks and trading venues. For the years ended December 31, 2015,
2014 and 2013, we generated revenue of $1,113.4 million, $1,065.1 million and $947.9 million, respectively. For the years ended
December 31, 2015, 2014 and 2013, we generated profit attributable to equity holders of $152.5 million, $165.2 million and $139.4
million, respectively, and Adjusted EBITDA of $496.9 million, $488.2 million and $421.3 million, respectively. Our Adjusted
EBITDA margins for the years ended December 31, 2015, 2014 and 2013 were 45.0%, 46.0% and 45.6%, reflecting the operating
leverage inherent in our business model and our focus on disciplined cost management.
For the years ended December 31, 2015, 2014 and 2013 approximately 50.0%, 49.8% and 49.9% of our revenue came from
customers in the United States, 38.8%, 39.4% and 40.3% from the European Union and 11.2%, 10.8% and 9.8% from other
geographic areas, respectively. For the years ended December 31, 2015, 2014 and 2013 we generated 56.1%, 52.5% and 50.6%
of our revenue from recurring fixed fees and 37.6%, 42.3% and 45.3% from recurring variable fees, respectively.
Our business is organised in three divisions: Information, Processing and Solutions.
Information: Our Information division, which represented approximately 45.0% of our revenue in 2015, provides enriched content
consisting of pricing and reference data, indices and valuation and trading services across multiple asset classes and geographies
through both direct and third-party distribution channels. Our Information division products and services are used for independent
valuations, research, trading, and liquidity and risk assessments. These products and services help our customers price
instruments, comply with relevant regulatory reporting and risk management requirements, and analyse financial markets.
Processing: Our Processing division, which represented approximately 23.0% of our revenue in 2015, offers trade processing
solutions globally for over-the-counter (“OTC”) derivatives, foreign exchange (“FX”) and syndicated loans. Our trade processing
services enable buy-side and sell-side firms to process transactions rapidly, which increases efficiency by optimising post-trade
workflow, reducing risk, complying with reporting regulations and improving connectivity. We believe we are the largest provider of
end-to-end multiple asset OTC derivatives trade processing services.
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Solutions: Our Solutions segment, which represented approximately 32.0% of our revenue in the year ended December 31,
2015, provides configurable enterprise software platforms, managed services and hosted digital solutions. Our enterprise software
delivers customised solutions to automate our customers’ in-house processing and connectivity for trading and post-trading
processing, as well as enterprise risk management solutions to enable customers to calculate risk measures. Our managed
services and hosted digital solutions offerings, which are targeted at a broad range of financial services industry participants, help
our customers capture, organise, process, display and analyse information, manage risk, reduce fixed costs and meet regulatory
requirements.
Our Competitive Strengths
We believe that our competitive strengths include the following:
Demonstrated Ability to Innovate and Develop New Products. We work closely with our customers to develop and introduce
new offerings that are designed to enhance transparency, reduce risk and improve operational efficiency in the financial markets.
In recent years, we have launched new products addressing a wide array of customer needs, such as meeting regulatory
reporting requirements, increasing efficiency in trade confirmation and improving bond market transparency. We offer a
distribution model that enables our customers to receive our data either through our own proprietary distribution channels or
through third-party applications. This flexible model allows customers to use our products efficiently.
Trusted Partner with Diversified, Global Customer Base and Strong Brand Recognition. We believe that our customers trust
and rely on us for our consultative approach to product development, dedication to customer support and proven ability to execute
and deliver effective solutions. Our industry expertise allows us to anticipate and understand our customers’ needs, providing
effective solutions through our product and service offerings. Our global footprint allows us to serve our customers throughout the
world and to introduce our products and services to customers in new markets. The Markit brand is well established and
recognised throughout the financial services industry—many of the major financial market participants use our products and
services. We also own a number of well-known index brands, including the Purchasing Managers Index (“PMI”) series and the
iBoxx indices.
Proven Ability to Acquire and Grow Complementary Businesses. We have a history of making targeted acquisitions that
facilitate our growth by complementing our existing products and services and addressing market opportunities. We seek to
acquire companies that allow us to consolidate existing businesses, diversify into related markets, and access technologies,
products or expertise that enhance our product and service offerings. We have a proven track record of successfully integrating
acquisitions into our business, including our global sales network, technology infrastructure and operational delivery model. With
this strategy, we have driven strong growth in our acquired products, generating attractive returns on capital.
Attractive Financial Model. We believe we have an attractive financial model due to high recurring revenue, strong organic
growth and high cash generation.
–
High Recurring Revenue : We offer our products and services primarily through recurring fixed fee and variable fee
agreements, and this business model has historically delivered stable revenue and predictable cash flows. For the year ended
December 31, 2015, we generated 56.1% of our revenue from recurring fixed fees and 37.6% from recurring variable fees.
Many of the capabilities that we provide are core to our customers’ business operations, deeply embedded in their existing
workflows and difficult to replace.
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–
We calculate a renewal rate to assess how successful we have been in maintaining our existing business for products and
services that fall due for renewal. This renewal rate compares the dollar value of renewals during the period to the total dollar
value of all contracts that fall due for renewal during the period. This population of renewals is largely contracts that are
recurring fixed fee in nature. The value of the contracts renewed includes situations where customers have renewed but
downgraded the contract price, reduced the number of products and services they purchase from us or decided not to renew
all products and services. It does not include the benefit of price increases on these existing products or services, or upgrades
to existing contracted products or services. Using this definition, for the year ended December 31, 2015, our renewal rate of
recurring fixed fee contracts was 89.8%.
–
Strong Organic Growth : The breadth of our offerings in conjunction with our large, global customer base allows us to
cross-sell our products and services. We have also developed new products and services and substantially expanded our
customer base.
–
High Cash Generation : Our business has low capital requirements for product maintenance and development, allowing us to
generate strong cash flow.
Experienced Management Team Incentivised by Ownership Culture. On average, our 15 most senior managers have worked
in the financial services industry for 22 years. This experience has provided our management team with a strong network of
relationships and an extensive understanding of market participants within the financial services industry. We have attracted a
highly qualified and motivated employee base through significant employee ownership which creates a culture of innovation and
an organisation that quickly adapts to change.
Our Market Opportunity
We believe we are well-positioned to embrace changes in the financial services industry:
Focus on Efficiency in the Financial Services Industry. Financial institutions are focused on rationalising costs and
increasingly view third-party products and services as an effective means of achieving cost efficiencies. In addition, as financial
institutions look to optimise vendor management, they are exhibiting a preference for companies with scale that offer a broad
array of products and services. We believe our scale and broad portfolio of solutions position us well as customers seek to
consolidate vendors. We also work actively with our customers to find opportunities to reduce their costs and improve services
through industry solutions, most notably in managed services.
Changing Regulatory Landscape. New global regulations are driving higher capital requirements, enhanced risk management,
and increased electronic trading and reporting and compliance requirements. In addition, regulations are driving market
participants to gather more timely, relevant and complete data to improve transparency and demonstrate they have the proper
internal controls and processes needed to meet the evolving regulations. Regulatory authorities have also included in their
decision-making process public consultations on the functioning and liquidity of financial markets and on supporting the
development of regulatory technology. With these new regulations and as regulatory authorities globally continue to establish
stricter standards, we believe our customers will continue to strengthen their compliance capabilities, manage greater volumes of
data, improve their risk management functions and require services and solutions to meet these obligations
Evolving Technology and Communication Networks. Technology and information services are migrating toward cloud-based
solutions and open architecture platforms. This trend creates challenges for securities firms and institutional investors, which have
typically employed technology that is designed, built and administered in-house, a model that has limited flexibility and results in
increased costs. These trends present an opportunity to create new services based on flexible technologies in a secure and
compliant manner by moving away from high-cost, single-provider platforms.
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Shifting Investment Styles . Investors are allocating increasing amounts of capital to passive investment products and are
seeking exposure beyond equities to a wider range of asset classes, including bonds, loans and commodities. Passive investment
products have proliferated due to investor demand for transparency, lower costs and greater liquidity. We believe these trends will
persist, generating significant growth opportunities for our multiple asset class offerings.
Our Growth Strategies
The key components of our growth strategy include:
Deliver Products and Services to Drive Customer Cost-Efficiency. The financial services industry’s regulatory and operating
environment is putting pressure on our customers’ profits, driving them to rationalise costs and operate more efficiently. We
believe there is a significant opportunity to reshape the cost structure of the industry by replacing services that have historically
been duplicated across institutions. Our experience, reputation as a trusted partner and strong relationships with major financial
institutions have allowed us to respond to customer needs for centralised services such as reference data management, customer
onboarding, withholding-tax compliance, third-party risk management, global corporate actions and document management, which
we believe will generate substantial cost savings for our customers. For example, our Markit Genpact KYC Services joint venture
centralises non-proprietary processes for onboarding new customers and manages other know-your-customer (“KYC”)
requirements for the financial services industry and our KY3P (Know Your Third Party) solution acts as a centralised, cloud-based
data hub that simplifies and standardises third-party risk management processes focusing on vendor due diligence and ongoing
monitoring.
Capitalise on Evolving Regulatory and Compliance Environment. Changing regulations are creating the need for new
compliance and reporting processes, risk management protocols, disclosure requirements, data and analytics. Increased
regulatory focus on liquidity risk has been extending to both sell side and buy side financial institutions, which is expected to
continue to increase demand for liquidity data. More recent regulatory initiatives also aim to foster the improved functioning of
financial markets and encourage the development of third-party reporting and compliance services. We will continue to address
these needs by providing auditable and compliant sources of risk and pricing data, integrated market and credit risk reporting and
multiple asset class global solutions. Our solutions are expected to support customers’ regulatory submissions, including stress
testing and scenario analysis. We expect our index business to benefit from the increased regulatory scrutiny imposed on
administrators of benchmarks, which larger, well-established providers such as ourselves are best positioned to address, and our
pricing business to benefit from regulation requiring funds to mark or float net asset values, provide greater transparency and
frequency of valuations through services such as intra-day and real-time pricing, and to report on their full risk profile with better
liquidity risk metrics. In addition, we are repositioning our derivatives processing business from a transaction-based confirmation
service to a connectivity and regulatory reporting service; building out our KYC managed services capabilities; and enhancing our
counterparty risk management and risk and trading analytics offerings to meet the growing requirements of regulation and
compliance.
Introduce Innovative Offerings and Enhancements. To maintain and enhance our position as a leading financial services
provider, we continuously strive to introduce enhancements to our products and services as well as launch new products and
services. We maintain an active dialogue with our customers and partners to allow us to understand their needs and anticipate
market developments. We also seek to develop innovative uses for our existing products and services to generate incremental
revenue, find more cost-effective inputs to support our existing products and services, and facilitate development of profitable new
products and services.
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Increase in Geographic, Product and Customer Penetration. We believe there are significant opportunities to increase the
number of users of our products and services at existing institutional customers, increase the number of locations where our
products and services are used with existing customers and increase the use of our broad set of products and services. We plan
to add new customers by anticipating and responding to the changing demands of the financial services industry and by
leveraging our brand strength, broad portfolio of solutions, global footprint and industry expertise. We have developed significant
penetration into large sell-side and buy-side firms in North America and Western Europe and have established a presence in
select emerging markets and developing economies, and there is potential for further penetration and growth in emerging markets
and developing economies, particularly in Asia. Reflecting our commitment to these markets, we relocated key management to
Singapore to support our growing presence in the Asian markets.
Pursue Strategic Acquisitions and Partnerships. We selectively evaluate technologies and businesses, like blockchain, that
we believe have potential to enhance, complement or expand our product and service offerings and strengthen our value
proposition to customers. We target acquisitions and partnerships that can be efficiently integrated into our global sales network,
technology infrastructure and operational delivery model to drive value. We believe we are an acquirer of choice among
prospective acquisition targets and a partner of choice among our peers due to our entrepreneurial culture, growth, global scale,
strong brand, broad distribution capabilities and market position.
Business Divisions
Information
Our Information division (2015 revenue of $501.6 million) provides enriched content consisting of pricing and reference data,
indices and valuation and trading services across multiple asset classes and geographies through both direct and third-party
distribution channels. Our Information division products and services are used throughout the financial services industry for
independent valuations, research, trading, and liquidity and risk assessments. These products and services help our customers to
price instruments, comply with relevant regulatory reporting and risk management requirements, and analyse financial markets.
The Information division serves more than 2,600 customers including buy-side firms (mutual funds, hedge funds, private equity
funds, investment managers, insurance companies, pension funds, sovereign wealth funds and wealth managers), sell-side firms
(investment banks, commercial banks, prime brokers, retail banks and custodian banks), exchanges, central banks, regulators,
government agencies, rating agencies, research organisations, academics, accounting firms, consultancies, technology and
service providers, and other corporations.
The Information division consists of three subdivisions:
–
Pricing and Reference Data . Our pricing and reference data subdivision provides our customers with independent pricing
across major geographies and asset classes as well as instrument, entity and reference data products. We price instruments
in the major asset classes, including fixed income, equities and credit. Our offering comprises several products that support
the pricing and reference data needs of the credit derivative, bond and syndicated loan markets, most notably Reference
Entity Database (“RED”) and Bond Reference Data. Customers use our pricing data primarily for independent valuations, risk
analytics and pre-trade analytics. They use our reference data products in a broad range of valuation, trading and risk
applications.
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–
Indices . We own and administer indices covering loans, bonds, credit default swaps, structured finance and economic
indicators, including the iBoxx, iTraxx and CDX indices, economic indices and the PMI series. We also deliver aggregated
index and ETP pricing data to banks, asset managers, exchanges, ETF issuers, hedge funds and trading platforms. In
addition to our index families, we provide a range of index-related services to enable our customers to meet their custom
index requirements. Our indices are used for benchmarking, risk management, valuation and trading. They also form the
basis of a wide range of financial products, including exchange traded funds, index funds, structured products and derivatives.
–
Valuation and Trading Services . We provide a broad range of valuation and trading services to both derivative and cash
market participants focused on instrument and portfolio valuations, trading performance and analysis, research aggregation
and investment process workflow. For example, our Totem service provides model validation and pricing verification of
complex derivatives for sell-side firms, our portfolio valuation service provides buy-side firms with independent valuations for a
wide range of derivatives and cash products across all asset classes, and our hosted trading analytics, compliance and
reporting business measures trade execution quality and provides regulatory and best execution reporting.
For the years ended December 31, 2015, 2014 and 2013, our Information division generated revenue of $501.6 million, $486.5
million and $459.6 million, representing 45.0%, 45.7% and 48.5% of our total revenue, respectively, and Adjusted EBITDA of
$245.1 million, $239.2 million and $217.2 million, representing 49.1%, 48.9% and 50.2% of our total Adjusted EBITDA before the
removal of non-controlling interest, respectively.
Processing
Our Processing division (2015 revenue of $256.0 million) offers trade processing solutions globally for OTC derivatives, FX and
syndicated loans, including connectivity, infrastructure and post-trade support. Our trade processing services enable buy-side and
sell-side firms to process transactions rapidly, which increases efficiency by optimising post-trade workflow, reducing risk,
complying with reporting regulations and improving connectivity. Our Processing division sells products and offers services directly
and via third parties, and its most significant offerings are our derivatives processing platform and our loans processing platform.
We believe our derivatives processing platform is the industry standard for OTC derivatives post-trade processing across credit,
interest rates, equity and FX asset classes. The platform supports electronic confirmation, regulatory reporting, clearing
connectivity and trade delivery for trade counterparties and inter-dealer brokers, clearing houses, trading venues and swap
execution facilities. Our derivatives processing platform has an active network of more than 2,000 customers, including sell-side
firms, buy-side firms and execution venues, with connectivity to 17 central counterparties. On an average day, our derivatives
processing platform processes more than 90,000 transaction processing actions.
We believe our loans processing platform is the primary platform for the electronic confirmation, documentation and settlement of
syndicated loans in the United States. It provides real-time data on loan inventories as well as reconciliation and status reporting
for new and historical trades. The platform connects sell-side and buy-side firms and loan agents in a single workflow.
Functionality is currently being expanded to include loan custodians. We settle substantially all Loan Syndications and Trading
Association (“LSTA”) leveraged syndicated loans and also support and settle loans trading in the Loan Market Association (“LMA”)
market through our loans processing platform. With the acquisition of DealHub, a software company specialising in FX solutions,
in September 2015, our Processing division expanded its core post-trade services and enhanced our offering with pre-trade tools
and the ability to deploy customised software solutions that automate customers’ in house processes.
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For the years ended December 31, 2015, 2014 and 2013, our Processing division generated revenue of $256.0 million, $284.9
million and $265.3 million, representing 23.0%, 26.7% and 28.0% of our total revenue, respectively, and Adjusted EBITDA of
$133.9 million, $156.6 million and $138.1 million, representing 26.8%, 32.0% and 31.9% of our total Adjusted EBITDA before the
removal of non-controlling interest, respectively.
Solutions
Our Solutions division (2015 revenue of $355.8 million) provides configurable enterprise software platforms, managed services
and hosted digital solutions under two subdivisions, enterprise software and managed services. Our offerings help our customers
capture, organise, process, display and analyse information, automate in-house processing and connectivity, calculate and
manage risk and meet regulatory requirements. As the financial services industry places a renewed emphasis on cost efficiency
and operational risk reduction, we believe institutions are likely to increase their use of outsourcing to industry experts. Our
products and services are designed to help our customers achieve material operational efficiency gains by using deep subject
matter expertise and increased automation and by leveraging standardised, mutualised data and processes.
Our Solutions division targets a broad customer base within the financial services industry including buy-side and sell-side firms,
custodians, private equity firms, wealth management firms, retail brokerages, insurance companies, asset managers, fund
administrators, regulators, media firms, data providers and multinational corporations. Our division uses in-house sales teams to
sell directly to customers.
Our Solutions division provides enterprise software and managed services covering:
–
Digital . We design, build and host custom web solutions for both retail and institutional financial services firms. Our solutions
help our global customers and their clients access, visualise and understand complex financial datasets. We leverage a single
infrastructure for fast-to-market delivery and apply award-winning design to align with our customers’ unique branding and
vision.
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Regulatory compliance . We provide standardised, centralised solutions that enable our customers to rapidly address complex
and evolving regulatory requirements. This allows financial institutions to address entrenched structural costs in
non-differentiating processes while reducing overall risk. Counterparty Manager helps manage and share counterparty
documentation, make regulatory representations and validate compliance with evolving obligations. CTI Tax Solutions
provides a suite of tools that helps financial institutions and multi-national corporations comply with the withholding and
reporting tax rules associated with cross-border payments. Kyc.com is a centralised service for end-to-end management of
client on boarding and other KYC requirements in the financial markets, and KY3P is a centralised data hub that standardises
and simplifies third-party due diligence and ongoing monitoring.
–
Asset servicing . Our asset servicing solutions enable customers to achieve front-to-back business benefits in prime
brokerage , loan operations, corporate actions and securities processing while lowering the cost of ownership through the use
of shared technology and processes. We provide outsourced access to our suite of services for middle- and back-office loan
operations, including portfolio management, trade settlement and agent servicing. Our corporate actions solution provides a
centralised source of validated corporate action data for equities, fixed income and structured securities. Information Mosaic is
a suite of integrated software services that supports post-trade securities operations to provide solutions for securities
processing, asset servicing and management of the corporate actions life cycle. We also provide a suite of hosted global
prime finance software, Prime Services, to enable full management of prime services operations.
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–
Data management . Our EDM offering is a hosted or installed platform used to acquire, validate, distribute and store a wide
range of trade, operational, risk, finance and customer data, allowing customers to streamline front-, middle- and back-office
operations in a fully audited and transparent environment. Solutions include master data management, data integration, data
aggregation, reconciliation and reporting. It enables customers to benefit from greater control, ongoing compliance,
auditability and transparency of their data. By creating golden copies and ensuring the right data is available in the right
format at the right time, our customers can help build trust in their data and reporting.
–
Risk analytics . Analytics provide a range of risk management solutions including market risk, counterparty credit risk,
regulatory capital and xVA solutions, addressing regulatory risk requirements across a broad range of asset classes. These
solutions are highly performant and scalable solutions, helping large financial institutions address new regulations.
–
Trading and portfolio management . Our integrated front office solution, thinkFolio, provides portfolio modelling, trade order
management, compliance and real-time cash management across asset classes. WSO, our loan portfolio management
software, delivers reporting, collateralised loan obligation compliance, integration, performance analysis and agent
syndication across the complete trading lifecycle.
For the years ended December 31, 2015, 2014 and 2013, our Solutions division generated revenue of $355.8 million, $293.7
million and $223.0 million, representing 32.0%, 27.6% and 23.5% of our total revenue, respectively, and Adjusted EBITDA of
$120.0 million, $93.1 million and $77.5 million, representing 24.1%, 19.1% and 17.9% of our total Adjusted EBITDA before the
removal of non-controlling interest, respectively.
Customers
We have a diverse global customer base across buy-side and sell-side firms, including banks, asset managers, hedge funds,
private equity and venture capital funds, fund administration firms and other organisations. Our customers also include
exchanges, central banks, regulators, government agencies, rating agencies, research organisations, academics, accounting
firms, consultancies, technology and service providers, information service providers, exchanges, clearing and trading venues,
and other corporations. We have over 3,500 institutional customers, including many of the largest companies in the financial
services industry. In 2015, no customers or group of affiliated customers represented more than 5% of our revenue and fewer
than 25 customers or groups of affiliated customers each generated more than $10 million in revenue.
Sales and Marketing
We have a dedicated global sales force, which consists of a global account management team and a specialists team covering all
regions, products and services. We annually develop sales, distribution and marketing strategies on a product-by-product and
service-by-service basis. We leverage customer data, business and market intelligence and competitive profiling to retain
customers and cross-sell products and services, while also working to promote unified brand recognition across all our products
and services.
Sources of Data
The data supporting our Information division products and services is sourced principally through three different kinds of
arrangements. First, we gather data from some of our customers under agreements
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that also permit these customers to use the products and services created based on their data contribution. Second, we license
data from market data providers under contracts on commercial terms. Third, we source data either from public sources, such as
corporate actions or bond issuances, or through direct means, such as conducting surveys for economic data.
Competitors
We believe the principal competitive factors in our business include the depth, breadth, timeliness and cost-effectiveness of our
products and services; quality and relevance of our offerings; ease of use; our employees; and customer support. The breadth of
the products and services we offer and the markets we serve expose us to a broad range of competitors that include large
information service providers, market data vendors, exchanges, inter-dealer brokers and transaction processing providers.
Our principal competitors for our Information division products and services are Bloomberg L.P., FactSet,
IntercontinentalExchange, Inc. and Thomson Reuters Inc. The principal competitors for our Processing division products and
services are Bloomberg L.P., IntercontinentalExchange, Inc., Traiana, Inc. and Thomson Reuters Inc. Our Solutions division
products and services compete with firms such as BlackRock, Inc., Bloomberg L.P., IBM Algorithmics, Thomson Reuters Inc. and
global accounting and consulting firms.
C. ORGANIZATIONAL STRUCTURE
A list of our subsidiaries, including name, country of incorporation or residence and proportion of ownership interest and voting
power is provided in “Item 19. Exhibits—Exhibit 8.1,” which is incorporated herein by reference.
D. PROPERTY, PLANT AND EQUIPMENT
Markit is headquartered in London, United Kingdom and operates in 30 offices around the globe. As of December 31, 2015, our
principal offices consisted of the following properties:
Location
London, United Kingdom
New Delhi, India
New York City, U.S.
Dallas, U.S.
Boulder, U.S. (Central Ave.)
Boulder, U.S. (Flatiron Pkwy.)
Square feet
105,000
51,971
41,743
47,713
59,620
30,196
Lease expiration date(1)
Use
December 2025
July 2021
August 2018
September 2029
December 2017
December 2027
Office Space
Office Space
Office Space
Office Space
Office Space
Office Space
(1) Expiration dates include exclusive renewal options granted to Markit in existing leases.
We also lease offices in the following locations: Amsterdam, Andover, Boston, Calgary, Chicago, Dublin, Frankfurt, Gurgaon,
Hauppauge, Henley on Thames, Hong Kong, London, Manchester, New York, Paris, Singapore, South Africa, Sydney, Tokyo,
Toronto, Valley Cottage, and Vancouver. Historically, we have sought to consolidate acquisitions into major locations, such as
London and New York, whenever logistically and commercially reasonable; however, there have been instances where we have
expanded our footprint into new locations post-acquisition.
On March 26, 2015, we entered into a lease for a new primary office location in New York City, which will consolidate the two
office locations we currently have in the city. We expect to spend approximately $27.5 million in building out the space, funded by
our working capital.
We continue to invest in our current locations as necessary and we believe that our properties, taken as a whole, are in good
operating condition and are suitable and adequate for our current business operations, and that additional or alternative space will
be available on commercially reasonable terms for future use and expansion.
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ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. OPERATING RESULTS
The following information should be read in conjunction with the consolidated financial statements and notes thereto included as
part of this annual report. This discussion and analysis includes forward-looking statements. These forward-looking statements
are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or
implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited
to, those discussed elsewhere in this annual report. See in particular “Cautionary Statement Regarding Forward-Looking
Statements” and “Item 3. Key Information—D. Risk Factors.”
Business Overview
Markit is a leading global diversified provider of financial information services. Our offerings enhance transparency, reduce risk
and improve operational efficiency in the financial markets. Since we launched our business in 2003, we have become deeply
embedded in the systems and workflows of many of our customers and continue to become increasingly important to our
customers’ operations. We leverage leading technologies and our industry expertise to create innovative products and services
across multiple asset classes. We provide pricing and reference data, indices, valuation and trading services, trade processing,
enterprise software and managed services. Our end users include front- and back-office professionals, such as traders, portfolio
managers, risk managers, research professionals, technology companies and other financial markets participants, as well as
operations, compliance and enterprise data managers. We anticipate and are highly responsive to evolving industry needs and
work closely with market participants to develop new products and services. We have more than 3,500 institutional customers
globally, including banks, hedge funds, asset managers, accounting firms, regulators, corporations, exchanges, clearing houses,
central banks and trading venues. As of December 31, 2015, we had 30 offices in 13 countries.
Key Developments
On March 10, 2015 we agreed to acquire the assets and intellectual property associated with the Halifax House Price Index from
Lloyds Banking Group. The Halifax House Price Index is a leading barometer of the UK’s property market. The financial results
associated with the Halifax House Price Index will be reported within our Information segment post-closing.
On March 26, 2015, we entered into a lease for a new primary office location in New York City, which will consolidate the two
office locations we currently have in the city. We currently expect to move to the new location as soon as the fourth quarter of
2016.
On May 7, 2015, our Board of Directors authorised the repurchase of up to $500 million of our common shares over two years, at
the discretion of our management.
On June 10, 2015, we completed a public offering of common shares pursuant to a Registration Statement on Form F-1, as
amended (Registration No. 333-204106) that was declared effective on June 4, 2015. Under the registration statement, we
registered the offering and sale by certain selling shareholders of an aggregate of 27,501,271 common shares. As part of the
offering, we purchased from the underwriters 14,048,820 common shares sold in the offering at a price per common share of
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$24.913125, for an aggregate purchase price of approximately $350 million. All repurchased shares were cancelled. We funded
the purchase of shares through a combination of cash on hand and a drawdown of our revolving credit facility. The remaining
common shares registered under the registration statement, which included 1,754,667 common shares sold pursuant to an option
to purchase additional shares granted to the underwriters, were sold at a price to the public of $25.75 per share. We did not
receive any proceeds from the sale of common shares in the offering. The offering expenses, not including the underwriting
discounts and commissions, were approximately $1.40 million and were payable by us. The offering expenses include SEC
registration fees, FINRA filing fees, legal fees and expenses, printing expenses, transfer agent fees and expenses, accounting
fees and expenses, as well as other miscellaneous fees and expenses.
On July 1, 2015, we completed the acquisition of Information Mosaic Limited. Information Mosaic is a leading software provider,
offering a suite of products that offer tier-one financial institutions integrated software services that support post-trade securities
operations, which provides industry-leading solutions for securities processing, asset servicing and management of the corporate
actions life cycle. Information Mosaic is reported within our Solutions segment.
On September 1, 2015, we completed the acquisition of DealHub. DealHub is a leading provider of trade processing and trading
services to the foreign exchange market. Dealhub is reported within our Processing segment.
On September 30, 2015, we reached an agreement to settle the consolidated antitrust class action lawsuit in the United States
District Court in the Southern District of New York that Markit had been defending with a number of major international investment
banks and ISDA. The settlement agreement provides for Markit to pay a settlement amount of $45 million with no injunctive or
other significant non-monetary obligations and no admission of any liability. The final settlement agreement was preliminarily
approved by the court on October 29, 2015.
On October 1, 2015, we completed the acquisition of CoreOne Technologies, a leading provider of financial data creation,
management and distribution services and solutions, used in the front-, middle- and back-office by asset managers, hedge funds,
wealth managers, prime brokers, fund administrators and investment banks. The total consideration payable was approximately
$200 million and was funded using cash and a drawdown of our revolving credit facility. Two CoreOne businesses were
incorporated in out Information division: DeltaOne Solutions delivers aggregated index and ETP pricing data to banks, asset
managers, exchanges, ETF issuers, hedge funds and trading platforms, and was incorporated into the Index subdivision, and
RegOne Solutions, a hosted trading analytics, compliance and reporting business which measures trade execution quality and
provides regulatory and best execution reporting, is used by broker-dealers, asset managers, alternative trading systems, stock
exchanges and other industry professionals, and was incorporated into the Valuation and Trading Services subdivision. Two
CoreOne businesses were also incorporated into the Enterprise Software subdivision of our Solutions segment: VistaOne
Solutions, an end-to-end suite of data warehouse, data governance, reporting, web publishing, installed and hosted products,
provides data management, reporting and distribution solutions to securities and asset management industries and PrimeOne
Solutions provides hosted global prime brokerage application services, including synthetic prime brokerage, a full function global
prime brokerage system, securities lending technology and reporting and a customer servicing suite.
On November 4, 2015 we issued two series of senior unsecured notes having an aggregate principal amount of $500 million to
certain institutional investors. One series of the notes was issued in an aggregate principal amount of $210 million, bears interest
at a fixed rate of 3.73% and matures on November 4, 2022. The other series of the notes was issued in an aggregate principal
amount of $290 million, bears interest at a fixed rate of 4.05% and matures on November 4, 2025. The proceeds from the notes
were used to pay down debt on our existing revolving credit facility.
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On December 7, 2015 we entered into an aggregate $200 million accelerated share repurchase (“ASR”) with each of J.P. Morgan
Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch, and Morgan Stanley & Co. LLC. Upon
commencement, 5,095,108 shares representing approximately $150 million of the aggregate amount of the ASR were received
and cancelled thereafter. We may receive additional shares at or prior to maturity of the ASR. The total number of shares
ultimately to be repurchased under the ASR will generally be based on the daily volume-weighted average price of the shares
during the calculation period for the ASR, less an agreed discount. At final settlement of the ASR, we may be entitled to receive
additional shares, or, under certain limited circumstances, be required to deliver shares to the relevant ASR counterparty. We
anticipate that all repurchases under the ASR agreements will be completed by the third quarter of 2016, although each ASR
counterparty has the right to accelerate settlement of its respective ASR agreement under certain circumstances. The transaction
completed the $500 million share repurchase program authorised in May 2015, with an additional $50 million share repurchase
being approved by our Board of Directors in connection with the ASR.
On January 11, 2016 we agreed to acquire the position reconciliation technology assets of DTCC Loan/SERV LLC
(“Loan/SERV”), a subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). Nearly 400 asset managers representing
approximately 6,000 funds in the global syndicated loan market use the Loan/SERV Loan Position Reconcilement Service to
reconcile over one million positions with the records maintained by administrative agent banks. Loan/SERV will be reported in our
Processing segment.
On January 21, 2016 we completed the transfer of HSBC’s Asian Bond Index series (ALBI, ADBI and AHBI indices). The indices
are operated as part of our iBoxx family of indices, allowing us to provide essential benchmarks for passive and active portfolio
management.
On February 4, 2016, our Board of Directors authorised the repurchase of up to $500 million of our common shares over the next
two years, at the discretion of our management. At management’s discretion, we may repurchase our common shares on the
open market from time to time, in privately negotiated transactions or block transactions, or through an accelerated repurchase
agreement. The timing of such repurchases depends on the availability of common shares, price, market conditions, alternative
uses of capital, and applicable regulatory requirements. The program may be modified, suspended or terminated at any time
without prior notice.
Our Operating Segments
We organise our business in three segments: Information, Processing and Solutions.
Information segment
Our Information segment, which represented 45.0% of our revenue in the year ended December 31, 2015, provides enriched
content consisting of pricing and reference data, indices and valuation and trading services across multiple asset classes and
geographies through both direct and third-party distribution channels. Our Information segment products and services are used for
independent valuations, research, trading, and liquidity and risk assessments. These products and services help our customers
price instruments, comply with relevant regulatory reporting and risk management requirements, and analyse financial markets.
Processing segment
Our Processing segment, which represented 23.0% of our revenue in the year ended December 31, 2015, offers trade processing
solutions globally for over-the-counter (“OTC”) derivatives, foreign
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exchange (“FX”) and syndicated loans. Our trade processing services enable buy-side and sell-side firms to process transactions
rapidly, which increases efficiency by optimising post-trade workflow, reducing risk, complying with reporting regulations and
improving connectivity. We believe we are the largest provider of end-to-end multiple asset OTC derivatives trade processing
services.
Solutions segment
Our Solutions segment, which represented approximately 32.0% of our revenue in the year ended December 31, 2015, provides
configurable enterprise software platforms, managed services and hosted digital solutions. Our enterprise software delivers
customised solutions to automate our customers’ in-house processing and connectivity for trading and post-trading processing, as
well as enterprise risk management solutions to enable customers to calculate risk measures. Our managed services and hosted
digital solutions offerings, which are targeted at a broad range of financial services industry participants, help our customers
capture, organise, process, display and analyse information, manage risk, reduce fixed costs and meet regulatory requirements.
Key Performance Indicators
We believe that revenue growth, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings are key measures to assess
our financial performance. These measures demonstrate our ability to grow while maintaining profitability and generating strong
positive cash flows over time.
Adjusted EBITDA and Adjusted Earnings are not measures defined by IFRS. The most directly comparable IFRS measure for
Adjusted EBITDA and Adjusted Earnings is our profit from continuing operations for the relevant period. These measures are not
necessarily comparable to similarly referenced measures used by other companies. As a result, investors should not consider
these performance measures in isolation from, or as a substitute analysis for, our results of operations as determined in
accordance with IFRS. Please see “—Reconciliation to Non-IFRS Financial Measures” for a description of our non-IFRS financial
measures, an explanation of why we believe they are useful measures of our performance, including our ability to generate cash
flow, and reconciliations of these non-IFRS financial measures to the most directly comparable IFRS financial measures.
Revenue growth
We view period-over-period revenue growth as a key measure of our financial success. We measure revenue growth in terms of
organic revenue growth, acquisition related revenue growth, foreign currency impact on revenue growth and constant currency
revenue growth.
We define these components as follows:
–
Organic – Revenue growth from continuing operations from factors other than acquisitions and foreign currency fluctuations.
We derive organic revenue growth from the development of new products and services, increased penetration of existing
products and services to new and existing customers, price changes for our products and services and market driven factors
such as increased trading volumes or changes in customer assets under management.
–
Acquisition related – Revenue growth from acquired businesses through the end of the fiscal year following the fiscal year
in which the acquisition was completed. This growth results from our strategy of making targeted acquisitions that facilitate
growth by complementing our existing products and services and addressing market opportunities.
–
Foreign currency – The impact on revenue growth resulting from the difference between current revenue at current
exchange rates and current revenue at the corresponding prior period exchange rates.
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–
Constant currency – Total revenue growth, excluding the impact of exchange rate movements from the prior period to the
current period. This is equal to the combination of organic and acquisition related revenue growth, as described above.
Adjusted EBITDA and Adjusted EBITDA margin
We believe Adjusted EBITDA, as defined under “—Reconciliation to Non-IFRS Financial Measures,” is useful to investors and is
used by our management for measuring profitability because it excludes the impact of certain items which have less bearing on
our core operating performance. Adjusted EBITDA measures are frequently used by securities analysts, investors and other
interested parties in their evaluation of companies comparable to us, many of which present an Adjusted EBITDA-related
performance measure when reporting their results. Adjusted EBITDA margin is also defined under “—Reconciliation to Non-IFRS
Financial Measures.”
Adjusted Earnings and related metrics
We believe Adjusted Earnings, as defined under “—Reconciliation to Non-IFRS Financial Measures,” is useful to investors and is
used by our management for measuring profitability because it represents a group measure of performance which excludes the
impact of certain non-cash charges and other charges not associated with the underlying operating performance of the business,
while including the effect of items that we believe affect shareholder value and in-year return, such as income tax expense and net
finance costs. Adjusted Earnings measures are frequently used by securities analysts, investors and other interested parties in
their evaluation of companies comparable to us, many of which present an Adjusted Earnings-related performance measure when
reporting their results. Adjusted Earnings per share, diluted is also defined under “—Reconciliation to Non-IFRS Financial
Measures,”
Factors Affecting the Comparability of Our Results
Global operations
We are a global company with operations, as of December 31, 2015, primarily in the United Kingdom, the United States,
Germany, the Netherlands, India, Singapore, Canada, Australia, Japan and Hong Kong. As a result, our consolidated revenue and
results of operations are affected by fluctuations in the exchange rates of the currencies of the countries in which we operate,
primarily the U.S. dollar, pound sterling and euro. Our revenue is typically earned in these currencies, and our expenses across
the company are typically incurred in these same currencies, providing a natural hedge to the exposure. Where this is not the
case, we have implemented a strategy to hedge material, highly probable or committed foreign currency cash flows. We do not
use financial derivatives for trading or other speculative purposes. We have not historically considered it necessary to, and we do
not currently, hedge our balance sheet or capital exposures.
Product and service innovation
We plan to continue making investments to enhance our products, services and technical capabilities to create avenues for
growth. The associated expenses consist primarily of personnel-related costs for our developers and other employees engaged in
research and development. These expenses may vary depending on the number and scale of development projects in a particular
period.
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Business combinations
Acquisitions are an important part of our growth strategy, and we expect to make additional acquisitions in the future. From
January 1, 2013 to December 31, 2015, we acquired six businesses for aggregate consideration of $468.2 million. As a
consequence of the contributions of these businesses and acquisition related expenses, our consolidated results of operations
may not be comparable between periods.
Our most significant acquisitions since January 1, 2013 were:
–
Our acquisition of thinkFolio Limited on January 13, 2014, a leading portfolio management software company, which is
reported within our Solutions segment.
–
Our acquisition on July 1, 2014 of a majority shareholding in Compliance Technologies International LLP (“CTI”), a leading
provider of tax certification services, which is reported within our Solutions segment.
–
Our acquisition on October 1, 2015 of CoreOne Technologies, a leading provider of financial data creation, management and
distribution services and solutions, used in the front-, middle- and back-office by asset managers, hedge funds, wealth
managers, prime brokers, fund administrators and investment banks.
Acquisition of non-controlling interest
On April 2, 2013, we acquired the remaining interests in our subsidiary MarkitSERV, LLC, previously owned by DTCC, increasing
our holding to 100%. As a result of this transaction, our results of operations are no longer reduced by this non-controlling interest.
Public company expenses
We are incurring additional operating expenses as a result of operating as a public company. This includes increased accounting
and legal expenses, the cost of an investor relations function, expenses related to the Sarbanes-Oxley Act and increased director
and officer insurance premiums. We do not expect these expenses to materially affect our overall profitability or to impede our
growth prospects.
Share based compensation and related items
We operate a number of equity-settled, share based compensation plans, under which we grant equity instruments (options and
restricted shares) as consideration for services from our employees. The total amount to be expensed is determined by reference
to the fair value of the equity instruments granted. The equity instruments granted vest upon the satisfaction of a service condition
which, for the majority of awards, is satisfied over either three or five years. Restricted shares are granted to certain employees
and become unrestricted typically over a period of three or five years. A number of equity instruments vested in full upon the
successful completion of our initial public offering in June 2014 and an accelerated share-based compensation charge of $7.3
million has been recognised as an exceptional item in the year ended December 31, 2014 in relation to these.
On August 1, 2013, we granted options to purchase 2.6 million shares (before giving effect to our 10-to-1 share split in connection
with our corporate reorganisation and initial public offering) to certain key employees as part of an incentive based retention
program. These options will vest upon the satisfaction of a service condition which will be satisfied over a five-year period after our
initial public offering. Annual compensation expense related to this grant is approximately $2.7 million.
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In 2014, a total share-based compensation charge of $4.0 million was recognised in relation to these options, including $1.4
million which has been treated as an exceptional item and which relates to the acceleration of the amount which would have been
recognised to the date in first quarter of 2014 when the successful completion of our initial public offering was deemed probable, if
the completion of the initial public offering had been considered probable on the grant date.
In many of our locations globally, employer’s tax liabilities result from the exercise or vesting of employee equity instruments.
During the second quarter of 2014, we recognised a liability for social security costs on employee equity instruments of $20.1
million as we agreed to meet these obligations on behalf of employees. This has been classified as an exceptional item due to the
one-off nature and size of the initial recognition. Subsequent to initial recognition, the liability shall be revalued each period end to
reflect the fair value of future expected social security costs on employee equity instrument exercise.
As a public company, a higher premium is attributed to our equity than when we were a private company. Charges in respect of
our share-based compensation charges, related to new equity grants, are consequently expected to be at a higher value than
when we were a private company.
See Note 24 of the audited consolidated financial statements for a more detailed analysis of our share-based compensation plans.
Results of Operations
Description of key line items of the historical consolidated statements of income
Set forth below is a brief description of the composition of the key line items of our historical consolidated statements of income
from continuing operations:
–
–
Revenue . Represents the income recognised from our sale of pricing and reference data, indices, valuation and trading
services, trade processing, enterprise software and managed services. We classify the revenue recognised from the sale of
our products and services into three groups as defined below:
–
Recurring fixed revenue – Revenue generated from contracts specifying a fixed fee for services delivered over the life of
the contract. The fixed fee is typically paid annually, semiannually or quarterly in advance. These contracts are typically
subscription contracts where the revenue is recognised across the life of the contract. The initial term of these contracts
can range from one to five years and usually includes auto-renewal clauses.
–
Recurring variable revenue – Revenue derived from contracts that specify a fee for services which is typically not fixed.
The variable fee is typically paid monthly in arrears. Recurring variable revenue is based on, among other factors, the
number of trades processed, assets under management or the number of positions we value. Many of these contracts do
not have a maturity date while the remainder have an initial term ranging from one to five years.
–
Non-recurring revenue – Revenue that relates to certain software licence sales and the associated consulting revenue.
Operating expenses. Includes personnel costs, operating lease payments, technology costs, subcontractor and
professional fees and other expenses. Personnel costs are our most significant cost and include salaries, bonuses and
benefits.
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–
Exceptional items. Items of income and expenses that have been shown separately due to the significance of their nature,
size or incidence of occurrence. Exceptional items include certain legal advisory costs, platform migration costs, IFRS
conversion costs, impairments of intangible assets, fair value gains or losses on disposals, profit/(loss) on the sale of available
for sale financial assets, indirect taxes, restructuring costs, legal settlements and other charges related to our initial public
offering.
–
Acquisition related items. Relates to legal and tax advisory costs attributable to acquisitions. In addition to these direct
acquisition costs, we also include fair value adjustments to contingent consideration paid in relation to our completed
acquisitions.
–
Amortisation – acquisition related. Amortisation of the intangible assets associated with our acquisitions is calculated
using the straight line method to allocate the difference between each asset’s cost and the residual value over the asset’s
estimated useful life.
–
Depreciation and amortisation – other. Depreciation on tangible fixed assets and amortisation of other intangible assets is
calculated using the straight line method to allocate the difference between each asset’s cost and the residual value over the
asset’s estimated useful life.
–
Share based compensation and related items. Relates to equity compensation arrangements for our employees under
which we grant equity instruments as consideration for services and the non-cash movement in the fair value of the liability for
social security costs on employee equity instruments.
–
Other gains/(losses) – net . Principally includes the net profit and loss impact of adjustments to the fair value of unrealised
forward foreign exchange contracts used to manage our foreign exchange risk and the non-cash impact of the retranslation of
foreign exchange exposures on monetary balances.
–
Finance costs – net . Interest and similar expenses relate to interest on borrowings and on finance lease liabilities, issue
costs on borrowings, dividends on redeemable preference shares and the unwinding of discounts. Interest income relates to
interest earned on short term bank deposits.
–
Share of results from joint venture .
–
Income tax expense . Represents the aggregate amount included in the determination of profit for the period in respect of
current tax and deferred tax, predominantly paid in the United Kingdom and the United States.
Relates to our share of profits or losses associated with our joint venture.
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Results of operations for the years ended December 31, 2015 and December 31, 2014
The following table summarises our results of operations for the years ended December 31, 2015 and 2014:
For the year ended December 31,
($ in millions, except per share amounts, number of shares and percentages)
2015
Revenue
Operating expenses
Exceptional items
Acquisition related items
Amortisation – acquisition related
Depreciation and amortisation – other
Share based compensation and related items
Other gains / (losses) – net
Operating profit
Finance costs – net
Share of results from joint venture
Profit before income tax
Income tax expense
Profit after income tax
Earnings per share, basic
Earnings per share, diluted
Weighted average number of shares issued and outstanding, basic
Weighted average number of shares issued and outstanding, diluted
Other financial data(1):
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted Earnings
Adjusted Earnings per share, diluted(2)
1,113.4
(600.4 )
(48.7 )
(4.2 )
(63.7 )
(107.0 )
(50.8 )
13.7
252.3
(18.9 )
(11.3 )
222.1
(70.0 )
152.1
0.85
0.80
179,797,425
189,796,719
496.9
45.0%
273.9
1.44
2014
1,065.1
(569.2)
(84.9)
12.4
(57.9)
(100.1)
(16.0)
(6.0)
243.4
(16.9)
(5.9)
220.6
(56.5)
164.1
0.92
0.90
179,183,880
184,467,540
488.2
46.0%
279.0
1.51
(1)
See “—Reconciliation to Non-IFRS Financial Measures” for definitions and descriptions of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
Earnings and for reconciliations of Adjusted EBITDA and Adjusted Earnings to profit for the period from continuing operations.
(2)
Adjusted earnings per share, diluted is defined as Adjusted Earnings divided by the weighted average number of shares issued and outstanding, diluted.
Revenue
Revenue increased by $48.3 million, or 4.5%, to $1,113.4 million for the year ended December 31, 2015, from $1,065.1 million for
the year ended December 31, 2014. On a constant currency basis, our revenue growth was 7.4%.
Organic revenue growth was $38.3 million, or 3.6%. This was driven by new business wins and increased customer assets under
management across our Solutions and Information segments, offset by a decrease in our Processing segment mainly as a result
of previously announced price reductions in our derivatives processing product and lower primary loan issuance volumes in our
loans processing product.
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Acquisitions contributed $41.1 million, or 3.8%, to revenue growth. In our Solutions segment, thinkFolio, CTI Tax Solutions and
Information Mosaic were acquired in January 2014, July 2014 and July 2015, respectively. In our Processing segment, DealHub
was acquired in September 2015. In our Information and Solutions segments, CoreOne was acquired in October 2015.
We experienced an adverse movement in exchange rates period-over-period, which decreased our revenue growth by $31.1
million, or 2.9%. Our revenue currency exposure for the year ended December 31, 2015 was 71.7% in U.S. dollars, 23.7% in
British pounds and 4.6% in other currencies.
Recurring fixed revenue as a percentage of total revenue increased to 56.1% for the year ended December 31, 2015, from 52.5%
for the year ended December 31, 2014. This was due to new business wins in our Information and Solutions segments, customers
moving from variable to fixed contracts in the Information Valuation and Trading Services subdivision, and the acquisitions of
Information Mosaic, DealHub, and CoreOne.
Recurring variable revenue as a percentage of total revenue decreased to 37.6% for the year ended December 31, 2015, from
42.3% for the year ended December 31, 2014. This was largely due to decreased revenue within the Processing segment as
described above and customers moving from variable to fixed contracts in the Information Valuation and Trading Services
subdivision, partially offset by increases in the Solutions segment and Information Indices subdivision associated with increased
customer assets under management and new business wins.
Non-recurring revenue as a percentage of total revenue increased to 6.3% for the year ended December 31, 2015, from 5.2% for
the year ended December 31, 2014, and increased to $70.0 million for the year ended December 31, 2015, from $55.4 million for
the year ended December 31, 2014. This was principally due to new business wins in our Solutions segment, and the acquisitions
of CTI Tax Solutions and Information Mosaic.
Operating expenses
Operating expenses increased by $31.2 million, or 5.5%, to $600.4 million for the year ended December 31, 2015, from $569.2
million for the year ended December 31, 2014. As a percentage of revenue, operating expenses increased slightly to 53.9% for
the year ended December 31, 2015, compared to 53.4% for the year ended December 31, 2014.
Personnel costs increased by $11.9 million, or 3.4%, to $362.3 million for the year ended December 31, 2015, from $350.4 million
for the year ended December 31, 2014. This increase was driven by several factors, including the addition of employees due to
acquisitions and continued investment in products to facilitate future growth, partially offset by tighter controls over employee
compensation and the impact of favourable movements in foreign exchange rates. Personnel costs as a percentage of total
operating expenses decreased to 60.3% for the year ended December 31, 2015 from 61.6% for the year ended December 31,
2014.
Exceptional items
Exceptional items for the year ended December 31, 2015 were $48.7 million. These pertain to the agreement to settle the
consolidated U.S. antitrust class action lawsuit regarding credit derivatives and related markets for $45.0 million and legal advisory
fees of $3.7 million associated with the antitrust class action lawsuit as well as the related ongoing antitrust investigations by the
U.S. Department of Justice and the European Commission.
Exceptional items for the year ended December 31, 2014 were $84.9 million. Costs associated with our initial public offering in
June 2014 were $39.5 million, $8.3 million was due to an impairment charge resulting from the decision to close the Credit Centre
business within the Processing segment, $31.5 million was due to the impairment charge against goodwill in the Analytics
business within the Solutions segment, and $5.6 million was due to legal advisory fees related to ongoing antitrust investigations
by the U.S. Department of Justice and the European Commission and the associated consolidated class action lawsuit regarding
credit derivatives and related markets.
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Acquisition related items
Acquisition related items for the year ended December 31, 2015 were a net expense of $4.2 million relating to legal and other
advisory fees totalling $4.8 million associated with the acquisitions of Information Mosaic, DealHub and CoreOne and $0.9 million
of remuneration related to the CoreOne acquisition, partially offset by a $1.5 million credit in relation to revaluation of contingent
consideration relating to the acquisition of DTCC Loan/SERV’s messaging business in 2011.
Acquisition related items for the year ended December 31, 2014 were a net credit of $12.4 million, consisting of a $13.5 million
credit to reduce the carrying value of contingent consideration relating to the Securities Hub acquisition, a $2.4 million credit to
adjust the fair value of contingent consideration and related remuneration associated with our thinkFolio acquisition, and an
expense of $3.5 million in relation to legal and advisory fees for the acquisitions of thinkFolio and CTI Tax Solutions.
Amortisation – acquisition related
Acquisition related amortisation increased by $5.8 million, or 10.0%, to $63.7 million for the year ended December 31, 2015, as
compared to the year ended December 31, 2014, reflecting the acquisitions of Information Mosaic, DealHub and CoreOne during
the course of 2015.
Depreciation and amortisation – other
Depreciation and amortisation – other increased by $6.9 million, or 6.9%, to $107.0 million for the year ended December 31, 2015
as compared to the year ended December 31, 2014. This increase reflects the continued investment in developing new and
enhancing existing products and services, including a $4.2 million increase in the amortisation of internally generated intangibles.
Share based compensation and related items
Share based compensation and related items increased by $34.8 million to $50.8 million for the year ended December 31, 2015,
from $16.0 million for the year ended December 31, 2014. The increase reflects a higher fair value per unit ascribed to new equity
awards in the period following the removal of the illiquidity discount we had as a private company, the impact of which was fully
realised on the annual awards made in January 2015. In addition, a charge of $14.4 million was incurred in the year ended
December 31, 2015 to recognise the increase in the fair value of social security liability in respect of future expected equity
exercises, compared to a charge of $2.6 million for the year ended December 31, 2014. The change in the fair value of the social
security liability in both 2014 and 2015 was impacted principally by movements in the company’s share price.
Other gains / (losses) – net
For the year ended December 31, 2015, total net other gains were $13.7 million compared to total net other losses of $6.0 million
for the year ended December 31, 2014. The movement reflects, in part, net gains on foreign exchange forward contracts of $9.1
million for the year ended December 31, 2015, compared with net losses on foreign exchange forward contracts of $2.5 million for
the year ended December 31, 2014.
Net foreign exchange gains were $4.6 million in the year ended December 31, 2015 compared to net foreign exchange losses of
$3.5 million in the year ended December 31, 2014; these gains represent the non-cash impact of the retranslation of foreign
exchange exposures on monetary balances.
Finance costs – net
Net finance costs increased by $2.0 million, or 11.8%, to $18.9 million for the year ended December 31, 2015, from $16.9 million
for the year ended December 31, 2014, primarily as a result of an increase in the interest payable following the issuance of the
senior unsecured notes, partially offset by the reduction in the charge from the unwind of discount following payments made to
reduce discounted liabilities.
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Share of results from joint venture
This represents our share of the result of Markit Genpact KYC Limited, a joint venture established with Genpact to provide KYC
services. Our share of the loss incurred for the year ended December 31, 2015 was $11.3 million, compared to $5.9 million for the
year ended December 31, 2014, and represents the ongoing investment of the joint venture in establishing its service.
Income tax expense
Income tax expense was $70.0 million for the year ended December 31, 2015 compared to $56.5 million for the year ended
December 31, 2014, an increase of $13.5 million, or 23.9%. Our effective tax rate was 31.5% for the year ended December 31,
2015 compared to 25.6% for the year ended December 31, 2014.
The increase in effective tax rate in 2015 is primarily the result of prior period adjustments being recognised during the year ended
December 31, 2015. In addition, the impact on deferred tax balances of a change to U.S. state taxes had the result of increasing
the tax charge and effective tax rate in the year ended December 31, 2015.
Profit after income tax
Profit was $152.1 million for the year ended December 31, 2015, compared to $164.1 million for the year ended December 31,
2014, a reduction of $12.0 million, or 7.3%. This principally reflects the operating performance discussed above and a reduction in
exceptional items, offset by higher acquisition related and share based compensation expenses and income tax expense.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA of $496.9 million for the year ended December 31, 2015 increased by $8.7 million, or 1.8%, from $488.2 million
for the year ended December 31, 2014. This increase was driven by the Solutions and Information segments, partially offset by a
decrease in the Processing segment and reflects the operating performance as described above. Adjusted EBITDA also includes
a $14.0 million loss in the year ended December 31, 2015 associated with our share of the KYC joint venture, which is included in
our Solutions segment.
Adjusted EBITDA margin decreased to 45.0% for the year ended December 31, 2015, compared to 46.0% for the year ended
December 31, 2014, largely as a result of reduced revenue in the Processing segment.
Adjusted Earnings and Adjusted Earnings per share, diluted
Adjusted earnings for the year ended December 31, 2015, decreased $5.1 million, or 1.8%, to $273.9 million from $279.0 million
for the year ended December 31, 2014. This reflects an increase in the depreciation and amortisation charge and cash interest
expense for the period which outweighed the increase in Adjusted EBITDA for the period.
Adjusted earnings per share, diluted for the year ended December 31, 2015 was $1.44 compared to $1.51 for the year ended
December 31, 2014. This reflects the decrease in year-on-year adjusted earnings as well as increased dilution from a higher,
post-IPO share price and the associated impact on share option dilution, in addition to dilution from share option exercises since
December 31, 2014.
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Results of operations for the years ended December 31, 2014 and December 31, 2013
The following table summarises our results of operations for the years ended December 31, 2014 and 2013:
For the year ended December 31,
($ in millions, except per share amounts, number of shares and percentages)
2014
Revenue
Operating expenses
Exceptional items
Acquisition related items
Amortisation – acquisition related
Depreciation and amortisation – other
Share based compensation and related items
Other (losses) / gains – net
Operating profit
Finance costs – net
Share of results from joint venture
Profit before income tax
Income tax expense
Profit after income tax
Earnings per share, basic
Earnings per share, diluted
Weighted average number of shares issued and outstanding, basic
Weighted average number of shares issued and outstanding, diluted
Other financial data(1):
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted Earnings
Adjusted earnings per share, diluted(2)
2013
1,065.1
(569.2 )
(84.9 )
12.4
(57.9 )
(100.1 )
(16.0 )
(6.0 )
243.4
(16.9 )
(5.9 )
220.6
(56.5 )
164.1
0.92
0.90
179,183,880
184,467,540
488.2
46.0 %
279.0
1.51
947.9
(515.1)
(60.6)
1.4
(50.1)
(86.0)
(8.1)
0.7
230.1
(19.4)
–
210.7
(63.7)
147.0
0.80
0.79
173,875,980
175,550,760
421.3
45.6%
248.4
1.41
(1)
See “—Reconciliation to Non-IFRS Financial Measures” for definitions and descriptions of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted
Earnings and for reconciliations of Adjusted EBITDA and Adjusted Earnings to profit for the period from continuing operations.
(2)
Adjusted earnings per share, diluted is defined as Adjusted Earnings divided by the weighted average number of shares issued and outstanding, diluted.
Revenue
Revenue increased by $117.2 million, or 12.4%, to $1,065.1 million for the year ended December 31, 2014, from $947.9 million for
the year ended December 31, 2013. On a constant currency basis, our revenue growth was 10.9%, or $102.6 million.
Organic revenue growth accounted for $73.4 million, or 7.8% of the 12.4% increase. This was driven by growth across all our
segments, most notably within our Solutions and Information segments due to new business wins.
Acquisitions contributed $29.2 million to revenue growth, or 3.1% of the 12.4% increase in revenue, in relation to the acquisitions
in our Solutions segment of Corporate Actions, thinkFolio and CTI Tax Solutions, which were acquired in July 2013, January 2014,
and July 2014, respectively.
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We experienced a favourable movement in exchange rates period-over-period, which increased our revenue growth by $14.6
million, or 1.5% of the 12.4% increase in revenue. Our approximate revenue currency exposure for the year ended December 31,
2014 was 69.2% in U.S. dollars, 26.2% in British pounds, and 4.6% in other currencies.
Recurring fixed revenue as a percentage of total revenue increased from 50.6% for the year ended December 31, 2013 to 52.5%
for the year ended December 31, 2014, and increased from $479.6 million for the year ended December 31, 2013 to $559.2
million for the year ended December 31, 2014. This was due to new business wins in our Information and Solutions segments, as
a result of a number of existing customers moving from variable contracts to fixed contracts in the Information Valuation and
Trading Services subdivision, and as a result of the acquisition of thinkFolio.
Recurring variable revenue as a percentage of total revenue decreased from 45.3% for the year ended December 31, 2013 to
42.3% for the year ended December 31, 2014. Recurring variable revenue increased from $429.4 million for the year ended
December 31, 2013 to $450.5 million for the year ended December 31, 2014, due to growth in the Processing segment, and due
to growth in the Solutions segment driven by the acquisition of Corporate Actions and increased assets under management in the
strong loans market. This was partially offset by the move of several customers in our Information Valuation and Trading Services
subdivision from variable-revenue to fixed-revenue contracts.
Non-recurring revenue as a percentage of total revenue increased from 4.1% for the year ended December 31, 2013 to 5.2% for
the year ended December 31, 2014, and increased from $38.9 million for the year ended December 31, 2013 to $55.4 million for
the year ended December 31, 2014. This was principally due to new business wins in our Solutions segment.
Operating expenses
Operating expenses increased by $54.1 million, or 10.5%, to $569.2 million for the year ended December 31, 2014 from $515.1
million for the year ended December 31, 2013. As a percentage of revenue, operating expenses decreased to 53.4% for the year
ended December 31, 2014 compared to 54.3% for the year ended December 31, 2013.
Personnel costs comprised 59.7% and 61.6% of total operating expenses for the year ended December 31, 2013 and 2014,
respectively. Personnel costs increased by $43.1 million, or 14.0%, to $350.4 million for the year ended December 31, 2014 as
compared to the year ended December 31, 2013. This increase was driven by the addition of employees through acquisitions,
continued investment in products to facilitate future growth, increases in employee compensation levels, and the impact of
adverse movements in foreign exchange rates.
Exceptional items
Exceptional items for the year ended December 31, 2014 were an expense of $84.9 million, principally related to $39.5 million of
costs associated with our initial public offering in June 2014 and $39.8 million of impairment charges.
The costs linked to the initial public offering included the recognition of a liability for social security costs on employee equity
instruments, initial public offering preparation and execution costs and accelerated share based compensation charges. The
completion of the initial public offering in the second quarter of 2014 required the recognition of the liability for social security costs
on employee equity instruments of $20.1 million. The initial public offering preparation and execution costs of $12.1 million
consisted of legal and professional fees associated with the initial public offering. Accelerated share based compensation charges
of $7.3 million included the acceleration of the accounting charge for options which vested upon the completion of the initial public
offering as well as an accelerated charge related to options which only commenced vesting upon the completion of the initial
public offering.
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A $31.9 million impairment of goodwill was taken in relation to Analytics, within our Solutions division, as developments in the
regulatory and business environment have resulted in weaker than anticipated growth. Also a $7.9 million impairment of other
intangible assets was taken in regard to Credit Centre, in our Processing segment, following the decision to close the business.
We also incurred $5.6 million of legal advisory fees for the year ended December 31, 2014 that related to the ongoing antitrust
investigations by the U.S. Department of Justice and the European Commission and the associated consolidated class action
lawsuit relating to credit derivatives and related markets.
Exceptional items for the year ended December 31, 2013 were a net expense of $60.6 million, and principally consisted of a $53.5
million impairment charge related to goodwill and acquired intangibles. The impairments are associated with the following product
areas: full impairment of the assets of Markit Hub associated with the commercial outlook for this product, a partial impairment of
our On Demand goodwill due to local cost pressures associated with operating at this asset’s location reducing the anticipated
rate of profit growth, and full impairment of the assets associated with BOAT following our decision to cease the operation of this
product.
In addition, we incurred legal advisory fees of $6.3 million related to ongoing antitrust investigations by the U.S. Department of
Justice and the European Commission and the associated class action lawsuits. A $5.0 million non-recurring charge associated
with our review of our indirect tax compliance has been taken. These costs were partially offset by a $4.2 million profit on the sale
of an investment.
Acquisition related items
Acquisition related items were a net gain of $12.4 million for the year ended December 31, 2014, relating primarily to the
recognition of a $15.9 million credit to reduce the carrying value of contingent consideration, of which $13.5 million was related to
our 2009 Securities Hub acquisition, reflecting a lower fair value associated with the future discounts provided post acquisition as
part of the deal structure.
These credits were partially offset by $3.5 million of legal and tax advisory costs incurred in relation to the acquisitions of
thinkFolio and CTI Tax Solutions in the year ended December 31, 2014.
Acquisition related items for the year ended December 31, 2013 were a gain of $1.4 million and primarily consisted of a credit on
the reassessment of the fair value of contingent consideration related to historical acquisitions.
Amortisation – acquisition related
Acquisition related amortisation increased by $7.8 million, or 15.6%, to $57.9 million for the year ended December 31, 2014 as
compared to the year ended December 31, 2013, reflecting the acquisitions of thinkFolio on January 13, 2014 and CTI Tax
Solutions on July 1, 2014.
Depreciation and amortisation – other
Depreciation and amortisation – other increased by $14.1 million, or 16.4%, to $100.1 million for the year ended December 31,
2014 compared to the year ended December 31, 2013. This increase reflects the continued investment in developing and
enhancing products and services, including a $10.0 million increase in the amortisation of internally generated intangibles and a
$4.0 million increase in the depreciation of computer equipment and amortisation of software licences.
Share based compensation and related items
Share based compensation and related items increased by $7.9 million, or 97.5%, to $16.0 million for the year ended
December 31, 2014, from $8.1 million for the year ended December 31, 2013. This reflects an increase in the number of restricted
shares granted as well as the recognition, from the first quarter of 2014, of an expense associated with retention options granted
in August 2013 which only
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commenced vesting after the completion of our initial public offering. In addition, there was a $2.6 million charge for the estimated
increase in the related social security liability in respect of employee equity instruments, which largely reflects the increase in our
share price following our initial public offering.
Other (losses) / gains – net
For the year ended December 31, 2014, we had total net other losses of $6.0 million compared to total net other gains of $0.7
million for the year ended December 31, 2013. The movement reflects net foreign exchange losses of $3.5 million and a net loss
on foreign exchange forward contracts of $2.5 million for the year ended December 31, 2014, compared with net foreign exchange
losses of $0.9 million offset by a net gain on foreign exchange forward contracts of $1.6 million for the year ended December 31,
2013. Net foreign exchange gains/losses represent the non-cash impact of the retranslation of foreign exchange exposures on
monetary balances.
Finance costs – net
Net finance costs decreased by $2.5 million, or 12.9%, to $16.9 million for the year ended December 31, 2014, from $19.4 million
for the year ended December 31, 2013. The movement principally reflects a $2.0 million reduction in the unwinding of discounts
following payments to reduce the share buyback liability, created following a share repurchase of $495.1 million in August 2012.
See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources” for more detail regarding this
transaction.
Share of results from joint ventures
This represents our share of the result of Markit Genpact KYC Limited, a joint venture established with Genpact to provide KYC
services. Our share of the loss incurred in the period was $5.9 million and represents the ongoing investment of the joint venture
in establishing its service.
Income tax expense
Income tax expense was $56.5 million for the year ended December 31, 2014 compared to $63.7 million for the year ended
December 31, 2013, a decrease of $7.2 million, or 11.3%. Our effective tax rate was 25.6% for the year ended December 31,
2014 compared to 30.2% for the year ended December 31, 2013. The decrease in effective tax rate in 2014 primarily reflects the
impact of acquisition related deferred tax accounting adjustments associated with both current and out-of-period acquisition
related items, partially offset by an out-of-period amendment to deferred tax related to internally developed intangible assets. The
impact of the out-of-period adjustments was a $9.2 million reduction in our income tax expense. The deferred tax adjustments
were identified as a result of a detailed tax balance sheet review undertaken by management, which had a primary focus on tax
balances associated with acquisition accounting.
Profit after income tax
Profit for the period was $164.1 million for the year ended December 31, 2014, compared to $147.0 million for the year ended
December 31, 2013, an increase of $17.1 million, or 11.6%, which principally reflects the operating performance discussed above.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA of $488.2 million for the year ended December 31, 2014 increased by $66.9 million, or 15.9%, from $421.3
million for the year ended December 31, 2013 due to increases in Adjusted EBITDA across all our segments. In addition, the
increase in Adjusted EBITDA reflects a net reduction in non-controlling interest of $10.8 million, following the acquisition of the
remaining interest in our subsidiary MarkitSERV, LLC in April 2013, offset by an increase in non-controlling interest related to CTI
Tax Solutions following its acquisition in July 2014. See “—Reconciliation to Non-IFRS Financial Measures” for a reconciliation of
Adjusted EBITDA to profit for the period from continuing operations.
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Adjusted EBITDA margin increased to 46.0% for the year ended December 31, 2014 compared to 45.6% for the year ended
December 31, 2013.
Adjusted Earnings and adjusted earnings per share, diluted
Adjusted Earnings for the year ended December 31, 2014 increased $30.5 million, or 12.3%, to $279.0 million from $248.5 million
for the year ended December 31, 2013. This was due to the improved financial performance discussed above, partially offset by
an increase in non-acquisition related intangible asset amortisation, reflecting the continued investment in the development of new
products and services and an increase in the tax charge, including a $7.5 million tax charge associated with the out-of-period
deferred tax adjustment. See “—Reconciliation to Non-IFRS Financial Measures” for a reconciliation of Adjusted Earnings to profit
for the period from continuing operations.
Adjusted earnings per share, diluted for the year ended December 31, 2014 increased 7.1% to $1.51 compared to $1.41 for the
year ended December 31, 2013. Adjusted earnings per share, diluted for 2014 was impacted by an increase in the weighted
average number of shares, primarily due to option exercises during the period and reflecting an increase in the share price when
compared to the prior period.
Segmental Analysis
For the years ended December 31,
($ in millions, except percent)
Information
Processing
Solutions
Total revenue
Information
Processing
Solutions
Non-controlling interest
Total Adjusted EBITDA
Information
Processing
Solutions
Total Adjusted EBITDA margin(1)
2015
2014
2013
501.6
256.0
355.8
1,113.4
245.1
133.9
120.0
(2.1 )
496.9
48.9 %
52.3 %
33.7 %
45.0 %
486.5
284.9
293.7
1,065.1
239.2
156.6
93.1
(0.7 )
488.2
49.2 %
55.0 %
31.7 %
46.0 %
459.6
265.3
223.0
947.9
217.2
138.1
77.5
(11.5 )
421.3
47.3 %
52.1 %
34.8 %
45.6 %
(1) Adjusted EBITDA margin is total Adjusted EBITDA divided by total revenue, excluding revenue attributable to non-controlling interests.
Segmental analysis for the year ended December 31, 2015 and December 31, 2014
Information
Revenue in our Information segment increased by $15.1 million, or 3.1%, to $501.6 million for the year ended December 31, 2015,
compared to $486.5 million for the year ended December 31, 2014. Organic revenue growth was 5.2%. Acquired revenue growth
was 1.0%, driven by the acquisition of CoreOne in October 2015, which is reported across the Information and Solutions
segments. Adverse movements in exchange rates period-over-period offset this growth, reducing Information revenue growth by
3.1%.
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Organic revenue growth was largely driven by new business wins within the Pricing and Reference Data and Indices subdivisions,
as well as increased customer assets under management in products benchmarked to our indices.
Adjusted EBITDA in our Information segment increased by $5.9 million, or 2.5%, to $245.1 million for the year ended
December 31, 2015, compared to $239.2 million for the year ended December 31, 2014. This increase was largely attributable to
the revenue growth described above. Adjusted EBITDA margin was 48.9% for the year ended December 31, 2015, compared to
49.2% for the year ended December 31, 2014.
Processing
Revenue in our Processing segment decreased by $28.9 million, or 10.1%, to $256.0 million for the year ended December 31,
2015, from $284.9 million for the year ended December 31, 2014. Organic revenues decreased 8.2%. Adverse movements in
exchange rates period-over-period contributed 3.2% of the decrease in revenue. Partially offsetting this was the acquisition of
DealHub in September 2015, which contributed an increase of 1.3% to Processing revenue.
The decrease in organic revenue reflects reduced revenue in our derivatives processing product due to previously announced
price reductions introduced on April 1, 2015 in the rates asset class, reduced volumes in the credit asset class and one-off
regulatory reporting revenue in the prior year comparator. In addition, we saw lower revenues in our loans processing product
associated with reduced primary loan issuance volumes period over period, partially mitigated by increased secondary trading
levels.
Adjusted EBITDA in our Processing segment decreased by $22.7 million, or 14.5%, to $133.9 million for the year ended
December 31, 2015, compared to $156.6 million for the year ended December 31, 2014. This decrease was largely attributable to
the revenue decrease described above, partially offset by cost savings. Adjusted EBITDA margin decreased to 52.3% for the year
ended December 31, 2015, from 55.0% for the year ended December 31, 2014.
Solutions
Revenue in our Solutions segment increased by $62.1 million, or 21.1%, to $355.8 million for the year ended December 31, 2015,
from $293.7 million for the year ended December 31, 2014. Organic revenue growth was 12.3%. Acquired revenue growth was
11.1%, driven by the acquisitions of thinkFolio, CTI Tax Solutions, Information Mosaic and CoreOne in January 2014, July
2014, July 2015 and October 2015, respectively. Adverse movements in exchange rates period-over-period reduced Solutions
revenue by 2.3%.
Organic revenue growth was driven by new business wins across our Enterprise Software and Managed Services subdivisions, as
well as increased customer assets under management in our Managed Services subdivision.
Adjusted EBITDA in our Solutions segment increased by $26.9 million, or 28.9%, to $120.0 million for the year ended
December 31, 2015, from $93.1 million for the year ended December 31, 2014. This increase was a result of the revenue growth
described above, partially offset by investment in new product offerings in the Managed Services subdivision, including Markit’s
share of the Adjusted EBITDA loss associated with the KYC joint venture established in 2014. Adjusted EBITDA margin increased
to 33.7% for the year ended December 31, 2015, from 31.7% for the year ended December 31, 2014.
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Segmental analysis for the year ended December 31, 2014 and December 31, 2013
Information
Revenue in our Information segment increased by $26.9 million, or 5.9%, to $486.5 million for the year ended December 31, 2014
compared to $459.6 million for the year ended December 31, 2013. The revenue increase was largely driven by new business
wins within the Pricing and Reference Data subdivision, and the positive impact of foreign exchange movements across the
segment. Organic revenue growth contributed 4.4% of the 5.9% increase in revenue. Favourable movements in exchange rates
period-over-period contributed 1.5% of the 5.9% increase in revenue.
Adjusted EBITDA in our Information segment increased by $22.0 million, or 10.1%, to $239.2 million for the year ended
December 31, 2014 compared to $217.2 million for the year ended December 31, 2013. This increase was largely attributable to
revenue growth. Adjusted EBITDA margin increased to 49.2% for the year ended December 31, 2014 from 47.3% for the year
ended December 31, 2013.
Processing
Revenue in our Processing segment increased by $19.6 million, or 7.4%, to $284.9 million for the year ended December 31, 2014,
from $265.3 million for the year ended December 31, 2013. This reflects higher activity levels in our derivatives processing and
loan processing products, as well as favourable foreign exchange movements during the period. Organic revenue growth
contributed 5.1% of the 7.4% increase in revenue. Favourable movements in exchange rates period-over-period contributed 2.3%
of the 7.4% increase in revenue.
Adjusted EBITDA in our Processing segment increased by $18.5 million, or 13.4%, to $156.6 million for the year ended
December 31, 2014 from $138.1 million for the year ended December 31, 2013. This increase was largely attributable to revenue
growth. Our Adjusted EBITDA margin increased to 55.0% for the year ended December 31, 2014 compared to 52.1% for the year
ended December 31, 2013.
Solutions
Revenue in our Solutions segment increased by $70.7 million, or 31.7%, to $293.7 million for the year ended December 31, 2014
from $223.0 million for the year ended December 31, 2013. Revenue growth was driven by new business wins across both the
Enterprise Software and Managed Services subdivisions, and increased revenue linked to assets under management in the loan
market, in addition to the acquisitions of Corporate Actions, thinkFolio and CTI Tax Solutions.
Constant currency revenue growth comprised 30.9% of the 31.7% increase in revenue. Organic revenue growth contributed
17.8% of the 31.7% increase in revenue. Acquisitions contributed 13.1% of the 31.7% increase in revenue as a result of the
acquisitions of Corporate Actions, thinkFolio and CTI Tax Solutions in July 2013, January 2014 and July 2014, respectively.
Favourable movements in exchange rates period-over-period contributed 0.8% of the 31.7% increase in revenue.
Adjusted EBITDA in our Solutions segment increased by $15.6 million, or 20.1%, to $93.1 million for the year ended
December 31, 2014 from $77.5 million for the year ended December 31, 2013. This increase was driven by the revenue growth
described above, offset by increased investment in new product offerings in the Managed Services subdivision, including our
share of the Adjusted EBITDA loss associated with the Markit Genpact KYC Services joint venture established in 2014. Adjusted
EBITDA margin decreased to 31.7% for the year ended December 31, 2014 from 34.8% for the year ended December 31, 2013.
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Reconciliation to Non-IFRS Financial Measures
Adjusted EBITDA and Adjusted EBITDA margin
In considering the financial performance of the business, management and our chief operating decision maker analyse the
primary financial performance measure of Adjusted EBITDA in our business segments and at a company level.
Adjusted EBITDA is defined as profit for the period from continuing operations before income taxes, net finance costs,
depreciation and amortisation on fixed assets and intangible assets (including acquisition related intangible assets), acquisition
related items, exceptional items, share based compensation and related items, net other gains or losses, including Adjusted
EBITDA attributable to joint ventures and excluding Adjusted EBITDA attributable to non-controlling interests. Adjusted EBITDA is
not a measure defined by IFRS. The most directly comparable IFRS measure to Adjusted EBITDA is our profit for the period from
continuing operations.
Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue, excluding revenue attributable to non-controlling
interests.
We believe Adjusted EBITDA is useful to investors and is used by our management for measuring profitability because it excludes
the impact of certain items which have less bearing on our core operating performance. We believe that utilising Adjusted EBITDA
allows for a more meaningful comparison of operating fundamentals between companies within our industry by eliminating the
impact of capital structure and taxation differences between the companies. We further adjust our profit for the following non-cash
items: depreciation, amortisation of intangible fixed assets, share based compensation and related items, and other gains and
losses associated with foreign exchange variations.
We have historically incurred significant acquisition related expenses acquiring businesses. These acquisition related expenses
include acquisition costs, fair-value adjustments to contingent consideration and amortisation of intangible fixed assets. Adjusted
EBITDA is important in illustrating what our core operating results would have been without the impact of non-operational
acquisition related expenses.
We also adjust for exceptional items which are determined to be those that in management’s judgment need to be disclosed by
virtue of their size, nature or incidence, which include non-cash items and items settled in cash. In determining whether an event
or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or
predictability of occurrence. This is consistent with the way that financial performance is measured by management and reported
to our Board of Directors and assists in providing a meaningful analysis of our operating performance.
Adjusted EBITDA measures are frequently used by securities analysts, investors and other interested parties in their evaluation of
companies comparable to us, many of which present an Adjusted EBITDA-related performance measure when reporting their
results.
Adjusted EBITDA has limitations as an analytical tool. It is not a presentation made in accordance with IFRS, nor is it a measure
of financial condition or liquidity and it should not be considered as an alternative to profit or loss for the period determined in
accordance with IFRS or operating cash flows determined in accordance with IFRS. Adjusted EBITDA is not necessarily
comparable to similarly titled measures used by other companies. As a result, you should not consider this performance measure
in isolation from, or as a substitute analysis for, our results of operations as determined in accordance with IFRS.
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The following table reconciles our profit for the period from continuing operations to our Adjusted EBITDA for the periods
presented:
For the years ended December 31,
($ in millions)
Profit for the period
Income tax expense
Finance costs – net
Depreciation and amortisation – other
Amortisation – acquisition related
Acquisition related items
Exceptional items
Share based compensation and related items
Other (gains) / losses – net
Share of results from joint venture not attributable to Adjusted EBITDA
Adjusted EBITDA attributable to non-controlling interests
Adjusted EBITDA
2015
2014
2013
152.1
70.0
18.9
107.0
63.7
4.2
48.7
50.8
(13.7)
(2.7)
(2.1)
496.9
164.1
56.5
16.9
100.1
57.9
(12.4)
84.9
16.0
6.0
(1.1)
(0.7)
488.2
147.0
63.7
19.4
86.0
50.1
(1.4)
60.6
8.1
(0.7)
–
(11.5)
421.3
Adjusted Earnings and related metrics
In considering the financial performance of the business, management and our chief operating decision maker analyse the
performance measure of Adjusted Earnings. Adjusted Earnings is defined as profit for the period from continuing operations
before amortisation of acquired intangibles, acquisition related items, exceptional items, share based compensation and related
items, net other gains or losses and unwind of discount, less the tax effect of these adjustments and excluding Adjusted Earnings
attributable to non-controlling interests. The most directly comparable IFRS measure to Adjusted Earnings is our profit for the
period from continuing operations. Adjusted earnings per share, diluted is defined as Adjusted Earnings divided by the weighted
average number of shares issued and outstanding, diluted.
We believe Adjusted Earnings is useful to investors and is used by our management for measuring profitability because it
represents a group measure of performance which excludes the impact of certain non-cash charges and other charges not
associated with the underlying operating performance of the business, while including the effect of items that we believe affect
shareholder value and in-year return, such as income tax expense and net finance costs.
Management uses Adjusted Earnings to (i) provide senior management a monthly report of our operating results that is prepared
on an adjusted earnings basis; (ii) prepare strategic plans and annual budgets on an adjusted earnings basis; and (iii) review
senior management’s annual compensation, in part, using adjusted performance measures.
Adjusted Earnings is defined to exclude items which have less bearing on our core operating performance or are unusual in
nature or infrequent in occurrence and therefore are inherently difficult to budget for or control. Adjusted Earnings measures are
frequently used by securities analysts, investors and other interested parties in their evaluation of companies comparable to us,
many of which present an Adjusted Earnings-related performance measure when reporting their results.
In addition we use Adjusted Earnings for the purposes of calculating diluted Adjusted earnings per share. Management uses
diluted Adjusted earnings per share to assess total company performance on a consistent basis at a per share level.
Adjusted Earnings has limitations as an analytical tool. Adjusted Earnings is not a presentation made in accordance with IFRS,
nor is it a measure of financial condition or liquidity and it should not be
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considered as an alternative to profit or loss for the period determined in accordance with IFRS or operating cash flows
determined in accordance with IFRS. Adjusted Earnings is not necessarily comparable to similarly titled measures used by other
companies. As a result, you should not consider this performance measure in isolation from, or as a substitute analysis for, our
results of operations as determined in accordance with IFRS.
The following table reconciles our profit for the period from continuing operations to our Adjusted Earnings for the periods
presented:
For the year ended December 31,
($ in millions)
2015
Profit for the period
Amortisation – acquisition related
Acquisition related items
Exceptional items
Share based compensation and related items
Other (gains) / losses – net
Unwind of discount(1)
Tax effect of above adjustments
Adjusted Earnings attributable to non-controlling interests
Adjusted Earnings
Weighted average number of shares issued and outstanding, diluted
(1)
152.1
63.7
4.2
48.7
50.8
(13.7)
9.2
(38.7)
(2.4)
273.9
189,796,719
2014
164.1
57.9
(12.4)
84.9
16.0
6.0
10.5
(47.4)
(0.6)
279.0
184,467,540
2013
147.0
50.1
(1.4)
60.6
8.1
(0.7)
12.4
(18.0)
(9.7)
248.4
175,550,760
Unwind of discount represents the non-cash unwinding of discount, recorded through finance costs – net in the income statement, primarily in relation to our
share buyback liability.
Principal Accounting Policies, Critical Accounting Estimates and Key Judgments
The preparation of our financial information requires management to make judgments, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, revenue and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances.
Our accounting policies which drive critical accounting estimates and involve key judgments include business combinations,
valuation of contingent consideration, valuation of intangible assets on acquisition, goodwill impairment testing, internally
developed intangibles, revenue recognition, valuation of the company’s shares and income taxes, and are discussed in further
detail in Note 6 to the audited consolidated financial statements that appear elsewhere in this annual report. For a summary of all
our significant accounting policies, see Note 4 to the audited consolidated financial statements included elsewhere in this annual
report. New standards and interpretations not yet adopted are also disclosed in Note 4.25 to the audited consolidated financial
statements included elsewhere in this annual report.
B. LIQUIDITY AND CAPITAL RESOURCES
We believe that cash flow from operating activities, available cash and cash equivalents and our access to our revolving credit
facility will be sufficient to fund our liquidity requirements for at least the next 12 months.
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At December 31, 2015, we had $996.0 million of total liquidity, consisting of $146.0 million in cash and cash equivalents, and
$850.0 million of available borrowings under our multi-currency revolving credit facility. In addition, we have historically generated
strong cash flows from operations.
As of December 31, 2015, cash and cash equivalents of $85.6 million and $53.7 million were held in the United Kingdom and
United States, respectively. All material cash and cash equivalents are available for use in the United Kingdom if required without
ramification. Only independently rated parties with a minimum short term investment grade rating of “A1” are accepted as
investment counterparties. As of December 31, 2015, all cash and cash equivalents were held in accounts with banks such that
the funds are immediately available or in fixed term deposits with a maximum maturity of three months.
In November 2015 we issued two series of senior unsecured notes having an aggregate principal amount of $500 million to
certain institutional investors. One series of the notes was issued in an aggregate principal amount of $210 million, bears interest
at a fixed rate of 3.73% and matures on November 4, 2022. The other series of the notes was issued in an aggregate principal
amount of $290 million, bears interest at a fixed rate of 4.05% and matures on November 4, 2025. The notes are our senior
unsecured obligations ranking pari passu with our revolving credit facility. The proceeds from the notes were used to pay down
debt drawn on our existing revolving credit facility. The note purchase agreement for the notes contains customary affirmative
covenants relating to, among other things, compliance with law, insurance coverage, maintenance of properties, payment of taxes
and claims, maintenance of corporate existence, maintenance of books and records, maintenance of priority of obligations, and
maintenance of subsidiary guarantors, as well as negative covenants that limit our and our subsidiaries’ ability to, among other
things, enter into transactions with affiliates, consolidate or merge, sell, transfer or dispose of assets, create liens, create or incur
subsidiary indebtedness, substantially change the nature of our business, or violate economic sanctions laws. We will be obligated
to maintain a Consolidated EBITDA to Consolidated Net Finance Charges ratio of not less than 4.00:1.00 and a Consolidated Net
Debt to Consolidated EBITDA ratio of no more than 3.00:1.00 (each as defined in the note purchase agreement), subject to our
right to increase such ratio up to three times to 3.50:1.00 for not more than two consecutive semi-annual periods following a
significant acquisition, during which time the interest rate will be 0.25% higher than the coupon rate for the senior notes. We may
prepay all or any part of the notes at our option in an amount not less than 5% of the aggregate principal amount of the notes then
outstanding at a price equal to 100% of the principal amount of the notes plus the applicable make-whole amount, as defined in
the note purchase agreement. Additionally, at the option of the holders of the notes, we may be required to purchase all or a
portion of the notes upon occurrence of a Noteholder Sanctions Event or Change of Control (each as defined in the Note
Purchase Agreement) or following certain significant disposals of assets, at a price equal to 100% of the principal amount of the
notes plus accrued and unpaid interest to the date of purchase. The note purchase agreement contains customary events of
default, including, among other things, payment default, covenant default, judgment defaults, employee benefit defaults, breach of
representation or warranty, bankruptcy, cross-default and failure to maintain subsidiary guarantees.
In March 2014, we amended and restated our existing credit agreement to provide a $1,050.0 million unsecured multi-currency
revolving credit facility with accordion capacity to $1,450.0 million. The amended and restated facility is for a term of five years,
ending on March 21, 2019, and carries interest on drawn amounts of between 0.75% and 1.75% over LIBOR, or, for amounts
drawn in euro, over EURIBOR, and a commitment fee of 35% of the margin on the undrawn balance. At December 31, 2015, we
were in material compliance with all covenants under the facility. See Note 28 to the audited consolidated financial statements
included elsewhere in this annual report for a summary of the material terms of our revolving credit facility.
In August 2012 we repurchased 2,139,948 shares (before giving effect to our 10-to-1 share split in connection with our corporate
reorganisation and initial public offering) for consideration of $495.1 million, payable in quarterly instalments through May 2017.
Amounts outstanding under this
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arrangement carry no coupon but bear an accounting charge for the unwinding of discounts. For accounting purposes, the present
value of this liability at December 31, 2015 was $128.6 million.
At December 31, 2015, we had total debt, excluding capitalised capital leases, arrangement fees, and certain other obligations, of
$828.6 million which consisted of $200.0 million drawn under our long-term multi-currency revolving credit facility, $500.0 million
aggregate principal amount of senior unsecured notes and $128.6 million related to our share repurchase in August 2012.
Cash flows
The following table summarises our operating, investing and financing activities for the years ended December 31, 2015, 2014
and 2013:
For the years ended December 31,
($ in millions)
Net cash generated from / (used in):
Operating activities
Investing activities
Financing activities
Net increase/(decrease) in cash and cash equivalents
2015
2014
2013
405.6
(434.1 )
58.5
30.0
369.9
(250.9 )
(75.3 )
43.7
339.8
(170.6 )
(203.9 )
(34.7 )
Net cash generated from operating activities
Net cash generated by operating activities increased by $35.7 million, to $405.6 million for the year ended December 31, 2015,
from $369.9 million for the year ended December 31, 2014.
Cash generated from operating activities for the year ended December 31, 2015 was impacted by favourable working capital
movements offset by an increase in income taxes paid. The improvement in working capital was primarily driven by collections of
trade receivables which contributed a $26.0 million cash inflow for the year ended December 31, 2015, compared to an outflow of
$56.6 million for the year to December 31, 2014. These movements were partially offset by an increase of $18.5 million in income
tax paid to $63.6 million for the year ended December 31, 2015.
Net cash generated by operating activities increased by $30.1 million, to $369.9 million for the year ended December 31, 2014
from $339.8 million for the year ended December 31, 2013.
Cash generated for the year ended December 31, 2014 reflected increased cash generated from operations during the period and
a reduction in income tax paid, offset by the cash impact of exceptional items and by working capital movements, reflecting
continued business growth.
Net cash used in investing activities
Cash flows used in investing activities increased by $183.2 million, to $434.1 million, for the year ended December 31, 2015,
compared to $250.9 million for the year ended December 31, 2014.
Cash flows used in investing activities for the year ended December 31, 2015 consisted of $300.7 million in relation to the
acquisitions of Information Mosaic, DealHub and CoreOne, $25.3 million of investment in the KYC joint venture, and $1.6 million in
settling contingent consideration. In addition, we spent $117.1 million on capital expenditure largely related to internal
development costs. This was offset by a cash inflow of $11.6 million on the settlement of contingent consideration relating to the
thinkFolio acquisition previously held in escrow.
Cash flows used in investing activities for the year ended December 31, 2014 primarily related to $127.4 million used for the
acquisitions of thinkFolio and CTI Tax Solutions. In addition, we spent $124.9 million on capital expenditure largely related to
internal development costs.
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Cash flows used in investing activities increased by $80.3 million to an outflow of $250.9 million for the year ended December 31,
2014 from an outflow of $170.6 million for the year ended December 31, 2013.
Cash flows used in investing activities for the year ended December 31, 2013 primarily related to the payment of $33.1 million of
contingent consideration in relation to historical acquisitions and capital expenditures of $130.5 million. This was partially offset by
the proceeds from the sale of an investment. The $5.6 million decrease in capital expenditures from the year ended December 31,
2013 to the year ended December 31, 2014 related to leasehold improvements and furniture, fittings and equipment as we
invested in new office space in London and Dallas in the year ended December 31, 2013.
Net cash generated from / (used in) financing activities
Net cash generated from financing activities was a net inflow of $58.5 million for the year ended December 31, 2015, compared to
net cash outflow of $75.3 million for the year ended December 31, 2014.
Net cash generated from financing activities for the year ended December 31, 2015 principally reflected $670.0 million of
drawdowns of bank borrowings, $500.0 million inflow in respect of the senior unsecured notes and $227.2 million in connection
with the issuance of share capital in respect of share option exercises. This was offset by $350.9 million of transactions with
shareholders as part of our share repurchase programme, $200.0 million relating to the accelerated share repurchase, $87.8
million of transactions with shareholders relating to the share buyback liability associated with our 2012 share repurchase and
$700.0 million of borrowing repayments.
Net cash used in financing activities for the year ended December 31, 2014 principally reflected $100.0 million of proceeds from
bank borrowings used to finance investing activities, and $72.3 million in connection with the issuance of share capital in respect
of share option exercises. This was offset by $103.5 million related to transactions with shareholders and $140.0 million of
borrowing repayments.
Net cash used in financing activities decreased to an outflow of $75.3 million for the year ended December 31, 2014 from an
outflow of $203.9 million for the year ended December 31, 2013.
Net cash used in financing activities for the year ended December 31, 2013 reflected $281.3 million related to transactions with
shareholders and $157.0 million of borrowing repayments, partially offset by $177.0 million of proceeds from bank borrowings
used to finance investing activities and $57.4 million of proceeds from the issuance of ordinary shares. The proceeds from
issuance of shares predominantly reflect the exercise price associated with options exercised by employees in connection with the
investment by Temasek Holdings (Private) Limited (“Temasek”).
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES, ETC.
Information Technology
Our information technology systems are fundamental to our success. They are used for the storage, processing, access and
delivery of the data that forms the foundation of our business and the development and delivery of the products and services we
provide to our customers. Much of the technology we use and provide to our customers is developed, maintained and supported
in-house by a team of more than 1,900 employees. We generally own or have secured ongoing rights to use for the purposes of
our business all the customer-facing applications that are material to our operations. We support and implement a mix of
technologies, focused on implementing the most efficient technology for any given business requirement or task.
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Data centres
We provide most of our corporate and customer-facing services through 11 core data centres that provide a geographically
separated and resilient structure. These data centres are located in London, Amsterdam, Boulder (Colorado), Littleton (Colorado),
Dallas (Texas), Atlanta (Georgia) and Carlstadt (New Jersey), and are strategically located and operated as close as possible to
the business needs in each geographic region.
Disaster recovery
We seek to ensure that key assets, such as premises, systems, documents and services are available, robust and can be
recovered and resumed within acceptable timeframes following an incident that impacts operations. We have a committed
business continuity infrastructure that is directed by a steering group, which includes our global head of business continuity and
information security, global head of group technology services and other key business heads. Each product and service has a
business continuity plan that is tied into an overarching crisis management plan and an office business continuity plan. Our goal is
to ensure that production infrastructure and staffing do not create the potential for single points of failure. Thus, all product and
service data is backed up regularly, with weekly and monthly backups stored securely at a third-party off-site storage facility.
Security
We place a high level of importance on our data protection and information security systems and have a dedicated team of
security specialists. Markit’s information security team manages a wide range of security controls aimed at allowing our workforce
to operate in a secure, policy-compliant manner, including multiple tiers of firewall protections, the use of intrusion detection
software, the encryption of network traffic, access rights, regular risk assessments, audit logs and database logging. These
controls, which are regularly reviewed by our team, are designed to alert us to possible weaknesses and breaches and to ensure
appropriate responses from our information security team.
Our information security team also provides guidance at the product development stage to ensure best practice and engages in
regular penetration testing of our products and services to assess security.
Intellectual Property
We rely on a combination of trademark, trade secret, patent, misappropriation and copyright laws, as well as contractual and
technical measures, to protect our proprietary rights and intellectual property. We seek to control access to and distribution of our
confidential and proprietary information and enter into non-disclosure agreements with our employees, consultants, customers
and suppliers that provide that any confidential or proprietary information owned or developed by us or on our behalf be kept
confidential and limited to internal use. In the normal course of business, we provide our proprietary data, software and
methodologies and business processes to third parties through licensing or restricted use agreements. We have proprietary
information, rights and know-how in our data, indices, software processes, methodologies and business processes. We also
pursue the registration of certain of our trademarks and service marks for our relevant fields of services in the United States and
other key jurisdictions. As of December 31, 2015, we have registered 28 U.S. trademarks, including “MARKIT,” “IBOXX,”
“ITRAXX,” and “CDX,” and have filed two pending trademark applications with the U.S. Patent and Trademark Office. As of
December 31, 2015, we have also registered over 230 trademarks, including “MARKIT,” “PMI,” “IBOXX,” “ITRAXX” and “CDX,” in
various other jurisdictions throughout the world. In addition, we have registered domain names covering many of our marks,
including www.markit.com .
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D. TREND INFORMATION
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or
events since December 31, 2015 that are reasonably likely to have a material adverse effect on our revenues, income,
profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of
future operating results or financial conditions.
E. OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2015, we had no significant off-balance sheet arrangements.
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Contractual Obligations
The following table summarises our estimated material contractual cash obligations and other commercial commitments at
December 31, 2015, and the future periods in which such obligations are expected to be settled in cash:
Cash payments due by period
($ in millions)
Bank borrowings(1)
Other indebtedness
Operating leases
Obligations in respect of historical
acquisitions
Total
Total
Less than
1 year
1-3 years
3-5 years
After 5 years
217.1
800.9
265.9
5.3
107.3
22.8
10.5
83.1
53.3
201.3
39.2
40.3
–
571.3
149.5
133.2
1,417.1
18.0
153.4
115.2
262.1
–
280.8
–
720.8
(1) Borrowings commitment includes estimates of future interest payable; the amount of interest payable will depend upon the timing of cash
flows as well as fluctuations in the applicable interest rates. In respect of the interest presented in this table, we have assumed an interest
rate of 1.0655% as of December 31, 2015, which has been applied to the amount at that date. Of our estimated interest payments in
respect of borrowings of $8.0 million, $2.5 million is payable in less than one year, $4.9 million is payable in one to three years and $0.6
million is payable in three to five years.
G. SAFE HARBOR
See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this annual report.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
The following table lists information about each of our executive officers and directors.
Name
Executive Officers
Lance Uggla
Kevin Gould
Jeffrey Gooch
Shane Akeroyd
Stephen Wolff
Non-Executive Directors
Edwin D. Cass
Gillian H. Denham
Dinyar S. Devitre
William E. Ford
Timothy J.A. Frost
Robert P. Kelly
James A. Rosenthal
Cheng Chih Sung
Anne Walker
Age
Position
54
53
48
52
48
Chairman and Chief Executive Officer
President
Chief Financial Officer
Global Head of Sales
Global Head of Corporate Strategy
54
55
68
54
51
61
62
54
41
Director
Director
Director
Director
Director
Director
Director
Director
Director
The following is a brief biography of each of our executive officers and directors.
Executive Officers
Lance Uggla is Chief Executive Officer and Chairman of our Board of Directors, responsible for leading the company’s strategic
development and managing its day-to-day operations. Mr. Uggla is a founder of Markit and has been a director and chief
executive of the business since its formation in 2003. Prior to this, Mr. Uggla was Global Head of Credit Trading and Head of
Europe and Asia for TD Securities. Mr. Uggla started his career at Wood Gundy in Toronto and, following the acquisition by CIBC,
was latterly Global Head of Fixed Income. Mr. Uggla holds a BBA from the Simon Fraser University and an MSc from the London
School of Economics.
Kevin Gould is President of Markit and a co-founder of the company. Mr. Gould was appointed head of Markit Asia Pacific in July
2013 and leads strategy and operations across that region. Mr. Gould established Markit’s business in North America in 2004 and
was a director of Markit from 2003 to January 2014. Prior to this, Mr. Gould was European and Asian Head of Credit Trading and
Sales at TD Securities in London. Mr. Gould holds a BSc in Mechanical Engineering from Bristol University.
Jeffrey Gooch was appointed Chief Financial Officer of Markit in September 2013 and is Chairman of MarkitSERV. He was a
board member of Markit from 2003 to 2005. Mr. Gooch joined Markit in 2007 to lead the company’s portfolio valuations and
derivatives processing business. In 2009, Mr. Gooch was appointed Chief Executive Officer of MarkitSERV and held that role until
September 2013. Prior to this, Mr. Gooch had a ten-year career at Morgan Stanley, most recently as Head of Fixed Income
Operations. Mr. Gooch started his career at Ernst & Young. Mr. Gooch is a chartered accountant and holds an MA in Mathematics
from Cambridge University.
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Shane Akeroyd is Global Head of Sales and leads Markit’s sales strategy and implementation across all products and
geographies. Prior to joining Markit in 2008, Mr. Akeroyd held a number of sales roles most recently as Global Head of Sales for
RBC Capital Markets. Mr. Akeroyd holds a BSc (Hons) in Economics from University College London.
Stephen Wolff is Global Head of Corporate Strategy. Mr. Wolff joined Markit in February 2014 from Deutsche Bank where he was
Head of Strategic Investments, managing a portfolio of principal investments, primarily focused on financial market infrastructure.
Previous roles at Deutsche Bank included Head of Fixed Income e-commerce and in a prior period, interest rate and FX
derivatives trading in both G7 and emerging markets. Between 1999 and 2004, Mr. Wolff worked for Razorfish, and then as
managing director of a start-up, Pogo Technology. Mr. Wolff holds a BA in Economics from Manchester University.
Adam Kansler was no longer an executive officer as of April 1, 2015.
Non-Executive Directors
Edwin D. Cass has been a director of Markit since October 2014. Mr. Cass is the senior managing director and Chief Investment
Strategist for the Canada Pension Plan Investment Board (“CPPIB”), responsible for overall fund level investment strategy. He
chairs CPPIB’s investment planning committee, which approves all new investment programmes and oversees all portfolio risks.
Mr. Cass has been with CPPIB since 2008 in various positions. Mr. Cass is also a member of the board of trustees of the
University of Guelph in Canada. Prior to joining CPPIB, Mr. Cass was a managing director and co-chief investment officer for
Fortress Investment Group’s Drawbridge Relative Value Fund where he was responsible for fixed-income, currency, stock index
and commodity trading strategies. Mr. Cass previously held senior positions at Deutsche Bank and Toronto-Dominion Securities
Inc. He holds a Bachelor of Science (Honours) degree in Theoretical Physics from Queen’s University and a Bachelor of Laws
from Osgoode Hall Law School.
Gillian (Jill) H. Denham has been a director of Markit since December 2013. Ms. Denham is chair of the board of directors of
Morneau Shepell Inc. and a member of the board of directors of Penn West Petroleum Ltd. and National Bank of Canada.
Ms. Denham is also chair of the boards of directors of Munich Reinsurance Company of Canada and Temple Insurance Company,
where she is also chair of the investment committees and a member of the audit committees. Ms. Denham is a member of the
board of governors and chairs the audit committee of Upper Canada College. From 2001 to 2005, Ms. Denham was Vice Chair,
Retail Markets at the Canadian Imperial Bank of Commerce. Ms. Denham joined Wood Gundy (subsequently acquired by CIBC)
in 1983 as an Assistant Vice-President in Corporate Finance and throughout her career at CIBC held progressively more senior
roles. Ms. Denham previously served on the boards of the Ontario Teachers’ Pension Plan Board, the Foundation Board of the
Hospital for Sick Children and the Prostate Cancer Research Foundation. Ms. Denham holds an Honours Business Administration
degree from the University of Western Ontario School of Business Administration and an MBA from Harvard Business School.
Dinyar S. Devitre has been a director of Markit since November 2012. Mr. Devitre is a special adviser to General Atlantic LLC, a
global growth equity firm. Mr. Devitre is also a member of the board of directors of Altria Group, Inc., where he serves on its
finance committee and SABMiller plc, where he serves on its audit committee. Mr. Devitre also is the Executive Chairman of
Pratham USA and serves as a Trustee of the Brooklyn Academy of Music and a Trustee Emeritus of the Asia Society. In March
2008, Mr. Devitre retired from his position as Senior Vice President and Chief Financial Officer of Altria Group, Inc. Prior to
Mr. Devitre’s appointment to this position in April 2002, he held a number of senior management positions with Altria. Mr. Devitre
previously served on the boards of Western Union
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Company, Emdeon Inc., Kraft Foods Inc. (now known as Mondelēz International, Inc.) and The Lincoln Center for the Performing
Arts, Inc. Mr. Devitre holds a BA (Hons) degree from St. Joseph’s College, Darjeeling and an MBA from the Indian Institute of
Management in Ahmedabad.
William E. Ford has been a director of Markit since January 2010. Mr. Ford is the Chief Executive Officer and Managing Director
of General Atlantic LLC, a global growth equity firm, where he has worked since 1991. Mr. Ford sits on the boards of Tory Burch
and Oak Hill Advisors, which are General Atlantic portfolio companies. Mr. Ford is actively involved in various non-profit
organisations and serves on the boards of the National Committee on US-China Relations, Shofco (Shining Hope for
Communities), New York Genome Center and New York Public Library. Mr. Ford is a member of the advisory board of Soros
Fund Management Advisory Committee, McKinsey Investment Office Advisory Council, Stanford Graduate School of Business,
Tsinghua University School of Economics and Management, TBG Limited Advisory Board, Lincoln Center and The Johnson
Company. He is also a Vice Chairman of the board of trustees of The Rockefeller University, a member of the board of overseers
and managers of Memorial Sloan Kettering Cancer Center and a chairman of the Investment Committee of Amherst College.
Mr. Ford formerly served on the boards of a number of General Atlantic portfolio companies including CareCore National, NYSE
Euronext, E*Trade, Priceline, NYMEX and Zagat Survey. Mr. Ford holds a BA in Economics from Amherst College and an MBA
from the Stanford Graduate School of Business.
Timothy J.A. Frost has been a director of Markit since January 2010. He previously served as a director from 2003 to 2004.
Mr. Frost is a non-executive director of Cairn Capital Group Limited. He is also a Governor of the London School of Economics
and Political Science and a member of the Court of Directors of The Bank of England, where he is also a member of its audit and
risk committee. Prior to Cairn Capital, Mr. Frost worked at J.P. Morgan in a variety of roles, including European Head of Credit
Trading, Sales and Research. Mr. Frost began his career as an officer in the British Army and served in Germany and the
Falkland Islands. Mr. Frost holds a BSc in Economics from the London School of Economics and Political Science.
Robert P. Kelly has been a director of Markit since November 2012 and serves as lead director of our Board of Directors. Mr. Kelly
is chairperson of Canada Mortgage and Housing Corporation and chairman of Santander Asset Management. Mr. Kelly also
serves as a member of the Trilateral Commission and head of the U.S. alumni association of the Cass Business School, London.
Mr. Kelly was most recently chairman and Chief Executive Officer of The Bank of New York Mellon and The Bank of New York
Mellon Corporation until 2011. Prior to that, Mr. Kelly was Chairman, Chief Executive Officer and President of Mellon Bank
Corporation, Chief Financial Officer of Wachovia Corporation and Vice- Chairman of Toronto-Dominion Bank. Mr. Kelly previously
served as Chancellor of Saint Mary’s University in Canada, was a former member of the boards of the Financial Services Forum,
the Federal Advisory Council of the Federal Reserve Board, the Financial Services Roundtable, and Institute of International
Finance, and a former member of the board of trustees of St. Patrick’s Cathedral in New York City, Carnegie Mellon University in
Pittsburgh and the Art Gallery of Ontario. Mr. Kelly holds a B.Comm. from Saint Mary’s University, an MBA from the Cass
Business School, City University, London, United Kingdom and is a Chartered Accountant and Fellow Chartered Accountant.
Mr. Kelly has been awarded honorary doctorates from City University and Saint Mary’s University.
James A. Rosenthal has been a director of Markit since September 2013. Mr. Rosenthal is the Executive Vice President and Chief
Operating Officer of Morgan Stanley, a member of Morgan Stanley’s management and operating committees, Chairman and Chief
Executive Officer of Morgan Stanley Bank, N.A., and Chairman of the board of Morgan Stanley Private Bank, N.A. Mr. Rosenthal
is a member of the board of The Lincoln Center for the Performing Arts, Inc. Mr. Rosenthal was previously Head of Corporate
Strategy of Morgan Stanley, Chief Operating Officer of Morgan Stanley
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Wealth Management and Head of Firmwide Technology and Operations for Morgan Stanley. Prior to joining Morgan Stanley,
Mr. Rosenthal served as Chief Financial Officer of Tishman Speyer from 2006 to 2008. Mr. Rosenthal holds a BA from Yale and a
JD from Harvard Law School.
Cheng Chih Sung has been a director of Markit since December 2013. Dr. Sung is the Chief Executive Officer of Avanda
Investment Management Pte. Ltd. and an investment adviser to the finance ministries in Singapore and Norway. Dr. Sung serves
on the boards, investment and risk committees, and human resource and remuneration committees of a number of financial and
academic institutions including the MIT Investment Management Company, the NTUC Income Insurance Co-Operative and the
Wealth Management Institute in Singapore. Dr. Sung was previously an investment adviser to the Monetary Authority of
Singapore and the Government of Singapore Investment Corporation. Prior to 2011, Dr. Sung was Managing Director and Chief
Risk Officer for the Government of Singapore Investment Corporation, which he joined in 1993, as well as chairman of the group
risk committee and a member of the group executive committee. Dr. Sung holds a BSc and MSc in Applied Mathematics from the
University of Waterloo and a PhD in Pure Mathematics from the University of Minnesota.
Anne Walker has been a director of Markit since February 2013. Ms. Walker is currently Head of Enterprise Strategic Initiatives at
Bank of America, including oversight of Bank of America’s effort to streamline and drive operational excellence as well as lead
development of payment strategy. Prior to this, Ms. Walker was the Head of Global Corporate Strategy & Investor Relations and
the Head of U.S. Equity Syndicate at Bank of America. Ms. Walker started her career with Merrill Lynch in 1996 in investment
banking and joined Equity Capital Markets in 2001. Ms. Walker holds a BA from Harvard University and an MBA from Columbia
Business School.
No director or executive officer has a family relationship with any other director or executive officer.
Arrangements or Understandings
Prior to the consummation of our initial public offering, our Shareholders’ Agreement, dated as of May 21, 2013, provided certain
of our shareholders the right to each designate one individual to serve on our Board of Directors. See “Item 7. Major Shareholders
and Related Party Transactions—B. Related Party Transactions—Transactions with Related Parties—Shareholders’ Agreement.”
The Shareholders’ Agreement was terminated upon the pricing of our initial public offering on June 18, 2014.
Upon the termination of our Shareholders’ Agreement and the consummation of our initial public offering, our shareholders no
longer had a right to designate any individuals to serve on our Board of Directors, other than as described below, and our Board of
Directors became divided into three classes. Pursuant to our bye-laws, directors are elected at the annual general meeting of
shareholders for a period of three years, with each director serving until the third annual general meeting of shareholders following
their election, except that the initial Class I directors were appointed to serve until the 2015 annual general meeting of
shareholders and the Class II directors were appointed to serve until the 2016 annual general meeting of shareholders after our
initial public offering. Upon the expiration of the term of a class of directors, directors in that class are elected for three-year terms
at the annual general meeting of shareholders in the year of such expiration.
Mr. Devitre, Mr. Kelly, Dr. Sung and Robert-Jan Markwick were initially appointed as Class I directors for a term expiring in 2015.
Mr. Devitre, Mr. Kelly and Dr. Sung were re-elected as Class I directors at our 2015 annual general meeting of shareholders.
Mr. Markwick decided not to stand for re-election at our 2015 annual general meeting of shareholders.
Zar Amrolia, Mr. Frost, Mr. Rosenthal and Ms. Walker were initially appointed as Class II directors for a term expiring in 2016.
Mr. Uggla, Ms. Denham, Mr. Ford and Thomas Timothy Ryan, Jr. were initially appointed as Class III directors for a term expiring
in 2017. In October 2014, Mr. Amrolia resigned from
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our Board of Directors and Mr. Ryan agreed to become a Class II director and Mr. Cass, the designee nominated by CPPIB
pursuant to a director nomination agreement between CPPIB and us as described below, was appointed to our Board of Directors
as a Class III director. In November 2014, Mr. Ryan resigned from our Board of Directors.
CPPIB purchased approximately $250 million of our common shares at the initial public offering price in our initial public offering,
and has the right to nominate, in consultation with our Nominating and Governance Committee, one director for appointment to
our Board of Directors pursuant to a Director Nomination Agreement between CPPIB and Markit. This right will expire if CPPIB’s
beneficial ownership of our common shares falls below 100% of the number of common shares CPPIB purchased in our initial
public offering. Mr. Cass was the designee nominated by CPPIB and was elected to our Board of Directors in October 2014 as a
Class III director to fill a vacancy.
B. COMPENSATION
The aggregate cash compensation, including benefits in kind, accrued or paid to our executive officers and directors with respect
to the year ended December 31, 2015 for services in all capacities was $7,783,647. In addition, for the year ended December 31,
2015, we also granted 406,344 restricted shares in the aggregate to our executive officers and directors, as set forth in the
following tables.
No. of restricted shares for executive officers
Vesting Schedule
390,662
Restricted shares vest in three equal annual
instalments on the first, second and third
anniversaries of the applicable grant date.
No. of restricted shares for directors
Vesting Schedule
15,682
Restricted shares vest on the first
anniversary of the applicable grant date.
During the year ended December 31, 2015, the amount we set aside or accrued to provide pension, retirement or similar benefits
to our executive officers and directors was $45,009.
Incentive Compensation Plans
Prior to the completion of our corporate reorganisation, all our equity incentive plans were administered by our wholly owned
subsidiary, Markit Group Holdings Limited. Following the completion of our corporate reorganisation, all our equity incentive plans
are administered by Markit Ltd. For purposes of this section, prior to the completion of our corporate reorganisation, references to
our “Board of Directors” refer to the board of directors of Markit Group Holdings Limited (or a duly authorised committee thereof).
Following the completion of our corporate reorganisation, references to our “Board of Directors” refer to the board of directors of
Markit Ltd. (or a duly authorised committee thereof). Prior to the completion of our corporate reorganisation, shares that were
issued pursuant to an equity award granted under such plans were the ordinary shares of Markit Group Holdings Limited.
Following the completion of our corporate reorganisation, shares that are issued pursuant to an equity award granted under such
plans are the common shares of Markit Ltd.
Share Option Plans
Starting in 2004, as part of our equity compensation program, we historically adopted a new share option plan each year under
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voting shares in the company to eligible participants. Our share option plans were intended to enable us to motivate eligible
participants who are important to our success and growth and to create a long term mutuality of interest between such participants
and our shareholders through grants of options to purchase shares in the company. Although the specific terms of our share
option plans differed from year to year, the material terms of our share option plans are set forth below.
Any employee, director and consultant of the company or its affiliates was eligible to participate in our share option plans. Our
Board of Directors administers our share option plans and had absolute discretion to determine the award recipients under each
plan, as well as the terms of each individual award, including the vesting schedule and exercise price of such award (which must
be determined no later than the grant date). Our Board of Directors may also at any time delete, amend or add to the provisions of
our share option plans, provided that no deletion, amendment or addition may adversely affect existing rights of participants
without prior approval. Under certain of our share option plans, our Board of Directors also had the authority to designate an
award of share options to employees as incentive stock options. The exercise price of an incentive stock option was no less than
100% of the grant date fair market value of a share (or 110% in the case of an incentive stock option granted to a 10%
shareholder), as set by our Board of Directors in good faith based on reasonable valuation methods. As of December 31, 2015,
there were 27,589,592 shares underlying outstanding share options, including incentive stock options, granted pursuant to our
share option plans (excluding the KEIP options and any Awards under our 2014 Equity Plan, each described below), at exercise
prices ranging from $0.900 to $29.14.
Subject to our Board of Directors determining otherwise, on or before the grant of a share option, share options generally have a
seven-year term from the commencement of vesting, with certain share options having a ten-year term. They vest in accordance
with the vesting terms as provided in the applicable share option plan or share option grant, and vest over a three- or five-year
vesting period. For example, if a share option had a five-year vesting period, upon each anniversary of the grant date, the share
option would vest as to one-fifth of the shares underlying such option over a total period of five years. Our Board of Directors may
at any time in its absolute discretion determine to treat an otherwise unvested share option as having vested in full or in part and
may extend the exercise period or lapse date of a share option, provided that such lapse date may not be extended past the
original term of the share option.
Upon a termination of employment or provision of services to the company, unvested share options will generally lapse
immediately and vested share options will generally lapse after the expiry of a specified exercise period. In certain circumstances,
vested share options may also lapse immediately upon termination. In connection with certain corporate transactions (such as
when our common shares became listed on NASDAQ), share options may become fully vested and exercisable for a specified
exercise period and may lapse thereafter. Prior to our initial public offering, our Board of Directors amended certain of our share
option plans to provide that share options that become fully exercisable upon a listing event (which was the date of our initial
public offering) remain fully vested and exercisable for the remainder of the original term of such share option. In 2015, our Board
of Directors delegated administration of our share option plans to the HR and Compensation Committee of the Board of Directors.
Each of our share option plans may be terminated at any time by our Board of Directors or the company and will in any event
terminate on the tenth anniversary of its commencement date. Termination will not affect the outstanding rights of participants.
Restricted Share Plan
Starting in 2006, under our restricted share plan, our Board of Directors granted awards of restricted ordinary non-voting shares in
the company to eligible participants. The material terms of our restricted share plan are set forth below.
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Any senior employee (including a director) of the company or an affiliate of the company is eligible to participate in the restricted
share plan. As of December 31, 2015, there were 662,142 issued and outstanding restricted shares awarded under our restricted
share plan. Under our restricted share plan, shares were issued to participants and registered in their name. Each restricted share
has a nominal value of $0.01 per share, which the participant must pay in respect of the aggregate number of shares underlying
the restricted share award. Restricted shares held by participants are subject to a vesting period set out in the participant’s
allotment letter. For example, if an award of restricted shares has a three-year vesting period, upon each anniversary of the grant
date, one-third of the restricted shares would vest over a total period of three years. Upon a termination of employment, certain
forfeiture provisions may apply to a participant’s vested and/or unvested restricted shares.
Key Employee Incentive Program
The Markit Key Employee Incentive Program (the “KEIP”) was approved by our Board of Directors and adopted by the company
on July 25, 2013. Under the KEIP, our Board of Directors (or a committee appointed by the Board of Directors) could grant options
to purchase ordinary non-voting shares in the company (“KEIP options”) to any employee (including an executive director) of the
company or its subsidiaries who is required to devote substantially the whole of his or her working time to his or her employment
or office. As of December 31, 2015, there are 21,615,000 shares underlying outstanding KEIP options, at an exercise price of
$26.700 per share.
In 2015, our Board of Directors delegated administration of the KEIP to the HR and Compensation Committee of the Board of
Directors, which has absolute discretion to, at any time delete, amend or add to the provisions of the KEIP, provided that no
deletion, amendment or addition may adversely affect in any material manner existing rights of participants without prior requisite
approval.
To be eligible to receive a KEIP option, a participant agreed to an extension of the vesting period for a portion of his or her
outstanding share options, which portion was equal to a specified percentage (ranging from 20% to 30%) of their KEIP option
grant. Instead of becoming fully vested and exercisable for a specified exercise period upon the occurrence of a listing event, such
portion of a participant’s outstanding share options would instead become fully vested and exercisable on the second anniversary
of our listing date.
KEIP options vest and become exercisable in three equal tranches on the third, fourth and fifth anniversaries of certain listing
events, including, but not limited to, our listing on the NASDAQ. KEIP options have a seven-year term from the grant date. Our HR
and Compensation Committee may at any time in its sole discretion decide to accelerate the vesting of unvested KEIP options.
Upon a termination of employment, unvested KEIP options will generally lapse immediately and vested KEIP options will generally
lapse after the expiry of a specified exercise period. In certain circumstances, vested KEIP options may also lapse immediately
upon termination of employment. In connection with certain corporate transactions, KEIP options may become fully vested and
exercisable for a specified exercise period.
The KEIP may be terminated at any time by our Board of Directors or the company and will in any event terminate on the tenth
anniversary of its commencement date. Termination will not affect the outstanding rights of participants.
2014 Equity Plan
In 2014, following the completion of our initial public offering, we discontinued our historical practice of adopting a new share
option plan each year or making annual awards under a restricted share plan. Instead, we adopted a new 2014 equity incentive
award plan (the “2014 Equity Plan”) under which we would have the discretion to grant a broad range of equity-based awards to
our employees (including
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our officers), consultants, and non-employee directors, as well as employees, consultants and non-employee directors of our
subsidiaries, parent companies and certain affiliates. The following is a summary of the 2014 Equity Plan which is qualified in its
entirety by reference to the complete text of the 2014 Equity Plan, a copy of which is included as an exhibit to this annual report.
Share reserve
Under the 2014 Equity Plan, 9,848,238 of our common shares are reserved for issuance pursuant to a variety of share based
compensation awards (“Awards”), including non-qualified share options, incentive share options (“ISOs”), share appreciation rights
(“SARs”), restricted share awards, restricted share unit awards, deferred share awards, dividend equivalent awards, share
payment awards and performance awards. The amount reserved for issuance under the 2014 Equity Plan includes (i) 1,686,000
common shares previously authorised but unissued under the KEIP, (ii) 626,760 common shares previously authorised but
unissued under our 2013 and 2014 share option plans, and (iii) 21,510 common shares previously authorised but unissued under
our 2014 restricted share plan, plus the number of authorised shares that are issued or used for reference purposes in respect of
any awards made and outstanding under the KEIP, the 2013 and 2014 share option plans, and the 2013 and 2014 restricted
share plans that terminate by expiration, forfeiture, cancellation or otherwise without the issuance of common shares. The
aggregate share reserve specified above will be increased on January 1 of each year commencing in 2015 and ending on (and
including) January 1, 2024, in an amount equal to the lesser of: (x) 2.5% of the total number of our common shares issued and
outstanding on a fully diluted basis as of December 31 of the immediately preceding calendar year and (y) such number of
common shares determined by our Board of Directors. We filed with the SEC a registration statement on Form S-8 on the date of
our initial public offering covering the common shares issuable under the 2014 Equity Plan. On January 1, 2016, the aggregate
share reserve increased by 2.5% of the total number of our common shares issued and outstanding on a fully diluted basis as of
December 31, 2015.
Administration
The HR and Compensation Committee of our Board of Directors (or other committee as our Board of Directors may appoint)
administers the 2014 Equity Plan unless our Board of Directors assumes authority for administration. For Awards made to
non-employee directors, the Nominating and Corporate Governance committee of our Board of Directors (or other committee as
our Board of Directors may appoint) administers the 2014 Equity Plan unless our Board of Directors assumes authority for
administration. Subject to the terms and conditions of the 2014 Equity Plan, the plan administrator has the authority to select the
persons to whom Awards are to be made, determines the types of Awards to be granted, the number of Awards to be granted, the
number of common shares to be subject to Awards and the terms and conditions of Awards, makes all other determinations under
the 2014 Equity Plan and can take all other actions necessary or advisable for the administration of the 2014 Equity Plan.
Types of Awards
The following are the types of Awards that may be granted under the 2014 Equity Plan. Each Award is required to be evidenced
by an Award agreement that sets forth the terms, conditions and limitations of such Award.
–
Share Options provide for the right to purchase our common shares at a specified exercise price (which cannot be less than
100% of the fair market value of a common share on the grant date or, in the case of ISOs granted to greater than ten percent
shareholders, 110% of the fair market value on the grant date, unless otherwise determined by the plan administrator). The
maximum term of
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share options under the 2014 Equity Plan is ten years (or five years in the case of ISOs granted to greater than ten percent
shareholders). Unless otherwise determined by the plan administrator, share options that are vested and exercisable as of the
date of an option holder’s termination of employment, consultancy or directorship (as applicable) will remain exercisable for
the following periods following the date of termination (but in no event beyond the expiration of the stated term of the share
option): if such termination is due to the participant’s death or “disability” (as defined in the 2014 Equity Plan), one year; or if
such termination is by us without “cause” (as defined in the 2014 Equity Plan), or if such termination is a voluntary resignation,
90 days. Upon an employment termination by us for cause or a voluntary resignation following an event that would be
grounds for termination for cause, the share options (whether vested or not) will terminate and expire on the date of
termination.
–
Share Appreciation Rights , or SARs, entitle the holder to receive an amount, with respect to each SAR, equal to the
difference between the exercise price of the SAR (which cannot be less than 100% of the fair market value of a common
share on the grant date) and the fair market value of a common share on the date of exercise. The maximum term of SARs
under the 2014 Equity Plan is ten years. SARs may be settled in cash or common shares, or in a combination of both, as
determined by the plan administrator.
–
Restricted Shares are common shares made subject to such restrictions and vesting requirements as may be determined by
the plan administrator. Unless otherwise determined by the plan administrator, restricted shares are forfeited or repurchased,
as applicable, if the conditions or restrictions on vesting are not met. Unless otherwise provided for by the plan administrator,
holders of restricted shares have all the rights of a shareholder with respect to the shares subject to the restrictions set forth in
the applicable award agreement, including the right to receive dividends and other distributions, if any, made prior to the time
when the restrictions lapse.
–
Restricted Share Units are units representing the right to receive common shares, subject to vesting conditions based on
continued service, performance criteria or other criteria as may be established by the plan administrator. Holders of restricted
share units generally have no voting or dividend rights prior to the time when the underlying common shares are transferred to
the holder.
–
Deferred Shares represent the right to receive common shares on a future date. Unless otherwise provided by the plan
administrator, holders of deferred shares have no rights as a shareholder prior to the time when the common shares are
issued. Deferred shares generally will be forfeited, and the common shares for the deferred shares will not be issued, if the
applicable conditions or other restrictions on the deferred shares are not met.
–
Dividend Equivalents represent the value of the dividends, if any, declared on our common shares and paid by us, calculated
with reference to the number of common shares covered by the Award. Dividend equivalents may be settled in cash or
common shares and at such times as determined by the plan administrator.
–
Share Payments are payments made in the form of common shares or an option or other right to purchase common shares.
Share payments may be made as part of a bonus, deferred compensation or other arrangement and may be subject to a
vesting schedule, including vesting upon the attainment of performance criteria or any other specific criteria determined by the
plan administrator. Share payments may be made in addition to, or in lieu of, cash compensation that would otherwise be
payable to the holder. Unless otherwise determined by the plan administrator, holders of share payments have no rights as a
shareholder prior to the time when the common shares are issued.
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–
Performance Awards are cash bonus, share bonus, performance or other incentive awards which may be linked to
performance criteria determined by the plan administrator. Performance shares may be paid in cash, common shares or a
combination of both.
Change in control
Unless otherwise provided in an Award agreement, or determined by the plan administrator, in the event of a change of control of
the company, outstanding Awards will continue in effect or be assumed by the successor corporation (or a parent or subsidiary of
the successor corporation). In the event that the successor corporation refuses to assume such Awards, the plan administrator
may cause all such Awards to be fully exercisable immediately prior to the change in control and cause all forfeiture restrictions on
such Awards to lapse.
Under the 2014 Equity Plan, a “change in control” is generally defined as:
–
a transaction or series of transactions (other than a public share offering) whereby any individual, entity or group directly or
indirectly acquires beneficial ownership of securities of the company possessing more than 50% of the combined voting
power of the company’s issued and outstanding securities;
–
during any period of two consecutive years, individuals who at the beginning of such period constitute our Board of Directors
(together with any new directors whose election or nomination was approved by at least two-thirds of the Directors then in
office who either were Directors at the beginning of the two-year period or whose election or nomination was previously so
approved) cease for any reason to constitute a majority of our Board of Directors;
–
under certain circumstances set forth in the 2014 Equity Plan, the consummation by the company of a merger, amalgamation,
consolidation, reorganisation, or business combination, or a sale or disposition of all or substantially all the company’s assets,
or the acquisition of stock or assets of another entity if, after the transaction, an individual or group generally acquires 50%
more of the combined voting power of the company or a successor; or
–
the company’s shareholders’ approval of a liquidation or dissolution of the company.
Adjustments of Awards
In the event of any share dividend, bonus issuance, share split, share consolidation or exchange of shares, merger,
amalgamation, consolidation, reorganisation or other distribution (other than normal cash dividends) of company assets to
shareholders, or any other change affecting the shares in the company’s share capital or the price of the company’s shares, (i) the
plan administrator may make (and in certain circumstances shall make) equitable adjustments, as determined in its discretion, to
the aggregate number and type of shares subject to the 2014 Equity Plan, the number and kind of shares subject to outstanding
Awards, the terms and conditions of outstanding Awards (including, without limitation, any applicable performance targets or
criteria with respect to such Awards), and the grant or exercise price per share of any outstanding Awards under the 2014 Equity
Plan, and (ii) in connection with certain transactions or events or changes in law, the plan administrator is authorised to take
certain actions (such as terminating an award in exchange for cash, requiring the assumption of Awards, providing that Awards
shall be exercisable, payable or fully vested or requiring that the Awards cannot vest, be exercised or become payable after the
event) to facilitate the transaction or event or to give effect to the changes in law.
Amendment and termination
Our Board of Directors or the committees administering the 2014 Equity Plan may terminate, amend, modify or suspend the 2014
Equity Plan, in whole or in part, at any time and from time to time.
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However, no amendment, suspension or termination of the 2014 Equity Plan shall, without the consent of the affected Award
holder, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise
expressly so provides. No action by our Board of Directors or the committees administering the 2014 Equity Plan (other than
adjustments described in “— 2014 Equity Plan — Adjustments of Awards” above) may increase the limits on the maximum
number of shares which may be issued under the 2014 Equity Plan unless shareholder approval is obtained within 12 months
before or after such action.
Non-transferability of Awards
Except as the plan administrator may permit, at the time of grant or thereafter, Awards granted under the 2014 Equity Plan are
generally not transferable by a holder other than by will or the laws of descent and distribution. Awards that are acquired by a
permissible transferee will continue to be subject to the terms of the 2014 Equity Plan and the applicable Award agreement.
Indemnification and Insurance
Our bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect
of their fraud or dishonesty, and that we shall advance funds to our officers and directors for expenses incurred in their defence on
condition to repay the funds if any allegation of fraud or dishonesty is proved. Our bye-laws provide that the shareholders waive all
claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or
officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or
dishonesty of such director or officer.
In addition, we have entered into agreements with our officers and directors to indemnify them against expenses and liabilities to
the fullest extent permitted by law. These agreements also provide, subject to certain exceptions, for indemnification for related
expenses including, among others, attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by any of these
individuals in any action or proceeding.
We have also purchased and maintain a directors’ and officers’ liability policy for the benefit of any officer or director in respect of
any loss or liability attaching to him or her in respect of any negligence, default, breach of duty or breach of trust, whether or not
we may otherwise indemnify such officer or director.
Employee Benefit Trust
The Markit Group Holdings Limited Employee Benefit Trust (the “EBT”) is a discretionary trust established by a deed dated
January 27, 2010 between Markit Group Holdings Limited and Elian Employee Benefit Trustee Limited (the “trustee”), as trustee
of the EBT, through which shares and other benefits may be provided to Markit’s existing and former employees in satisfaction of
their rights under any compensation or share incentive arrangements established by Markit. The trustee is an independent
provider of fiduciary services, based in Jersey, Channel Islands. The EBT will terminate on January 27, 2090, unless terminated
earlier by the trustee.
No current or former employee has the right to receive any benefit from the EBT unless and until the trustee exercises its
discretion to confer a benefit. Neither Markit nor any of its subsidiaries is permitted to be a beneficiary of the EBT. Subject to the
exercise of the trustee’s discretion, shares held by the EBT may be delivered to such employees in satisfaction of their rights
under any share incentive arrangements established by Markit. We may make non-binding recommendations to the trustee
regarding the EBT.
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The Trustee may amend the EBT, subject to our consent, but not in any manner that would confer on Markit any benefit or
possibility of benefit. The principal activity of the EBT has been to acquire shares in Markit from its existing and former employees
and to hold such shares for their benefit. Unless we direct otherwise, the trustee of the EBT may not vote any of the common
shares held by the EBT and is also generally obliged to forgo dividends.
Markit has historically funded the EBT’s acquisition of common shares through interest-free loans that are repayable on demand,
but without recourse to any assets other than those held by the trustee in its capacity as trustee of the EBT.
C. BOARD PRACTICES
Our Board of Directors is composed of ten members, and Mr. Uggla serves as the Chairman of our Board of Directors. Each of
our directors will continue to serve as director until the election and qualification of his or her successor, or until the earlier of his or
her death, resignation or removal. Our directors do not have a mandatory retirement age requirement under our bye-laws.
Our Board of Directors is divided into three classes. Pursuant to our bye-laws, our directors are elected at the annual general
meeting of shareholders for a period of three years, with each director serving until the third annual general meeting of
shareholders following their election, except that the initial Class I directors were appointed to serve until the 2015 annual general
meeting of shareholders and the Class II directors were appointed to serve until the 2016 general meeting of shareholders. Upon
the expiration of the term of a class of directors, directors for that class will be elected for a three-year term at the annual general
meeting of shareholders in the year of such expiration.
Timothy Frost, James A. Rosenthal and Anne Walker are initially serving as Class II directors for a term expiring in 2016.
Edwin Cass, Lance Uggla, Jill Denham and William E. Ford are initially serving as Class III directors for a term expiring in 2017.
Dinyar Devitre, Robert Kelly and Cheng Chih Sung were re-elected as Class I directors at our 2015 annual general meeting of
shareholders for a term expiring in 2018.
Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so
that, as nearly as possible, each class will consist of one-third of our directors.
Our Board of Directors has determined that seven directors qualify as “independent” under the listing standards of NASDAQ:
Edwin Cass, Jill Denham, Dinyar Devitre, William E. Ford, Timothy Frost, Robert Kelly and Cheng Chih Sung.
Committees of Our Board of Directors
Audit and Risk Committee
Our Audit and Risk Committee consists of Edwin Cass, Dinyar Devitre, Cheng Chih Sung and Timothy Frost. The Audit and Risk
Committee assists our Board of Directors in overseeing our accounting and financial reporting processes and the audits of our
financial statements. In addition, the Audit and Risk Committee is directly responsible for recommending the appointment of, and
the compensation, retention and oversight of the work of our independent registered public accounting firm. Mr. Devitre is chair of
our Audit and Risk Committee.
Our Board of Directors has determined that each of Edwin Cass, Dinyar Devitre, Cheng Chih Sung and Timothy Frost satisfies the
“independence” requirement of Rule 10A-3 under the Exchange Act and
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meets the financial literacy and sophistication requirements of the listing standards of NASDAQ. Our Board of Directors has also
determined that Mr. Devitre qualifies as an “audit committee financial expert” as such term is defined in the rules of the SEC.
HR and Compensation Committee
Our HR and Compensation Committee consists of Jill Denham, William E. Ford, Robert Kelly, and James A. Rosenthal. The HR
and Compensation Committee’s duties include determining the compensation to our Chief Executive Officer and our other
executive officers and other key management personnel. The HR and Compensation Committee is also responsible for approving,
allocating and administering our share incentive plans, executive-level contract provisions, executive-level succession plans, CEO
performance appraisal criteria and benchmarking compensation recommendations against generally accepted market total
compensation levels for annual recommendation to our Board of Directors. Mr. Kelly is chair of the HR and Compensation
Committee.
Nominating and Governance Committee
Our Nominating and Governance Committee consists of Jill Denham, Dinyar Devitre, Timothy Frost, Robert Kelly and Lance
Uggla. Our Nominating and Governance Committee identifies, evaluates and selects, or makes recommendations to our Board of
Directors regarding, nominees for election to our Board of Directors and its committees. Mr. Frost is chair of our Nominating and
Governance Committee.
Communications to Our Board of Directors
Shareholders and other interested parties may communicate directly with our independent directors by sending a written
communication in an envelope addressed to: Board of Directors (Independent Members), c/o Company Secretary, Markit Legal
Department, Markit Ltd., 4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
Shareholders and other interested parties may communicate directly with the full Board of Directors by sending a written
communication in an envelope addressed to: Board of Directors, c/o Company Secretary, Markit Legal Department, Markit Ltd.,
4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
Our Audit and Risk Committee has established a process for communicating complaints regarding accounting or auditing matters.
In order to submit a complaint, you may call our hotline at +1-877-865-4585 or post a message at www.openboard.info/MRKT/.
Any such complaints received or submitted are forwarded as appropriate to the Audit and Risk Committee, to take such action as
may be appropriate.
Risk Management
Our Board of Directors executes its oversight responsibility for risk management directly and through our Audit and Risk
Committee. The Audit and Risk Committee has the primary responsibility of reviewing our policies and practices with respect to
risk assessment and risk management, including discussing with management our major operational, financial, reputational, legal
and compliance risk exposures and the steps that have been taken to identify, assess, monitor and control such exposures. It is
the responsibility of our Chief Risk Officer to make regular independent reports about our risk profile and any reports on material
breaches of related policies and practices. The Audit and Risk Committee’s meeting agenda regularly include a review of our
policies and practices with respect to
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risk assessment and risk management. In addition, the Audit and Risk Committee’s meeting agenda regularly include a review
and discussion with management of our compliance with laws and regulations, including major legal and regulatory initiatives, and
a review of any major litigation or investigations against us that may have a material impact on our financial statements. Our
Board of Directors is kept informed of the Audit and Risk Committee’s risk management and other compliance matters via reports
of the committee chair to the full Board of Directors. These reports are presented at every regular Board meeting. Management
routinely informs the Board of developments that could affect our risk profile or other aspects of our business.
Corporate Governance Guidelines
Our Board of Directors has adopted corporate governance guidelines (the “Corporate Governance Guidelines”) that serve as a
flexible framework within which our Board of Directors and its committees operate. These guidelines cover a number of areas
including the size and composition of our Board of Directors, membership criteria and director qualifications, director
responsibilities, Board agenda, roles of the Chairman and Chief Executive Officer and lead independent director, meetings of
independent directors, committee responsibilities and assignments, Board member access to management and independent
advisers, director communications with third parties, director compensation, director orientation and continuing education,
evaluation of senior management and management succession planning.
The Corporate Governance Guidelines are publicly available under the “Governance” section of our investor relations website at
http://www.markit.com/company/investors. The information on our website is not incorporated by reference into this annual report.
A copy will be provided in print without charge upon written request to our Company Secretary at c/o Markit Legal Department,
Markit Ltd., 4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
Employment and Service Agreements
Our executive officers have entered into employment agreements with the company, certain of which provide for benefits upon a
termination of employment. None of our directors have entered into service agreements with the company.
D. EMPLOYEES
As of December 31, 2015, 2014 and 2013 Markit had more than 4,200, 3,600 and 3,200 employees, respectively with more than
1,100, 1,000 and 900 in Europe, including more than 1,000, 900 and 800 in the United Kingdom and Ireland, more than 1,700,
1,600 and 1,400 in North America and more than 1,300, 900 and 800 in other locations globally. None of our employees are
represented by collective bargaining agreements.
E. SHARE OWNERSHIP
The following table sets forth information relating to the beneficial ownership of our common shares, as of December 31, 2015, by:
–
each of our current executive officers;
–
each of our current non-executive directors; and
–
all our current directors and executive officers as a group.
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Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table below have
sole voting and investment power with respect to all common shares held by that person.
The percentage of common shares beneficially owned is computed on the basis of 202,006,378 common shares issued and
outstanding as of December 31, 2015. Solely for purposes of the following table and accompanying footnotes relating to beneficial
ownership of our common shares, the number of common shares issued and outstanding as of December 31, 2015 includes
25,219,470 common shares held by the EBT as further described in footnote (4) of the table included in “Item 7. Major
Shareholders and Related Party Transaction—A. Major shareholders.”
Common shares
beneficially owned(1)
Name
Number
Executive Officers
Lance Uggla(2)
Kevin Gould(3)
Jeffrey Gooch
Shane Akeroyd
Stephen Wolff
Non-Executive Directors
Edwin Cass
Jill Denham
Dinyar Devitre
William E. Ford(4)
Timothy Frost
Robert Kelly
James A. Rosenthal
Cheng Chih Sung
Anne Walker
Total Executive Officers and Directors as a group (16 persons)
*
Percentage
*
3,697,349
*
*
*
—
*
*
23,275,970
*
*
—
—
—
31,104,168
*
1.83 %
*
*
*
—
*
*
11.52 %
*
*
—
—
—
15.40
Indicates beneficial ownership of less than 1% of the total issued and outstanding common shares.
(1) The amounts and percentages of our common shares beneficially owned are reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities, and the information is not necessarily indicative of beneficial ownership for any other
purpose. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting
power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose
of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of
such securities as to which such person has an economic interest. Common shares that a person has the right to acquire within 60 days are
deemed issued and outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed
issued and outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage
ownership of all directors and executive officers as a group.
(2) These holdings do not reflect common shares and restricted shares held through a voting trust, of which Mr. Uggla and certain members of
his family are beneficiaries.
(3) Includes vested options to purchase 73,950 common shares and 24,765 restricted shares granted to Mr. Gould on January 1, 2016.
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(4) Represents common shares held by GA Tango. See footnote (3) of the table included in “Item 7. Major Shareholders and Related Party
Transaction—A. Major shareholders.”
For arrangements for involving our employees in our capital, see “Item 6. Directors, Senior Management and Employees—B.
Compensation.”
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table and accompanying footnotes set forth information relating to the beneficial ownership of our common shares,
by each person, or group of affiliated persons, known by us to beneficially own 5% or more of our issued and outstanding common
shares. We have only one class of shares issued and outstanding, that being common shares, and all holders of our common
shares have the same voting rights. The information provided in the table is based on information filed with the SEC and on
information provided to us as of December 31, 2015.
Except as otherwise indicated, the persons named in the table below have sole voting and investment power with respect to all
common shares held by that person.
The percentage of common shares beneficially owned is computed on the basis of 202,006,378 common shares issued and
outstanding as of December 31, 2015. Solely for purposes of the following table and accompanying footnotes relating to beneficial
ownership of our common shares, the number of common shares issued and outstanding as of December 31, 2015 includes
25,219,470 common shares held by the EBT as further described in footnote (4) of the table below. Common shares that a person
has the right to acquire within 60 days of December 31, 2015 are deemed issued and outstanding for purposes of computing the
percentage ownership of the person holding such rights, but are not deemed issued and outstanding for purposes of computing
the percentage ownership of any other person.
As of December 31, 2015, 121,097,614 common shares, representing 59.95% of our issued and outstanding common shares,
were held by 31 U.S. record holders. Since certain of such shares are held by nominees, the foregoing figures are not
representative of the number of beneficial holders.
To our knowledge, we are not controlled directly or indirectly, by any other corporation, government or any other natural or legal
person. We do not know of any arrangements which would result in a change in our control.
Common shares
beneficially owned(1)
Name of beneficial owner
Number
Esta Investments Pte Limited(2)
General Atlantic Partners Tango, L.P.(3)
Markit Group Holdings Limited Employee Benefit Trust(4)
Canada Pension Plan Investment Board(5)
Mawer Investment Management Ltd.(6)
21,173,310
23,275,970
25,210,470
15,673,940
10,630,740
Percentage
10.48 %
11.52 %
12.48 %
7.76 %
5.26 %
(1) The amounts and percentages of our common shares beneficially owned are reported on the basis of regulations of the SEC governing the
determination of beneficial ownership of securities, and the information is not necessarily indicative of beneficial ownership for any other
purpose. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting
power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose
of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed to be a beneficial owner of
such securities as to which
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such person has an economic interest. Common shares that a person has the right to acquire within 60 days are deemed issued and
outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed issued and
outstanding for purposes of computing the percentage ownership of any other person.
(2) Based on Schedule 13G filed on February 13, 2015, reflects 21,173,310 common shares held by Esta Investments Pte Limited (“Esta”).
Esta is a wholly owned subsidiary of Tembusu Capital Pte. Ltd., which in turn is a wholly owned subsidiary of Temasek Holdings (Private)
Limited (“Temasek”). Accordingly, as of December 31, 2014, each of Tembusu Capital Pte. Ltd. and Temasek may be deemed to
beneficially own the shares held by Esta. The address for each of Esta, Tembusu Capital Pte. Ltd. and Temasek is 60B Orchard Road,
#06-18 Tower 2, The Atrium@Orchard, Singapore, 238891.
(3) Based on Schedule 13G filed on February 13, 2015, reflects 23,275,970 common shares held by General Atlantic Partners Tango, L.P.
(“GA Tango”). The general partner of GA Tango is GAP (Bermuda) Limited (“GAP (Bermuda) Limited”). The limited partners of GA Tango
are the following General Atlantic investment funds (the “GA Funds”): General Atlantic Partners (Bermuda) II, L.P. (“GAP Bermuda II”), GAP
Coinvestments III, LLC (“GAPCO III”), GAP Coinvestments IV, LLC (“GAPCO IV”), GAP Coinvestments CDA, L.P. (“GAPCO CDA”) and
GAPCO GmbH & Co. KG (“GAPCO KG”). The general partner of GAP Bermuda II is General Atlantic GenPar (Bermuda), L.P. (“GenPar
Bermuda”) and the general partner of GenPar Bermuda is GAP (Bermuda) Limited. General Atlantic LLC (“GA LLC”) is the managing
member of GAPCO III and GAPCO IV and the general partner of GAPCO CDA. GAPCO Management GmbH (“Management GmbH”) is the
general partner of GAPCO KG. The Managing Directors of GA LLC are also the directors and voting shareholders of GAP (Bermuda)
Limited. The Managing Directors of GA LLC make voting and investment decisions with respect to securities held by GAPCO KG and
Management GmbH. As of February 13, 2015, there are 23 Managing Directors of GA LLC, including Mr. Ford, one of our directors. Each of
the Managing Directors of GA LLC disclaims ownership of the common shares held by the GA Tango except to the extent he has a
pecuniary interest therein. By virtue of the foregoing, GA Tango, GAP (Bermuda) Limited, GAP Bermuda II, GAPCO III, GAPCO IV, GAPCO
CDA, GAPCO KG, GenPar Bermuda, Management GmbH, and GA LLC may be deemed to share voting power and the power to direct the
disposition of the common shares that each owns of record. GA Tango, GAP (Bermuda) Limited, GenPar Bermuda, GAP Bermuda II,
GAPCO III, GAPCO IV, GAPCO CDA, GAPCO KG, Management GmbH and GA LLC are a “group” within the meaning of Rule 13d-5
promulgated under the Securities Exchange Act of 1934, as amended and may be deemed to beneficially own the number of common
shares held by GA Tango. The principal business address of GA Tango, GAP (Bermuda) Limited, GAP Bermuda II, GAPCO III, GAPCO IV,
GAPCO CDA, GAPCO KG, GenPar Bermuda, Management GmbH, and GA LLC is c/o General Atlantic Service Company, LLC, 55 East
52nd Street, 32nd Floor, New York, New York 10055.
(4) Based on Schedule 13G filed on February 18, 2015, Elian Employee Benefit Trustee Limited (“EEBTL”) is the trustee of the EBT and has
the sole power to vote, direct the voting of, dispose of and direct the disposition of all the common shares held by EBT. The address for
EEBTL is 44 Esplanade, St Helier, Jersey JE4 9WG, Channel Islands. Unless Markit directs otherwise, EEBTL may not vote any of the
shares held by the EBT and is also generally obliged to forgo dividends.
(5) Based on Schedule 13D/A filed on December 10, 2015 the business address of the Canada Pension Plan Investment Board is One Queen
Street East, Suite 2500, Toronto, ON M5C 2W5.
(6) Based on Schedule 13G filed on February 4, 2016, the business address of Mawer Investment Management Ltd. is 600, 517 – 10th Avenue
SW, Calgary, Alberta, Canada T2R 0A8.
Since the formation of the Company on January 16, 2014, the only significant changes of which we have been notified in the
percentage ownership of our shares by our major shareholders described above were that:
–
each of Esta Investments Pte Limited, General Atlantic Partners Tango, L.P., JPMorgan Chase & Co., and Markit Group
Holdings Limited Employee Benefit Trust received their common shares at the completion of our corporate reorganisation in
June 2014 in connection with our public offering, upon the cancellation of their ownership interests in Markit Group Holdings
Limited and the reclassification of our voting and non-voting common shares into a single class of common shares;
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–
JPMorgan Chase & Co. sold 5,000,740 common shares in our initial public offering in June 2014;
–
CPPIB purchased 10,420,000 common shares in our initial public offering in June 2014;
–
On February 4, 2015, JPMorgan Chase & Co. made a public filing that it held 11,669,246 common shares representing 6.4%
of the class;
–
On December 10, 2015, CPPIB purchased 5,253,940 common shares from JPMorgan Chase & Co. and on January 20, 2015,
JPMorgan Chase & Co. made a public filing that it held 7,114,510 common shares representing less than 5% of our issued
and outstanding shares; and
–
On February 4, 2016, Mawer Investment Management Ltd. made a made a public filing that it held 10,630,740 common
shares representing 5.9% of our issued and outstanding shares.
B. RELATED PARTY TRANSACTIONS
Transactions with Related Parties
Customer relationships
Since January 1, 2015, certain of our shareholders were the beneficial owners of more than 10% of our common shares or had
the right to designate one individual to serve on our Board of Directors and certain affiliates of such shareholders are also our
customers. Such shareholder customers included the following entities or their affiliates: Esta Investments Pte Limited, General
Atlantic Partners Tango, L.P. and CPPIB (collectively, the “Customer Related Parties”).
We receive fees from the Customer Related Parties from the sale of our products and services. In some cases, we may receive
data or other information from the Customer Related Parties, as well as from non-affiliated customers, that we use in providing our
products and services. In exchange for that data and information, we may from time to time offer a range of consideration
including discounts, rebates or other incentives. Although we believe the terms of these various arrangements with the Customer
Related Parties are comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties, they are
often bespoke arrangements and there may not always be a clear objective measure. We cannot assure anyone, therefore, that in
all cases these arrangements are on terms comparable to those that could be obtained in dealings with unrelated third parties.
Revenue (net of rebates) from the Customer Related Parties totalled $1.6 million for year ended December 31, 2015.
In addition, currently four of our directors, Messrs. Cass, Devitre and Ford, and Dr. Sung, are employees of, or advisers to, our
Customer Related Parties.
Shareholders’ agreement
Markit Group Holdings Limited entered into a Shareholders’ Agreement, amended as of May 21, 2013, among us, certain
members of our management team including, among others, our Chief Executive Officer and President (the “Management
Investors”) and certain shareholders, including General Atlantic and Temasek. For purpose of this section only Bank of America,
Barclays, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, RBS and UBS are
referred to as the “Bank Investors.”
Under the terms of the Shareholders’ Agreement, each of the Bank Investors, General Atlantic and Temasek was entitled to
designate one individual to serve on our Board of Directors. In addition, the Management Shareholders were entitled to designate
one individual to serve on our Board of
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Directors, and, if there were at any time seven or more Bank Investors, the Management Shareholders were entitled to designate
one additional individual to serve on our Board of Directors. The Shareholders’ Agreement provided that our Board of Directors
could at any time appoint up to three individuals to serve as independent directors.
Effective upon the commencement of trading of our common shares on NASDAQ, pursuant to the terms of the Shareholders’
Agreement, all the rights and obligations of the Shareholders’ Agreement terminated.
Registration rights agreement
On June 24, 2014, we entered into a registration rights and lock-up agreement (the “Registration Rights Agreement”) with our
executive officers and the Customer Related Parties and certain other shareholders, in their capacities as our shareholders. On
June 10, 2015, the Registration Rights Agreement was amended in connection with our secondary offering of shares at that time
(the “2015 Secondary Offering”) in which the Shareholders were permitted to sell up to 85% of their Initial Ownership Common
Shares (as defined below). The agreement, as amended, provides for the restrictions and rights set forth below. For purposes of
this section only, Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan,
Morgan Stanley, RBS, UBS, and Credit Suisse are referred to as the “Bank Shareholders,” and General Atlantic, Temasek and
CPPIB are referred to as the “PE Shareholders.” The Bank Shareholders, PE Shareholders and our executive officers are
collectively referred to in this section as the “Shareholders.”
Transfer restrictions
Without our written consent, the Bank Shareholders and PE Shareholders are not permitted to transfer any common shares they
beneficially owned as of the closing of our initial public offering (the “Initial Ownership Common Shares”) except (i) to certain
permitted transferees (which, as a condition of transfer, must agree to be bound by the terms of the Registration Rights
Agreement), (ii) after the first anniversary of the closing of our initial public offering, in accordance with the registration rights
provisions and the other transfer restrictions described below, or (iii) in the case of the Bank Shareholders, when the transfer
restrictions cease to apply no later than the fifth anniversary of the closing of our initial public offering and, in the case of the PE
Shareholders, when the transfer restrictions cease to apply no later than the fourth anniversary of the closing of our initial public
offering. With respect to a Bank Shareholder, no more than 25% of such Bank Shareholder’s Initial Ownership Common Shares
may be transferred pursuant to clause (ii) in each successive 12-month period beginning on the first anniversary of the closing of
our initial public offering or any anniversary thereof. With respect to a PE Shareholder, no more than 33-1/3% of such PE
Shareholder’s Initial Ownership Common Shares may be transferred pursuant to clause (ii) in each successive 12-month period
beginning on the first anniversary of the closing of our initial public offering or any anniversary thereof. If, however, any Bank
Shareholder or PE Shareholder does not transfer the maximum allowable number of Initial Ownership Common Shares in any
12-month period, such remaining number of Initial Ownership Common Shares will be available for transfer in the next subsequent
12-month period, and if a Bank Shareholder or PE Shareholder sold more than 25% or 33-1/3%, as applicable, of such
Shareholder’s Initial Ownership Common Shares in the 2015 Secondary Offering, then the number of such shares such
Shareholder would be permitted to sell in each remaining 12-month period is proportionally reduced.
In addition, our Chief Executive Officer, Lance Uggla, has separately agreed with us to transfer restrictions on 3,000,000 common
shares either held by him or to which he is a beneficiary, on terms substantially similar to the transfer restrictions applicable to the
PE Shareholders.
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Demand registration rights
Subject to the transfer restrictions described above, any two Shareholders that are either Bank Shareholders or PE Shareholders,
or both will be entitled to request that we effect up to an aggregate of four demand registrations under the Registration Rights
Agreement, but no more than one demand registration within (i) a period of 90 days after the effective date of any other demand
registration statement or (ii) any successive 12-month period beginning on the first anniversary of the closing of this offering or any
anniversary thereof. Within ten business days of our receiving a demand notice, we must give notice of such requested demand
registration to the other Shareholders. Within five business days after the date of our notice, any of such other Shareholders may
request that we also effect the registration of certain of their common shares that are eligible for registration. Any demand
registration through the fourth anniversary of the closing of our initial public offering is required to meet an expected aggregate
gross proceeds threshold of $100 million.
The demand registration rights are subject to certain customary conditions and limitations, including customary underwriter
cutback rights and our ability to defer registration. If any Shareholders are cutback by the underwriters, they may either seek a
waiver from us permitting them to sell any excluded common shares by any means available under the Securities Act or request
that we effect a second demand registration, which would not be deemed one of the four available demand registrations. If, in
connection with a second demand registration, any Shareholders are cutback by the underwriters, then such Shareholders may
sell any excluded common shares by any means available under the Securities Act.
In addition, if, subsequent to the fourth anniversary of the closing of our initial public offering, any PE Shareholder owns 100% of
the number of its Initial Ownership Common Shares and our Board of Directors includes a PE Shareholder director nominee, such
PE Shareholder will be entitled to one additional demand registration (which each other PE Shareholder may join so long as it
satisfies the same requirements as the requesting PE Shareholder). Such additional demand registration shall not be deemed one
of the four available demand registrations. In addition, if, as of the fourth anniversary of the closing of our initial public offering, any
Shareholder owns more than 5% of our issued and outstanding common shares, then such Shareholder will be entitled to one
additional demand registration (which any other Shareholder may join so long as it satisfies the same requirements as the
requesting Shareholder). Such additional demand registration shall not be deemed one of the four available demand registrations.
Shelf registration rights
Subject to the transfer restrictions described above, at any time after the first anniversary of the closing of our initial public offering,
if we are eligible to use a shelf registration statement, then any two Shareholders that are either Bank Shareholders or PE
Shareholders, or both, will be entitled to request that we effect a shelf registration on similar terms as the demand registrations
described above, except that offerings will be conducted as underwritten takedowns. Each underwritten takedown constitutes a
demand registration for purposes of the four demand registrations we are obligated to effectuate subject to the additional demand
rights described in the immediately preceding paragraph.
The Registration Rights Agreement provides that we must pay all registration expenses (other than fees and expenses of the
Shareholders, including counsel fees and any underwriting discounts and commissions) in connection with any effected demand
registration or shelf registration. The Registration Rights Agreement contains customary indemnification and contribution
provisions.
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Indemnification agreements
We have entered into indemnification agreements with our directors and executive officers. The indemnification agreements and
our bye-laws require us to indemnify our directors and executive officers to the fullest extent permitted by law. See “Item 6.
Directors, Senior Management and Employees—B. Compensation.”
Procedures for Review of Transactions with Related Persons
We have adopted a set of written related person transaction policies designed to minimise potential conflicts of interest arising
from any dealings we may have with our affiliates and to provide appropriate procedures for the disclosure, approval and
resolution of any real or potential conflicts of interest which may exist from time to time. Such policies provide, among other things,
that all related person transactions, including any loans between us and our affiliates, but excluding compensation arrangements
and the purchase or sale of products or services in the ordinary course of business, require approval by our Nominating and
Governance Committee, after considering all relevant facts and circumstances, including, without limitation, the commercial
reasonableness of the terms, the benefit and perceived benefit, or lack thereof, to us, opportunity costs of alternative transactions,
the materiality and character of the related party’s direct or indirect interest, and the actual or apparent conflict of interest of the
related party, and after determining that the transaction is in, or not inconsistent with, our and our shareholders’ best interests.
There have been no related party transactions since the adoption of related party transaction policy where such policy was not
followed.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See “Item 18. Financial Statements.”
Legal Proceedings
In addition to the matters described below, in the ordinary course of our business, we are or may be from time to time involved in
various legal proceedings, lawsuits and other claims, including employment, commercial, intellectual property, environmental,
safety and health matters. In addition, we may receive routine requests for information from governmental agencies in connection
with their regulatory or investigatory authority. We review such proceedings, lawsuits, claims and requests for information and take
appropriate action as necessary. Except for the matters described below, we do not believe, based on currently available
information, that the results of any of these proceedings, lawsuits, claims or requests for information will have a material adverse
effect on our business or results of operations.
With respect to the below ongoing matters, except as described below, we are currently unable to determine the ultimate
resolution of, or provide a reasonable estimate of the range of possible loss attributable to, these matters, and therefore we cannot
predict the impact they may have on us.
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Credit Default Swaps Investigations
In April 2011, the Competition Directorate General of the European Commission (“EC”) opened a civil investigation of the credit
default swaps information industry, with a primary focus on the activities of certain major international investment banks (the
“Dealers”), the International Swaps and Derivatives Association (“ISDA”) and Markit. On July 1, 2013, the EC issued a Statement
of Objections to Markit, ISDA and the Dealers, alleging that between 2006 and 2009, the Dealers acted collectively to prevent
potential competitors from offering exchange-traded credit default swaps products based on Markit’s CDX and iTraxx indices. The
EC further alleged that, at the direction of the Dealers, Markit and ISDA denied essential inputs to proposed exchange initiatives
and that Markit and ISDA acted as Dealer-controlled associations of undertakings. In December 2015, the EC announced that,
based on an analysis of all information received from the parties, it was closing the proceedings against the Dealers as described
in the Statement of Objections, but that its investigation regarding Markit and ISDA was ongoing.
If the EC ultimately finds that Markit has violated European Union competition laws on this basis and the EC imposes fines on the
company, Markit could incur liability, capped at 10% of the sum of the annual total worldwide revenue of each of the relevant
Dealers. Depending on the EC findings, it is also possible that the fine could be limited to an amount not greater than 10% of the
annual worldwide revenue of Markit. The EC may also seek to require Markit to change how it offers products or services,
including changes to existing contractual relationships and changes to future licensing arrangements.
Separately, Markit and other participants, including certain Dealers, have also responded to a civil investigation initiated in May
2009 by the Antitrust Division of the United States Department of Justice related to the credit default swaps business, in which
Markit produced documents in response to DOJ requests for information and participated in depositions conducted by the DOJ
until August 2012. Markit fully cooperated with the DOJ in connection with its investigation.
Although we believe we have strong defences and we will continue to defend these matters vigorously, there can be no assurance
as to the outcome of these matters and we could in the future incur judgments or fines or enter into settlements of claims that
could have a material adverse effect on our results of operations, financial position or cash flows.
Credit Default Swaps Litigation
In addition, Markit was named as a defendant with the Dealers and ISDA in a number of putative class action lawsuits related to
the same fact patterns that are the subject of the EC and the DOJ civil investigations, filed beginning in May 2013 in various U.S.
courts and consolidated in the U.S. District Court for the Southern District of New York in December 2013. On September 30,
2015, Markit entered into a definitive settlement agreement with the plaintiffs to settle the consolidated antitrust class action
lawsuit. The settlement agreement provides for Markit to pay a settlement amount of $45 million with no injunctive or other
significant non-monetary obligations and no admission of any liability. The settlement agreement is subject to court approval, and
there can be no assurance that the court will approve the settlement or that no members of the class will opt-out of the settlement.
In addition, certain plaintiffs have requested to be excluded from the settlement, and no assurance can be given that they will not
undertake additional legal proceedings or lawsuits or assert other claims. The full amount of the settlement was reflected as an
exceptional item in our financial statements for the year ended December 31, 2015.
SEC Investigation
In October 2015, the Division of Enforcement of the SEC opened a non-public civil investigation related to certain of Markit’s
current and former securitized product indices, and requested that Markit provide certain documents in connection with its
investigation. Markit has responded to these inquiries and document requests, and has been cooperative, and will continue to
cooperate, with the SEC in connection with its investigation.
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Dividend Policy
We have not adopted a dividend policy with respect to future dividends, and we do not currently intend to pay cash dividends on
our common shares. Any future determination related to our dividend policy will be made at the discretion of our Board of
Directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements,
contractual restrictions, business prospects and other factors our Board of Directors may deem relevant.
Additionally, we are subject to Bermuda legal constraints that may affect our ability to pay dividends on our common shares and
make other payments. Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for
believing that: (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the
realisable value of its assets would thereby be less than its liabilities.
Under our bye-laws, each common share is entitled to dividends when dividends are declared by our Board of Directors, subject
to any preferred dividend right of the holders of any preference shares.
B. SIGNIFICANT CHANGES
A discussion of the significant changes in our business can be found under “Item 5. Operating and Financial Review and
Prospects—A. Operating Results.”
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ITEM 9. THE OFFER AND LISTING
A. OFFER AND LISTING DETAILS
Our common shares were approved for listing on the NASDAQ Global Select Market, or NASDAQ, on June 19, 2014. Prior to this
listing, no public market existed for our common shares. The table below shows the quoted high and low sales prices in U.S.
dollars on the NASDAQ for our shares for the indicated periods.
U.S. Dollar price
per common share
High
Low
$30.87
27.45
$24.93
20.99
$30.87
29.98
27.63
27.50
$28.14
25.62
24.96
24.93
$26.95
27.20
27.45
$20.99
23.08
26.06
$28.98
30.30
$26.29
26.01
30.50
30.86
30.87
29.75
28.38
28.14
28.42
27.99
Annual
2015
2014 (from June 19, 2014)
Quarterly
2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2014
Fourth Quarter
Third Quarter
Second Quarter (from June 19, 2014)
Most Recent Six Months:
2016
February
January
2015
December
November
October
September
B. PLAN OF DISTRIBUTION
Not applicable.
C. MARKETS
Our common shares are listed on the NASDAQ under the symbol “MRKT.”
D. SELLING SHAREHOLDERS
Not applicable.
E. DILUTION
Not applicable.
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F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The following description of our share capital summarises certain provisions of our memorandum of association and our bye-laws.
Such summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the
provisions of our memorandum of association and bye-laws, copies of which have been filed as exhibits to this annual report.
Prospective investors are urged to read the exhibits for a complete understanding of our memorandum of association and
bye-laws.
General
We are an exempted company incorporated under the laws of Bermuda. We are registered with the Registrar of Companies in
Bermuda under registration number 48610. We were incorporated on January 16, 2014 under the name Markit Ltd. Our registered
office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
The objects of our business are unrestricted, and the company has the capacity of a natural person. We can therefore undertake
activities without restriction on our capacity.
Since our incorporation, other than an increase in our authorised share capital to 3,000,000,000 shares, there have been no
material changes to our share capital, mergers, amalgamations or consolidations of us or any of our subsidiaries, no material
changes in the mode of conducting our business, no material changes in the types of products produced or services rendered and
no name changes. There have been no bankruptcy, receivership or similar proceedings with respect to us or our subsidiaries.
There have been no public takeover offers by third parties for our shares nor any public takeover offers by us for the shares of
another company which have occurred during the last or current financial years.
Our common shares are listed on the NASDAQ Global Select Market under the symbol “MRKT.”
Settlement of our common shares takes place through The Depository Trust Company (“DTC”) in accordance with its customary
settlement procedures for equity securities registered through DTC’s book-entry transfer system. Each person beneficially owning
common shares registered through DTC must rely on the procedures thereof and on institutions that have accounts therewith to
exercise any rights of a holder of the common shares.
Share Capital
Our authorised share capital consists of issued common shares, par value $0.01 per share, and undesignated shares, par value
$0.01 per share that our Board of Directors is authorised to designate from time to time as common shares or as preference
shares.
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As of December 31, 2015, there were 176,786,908 common shares issued and outstanding, including 2,505,828 issued and
outstanding restricted shares, and excluding 51,965,745 common shares issuable upon exercise of options granted as of
December 31, 2015, 52,604 issued restricted share units, and 25,219,470 common shares held by the EBT. As of December 31,
2015, no preference shares were issued and outstanding. All of our issued and outstanding common shares are fully paid.
Pursuant to our bye-laws, subject to the requirements of any stock exchange on which our shares are listed and to any resolution
of the shareholders to the contrary, our Board of Directors is authorised to issue any of our authorised but unissued shares. There
are no limitations on the right of non-Bermudians or non-residents of Bermuda to hold or vote our shares.
Common Shares
Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are
entitled to one vote per share on all matters submitted to a vote of holders of common shares. Unless a different majority is
required by law or by our bye-laws, resolutions to be approved by holders of common shares require approval by a simple majority
of votes cast at a meeting.
In the event of our liquidation, dissolution or winding up, the holders of common shares are entitled to share equally and ratably in
our assets, if any, remaining after the payment of all of our debts and liabilities, subject to any liquidation preference on any issued
and outstanding preference shares.
Preference Shares
Pursuant to Bermuda law and our bye-laws, our Board of Directors may, by resolution, establish one or more series of preference
shares having such number of shares, designations, dividend rates, relative voting rights, conversion or exchange rights,
redemption rights, liquidation rights and other relative participation, optional or other special rights, qualifications, limitations or
restrictions as may be fixed by our Board of Directors without any further shareholder approval. Such rights, preferences, powers
and limitations, as may be established, could have the effect of discouraging an attempt to obtain control of the company.
Dividend Rights
Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the
company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realisable value of its
assets would thereby be less than its liabilities. Under our bye-laws, each common share is entitled to dividends if, as and when
dividends are declared by our Board of Directors, subject to any preferred dividend right of the holders of any preference shares.
Any cash dividends payable to holders of our common shares listed on NASDAQ will be paid to Computershare Inc., our paying
agent in the United States for disbursement to those holders.
Variation of Rights
If at any time we have more than one class of shares, the rights attaching to any class, unless otherwise provided for by the terms
of issue of the relevant class, may be varied either: (i) with the consent in writing of the holders of 75% of the issued shares of that
class; or (ii) with the sanction of a resolution passed by a majority of the votes cast at a general meeting of the relevant class of
shareholders at which a quorum consisting of at least two persons holding or representing one-third of the issued shares of the
relevant class is present. Our bye-laws specify that the creation or issue of
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shares ranking equally with existing shares will not, unless expressly provided by the terms of issue of existing shares, vary the
rights attached to existing shares. In addition, the creation or issue of preference shares ranking prior to common shares will not
be deemed to vary the rights attached to common shares or, subject to the terms of any other class or series of preference
shares, to vary the rights attached to any other class or series of preference shares.
Transfer of Shares
Our Board of Directors may, in its absolute discretion and without assigning any reason, refuse to register the transfer of a share
that it is not fully paid. Our Board of Directors may also refuse to recognise an instrument of transfer of a share unless it is
accompanied by the relevant share certificate and such other evidence of the transferor’s right to make the transfer as our Board
of Directors shall reasonably require. Subject to these restrictions, a holder of common shares may transfer the title to all or any of
his common shares by completing a form of transfer in the form set out in our bye-laws (or as near thereto as circumstances
admit) or in such other common form as our Board of Directors may accept. The instrument of transfer must be signed by the
transferor and transferee, although in the case of a fully paid share our Board of Directors may accept the instrument signed only
by the transferor.
Where our shares are listed or admitted to trading on any appointed stock exchange, such as NASDAQ, they will be transferred in
accordance with the rules and regulations of such exchange.
Meetings of Shareholders
Under Bermuda law, a company is required to convene at least one general meeting of shareholders each calendar year (the
“annual general meeting”). However, the shareholders may by resolution waive this requirement, either for a specific year or
period of time, or indefinitely. When the requirement has been so waived, any shareholder may, on notice to the company,
terminate the waiver, in which case an annual general meeting must be called. We have chosen not to waive the convening of an
annual general meeting.
Bermuda law provides that a special general meeting of shareholders may be called by the board of directors of a company and
must be called upon the request of shareholders holding not less than 10% of the paid-up capital of the company carrying the right
to vote at general meetings. Bermuda law also requires that shareholders be given at least five days’ advance notice of a general
meeting, but the accidental omission to give notice to any person does not invalidate the proceedings at a meeting. Our bye-laws
provide that our Board of Directors may convene an annual general meeting and the chairman or a majority of our directors then
in office may convene a special general meeting. Under our bye-laws, at least 14 days’ notice of an annual general meeting or 10
days’ notice of a special general meeting must be given to each shareholder entitled to vote at such meeting. This notice
requirement is subject to the ability to hold such meetings on shorter notice if such notice is agreed: (i) in the case of an annual
general meeting by all of the shareholders entitled to attend and vote at such meeting; or (ii) in the case of a special general
meeting by a majority in number of the shareholders entitled to attend and vote at the meeting holding not less than 95% in
nominal value of the shares entitled to vote at such meeting. Subject to the rules of NASDAQ, the quorum required for a general
meeting of shareholders is two or more persons present in person at the start of the meeting and representing in person or by
proxy in excess of 50% of all issued and outstanding common shares.
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Access to Books and Records and Dissemination of Information
Members of the general public have a right to inspect the public documents of a company available at the office of the Registrar of
Companies in Bermuda. These documents include the company’s memorandum of association, including its objects and powers,
and certain alterations to the memorandum of association. The shareholders have the additional right to inspect the bye-laws of
the company, minutes of general meetings and the company’s audited financial statements, which must be presented in the
annual general meeting. The register of members of a company is also open to inspection by shareholders and by members of the
general public without charge. The register of members is required to be open for inspection for not less than two hours in any
business day (subject to the ability of a company to close the register of members for not more than thirty days in a year). A
company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act 1981 (the
“Companies Act”), establish a branch register outside of Bermuda. A company is required to keep at its registered office a register
of directors and officers that is open for inspection for not less than two hours in any business day by members of the public
without charge. Bermuda law does not, however, provide a general right for shareholders to inspect or obtain copies of any other
corporate records.
Election and Removal of Directors
Our bye-laws provide that our Board of Directors shall consist of five directors or such greater number as our Board of Directors
may determine. Our Board of Directors is divided into three classes that are, as nearly as possible, of equal size. Each class of
directors is elected for a three-year term of office, but the terms are staggered so that the term of only one class of directors
expires at each annual general meeting. The initial term of the Class I directors expired in 2015 and initial terms of the Class II and
Class III directors expire in 2016 and 2017, respectively. At each succeeding annual general meeting, successors to the class of
directors whose term expires at the annual general meeting will be elected for a three-year term.
Any shareholder wishing to propose for election as a director someone who is not an existing director or is not proposed by our
Board of Directors must give notice of the intention to propose the person for election. Where a Director is to be elected at an
annual general meeting, that notice must be given not less than 90 days nor more than 120 days before the anniversary of the last
annual general meeting prior to the giving of the notice or, in the event the annual general meeting is called for a date that is not
less than 30 days before or after such anniversary the notice must be given not later than 10 days following the earlier of the date
on which notice of the annual general meeting was posted to shareholders or the date on which public disclosure of the date of
the annual general meeting was made. Where a Director is to be elected at a special general meeting, that notice must be given
not later than seven days following the earlier of the date on which notice of the special general meeting was posted to
shareholders or the date on which public disclosure of the date of the special general meeting was made.
A director may be removed, only with cause, by the shareholders, provided notice of the shareholders meeting convened to
remove the director is given to the director. The notice must contain a statement of the intention to remove the director and a
summary of the facts justifying the removal and must be served on the director not less than 14 days before the meeting. The
director is entitled to attend the meeting and be heard on the motion for his removal.
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Proceedings of Board of Directors
Our bye-laws provide that our business is to be managed and conducted by our Board of Directors. Bermuda law permits
individual and corporate directors and there is no requirement in our bye-laws or Bermuda law that directors hold any of our
shares. There is also no requirement in our bye-laws or Bermuda law that our directors must retire at a certain age.
The compensation of our directors is determined by our Board of Directors, and there is no requirement that a specified number or
percentage of “independent” directors must approve any such determination. Our directors may also be paid all travel, hotel and
other reasonable out-of-pocket expenses properly incurred by them in connection with our business or their duties as directors.
A director who discloses a direct or indirect interest in any contract or proposed contract with us as required by Bermuda law is not
entitled to vote in respect of any such contract or proposed contract in which he or she is interested unless the chairman of the
relevant meeting of our Board of Directors determines that such director is not disqualified from voting.
Indemnification of Directors and Officers
Section 98 of the Companies Act provides generally that a Bermuda company may indemnify its directors, officers and auditors
against any liability which by virtue of any rule of law would otherwise be imposed on them in respect of any negligence, default,
breach of duty or breach of trust, except in cases where such liability arises from fraud or dishonesty of which such director, officer
or auditor may be guilty in relation to the company. Section 98 further provides that a Bermuda company may indemnify its
directors, officers and auditors against any liability incurred by them in defending any proceedings, whether civil or criminal, in
which judgment is awarded in their favour or in which they are acquitted or granted relief by the Supreme Court of Bermuda
pursuant to Section 281 of the Companies Act.
Our bye-laws provide that we shall indemnify our officers and directors in respect of their actions and omissions, except in respect
of their fraud or dishonesty, and that we shall advance funds to our officers and directors for expenses incurred in their defence on
condition to repay the funds if any allegation of fraud or dishonesty is proved. Our bye-laws provide that the shareholders waive all
claims or rights of action that they might have, individually or in right of the company, against any of the company’s directors or
officers for any act or failure to act in the performance of such director’s or officer’s duties, except in respect of any fraud or
dishonesty of such director or officer. Section 98A of the Companies Act permits us to purchase and maintain insurance for the
benefit of any officer or director in respect of any loss or liability attaching to him in respect of any negligence, default, breach of
duty or breach of trust, whether or not we may otherwise indemnify such officer or director. We have purchased and maintain a
directors’ and officers’ liability policy for such purpose.
Amendment of Memorandum of Association and Bye-laws
Bermuda law provides that the memorandum of association of a company may be amended by a resolution passed at a general
meeting of shareholders. Our bye-laws provide that no bye-law shall be rescinded, altered or amended, and no new bye-law shall
be made, unless it shall have been approved by a resolution of our Board of Directors and by a resolution of our shareholders. In
the case of certain bye-laws, such as the bye-laws relating to election and removal of directors, approval of business combinations
and amendment of bye-law provisions, the required resolutions must include the affirmative vote of at least 66-2/3% of our
directors then in office and the affirmative vote of at least 66-2/3% of the attached to all of our shares in issue.
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Under Bermuda law, the holders of an aggregate of not less than 20% in par value of a company’s issued share capital or any
class thereof have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum
of association adopted by shareholders at any general meeting, other than an amendment that alters or reduces a company’s
share capital as provided in the Companies Act. Where such an application is made, the amendment becomes effective only to
the extent that it is confirmed by the Supreme Court of Bermuda. An application for an annulment of an amendment of the
memorandum of association must be made within 21 days after the date on which the resolution altering the company’s
memorandum of association is passed and may be made on behalf of persons entitled to make the application by one or more of
their number as they may appoint in writing for the purpose. No application may be made by shareholders voting in favour of the
amendment.
Amalgamations, Mergers and Business Combinations
The amalgamation or merger of a Bermuda company with another company or corporation (other than certain affiliated
companies) requires the amalgamation or merger agreement to be approved by the company’s Board of Directors and by its
shareholders. Unless the company’s bye-laws provide otherwise, the approval of 75% of the shareholders voting at such meeting
is required to approve the amalgamation or merger agreement, and the quorum for such meeting must be two or more persons
holding or representing more than one-third of the issued shares of the company. Our bye-laws provide that a merger or an
amalgamation (other than with a wholly owned subsidiary) that has been approved by our Board of Directors must only be
approved by a majority of the votes cast at a general meeting of the shareholders at which the quorum shall be two or more
persons present in person and representing in person or by proxy in excess of 50% of all issued and outstanding common shares.
Any merger or amalgamation or other business combination (as defined in our bye-laws) not approved by our Board of Directors
must be approved by the holders of not less than 66-2/3% of all votes attaching to all shares then in issue entitling the holder to
attend and vote on the resolution.
Under Bermuda law, in the event of an amalgamation or merger of a Bermuda company with another company or corporation, a
shareholder of the Bermuda company who did not vote in favour of the amalgamation or merger and who is not satisfied that fair
value has been offered for such shareholder’s shares may, within one month of notice of the shareholders meeting, apply to the
Supreme Court of Bermuda to appraise the fair value of those shares.
Our bye-laws contain provisions regarding “business combinations” with “interested shareholders.” Pursuant to our bye-laws, in
addition to any other approval that may be required by applicable law, any business combination with an interested shareholder
within a period of three years after the date of the transaction in which the person became an interested shareholder must be
approved by our Board of Directors and authorised at an annual or special general meeting by the affirmative vote of at least
66-2/3% of the votes attaching to our issued and outstanding voting shares that are not owned by the interested shareholder,
unless: (i) prior to the time that the shareholder becoming an interested shareholder, our Board of Directors approved either the
business combination or the transaction that resulted in the shareholder becoming an interested shareholder; or (ii) upon the
consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder
owned shares of the company representing at least 85% of the votes attaching to our issued and outstanding voting shares at the
time the transaction commenced. For purposes of these provisions, “business combinations” include mergers, amalgamations,
consolidations and certain sales, leases, exchanges, mortgages, pledges, transfers and other dispositions of assets, issuances
and transfers of shares and other transactions resulting in a financial benefit to an interested shareholder. An “interested
shareholder” is a person that beneficially owns shares representing 15% or more of the
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votes attaching to our issued and outstanding voting shares and any person affiliated or associated with us that owned shares
representing 15% or more of the votes attaching to our issued and outstanding voting shares at any time three years prior to the
relevant time.
Shareholder Suits
Class actions and derivative actions are generally not available to shareholders under Bermuda law. The Bermuda courts,
however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a
wrong to the company where the act complained of is alleged to be beyond the corporate power of the company or illegal, or
would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given
by a Bermuda court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act
requires the approval of a greater percentage of the company’s shareholders than that which actually approved it.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some part of
the shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees
fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any
shareholders by other shareholders or by the company.
Our bye-laws contain a provision by virtue of which our shareholders waive any claim or right of action that they have, both
individually and on our behalf, against any director or officer in relation to any action or failure to take action by such director or
officer, except in respect of any fraud or dishonesty of such director or officer.
Capitalisation of Profits and Reserves
Pursuant to our bye-laws, our Board of Directors may (i) capitalise any part of the amount of our share premium or other reserve
accounts or any amount credited to our profit and loss account or otherwise available for distribution by applying such sum in
paying up unissued shares to be allotted as fully paid bonus shares pro rata (except in connection with the conversion of shares)
to the shareholders; or (ii) capitalise any sum standing to the credit of a reserve account or sums otherwise available for dividend
or distribution by paying up in full, partly paid or nil paid shares of those shareholders who would have been entitled to such sums
if they were distributed by way of dividend or distribution.
Registrar or Transfer Agent
A register of holders of the common shares is maintained by Codan Services Limited in Bermuda, and a branch register is
maintained in the United States by Computershare Trust Company, N.A., which serves as branch registrar and transfer agent.
Untraced Shareholders
Our bye-laws provide that our Board of Directors may forfeit any dividend or other monies payable in respect of any shares that
remain unclaimed for six years from the date when such monies became due for payment. In addition, we are entitled to cease
sending dividend drafts and cheques by post or otherwise to a shareholder if such instruments have been returned undelivered to,
or left uncashed by,
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such shareholder on at least two consecutive occasions or, following one such occasion, reasonable enquires have failed to
establish the shareholder’s new address. This entitlement ceases if the shareholder claims a dividend or cashes a dividend
cheque or draft.
Certain Provisions of Bermuda Law
We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This
designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our
ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S.
residents who are holders of our common shares.
The Bermuda Monetary Authority has given its consent for the issue and free transferability of all shares of the company to and
between residents and non-residents of Bermuda for exchange control purposes, provided our shares remain listed on an
appointed stock exchange, which includes NASDAQ. Approvals or permissions given by the Bermuda Monetary Authority do not
constitute a guarantee by the Bermuda Monetary Authority as to our performance or our creditworthiness. Accordingly, in giving
such consent or permissions, the Bermuda Monetary Authority shall not be liable for the financial soundness, performance or
default of our business or for the correctness of any opinions or statements expressed in this annual report. Certain issues and
transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific
consent of the Bermuda Monetary Authority.
In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the
case of a shareholder acting in a special capacity (for example as a trustee), certificates may, at the request of the shareholder,
record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we are not bound
to investigate or see to the execution of any such trust.
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Bermuda Company Considerations
Our corporate affairs are governed by our memorandum of association and bye-laws and by the corporate law of Bermuda. The
provisions of the Companies Act, which applies to us, differ in certain material respects from laws generally applicable to U.S.
companies incorporated in the State of Delaware and their stockholders. The following is a summary of significant differences
between the Companies Act (including modifications adopted pursuant to our bye-laws) and Bermuda common law applicable to
us and our shareholders and the provisions of the Delaware General Corporation Law applicable to U.S. companies organised
under the laws of Delaware and their stockholders.
Bermuda
Delaware
Shareholder meetings
–
May be called by our Board of Directors and must be called
upon the request of shareholders holding not less than 10% of
the paid-up capital of the company carrying the right to vote at
general meetings.
–
May be held at such time or place as designated in the
certificate of incorporation or the bylaws, or if not so
designated, as determined by the board of directors.
–
May be held in or outside Bermuda.
–
May be held in or outside of Delaware.
–
Notice:
–
Notice:
–
Shareholders must be given at least five days’ advance
notice of a general meeting, but the unintentional failure to
give notice to any person does not invalidate the
proceedings at a meeting.
–
Under our bye-laws, at least 14 days’ notice of any annual
general meeting or 10 days’ notice of a special general
meeting must be given to each shareholder entitled to vote
at such meeting.
–
Notice of general meetings must specify the place, the day
and hour of the meeting and in the case of special general
meetings, the general nature of the business to be
considered.
–
Written notice shall be given not less than 10 nor
more than 60 days before the meeting.
–
Whenever stockholders are required to take any
action at a meeting, a written notice of the meeting
shall be given which shall state the place, if any, date
and hour of the meeting, and the means of remote
communication, if any.
Shareholder’s voting rights
–
Shareholders may act by written consent to elect directors.
Shareholders may not act by written consent to remove a
director or auditor.
–
With limited exceptions, stockholders may act by written
consent to elect directors.
–
Generally, except as otherwise provided in the bye-laws, or
the Companies Act, any action or resolution requiring approval
of the shareholders may be passed by a simple
–
Any person authorised to vote may authorise another
person or persons to act for him or her by proxy.
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Bermuda
Delaware
majority of votes cast. Any person authorised to vote may
authorise another person or persons to act for him or her by
proxy.
–
The voting rights of shareholders are regulated by the
company’s bye-laws and, in certain circumstances, by the
Companies Act. The bye-laws may specify the number to
constitute a quorum and if the bye-laws permit, a general
meeting of the shareholders of a company may be held with
only one individual present if the requirement for a quorum is
satisfied.
–
For stock corporations, the certificate of incorporation or
bylaws may specify the number to constitute a quorum,
but in no event shall a quorum consist of less than
one-third of shares entitled to vote at a meeting. In the
absence of such specifications, a majority of shares
entitled to vote shall constitute a quorum.
–
Our bye-laws provide that when a quorum is once present in
general meeting it is not broken by the subsequent withdrawal
of any shareholders.
–
When a quorum is once present to organise a meeting, it
is not broken by the subsequent withdrawal of any
stockholders.
–
The bye-laws may provide for cumulative voting, although our
bye-laws do not.
–
The certificate of incorporation may provide for
cumulative voting.
–
The amalgamation or merger of a Bermuda company with
another company or corporation (other than certain affiliated
companies) requires the amalgamation or merger agreement
to be approved by the company’s board of directors and by its
shareholders. Unless the company’s bye-laws provide
otherwise, the approval of 75% of the shareholders voting at
such meeting is required to approve the amalgamation or
merger agreement, and the quorum for such meeting must be
two or more persons holding or representing more than
one-third of the issued shares of the company.
–
Any two or more corporations existing under the laws of
the state may merge into a single corporation pursuant to
a board resolution and upon the majority vote by
stockholders of each constituent corporation at an annual
or special meeting.
–
Every company may at any meeting of its board of directors
sell, lease or exchange all or substantially all of its property
and assets as its board of directors deems expedient and in
the best interests of the company to do so when authorised by
a resolution adopted by the holders of a majority of issued and
outstanding shares of a company entitled to vote.
–
Every corporation may at any meeting of the board of
directors sell, lease or exchange all or substantially all of
its property and assets as its board deems expedient and
for the best interests of the corporation when so
authorised by a resolution adopted by the holders of a
majority of the outstanding stock of a corporation entitled
to vote.
–
Any company which is the wholly owned subsidiary of a
holding company, or one or more companies which are wholly
owned subsidiaries of the same holding company, may
amalgamate or merge without the vote or consent of
–
Any corporation owning at least 90% of the outstanding
shares of each class of another corporation may merge
the other corporation into itself and assume all of its
obligations without the vote or consent of stockholders;
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Bermuda
Delaware
shareholders provided that the approval of the board of directors
is obtained and that a director or officer of each such company
signs a statutory solvency declaration in respect of the relevant
company.
however, in case the parent corporation is not the surviving
corporation, the proposed merger shall be approved by a
majority of the outstanding stock of the parent corporation
entitled to vote at a duly called stockholder meeting.
–
–
Any mortgage or pledge of a corporation’s property and
assets may be authorised without the vote or consent of
stockholders, except to the extent that the certificate of
incorporation otherwise provides.
Any mortgage, charge or pledge of a company’s property and
assets may be authorised without the consent of shareholders
subject to any restrictions under the bye-laws.
Directors
–
The board of directors of a company must consist of at least
one director.
–
The board of directors must consist of at least one
member.
–
The number of directors is fixed by the bye-laws, and any
changes to such number must be approved by the board of
directors and/or the shareholders in accordance with the
company’s bye-laws.
–
Number of board members shall be fixed by the bylaws,
unless the certificate of incorporation fixes the number of
directors, in which case a change in the number shall be
made only by amendment of the certificate of
incorporation.
–
Removal:
–
Removal:
–
Under our bye-laws, any or all directors may be removed,
with cause, by the holders of a majority of the shares
entitled to vote at a special meeting convened and held in
accordance with the bye-laws for the purpose of such
removal.
–
Any or all of the directors may be removed, with or
without cause, by the holders of a majority of the
shares entitled to vote unless the certificate of
incorporation otherwise provides.
–
In the case of a classified board, stockholders may
effect removal of any or all directors only for cause.
Duties of directors
–
The Companies Act authorises the directors of a company,
subject to its bye-laws, to exercise all powers of the company
except those that are required by the Companies Act or the
company’s bye-laws to be exercised by the shareholders of
the company. Our bye-laws provide that our business is to be
managed and conducted by our Board of Directors. At
common law, members of a board of directors owe a fiduciary
duty to the company to act in good faith in their dealings with
or on behalf of the company and exercise their powers and
fulfil
103
–
Under Delaware law, the business and affairs of a
corporation are managed by or under the direction of its
board of directors. In exercising their powers, directors
are charged with a fiduciary duty of care to protect the
interests of the corporation and a fiduciary duty of loyalty
to act in the best interests of its stockholders. The duty of
care requires that a director act in good faith, with the
care that an ordinarily prudent person would exercise
under similar circumstances. Under this duty, a director
must inform
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Bermuda
Delaware
the duties of their office honestly. This duty includes the following
essential elements:
himself of, and disclose to stockholders, all material
information reasonably available regarding a significant
transaction. The duty of loyalty requires that a director act in
a manner he reasonably believes to be in the best interests
of the corporation. He must not use his corporate position for
personal gain or advantage. This duty prohibits self-dealing
by a director and mandates that the best interest of the
corporation and its stockholders take precedence over any
interest possessed by a director, officer or controlling
shareholder and not shared by the stockholders generally.
–
–
–
a duty to act in good faith in the best interests of the
company;
–
a duty not to make a personal profit from opportunities that
arise from the office of director;
–
a duty to avoid conflicts of interest; and
–
a duty to exercise powers for the purpose for which such
powers were intended.
The Companies Act imposes a duty on directors and officers
of a Bermuda company:
–
to act honestly and in good faith with a view to the best
interests of the company; and
–
to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable
circumstances.
–
In general, actions of a director are presumed to have
been made on an informed basis, in good faith and in the
honest belief that the action taken was in the best
interests of the corporation. However, this presumption
may be rebutted by evidence of a breach of one of the
fiduciary duties. Should such evidence be presented
concerning a transaction by a director, a director must
prove the procedural fairness of the transaction, and that
the transaction was of fair value to the corporation.
–
Delaware law provides that a parent corporation, by
resolution of its board of directors and without any
stockholder vote, may merge with any subsidiary of which
it owns at least 90% of each class of its capital stock.
Upon any such merger, and in the event the parent
corporate does not own all of the stock of the subsidiary,
dissenting stockholders of the subsidiary are entitled to
certain appraisal rights.
–
Delaware law also provides, subject to certain
exceptions, that if a person acquires
The Companies Act also imposes various duties on directors
and officers of a company with respect to certain matters of
management and administration of the company. Under
Bermuda law, directors and officers generally owe fiduciary
duties to the company itself, not to the company’s individual
shareholders, creditors or any class thereof. Our shareholders
may not have a direct cause of action against our directors.
Takeovers
–
An acquiring party is generally able to acquire compulsorily
the common shares of minority holders of a company in the
following ways:
–
By a procedure under the Companies Act known as a
“scheme of arrangement.” A scheme of arrangement could
be effected by obtaining the agreement of the company and
of holders of common shares, representing in the
aggregate a majority in number and at least 75% in value of
the common shareholders present and voting at a court
ordered meeting held to consider the scheme of
arrangement.
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Bermuda
Delaware
The scheme of arrangement must then be sanctioned by the
Bermuda Supreme Court. If a scheme of arrangement receives all
necessary agreements and sanctions, upon the filing of the court
order with the Registrar of Companies in Bermuda, all holders of
common shares could be compelled to sell their shares under the
terms of the scheme of arrangement.
– If the acquiring party is a company, by acquiring pursuant
to a tender offer 90% of the shares or class of shares not
already owned by, or by a nominee for, the acquiring party
(the offeror), or any of its subsidiaries. If an offeror has,
within four months after the making of an offer for all the
shares or class of shares not owned by, or by a nominee
for, the offeror, or any of its subsidiaries, obtained the
approval of the holders of 90% or more of all the shares to
which the offer relates, the offeror may, at any time within
two months beginning with the date on which the approval
was obtained, by notice compulsorily acquire the shares of
any nontendering shareholder on the same terms as the
original offer unless the Supreme Court of Bermuda (on
application made within a one-month period from the date
of the offeror’s notice of its intention to acquire such
shares) orders otherwise.
15% of voting stock of a company, the person is an
“interested stockholder” and may not engage in “business
combinations” with the company for a period of three years
from the time the person acquired 15% or more of voting
stock.
–
Where the acquiring party or parties hold not less than
95% of the shares or a class of shares of the company, by
acquiring, pursuant to a notice given to the remaining
shareholders or class of shareholders, the shares of such
remaining shareholders or class of shareholders. When this
notice is given, the acquiring party is entitled and bound to
acquire the shares of the remaining shareholders on the
terms set out in the notice, unless a remaining shareholder,
within one month of receiving such notice, applies to the
Supreme Court of Bermuda for an appraisal of the value of
their shares. This provision only applies where the
acquiring party offers the same terms to all holders of
shares whose shares are being acquired.
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Bermuda
Delaware
Dissenter’s rights of appraisal
–
A dissenting shareholder (that did not vote in favour of the
amalgamation or merger) of a Bermuda exempted company is
entitled to be paid the fair value of his or her shares in an
amalgamation or merger.
–
With limited exceptions, appraisal rights shall be
available for the shares of any class or series of stock of
a corporation in a merger or consolidation.
–
The certificate of incorporation may provide that
appraisal rights are available for shares as a result of an
amendment to the certificate of incorporation, any merger
or consolidation or the sale of all or substantially all of the
assets.
–
Under Delaware law, a corporation may voluntarily
dissolve (i) if a majority of the board of directors adopts a
resolution to that effect and the holders of a majority of
the issued and outstanding shares entitled to vote
thereon vote for such dissolution; or (ii) if all stockholders
entitled to vote thereon consent in writing to such
dissolution.
–
In any derivative suit instituted by a stockholder of a
corporation, it shall be averred in the complaint that the
plaintiff was a stockholder of the corporation at the time
of the transaction of which he complains or that such
stockholder’s stock thereafter devolved upon such
stockholder by operation of law.
Dissolution
–
Under Bermuda law, a solvent company may be wound up by
way of a shareholders’ voluntary liquidation. Prior to the
company entering liquidation, a majority of the directors shall
each make a statutory declaration, which states that the
directors have made a full enquiry into the affairs of the
company and have formed the opinion that the company will
be able to pay its debts within a period of 12 months of the
commencement of the winding up and must file the statutory
declaration with the Registrar of Companies in Bermuda. The
general meeting will be convened primarily for the purposes of
passing a resolution that the company be wound up voluntarily
and appointing a liquidator. The winding up of the company is
deemed to commence at the time of the passing of the
resolution.
Shareholder’s derivative actions
–
Class actions and derivative actions are generally not
available to shareholders under Bermuda law. Bermuda
courts, however, would ordinarily be expected to permit a
shareholder to commence an action in the name of a company
to remedy a wrong to the company where the act complained
of is alleged to be beyond the corporate power of the company
or illegal, or would result in the violation of the company’s
memorandum of association or bye-laws. Furthermore,
consideration would be given by a Bermuda court to acts that
are alleged to constitute a fraud against the minority
shareholders or, for instance, where an act requires the
approval of a greater percentage of the company’s
shareholders than that which actually approved it.
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C. MATERIAL CONTRACTS
None.
D. EXCHANGE CONTROLS
Under Bermuda law, there are currently no restrictions on the export or import of capital, including foreign exchange controls or
restrictions that affect the remittance of dividends, interest or other payments to non-resident holders of our common shares.
We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This
designation allows us to engage in transactions in currencies other than the Bermuda dollar, and there are no restrictions on our
ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S.
residents who are holders of our common shares.
Under Bermuda law, “exempted” companies are companies formed for the purpose of conducting business outside Bermuda from
a principal place of business in Bermuda. As an exempted company, we may not carry on certain business in Bermuda without a
licence or consent granted by the Minister responsible for the Companies Act.
E. TAXATION
The following sets forth material Bermuda, U.K. and U.S. federal income tax consequences of owning and disposing of our
common shares. It is based upon laws and relevant interpretations thereof as of the date of this annual report, all of which are
subject to change. This discussion does not address all possible tax consequences relating to an investment in our common
shares, such as the tax consequences under U.S. state, local and other tax laws.
Bermuda Tax Considerations
At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister
of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted
in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in
the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to us or to any of our operations
or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is
payable by us in respect of real property owned or leased by us in Bermuda.
United Kingdom Taxation
General
The following is a description of the material U.K. tax consequences of an investment in our common shares. It is intended only as
a general guide to the position under current U.K. tax law and what is understood to be the current published practice of HMRC
and may not apply to certain classes of investors, such as dealers in securities, persons who acquire (or are deemed to acquire)
their securities by reason of an office or employment, insurance companies and collective investment schemes. Rates of tax,
thresholds and allowances are given for the U.K. tax year 2015-16, and may change for the tax year 2016-17. Any person who is
in doubt as to his tax position is strongly
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recommended to consult his own professional tax adviser. To the extent this description applies to U.K. resident and, if individuals,
domiciled shareholders, it applies only to those shareholders who beneficially hold their shares as an investment (unless
expressly stated otherwise).
The Company
It is the intention of the directors to conduct the affairs of Markit Ltd. so that the central management and control of Markit Ltd. is
exercised in the United Kingdom such that Markit Ltd. is treated as resident in the United Kingdom for U.K. tax purposes.
Taxation of dividends
Withholding tax
We will not be required to withhold U.K. tax at source on any dividends paid to shareholders in respect of our common shares.
U.K. resident shareholders
Individuals resident in the United Kingdom for taxation purposes are generally liable to income tax on the aggregate amount of
any dividend received and a tax credit equal to one-ninth of the dividend received (the “gross dividend”). For example, on a
dividend received of £90, the tax credit would be £10, and an individual would be liable to income tax on £100. The gross dividend
will be part of the individual’s total income for U.K. income tax purposes and will be regarded as the top slice of that income.
However, in calculating the individual’s liability to income tax in respect of the gross dividend, the tax credit (which equates to 10
percent of the gross dividend) is set off against the tax chargeable on the gross dividend.
U.K. resident individuals who are subject to income tax at the basic rate (currently 20 percent for taxable income up to £31,785),
will be subject to tax on the gross dividend at the dividend ordinary rate of 10 percent. The tax credit will, in consequence, satisfy
in full their liability to income tax on the gross dividend.
U.K. resident individuals who are subject to income tax at the higher rate (currently 40 percent) are subject to tax on the gross
dividend at the dividend upper rate of 32.5 percent, to the extent that the gross dividend falls above the threshold (currently
£31,785) for the higher rate of income tax but below the threshold (currently £150,000) for the additional rate of income tax
(currently 45 percent), but are entitled to offset the 10 percent tax credit against such liability. For example, on a dividend received
of £90 such a taxpayer would have to pay additional tax of £22.50 (representing 32.5 percent of the gross dividend less the 10
percent credit). This represents an effective tax rate of 25 percent of the cash dividend received.
U.K. resident individuals who are subject to income tax at the additional rate (currently 45 percent) are subject to tax on the gross
dividend at the dividend additional rate of 37.5 percent to the extent that the gross dividend falls above the threshold (currently
£150,000) for the additional rate of income tax, but are entitled to offset the 10 percent tax credit against such liability. For
example, on a dividend received of £90 such a taxpayer would be required to account for income tax of £27.50 (being 37.5
percent of the gross dividend less the 10 percent tax credit). This represents an effective tax rate of 30.55 percent of the cash
dividend received.
However, in the Summer Budget 2015 and 2015 Autumn Statement and Spending Review, the Chancellor of the Exchequer
announced that it was the intention of the UK government to introduce legislation in the Finance Bill 2016 to repeal the dividend
tax credit and introduce a new dividend allowance and new rates of income tax on dividends with effect from 6 April 2016.
Assuming that the Finance Bill 2016 is brought into effect in its current form, from 6 April 2016 individuals will pay no tax
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on a dividend allowance, being the first £5,000 of dividend income, and that the rates of income tax on dividends received above
the allowance will be changed to: (a) 7.5% for dividends taxed in the basic rate band; (b) 32.5% for dividends taxed in the higher
rate band; and (c) 38.1% for dividends taxed in the additional rate band. Dividend income that is within the dividend allowance will
still count towards an individual’s basic or higher rate limits—and may therefore affect the level of savings allowance that they are
entitled to, and the rate of tax that is due on any dividend income in excess of this allowance. In calculating into which tax band
any dividend income over the £5,000 allowance falls, savings and dividend income are treated as the highest part of an
individual’s income. Where an individual has both savings and dividend income, the dividend income is treated as the top slice.
A U.K. resident shareholder who holds common shares in an individual savings account or personal equity plan will be exempt
from income tax on dividends in respect of such shares but will not be able to claim payment from HMRC of the tax credit
associated with the dividend (and in any event, the Finance Bill 2016 includes provisions abolishing the dividend tax credit).
No repayment of the tax credit in respect of dividends paid by us can be claimed by a U.K. resident shareholder who is not liable
to U.K. tax on dividends (such as pension funds and charities). In any event, the Finance Bill 2016 includes provisions abolishing
the dividend tax credit.
Subject to certain exceptions, including for traders in securities and insurance companies, dividends paid by us and received by a
corporate shareholder resident in the United Kingdom for tax purposes should be able to rely on the provisions set out in Part 9A
of the Corporation Tax Act 2009 which exempt certain classes of dividend from corporation tax. Each shareholder’s position will
depend on its own individual circumstances, although it would normally be expected that the dividends paid by us would fall into
an exempt class and will not be subject to corporation tax. Such shareholders will not be able to reclaim repayment of tax credits
attaching to dividends and in any event, the Finance Bill 2016 includes provisions abolishing the dividend tax credit.
Non-U.K. resident shareholders
Non-U.K. resident shareholders are not subject to tax (including withholding tax) in the United Kingdom on dividends received on
our common shares unless they carry on a trade, profession or vocation in the United Kingdom through a branch or agency (or, in
the case of a non-U.K. resident corporate shareholder, a permanent establishment) to which the common shares are attributable,
and are therefore not generally entitled to payment of any part of the income tax credit (in any event, the Finance Bill 2016
includes provisions abolishing the dividend tax credit), subject to the existence and terms of any applicable double tax convention
between the United Kingdom and the jurisdiction in which such shareholder is resident.
Taxation of capital gains
U.K. resident shareholders
A disposal of common shares by an individual shareholder who is (at any time in the relevant U.K. tax year) resident in the United
Kingdom for tax purposes, may give rise to a chargeable gain or an allowable loss for the purposes of U.K. taxation of chargeable
gains, depending on the shareholder’s circumstances and subject to any allowable deductions and any available exemption or
relief including the annual exempt amount (being £11,100 for 2015-16). Capital gains tax is charged on chargeable gains at a rate
of either 18 percent or 28 percent depending on whether the individual is a basic rate taxpayer or a higher or additional rate
taxpayer.
For shareholders within the charge to U.K. corporation tax on chargeable gains that do not qualify for the substantial shareholding
exemption in respect of the common shares, indexation allowance should be available to reduce the amount of any chargeable
gain realised on a disposal of common shares (but not to create or increase any loss).
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Non-resident shareholders
A shareholder who is not resident in the United Kingdom for tax purposes will not be subject to U.K. taxation of capital gains on
the disposal or deemed disposal of common shares unless they carry on a trade, profession or vocation in the United Kingdom
through a branch or agency (or, in the case of a non-U.K. resident corporate shareholder, a permanent establishment) to which
the common shares are attributable, in which case they will be subject to the same rules which apply to U.K. resident
shareholders.
A shareholder who is an individual and who is temporarily resident for tax purposes outside the United Kingdom at the date of
disposal of common shares may also be liable, on his return, to U.K. taxation of chargeable gains (subject to any available
exemption or relief).
Stamp duty and stamp duty reserve tax (“SDRT”)
The statements below summarise the current law and are intended as a general guide only to stamp duty and SDRT. Special
rules apply to agreements made by broker dealers and market makers in the ordinary course of their business and to transfers,
agreements to transfer or issues to certain categories of person (such as depositaries and clearance services) which may be
liable to stamp duty or SDRT at a higher rate.
No stamp duty reserve tax will be payable on any agreement to transfer the common shares, provided that the common shares
are not registered in a register kept in the United Kingdom. It is not intended that such a register will be kept in the United
Kingdom. Further, no stamp duty will be payable on transfer of the common shares provided that (i) any instrument of transfer is
not executed in the United Kingdom; and (ii) such instrument of transfer does not relate to any property situated, or any matter or
thing done or to be done, in the United Kingdom.
Inheritance tax
U.K. inheritance tax may be chargeable on the death of, or on a gift of common shares by, a U.K. domiciled shareholder. For
inheritance tax purposes, a transfer of assets at less than full market value may be treated as a gift and particular rules apply to
gifts where the donor reserves or retains some benefit. Special rules also apply to the trustees of settlements who hold common
shares. Potential investors should consult an appropriate professional adviser if they make a gift or transfer at less than full market
value or they intend to hold common shares through trust arrangements.
ISA
The common shares are eligible for inclusion in the stocks and shares component of an ISA, subject, where applicable, to the
annual subscription limits for new investments into an ISA (for the tax year 2015/2016 this is £15,240). Sums received by a
shareholder on a disposal of common shares will not count towards the shareholder’s annual limit, but a disposal of common
shares held in an ISA will not serve to make available again any part of the annual subscription limit that has already been used
by the shareholder in that tax year.
U.S. Federal Income Tax Considerations
The following is a description of the material U.S. federal income tax consequences to the U.S. Holders described below of
owning and disposing of common shares. It does not describe all tax considerations that may be relevant to a particular person’s
decision to hold the common shares.
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This discussion applies only to a U.S. Holder that holds common shares as capital assets for tax purposes. In addition, it does not
describe all of the tax consequences that may be relevant in light of the U.S. Holder’s particular circumstances, including
alternative minimum tax consequences, the potential application of the provisions of the Code known as the Medicare contribution
tax and tax consequences applicable to U.S. Holders subject to special rules, such as:
–
certain financial institutions;
–
dealers or traders in securities who use a mark-to-market method of tax accounting;
–
persons holding common shares as part of a hedging transaction, straddle, wash sale, conversion transaction or other
integrated transaction or persons entering into a constructive sale with respect to the common shares;
–
persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
–
entities classified as partnerships for U.S. federal income tax purposes;
–
tax-exempt entities, including an “individual retirement account” or “Roth IRA”;
–
persons who acquired our common shares pursuant to the exercise of an employee stock option or otherwise as
compensation;
–
persons that own or are deemed to own ten percent or more of our voting shares; or
–
persons holding common shares in connection with a trade or business conducted outside of the United States.
If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income
tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships
holding common shares and partners in such partnerships should consult their tax advisers as to the particular U.S. federal
income tax consequences of owning and disposing of the common shares.
This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), administrative pronouncements,
judicial decisions, final, temporary and proposed Treasury regulations and the income tax treaty between the United Kingdom and
the United States (the “Treaty”), all as of the date hereof, any of which is subject to change or differing interpretations, possibly
with retroactive effect.
A “U.S. Holder” is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares and is:
–
a citizen or individual resident of the United States;
–
a corporation, or other entity taxable as a corporation, created or organised in or under the laws of the United States, any
state therein or the District of Columbia; or
–
an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of owning
and disposing of common shares in their particular circumstances.
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This discussion assumes that we are not, and will not become, a passive foreign investment company, as described below.
Taxation of distributions
Distributions paid on common shares, other than certain pro rata distributions of common shares, will be treated as dividends to
the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles).
Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that
distributions generally will be reported to U.S. Holders as dividends. For so long as our common shares are listed on NASDAQ or
we are eligible for benefits under the Treaty, dividends paid to certain non-corporate U.S. Holders will be eligible for taxation as
“qualified dividend income” and therefore, subject to applicable limitations, will be taxable at rates not in excess of the long-term
capital gain rate applicable to such U.S. Holder. U.S. Holders should consult their tax advisers regarding the availability of the
reduced tax rate on dividends in their particular circumstances. The amount of the dividend will generally be treated as
foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received deduction generally available to
U.S. corporations under the Code. Dividends will be included in a U.S. Holder’s income on the date of the U.S. Holder’s receipt of
the dividend.
Sale or other disposition of common shares
For U.S. federal income tax purposes, gain or loss realised on the sale or other disposition of common shares will be capital gain
or loss, and will be long-term capital gain or loss if the U.S. Holder held the common shares for more than one year. The amount
of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the common shares disposed of and the amount
realised on the disposition, in each case as determined in U.S. dollars. This gain or loss will generally be U.S.-source gain or loss
for foreign tax credit purposes. The deductibility of capital losses is subject to various limitations.
Passive foreign investment company rules
We believe that we were not a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax purposes for our 2015
taxable year. In general, a non-U.S. corporation is a PFIC for any taxable year if: (i) 75% or more of its gross income consists of
passive income (such as dividends, interest, rents and royalties) or (ii) 50% or more of the average quarterly value of its assets
consists of assets that produce, or are held for the production of, passive income. Because PFIC status depends on the
composition of a company’s income and assets and the value of its assets from time to time, there can be no assurance that we
will not be a PFIC for any taxable year.
If we were a PFIC for any taxable year during which a U.S. Holder held common shares (assuming such U.S. Holder has not
made a timely mark-to-market election, as described below), gain recognised by a U.S. Holder on a sale or other disposition
(including certain pledges) of the common shares would be allocated ratably over the U.S. Holder’s holding period for the common
shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC
would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in
effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the
amount allocated to that taxable year. Further, to the extent that any distribution received by a U.S. Holder on its common shares
exceeds 125% of the average of the annual distributions on the common shares received during the preceding three years or the
U.S. Holder’s holding period, whichever is shorter, that distribution would be subject to taxation in the same manner as gain,
described immediately above. A U.S. Holder can avoid certain of the adverse rules described above by making a mark-to-market
election with respect to its common
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shares, provided that the common shares are “marketable.” Common shares will be marketable if they are “regularly traded” on a
“qualified exchange” or other market within the meaning of applicable Treasury regulations. If a U.S. Holder makes the
mark-to-market election, it generally will recognise as ordinary income any excess of the fair market value of the common shares
at the end of each taxable year over their adjusted tax basis, and will recognise an ordinary loss in respect of any excess of the
adjusted tax basis of the common shares over their fair market value at the end of the taxable year (but only to the extent of the
net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the
holder’s tax basis in the common shares will be adjusted to reflect the income or loss amounts recognised. Any gain recognised
on the sale or other disposition of common shares in a year when the Company is a PFIC will be treated as ordinary income and
any loss will be treated as an ordinary loss (but only to the extent of the net amount of income previously included as a result of
the mark-to-market election).
In addition, in order to avoid the application of the foregoing rules, a United States person that owns stock in a PFIC for U.S.
federal income tax purposes may make a “qualified electing fund” election (a “QEF Election”) with respect to such PFIC if the
PFIC provides the information necessary for such election to be made. If a United States person makes a QEF Election with
respect to a PFIC, the United States person will be currently taxable on its pro rata share of the PFIC’s ordinary earnings and net
capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is classified as a PFIC
and will not be required to include such amounts in income when actually distributed by the PFIC. We do not intend to provide
information necessary for U.S. Holders to make qualified electing fund elections.
If we are a PFIC for any taxable year during which a U.S. Holder owned our shares, the U.S. Holder will generally be required to
file IRS Form 8621 with their annual U.S. federal income tax returns, subject to certain exceptions.
Information reporting and backup withholding
Payments of dividends and sales proceeds that are made within the United States or through certain U.S.-related financial
intermediaries generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder
is a corporation or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer
identification number and certifies that it is not subject to backup withholding.
Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be
allowed as a credit against the holder’s U.S. federal income tax liability and may entitle it to a refund, provided that the required
information is timely furnished to the IRS.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
We are subject to the informational requirements of the Exchange Act. Accordingly, we are required to file reports and other
information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect and copy reports and
other information filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on
the operation of the
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Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that
website is www.sec.gov .
In addition, our website is located at www.markit.com, and our investor relations website is located at
www.markit.com/company/investors. The following filings are available through our investor relations website as soon as we
electronically file or furnish such material to the SEC:
–
our Annual Reports on Form 20-F;
–
Current Reports on Form 6-K; and
–
amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
All such postings and filings are available on our investor relations website free of charge. A copy of our annual report will be
provided in print without charge upon written request to our Company Secretary at c/o Markit Legal Department, Markit Ltd., 4th
Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In addition to the risks inherent in our operations, we are exposed to a variety of financial risks, such as market risk (including
foreign currency exchange, cash flow and fair value interest rate risk), credit risk and liquidity risk, and further information can be
found in Note 5 to the audited consolidated financial statements included elsewhere in this annual report.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
None.
ITEM 15. CONTROLS AND PROCEDURES
A. DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this annual report, an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, our principal
executive officer and principal financial officer, respectively.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective, as of the end of the period covered by this annual report, in providing a reasonable level of assurance
that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed,
summarised, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance
that information required to be disclosed by us in such reports is accumulated and communicated to our management, including
our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required
disclosure.
B. MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. 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 for external
purposes in accordance with IFRS. Because of its inherent limitations, a system of internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31,
2015 based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that our internal control over financial reporting was effective as of
December 31, 2015.
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The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included
herein.
C. ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
Our independent registered public accounting firm has audited, and reported on, the effectiveness of our internal control over
financial reporting, included in its opinion of the audited consolidated financial statements of Markit Ltd., included elsewhere in this
annual report and incorporated herein by reference.
D. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the year ended December 31, 2015 there were no changes to our internal controls over financial reporting that have
materially affected or are reasonably likely to materially affect our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that Mr. Dinyar S. Devitre satisfies the “independence” requirements set forth in Rule
10A-3 under the Exchange Act. Our Board of Directors has also determined that Mr. Dinyar S. Devitre is an “audit committee
financial expert” as defined in Item 16A of Form 20-F under the Exchange Act.
ITEM 16B. CODE OF ETHICS
Our Board of Directors has adopted a code of conduct and business ethics (the “Code of Conduct”), which covers a broad range
of matters including the handling of conflicts of interest, compliance issues and other corporate policies such as insider trading
and equal opportunity and non-discrimination standards, and applies to all our directors, officers and other employees. Any waiver
of the Code of Conduct for directors or executive officers may be made only by our Board of Directors and will be promptly
disclosed to our shareholders as required by applicable laws and NASDAQ rules. Amendments to the Code of Conduct must be
approved by our Board of Directors and will be promptly disclosed (other than technical, administrative or non-substantive
changes).
During 2015, no amendments were made to a provision of the Code of Conduct, and no waivers were explicitly or implicitly
granted to any of our principal executive officer, principal financial officer and principal accounting officer, in each case that would
be required to be disclosed herein.
The Code of Conduct is publicly available under the “Governance” section of our investor relations website at
http://www.markit.com/company/investors. The information on our website is not incorporated by reference into this annual report.
A copy will be provided in print without charge upon written request to our Company Secretary at c/o Markit Legal Department,
Markit Ltd., 4th Floor, Ropemaker Place, 25 Ropemaker Street, London, England EC2Y 9LY.
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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PricewaterhouseCoopers LLP (“PwC”) acted as our independent auditor for the fiscal years ended December 31, 2015 and 2014.
The table below sets out the total amount billed to us by PwC, for services performed in the years ended December 31, 2015 and
2014, and breaks down these amounts by category of service:
($ in thousands)
Audit Fees
Audit-Related Fees
All Other Fees
Total
2015
2014
3,341
443
74
3,858
2,254
1,027
63
3,344
Audit fees
Audit fees in 2015 and 2014 were related to the audit of our consolidated and subsidiary financial statements and other audit or
interim review services provided in connection with statutory and regulatory filings or engagements.
Audit-related fees
Audit-related fees are 2015 and 2014 were related to professional services rendered in connection with our initial public offering.
All other fees
All other fees in 2015 and 2014 relate to services in connection with corporate compliance matters.
Pre-approval policies and procedures
The advance approval of our Audit and Risk Committee or members thereof, to whom approval authority has been delegated, is
required for all audit and non-audit services provided by our auditors.
All services provided by our auditors are approved in advance by either our Audit and Risk Committee or members thereof, to
whom authority has been delegated, in accordance with our Audit and Risk Committee’s pre-approval policy and procedure. No
such services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which waives the
general requirement for pre-approval in certain circumstances.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On May 7, 2015, our Board of Directors authorised a share repurchase plan (the “2015 Share Repurchase Plan”), pursuant to
which we were authorised to repurchase our own common shares with an aggregate value of up to $500 million, to be funded
using our existing cash, cash equivalents, marketable securities and future cash flows, or through the incurrence of short- or
long-term indebtedness. Under the 2015 Share Repurchase Plan, we were authorised to repurchase our
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common shares on the open market from time to time, in privately negotiated transactions or block transactions, or through
accelerated repurchase agreements, subject to availability of common shares, price, market conditions, alternative uses of capital,
and applicable regulatory requirements, in management’s discretion and on the terms set out in the resolutions of our Board of
Directors approving such share repurchases.
On June 10, 2015, as part of a public offering and sale of 27,501,271 common shares by certain selling shareholders, we
purchased from the underwriters 14,048,820 common shares sold in the offering, for an aggregate purchase price of
approximately $350 million.
On December 4, 2015 our Board of Directors authorised an accelerated share repurchase (the “2015 ASR”) with an aggregate
amount of $200 million of our common shares, reflecting the $150.0 million that remained authorised under the 2015 Share
Repurchase Plan and an additional authorisation of $50.0 million to be repurchased under the 2015 ASR.
On February 4, 2016, our Board of Directors authorised a share repurchase plan (the “2016 Share Repurchase Plan”), pursuant to
which we are authorised the repurchase up to $500 million of our common shares through February 28, 2018, to be funded using
our existing cash, cash equivalents, marketable securities and future cash flows, or through the incurrence of short- or long-term
indebtedness at the discretion of our management. Under the 2016 Share Repurchase Plan, we are authorised to repurchase our
common shares on the open market from time to time, in privately negotiated transactions or block transactions, or through
accelerated repurchase agreements, subject to availability of common shares, price, market conditions, alternative uses of capital,
and applicable regulatory requirements, in management’s discretion and on the terms set out in the resolutions of our Board of
Directors approving such share repurchases. The 2016 Share Repurchase Plan may be modified, suspended or terminated at any
time without prior notice. As of the date of this annual report on Form 20-F, no shares have been repurchased under the 2016
Share Repurchase Plan.
Period
January 2015
February 2015
March 2015
April 2015
May 2015
June 2015(3)
July 2015
August 2015
September
2015
October 2015
November 2015
December
2015(4)
Total
Total number of common
shares purchased(1)
Average price paid per
common share(2)
Total number of common shares
purchased as part of publicly
announced plans(1)
–
–
–
–
–
14,048,820
–
–
–
–
–
–
–
24.913125
–
–
–
–
–
–
–
14,048,820
–
–
–
–
–
5,095,108
19,143,928
–
–
–
–
–
–
29.44
26.12
Approximate dollar value of
common shares that may
yet be purchased under the
plans(1)(2)(5)
–
–
–
–
$500,000,000
$150,000,000
$150,000,000
$150,000,000
$150,000,000
$150,000,000
$150,000,000
5,095,108
19,143,928
0
0
(1) In 2015, our Board of Directors authorised the repurchase of $550.0 million of common shares through the 2015 Share Repurchase Plan
and the 2015 ASR.
(2) Excludes brokerage commissions
(3) On June 10, 2015, we purchased 14,048,820 common shares from the underwriters of the public offering of our shares by certain
shareholders.
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(4) In December 2014, we paid $200.0 million under the 2015 ASR and received an initial delivery of 5,095,108 common shares which is
reflected in the table shown above. The average price paid per common share was calculated using the fair market value of the shares on
the date the initial shares were delivered.
(5) Excludes $500.0 million available under the 2016 Share Repurchase Plan. As of the date of this annual report on Form 20-F, no shares
have been repurchased under the 2016 Share Repurchase Plan.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
Our common shares are listed on NASDAQ. In order to list on NASDAQ, we are required to comply with certain of the NASDAQ
Rules. As a foreign private issuer, we may follow our home country’s corporate governance practices in lieu of certain of the
NASDAQ Rules. Our corporate governance practices differ in certain respects from those that U.S. companies must adopt in
order to maintain a NASDAQ listing. A brief summary of those differences is provided as follows.
Independent directors
The HR and Compensation Committee and the Nominating and Governance Committee of our Board of Directors are not
composed entirely of independent directors.
Proxies and shareholder voting
Our bye-laws do not require us to solicit proxies or provide proxies for all meetings of shareholders.
Our bye-laws do not require shareholder approval for the issuance of shares (i) in connection with the acquisition of stock or
assets of another company; (ii) when it would result in a change of control; (iii) when a share option or purchase plan is to be
established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which
shares may be acquired by officers, directors, employees, or consultants; or (iv) in connection with a transaction (other than a
public offering) involving the sale, issuance or potential issuance of shares at a price less than market value.
Other than the foregoing, there are no significant differences between the corporate governance practices of Markit Ltd. and those
required of a U.S. domestic issuer under the NASDAQ Rules.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
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PART III
ITEM 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
ITEM 18. FINANCIAL STATEMENTS
The audited consolidated financial statements as required under Item 18 are attached hereto starting on page F-1 of this annual
report.
ITEM 19. EXHIBITS
Exhibit
number
1.1
1.2
1.3
1.4
2.1
2.2
2.3
2.4
2.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
Description of document
Certificate of Incorporation*
Memorandum of Association**
Memorandum of Increase of Share Capital
Bye-laws**
Form of certificate of common shares**
Director Nomination Agreement between Markit Ltd. and Canada Pension Plan Investment Board***
Registration Rights Agreement among Markit Ltd. and the Shareholders party thereto***
Transfer Restriction Letter Agreement among Markit Ltd., Lance Uggla and Pan Praewood***
Amendment No. 1 to the Registration Rights Agreement among Markit Ltd. and the Shareholders party thereto
Amended and Restated 2004 Markit Additional Share Option Plan***
Amended and Restated Markit 2006 Share Option Plan***
Amended and Restated Markit 2006 Additional Share Option Plan***
Amended and Restated Markit 2007 Share Option Plan***
Amended and Restated Markit 2008 Share Option Plan (1/3 vesting)***
Amended and Restated Markit 2008 Share Option Plan (1/5 vesting)***
Amended and Restated Markit 2008 Additional Share Option Plan (1/3 vesting)***
Amended and Restated Markit 2008 Additional Share Option Plan (1/5 vesting)***
Amended and Restated Markit 2009 Additional Share Option Plan***
Amended and Restated Markit 2009 Share Option Plan (1/3 vesting)***
Amended and Restated Markit 2009 Share Option Plan (1/5 vesting)***
Amended and Restated Markit 2010 Share Plan***
Amended and Restated Markit 2010 Share Option Plan***
Amended and Restated Markit 2010 Share Option Plan (1/3 vesting)***
Amended and Restated Markit 2010 Share Option Plan (1/5 vesting)***
Amended and Restated 2011 Markit Share Plan***
Amended and Restated 2011 Markit Share Option Plan***
Amended and Restated 2012 Markit Share Plan***
Amended and Restated 2012 Markit Share Option Plan***
Amended and Restated 2013 Markit Share Plan***
Amended and Restated 2013 Markit Share Option Plan***
Amended and Restated 2013 Markit Share Option Plan (mid-year awards April through December 2013)***
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Exhibit
number
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
4.43
8.1
12.1
12.2
13.1
13.2
15.1
Description of document
Amended and Restated 2014 Markit Share Plan***
Amended and Restated 2014 Markit Share Option Plan***
Amended and Restated Markit Key Employee Incentive Program (KEIP)***
Markit Ltd. 2014 Equity Incentive Award Plan***
Form of Restricted Share Agreement***
Form of Non-Qualified Share Option Agreement***
Form of Restricted Share Unit Agreement***
Non-Employee Director Compensation Policy***
Lease relating to premises on Level 3, Ropemaker Place†*
Lease relating to premises on Level 4, Ropemaker Place†*
Lease relating to premises on Level 5, Ropemaker Place†*
Lease Deed relating to premises at Noida Green Boulevard†*
Indenture of Lease relating to premises at 620 Eighth Avenue†*
Office Lease relating to premises at Three Lincoln Centre†*
Commercial Lease relating to premises at Central Avenue†*
Office Lease Agreement relating to premises at Flatiron Parkway†*
Deriv/SERV Support Agreement by and among DTCC Deriv/SERV LLC, The Depository Trust & Clearing Corporation and
MarkitSERV, LLC, dated as of April 2, 2013†*
Amended and Restated Multicurrency Revolving Facility Agreement for Markit Group Holdings Limited, arranged by Barclays
Bank plc, HSBC Bank plc, Royal Bank of Canada and The Royal Bank of Scotland plc, with HSBC Bank acting as Agent, dated
March 21, 2014*
Supplemental Agreement to the Amended and Restated Multicurrency Revolving Facility Agreement for Markit Group Holdings
Limited, arranged by Barclays Bank plc, HSBC Bank plc, Royal Bank of Canada and The Royal Bank of Scotland plc, with
HSBC Bank acting as Agent, dated June 13, 2014***
Amendment Letter to the Amended and Restated Multicurrency Revolving Facility Agreement for Markit Group Holdings
Limited, arranged by Barclays Bank plc, HSBC Bank plc, Royal Bank of Canada and The Royal Bank of Scotland plc, with
HSBC Bank acting as Agent, dated May 29, 2015
Note Purchase and Guarantee Agreement among Markit Ltd., Markit Group Holdings Limited and the Purchasers named
therein dated as of November 4, 2015
List of subsidiaries
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Consent of PricewaterhouseCoopers LLP
*
Incorporated by reference to our registration statement on Form F-1 (file no. 333-198711), as amended, as filed on May 5,
2014.
**
Incorporated by reference to our registration statement on Form F-1 (file no. 333-198711), as amended, as filed on June 3,
2014.
*** Incorporated by reference to our Annual Report on Form 20-F for the year ended December 31, 2014 (file no. 001-36495) as
filed on March 10, 2015.
†
Filed in redacted form subject to a Request for Confidential Treatment that was granted.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorised the undersigned to sign this Annual Report on its behalf.
Markit Ltd.
By:
Name:
Title:
Date: March 11, 2016
122
/s/ Jeffrey Gooch
Jeffrey Gooch
Chief Financial Officer
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Markit Ltd. (the “Company”)
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and
comprehensive income, of shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of
Markit Ltd. and its subsidiaries at 31 December 2015 and 31 December 2014, and the results of their operations and their cash
flows for each of the three years in the period ended 31 December 2015 in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of 31 December 2015, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on
these financial statements and on the Company’s internal control over financial reporting based on our audits (which was an
integrated audit in 2015). 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 audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s 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 for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
March 11, 2016
PricewaterhouseCoopers LLP, 7 More London Riverside, London, SE 1 2 RT
T: +44 (0) 2075 835 000, F: +44 (0) 2072 127 500, www.pwc.co.uk
F-1
Table of Contents
MARKIT LTD.
CONSOLIDATED INCOME STATEMENT
Notes
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013 1
$’m
Revenue
7
1,113.4
1,065.1
947.9
Operating expenses
Exceptional items
Acquisition related items
Amortisation – acquisition related
Depreciation and amortisation –
other
Share based compensation and
related items
Other gains/(losses) – net
8
9
10
17
(600.4)
(48.7)
(4.2)
(63.7)
(569.2)
(84.9)
12.4
(57.9)
(515.1)
(60.6)
1.4
(50.1)
16,17
(107.0)
(100.1)
(86.0)
11
12
(50.8)
13.7
(16.0)
(6.0)
(8.1)
0.7
252.3
243.4
230.1
(18.9)
(11.3)
(16.9)
(5.9)
(19.4)
-
222.1
220.6
210.7
(70.0)
(56.5)
(63.7)
Profit for the year
152.1
164.1
147.0
Profit attributable to:
Owners of the parent
Non-controlling interests
152.5
(0.4)
165.2
(1.1)
139.4
7.6
152.1
164.1
147.0
$
0.85
0.80
$
0.92
0.90
$
0.80
0.79
Operating profit
Finance costs - net
Share of results from joint venture
13
20
Profit before income tax
Income tax expense
Earnings per share, basic
Earnings per share, diluted
1
14
15
15
Restated to reflect the share split (see note 2).
There were no discontinued operations for any of the years presented.
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Table of Contents
MARKIT LTD.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended
December 31,
2015
$’m
152.1
Year ended
December 31,
2014
$’m
164.1
Year ended
December 31,
2013
$’m
147.0
-
-
(1.8)
8.0
(9.9)
0.4
0.2
(43.5)
5.2
9.8
(3.0)
(42.4)
(12.1)
2.3
2.0
11.5
Other comprehensive (loss)/income for
the year, net of tax
(44.8)
(30.4)
1.9
Total comprehensive income for the year
107.3
133.7
148.9
Attributable to:
Owners of the parent
Non-controlling interests
107.7
(0.4)
134.8
(1.1)
140.8
8.1
Total comprehensive income for the year
107.3
133.7
148.9
Notes
Profit for the year
Items that may be subsequently
reclassified to profit or loss:
Available for sale financial assets:
- Reclassification adjustment for sale of
available for sale financial assets
Cash flow hedges:
- Fair value gains/(losses) arising during
the year
- Transfers to Other gains/(losses) - net
- Current tax credit
- Deferred tax credit/(charge)
Currency translation differences
26
26
14
14
26
Items included in the statement above may all be subsequently reclassified to profit or loss.
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
MARKIT LTD.
CONSOLIDATED BALANCE SHEET
December 31,
2015
December 31,
2014
$’m
$’m
49.6
3,076.8
2.3
0.5
12.5
1.1
56.5
2,823.3
4.2
0.9
1.1
-
3,142.8
2,886.0
272.5
3.9
3.1
146.0
288.8
7.1
0.4
117.7
425.5
414.0
3,568.3
3,300.0
1.7
177.2
(170.0)
2,067.4
1.8
456.8
(75.2)
1,850.6
Equity attributable to owners of the parent
Non-controlling interests
2,076.3
36.2
2,234.0
36.6
Total equity
2,112.5
2,270.6
737.6
157.2
0.1
22.9
349.2
143.1
0.6
30.2
917.8
523.1
86.4
213.4
226.7
9.9
1.6
86.4
203.7
194.2
19.7
2.3
538.0
506.3
1,455.8
1,029.4
Notes
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred income tax assets
Derivative financial instruments
Investment in joint venture
Available for sale financial assets
16
17
29
19
20
Total non-current assets
Current assets
Trade and other receivables
Derivative financial instruments
Current income tax receivables
Cash and cash equivalents
21
19
22
Total current assets
Total assets
Equity
Capital and reserves
Common shares
Share premium
Other reserves
Retained earnings
Liabilities
Non-current liabilities
Borrowings
Trade and other payables
Derivative financial instruments
Deferred income tax liabilities
23
23
26
25
28
27
19
29
Total non-current liabilities
Current liabilities
Borrowings
Trade and other payables
Deferred income
Current income tax liabilities
Derivative financial instruments
Total current liabilities
Total liabilities
28
27
19
Total equity and liabilities
3,568.3
The accompanying notes are an integral part of these consolidated financial statements.
F-4
3,300.0
Table of Contents
MARKIT LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to holders of the Company
Share
premium
$’m
Other
reserves
$’m
Retained
earnings
$’m
Total
$’m
1.8
-
456.8
-
(75.2)
-
1,850.6
152.5
2,234.0
152.5
36.6
(0.4)
2,270.6
152.1
-
-
(44.8)
-
(44.8)
-
(44.8)
-
-
(44.8)
152.5
107.7
(0.4)
107.3
10,11
-
-
-
37.3
37.3
-
37.3
14
-
-
-
27.0
27.0
-
27.0
23
(0.1)
(351.2)
-
-
(351.3)
-
(351.3)
23,26
-
-
(200.1)
-
(200.1)
-
(200.1)
23,26
23
(0.1)
0.1
(150.0)
221.6
150.1
-
-
221.7
-
221.7
(0.1)
(279.6)
(50.0)
64.3
(265.4)
-
(265.4)
1.7
177.2
(170.0)
2,067.4
2,076.3
36.2
2,112.5
Notes
Balance at
January 1, 2015
Profit for the year
Other
comprehensive
income for the
year, net of
income tax
Total
comprehensive
income for the
year
Share based
compensation
Tax on items
recognised
directly in equity
Repurchase of
shares
Accelerated share
repurchase
Transfer between
reserves
New share capital
Noncontrolling
interests
$’m
Share
capital
$’m
Total contributions
by and
distributions to
owners
Balance at
December 31,
2015
Notes
Balance at January 1,
2014
Profit for the year
Other comprehensive
income for the year,
net of income tax
Noncontrolling
interests
$’m
Total
equity
$’m
0.2
-
372.9
-
19.5
-
1,663.3
165.2
2,055.9
165.2
(1.1)
2,055.9
164.1
-
-
(30.4)
-
(30.4)
-
(30.4)
-
-
(30.4)
165.2
134.8
(1.1)
133.7
11
-
-
-
20.7
20.7
-
20.7
14
26
-
-
21.7
(73.0)
1.4
-
23.1
(73.0)
37.7
23.1
(35.3)
Total comprehensive
income for the year
Share based
compensation
Tax on items recognised
directly in equity
Acquisitions
Share
capital
$’m
Equity attributable to holders of the Company
Share
premiu
Other
Retained
m
reserves
earnings
Total
$’m
$’m
$’m
$’m
Total
equity
$’m
Transfer between
reserves
New share capital
26
23
1.6
-
11.4
72.5
(13.0)
-
-
72.5
-
72.5
Total contributions by
and distributions to
owners
1.6
83.9
(64.3)
22.1
43.3
37.7
81.0
Balance at
December 31, 2014
1.8
456.8
(75.2)
1,850.6
2,234.0
36.6
2,270.6
F-5
Table of Contents
MARKIT LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Notes
Share
capital
$’m
0.2
-
Balance at January 1, 2013
Profit for the year
Other comprehensive income for the
year, net of income tax
Equity attributable to holders of the Company
Share
premiu
Other
Retained
m
reserves
earnings
Total
$’m
$’m
$’m
$’m
297.0
16.3
1,423.0
1,736.5
139.4
139.4
Noncontrolling
interests
Total
equity
$’m
193.2
7.6
$’m
1,929.7
147.0
-
-
3.2
(1.8)
1.4
0.5
1.9
-
-
3.2
137.6
140.8
8.1
148.9
11
-
-
-
8.1
8.1
-
8.1
14
-
75.9
-
2.3
-
2.3
75.9
-
2.3
75.9
-
75.9
-
10.4
86.3
-
86.3
-
-
-
69.4
69.4
-
69.4
-
-
-
22.9
22.9
(201.3)
(178.4)
Total changes in ownership
interests in subsidiaries that do
not result in a loss of control
-
-
-
92.3
92.3
(201.3)
(109.0)
Total transactions
-
75.9
-
102.7
178.6
(201.3)
(22.7)
0.2
372.9
19.5
1,663.3
2,055.9
-
2,055.9
Total comprehensive income for the
year
Share based compensation
Tax on items recognised directly in
equity
New share capital
Total contributions by and
distributions to owners of the
parent
Tax arising on transactions with
non-controlling interests
Elimination of non-controlling
interests
Balance at December 31, 2013
14
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
MARKIT LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
222.1
220.6
210.7
63.7
107.0
0.6
(0.8)
37.3
18.9
11.3
57.9
100.1
39.8
0.2
(15.9)
20.7
16.9
5.9
50.1
86.0
53.5
(4.2)
(3.9)
(1.8)
8.1
19.4
-
(1.1)
14.5
3.2
26.0
(9.4)
(56.6)
17.2
(36.0)
28.7
Cash generated from operations
475.6
421.3
413.8
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax paid
475.6
(6.4)
(63.6)
421.3
(6.3)
(45.1)
413.8
(7.3)
(66.7)
Net cash generated from operating activities
405.6
369.9
339.8
(300.7)
11.6
(1.6)
(16.6)
(1.1)
(100.5)
(25.3)
0.1
(1.4)
(127.4)
(1.4)
4.1
(23.5)
(101.4)
0.1
(12.5)
(33.1)
(35.0)
5.2
(95.5)
0.3
(434.1)
(250.9)
(170.6)
227.2
(638.7)
1,170.0
(698.0)
(2.0)
72.3
(103.5)
100.0
(140.0)
(4.1)
57.4
(102.9)
(178.4)
177.0
(157.0)
-
58.5
(75.3)
(203.9)
Notes
Profit before income tax
Adjustment for:
Amortisation – acquisition related
Depreciation and amortisation – other
Impairments
Profit on sale of available for sale financial assets
Fair value losses/(gains) on derivative financial instruments
Fair value gains on contingent consideration
Share based compensation
Finance costs – net
Share of results from joint venture
Foreign exchange (gains)/losses and other non-cash (income)/charges
in operating activities
Changes in working capital:
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flows from investing activities
Disposal of subsidiaries, net of cash disposed
Acquisition of subsidiaries, net of cash acquired
Release of escrow associated with contingent consideration
Settlement of contingent consideration
Proceeds on disposal of assets
Purchases of property, plant and equipment
Investment in available for sale financial assets
Proceeds from sale of available for sale financial assets
Purchases of intangible assets
Investment in joint venture
Interest received
17
16,17
9
9
10
10,11
13
20
32
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of common shares
Payments for shares bought back
Transactions with non-controlling interests in subsidiaries
Proceeds from borrowings
Repayments of borrowings
Capitalised arrangement fees
28
28
28
Net cash generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
30.0
43.7
(34.7)
Cash and cash equivalents at beginning of year
Net increase/(decrease) in cash and cash equivalents
Exchange losses on cash and cash equivalents
22
117.7
30.0
(1.7)
75.3
43.7
(1.3)
110.2
(34.7)
(0.2)
Cash and cash equivalents at end of year
22
146.0
117.7
75.3
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
General information
Markit Ltd. (the “Company”) is an exempted company incorporated in Bermuda with common shares listed on the NASDAQ stock
market. The Company’s principal executive offices are located at 4th Floor, Ropemaker Place, 25 Ropemaker Street, London,
England EC2Y 9LY. The Company maintains a registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM
11, Bermuda. The consolidated financial information (hereafter, “financial information”) comprises the results of the Company and
its subsidiaries (hereafter the “Group”).
The Group sells financial information services to provide price transparency and to reduce risk and improve operational efficiency
in the financial markets. The Group has operations around the world and sells mainly within the United Kingdom, the United
States of America and Europe. The Group acquired a number of businesses in the two years ended December 31, 2015 as
disclosed in note 32. Further information regarding principal activities and operating segments is disclosed in note 7.
The financial statements were authorised for issue by the Company’s Board of Directors on March 10, 2016.
The Company became the parent of the Group as a result of reorganisation transactions which were completed prior to the initial
public offering of the shares of the Company as described further in note 2. The Company historically conducted its business
through Markit Group Holdings Limited (“MGHL”).
2.
Corporate reorganisation and initial public offering
On June 18, 2014, the Company completed a corporate reorganisation pursuant to a scheme of arrangement under Part 26 of the
United Kingdom Companies Act 2006 approved by the High Court of Justice of England and Wales and by the Group’s
shareholders, whereby the entire share capital of MGHL was cancelled and extinguished and MGHL became a wholly and directly
owned subsidiary of the Company, a newly formed company. Existing shareholders of MGHL became shareholders of the
Company with their rights and interests in MGHL substantially replicated in the common shares they were issued in the Company.
Markit Ltd. became the ultimate parent company of the Group.
The Company was formed by a comprehensive legal restructuring, whereby all controlling interests in MGHL assets were
transferred to Markit Ltd. and which resulted in a $1.6m reclassification from share premium to share capital (see note 23). As the
Group has been formed through a reorganisation of entities under common control, these financial statements have been
prepared using the predecessor basis. Accordingly, the financial statements, including corresponding amounts, have been
presented as if the transfers of controlling interests in the subsidiaries had occurred at the beginning of the earliest year
presented, or, if later, on the date of acquisition of the subsidiary by the transferring entities under common control. The assets
and liabilities of the transferred subsidiaries were recorded in these financial statements at the carrying amount in the transferring
entities’ financial statements.
On June 24, 2014, the Company completed an initial public offering (“IPO”) of its common shares, which resulted in the sale of
common shares held by certain of its shareholders at a price of $24.00 per share. The Company received no proceeds from the
sale of common shares by the shareholders.
F-8
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
On June 24, 2014, in connection with the completion of the Company’s IPO, all the Company’s share classes were reclassified
into a single class of common shares with the same economic and voting
rights and a share split at a ratio of 10:1 was completed.
3.
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), and the International Financial Reporting
Standards Interpretations Committee (“IFRIC”) interpretations (collectively “IFRSs”). The consolidated financial statements have
also been prepared under the historical cost convention, as modified to include the fair value of certain financial instruments in
accordance with IFRS.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements, are disclosed in note 6.
The Group continues to adopt the going concern basis in preparing its consolidated financial statements. The Company’s Board of
Directors has a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance,
show that the Group should be able to operate within the level of its current facilities.
Out-of-period adjustments
The consolidated financial statements for the financial year ended December 31, 2014 included certain out-of-period adjustments
which were not considered material to the prior year financial statements.
These adjustments resulted in a net credit to the consolidated income statement of $9.2m for the year ended December 31, 2014
and are detailed as follows:
–
–
–
4.
A credit of $5.0m related to deferred income tax liabilities associated with the prior year acquisition of Non-controlling
interests. A deferred income tax liability of $63.7m was recognised through equity in regard to this.
A credit of $11.7m related to deferred income tax assets associated with a prior year acquisition.
A charge of $7.5m related to deferred income tax liabilities associated with prior year capitalised development costs.
Accounting policies
4.1 Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity.
F-9
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the fair
value of any equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an acquisition-by-acquisition basis.
Acquisition related costs are expensed as incurred (see note 10).
If the business combination is achieved in stages, at the acquisition date for which control is obtained, the fair value of the Group’s
previously held equity interest in the acquiree is remeasured to fair value with any resulting gain or loss recorded in the
consolidated income statement.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration are recognised in the consolidated income statement.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling
interest over the net identifiable assets acquired and liabilities assumed.
Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated. Gains and
losses resulting from intercompany transactions that are recognised in assets are also eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions — that is,
as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the
relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to
non-controlling interests are also recorded in equity.
(c) Joint arrangements
Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the
contractual rights and obligations of each investor. The nature of the Group’s joint arrangement has been assessed by
management and it was determined to be a joint venture. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to
recognise the Group’s share of the post-acquisition profits and losses and
F-10
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
movements in other comprehensive income. When the Group’s share of losses in the joint venture equals or exceeds its interests
in the joint venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of
the joint venture.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in
the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of the joint venture have been changed where necessary to ensure consistency with the policies
adopted by the Group.
4.2 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are
presented in US Dollars ($), which is the Group’s presentation currency.
The exchange rates used for the translation of the consolidated income statement and the balance sheet are as follows:
STERLING
Income statement (average rate)
Balance sheet (closing rate)
EURO
Income statement (average rate)
Balance sheet (closing rate)
2015
2014
2013
1.5283
1.4739
1.6477
1.5593
1.5642
1.6563
1.1099
1.0863
1.3290
1.2101
1.3283
1.3800
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the consolidated income statement. Foreign exchange gains and losses that relate to borrowings and
cash and cash equivalents are presented in the consolidated income statement within “Finance costs – net”. All other foreign
exchange gains and losses are presented in the consolidated income statement within “Other gains/(losses) – net”.
Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed
between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying
amount of the security. Translation differences related to changes in amortised cost are recognised in the consolidated income
statement, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are
recognised in the consolidated income statement as part of the fair value gain or loss. Translation differences on non-monetary
financial assets, such as equities classified as available for sale, are included in other comprehensive income.
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(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions); and
(iii) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign
entity and translated at the closing rate. Exchange differences arising are recognised in equity.
4.3 Property, plant and equipment
All property, plant and equipment are stated at historical cost less depreciation and impairments if relevant.
Historical cost includes expenditure that is directly attributable to bringing the asset to its working condition for its intended use.
Depreciation on other assets is calculated using the straight line method to allocate their cost to their residual values over their
estimated useful lives, as follows:
Leasehold improvements
-
Over the period of the lease or 5 years
Computer equipment
-
3 years
Fixtures, fittings and equipment
-
4 years
Other
-
4 years
Assets under construction
Not depreciated
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
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4.4 Intangible assets
(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s
interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the
non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to groups of cash generating units
(“CGUs”) that are expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill is monitored at the level of groups of CGUs.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the group of CGUs is compared to the recoverable amount, which is the higher of the
value in use and the fair value less costs to sell. Any impairment is first allocated to goodwill. Any goodwill impairment is
recognised immediately as an expense and not reversed subsequently.
(b) Customer relationships and other acquired intangibles
Customer relationships and other acquired intangibles comprise intellectual property, and software licences and customer
relationships acquired separately or in business combinations.
Separately customer relationships and other acquired intangibles are shown at historical cost.
Customer relationships and other acquired intangibles in a business combination are recognised at fair value at the acquisition
date. Customer relationships and other acquired intangibles have a finite useful life and are carried at cost less accumulated
amortisation. Customer relationships acquired through business combinations are evaluated on a case by case basis, evaluating
the terms of contracts such as fixed fee arrangements or flexible contracts with revenues based on transactions and volume, to
determine the useful lives of each relevant asset. Amortisation is calculated using the straight line method to allocate the cost of
licences over their estimated useful lives as follows and included within the Amortisation - acquisition related line of the
consolidated income statement. The estimated useful lives are typically as follows:
Customer relationships
-
6 - 18 years
Other acquired intangibles
-
2 - 20 years
Internally developed intangibles
-
3 years
Other intangible assets
-
3 years
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(c) Development costs
Development costs that are directly attributable to the design and testing of software products used internally and for providing
services to customers are recognised as intangible assets once the project has progressed beyond the research phase and to that
of application development. Intangible assets are recognised when the following criteria are met:
–
–
–
–
–
–
it is technically feasible to complete the software product so that it will be available for use;
management intends to complete the software product and use or sell it;
there is an ability to use or sell the software product;
it can be demonstrated how the software product will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell the software product are
available; and
the expenditure attributable to the software product during its development can be reliably measured.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Other development
expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised
as an expense are not recognised as an asset in a subsequent period.
Directly attributable costs that are capitalised as part of a software product include the software development employee costs and
the costs of external subcontractors.
Software development costs recognised as assets are amortised over their estimated useful lives, which is three years and
included within the Depreciation and amortisation – other line of the consolidated income statement.
4.5 Impairment of non-financial assets
Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to
amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the
level at which management monitors goodwill, with groups of CGUs combined at an operating segment level. Non-financial assets
other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
4.6 Financial assets
(a) Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss (which includes derivatives
held for trading), loans and receivables, and available for sale. The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of its financial assets at initial recognition.
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(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include all derivatives that are not designated as hedging instruments. The
Group has no other financial assets held for trading.
Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as
non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period.
These are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables” and “cash
and cash equivalents” in the balance sheet (see notes 4.10 and 4.11).
(iii) Available for sale financial assets
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless the investment matures or the Group intends to dispose of it
within 12 months of the end of the reporting period.
(b) Recognition and measurement
Regular purchases and sales of financial assets are recognised on the trade date – the date on which the Group commits to
purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of
ownership. Available for sale financial assets and derivatives held for trading are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortised cost using the effective interest method.
Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other
comprehensive income.
When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity
are included in the consolidated income statement.
Dividends on available for sale equity instruments are recognised in the consolidated income statement as part of other income
when the Group’s right to receive payments is established.
4.7 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle
the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency and bankruptcy of the company or counterparty.
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4.8 Impairment of financial assets
(a) Loans and receivables
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if
there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a
“loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial
reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such
as changes in arrears or economic conditions that correlate with defaults.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective
interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income
statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an
instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in the consolidated income statement.
(b) Assets classified as available for sale
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of
financial assets classified as available for sale is impaired. In the case of equity investments classified as available for sale, a
significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any
such evidence exists for available for sale financial assets, the cumulative loss — measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the
consolidated income statement — is removed from equity and recognised in the consolidated income statement. Impairment
losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income
statement.
4.9 Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured
at their fair value.
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Derivatives are classified as a current or non-current asset or liability. The accounting policy for derivatives designated as hedging
instruments is set out in note 4.24. The gain or loss on the revaluation of other derivatives is recognised immediately in the
consolidated income statement within “Other gains/(losses) – net”.
The fair values of derivative instruments are disclosed in note 19.
4.10 Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business and
are classified within current assets as collection is expected in one year or less.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment.
4.11 Cash and cash equivalents
In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with financial
institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. In the consolidated
balance sheet, bank overdrafts are shown within borrowings in current liabilities.
4.12 Share capital
Common shares are classified as equity.
Incremental costs directly attributable to the issue of new common shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
Where any Group company issues share capital which is held in escrow to settle future potential contingent consideration on past
acquisitions the nominal value is deducted from equity attributable to the Company’s equity holders until the shares are cancelled
or reissued.
Where such common shares are subsequently reissued, any consideration received, net of any directly attributable incremental
transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
4.13 Share repurchase programmes
When accounting for share repurchase programmes where consideration is paid in advance and the counterparty bank is not
acting as an agent for the company, the Group treats the initial obligation as a forward contract to purchase its own equity
instrument for cash, recording a financial liability with a corresponding adjustment to equity. There is no subsequent measurement
of the financial liability for contracts where the redemption price is fixed (even if the number of shares is variable). The liability is
derecognised when the consideration is paid. Shares received from the bank pursuant to the program are considered treasury
shares when received, and reflected as such in earnings per share. Once
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shares are delivered under the contract, amounts may be reclassified within equity but there is no gain or loss within equity upon
receipt of the shares. At the end the program, any additional shares that may be required to be issued are reflected in equity and
considered outstanding for purposes of earnings per share.
4.14 Compound financial instruments
Compound financial instruments issued by the Company comprise convertible loan notes that can be converted to share capital at
the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not
have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the
compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs
are allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial
recognition.
4.15 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
4.16 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
consolidated income statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity
services and amortised over the period of the facility to which it relates.
The share buy-back liability arising on the repurchase of shares during 2012 is carried at amortised cost and the difference
between this and the redemption value is recognised in the consolidated income statement over the period of the borrowings
using the effective interest method (see note 28).
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4.17 Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the consolidated income statement,
except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is
recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet
date in the countries where the Company and its subsidiaries operate and generate taxable income. The Group periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from the initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for
deferred income tax liabilities where the timing of the reversal of temporary differences is controlled by the Group and it is
probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net
basis.
4.18 Employee benefits
The Group recognises a liability and an expense for bonuses, based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a constructive obligation.
4.19 Share based payments and related items
The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from
employees as consideration for equity instruments (options, restricted
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shares and restricted share units) of the Company. The fair value of the employee services received in exchange for the grant of
the options is recognised as an expense over the vesting period. The total amount to be expensed is determined by reference to
the fair value of the options granted.
The fair value of the options or restricted shares granted is determined using Monte Carlo option pricing models, which take into
account the exercise price of the option, the current share price, the dividend expected on the shares, the risk free interest rate,
the expected volatility of the share price over the life of the option and other relevant factors.
Non-market vesting conditions are taken into account by adjusting the number of shares or share options included in the
measurement of the cost of employee services so that ultimately, the amount recognised in the consolidated income statement
reflects the number of vested shares or share options.
At each balance sheet date, the entity revises its estimate of the number of options that are expected to vest. It recognises the
impact of the revision to original estimates, if any, in the consolidated income statement, with a corresponding adjustment to
equity.
The liability for social security costs on employee equity instruments is calculated with reference to options and restricted shares
to the extent that they have vested at the balance sheet date, taking account of expected employee attrition, and the location of
the employees holding the options and restricted shares.
The timing of the recognition of the liability reflects the fact that post IPO the Company has communicated to employees that it
would bear the employer social security costs associated with exercising options and the vesting of restricted shares.
The liability is classified on a cash settled basis and consequently is recorded at fair value at each reporting date; it is therefore
sensitive to fluctuations in the share price as well as other inputs to the fair value calculation model. The liability is therefore
subject to review at each reporting date.
4.20 Revenue recognition
The Group’s revenue is mainly derived from selling financial data and providing pre and post-trade processing technology
services. The Group also provides financial data web solutions development and maintenance services and sells software
licences and related services for risk management, enterprise data management, and pricing and financial analytics.
Revenue is measured at the fair value of the consideration received or receivable and when the following general revenue
recognition principles are met: the amount of revenue can be reliably measured, the receipt of economic benefits are probable,
costs incurred or to be incurred can be measured reliably and where relevant, the risks and rewards of ownership have been
transferred to the buyer.
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In addition to the general principles outlined above, the following specific policies are applied:
(a) Financial data, pre- and post-trade processing services and development and maintenance of web solutions services
Customers are invoiced on either a subscription or volume usage basis.
For subscription invoiced arrangements, revenue is recognised over the period of the subscription on a straight line basis and
once the general revenue recognition principles have been met. Subscription revenues are invoiced in advance, often on an
annual or quarterly basis. Where payments are received from customers in advance, the amounts are recorded as deferred
income and released when the services are rendered.
For volume usage arrangements, revenue is recognised in line with the usage in the period and when the general revenue
recognition principles are met. Customers are invoiced on a monthly basis to reflect actual usage. Where amounts are invoiced in
arrears, revenue is accrued accordingly.
Revenue generated from the sale of third-party financial data products or services is recorded net of costs when the Group is
acting as an agent between the customer and the vendor and recorded gross when the Group is considered the principal in the
transaction.
(b) Software
The Group licenses its software on term licences in multiple element transactions with related support services and at times,
professional services. The elements of the transactions are considered to be separately identifiable if the product or service has
standalone value to the customer. The amount allocated to each component is based on their relative fair value to the
arrangement as a whole or based on the difference between the total arrangement value and the fair value of the undelivered
component. Fair values are determined based on prices regularly charged for a component when sold separately, or, when a
component is not sold separately, based on internal estimates supported by internal costing and pricing information.
The Group determines that delivery of software licences occurs upon electronic shipment of the licence key to the end user and
when all the other general principles have been met.
Support services consist of software maintenance support. The Group renders software maintenance support services over the
contract period, which typically ranges from 3 to 7 years.
Professional services constitute installation and do not generally involve significant production, modification or customisation of
the related software. Revenue is recognised as the services are performed. Occasionally, when customisation is requested by a
customer, revenue is recognised for software and customisation services together using the percentage-of-completion method
based on contract costs incurred to date as a percentage of total estimated contract costs required to complete the development
work. The Group assess the recoverability of these contracts on an ongoing basis.
Support services are recognised upon customer acceptance and when all the other general principles have been met.
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4.21 Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated
income statement on a straight line basis over the period of the lease.
The Group leases certain property, plant and equipment and certain intangible assets. Leases where the Group has substantially
all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s
commencement at the lower of the fair value of the leased asset and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance
costs, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated income
statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period. The property, plant and equipment and certain intangible assets acquired under finance leases are depreciated or
amortised over the shorter of the useful life of the asset and the lease term.
Operating lease incentives are accounted for as a reduction of the rental expense and spread on a straight line basis over the
term of the lease.
4.22 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the consolidated financial statements in the
period in which the dividends are approved.
4.23 Exceptional items
Exceptional items are disclosed separately in the consolidated financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group. They are items of income or expense that have been shown
separately due to the significance of their nature, size or incidence of occurrence.
In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors
such as the frequency or predictability of occurrence. This is consistent with the way that financial performance is measured by
management and reported to the Company’s Board of Directors and assists in providing a meaningful analysis of the trading
results of the Group.
4.24 Hedge accounting
The Group hedge accounts for certain of its forward foreign exchange contracts under the provisions of IAS 39, “Financial
instruments: Recognition and measurement”. Derivative financial instruments are initially recognised at fair value on the contract
date and are subsequently measured at their fair value at each balance sheet date. The method of recognising the resulting fair
value gain or loss depends on whether the derivative is designated as a hedging instrument and the nature of the item being
hedged.
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At the inception of a hedging transaction, the Group documents the relationship between the hedging instrument and hedged item
together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents its
assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the
hedge in offsetting movements in the cash flows of the hedged items.
Where the hedging relationship is classified as a cash flow hedge, to the extent the hedge is effective, changes in the fair value of
the hedging instrument arising from the hedged risk are recognised directly in equity rather than in the consolidated income
statement. When the hedged item is recognised in the financial statements, the accumulated gains and losses recognised in other
comprehensive income are either recycled to the consolidated income statement, or if the hedged item results in a non-financial
asset, are recognised as adjustments to its initial carrying amount. The gain or loss relating to any ineffective portion is recognised
immediately in the consolidated income statement within Other gains/(losses) – net.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately transferred to the consolidated income statement within Other gains/(losses) –
net.
The full fair value of hedging derivatives is classified as current when the remaining maturity of the hedged item is less than 12
months.
4.25 Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
The following standards have been adopted by the Group for the first time for the financial year beginning on or after Januar y 1,
2015:
–
–
Annual Improvements to IFRSs – 2010-2012 Cycle
Annual Improvements to IFRSs – 2011-2013 Cycle
The adoption of these amendments did not have a significant impact on the current period or any prior period and is not likely to
affect future periods.
The Group also elected to adopt the following two amendments early:
–
–
Annual Improvements to IFRSs 2012-2014 Cycle; and
Disclosure Initiative: Amendments to IAS 1
As these amendments merely clarify the existing requirements, they do not affect the Group’s accounting policies or any of the
disclosures.
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(b) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after
January 1, 2015, and have not been applied in preparing these consolidated financial statements. None of these are expected to
have a significant effect on the consolidated financial statements of the Group, except the following set out below:
–
IFRS 16, “Leases” addresses the definition of a lease, recognition and measurement of leases and establishes principles for
reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key
change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard
replaces IAS 17 “Leases”, and related interpretations. The standard is effective for annual periods beginning on or after
January 1, 2019 and earlier application is permitted subject to EU endorsement and the entity adopting IFRS 15 “Revenue
from contracts with customers” at the same time. The Group is currently assessing the impact of IFRS 16.
–
IFRS 15, “Revenue from contracts with customers” deals with revenue recognition and establishes principles for reporting
useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or
service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS
18 “Revenue” and IAS 11 “Construction contracts” and related interpretations. The standard is effective for annual periods
beginning on or after January 1, 2018. The Group is currently assessing the impact of IFRS 15.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on
the Group.
5.
Financial risk management
5.1 Financial risk factors
The Group’s operations expose it to a variety of financial risks: market risks (including foreign exchange risk, market price risk and
cash flow interest rate risk), credit risk and liquidity risk.
The Group has procedures in place that seek to limit the adverse effects on the financial performance and stability of the Group by
monitoring relevant indicators.
The Group uses derivative financial instruments to hedge the economic impact of certain risk exposures.
Risk management is carried out by a central treasury department (“Group Treasury”) under policies approved by the Chief
Financial Officer and governed by the Treasury Oversight Committee (“TOC”). Group Treasury identifies, evaluates and with the
approval of the Chief Financial Officer hedges the identified financial risks in close co-operation with the Group’s operating units.
F-24
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Group Treasury provides written principles for overall risk management, as well as written policies covering specific areas, such
as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial
instruments and investment of excess liquidity which are presented to the Chief Financial Officer for approval before their
implementation.
(a) Market risk
(i) Foreign exchange risk
The Group’s principal currency risk is translation risk. Translation risk or exposure arises from the fact that the financial records of
certain Group subsidiaries are maintained in local currency. The Group’s US Dollar-denominated consolidated financial
statements can be affected by changes in the relative value of those local currencies against the US Dollar.
In addition, the Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the
US Dollar, Pound Sterling, Euro, Indian Rupee, Singapore Dollar and Canadian Dollar. These exposures arise from transactions
in currencies other than the functional currency of the entities. Foreign exchange risk arises from the future settlement of
recognised assets and liabilities denominated in a currency that is not the entities’ functional currency.
The approved foreign exchange risk policy is to hedge Pound Sterling, Euro, Indian Rupee, Singapore Dollar and Canadian Dollar
exchange rate risk at a Group level using a mixture of forward foreign exchange contracts and plain vanilla derivative contracts.
For Pound Sterling and Euro foreign exchange risk management, the policy is to hedge a proportion of exposure to forecast
consolidated Pound Sterling and Euro revenue on a rolling 15 month basis. For Canadian Dollar, Indian Rupee and Singapore
Dollar foreign exchange risk management the policy is to hedge 100% of consolidated operating expenditure exposure for 15
months starting from January 1 following the annual budget process.
In addition, other foreign exchange exposures relating to significant cash flows, such as the Group’s annual bonus payment, are
hedged when the magnitude and the probability of them occurring is deemed significant. These FX forward contracts are not
hedge accounted for.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Currency exposure arising from the net assets of the Group’s foreign operations is not hedged as the Group has no current
intentions to reduce its investments in any overseas entities.
At December 31, 2015, if the Euro had weakened/strengthened by 10% against the US Dollar with all other variables held
constant, operating profit for the year would have been $7.6m lower/higher (2014: $2.4m, 2013: $1.6m). The impact on equity
would have been $9.5m lower (2014: $4.8m) due to the translation of net assets of overseas entities.
At December 31, 2015, if the Pound Sterling had weakened/strengthened by 10% against the US Dollar with all other variables
held constant, operating profit for the year would have been $25.0m lower/higher (2014: $5.7m, 2013: $8.2m). The impact on
equity would have been $18.3m lower/higher (2014: $17.2m) due to the translation of net assets of overseas entities.
F-25
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Changes to exchange rate fluctuations in respect of other currencies would not significantly impact the Group’s results.
(ii) Market price risk
The Group is not exposed to significant market price risk as it holds no listed investments, and has no investment trading activity.
(iii) Cash flow interest rate risk
The Group’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest
rate risk which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value
interest rate risk (see note 28).
At December 31, 2015 the Group held borrowings with a floating rate of interest totalling $200.0m (2014: $228.0m). If interest
rates on floating rate borrowings had been 100 basis points higher/lower with all other variables held constant, post-tax profit for
the year would have been $2.6m lower/higher (2014: $3.7m).
At December 31, 2015 the Group held borrowings of $500.0m (2014: $nil) with a fixed rate of interest.
Any future potential interest rate risk exposure as a result of new long-term borrowings will be assessed for the impact of a shift in
interest rates over the expected term of the borrowings and if considered material a potential exposure to interest rate movement
will be hedged using the appropriate financial instruments approved by the Chief Financial Officer.
(b) Credit risk
The Group’s credit risk is primarily attributable to trade and other receivables and cash and cash equivalents. The directors
believe that such risk is limited, as the Group’s customer base primarily consists of large financial institutions. The amount of
exposure to any individual counterparty is actively monitored and assessed by management.
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial
institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks
and financial institutions, independently rated parties with a minimum short term investment grade rating of “A1” are accepted as
investment counterparties. At December 31, 2015 cash and cash equivalents were held with 19 (2014: eight) independent
financial institutions. For customers, the Group assesses the credit quality of the customer, taking into account its financial
position, past experience and other factors. Individual risk limits are set based on internal ratings in accordance with limits
approved by the Management Committee.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings
(if available) or to historical information about counterparty default rates. At December 31, 2015, 50% (2014: 49%) of the Group’s
counterparty risk is with larger institutions which have an external credit rating of investment grade or better. The remaining
F-26
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
counterparties are closely monitored. Of these counterparties 72% (2014: 78%) are with customers with whom the Group has a
trading relationship for more than 12 months and with no significant history of default. The credit quality of financial assets in the
comparative periods was not significantly different from the current period.
(c) Liquidity risk
The Group’s management reviews liquidity issues on an ongoing basis and the Group actively maintains a mixture of long term
and short term debt finance at competitive interest rates that is designed to ensure the Group has sufficient available funds for
operations. On-going business is cash flow generative and excess liquidity is invested over the short term at competitive yields
with approved investment grade institutions.
Cash flow forecasting is performed monthly by the operating entities of the Group and aggregated by Group Treasury on a rolling
12 month basis. Group Treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to
meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the
Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. Such forecasting takes
into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets
and, if applicable, external regulatory or legal requirements.
Surplus cash held by the operating entities over and above the balance required for working capital management is transferred to
Markit Group Limited, the Group’s internal bank managed by Group Treasury. Group Treasury invests surplus cash in interest
bearing current accounts, time deposits and money market deposits, choosing appropriate maturities or sufficient liquidity to
provide sufficient headroom as determined by the above-mentioned forecasts. At the reporting date, the Group held short term
deposits and cash of $146.0m (2014: $117.7m) that are expected to readily generate cash for managing liquidity risk.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash
flows, except for derivatives for which fair values are disclosed:
At December 31, 2015
Borrowings
Derivative financial instruments
Trade and other payables
At December 31, 2014
Borrowings
Derivative financial instruments
Trade and other payables
Less than 6
months
Between 6 months
and 1 year
Between 1 and
5 years
$’m
$’m
$’m
43.9
1.4
213.4
43.9
0.2
-
243.9
0.1
157.2
500.0
-
Less than 6
months
Between 6 months
and 1 year
Between 1 and
5 years
Over 5 years
$’m
$’m
$’m
$’m
43.9
1.8
203.7
43.9
0.5
-
359.7
0.6
143.1
F-27
Over 5 years
$’m
-
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group does not anticipate any significant liquidity risks to arise from the repayments scheduled above.
5.2 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the
cost of capital.
In order to maintain or adjust the capital structure, the Group returns capital to shareholders, issues new shares or sells assets to
reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the leverage ratio. This is calculated as net debt
divided by Adjusted EBITDA. Net debt is calculated as total borrowings (including “current and non-current borrowings” as shown
in the consolidated balance sheet) less “cash and cash equivalents”. Adjusted EBITDA is defined as profit for the period from
continuing operations before income taxes, net finance costs, depreciation and amortisation on fixed assets and intangible assets
(including acquisition related intangible assets), acquisition related items, exceptional items, share based compensation and
related items, net other gains or losses, including Adjusted EBITDA attributable to joint ventures and excluding Adjusted EBITDA
attributable to non-controlling interests (see note 7).
The Group’s leverage ratio at December 31, 2015 was 1.36:1 (2014: 0.65:1).
The Group considered that the leverage ratio is appropriate to the current requirements of the Group.
5.3 Fair value estimation
Except for foreign currency derivatives, available for sale financial assets and contingent consideration in respect of past
acquisitions, the Group holds no financial instruments at fair value. The Group uses the following hierarchy for determining and
disclosing the fair value of these financial instruments:
–
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
–
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (level 2); or
–
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Foreign currency derivatives are valued using inputs provided by the respective counterparties, which are large financial
institutions, and are based on the difference between the spot rate and the forward rate. The fair value of the available for sale
financial assets and the contingent consideration is based on the Group’s estimates (level 3), the inputs for which are not based
on observable market data (that is, unobservable inputs). The movements in available for sale financial assets and contingent
consideration are shown in note 5.4.
F-28
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the Group’s assets and liabilities that are measured at fair value at December 31, 2015:
Assets
Derivatives used for hedging
Available for sale financial assets
Liabilities
Contingent consideration
Derivatives used for hedging
Level 1
$’m
-
Level 2
$’m
4.4
-
Level 3
$’m
1.1
Total
$’m
4.4
1.1
-
4.4
1.1
5.5
-
1.7
67.2
-
67.2
1.7
-
1.7
67.2
68.9
The table below presents the Group’s assets and liabilities that are measured at fair value at December 31, 2014:
Assets
Derivatives used for hedging
Liabilities
Contingent consideration
Derivatives used for hedging
Level 1
$’m
-
Level 2
$’m
8.0
Level 3
$’m
-
Total
$’m
8.0
-
8.0
-
8.0
-
2.9
50.7
-
50.7
2.9
-
2.9
50.7
53.6
5.4 Fair value measurements using significant unobservable inputs (level 3)
Assets
Balance at January 1
Available for sale financial assets:
- Recognised on investment in the year
Year ended
December 31,
2015
$’m
1.1
Balance at December 31
Liabilities
Balance at January 1
Contingent consideration:
- Recognised on acquisition
- Fair value gains on contingent consideration – recognised within
Acquisition related items
- Unwind of discount – recognised within Finance costs – net
- Settlement
- Foreign exchange movements through Other gains/(losses) – net
Balance at December 31
1.1
Year ended
December 31,
2015
$’m
50.7
Year ended
December 31,
2014
$’m
33.6
19.0
35.3
(0.8)
1.6
(2.9)
(0.4)
(15.9)
1.3
(3.6)
-
67.2
50.7
F-29
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group has obligations to pay additional consideration for prior acquisitions, based upon revenue and EBITDA performance
contractually agreed at the time of purchase. These are measured using significant unobservable inputs and at December 31,
2015, the Group held liabilities of $67.2m (2014: $50.7m). The Group believes that additional payments in connection with these
transactions would not have a material impact on the consolidated financial statements.
Excluding contingent consideration linked to revenue and EBITDA share agreements which were valued at $14.5m at
December 31, 2015 (2014: $17.8m), the total undiscounted maximum potential consideration payable over and above that already
recognised would amount to $16.4m (2014: $2.7m).
The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or
change in circumstances that caused the transfer. There have been no transfers between levels in the year.
There were no changes in valuation techniques during the year.
5.5 Group’s valuation process
The Group’s finance department performs the valuations of financial assets and liabilities required for financial reporting purposes,
including level 3 fair values. These valuations are reviewed by the Chief Financial Officer.
At each reporting period the Group revalues its contingent consideration payment obligations relating to past business
acquisitions. The main level 3 inputs in calculating these fair values are the business performance of acquirees and discount
rates. The actual performance of relevant acquirees is discounted to a present value at a discount rate that reflects the
proportionate risk a market participant would incur in meeting this liability. The resultant present values form the bases of the
contingent consideration due. Changes in fair values are analysed at each reporting date by the business.
The Group’s only derivatives are forward foreign exchange contracts. These contracts are initially recognised at fair value, which
is equal to the contract value based on the forward rate at the time of entering into the contract. Subsequently, each contract is
revalued to its fair value on a monthly basis, based on the difference between the spot rate and the forward rate. These valuations
are provided by the respective hedge counterparties, which are large financial institutions.
The fair values of all financial assets and liabilities held at amortised cost were not materially different from their carrying values.
6.
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are addressed below.
F-30
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.1 Business combinations
The Group is highly acquisitive and accordingly there are a number specific areas in which the Group relies on estimates and is
required to exercise judgement. Specifically these include:
(a) Valuation of contingent consideration
Contingent consideration is based on performance metrics of the acquired businesses, including revenue and EBITDA. The best
estimate of the amount payable is assessed at the time of acquisition. The fair value of the liability is then reassessed at each
reporting date to reflect current forecasts and estimates. Determining the fair value requires estimates of the future performance
metrics of the businesses acquired. See note 5.3 for further detail.
(b) Valuation of intangible assets on acquisition
The identification and valuation of separable intangible assets acquired as part of the business combination requires judgement
and the use of estimates to determine the expected future cash flows from the separately identified intangible assets (see note
4.4).
(c) Goodwill impairment testing
The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash generating units have
been determined based on value in use calculations. These calculations require the use of estimates as described in note 17. The
impact of changes in assumptions used in testing for impairment of goodwill is disclosed in note 17.
6.2 Internally developed intangibles
The Group has applied its judgement in determining which development projects meet the criteria for capitalisation in IAS 38
“Intangible Assets” (see note 4.4) and the point at which capitalisation should commence on those development projects. The
carrying value of development costs capitalised is disclosed in note 17, as “Internally developed intangibles”.
The Group has applied its judgement in determining and reviewing the useful economic lives of these assets on a regular basis.
The basis of these estimates includes the timing of technological obsolescence, competitive pressures, historical experience and
internal business plans for the software. Future results could be affected if management’s current assessment of its software
projects differs from actual performance.
6.3 Revenue recognition
As described in note 4.20, the Company exercises judgement in determining whether the components of multiple element
transactions are identifiable products or services that have standalone value to the customer. In this determination, management
considers the transaction from the customer’s perspective and among other factors; management assesses whether the service
or good is sold separately by the Company in the normal course of business or whether the customer could purchase the service
or good separately.
F-31
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Company also uses estimates and exercises judgement in its determination of the fair value of each component in a multiple
element transaction in order to allocate the arrangement value to the components. As evidence of the component’s fair value,
management looks to the price regularly charged for the component when sold separately, or when a component is not sold
separately, management looks to internal estimates supported by internal costing and pricing information.
6.4 Income taxes
The Company calculates an income tax provision in each of the jurisdictions in which it operates. However, actual amounts of
income tax expense only become final upon filing and acceptance of the tax return by the relevant authorities, which occurs
subsequent to the issuance of the financial statements. Additionally, estimation of income taxes includes evaluating the
recoverability of deferred tax assets based on an assessment of the ability to use the underlying future tax deductions before they
expire against future taxable income. The assessment is based upon existing tax laws and estimates of future taxable income. To
the extent estimates differ from the final tax return, earnings would be affected in a subsequent period.
The Company’s 2015 effective income tax rate on earnings from continuing operations was 31.5% (2014: 25.6%, 2013: 30.2%). A
1% increase in the effective income tax rate would have increased 2015 income tax expense by approximately $2.2m (2014:
$2.2m, 2013: $2.1m).
6.5 Repurchase of shares
When accounting for share repurchase programmes where consideration is paid in advance, management exercises judgement
around the initial recognition of the obligation to buy back its own shares and receipt of shares over the contract. Management
treats the obligation as a financial liability with a corresponding adjustment to equity. There is no subsequent measurement of the
financial liability for contracts where the redemption price is fixed (even if the number of shares is variable). The liability is
derecognised when the consideration is paid. Shares received from the bank pursuant to the program are considered treasury
shares when received, and reflected as such in earnings per share. Once shares are delivered under the contract, amounts may
be reclassified within equity but there is no gain or loss within equity upon receipt of the shares. At the end the program, any
additional shares that may be required to be issued would be reflected in equity and considered outstanding for purposes of
earnings per share. The company has evaluated the terms of its share repurchase agreement and has determined that the
counterparty bank is not acting as an agent for the company.
7.
Operating segments
Operating segment information
The Chief Executive Officer (“CEO”) is the Group’s chief operating decision-maker. Management has determined the operating
segments based on the information received by the CEO for the purposes of allocating resources and assessing performance.
The CEO considers the performance of the business primarily from the perspective of groups of similar products.
F-32
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The CEO assesses the performance of the operating segments based on Adjusted EBITDA, a measure of earnings before income
taxes, net finance costs, depreciation and amortisation on fixed assets and intangible assets (including acquisition related
intangible assets), acquisition related items, exceptional items, share based compensation and related items and other
gains/(losses)- net, including share of Adjusted EBITDA attributable to joint ventures and excluding Adjusted EBITDA attributable
to non-controlling interests.
This measure excludes the effects of charges or income from the operating segments such as restructuring costs, legal expenses
and goodwill impairments when those items result from an isolated event. The measure also excludes the effects of equity-settled
share based payments and foreign exchange gains/losses.
Finance costs are not allocated to segments as this type of activity is driven by Group Treasury which manages the financing
position of the Group.
Central costs are allocated to segments based on various metrics, including revenue, EBITDA and headcount, reflecting the
nature of the costs incurred.
The Group’s operating segments are as follows:
Information : The Group’s Information division provides enriched content comprising pricing and reference data, indices,
valuation and trading services across multiple asset classes and geographies through both direct and third-party distribution
channels. The Group’s Information segment products and services are used for independent valuations, research, trading, and
liquidity and risk assessments. These products and services help the Group’s customers price instruments, comply with relevant
regulatory reporting and risk management requirements, and analyse financial markets.
Processing : The Group’s Processing division offers trade processing solutions globally for over-the-counter (“OTC”) derivatives,
foreign exchange and syndicated loans. The Group’s trade processing and connectivity services enable buy side and sell side
firms to confirm transactions rapidly, which increases efficiency by optimising post-trade workflow, reducing risk and complying
with reporting regulations. The Group believes it is the largest provider of end-to-end multi-asset OTC derivatives trade processing
services.
F-33
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Solutions : The Group’s Solutions division provides configurable enterprise software platforms, managed services and hosted
custom web solutions. The Group’s offerings help its customers capture, organise, process, display and analyse information,
manage risk and meet regulatory requirements.
Year ended
December 31,
2015
Year ended
December 31,
2014
Year ended
December 31,
2013
$’m
$’m
$’m
501.6
256.0
355.8
486.5
284.9
293.7
459.6
265.3
223.0
1,113.4
1,065.1
947.9
Adjusted EBITDA 1
- Information
- Processing
- Solutions
- Non-controlling interest
245.1
133.9
120.0
(2.1)
239.2
156.6
93.1
(0.7)
217.2
138.1
77.5
(11.5)
Total adjusted EBITDA 1
496.9
488.2
421.3
(48.7)
(4.2)
(63.7)
(107.0)
(50.8)
13.7
(18.9)
2.1
(84.9)
12.4
(57.9)
(100.1)
(16.0)
(6.0)
(16.9)
0.7
(60.6)
1.4
(50.1)
(86.0)
(8.1)
0.7
(19.4)
11.5
2.7
1.1
-
222.1
220.6
210.7
Revenue
- Information
- Processing
- Solutions
Total revenue
Reconciliation to the consolidated income
statement:
- Exceptional items
- Acquisition related items
- Amortisation - acquisition related
- Depreciation and amortisation - other
- Share based compensation and related items
- Other gains/(losses) - net
- Finance costs - net
- Non-controlling interest
- Share of results from joint venture not attributable
to Adjusted EBITDA
Profit before income tax
1 Adjusted EBITDA is defined as profit for the period from continuing operations before income taxes, net finance costs,
depreciation and amortisation on fixed assets and intangible assets (including acquisition related intangible assets), acquisition
related items, exceptional items, share based compensation and related items, net other gains or losses, including Adjusted
EBITDA attributable to joint ventures and excluding Adjusted EBITDA attributable to non-controlling interests.
F-34
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Geographical segment information
Revenue
- United States of America
- United Kingdom
- Other European Union
- All other countries
Total revenue
Non-current assets
- United States of America
- United Kingdom
- Other European Union
- All other countries
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
556.5
314.7
117.0
125.2
530.3
310.1
109.9
114.8
473.4
283.9
98.2
92.4
1,113.4
1,065.1
947.9
Balance at
December 31,
2015
$’m
Balance at
December 31,
2014
$’m
407.5
2,650.1
50.6
31.2
332.4
2,507.3
7.7
34.4
3,139.4
2,881.8
2.3
1.1
4.2
-
3,142.8
2,886.0
Deferred income tax assets
Available for sale financial assets
Total non-current assets
No individual customer accounts for more than 10% of Group revenue.
8.
Operating expenses
Personnel costs
Operating lease payments
Technology costs
Subcontractors and professional fees
Other expenses
Operating expenses
Year ended
December 31,
2015
$’m
362.3
18.6
92.8
49.1
77.6
Year ended
December 31,
2014
$’m
350.4
16.8
89.5
44.0
68.5
Year ended
December 31,
2013
$’m
307.3
15.5
86.2
40.1
66.0
600.4
569.2
515.1
The operating expenses above exclude exceptional items (see note 9), acquisition related items (see note 10), share based
compensation and related items (see note 11), other gains/(losses) - net (see note 12), depreciation on property, plant and
equipment (see note 16) and amortisation of intangible assets (see note 17).
A charge of $11.6m relating to employer contributions to employee defined contribution pension plans has been included in
personnel costs in the year (2014: $8.7m, 2013: $4.6m).
F-35
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
Exceptional items
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
Settlement of class action lawsuit
Impairments
Recognition of liability for social security costs
on employee equity instruments
IPO preparation and execution costs
Accelerated share based compensation
charges
Legal advisory costs
Indirect taxes
Profit on sale of available for sale financial
assets
45.0
-
39.8
53.5
-
20.1
12.1
-
3.7
-
7.3
5.6
-
6.3
5.0
-
-
(4.2)
Exceptional items
48.7
84.9
60.6
Exceptional items are considered by management to constitute items that are significant either because of their size, nature or
incidence of occurrence, and are presented on the face of the consolidated income statement. The separate reporting of
exceptional items is set out below to provide an understanding of the Group’s underlying performance.
Legal advisory costs are associated with ongoing antitrust investigations by both the US Department of Justice and the European
Commission and the associated consolidated class action lawsuit relating to the credit derivatives and related markets. These
costs have been classified as exceptional due to the complexity and individual nature of these related cases along with the size of
the costs being incurred. These costs represent an industry-wide issue and are consequently not considered part of the Group’s
normal course of business.
For the year ended December 31, 2015:
–
The Group paid $45.0m associated with the agreement to the settlement in principle of an antitrust class action lawsuit in the
United States relating to credit derivatives and related markets. These costs have been classified as exceptional due to the
one-off, individual nature of this matter along with the size of the costs being incurred. These costs are consequently not
considered to be part of the normal course of business.
For the year ended December 31, 2014:
–
–
–
A $31.9m impairment of goodwill was taken in relation to Analytics, within the Group’s Solutions segment, as developments in
the regulatory and business environment have resulted in weaker than anticipated growth.
A $7.9m impairment charge, relating primarily to Credit Centre’s other intangible assets, within the Group’s Processing
segment, was recorded following a decision to wind down the business due to the market not evolving as expected.
IPO preparation and execution costs consisted of legal and professional fees associated with the Company’s initial public
offering. These costs are one off in nature and not considered part of the Group’s normal course of business.
F-36
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
–
–
The completion of the IPO resulted in a non-recurring acceleration of vesting for options granted prior to August 2013. The
accelerated share based compensation charge reflects the impact of the IPO process.
During the second quarter of 2014, the Group recognised a liability for social security costs on employee equity instruments
as the Group agreed to meet these obligations on behalf of employees. This has been classified as an exceptional item due
to the one-off nature and size of the initial recognition.
For the year ended December 31, 2013:
–
–
–
–
–
10.
A $12.7m impairment of all goodwill in relation to BOAT, within the Group’s Information segment and servicing a MiFID
compliant trade reporting platform, was taken following the decision to close the business.
An impairment charge of $20.2m was recognised in relation to Markit Hub within the Group’s Information segment and
providing a centralised interface for managing research content. Taking account of a reduced commercial outlook for this
product, management fully impaired goodwill of $18.4m and other intangibles assets of $1.8m.
An impairment charge of $20.0m was recognised in relation to On Demand reflecting local cost pressures associated with
operating at this asset’s location, reducing expectations for improvements in profit margins. On Demand provides web design,
development and hosting services in the Solutions operating segment.
Profit on the sale of available for sale financial assets related to the gain realised on the sale of an investment, which due to
its size and one off occurrence was classified as exceptional.
Indirect taxes represent the anticipated cost in connection with the settlement of a one time indirect tax exposure.
Acquisition related items
Acquisition costs primarily relate to legal and tax advisory costs attributable to completed acquisitions.
Acquisition costs
Remuneration on acquisition
Fair value gains on contingent consideration and
other acquisition related arrangements
Year ended
December 31,
2015
$’m
4.8
0.9
Year ended
December 31,
2014
$’m
3.5
-
Year ended
December 31,
2013
$’m
0.4
-
(1.5)
(15.9)
(1.8)
4.2
(12.4)
(1.4)
Acquisition related items
In the year ended December 31, 2015, a charge of $0.9m has been recognised relating to the acquisition of CoreOne
Technologies (“CoreOne”). This represents the issuance of equity-based remuneration to senior management of the acquiree.
Further to this, total gains of $1.5m have been recognised in the period relating to the LoanSERV acquisition, including $0.8m on
contingent consideration (see note 5.4).
F-37
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In the year ended December 31, 2014, a $15.9m credit was recognised primarily relating to the acquisitions of Securities Hub
($13.5m credit) and thinkFolio ($2.8m credit) to adjust the carrying value of contingent consideration. This reflected a lower fair
value of future discounts provided by Securities Hub as part of the deal structure and with the run rate of acquired contracts for
thinkFolio.
11.
Share based compensation and related items
Share based compensation
Change in fair value of liability for social security
costs on employee equity instruments
Share based compensation and related items
Year ended
December 31,
2015
$’m
36.4
Year ended
December 31,
2014
$’m
13.4
Year ended
December 31,
2013
$’m
8.1
14.4
2.6
-
50.8
16.0
8.1
Additionally, for the period ended December 31, 2014, as a result of the IPO, a further $7.3m charge was treated as an
exceptional item (note 9) in relation to a non-recurring acceleration of vesting for options granted prior to August 2013, and a
charge of $20.1m was recognised within exceptional items (note 9) upon initial recognition of the liability for social security costs
on employee equity instruments.
12.
Other gains/(losses) – net
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
Foreign exchange forward contracts:
- Held for trading
- Held for hedging
Net foreign exchange gains/(losses)
(0.8)
9.9
4.6
7.3
(9.8)
(3.5)
3.9
(2.3)
(0.9)
Other gains/(losses) – net
13.7
(6.0)
0.7
The Group holds forward exchange contracts to economically hedge the foreign exchange risk of certain future payables and
receivables.
13.
Finance costs – net
Finance costs:
- Interest on borrowings
- Unwind of discount
- Facility fee amortisation
- Other
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
8.1
9.2
0.8
0.9
5.4
10.5
0.6
0.6
6.5
12.4
0.8
19.0
17.1
19.7
Finance income:
- Interest income on short-term bank deposits
Finance costs – net
(0.1)
(0.2)
(0.3)
(0.1)
(0.2)
(0.3)
18.9
16.9
19.4
F-38
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14.
Income tax expense
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
Current tax:
- Current tax on profits for the year
- Adjustments in respect of prior years
67.1
2.6
67.8
(11.2)
78.1
(2.7)
Total current tax
69.7
56.6
75.4
Deferred tax:
- Origination and reversal of temporary differences
- Impact of change in tax rate
- Adjustments in respect of prior years
0.1
1.8
(1.6)
9.2
0.9
(10.2)
(1.1)
(5.0)
(5.6)
0.3
(0.1)
(11.7)
70.0
56.5
63.7
Total deferred tax
Income tax expense
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the standard tax rate applicable
to profits of the Company as follows:
Profit before income tax
Tax using the UK corporate rate of 20.25% (2014:
21.5%, 2013: 23.25%)
Tax effect of non-deductible items
Research and development tax deductions
Share of results of equity investments
Effect of tax rates in foreign jurisdictions
Adjustments in respect of prior years
Deferred tax not recognised
Effect of change in tax rates on deferred tax
balances
Income tax expense
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
222.1
220.6
210.7
45.0
1.3
(2.2)
2.3
18.6
1.0
2.2
47.5
15.8
(2.0)
1.2
11.4
(21.4)
3.0
49.0
11.4
(2.4)
19.0
(8.3)
-
1.8
1.0
(5.0)
70.0
56.5
63.7
The UK corporation tax rate changed from 21% to 20% from April 1, 2015. Accordingly the Group’s profits for 2015 are taxed at a
blended rate of 20.25%. Reductions in the UK corporation tax rate to 19% from April 1, 2017 and to 18% from April 1, 2020 have
been substantively enacted and have been reflected in the calculation of deferred tax at the year end.
F-39
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The income tax (credited)/charged directly to equity during the year is as follows:
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
Year ended
December 31,
2013
$’m
Current tax recognised on share based compensation
Deferred tax recognised on share based compensation
Current tax recognised on acquisition of non-controlling interests
Deferred tax recognised on acquisition of non-controlling interests
Deferred tax recognised on redemption liability
Deferred tax recognised on derivative financial instruments
Current tax recognised on derivative financial instruments
(20.7)
(6.3)
(0.2)
(0.4)
(9.3)
(55.8)
4.5
59.2
(21.7)
3.0
-
(2.7)
0.4
(4.5)
(64.9)
(2.0)
-
Total tax recognised directly in equity
(27.6)
(20.1)
(73.7)
Income tax expense is recognised based on management’s estimate of the annual income tax rate expected for the year by
jurisdiction. The estimated average annual tax rate used for the year ended December 31, 2015 is 31.5% (2014: 25.6%, 2013:
30.2%). Income tax expense in the prior year contains out-of-period adjustments (see note 3).
15.
Earnings per share
Earnings per share, basic is calculated by dividing the net income attributable to owners of the Company by the weighted average
number of common shares issued and outstanding during the year. During the year ended December 31, 2014, the Company
completed a corporate reorganisation, a reclassification of its share classes and a share split at a ratio of 10:1 (see note
2). Following these transactions, historical financial information was restated to the corresponding weighted number of shares to
reflect the share split.
Profit attributable to owners of the Company
Weighted average number of common shares issued and outstanding,
basic
$’m
Earnings per share, basic
1
$
Year ended
December 31,
2015
152.5
Year ended
December 31,
2014
165.2
Year ended
December 31,
2013 1
139.4
179,797,425
179,183,880
173,875,980
0.85
0.92
0.80
Restated to reflect the share split (see note 2).
Profit attributable to owners of the Company
Weighted average number of common shares issued and
outstanding, basic
$’m
Adjustments for:
Share based payments
- Options
- Restricted shares
- Restricted share units
Weighted number of common shares issued and outstanding, diluted
Earnings per share, diluted
$
Year ended
December 31,
2015
152.5
Year ended
December 31,
2014
165.2
Year ended
December 31,
2013 1
139.4
179,797,425
179,183,880
173,875,980
8,424,500
1,532,544
42,250
4,307,360
976,300
-
1,032,090
642,690
-
189,796,719
184,467,540
175,550,760
0.80
0.90
0.79
1
Restated to reflect the share split (see note 2).
F-40
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Earnings per share, diluted is calculated by adjusting the weighted average number of common shares issued and outstanding to
assume conversion of all dilutive potential common shares. The Company has three categories of dilutive potential common
shares that adjust the weighted average shares, namely options, restricted shares and restricted share units. A calculation is done
to determine the number of common shares that could have been acquired at fair value (determined as the average market share
price of the Company’s issued and outstanding common shares for the year) based on the monetary value of the subscription
rights attached to the options, restricted shares and restricted share units. The number of common shares calculated above is
compared with the number of common shares that would have been issued and outstanding assuming the exercise of options and
the vesting of restricted shares and restricted share units.
16.
Property, plant and equipment
Leasehold
improvements
$’m
COST
Balance at January 1,
2015
Acquisitions
Additions
Transfers
Disposals
Effect of movements in
exchange rates
Balance at
December 31, 2015
Balance at January 1,
2014
Acquisitions
Additions
Transfer
Disposals
Effect of movements in
exchange rates
Balance at
December 31, 2014
ACCUMULATED
DEPRECIATION
AND
IMPAIRMENT
Balance at January 1,
2015
Depreciation for the
year
Disposals
Effect of movements in
exchange rates
Balance at
December 31, 2015
Balance at January 1,
2014
Depreciation for the
year
Computer
equipment
$’m
Fixtures,
fittings and
equipment
$’m
Assets
under
construction
$’m
Total
$’m
38.8
0.3
0.5
0.3
(0.2)
113.5
1.7
12.6
1.7
(0.1)
16.4
0.2
0.5
-
0.8
3.2
(2.0)
-
169.5
2.2
16.8
(0.3)
(0.3)
(3.2)
(0.1)
-
(3.6)
39.4
126.2
17.0
2.0
36.5
0.1
2.4
-
99.2
0.2
19.6
0.5
(2.3)
15.0
0.1
0.8
0.9
-
2.2
2.5
(3.8)
-
152.9
0.3
23.0
(2.3)
(0.2)
(3.7)
(0.4)
(0.1)
(4.4)
38.8
113.5
16.4
0.8
13.8
86.5
12.7
-
113.0
4.7
(0.2)
18.5
(0.1)
2.1
-
-
25.3
(0.3)
(0.2)
(2.5)
(0.3)
-
(3.0)
18.1
102.4
14.5
-
9.3
71.1
10.2
-
90.6
4.7
18.5
2.7
-
25.9
184.6
169.5
135.0
Impairment
Disposals
Effect of movements in
exchange rates
-
1.2
(1.2)
-
-
1.2
(1.2)
(0.2)
(3.1)
(0.2)
-
(3.5)
Balance at
December 31, 2014
13.8
86.5
12.7
-
NET BOOK VALUE
Balance at
December 31, 2014
25.0
27.0
3.7
0.8
56.5
Balance at
December 31, 2015
21.3
23.8
2.5
2.0
49.6
F-41
113.0
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.
Intangible assets
COST
Balance at
January 1, 2015
Acquisitions
Additions
Disposals
Effects of
movements in
exchange rates
Other movements*
Balance at
December 31,
2015
Goodwill
$’m
Acquired
intangibles Customer
relationships
$’m
Acquired
intangibles
- Other
$’m
2,331.9
169.5
-
492.0
113.0
-
183.8
59.2
-
334.2
90.8
(2.8)
97.9
0.7
5.9
(0.9)
3,439.8
342.4
96.7
(3.7)
(21.4)
(4.4)
(10.5)
-
(4.4)
-
(6.9)
-
(1.3)
-
(44.5)
(4.4)
Internally
developed
intangibles
$’m
415.3
Other
intangible
assets
$’m
102.3
Total
$’m
2,475.6
594.5
238.6
3,826.3
120.6
-
148.6
43.0
-
73.9
20.7
-
197.5
68.6
(0.5)
75.9
10.6
(0.7)
616.5
142.9
(1.2)
-
(2.7)
(1.2)
(3.6)
(1.2)
(8.7)
ACCUMULATED
AMORTISATIO
N AND
IMPAIRMENT
Balance at
January 1, 2015
Amortisation
Disposals
Effects of
movements in
exchange rates
Balance at
December 31,
2015
120.6
188.9
93.4
262.0
84.6
749.5
NET BOOK
VALUE
Balance at
December 31,
2014
2,211.3
343.4
109.9
136.7
22.0
2,823.3
Balance at
December 31,
2015
2,355.0
405.6
145.2
153.3
17.7
3,076.8
* Other movements represent fair value adjustments to the carrying value of goodwill as a result of the reassessment of deferred tax (see note 29).
F-42
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
Acquired
intangibles Customer
relationships
Acquired
intangibles
- Other
Internally
developed
intangibles
Other
intangible
assets
Total
$’m
$’m
$’m
$’m
$’m
$’m
2,220.0
134.2
-
464.0
38.4
-
148.8
39.0
-
257.3
1.8
90.7
(9.2)
132.4
0.1
15.0
(48.1)
3,222.5
213.5
105.7
(57.3)
(22.3)
(10.4)
(4.0)
(6.4)
(1.5)
(44.6)
2,331.9
492.0
183.8
334.2
97.9
3,439.8
88.7
31.9
111.4
39.6
-
56.6
18.3
-
140.7
64.4
(5.1)
0.2
107.3
10.7
(47.4)
6.5
504.7
133.0
(52.5)
38.6
-
(2.4)
(1.0)
(2.7)
(1.2)
(7.3)
120.6
148.6
73.9
197.5
75.9
616.5
NET BOOK VALUE
Balance at
December 31,
2013
2,131.3
352.6
92.2
116.6
25.1
2,717.8
Balance at
December 31,
2014
2,211.3
343.4
109.9
136.7
22.0
2,823.3
COST
Balance at
January 1, 2014
Acquisitions
Additions
Disposals
Effects of
movements in
exchange rates
Balance at
December 31,
2014
ACCUMULATED
AMORTISATION
AND IMPAIRMENT
Balance at
January 1, 2014
Amortisation
Disposals
Impairments
Effects of
movements in
exchange rates
Balance at
December 31,
2014
In the above tables, Acquired intangibles - Other relates predominantly to software and technology intangible assets.
Impairment tests for goodwill
Goodwill is allocated to a group of CGUs, represented by segments, which is the lowest level at which goodwill is monitored b y
management. Typically, acquisitions are integrated into existing operating segments, and the goodwill arising is allocated to the
CGUs that are expected to benefit from the synergies of the acquisition. As the business areas have become increasingly
integrated and globalised, management has reviewed the level at which goodwill is monitored.
The Group is actively using acquired skilled workforce and customer relationships over each division. The allocation of goodwill to
groups of CGUs is made based on the synergies expected to be derived from the combination. In order to reflect this, the level at
which goodwill is assessed has changed
F-43
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
whereby it is now tested at an operating segment level. As a result, the groups of CGUs tested have been reduced from 20 in
2014 to three in 2015. Groups of CGUs have been tested on the basis of the operating segment within which they are managed,
based on the synergies expected to be derived from the combination. There has been no change in the segments within which
each CGU operates, or any changes in allocation of goodwill between CGUs.
The level at which groups of CGUs are now tested had no impact on the carrying values of goodwill, which are set out below. We
have also tested goodwill on the prior year basis to ensure that the change does not avoid goodwill impairments.
CGU
segment
December 31,
2014
Acquisitions
Impairment
Information
Processing
Solutions
$’m
1,542.5
222.3
446.5
$’m
55.3
46.2
68.0
$’m
-
$’m
(16.5)
(1.6)
(3.3)
$’m
(4.4)
$’m
1,581.3
266.9
506.8
Total
2,211.3
169.5
-
(21.4)
(4.4)
2,355.0
December 31,
2013
Acquisitions
Impairment
Information
Processing
Solutions
$’m
1,552.6
223.0
355.7
$’m
134.2
$’m
(31.9)
Total
2,131.3
134.2
(31.9)
CGU
segment
*
Foreign
Exchange
Other
movements*
Foreign
Exchange
December 31,
2015
Other
movements
December 31,
2014
$’m
(10.1)
(0.7)
(11.5)
$’m
-
$’m
1,542.5
222.3
446.5
(22.3)
-
2,211.3
Other movements represent fair value adjustments to the carrying value of goodwill as a result of the reassessment of deferred tax (see note 29).
The recoverable amount of all CGUs has been determined based on value in use calculations.
These calculations use cash flow projections based on financial budgets approved by management covering a five-year period.
Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not
exceed the long-term average growth rate for similar business in which the CGU operates.
Management determined budgeted margin based on past performance and its expectations of market developments.
The key assumptions used for the value in use calculations are as follows:
2015
CGU
segment
Information
Processing
Solutions
Discount
rate
8%
10 %
13 %
2014
Perpetual
growth
rate
Up to 2.2 %
Up to 2.2 %
Up to 2.2 %
F-44
Discount
rate
10-11 %
12 %
11-14 %
Perpetual
growth
rate
Up to 2.5 %
2.5 %
2.5 %
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The perpetual growth rates used are consistent with economic reports. The discount rates used are pre-tax and reflect specific
risks relating to the relevant CGU.
Certain goodwill balances have been apportioned across multiple CGUs, specifically the acquisitions of Markit Group Limited and
WSO in 2008 and CoreOne in 2015. This reflects the allocation of identified CGUs acquired in these transactions to different
segments. The allocation of goodwill has been made based upon forecast cash flows at the date of acquisition as follows:
Acquisition
Markit Group Limited
WSO
CoreOne
CGU segment allocation
Processing
Solutions
$’m
$’m
4.8
215.0
54.4
Information
$’m
1,041.8
52.5
55.3
Total
Goodwill
$’m
1,046.6
267.5
109.7
Impairment charge arising in 2015
No impairment charge was recognised in 2015.
Impairment charge arising in 2014
An impairment charge of $31.9m was recognised in the Solutions CGU as developments in the regulatory and business
environment for the Group’s Risk Analytics product resulted in weaker than anticipated growth. This adjustment fully impaired
goodwill relating to this CGU.
Impairment review
The principle assumption underlying the value in use calculations is considered to be pre-tax cash flows. Given this, sensitivity
analysis has been performed to calculate the reduction in pre-tax cash flows which would eliminate the headroom. This analysis
identified:
–
–
–
In Information, the recoverable amount calculated on a value in use basis exceeded carrying value by 162%. A reduction in
forecast pre-tax cash flow of 45% would eliminate remaining headroom.
In Processing, the recoverable amount calculated on a value in use basis exceeded carrying value by 189%. A reduction in
forecast pre-tax cash flow of 44% would eliminate remaining headroom.
In Solutions, the recoverable amount calculated on a value in use basis exceeded carrying value by 132%. A reduction in
forecast pre-tax cash flow of 39% would eliminate remaining headroom.
Based on sensitivity analysis of the other assumptions of the value in use calculations for these CGUs no other reasonably
possible change in assumption would cause the carrying value of the CGU to exceed its recoverable amount. Across the
remaining CGUs there is no factor which is considered reasonably possible that would lead to an excess of carrying value over
recoverable amount.
F-45
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18.
Financial instruments by category
Balance at December 31, 2015
Loans and
receivables
$’m
Assets as per balance sheet
Trade and other receivables excluding
prepayments
Available for sale financial assets
Derivative financial instruments
Cash and cash equivalents
Assets at
fair
value
through
profit or
loss
$’m
191.7
146.0
4.4
-
337.7
4.4
Total
$’m
1.1
-
191.7
1.1
4.4
146.0
1.1
Liabilities at
fair value
through
profit or
loss
$’m
Liabilities as per balance sheet
Trade and other payables excluding non-financial
liabilities
Borrowings
Derivative financial instruments
Available for
sale
$’m
343.2
Other
financial
liabilities at
amortised
cost
$’m
Total
$’m
67.2
1.7
303.4
824.0
-
370.6
824.0
1.7
68.9
1,127.4
1,196.3
Balance at December 31, 2014
Assets as per balance sheet
Trade and other receivables excluding
prepayments
Derivative financial instruments
Cash and cash equivalents
Liabilities as per balance sheet
Loans and
receivables
$’m
Assets at fair
value through
profit or
loss
$’m
Available for
sale
$’m
Total
$’m
198.6
117.7
8.0
-
-
198.6
8.0
117.7
316.3
8.0
-
324.3
Liabilities at
fair value
through
profit or loss
$’m
Other
financial
liabilities at
amortised
cost
$’m
Total
$’m
Trade and other payables excluding non-financial liabilities
Borrowings
Derivative financial instruments
F-46
50.7
2.9
296.1
435.6
-
346.8
435.6
2.9
53.6
731.7
785.3
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Group deems the carrying value of financial instruments as a reasonable approximation of fair value.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet where the Group currently has a
legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously.
The following table presents the recognised financial instruments that are offset, or subject to enforceable master netting
arrangements and other similar agreements but not offset, at December 31, 2015 and December 31, 2014. The column “net
amount” shows the impact on the Group’s balance sheet if all set-off rights were exercised.
Financial assets
Gross
amount
s
$’m
Trade receivables
At December 31, 2015
At December 31, 2014
Effects of offsetting on the balance sheet
Gross amounts
Net amounts
set off in the
presented in the
balance sheet
balance sheet
$’m
$’m
202.9
190.2
(16.6)
(3.0)
186.3
187.2
The following financial liabilities are subject to offsetting:
Financial liabilities
Gross
amounts
$’m
Trade payables
At December 31, 2015
At December 31, 2014
19.
Effects of offsetting on the balance sheet
Gross amounts
Net amounts
set off in the
presented in the
balance sheet
balance sheet
$’m
$’m
(29.4)
(12.7)
16.6
3.0
(12.8)
(9.7)
Derivative financial instruments
Derivative financial instruments primarily relate to foreign exchange rate hedging activities.
Balance at
December 31,
2015
$’m
Assets
Forward foreign exchange contracts
Less: non-current portion
Current portion
Liabilities
Forward foreign exchange contracts
Less: non-current portion
Current portion
Balance at
December 31,
2014
$’m
4.4
(0.5)
8.0
(0.9)
3.9
7.1
Balance at
December 31,
2015
$’m
Balance at
December 31,
2014
$’m
1.7
(0.1)
2.9
(0.6)
1.6
2.3
F-47
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Trading derivatives are classified as an asset or liability. The movement in fair value which is recognised in the consolidated
income statement amounts to a loss of $0.8m (2014: gain of $7.3m) (see note 12).
Key details of the outstanding forward foreign exchange contracts are:
Average exchange rates
Currency
Pound Sterling (sold forward)
Euro (sold forward)
Indian Rupee (bought forward)
Singapore Dollar (bought forward)
Canadian Dollar (bought forward)
Australian Dollar (bought forward
Hong Kong Dollar (bought forward)
20.
December 31,
2015
December 31,
2014
1.5107
1.1208
68.3103
1.4027
1.3452
1.3843
7.7489
1.5342
1.3085
63.5524
1.2556
1.0579
-
Notional principal amounts
Balance at
Balance at
December 31,
December 31,
2015
2014
$’m
$’m
(130.4)
(39.5)
38.2
28.6
6.1
1.2
0.7
(117.3
(23.3
23.5
18.9
7.2
-
)
)
Investment in joint venture
Year
ended
December 31,
2015
$’m
Balance at start of period
- Investment
- Share of loss
Balance at end of period
Year
ended
December 31,
2014
$’m
1.1
22.7
(11.3)
7.0
(5.9
12.5
1.1
)
The joint venture listed below has share capital consisting solely of ordinary shares, which is held directly by the Group.
Nature of investment in joint venture
Investment in joint venture represents the Group’s 50% ownership in Markit Genpact KYC Services Limited, a company registered
in England and Wales. The Group has a 53.3% share of results of the joint venture. The Group has equity accounted for the joint
venture as control is considered to be joint.
Markit Genpact KYC Services Limited provides a service that standardises and centralises the collection and management of
know-your-customer data for financial institutions in order to streamline client onboarding.
Markit Genpact KYC Services Limited is a private company and there is no quoted market price available for its shares. There are
no commitments or contingent liabilities relating to the Group’s interest in the joint venture.
F-48
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Summarised financial information for joint ventures
Set out below is the summarised financial information for Markit Genpact KYC Services Limited.
Summarised balance sheet
December 31,
2015
December 31,
2014
$’m
7.4
$’m
2.2
Total non-current assets
7.4
2.2
Trade and other receivables
Cash and cash equivalents
12.0
6.3
13.1
-
Total current assets
18.3
13.1
Trade and other payables
Deferred income
(2.2)
(0.1)
(13.2)
-
Total current liabilities
(2.3)
(13.2)
Net assets
23.4
2.1
Group share of joint venture net assets
12.5
1.1
Year
ended
December 31,
2015
Year
ended
December 31,
2014
Non-current deferred tax asset
Summarised statement of comprehensive income
$’m
$’m
Revenue
Operating expenses
0.3
(26.7)
(13.2)
Operating loss before income tax
(26.4)
(13.2)
5.2
2.2
Loss for the year
(21.2)
(11.0)
Group share of joint venture results
(11.3)
(5.9)
Income tax credit
F-49
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.
Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments and accrued income
Other receivables
Balance at
December 31,
2015
$’m
186.3
(9.0)
Balance at
December 31,
2014
$’m
187.2
(5.0)
177.3
80.8
14.4
182.2
90.2
16.4
272.5
288.8
At December 31, 2015, the fair value of trade and other receivables is not materially different from their book values.
At December 31, 2015, trade receivables of $68.7m (2014: $89.8m) were past due but not impaired. Past due amounts have not
been impaired where collection is still considered likely based on past credit history and prior knowledge of debtor insolvency. The
ageing analysis of these trade receivables is as follows:
Balance at
December 31,
2015
$’m
Balance at
December 31,
2014
$’m
26.9
14.4
8.3
19.1
33.0
17.5
11.3
28.0
Receivables not past due
68.7
108.6
89.8
92.4
Total trade receivables – net
177.3
182.2
0 - 30 days
31 - 60 days
61 - 90 days
Greater than 90 days
At December 31, 2015, trade receivables of $9.0m (2014: $5.0m) were impaired and adequately provided for. The individually
impaired receivables mainly relate to individual small counterparties.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Balance at
December 31,
2015
Balance at
December 31,
2014
US Dollar
Pound Sterling
Euro
Other
$’m
191.7
61.9
13.4
5.5
$’m
212.3
62.9
9.6
4.0
Total
272.5
288.8
F-50
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Movements on the Group provision for impairment of trade receivables are as follows:
Year
ended
December 31,
2015
At January 1
Amounts provided
Utilised
Acquisitions
Released unutilised
At December 31
Year
ended
December 31,
2014
$’m
5.0
7.0
(3.5)
1.5
(1.0)
$’m
4.0
1.3
(0.3)
-
9.0
5.0
The creation and release of provision for impaired receivables have been included in operating expenses in the consolidated
income statement.
Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the
reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as
security.
22.
Cash and cash equivalents
Cash at bank and on hand
Short term bank deposits
Cash and cash equivalents (excluding bank overdrafts)
23.
Balance at
December 31,
2015
Balance at
December 31,
2014
$’m
96.4
49.6
$’m
62.7
55.0
146.0
117.7
Share capital and premium
As set out in note 2, during the second quarter of 2014 the Company completed a corporate reorganisation pursuant to a scheme
of arrangement, whereby the entire share capital of MGHL was cancelled and extinguished and MGHL became a wholly and
directly owned subsidiary of the Company. Existing shareholders of MGHL became shareholders of the Company with their rights
and interests in MGHL substantially replicated in the common shares they were issued in the Company. Markit Ltd. became the
ultimate parent company of the Group. Upon the completion of the corporate reorganisation, the historical consolidated financial
statements of MGHL became the historical consolidated financial statements of Markit Ltd. Following the corporate reorganisation
and upon completion of the IPO, all the Company’s share classes were reclassified into a single class of common shares, with a
par value of $0.01 per share and the same economic and voting rights, and a share split at a ratio of 10:1 was completed where
160,692,876 common shares were issued.
F-51
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Where the number of shares are shown below before giving effect to the share split, they are designated with an asterisk (*).
Issued and fully paid
Number of
shares
Share
capital
$’m
Share
premium
$’m
Total
$’m
Balance at December 31, 2013*
Options exercised and restricted shares awarded in Markit Group
Holdings Limited*
Issue of shares held in escrow*
Corporate reorganisation
Share split
Options exercised and restricted shares awarded in Markit Ltd.
17,683,602
0.2
372.9
373.1
113,726
57,436
160,692,876
3,959,872
1.6
-
2.5
13.0
(1.6)
70.0
2.5
13.0
70.0
Balance at December 31, 2014
Options exercised and restricted shares awarded
Restricted shares forfeited
Repurchase of shares
182,507,512
13,606,048
(182,724)
(19,143,928)
1.8
0.1
(0.2)
456.8
221.6
(501.2)
458.6
221.7
(501.4)
Balance at December 31, 2015
176,786,908
1.7
177.2
178.9
Issued and fully paid
Number of shares
Common shares of $0.01 each
Nominal value of shares
Common shares of $0.01 each
Balance at
December 31,
2015
Balance at
December 31,
2014
176,786,908
182,507,512
$
1,767,869
$
1,825,075
During the year, 13,606,048 shares were issued (2014: 113,726 pre share split and 3,959,872 post share split). The nominal value
of these shares was $136,060 (2014: $50,971) and the consideration received was $221.6m (2014: $72.3m).
On June 10, 2015, the Company repurchased 14,048,820 of its shares for a consideration of $351.3m including fees at a price of
approximately $24.91 per share. The share repurchase was funded through a combination of cash on hand and a drawdown of
the Group’s revolving credit facility.
On December 7, 2015, the Company entered into an aggregate $200.1m accelerated share repurchase (“ASR”) of issued and
outstanding common shares. Upon commencement, 5,095,108 shares representing approximately $150.0m of the aggregate
amount of the ASR were received and cancelled thereafter. We may receive additional shares at or prior to maturity of the ASR.
The total number of shares ultimately to be repurchased under the ASR will generally be based on the daily volume-weighted
average price of the shares during the calculation period for the ASR, less an agreed discount. At final settlement of the ASR, we
may be entitled to receive additional shares, or, under certain limited circumstances, be required to deliver shares to the relevant
ASR counterparty. The Group anticipates that all repurchases under the ASR Agreements will be completed by the third quarter of
2016, although each ASR counterparty has the right to accelerate settlement of its respective ASR under certain circumstances.
F-52
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the year ending December 31, 2014, 57,436 pre share split ordinary shares were issued in
respect of shares held in escrow relating to the purchase of EDM in 2012 (see note 26). The nominal value of these shares was
$574. The fair value of these shares was $13.0m.
The Company’s authorised share capital of 3,000,000,000 shares (2014: 3,000,000,000 shares) consists of issued common
shares, par value $0.01 per share, and undesignated shares, par value $0.01 per share that the Company’s Board of Directors is
authorised to designate from time to time as common shares or as preference shares.
As of December 31, 2015 there were 176,786,908 (2014: 182,507,512) common shares issued and outstanding, including
2,505,828 (2014: 1,309,322) issued and outstanding restricted shares. This excludes 51,965,745 (2014: 66,183,615) common
shares issuable upon exercise of options granted as of December 31, 2014, 52,604 (2014: nil) restricted share units and
25,219,470 (2014: 25,219,470) common shares held by the EBT. As of December 31, 2015 (2014: nil), no preference shares were
issued and outstanding. All of the Company’s issued and outstanding common shares are fully paid.
Holders of common shares have no pre-emptive, redemption, conversion or sinking fund rights. Holders of common shares are
entitled to one vote per share on all matters submitted to a vote of holders of common shares. Unless a different majority is
required by law or by the Company’s bye-laws, resolutions to be approved by holders of common shares require approval by a
simple majority of votes cast at a meeting. In the event of the Company’s liquidation, dissolution or winding up, the holders of
common shares are entitled to share equally and rateably in the Company’s assets, if any, remaining after the payment of all of
the Company’s debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares.
Pursuant to Bermuda law and the Company’s bye-laws, the Company’s Board of Directors may, by resolution, establish one or
more series of preference shares having such number of shares, designations, dividend rates, relative voting rights, conversion or
exchange rights, redemption rights, liquidation rights and other relative participation, optional or other special rights, qualifications,
limitations or restrictions as may be fixed by the Company’s Board of Directors without any further shareholder approval. Such
rights, preferences, powers and limitations, as may be established, could have the effect of discouraging an attempt to obtain
control of the company.
Under Bermuda law, a company may not declare or pay dividends if there are reasonable grounds for believing that: (i) the
company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) that the realisable value of its
assets would thereby be less than its liabilities. Under the Company’s bye-laws, each common share is entitled to dividends if, as
and when dividends are declared by the Company’s Board of Directors, subject to any preferred dividend right of the holders of
any preference shares.
F-53
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
Share based compensation
The Company operates share schemes for employees throughout the Group. All current schemes were adopted by the Company
in connection with the reorganisation (see note 2). The current schemes are shown below:
Description
2004 Additional share option plan
2006 Share option
plan-Communicator
2008 Share option plan
2008 Share option plan
2008 Share option plan (FCS)
2009 Share option plan
2010 Share option plan
2011 Share option plan
2012 Share option plan
2013 Share option plan
2013 Mid-year share option plan
Key Employee Incentive
Programme (“KEIP”)
2008 KEIP extensions
2009 KEIP extensions
2010 KEIP extensions
2011 KEIP extensions
2012 KEIP extensions
2013 KEIP extensions
2014 Share option plan*
2014 Share option plan
2014 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
2015 Share option awards*
Year of
grant
Exercise
price
($)
Exercise
period
2015
No. of
options
2014
No. of
options
2004
1.54 and 3.56
2006 to 2015
-
75,840
2006
2008
2008
2008
2009
2010
2011
2012
2013
2013
0.90
8.20
12.84
14.90
15.90
16.54
20.31
22.57
24.46
26.70
2007 to 2018
2009 to 2017
2009 to 2018
2009 to 2015
2010 to 2016
2010 to 2018
2011 to 2018
2012 to 2019
2014 to 2020
2014 to 2020
35,850
2,758,810
890,385
1,333,048
4,168,173
3,858,556
1,962,400
2,361,500
65,590
59,380
3,076,360
1,354,100
2,800,366
2,351,300
6,067,199
6,241,690
3,396,580
3,046,000
2013
2008
2009
2010
2011
2012
2013
2014
2014
2014
2015
2015
2015
2015
2015
2015
2015
2015
2015
26.70
12.84
15.90
16.54
20.31
22.57
24.46
25.00
26.70
21.96
25.96
26.03
26.05
26.36
26.39
26.70
29.00
29.02
29.14
2016 to 2020
2016 to 2017
2016 to 2017
2016 to 2017
2016 to 2018
2016 to 2019
2016 to 2020
2015 to 2021
2015 to 2021
2015 to 2021
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
2016 to 2022
21,615,000
22,030
6,250
1,492,020
1,466,730
1,964,470
400,000
5,269,370
200,000
200,000
50,000
32,500
300,000
100,000
400,000
100,000
500,000
478,653
25,160,000
22,030
663,860
14,000
1,635,760
1,609,320
2,231,260
600,000
5,512,980
200,000
-
51,965,745
66,183,615
Total share option plans
* Awarded under the 2014 Equity Incentive Award Plan
F-54
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Description
Year of
grant
Vesting
period
2015
No. of
shares
2014
No. of
shares
2010
2011
2012
2013
2014
2015
2011 to 2015
2012 to 2016
2013 to 2015
2014 to 2016
2015 to 2017
2016 to 2018
5,580
94,600
561,962
1,843,686
62,660
13,350
111,380
189,200
932,732
-
2,505,828
1,309,322
2010 Restricted share plan
2011 Restricted share plan
2012 Restricted share plan
2013 Restricted share plan
2014 Restricted share plan
2015 Restricted share awards*
Total restricted shares outstanding
* Awarded under the 2014 Equity Incentive Award Plan
Description
2015 Restricted share units awards*
Year of
grant
Vesting
period
2015
No. of
share units
2014
No. of
share units
2015
2016 to 2018
52,604
-
52,604
-
Total restricted share units outstanding
* Awarded under the 2014 Equity Incentive Award Plan
2014 Equity Incentive Award Plan
At the completion of the Company’s IPO in June 2014, the Company’s Board of Directors and shareholders approved a new 2014
equity incentive award plan (the “2014 Equity Plan”) under which the Company has the discretion to grant a broad range of
equity-based awards to the Group’s employees (including its officers), consultants, non-employee directors, and employees of
certain affiliates of the Group. Under the 2014 Equity Plan, 9,848,238 of the Company’s common shares are reserved for issuance
pursuant to a variety of share based compensation awards (“Awards”), including non-qualified share options, incentive share
options, share appreciation rights, restricted share awards, restricted share unit awards, deferred share awards, dividend
equivalent awards, share payment awards and performance awards. The aggregate share reserve specified above will be
increased on January 1 of each year commencing in 2015 and ending on (and including) January 1, 2024, in an amount equal to
the lesser of: (x) 2.5% of the total number of Company’s common shares issued and outstanding on a fully diluted basis as of
December 31 of the immediately preceding calendar year and (y) such number of common shares determined by the Company’s
Board of Directors.
In 2015, the Company granted options, restricted shares and restricted share units under the 2014 Equity Incentive Award
Plan. Options were granted with exercise prices between $25.96 and $29.14. The options are exercisable annually in five equal
tranches and the vesting period is five years. The options will lapse on the seventh anniversary from the date of grant. Restricted
shares and restricted share units are typically subject to vesting periods of three years. The restricted shares and restricted share
units become unrestricted Markit Ltd. common stock in three equal tranches on the anniversary of award.
F-55
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In 2014, the Company granted options under the 2014 Equity Incentive Award Plan. Options were granted with exercise prices of
$25.00 and $26.70. The options are exercisable annually in five equal tranches and the vesting period is five years. The options
will lapse on the seventh anniversary from the date of grant.
Details of other equity plans are given in the table below:
Plan
Year of
approval
Year of
grant
Exercise
price ($)
Tranches
Expiry
2004 Additional Share Option Plan
2004
2004
1.54 3.56
Thirty-six equal tranches vesting monthly
from date of award
December 31,
2015
2006 Share Option Plan –
Communicator
2006
2006
0.90
One tranche vesting on award
date
December 31, 2018
2008 Share Option Plan
2007
2008
8.20 12.84
Three equal tranches vesting annually on
anniversary of award
December 31, 2017
2008 Additional Share Option Plan
(FCS)
2008
2008
14.90
Five equal tranches vesting annually on
anniversary of award
7 years from date of award
2009 Share Option Plan
2008
2009
15.90
Three or five equal tranches vesting annually
on anniversary of award
7 years from date of award
2010 Share Option Plan
2010
2010
16.54
Three or five equal tranches vesting annually
on anniversary of award
7 years from date of award
2011 Share Option Plan
2011
2011
20.31
Three or five equal tranches vesting annually
on anniversary of award
7 years from date of award
2012 Share Option Plan
2012
2012
22.57
Three or five equal tranches vesting annually
on anniversary of award
7 years from date of award
2013 Share Option Plan
2013
2013
24.46
Three or five equal tranches vesting annually
on anniversary of award
7 years from date of award
2013 Mid-year Share Option Plan
2013
2013
26.70
Five equal tranches vesting annually on
anniversary of award
7 years from date of award
2014 Share Option Plan
2014
2014
26.70
Five equal tranches vesting annually on
anniversary of award
7 years from date of award
Key Employee Incentive Programme
2013
2013
Three equal tranches vesting on the third,
fourth and fifth anniversaries of award
7 years from date of award
Key Employee Incentive Programme
extensions
2013
2014
25.00
&
26.70
12.84 24.46
A number of awards from existing schemes
were amended so that vesting occurs in one
tranche on the second anniversary of IPO
A range of dates from
2017 to 2019
2010 Restricted Share Plan
2010
2010
-
Three or five equal tranches vesting annually
on anniversary of award
The restricted shares
become unrestricted
Markit Ltd. common
shares upon vesting
2011 Restricted Share Plan
2010
2011
-
Three or five equal tranches vesting annually
on anniversary of award
The restricted shares
become unrestricted
Markit Ltd. common
shares upon vesting
2012 Restricted Share Plan
2012
2012
-
Three equal tranches vesting annually on
anniversary of award
The restricted shares
become unrestricted
Markit Ltd. common
shares upon vesting
2013 Restricted Share Plan
2013
2013
-
Three equal tranches vesting annually on
anniversary of award
The restricted shares
become unrestricted
Markit Ltd. common
shares upon vesting
2014 Restricted Share Plan
2014
2014
-
Three equal tranches vesting annually on
anniversary of award
The restricted shares
become unrestricted
Markit Ltd. common
shares upon vesting
F-56
Table of Contents
MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Calculation of the fair value of share based payments
The number and weighted average exercise prices of share options are as follows:
Year ended December 31, 2015
Year ended December 31, 2014
Weighted average
exercise price
$
Number of
options
Weighted average
exercise price
$
Number of
options
Outstanding at the beginning
of the year
Granted during the year
Forfeited during the year
Exercised during the year
23.36
27.73
26.47
19.06
66,183,615
2,161,153
(4,750,820)
(11,628,203)
22.68
26.44
24.68
17.49
65,552,830
7,595,410
(2,820,383)
(4,144,242)
Outstanding at the end of the
year
24.22
51,965,745
23.36
66,183,615
Exercisable at the end of the
year
17,139,834
26,179,841
The weighted average share price at the date of exercise of share options was $27.49 (2014: $24.65).
The options outstanding at the year end have an exercise price in the range of $0.90 to $29.14 (2014: $0.90 to $26.70) and a
weighted average contractual life of 3.9 years (2014: 4.5 years).
The number of restricted shares is as follows:
Issued and outstanding at the beginning of the year
Granted during the year
Vested during the year
Forfeited during the year
Issued and outstanding at the end of the year
Year ended
December 31,
2015
Year ended
December 31,
2014
Number of
shares
1,309,322
1,970,406
(591,176)
(182,724)
Number of
shares
774,900
965,352
(413,310)
(17,620)
2,505,828
1,309,322
The restricted shares issued and outstanding at the year end have a weighted average contractual life of 1.1 years (2014: 0.8
years).
The number of restricted share units is as follows:
Issued and outstanding at the beginning of the year
Granted during the year
Vested during the year
Year ended
December 31,
2015
Year ended
December 31,
2014
Number of
share units
Number of
share units
54,151
-
-
Forfeited during the year
(1,547)
-
Issued and outstanding at the end of the year
52,604
-
F-57
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The restricted share units issued and outstanding at the year end have a weighted average contractual life of 1.0 years (2014: nil
years).
The other options were valued using the Monte Carlo option pricing model. There are no market or non-market performance
conditions attached to any of the option schemes, and as such, no performance conditions were included in the fair value
calculations. The fair value of the common shares has been determined by an independent valuation consultant. Consistent
assumptions have been used for annual share price volatility at 25% (2014: 25%), dividends expected on shares at 0% (2014:
0%) and employee exercise multiple at two times (2014: two times) across all schemes. Employee exit rate has been assumed at
between 0% and 15% on options and 10% on restricted shares (2014: 15% on options and 10% on restricted shares).
The Group’s shares have only been quoted since June 2014 therefore the amount of historical share price data was considered
insufficient to determine the expected volatility parameter at the time of valuation. This was therefore assessed based on the
volatilities of certain quoted companies that were considered to offer some degree of comparability to the Company. These
volatilities were assessed based on a measurement period of the past 10 years. The fair value of the Company’s shares were
valued using a combination of price-earnings multiple based on comparable company multiples, a discounted cash flow valuation
reflecting anticipated Group performance and with reference to recent equity transactions.
The remaining assumptions used in the calculations are as follows:
Options
Grant date
01/01/2015
12/01/2015
Appraisal
value at
date of
grant
$
6.94 - 8.09
7.02 - 7.53
Risk free
rate 1
%
1.97
1.68
Exercise
price of
option
$
25.98
26.70
Restricted shares
Grant date
01/01/2015 (3 year
vesting)
1
Appraisal
value at
date of
grant
$
Risk free
rate 1
%
26.43
1.97
Risk free rate is based on the yield of U.S. Government bonds for a period consistent with the life of the equity instrument.
F-58
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25.
Retained earnings
Notes
Balance at January 1
Profit for the year
Share based compensation
Deferred tax in relation to share based compensation
Current tax in relation to share based compensation
Current tax on acquisition of non-controlling interests
Deferred tax on acquisition of non-controlling interests
10,11
14
14
14
14
Year
ended
December 31,
2015
$’m
1,850.6
152.5
37.3
6.3
20.7
-
Year
ended
December 31,
2014
$’m
1,663.3
165.2
20.7
55.8
9.3
(4.5)
(59.2)
2,067.4
1,850.6
Balance at December 31
26.
Other reserves
Notes
Balance at January 1, 2015
Accelerated share repurchase
Transfer to share premium
Currency translation differences
Cash flow hedges:
- Fair value gains arising during the
year
- Transfers to Other gains/(losses) net
- Current tax credit
- Deferred tax credit
23
23
14
14
Balance at December 31, 2015
Balance at January 1, 2014
Transfer to share premium
Recognition of redemption liability
Deferred tax on redemption liability
Currency translation differences
Cash flow hedges:
- Fair value gains arising during the
year
- Transfers to Other gains/(losses) net
- Deferred tax charge
Balance at December 31, 2014
23
14
14
Hedging
reserve
$’m
4.2
-
Translation
reserve
$’m
(28.1)
(43.5)
Other
reserves
$’m
(51.3)
(200.1)
150.1
-
8.0
-
-
8.0
(9.9)
0.4
0.2
-
-
(9.9)
0.4
0.2
2.9
(71.6)
(101.3)
(170.0)
(7.8)
-
14.3
(42.4)
13.0
(13.0)
(73.0)
21.7
-
19.5
(13.0)
(73.0)
21.7
(42.4)
5.2
-
-
5.2
9.8
(3.0)
-
-
9.8
(3.0)
4.2
(28.1)
(51.3)
(75.2)
Total
$’m
(75.2)
(200.1)
150.1
(43.5)
The hedging reserve represents the movement in the fair value of forward foreign exchange contracts designated in hedge
relationships (see note 4.24).
F-59
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 2015, other reserves primarily represented:
— A call and put option over the shares held by non-controlling interests in Compliance Technologies International LLP (“CTI”)
for which the Group acquired a controlling stake in July 2014. The carrying value was recognised as a redemption liability of
$73.0m within other payables. This will be settled against non-controlling interests within reserves at the point the risks and
rewards associated with those shares fall within the Group. A deferred tax asset of $21.7m has been recognised against this.
— $50.0m regarding final settlement of the ASR contract (see note 23). The Group anticipates that all repurchases under the
ASR Agreements will be completed by the third quarter of 2016, although each ASR counterparty has the right to accelerate
settlement of its respective ASR under certain circumstances (see note 23).
As a part of the Group’s 2012 acquisition of Cadis Software Limited, 574,360 shares (post share split) were held in escrow not
issued. These were held within other reserves and were issued during the year ended December 31, 2014 upon satisfaction of
certain restrictions agreed on the purchase of the business (see note 23).
27.
Trade and other payables
Balance at
December 31,
2015
$’m
Balance at
December 31,
2014
$’m
46.4
82.9
27.9
47.5
74.1
21.5
157.2
143.1
12.8
17.8
34.8
20.8
127.2
9.7
13.7
38.2
3.2
138.9
213.4
203.7
370.6
346.8
Non-current
Contingent consideration
Other payables
Liability for social security costs on employee equity instruments
Current
Trade payables
Social security and other taxes
Other payables
Contingent consideration
Accrued expenses - other
Total trade and other payables
At December 31, 2015, the fair value of trade and other payables is not materially different from their book values.
Contingent consideration is based on performance metrics of the businesses (Level 3 as per note 5.3), including revenue and
EBITDA. At the time of acquisition the best estimate of the amount payable is assessed. The fair value of the liability is then
reassessed and updated at each reporting date to reflect the current forecasts and estimates.
Other payables (current) principally relates to deferred income for landlord contributions and rent free periods.
Other payables (non-current) principally relate to the CTI redemption liability (note 26).
F-60
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28.
Borrowings
December 31,
2015
$’m
December 31,
2014
$’m
197.4
42.2
498.0
224.5
124.7
-
737.6
349.2
86.4
86.4
86.4
86.4
824.0
435.6
Reconciliation of movement in borrowings
Balance at January 1
Repayments of other borrowings
Repayments of bank borrowings
Capitalised arrangement fees
Unwind of discount and amortisation of capitalised arrangement fees
Proceeds from senior unsecured note issuance
Proceeds of bank borrowings
2015
$’m
435.6
(87.8)
(698.0)
(2.0)
6.2
500.0
670.0
2014
$’m
574.6
(103.5)
(140.0)
(4.1)
8.6
100.0
Balance at December 31
824.0
Non-current
Bank borrowings
Share buyback
Senior unsecured notes
Current
Share buyback
Total borrowings
435.6
The fair value of the non-current borrowings are not significantly different to the carrying value. Bank borrowings are at floating
interest rates and, for the share buyback, commercial rates of borrowing have not changed during the year.
All borrowings are denominated in US Dollars.
(a)
Bank borrowings
On March 21, 2014 the Group increased its multi-revolving club facility agreement to $1,050m from $800m and extended the term
to March 2019. The facility carries interest at a margin of between 0.75% and 1.75% over LIBOR and a commitment fee at 35% of
margin on any undrawn balance. No significant changes have otherwise occurred to the terms of the borrowing.
The bank borrowings had an annual equivalent average interest rate for the period ended December 31, 2015 of 1.0% (year
ended December 31, 2014: 1.0%).
(b)
Senior unsecured notes
On November 4, 2015 the Group issued two series of senior unsecured notes having an aggregate principal amount of $500.0m
to certain institutional investors. The notes rank pari passu with the
F-61
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Group’s existing facility. One series of notes (Series A) was issued in an aggregate principal amount of $210.0m, bears interest at
a fixed rate of 3.73% and matures on November 4, 2022. The other series of notes (Series B) was issued in an aggregate
principal amount of $290.0m, bears interest at a fixed rate of 4.05% and matures on November 4, 2025. Interest is paid
semi-annually from the anniversary of issuance.
(c)
Share buyback
In August 2012, the Group purchased 2,193,948 MGHL shares (pre-share split) for a consideration of $495.1m. The consideration
is payable in quarterly instalments through to May 2017. The carrying value of the liability at December 31, 2015 amounted to
$128.6m (December 31, 2014: $211.1m). The carrying value is calculated using cash flows discounted at a rate based on an
average borrowing rate of 3.1%.
29.
Deferred income tax
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Balance at
December 31,
2015
$’m
Balance at
December 31,
2014
$’m
2.3
4.2
Deferred tax liabilities:
Deferred tax liabilities
(22.9)
(30.2)
Deferred tax liabilities – net
(20.6)
(26.0)
Deferred tax assets:
Deferred tax assets
F-62
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Materially all deferred tax balances are non-current. The movement in deferred income tax assets and liabilities during the year,
without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Gross deferred tax
assets –
2015
Goodwill
Tax losses
Share based
compensation
Intangibles
Other short term
timing differences
Total
Gross deferred
tax assets –
2014
Goodwill
Tax losses
Share based
compensation
Intangibles
Other short term
timing differences
Total
Gross deferred
tax liabilities –
2015
Intangibles
Goodwill
Development costs
Other short term
timing differences
Total
Gross deferred
tax liabilities –
2014
Intangibles
Goodwill
Development costs
Other short term
timing differences
Total
January 1
$’m
96.5
8.3
Acquired in
business
combination
$’m
37.8
5.9
Recognised
in income
$’m
(15.9)
-
Recognised
in equity
$’m
-
Transfers
$’m
(2.0)
-
Foreign
Exchang
e
$’m
(0.2)
December
31
$’m
116.4
14.0
64.9
3.3
-
6.8
(0.6)
6.3
-
(0.1)
-
78.0
2.6
18.7
0.4
1.8
0.2
(4.4)
(0.6)
16.1
191.7
44.1
(7.9)
6.5
(6.5)
(0.8)
227.1
January 1
$’m
81.1
8.1
Acquired in
business
combination
$’m
21.7
-
Recognised
in income
$’m
(10.8)
0.2
Recognised
in equity
$’m
4.5
-
Transfers
$’m
-
Foreign
Exchang
e
$’m
-
December
31
$’m
96.5
8.3
2.8
4.3
-
6.3
(1.0)
55.8
-
-
-
64.9
3.3
12.2
-
9.5
(3.0)
-
-
18.7
108.5
21.7
4.2
57.3
-
-
191.7
January 1
$’m
(133.2)
(36.2)
(40.3)
*Acquired in
business
combination
$’m
(51.1)
4.4
-
Recognised
in income
$’m
23.0
(10.5)
(4.9)
Recognised
in equity
$’m
-
Transfers
$’m
(2.4)
1.0
Foreign
Exchang
e
$’m
2.0
0.1
0.7
December
31
$’m
(159.3)
(44.6)
(43.5)
(8.0)
(0.2)
-
-
7.9
-
(0.3)
(217.7)
(46.9)
7.6
-
6.5
2.8
(247.7)
January 1
$’m
(84.8)
(25.1)
(26.7)
Acquired in
business
combination
$’m
(9.1)
-
Recognised
in income
$’m
24.4
(11.1)
(13.6)
Recognised
in equity
$’m
(63.7)
-
Transfers
$’m
-
Foreign
Exchang
e
$’m
-
December 31
$’m
(133.2)
(36.2)
(40.3)
(4.0)
-
(4.0)
-
-
-
(8.0)
(140.6)
(9.1)
(4.3)
(63.7)
-
-
(217.7)
* Included within deferred tax liabilities recognised on business combinations is a $4.4m adjustment in respect of deferred tax
liabilities consolidated as part of the Group’s acquisition of Wall Street on Demand in 2010.
F-63
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through
future taxable profits is probable. The Group did not recognise deferred tax assets of $20.1m (2014: $14.2m) in respect of losses
amounting to $62.6m (2014: $50.6m) that can be carried forward against future taxable income. None of the losses will expire
within the next 10 years.
At the balance sheet date the aggregate amount of the temporary differences for which deferred tax liabilities have not been
recognised was $0.5m (2014: $0.4m). These unrecognised deferred tax liabilities relate to undistributed profits from overseas
entities which would give rise to a tax liability if they were to be distributed. No liability has been recognised in respect of these
differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group
considers that it is probable that such differences will not reverse in the foreseeable future as the expectation is for these
undistributed profits to be permanently reinvested.
30.
Contingencies
The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business.
The Group is currently subject to a number of antitrust and competition-related claims and investigations, including investigations
by the Antitrust Division of the U.S. Department of Justice (the “DoJ”) and the Directorate-General for Competition of the
European Commission (the “EC”) as well as a class action lawsuit in the United States.
These investigations and lawsuits involve multiple parties and complex claims that are subject to substantial uncertainties and
unspecified penalties or damages. The Company reviews these matters in consultation with internal and external legal counsel to
make a determination on a case-by-case basis whether a loss from each of these matters is probable, possible or remote.
The Group considers it remote that a liability will arise from the antitrust investigations by the DoJ. Whilst it is possible that
remedies that may be sought by the DoJ may include changes in business practice or structure that could have an indirect
financial impact on the Group, it is not expected that any such remedy would involve direct financial liability. The Group co nsiders
it possible that liabilities will arise from the EC investigation. It is not considered practicable to estimate the financial effect of the
EC investigation, which remains ongoing.
The parties have entered into a settlement in the class action in the United States in the period, which has been preliminarily
approved by the court. The Group believes that the possibility of further material loss is remote (see note 9).
Given this, the Group has recorded no provision for any of the three incidents of investigations or lawsuits described above.
The Group considers that it is remote that any material liabilities will arise from any other contingent liabilities.
F-64
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
31.
Commitments
(a) Capital commitments
The Group has no significant capital expenditure contracted for at the end of each reporting year but not yet incurred.
(b) Operating lease commitments
The Group leases various equipment and intangible assets under non-cancellable operating lease agreements. The lease terms
are no longer than 15 years, and the majority of lease agreements are renewable at the end of the lease period at market rate.
The lease expenditure charged to the consolidated income statement during the year is disclosed in note 8. The future aggregate
minimum lease payments under non-cancellable operating leases are as follows:
Balance at December 31,
2015
No later than 1 year
Later than 1 year but no later than 5 years
Later than 5 years
Land and
Buildings
$’m
21.1
92.3
149.5
262.9
2014
Other
$’m
1.7
1.3
-
Land
and
Buildings
$’m
18.8
49.9
50.2
Other
$’m
3.5
0.1
-
3.0
118.9
3.6
The total minimum sublease payments expected to be received under non-cancellable subleases at December 31, 2015 is $4.2m
(2014: $5.3m).
F-65
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
32.
Business combinations
Acquisitions comprise the purchase of businesses that are typically integrated into existing business units to broaden and
enhance the Group’s range of product offerings as well as its presence in global markets.
The following provides a brief description of certain acquisitions completed during 2015 and 2014:
Date
Company
Acquiring
segment(s)
Information and Solutions
October 2015
CoreOne Technologies
September 2015
Option Computers t/a
DealHub
Processing
July 2015
Information Mosaic
Solutions
July 2014
Compliance Technologies
International
Solutions
January 2014
thinkFolio
Solutions
Description of business activities
A global leading provider of regulatory reporting, index
management, data management and prime brokerage
services to financial institutions.
Foreign exchange trade processing covering
straight–through-processing, connectivity, regulatory
reporting and economic services.
Enterprise software for the management and
processing of financial securities transactions, with a
focus in corporate actions workflow automation.
Software that automates the certification of tax
domicile, validation of withholding tax status and
calculation of withholding tax to help firms streamline
compliance with anti-money laundering and
know-your-customer regulations.
A portfolio management software company.
Each business combination has been accounted for using the acquisition method and the results of acquired businesses are
included in the consolidated financial statements from the dates of acquisition. The fair values of the assets acquired and liabilities
assumed related to certain acquisitions may be subject to adjustment to the extent that further information and knowledge come to
light that more accurately reflect conditions at the acquisition date.
F-66
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Details of net assets acquired and intangible assets related to the above acquisitions are as follows:
2015
$’m
2014
$’m
Consideration at date of acquisition
Cash
Fair value of contingent consideration
Working capital adjustment
Redemption liability
241.8
17.1
(11.7)
3.0
132.4
35.3
0.1
-
Total consideration
250.2
167.8
Recognised amounts of identifiable assets acquired and liabilities assumed
Intangible assets
Property, plant and equipment
Trade receivables
Other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Current tax liabilities
Deferred tax liabilities
172.9
2.2
20.3
7.1
6.6
(58.1)
(62.8)
(0.3)
(7.2)
79.3
0.3
4.9
0.8
5.2
(10.1)
(9.1)
Total identifiable net assets
Goodwill
Non-controlling interest
80.7
169.5
-
71.3
134.2
(37.7)
Total
250.2
167.8
The Group has obligations to pay additional consideration for prior acquisitions, contingent upon revenue performance
contractually agreed at the time of purchase. The Group believes that additional payments in connection with these transactions
would not have a material impact on the consolidated financial statements.
Certain cash flows necessary to settle borrowings have been included within cash flows from investing activities in the
consolidated statement of cash flows since they represented aggregate cash flows arising from acquisitions.
Goodwill arising on acquisition relates primarily to synergies with the Group’s existing businesses and the expansion of client
reach from selling new products to the Group’s existing customer base and selling existing products to the Group’s existing
customer base.
$110.0m of goodwill for acquisitions completed in 2015 is expected to be deductible for tax purposes (2014: $76.3m).
Acquisition transactions were completed by acquiring all equity interests or the net assets of the acquired business with the
exception of the acquisition of Compliance Technologies International in July 2014, where 52.8% was acquired and there is
consequently a non-controlling interest. The non-controlling interest represents the proportion of net assets not owned by the
Group.
F-67
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The aggregated revenues, operating losses and Adjusted EBITDA of businesses acquired in 2015 and since the date of
acquisition were $26.0m, $5.7m and $7.7m respectively. Had these acquisitions been acquired at the beginning of the year, the
aggregated revenues, operating losses and Adjusted EBITDA would have been $77.3m, $21.6m and $9.8m respectively.
The formal review of the fair values of the assets acquired and liabilities assumed is still in progress and will be completed within
12 months of the acquisition date of each business. At December 31, 2015, the measurement period for the acquisitions of
CoreOne, DealHub and Information Mosaic remained open and accordingly the fair values presented are provisional. Adjustments
are made to the assets acquired and liabilities assumed during the measurement period to the extent that further information and
knowledge come to light that more accurately reflect conditions at the acquisition date.
33.
Related party transactions
(a) Key management compensation
Key management comprises all directors (executive and non-executive) and key Group executives. The compensation paid or
payable to key management in respect of qualifying services is shown below:
Salary and other short term employee benefits
Share based compensation
Year ended
December 31,
2015
$’m
Year ended
December 31,
2014
$’m
7.8
8.2
7.2
5.6
16.0
12.8
Key management personnel have exercised 1,301,610 options (2014: nil) during the year with a fair value of $17.4m (2014: nil).
Key management were awarded 406,344 restricted shares (2014: 443,700) and no options (2014: 149,800) during the year.
There were no other material transactions or balances between the Group and its key management personnel or members of their
close family.
(b) Transactions with joint venture
Year ended
December 31,
2015
Year ended
December 31,
2014
Provision of services to joint venture (Markit Genpact KYC Services
Limited):
- Design and technology services
- Support service charges
11.8
4.3
3.6
2.2
Total
16.1
5.8
Services have been provided to the joint venture on normal commercial terms and conditions. As of December 31, 2015, the
Group owed Markit Genpact KYC Services Limited $4.3m (2014: Group owed joint venture $1.1m).
F-68
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MARKIT LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
34.
Principal subsidiaries
The Company has investments in the following subsidiary undertakings, which principally affected the profits or net assets of the
Group, as follows. All subsidiaries are included in the consolidated financial statements.
Entity name
Holding
Country of
incorporation
Markit on Demand Incorporated
100%
USA
Markit EDM Limited
Markit Equities Limited
100%
100%
England & Wales
England & Wales
Markit Group Holdings Limited*
Markit Group Limited
100%
100%
England & Wales
England & Wales
Markit Indices Limited
100%
England & Wales
Markit North America Incorporated
100%
USA
MarkitSERV Limited
100%
England & Wales
MarkitSERV LLC
100%
USA
Markit Valuations Limited
Markit WSO Corporation
100%
100%
England & Wales
USA
* Held directly by Markit Ltd.
F-69
Principal activities
Design, development and hosting of custom
websites, reports and tools for the financial
services industry
Enterprise data management software
Dividends forecasting services to the financial
markets
Holding company
Data and financial services to the financial
markets
Credit derivative, fixed income and foreign
exchange index services
Data, pricing and valuations services across the
financial services industry, including pricing
services and electronic trade processing and
settlement services for the loan market
An electronic trade confirmation network for the
OTC derivative markets
An electronic trade confirmation network for the
OTC derivatives market
Valuation services to the OTC derivatives markets
Portfolio risk management software and services
to syndicated loan market participants
Exhibit 1.3
Form 7
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF INCREASE OF SHARE CAPITAL OF
Markit Ltd.
(hereinafter referred to as “the Company”)
DEPOSITED in the office of the Registrar of Companies on 18 June 2014 in accordance with the provisions of section 45(3) of the Companies
Act 1981.
Authorised Share Capital of the Company
US$10,000
Increase of Share Capital as authorized by a resolution passed by a
written resolution of the sole member of the Company dated 12 June
2014
US$29,990,000
Authorised Share Capital as Increased:
US$30,000,000
Secretary
DATED THIS 18 th day of June 2014
Exhibit 2.5
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT (this “ Amendment ”) is entered into as of June 10, 2015
by and among Markit Ltd., a Bermuda exempted company (the “ Company ”) and each of the entities listed on the signature pages hereto.
Recitals
WHEREAS, the Company and certain shareholders of the Company entered into that certain Registration Rights Agreement dated as of
June 24, 2014 (the “ Original Agreement ”), pursuant to which the Company agreed to provide certain registration and other rights as set forth
in the Original Agreement;
WHEREAS, in advance of the Restriction Termination Date (as defined in the Original Agreement), the Company gave notice to
Shareholders (as defined in the Original Agreement) of its intention to conduct an underwritten public offering (the “ 2015 Public Offering ”)
of Common Shares (as defined in the Original Agreement) pursuant to which each Shareholder would be permitted to sell up to 85% of its
Initial Ownership Common Shares to the underwriters in the 2015 Public Offering in lieu of the Company’s obligation to effect a Demand
Registration (as defined in the Original Agreement) during the 12-month period beginning on the Restriction Termination Date; and
WHEREAS, the Shareholders party hereto hold a majority of the Registrable Securities (as defined in the Original Agreement) and have
agreed to the amendments to the Original Agreement set forth herein, which amendments are being affected in accordance with Section 4.03 of
the Original Agreement.
In consideration of the mutual promises made herein and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
Section 1. Capitalized Terms . Capitalized terms used in this Amendment shall have the meaning set forth in the Original Agreement
except as otherwise defined in this Amendment.
Section 2. Demand Registration; Notice and Lock-up Waiver . (a) The 2015 Public Offering shall be deemed to be a Demand Registration
during the 12-month period beginning on the Restriction Termination Date and for all other purposes set forth in the Original Agreement, and
each of the entities listed on the signature pages hereto that is participating in the 2015 Public Offering shall be deemed to be a Requesting
Shareholder for all purposes set forth in the Original Agreement; provided , however , that (i) the Company shall not have any obligation to
give each of the Shareholders a Demand
Notice in respect of the 2015 Public Offering in accordance with Section 3.01(a) of the Original Agreement and (ii) the provisions of
Section 3.01(b) of the Original Agreement regarding the right to request a waiver of the restrictions on Transfer or a second Demand
Registration shall only apply to the extent that a Shareholder is not permitted pursuant to the restrictions set forth in Section 3.01(f) of the
Original Agreement to include Registrable Securities representing at least 25% of its Initial Ownership Common Shares in the 2015 Public
Offering (or, if such Shareholder elected to sell less than 25% of its Initial Ownership Common Shares in the 2015 Public Offering, all Initial
Ownership Common Shares such Shareholder so elected to sell). For the avoidance of doubt, the provisions of Section 3.01(b) of the Original
Agreement shall not apply in the case of the exclusion from the 2015 Public Offering of Registrable Securities held by a Shareholder as a result
of not satisfying any minimum price per share specified in the power of attorney or form of election delivered by such Shareholder in
connection with its election to participate in the 2015 Public Offering.
(b) Section 2.04(a) of the Original Agreement shall not restrict any Shareholder’s ability to participate in the 2015 Public Offering.
(c) The Company hereby represents and warrants that it has offered each Bank Shareholder and each PE Shareholder the opportunity to
participate in the 2015 Public Offering, regardless of whether such Shareholder accepted such offer to so participate.
Section 3. Amendments to Original Agreement .
(a) Subsection (b) of Section 2.04 of the Original Agreement is hereby amended to replace the period at the end of such subsection with a
semi-colon and to add the following proviso:
“ provided that the foregoing restrictions in this Section 2.04(b) shall not limit any of the Shareholders from participating in the 2015
Public Offering; and provided further that:
(i) if a Shareholder sold more than 25% but equal to or less than 50% of its Initial Ownership Common Shares in the 2015 Public
Offering (including as a result of the exercise by the underwriters in the 2015 Public Offering of their option to purchase additional
Common Shares), then the number of Initial Ownership Common Shares that such Shareholder shall be able to Transfer in the 12-month
period beginning on the first anniversary of the Restriction Termination Date shall be reduced by the number of Common Shares so sold
in excess of 25% of such Shareholder’s Initial Ownership Common Shares;
(ii) if a Shareholder sold more than 50% but equal to or less than 75% of its Initial Ownership Common Shares in the 2015 Public
Offering (including as a result of the exercise by the underwriters in the 2015 Public Offering of their option to purchase additional
Common Shares), then such Shareholder shall not Transfer any of its remaining Initial Ownership Common Shares during the 12-month
period beginning on the first anniversary of the Restriction Termination
2
Date and the number of Initial Ownership Common Shares that such Shareholder shall be able to Transfer in the 12-month period
beginning on the second anniversary of the Restriction Termination Date shall be reduced by the number of Common Shares so sold in
excess of 50% of such Shareholder’s Initial Ownership Common Shares; and
(iii) if a Shareholder sold more than 75% of its Initial Ownership Common Shares in the 2015 Public Offering (including pursuant
to the exercise by the underwriters in the 2015 Public Offering of their option to purchase additional Common Shares), then such
Shareholder shall not Transfer any of its remaining Initial Ownership Common Shares during the 12-month period beginning on the first
anniversary of the Restriction Termination Date and during the 12-month period beginning on the second anniversary of the Restriction
Termination Date and the number of Initial Ownership Common Shares that such Shareholder shall be able to Transfer in the 12-month
period beginning on the third anniversary of the Restriction Termination Date shall be reduced by the number of Common Shares so sold
in excess of 75% of such Shareholder’s Initial Ownership Common Shares.”
(b) The following defined term is hereby added to Section 1.01 of the Original Agreement in the correct alphabetical order:
“ 2015 Public Offering ” means the underwritten public offering of Common Shares conducted by the Company pursuant to the
Company’s registration statement on Form F-1 filed with the SEC on May 13, 2015 (as amended).
Section 4. Governing Law . This Amendment shall be governed by, and construed and enforced in accordance with, the laws of the State
of New York, without regard to the conflicts of laws rules of such state.
Section 5. Counterparts; Effectiveness . This Amendment may be executed (including by facsimile or other electronic image scan
transmission) with counterpart signature pages or in any number of counterparts, each of which shall be deemed to be an original, and all of
which shall, taken together, be considered one and the same agreement, it being understood that each party need not sign the same counterpart.
This Amendment shall become effective when each party hereto shall have executed and delivered this Amendment. Until and unless each
party has executed and delivered this Amendment, this Amendment shall have no effect and no party shall have any right or obligation
hereunder.
Section 6. Entire Agreement . The Original Agreement, as amended by this Amendment, constitutes the entire agreement and
understanding among the parties hereto with respect to the subject matter of the Original Agreement, as amended by this Amendment, and
supersedes all prior and contemporaneous agreements and understandings, both oral and written, among the parties hereto with respect to the
subject matter hereof; provided that the Original Agreement, as amended by this Amendment, shall have no effect on and shall not supersede
the Lock-Up and Compulsory Transfer Deeds.
3
Section 7. Original Agreement . Except as expressly amended by this Amendment, the Original Agreement shall remain in full force and
effect and all of the terms of the Original Agreement are hereby ratified in all respects.
[ The remainder of this page is intentionally left blank ]
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as
of the day and year first above written.
Markit Ltd.
By:
/s/ Jeff Gooch
Name: Jeff Gooch
Title:
Chief Financial Officer
Banc of America Strategic Ventures, Inc.
By:
/s/ illegible
Name:
Title:
ML IBK Positions, Inc.
By:
/s/ illegible
Name:
Title:
Banc of America Strategic Investments Corporation
By:
/s/ illegible
Name:
Title:
Barclays Bank plc
By:
/s/ illegible
Name:
Title:
BNP PUK Holding Limited
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
BNP Paribas Arbitrage S.N.C.
By:
/s/ illegible
Name:
Title:
Citigroup Financial Products, Inc.
By:
/s/ illegible
Name:
Title:
Citigroup Global Markets Limited
By:
/s/ illegible
Name:
Title:
Citigroup Global Markets Inc.
By:
/s/ illegible
Name:
Title:
Credit Suisse NEXT Investors LLC
By:
7
/s/ illegible
Name:
Title:
DB UK Holdings Limited
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
DBR Investments Co. Limited
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
The Goldman Sachs Group, Inc.
By:
/s/ illegible
Name:
Title:
HSBC Bank plc
By:
8
/s/ illegible
Name:
Title:
JPMC Strategic Investments II Corporation
By:
/s/ illegible
Name:
Title:
Morgan Stanley Fixed Income Ventures Inc.
By:
/s/ illegible
Name:
Title:
RBS AA Holdings (UK) Limited
By:
/s/ illegible
Name:
Title:
UBS AG
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
General Atlantic Partners Tango, L.P.
By:
/s/ illegible
Name:
Title:
Esta Investments Pte Ltd.
By:
/s/ illegible
Name:
Title:
Canada Pension Plan Investment Board
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
Lance Uggla
/s/ Lance Uggla
Kevin Gould
/s/ Kevin Gould
Jeff Gooch
/s/ Jeff Gooch
Shane Akeroyd
/s/ Shane Akeroyd
Stephen Wolff
/s/ Stephen Wolff
Pan Praewood, Lombard International Assurance S.A.
By:
/s/ illegible
Name:
Title:
By:
/s/ illegible
Name:
Title:
Exhibit 4.42
Execution version
To:
Markit Group Holdings Limited
4th Floor, Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
(for itself and as Obligors’ Agent for and on behalf of the other Obligors pursuant to clause 2.5 ( Obligors’ Agent ) of the
Original Facility Agreement)
Cc:
Each Lender under and as defined in the Original Facility Agreement (as defined below)
29 May 2015
Dear Sirs
Amendment Letter relating to the US$1,050,000,000 multicurrency revolving facility agreement (the “Original Facility Agreement”)
dated 16 July 2012 (as amended and restated from time to time prior to the date of this letter, and as most recently amended and
restated on 21 March 2014 and most recently amended on 13 June 2014) and made between, among others, Markit Group Holdings
Limited (the “Company”), each of Barclays Bank PLC, HSBC Bank plc, Royal Bank of Canada and The Royal Bank of Scotland plc as
mandated lead arrangers and bookrunners (the “Arrangers”) and HSBC Bank plc as agent (the “Agent”)
1.
INTRODUCTION
1.1
We refer to:
(a)
the Original Facility Agreement; and
(b)
the Original Facility Agreement as amended by this letter (the “ Amended Facility Agreement ”).
1.2
Unless a contrary indication appears, terms defined in the Original Facility Agreement have the same meaning when used in this letter.
The principles of construction set out in the Original Facility Agreement shall have effect as if set out in this letter.
1.3
We write to you in our capacity as agent (acting as behalf of the other Finance Parties) under and in connection with the Finance
Documents, as set out in clause 27.1 ( Appointment of the Agent ) of the Original Facility Agreement.
2.
BACKGROUND
2.1
You sent an amendment request letter on 7 May 2015 and a supplemental request by e-mail on 14 May 2015 (together, the “ Request
Letters ”) in accordance with clause 36.1 ( Required consents ) of the Original Facility Agreement, requesting approval and
confirmation from the Majority Lenders with respect to the amendments set out in paragraph 3 ( Amendments ) of this letter.
2.2
We are pleased to confirm that all the Lenders have given consent to the amendments requested in the Request Letters.
- 1-
3.
AMENDMENTS
3.1
With effect from the date of your countersignature of this letter, the Original Facility Agreement shall be amended as follows:
3.1.1 Acceptable Bank
Paragraph (b) of the definition of “Acceptable Bank” in clause 1.1 ( Definitions ) of the Original Facility Agreement shall be
amended by inserting the words ““F-1” or higher by” immediately before the words “Fitch Rating Ltd”.
3.1.2 Cash Equivalent Investment
Each of paragraphs (g) and (i) of the definition of “Cash Equivalent Investments” in clause 1.1 ( Definitions ) of the Original
Facility Agreement shall be amended by deleting the term “F1” and replacing it with the term “F-1”.
3.1.3 Permitted Acquisition
(a)
Paragraph (c) of the definition of “Permitted Acquisition” in clause 1.1 ( Definitions ) of the Original Facility
Agreement shall be deleted and replaced as follows:
“(c)
acquisitions where cash consideration is more than US$425,000,000 or where the aggregate limit of
US$725,000,000 under paragraph (b) above would be exceeded provided that at least 14 days but no more than
60 days before the proposed acquisition, the Company provides a certificate (in form and substance satisfactory
to the Agent) signed by any two of a director(s), Group finance director or chief financial officer of the
Company and showing, in reasonable detail, that (assuming that the acquisition had occurred and on a pro forma
basis):
(i)
Interest Cover is not projected to be less than 4:1; and
(ii)
Total Leverage is not projected to exceed 3.5:1,
in each case, on each of the next two Financial Half Year Dates following the proposed date of completion of the
acquisition;”
(b)
An additional limb (g) shall be added to the definition of “Permitted Acquisition” in clause 1.1 ( Definitions ) of the
Original Facility Agreement as follows:
“(g) any defeasement, redemption, purchase, repurchase, cancellation, retirement, reduction or repayment in
respect of share capital of Topco or any Subsidiary of Topco.”
- 2-
3.1.4 Permitted Disposal
(a)
Paragraph (l) of the definition of “Permitted Disposal” in clause 1.1 ( Definitions ) of the Original Facility Agreement
shall be restated as follows:
“(l)
(b)
Paragraph (m) of the definition of “Permitted Disposal” in clause 1.1 ( Definitions ) of the Original Facility Agreement
shall be restated as follows:
“(m)
(c)
made on arm’s length terms and for full cash consideration at fair market value where the consideration
receivable (when aggregated with the consideration receivable for any other sale, lease, transfer or other disposal
by the Group, other than any permitted under paragraphs (a) to (l) above) exceeds the baskets set out in
paragraphs (k) and (l) above provided that the Disposal Proceeds arising from such disposals in excess of such
baskets are applied in prepayment and cancellation of the Facility in accordance with Clause 8.6 ( Permitted
Disposals ) save that such prepayment may be on a pro rata basis with any similar prepayment required pursuant
to the terms of any Private Placement Notes.”
Paragraph (a) of clause 8.6 ( Permitted Disposals ) of the Original Facility Agreement shall be restated as follows:
“(a)
(d)
made on arm’s length terms and for full cash consideration at fair market value where the consideration
receivable exceeds either of the baskets set out in paragraph (k) above provided that in any Financial Year an
aggregate amount of no more than US$175,000,000 of the Disposal Proceeds arising from such disposals is
reinvested in the business of the Group within 365 days of such disposals or, to the extent not so reinvested,
applied in prepayment and cancellation of the Facility in accordance with Clause 8.6 ( Permitted Disposals )
save that such prepayment may be on a pro rata basis with any similar prepayment required pursuant to the terms
of any Private Placement Notes; or”
The Company shall ensure that the Disposal Proceeds from any Permitted Disposal under paragraph (l) of the
definition of Permitted Disposal are applied (which may be on a pro rata basis with any similar prepayment
required pursuant to the terms of any Private Placement Notes) promptly in prepayment and cancellation of the
Facility to the extent they are not reinvested in the business of the Group within 365 days of the date of
completion of such disposal.”
Paragraph (b) of clause 8.6 ( Permitted Disposals ) of the Original Facility Agreement shall be restated as follows:
“(b)
The Company shall ensure that the Disposal Proceeds from any Permitted Disposal under paragraph (m) of the
definition of Permitted Disposal are applied (which may be on a pro rata basis with any similar prepayment
required pursuant to the terms of any Private Placement Notes) promptly in prepayment and cancellation of the
Facility.”
- 3-
3.1.5 Private Placement
The following definitions shall be inserted into clause 1.1 ( Definitions and interpretation ) of the Original Facility Agreement:
““ Private Placement ” means a private placement or offering under Section 4(a)(2) of the Securities Act of debt
securities issued by an Obligor.
“ Private Placement Notes ” means any notes issued and sold to institutional investors pursuant to a Private
Placement.”
3.1.6 Guarantor Coverage
Paragraph (b) of clause 22.20 ( Guarantor Coverage ) of the Original Facility Agreement shall be amended by the replacement
of the term “15 Business Days” with the term “45 Business Days”.
3.1.7 Financial Condition
Paragraph
“(b)
(b) of clause 21.2 ( Financial condition ) of the Original Facility Agreement shall be restated as follows:
Total Leverage
Total Leverage in respect of a Relevant Period shall not be more than 3:1 or, following completion of an acquisition
permitted under the definition of “Permitted Acquisition” where the ratio of 3:1 would not otherwise be exceeded but for
such permitted acquisition and for no more than two successive Relevant Periods after the completion of such
acquisition, 3.5: 1.”
4.
REPRESENTATIONS
4.1
The Repeating Representations are deemed to be made by each Obligor (by reference to the facts and circumstances then existing) on
the date of this letter and on the date of your countersignature of this letter and references to “this Agreement” in the Repeating
Representations should be construed as references to this letter, to the Original Facility Agreement and to the Amended Facility
Agreement.
5.
CONTINUITY AND FURTHER ASSURANCE
5.1
The provisions of the Original Facility Agreement and the other Finance Documents shall, save as amended by this letter, continue in
full force and effect.
- 4-
5.2
For the avoidance of doubt, each Guarantor confirms for the benefit of the Finance Parties that all Guarantee Obligations owed by it
under the Amended Facility Agreement shall (a) remain in full force and effect notwithstanding the amendments referred to in
paragraph 3 ( Amendments ) of this letter and (b) extend to any new obligations assumed by any Obligor under the Finance Documents
as a result of this letter (including, but not limited to, under the Amended Facility Agreement). For the purpose of this paragraph 5.2, “
Guarantee Obligations ” means the guarantee and indemnity obligations of a Guarantor contained in the Original Facility Agreement.
5.3
Each Obligor shall at our request and at their own expense, do all such acts and things necessary or desirable to give effect to the
amendments effected or to be effected pursuant to this letter.
6.
COSTS AND EXPENSES
6.1
You shall within 5 Business Days of demand pay us (for our own benefit and on behalf of the Finance Parties) the amount of all costs
and expenses (including, but not limited to, legal fees) subject to a cap (if any) agreed before the date of this letter plus VAT or other
similar taxes (if applicable), in each case reasonably incurred by us or any of them in connection with the negotiation, preparation,
printing and execution of this letter and any other documents referred to in this letter.
7.
MISCELLANEOUS
7.1
The provisions of clause 32 ( Notices ), clause 34 ( Partial invalidity ), clause 35 ( Remedies and waivers ), clause 41 ( Enforcement )
and clause 42 ( Waiver of Jury Trial ) of the Original Facility Agreement shall be incorporated into this letter as if set out in full in this
letter and as if references in those clauses to “this Agreement” or “the Finance Documents” are references to this letter.
7.2
You act as agent on behalf of the Obligors in accordance with clause 2.5 ( Obligors’ Agen t) of the Original Facility Agreement, and
any obligation incurred by an Obligor under paragraphs 5 ( Continuity and further assurance ) and 6 ( Costs and expenses ) of this letter
is incurred on the basis of you having acted as agent on behalf of that Obligor.
7.3
This letter may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on
a single copy of this letter.
7.4
Other than any Finance Party, a person who is not a signatory to this letter has no right under the Contracts (Rights of Third Parties) Act
1999 to enforce or to enjoy the benefit of any term of this letter.
7.5
In accordance with the Original Facility Agreement, each of the Company and Agent designates this letter as a Finance Document.
7.6
This letter and any non-contractual obligations arising out of or in connection with it are governed by English law.
- 5-
Yours faithfully
/s/ illegible
For and on behalf of
HSBC BANK PLC as Agent
- 6-
Acknowledged and agreed:
/s/ Jeff Gooch
For and on behalf of
MARKIT GROUP HOLDINGS LIMITED
Date: 29 May 2015
- 7-
Exhibit 4.43
EXECUTION VERSION
MARKIT GROUP HOLDINGS LIMITED
U.S.$210,000,000
3.73% Series A Senior Notes due November 4, 2022
and
U.S.$290,000,000
4.05% Series B Senior Notes due November 4, 2025
NOTE PURCHASE AND GUARANTEE AGREEMENT
Dated as of November 4, 2015
TABLE OF CONTENTS
Page
1.
2.
3.
4.
4.1.
4.2.
4.3.
4.4.
4.5.
4.6.
4.7.
4.8.
4.9.
4.10.
4.11.
4.12.
4.13.
5.
5.1.
5.2.
5.3.
5.4.
5.5.
5.6.
5.7.
5.8.
5.9.
5.10.
5.11.
5.12.
5.13.
5.14.
5.15.
5.16.
5.17.
5.18.
5.19.
5.20.
6.
6.1.
6.2.
6.3.
AUTHORIZATION OF NOTES; ESTABLISHMENT OF SERIES; SUBSIDIARY GUARANTEES.
SALE AND PURCHASE OF NOTES.
CLOSING.
CONDITIONS TO CLOSING.
Representations and Warranties.
Performance; No Default.
Compliance Certificates.
Opinions of Counsel.
Purchase Permitted By Applicable Law, Etc.
Sale of Other Notes.
Payment of Special Counsel Fees.
Private Placement Numbers.
Changes in Corporate Structure.
Funding Instructions.
Acceptance of Appointment to Receive Service of Process.
Original Subsidiary Guarantee Deeds.
Proceedings and Documents.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT GUARANTOR.
Organization; Power and Authority.
Authorization, Etc.
Disclosure.
Organization and Ownership of Shares of Subsidiaries; Affiliates.
Financial Statements; Material Liabilities.
Compliance with Laws, Other Instruments, Etc.
Governmental Authorizations, Etc.
Litigation; Observance of Agreements, Statutes and Orders.
Taxes.
Title to Property; Leases.
Licenses, Permits, Etc.
Compliance with ERISA; Non-U.S. Plans.
Private Offering by the Company.
Use of Proceeds; Margin Regulations.
Existing Financial Indebtedness; Future Liens.
Foreign Assets Control Regulations, Etc.
Status under Certain Statutes.
Environmental Matters.
Ranking of Obligations.
Representations of Original Subsidiary Guarantors.
REPRESENTATIONS OF THE PURCHASERS.
Purchase for Investment.
Source of Funds.
Confirmation of Tax Status of Japanese Holders of Notes.
-i-
1
2
2
3
3
3
3
4
4
4
4
5
5
5
5
5
5
6
6
6
6
7
8
8
8
9
9
10
10
11
12
13
13
14
15
15
15
16
16
16
17
18
TABLE OF CONTENTS
(continued)
Page
7.
7.1.
7.2.
7.3.
7.4.
7.5.
8.
8.1.
8.2.
8.3.
8.4.
8.5.
8.6.
8.7.
8.8.
8.9.
8.10.
9.
9.1.
9.2.
9.3.
9.4.
9.5.
9.6.
9.7.
9.8.
10.
10.1.
10.2.
10.3.
10.4.
10.5.
10.6.
10.7.
10.8.
10.9.
11.
12.
12.1.
12.2.
12.3.
12.4.
INFORMATION AS TO PARENT GUARANTOR.
Financial and Business Information.
Officer’s Certificate.
Visitation.
Electronic Delivery.
Limitation on Disclosure Obligation.
PAYMENT AND PREPAYMENT OF THE NOTES.
Maturity.
Optional Prepayments with Make-Whole Amount.
Prepayment for Tax Reasons.
Allocation of Partial Prepayments.
Maturity; Surrender, Etc.
Purchase of Notes.
Make-Whole Amount.
Payments Due on Non-Business Days.
Prepayment in Connection with a Noteholder Sanctions Event.
Change of Control Prepayment Offer.
AFFIRMATIVE COVENANTS.
Compliance with Law.
Insurance.
Maintenance of Properties.
Payment of Taxes and Claims.
Corporate Existence, Etc.
Books and Records.
Priority of Obligations.
Subsidiary Guarantors.
NEGATIVE COVENANTS.
Transactions with Affiliates.
Merger, Consolidation, Etc.
Sale of Assets.
Liens.
Limitation on Subsidiary Financial Indebtedness.
Interest Coverage Ratio.
Consolidated Leverage Ratio.
Line of Business.
Economic Sanctions, Etc.
EVENTS OF DEFAULT.
REMEDIES ON DEFAULT, ETC.
Acceleration.
Other Remedies.
Rescission.
No Waivers or Election of Remedies, Expenses, Etc.
-ii-
19
19
22
23
23
24
25
25
25
25
27
27
27
28
30
30
31
32
32
33
33
33
34
34
34
34
36
36
36
37
39
41
42
42
43
43
43
47
47
47
48
48
TABLE OF CONTENTS
(continued)
Page
13.
13.1.
13.2.
13.3.
13.4.
13.5.
14.
14.1.
14.2.
14.3.
15.
15.1.
15.2.
16.
16.1.
16.2.
16.3.
17.
18.
18.1.
18.2.
18.3.
18.4.
19.
20.
21.
22.
23.
23.1.
23.2.
23.3.
23.4.
23.5.
24.
24.1.
24.2.
24.3.
24.4.
24.5.
24.6.
24.7.
24.8.
24.9.
TAX INDEMNIFICATION.
Gross-up.
Treaty Clearance.
Passport Scheme.
Tax Credits, Etc.
FATCA Information.
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Registration of Notes.
Transfer and Exchange of Notes; No Transfer to Competitors.
Replacement of Notes.
PAYMENTS ON NOTES.
Place of Payment.
Home Office Payment.
EXPENSES, ETC.
Transaction Expenses.
Certain Taxes.
Survival.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
AMENDMENT AND WAIVER.
Requirements.
Solicitation of Holders of Notes.
Binding Effect, Etc.
Notes Held by Company, Etc.
NOTICES; ENGLISH LANGUAGE.
REPRODUCTION OF DOCUMENTS.
CONFIDENTIAL INFORMATION.
SUBSTITUTION OF PURCHASER.
PARENT GUARANTEE.
Parent Guarantee.
Obligations Absolute and Unconditional.
Subrogation.
Preference.
Marshalling and Accounts.
MISCELLANEOUS.
Successors and Assigns.
Accounting Terms.
Severability.
Construction, Etc.
Counterparts.
Governing Law.
Jurisdiction and Process.
Obligation to Make Payment in Dollars.
IFRS 39.
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Schedule A
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Defined Terms
Schedule B
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Information Relating to Purchasers
Schedule 5.3
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Disclosure Materials
Schedule 5.4
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Subsidiaries of the Parent Guarantor and Ownership of Subsidiary Stock
Schedule 5.5
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Financial Statements
Schedule 5.15
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Existing Financial Indebtedness
Exhibit 1(a)(i)
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Form of 3.73% Series A Senior Note due November 4, 2022
Exhibit 1(a)(ii)
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Form of 4.05% Series B Senior Note due November 4, 2025
Exhibit 1(c)
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Form of Subsidiary Guarantee Deed
Exhibit 4.4(a)(i)
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Form of Opinion of U.S. Special Counsel for the Parent Guarantor, the Company and the Original
Subsidiary Guarantors
Exhibit 4.4(a)(ii)
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Form of Opinion of English Special Counsel for the Parent Guarantor, the Company and the Original
Subsidiary Guarantors
Exhibit 4.4(a)(iii)
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Form of Opinion of Bermuda Special Counsel for the Parent Guarantor
Exhibit 4.4(a)(iv)
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Form of Opinion of Canada special Counsel for the Canadian Subsidiary Guarantor
Exhibit 4.4(a)(v)
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Form of Opinion of Luxembourg special Counsel for the Luxembourg Subsidiary Guarantor
Exhibit 4.4(a)(vi)
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Form of Opinion of Texas special Counsel for the Texas Subsidiary Guarantor
Exhibit 4.4(b)
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Form of Opinion of Special Counsel for the Purchasers
MARKIT GROUP HOLDINGS LIMITED
4 th Floor, Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
MARKIT LTD.
4 th Floor, Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
3.73% Series A Senior Notes due November 4, 2022
4.05% Series B Senior Notes due November 4, 2025
As of November 4, 2015
To Each of the Purchasers Listed in
Schedule B Hereto:
Ladies and Gentlemen:
MARKIT GROUP HOLDINGS LIMITED , (Registered No. 06240773), a company incorporated in England (together with
any successor thereto that becomes a party hereto pursuant to Section 10.2, the “ Company ”) and MARKIT LTD. (Registered No. 48610), a
company incorporated in Bermuda (together with any successor thereto that becomes a party hereto pursuant to Section 10.2, the “Parent
Guarantor” ), each agrees with each of the purchasers whose names appear in Schedule A (each, a “Purchaser” and, collectively, the
“Purchasers” ) as follows:
1.
AUTHORIZATION OF NOTES; ESTABLISHMENT OF SERIES; SUBSIDIARY GUARANTEES.
(a) The Company will authorize the issue and sale of (i) U.S.$210,000,000 aggregate principal amount of its 3.73% Series A
Senior Notes due November 4, 2022 (the “ Series A Notes ”) and (ii) U.S.$290,000,000 aggregate principal amount of its 4.05% Series
B Senior Notes due November 4, 2025 (the “ Series B Notes ”, and together with the Series A Notes, the “ Notes ”, such term to include
any amendment, restatement or other modification from time to time pursuant to Section 18 and including any such notes issued in
substitution therefor pursuant to Section 14). The Notes shall be substantially in the respective forms set out in Exhibits 1(a)(i) and
1(a)(ii). Certain capitalized and
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other terms used in this Agreement are defined in Schedule A. References to a “Schedule” or an “Exhibit” are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement. References to a “Section” are references to a Section of this
Agreement unless otherwise specified.
(b) The payment of the Notes and the performance by the Company of its obligations under this Agreement will be guaranteed by
the Parent Guarantor, pursuant to the guarantee contained in Section 23.
(c) The payment of the Notes and the performance by the Company of its obligations under this Agreement may, from time to
time, be guaranteed by other members of the Group (each being a “ Subsidiary Guarantor ”), pursuant to a Subsidiary Guarantee Deed
of such Subsidiary Guarantor (as amended from time to time).
2.
SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will issue and sell to each Purchaser and each Purchaser will
purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and in the series specified opposite such
Purchaser’s name in Schedule B at the purchase price of 100% of the principal amount thereof. The Purchasers’ obligations hereunder are
several and not joint obligations and no Purchaser shall have any liability to any Person for the performance or non-performance of any
obligation by any other Purchaser hereunder.
3.
CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser shall occur at the offices of Morrison & Foerster (UK) LLP,
One Ropemaker Street, Citypoint, 7 th Floor, London EC2Y 9AW, United Kingdom, at 9:00 a.m., New York City time, at a closing (the “
Closing ”) on November 4, 2015. At the Closing the Company will deliver to each Purchaser the Notes to be purchased by such Purchaser in
the form of a single Note of each series to be purchased by such Purchaser (or such greater number of Notes in denominations of at least
U.S.$500,000 as such Purchaser may request) dated the date of the Closing and registered in such Purchaser’s name (or in the name of its
nominee), against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the Company to the account and in accordance with the funding
instructions as set forth in the funding instructions delivered pursuant to Section 4.10.
If at the Closing the Company shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to such Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved
of all further obligations under this Agreement, without thereby waiving any rights such Purchaser may have by reason of any of the conditions
specified in Section 4 not having been fulfilled to such Purchaser’s satisfaction or such failure by the Company to tender such Notes.
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4.
CONDITIONS TO CLOSING.
Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such Purchaser at the Closing is subject to the
fulfilment to such Purchaser’s satisfaction, prior to or at the Closing, of the following conditions:
4.1.
Representations and Warranties.
The representations and warranties of the Company and the Parent Guarantor in this Agreement shall be correct when made and at
the Closing. The representations and warranties of each Original Subsidiary Guarantor in its Subsidiary Guarantee Deed shall be correct when
made and at the Closing.
4.2.
Performance; No Default.
Each of the Company and the Parent Guarantor shall have performed and complied with all agreements and conditions contained
in this Agreement required to be performed or complied with by it prior to or at the Closing. Before and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14), no Default or Event of Default shall have occurred
and be continuing. Neither the Company nor the Parent Guarantor nor any Subsidiary shall have entered into any transaction since the date of
the Memorandum that would have been prohibited by Sections 10.1, 10.3 or 10.4 had such Sections applied since such date.
4.3.
Compliance Certificates.
(a) Officer’s Certificate . Each of the Company and the Parent Guarantor shall have delivered to such Purchaser an Officer’s
Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary’s or Director’s Certificate . Each of the Company and the Parent Guarantor shall have delivered to such Purchaser a
certificate of its Secretary, an Assistant Secretary, a Director or another appropriate person, dated the date of the Closing, certifying as
to (i) the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes
and this Agreement, as applicable, and (ii) the Company’s and the Parent Guarantor’s organizational documents as then in effect. Each
Original Subsidiary Guarantor shall have delivered to such Purchaser a certificate of its Secretary or a Director or other appropriate
person, dated the date of the Closing, certifying as to (i) the resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of its Subsidiary Guarantee Deed and (ii) its organizational documents as then in effect.
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4.4.
Opinions of Counsel.
Such Purchaser shall have received opinions in form and substance satisfactory to such Purchaser, dated the date of the Closing
(a) from (i) Morrison & Foerster (UK) LLP, U.S. special counsel for the Company, the Parent Guarantor and the Original Subsidiary
Guarantors, (ii) Morrison & Foerster (UK) LLP, English special counsel for the Company and the English Original Subsidiary Guarantors,
(iii) Conyers, Dill & Pearman Limited, Bermuda special counsel to the Parent Guarantor, (iv) Blake, Cassels & Graydon LLP, as Canada
special counsel for the Canadian Original Subsidiary Guarantor, (v) Bonn Steichen & Partners, as Luxembourg special counsel for the
Luxembourg Original Subsidiary Guarantor, and (vi) Andrews Kurth LLP, as Texas special counsel for the Texas Original Subsidiary
Guarantor, substantially in the respective forms set forth in Exhibits 4.4(a)(i), 4.4(a)(ii), 4.4(a)(iii)¸ 4.4(a)(iv), 4.4(a)(v), 4.4(a)(vi) and
4.4(a)(vii) covering such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably
request (and the Company and the Parent Guarantor each hereby instructs its counsel to deliver such opinions to the Purchasers) and (b) from
Chapman and Cutler LLP, the Purchasers’ U.S. special counsel in connection with such transactions, substantially in the form set forth in
Exhibit 4.4(b) and covering such other matters incident to such transactions as such Purchaser may reasonably request.
4.5.
Purchase Permitted By Applicable Law, Etc.
On the date of the Closing such Purchaser’s purchase of Notes shall (a) be permitted by the laws and regulations of each
jurisdiction to which such Purchaser is subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any
applicable law or regulation (including, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject
such Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect
on the date hereof. If requested by such Purchaser, such Purchaser shall have received an Officer’s Certificate certifying as to such matters of
fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted.
4.6.
Sale of Other Notes.
Contemporaneously with the Closing the Company shall sell to each other Purchaser and each other Purchaser shall purchase the
Notes to be purchased by it at the Closing as specified in Schedule B.
4.7.
Payment of Special Counsel Fees.
Without limiting Section 16.1, the Company shall have paid on or before the Closing the reasonable fees, charges and
disbursements of the Purchasers’ special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the
Company at least two Business Days prior to the Closing.
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4.8.
Private Placement Numbers.
A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the SVO) shall have been
obtained for each series of the Notes.
4.9.
Changes in Corporate Structure.
Except as otherwise permitted by Section 10.2, neither the Company nor the Parent Guarantor nor the Original Subsidiary
Guarantors shall have changed their respective jurisdictions of incorporation or organization, as applicable, or been a party to any merger,
amalgamation or consolidation or succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of
the most recent financial statements referred to in Schedule 5.5.
4.10. Funding Instructions.
At least three Business Days prior to the date of the Closing, each Purchaser shall have received written instructions signed by a
Responsible Officer on letterhead of the Company confirming the information specified in Section 3 including (a) the name and address of the
transferee bank, (b) such transferee bank’s ABA number/SWIFT code/IBAN and (c) the account name and number into which the purchase
price for the Notes is to be deposited.
4.11. Acceptance of Appointment to Receive Service of Process.
Such Purchaser shall have received evidence of the acceptance by the Company of the appointments and designations provided for
by Section 24.7(d) of this Agreement and Section 8 of the Subsidiary Guarantee Deeds of the Original Subsidiary Guarantors, for the period
from the date of the Closing to November 4, 2026.
4.12. Original Subsidiary Guarantee Deeds.
Each of the Original Subsidiary Guarantors shall have duly executed and delivered to such Purchaser a Subsidiary Guarantee Deed
and such Subsidiary Guarantee Deed shall be in full force and effect.
4.13. Proceedings and Documents.
All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to such Purchaser and its special counsel, and such Purchaser and its special
counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or such special
counsel may reasonably request.
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5.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT GUARANTOR.
As of the date of Closing, each of the Company and the Parent Guarantor represents and warrants to each Purchaser that:
5.1.
Organization; Power and Authority.
Each of the Company and the Parent Guarantor is a corporation duly organized, validly existing and, where applicable, in good
standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and, where applicable, is in good
standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each of the
Company and the Parent Guarantor has the corporate power and authority to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and, with respect to the
Company only, the Notes, and to perform the provisions hereof and thereof.
5.2.
Authorization, Etc.
This Agreement and, with respect to the Company only, the Notes, have been duly authorized by all necessary corporate action on
the part of the Company and the Parent Guarantor, and this Agreement constitutes, and upon execution and delivery thereof, and with respect to
the Company only, each Note, will constitute, a legal, valid and binding obligation of the Company and the Parent Guarantor, enforceable
against the Company and the Parent Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and
(ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
5.3.
Disclosure.
The Company and the Parent Guarantor, through their agents, HSBC Securities (USA) Inc., RBS Securities Inc. and RBC Capital
Markets, LLC, has delivered to each Purchaser a copy of a Private Placement Memorandum, dated July 2015 (the “ Memorandum ”), relating
to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and
principal properties of the Parent Guarantor and its Subsidiaries. This Agreement, the Memorandum, the financial statements listed in Schedule
5.5 and the documents, certificates or other writings delivered to the Purchasers by or on behalf of the Company and the Parent Guarantor prior
to July 28, 2015 in connection with the transactions contemplated hereby and identified in Schedule 5.3 (this Agreement, the Memorandum and
such documents, certificates or other writings and such financial statements delivered to each Purchaser being referred to, collectively, as the “
Disclosure Documents ”), taken
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as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except as disclosed in the Disclosure Documents, since December 31,
2014 there has been no change in the financial condition, operations, business or properties of the Parent Guarantor or any Subsidiary except
changes that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There is no fact known to
the Company or the Parent Guarantor that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or
in the Disclosure Documents. No representation is made as to any projections in the Disclosure Documents other than that the projections are
based on information that the Company and the Parent Guarantor reasonably believe to be accurate and were calculated in a manner the
Company and the Parent Guarantor believe to be reasonable.
5.4.
Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Parent Guarantor’s Subsidiaries, showing,
as to each Subsidiary, the name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or
similar equity interests outstanding owned by the Parent Guarantor and each other Subsidiary, and designates which of such
Subsidiaries are Original Subsidiary Guarantors on the date of this Agreement, (ii) the Parent Guarantor’s Affiliates, other than
Subsidiaries, and (iii) the Parent Guarantor’s directors and executive officers.
(b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being
owned by the Parent Guarantor and its Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by the
Parent Guarantor or another Subsidiary free and clear of any Lien that is prohibited by this Agreement.
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and, where
applicable, in good standing under the laws of its jurisdiction of organization, and, where applicable, duly qualified as a foreign
corporation or other legal entity and, where applicable, is in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and
proposes to transact, except in such cases which could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(d) No Subsidiary is subject to any legal, regulatory, contractual or other restriction (other than the agreements listed on Schedule
5.4 and customary
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limitations imposed by corporate law or similar statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make
any other similar distributions of profits to the Parent Guarantor or any of its Subsidiaries that owns outstanding shares of capital stock
or similar equity interests of such Subsidiary, except in such cases which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.5.
Financial Statements; Material Liabilities.
The Parent Guarantor has delivered to each Purchaser copies of the consolidated financial statements of the Parent Guarantor or
the Company and its Subsidiaries listed on Schedule 5.5. All of such financial statements (including in each case the related schedules and
notes) fairly present in all material respects the consolidated financial position of the Parent Guarantor or the Company and its Subsidiaries as
of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). The Parent Guarantor and its
Subsidiaries do not have any Material liabilities that are not disclosed in the Disclosure Documents.
5.6.
Compliance with Laws, Other Instruments, Etc.
The execution, delivery and performance by the Company and the Parent Guarantor of this Agreement and, with respect to the
Company only, the Notes will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in
respect of any property of the Parent Guarantor or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter, memorandum of association, articles of association, regulations or by-laws, shareholders agreement or any
other agreement or instrument to which the Parent Guarantor or any Subsidiary is bound or by which the Parent Guarantor or any Subsidiary or
any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions
of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Parent Guarantor or any
Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Parent
Guarantor or any Subsidiary, except in any such cases which could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.7.
Governmental Authorizations, Etc.
No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by the Company or the Parent Guarantor of this Agreement or, with respect to the
Company only, the Notes, including, without limitation, any thereof required in connection with the obtaining of Dollars to make
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payments under this Agreement or the Notes and the payment of such Dollars to Persons resident in the United States of America or Japan. It is
not necessary to ensure the legality, validity, enforceability or admissibility into evidence in the United Kingdom or Bermuda of this
Agreement, the Notes or any Subsidiary Guarantee Deed that any thereof or any other document be filed, recorded or enrolled with any
Governmental Authority, or that any such agreement or document be stamped with any stamp, registration or similar transaction tax.
5.8.
Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as described in the Disclosure Documents, there are no actions, suits, investigations or proceedings pending or, to the
knowledge of the Company or the Parent Guarantor, threatened against or affecting the Parent Guarantor or any Subsidiary or any
property of the Parent Guarantor or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental
Authority that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Neither the Parent Guarantor nor any Subsidiary is (i) in default under any agreement or instrument to which it is a party or by
which it is bound, (ii) in violation of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or (iii) in
violation of any applicable law, ordinance, rule or regulation of any Governmental Authority (including, without limitation,
Environmental Laws, the USA Patriot Act or any of the other laws and regulations that are referred to in Section 5.16), which default or
violation could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.9.
Taxes.
(a) The Parent Guarantor and its Subsidiaries have filed all income tax returns that are required to have been filed in any
jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them
or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of which, individually or in the aggregate, is not Material
or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with
respect to which the Parent Guarantor or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP.
Neither the Company nor the Parent Guarantor knows of any basis for any other tax or assessment that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Parent
Guarantor and its Subsidiaries in respect of federal, national, state or other taxes for all fiscal periods are adequate.
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(b) No liability for any Tax, directly or indirectly, imposed, assessed, levied or collected by or for the account of any
Governmental Authority of the United Kingdom or Bermuda or any political subdivision thereof will be incurred by the Company or the
Parent Guarantor or any holder of a Note as a result of the execution or delivery of this Agreement or the Notes and no deduction or
withholding in respect of Taxes imposed by or for the account of the United Kingdom or Bermuda or, to the knowledge of the Company
or the Parent Guarantor any other Taxing Jurisdiction, is required to be made from any payment by the Company or the Parent
Guarantor under this Agreement or with respect to the Company only, the Notes except for any such liability, withholding or deduction
imposed, assessed, levied or collected by or for the account of any such Governmental Authority of the United Kingdom arising out of
circumstances described in clause (a), (b), (c), (d), (e), (f), (g), (x), (y) or (z) of Section 13.1 and the provisos thereto.
5.10. Title to Property; Leases.
The Parent Guarantor and its Subsidiaries have good and sufficient title to their respective properties that individually or in the
aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Parent Guarantor or any Subsidiary after such date (except as sold or otherwise disposed of in the ordinary course of
business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are
valid and subsisting and are in full force and effect in all Material respects.
5.11. Licenses, Permits, Etc.
(a) The Parent Guarantor and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights,
proprietary software, service marks, trademarks and trade names, or rights thereto, without known conflict with the rights of others,
except where the failure of ownership or possession could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) To the best knowledge of the Company and the Parent Guarantor, no product or service of the Parent Guarantor or any of its
Subsidiaries infringes in any material respect any license, permit, franchise, authorization, patent, copyright, proprietary software,
service mark, trademark, trade name or other right owned by any other Person, except in such cases where such infringement could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(c) To the best knowledge of the Company and the Parent Guarantor, there is no violation by any Person of any right of the Parent
Guarantor or any of its Subsidiaries with respect to any license, permit, franchise, authorization, patent, copyright, proprietary software,
service mark, trademark, trade name or other
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right owned or used by the Parent Guarantor or any of its Subsidiaries, except in such cases where such violation could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.12. Compliance with ERISA; Non-U.S. Plans.
(a) The Company, the Parent Guarantor and each ERISA Affiliate have operated and administered each Plan in compliance with
all applicable laws except for such instances of noncompliance as have not resulted in and could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. Neither the Company, the Parent Guarantor nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could, individually or in the
aggregate, reasonably be expected to result in the incurrence of any such liability by the Company, the Parent Guarantor or any ERISA
Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company, the Parent Guarantor or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to section 430(k) of the Code or to any such penalty or excise tax
provisions under the Code or federal law or section 4068 of ERISA or by the granting of a security interest in connection with the
amendment of a Plan, other than such liabilities or Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as
of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such
Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such
benefit liabilities. The present value of the accrued benefit liabilities (whether or not vested) under each Non-U.S. Plan that is funded,
determined as of the end of the Company’s most recently ended fiscal year in accordance with International Accounting Standard 19,
did not exceed the current value of the assets of such Non-U.S. Plan allocable to such benefit liabilities. The term “ benefit liabilities ”
has the meaning specified in section 4001 of ERISA and the terms “ current value ” and “ present value ” have the meaning specified
in section 3 of ERISA.
(c) The Parent Guarantor and its ERISA Affiliates have not incurred (i) withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are
Material or (ii) any obligation in connection with the termination of or withdrawal from any Non-U.S. Plan that individually or in the
aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of the last day of the Parent Guarantor’s most recently ended
fiscal year in
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accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 715-60, without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the Code) of the Parent Guarantor and its Subsidiaries is not
Material.
(e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction
that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to
section 4975(c)(1)(A)-(D) of the Code. The representation by the Parent Guarantor and the Company to each Purchaser in the first
sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of such Purchaser’s representation in Section 6.2 as
to the sources of the funds to be used to pay the purchase price of the Notes to be purchased by such Purchaser.
(f) All Non-U.S. Plans have been established, operated, administered and maintained in compliance with all laws, regulations and
orders applicable thereto, except where failure so to comply could not be reasonably expected to have a Material Adverse Effect. All
premiums, contributions and any other amounts required by applicable Non-U.S. Plan documents or applicable laws to be paid or
accrued by the Parent Guarantor and its Subsidiaries have been paid or accrued as required, except where failure so to pay or accrue
could not be reasonably expected to have a Material Adverse Effect.
5.13. Private Offering by the Company.
Neither the Company, the Parent Guarantor nor anyone acting on their behalf has offered the Notes or any similar Securities for
sale to, or solicited any offer to buy the Notes or any similar Securities from, or otherwise approached or negotiated in respect thereof with, any
Person other than the Purchasers and not more than 75 other Institutional Investors, each of which has been offered the Notes at a private sale
for investment. Neither the Company, nor the Parent Guarantor nor anyone acting on their behalf has, with respect to the Notes or the
guarantees of the Original Subsidiary Guarantors, engaged in any form of “general solicitation or general advertising,” as defined under Rule
502(c) of the Securities Act. Each of the Company and the Parent Guarantor has provided each Purchaser an opportunity to discuss with the
Company’s and the Parent Guarantor’s management the financial statements delivered pursuant to Section 5.5, as well as the Company’s and
the Parent Guarantor’s business, management, financial affairs and the terms and conditions of the offering of the Notes and the issuance of the
guarantees of the Original Subsidiary Guarantors. Neither the Company, the Parent Guarantor nor anyone acting on their behalf has taken, or
will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act or to
the registration requirements of any securities laws of the jurisdiction of organization of the Company, the Parent Guarantor or any Original
Subsidiary Guarantor.
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5.14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes hereunder to the repayment of other indebtedness and other general
corporate and working capital purposes. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a
violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR
220). Margin stock does not constitute more than 5% of the value of the consolidated assets of the Parent Guarantor and its Subsidiaries and the
Parent Guarantor does not have any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this
Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.
5.15. Existing Financial Indebtedness; Future Liens.
(a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Financial Indebtedness of
the Parent Guarantor and its Subsidiaries (other than Financial Indebtedness owing from one member of the Group to another) as of
October 30, 2015 (including descriptions of the obligors and obligees, principal amounts outstanding, any collateral therefor and any
guaranties thereof), since which date there has been no Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Financial Indebtedness of the Parent Guarantor or its Subsidiaries. Neither the Parent Guarantor nor any
Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Financial
Indebtedness of the Parent Guarantor or such Subsidiary and no event or condition exists with respect to any Financial Indebtedness of
the Parent Guarantor or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Financial Indebtedness to become due and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Parent Guarantor nor any Subsidiary has agreed or consented to cause or
permit any of its property, whether now owned or hereafter acquired, to be subject to a Lien that secures Financial Indebtedness that is
not permitted by Section 10.4 or to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien that secures Financial Indebtedness that is not permitted by
Section 10.4.
(c) Neither the Parent Guarantor nor any Subsidiary is a party to, or otherwise subject to any provision contained in, any
instrument evidencing Financial Indebtedness of the Parent Guarantor or such Subsidiary, any agreement
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relating thereto or any other agreement (including, but not limited to, its charter or other organizational document) which limits the
amount of, or otherwise imposes restrictions on the incurring of, Financial Indebtedness of the Company or the Parent Guarantor, except
as specifically indicated in Schedule 5.15.
5.16. Foreign Assets Control Regulations, Etc.
(a) Neither the Parent Guarantor nor the Company nor any Controlled Entity (i) is a Blocked Person, (ii) has been notified that its
name appears or will in the future appear on a State Sanctions List or (iii) is a target of sanctions that have been imposed by the United
Nations or the European Union.
(b) Neither the Parent Guarantor nor the Company nor any Controlled Entity (i) has violated, been found in violation of, or been
charged or convicted under, any applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws or
(ii) to the Company’s knowledge, is under investigation by any Governmental Authority for possible violation of any U.S. Economic
Sanctions Laws, Anti-Money Laundering Laws or Anti-Corruption Laws.
(c) No part of the proceeds from the sale of the Notes hereunder:
(i) constitutes or will constitute funds obtained on behalf of any Blocked Person or will otherwise be used by the Parent
Guarantor, the Company or any Controlled Entity, directly or indirectly, (A) in connection with any investment in, or any
transactions or dealings with, any Blocked Person, (B) for any purpose that would cause any Purchaser to be in violation of any
U.S. Economic Sanctions Laws or (C) otherwise in violation of any U.S. Economic Sanctions Laws;
(ii) will be used, directly or indirectly, in violation of any applicable Anti-Money Laundering Laws; or
(iii) will be used, directly or indirectly, for the purpose of making any improper payments, including bribes, to any
Governmental Official or commercial counterparty in order to obtain, retain or direct business or obtain any improper advantage,
in each case which would be in violation of any applicable Anti-Corruption Laws.
(d) Each of the Parent Guarantor and the Company has established procedures and controls which it reasonably believes are
adequate (and otherwise comply with applicable law) to ensure that the Parent Guarantor, the Company and each Controlled Entity is
and will continue to be in compliance with all applicable U.S. Economic Sanctions Laws, Anti-Money Laundering Laws and
Anti-Corruption Laws.
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5.17. Status under Certain Statutes.
Neither the Parent Guarantor nor any Subsidiary is subject to regulation under the United States Investment Company Act of
1940, as amended, the United States Public Utility Holding Company Act of 2005, as amended, the United States ICC Termination Act of
1995, as amended, or the United States Federal Power Act, as amended.
5.18. Environmental Matters.
(a) Neither the Parent Guarantor nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted asserting any claim against the Parent Guarantor or any of its Subsidiaries or any of their respective real
properties or other assets now or formerly owned, leased or operated by any of them, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse
Effect.
(b) Neither the Parent Guarantor nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could
not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(c) Neither the Parent Guarantor nor any Subsidiary has stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them in a manner contrary to any Environmental Laws that could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect;
(d) Neither the Parent Guarantor nor any Subsidiary has disposed of any Hazardous Materials in a manner contrary to any
Environmental Laws that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; and
(e) All buildings on all real properties now owned, leased or operated by the Parent Guarantor or any Subsidiary are in compliance
with applicable Environmental Laws, except where failure to comply could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Effect.
5.19. Ranking of Obligations
The Company’s payment obligations under this Agreement and the Notes will, upon issuance of the Notes, rank at least pari passu
, in right of payment without preference or priority, with all other unsecured and unsubordinated Financial
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Indebtedness of the Company except for those obligations that are mandatorily preferred by law. The Parent Guarantor’s payment obligations
under this Agreement will rank at least pari passu , in right of payment, without preference or priority, with all other unsecured and
unsubordinated Financial Indebtedness of the Parent Guarantor except for those obligations that are mandatorily preferred by law.
5.20. Representations of Original Subsidiary Guarantors.
The representations and warranties of each Original Subsidiary Guarantor contained in its Subsidiary Guarantee Deed are true and
correct as of the date of the Closing.
6.
REPRESENTATIONS OF THE PURCHASERS.
6.1.
Purchase for Investment.
(a) Each Purchaser severally represents that (i) it is an “accredited investor” within the meaning of Regulation D of the Securities
Act and is purchasing the Notes for its own account or for one or more separate accounts maintained by such Purchaser or for the
account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such
Purchaser’s or their property shall at all times be within such Purchaser’s or their control and (ii) it has knowledge and experience in
financial and business matters and is capable of evaluating the merits and risks of its investment in the Notes and is able to bear the
economic risk of holding the Notes for an indefinite period of time. Each Purchaser understands that the Notes have not been registered
under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes nor does it intend to do so and, in any event, a Purchaser shall only reoffer or resell the
Notes purchased by it in accordance with any available exemption from the requirements of Section 5 of the Securities Act, except as
aforesaid. Each Purchaser also severally represents that the Company and the Parent Guarantor have provided such Purchaser an
opportunity to discuss with the Parent Guarantor’s management the financial statements delivered pursuant to Section 5.5, as well as the
Company’s business, management, financial affairs and the terms and conditions of the offering of the Notes and the issuance of the
guarantees of the Original Subsidiary Guarantors.
(b) Each Purchaser organized in Japan severally represents that it (i) is an “Qualified Institutional Investor” within the meaning of
Japan’s Financial Instrument and Exchange Act (the “ Japanese Act ”) and (ii) if transferring a Note to any other party organized in
Japan, each such Purchaser shall only transfer such Note to another such Qualified Institutional Investor and shall do so in accordance
with the relevant rules and regulations promulgated under the Japanese Act.
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(c) Without limiting the foregoing, each Purchaser severally agrees that it will not, directly or indirectly, resell the Notes
purchased by it to, or substitute as a Purchaser of the Notes pursuant to Section 22, a Person which it is aware (i) is a Competitor (it
being understood that such Purchaser shall advise any broker or intermediary acting on its behalf that such resale to a Competitor is
limited hereby) or (ii) would cause the Parent Guarantor or any Controlled Entity to be in violation of U.S. Economic Sanctions Laws,
Anti-Money Laundering Laws or Anti-Corruption Laws.
6.2.
Source of Funds.
Each Purchaser severally represents that at least one of the following statements is an accurate representation as to each source of
funds (a “ Source ”) to be used by such Purchaser to pay the purchase price of the Notes to be purchased by such Purchaser hereunder:
(a) the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s
Prohibited Transaction Exemption (“ PTE ”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement
for life insurance companies approved by the NAIC (the “ NAIC Annual Statement ”)) for the general account contract(s) held by or
on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held
by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or
by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account
(exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile; or
(b) the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations
under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate
account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment
performance of the separate account; or
(c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 or (ii) a bank collective
investment fund, within the meaning of the PTE 91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant
to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially
owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or
(d) the Source constitutes assets of an “investment fund” (within the meaning of Part VI of PTE 84-14 (the “ QPAM Exemption
” )) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part VI
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of the QPAM Exemption), no employee benefit plan’s assets that are managed by the QPAM in such investment fund, when combined
with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning
of Part VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM,
represent more than 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM maintains an ownership interest in the Company
that would cause the QPAM and the Company to be “related” within the meaning of Part VI(h) of the QPAM Exemption and (i) the
identity of such QPAM and (ii) the names of any employee benefit plans whose assets in the investment fund, when combined with the
assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Part
VI(c)(1) of the QPAM Exemption) of such employer or by the same employee organization, represent 10% or more of the assets of such
investment fund, have been disclosed to the Company in writing pursuant to this clause (d); or
(e) the Source constitutes assets of a “plan(s)” (within the meaning of Part IV(h) of PTE 96-23 (the “ INHAM Exemption ”))
managed by an “in-house asset manager” or “INHAM” (within the meaning of Part IV(a) of the INHAM Exemption), the conditions of
Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM
(applying the definition of “control” in Part IV(d)(3) of the INHAM Exemption) owns a 10% or more interest in the Company and
(i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been
disclosed to the Company in writing pursuant to this clause (e); or
(f) the Source is a governmental plan; or
(g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in writing pursuant to this clause (g); or
(h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan,” and “separate account” shall have the respective meanings
assigned to such terms in section 3 of ERISA.
6.3.
Confirmation of Tax Status of Japanese Holders of Notes.
(a) Each of the Purchasers of Notes resident in Japan, and each such holder of the Notes on the date on which it becomes a party to
this Agreement, and each such holder of the Notes on each date that interest is payable in respect
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thereof (each an “ Interest Payment Date ”), in each case unless it has given notice to the Company under Section 6.3(b), represents to
the Company that the holder is a Qualifying Holder.
(b) A holder of such a Note shall notify the Company as soon as reasonably practicable after it becomes aware that it will not be
able to give the representation in Section 6.3(a) on the next Interest Payment Date and when making such a notification, such holder shall
also advise the Company of the country in which such holder is resident for tax purposes.
7.
INFORMATION AS TO PARENT GUARANTOR.
7.1.
Financial and Business Information.
The Parent Guarantor shall deliver to each holder of a Note that is an Institutional Investor (and for purposes of this Agreement the
information required by this Section 7.1 shall be deemed delivered on the date of delivery of such information in the English language or the
date of delivery of an English translation thereof):
(a) Interim Statements promptly after the same are available and in any event within 60 days after the end of each semiannual
fiscal period in each fiscal year of the Parent Guarantor (other than the last semiannual fiscal period of each such fiscal year), duplicate
copies of
(i) a consolidated balance sheet of the Parent Guarantor and its Subsidiaries as at the end of such fiscal period, and
(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Parent Guarantor and its
Subsidiaries, for such fiscal period,
setting forth in each case in comparative form the figures for the corresponding period in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to semiannual financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the consolidated financial position of the companies being reported on and their
consolidated results of operations and consolidated cash flows, subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Parent Guarantor’s Form 10-Q or Form 6-K relating to such semiannual
fiscal period, as the case may be, with respect to such period prepared in compliance with the requirements therefor and filed with the
SEC shall be deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements promptly after the same are available and in any event within 180 days after the end of each fiscal year of
the Parent Guarantor, duplicate copies of
(i) a consolidated balance sheet of the Parent Guarantor and its Subsidiaries as at the end of such year, and
(ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Parent Guarantor and its
Subsidiaries for such year,
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setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent public accountants of recognized international standing, which
opinion shall state that such financial statements present fairly, in all material respects, the consolidated financial position of the
companies being reported upon and their consolidated results of operations and consolidated cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the
circumstances, provided that the delivery within the time period specified above of the Parent Guarantor’s Form 10-K or Form 20-F, as
the case may be, for such fiscal year (together with the Parent Guarantor’s annual report to shareholders, if any) prepared in accordance
with the requirements therefor and filed with the SEC, shall be deemed to satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports promptly upon their becoming available, one copy of (i) each financial statement, report, circular,
notice or proxy statement or similar document sent by the Parent Guarantor or any Subsidiary to its principal lending banks as a whole
(excluding information sent to such banks in the ordinary course of administration of a bank facility, such as information relating to
pricing and borrowing availability) or to its public securities holders generally (if applicable), and (ii) each regular or periodic report,
each registration statement that shall have become effective (without exhibits except as expressly requested by such holder), and each
final prospectus and all amendments thereto filed by the Parent Guarantor or any Subsidiary with the SEC or any similar Governmental
Authority or securities exchange and of all press releases and other statements made available generally by the Parent Guarantor or any
Subsidiary to the public concerning developments that are Material;
(d) Notice of Default or Event of Default promptly and in any event within five days after a Responsible Officer becoming aware
of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed
default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in
Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company or the Parent
Guarantor, as the case may be, is taking or proposes to take with respect thereto;
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(e) Employee Benefit Matters promptly and in any event within five Business Days after a Responsible Officer becoming aware of
any of the following, a written notice setting forth the nature thereof and the action, if any, that the Parent Guarantor or an ERISA
Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for
which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Parent
Guarantor or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the incurrence of any liability by the Parent Guarantor or any
ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Parent Guarantor or any ERISA
Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with
any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; or
(iv) receipt of notice of the imposition of a Material financial penalty (which for this purpose shall mean any tax, penalty or
other liability, whether by way of indemnity or otherwise) with respect to one or more Non-U.S. Plans;
(f) Notices from Governmental Authority promptly, and in any event within 30 days of receipt thereof, copies of any notice to the
Parent Guarantor or any Subsidiary from any Governmental Authority relating to any order, ruling, statute or other law or regulation
that targets the Parent Guarantor or any Subsidiary and which could reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information with reasonable promptness, such other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Parent Guarantor or any of its Subsidiaries or relating to the ability of the
Company or the Parent Guarantor to perform its obligations hereunder and, with respect to the Company only, under the Notes as from
time to time may be reasonably requested by any such holder of Notes,
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including information readily available to the Parent Guarantor explaining the Parent Guarantor’s financial statements if such
information has been requested by the SVO in order to assign or maintain a designation of the Notes.
7.2.
Officer’s Certificate.
Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or (b) shall be accompanied by a
certificate of a Senior Financial Officer:
(a) Covenant Compliance setting forth the information from such financial statements that is required in order to establish whether
the Parent Guarantor was in compliance with the requirements of Section 10.3 through Section 10.7, inclusive, during the semiannual or
annual period covered by the statements then being furnished (including with respect to each such provision that involves mathematical
calculations, the information from such financial statements that is required to perform such calculations), and reasonably detailed
calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence, together with a reconciliation of such financial statements with
Pre-Default GAAP (if Pre-Default GAAP is being applied at such time) showing, in reasonable detail, the effect of the application of
Pre-Default GAAP. In the event that the Parent Guarantor or any Subsidiary has made an election to measure any financial liability
using fair value (which election is being disregarded for purposes of determining compliance with this Agreement pursuant to
Section 24.9) as to the period covered by any such financial statement, such Senior Financial Officer’s certificate as to such period shall
include a reconciliation from GAAP with respect to such election;
(b) Event of Default certifying that such Senior Financial Officer has reviewed the relevant terms hereof and has made, or caused
to be made, under his or her supervision, a review of the transactions and conditions of the Parent Guarantor and its Subsidiaries from
the beginning of the semiannual or annual period covered by the statements then being furnished to the date of the certificate and that
such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the
failure of the Parent Guarantor or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence
thereof and what action the Company or the Parent Guarantor, as the case may be, shall have taken or proposes to take with respect
thereto; and
(c) Subsidiary Guarantor(s) setting forth a list of all Subsidiaries that are Subsidiary Guarantors and certifying that each Subsidiary
that is required to be a Subsidiary Guarantor pursuant to Section 9.8 is a Subsidiary Guarantor, in each case, as of the date of such
certificate of Senior Financial Officer.
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7.3.
Visitation.
The Company and the Parent Guarantor shall permit the representatives of each holder of a Note (other than a Competitor) that is
an Institutional Investor:
(a) No Default if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the
Parent Guarantor and during normal business hours, to visit the principal executive office of the Parent Guarantor, to discuss the affairs,
finances and accounts of the Parent Guarantor and its Subsidiaries with the Parent Guarantor’s officers, and to visit the other offices and
properties of the Company and the Parent Guarantor and each Subsidiary, all at such reasonable times and as often as may be reasonably
requested in writing; and
(b) Default if a Default or Event of Default then exists, at the expense of the Parent Guarantor to visit and inspect any of the
offices or properties of the Parent Guarantor or any Subsidiary, to examine all their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the Parent Guarantor authorizes said accountants to discuss the
affairs, finances and accounts of the Parent Guarantor and its Subsidiaries), all at such times and as often as may be requested.
7.4.
Electronic Delivery.
Financial statements, opinions of independent certified public accountants, other information and Officer’s Certificates that are
required to be delivered by the Parent Guarantor and the Company pursuant to Sections 7.1(a), (b) or (c) and Section 7.2 shall be deemed to
have been delivered if the Company or the Parent Guarantor satisfies any of the following requirements with respect thereto:
(i) such financial statements satisfying the requirements of Section 7.1(a) or (b) and related Officer’s Certificate satisfying the
requirements of Section 7.2 and any other information required under Section 7.1(c) are delivered to each holder of a Note by e-mail at the
e-mail address set forth in such holder’s Schedule B or as communicated from time to time in a separate writing delivered to the Company or
the Parent Guarantor; or
(ii) such financial statements satisfying the requirements of Section 7.1(a) or Section 7.1(b) and related Officer’s Certificate(s)
satisfying the requirements of Section 7.2 and any other information required under Section 7.1(c) are timely posted by or on behalf of the
Company or the Parent Guarantor on IntraLinks or on any other similar website to which each holder of Notes has free access or are made
available on its home page on the internet, which is located at http://www.markit.com as of the date of this Agreement;
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provided however , that in no case shall access to such financial statements, other information and Officer’s Certificates be conditioned upon
any waiver or other agreement or consent (other than confidentiality provisions consistent with Section 21 of this Agreement); and, provided ,
further , that in the case of clause (ii), the Company shall have given each holder of a Note prior written notice, which may be by e-mail or in
accordance with Section 19, of such posting or availability in connection with each delivery, provided further, that upon request of any holder
to receive paper copies of such forms, financial statements, other information and Officer’s Certificates or to receive them by e-mail, the
Company or the Parent Guarantor will promptly e-mail them or deliver such paper copies, as the case may be, to such holder.
7.5.
Limitation on Disclosure Obligation.
Neither the Company nor the Parent Guarantor nor any Subsidiary shall be required to disclose the following information pursuant
to Section 7.1(c), 7.1(f), 7.1(g) or 7.3:
(a) information that the Parent Guarantor, the Company or Subsidiary determines after consultation with counsel qualified to
advise on such matters that, notwithstanding the confidentiality requirements of Section 21, it would be prohibited from disclosing by
applicable law or regulations without making public disclosure thereof; or
(b) information that, notwithstanding the confidentiality requirements of Section 21, the Parent Guarantor, the Company or
Subsidiary is prohibited from disclosing by the terms of an obligation of confidentiality contained in any agreement with any
non-Affiliate binding upon the Parent Guarantor, the Company or Subsidiary and not entered into in contemplation of this clause (b),
provided that the Parent Guarantor, the Company or Subsidiary shall use commercially reasonable efforts to obtain consent from the
party in whose favor the obligation of confidentiality was made to permit the disclosure of the relevant information and provided further
that the Parent Guarantor, the Company or Subsidiary has received advice of counsel (which may be an internal counsel) confirming
that disclosure of such information without consent from such other contractual party would constitute a breach of such agreement.
Promptly after a request therefor from any holder of Notes that is an Institutional Investor, the Parent Guarantor, the Company or Subsidiary
will provide such holder with a written confirmation of the advice of counsel (which may be addressed to the Parent Guarantor, the Company
or Subsidiary and which may be of an internal counsel) relied upon as to any requested information that the Parent Guarantor, the Company or
Subsidiary is prohibited from disclosing to such holder under circumstances described in this Section 7.5.
Under no circumstances shall the Parent Guarantor, the Company or any Subsidiary be required to disclose any information
whatsoever under the terms of this Agreement to any Person that is a Competitor.
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8.
PAYMENT AND PREPAYMENT OF THE NOTES.
8.1.
Maturity.
As provided therein, the entire unpaid principal balance of each series of the Notes shall be due and payable on the stated maturity
date thereof.
8.2.
Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the
Notes, in an amount not less than 5% of the aggregate principal amount of the Notes of all series then outstanding in the case of a partial
prepayment, at 100% of the principal amount so prepaid, and the Make-Whole Amount (if any) determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 10 days and not more than 60 days prior to the date fixed for such prepayment unless the Company and the Required
Holders agree to another time period pursuant to Section 18. Each such notice shall specify such date (which shall be a Business Day), the
aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.4), and the interest to be paid on the prepayment date with respect to such principal amount being
prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount (if any) for each
series due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the
details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.
8.3.
Prepayment for Tax Reasons.
(a) If at any time as a result of a Change in Tax Law (as defined below) the Company is or becomes obligated to make any
Additional Payments (as defined below) in respect of any payment of interest on account of any of the Notes in an aggregate amount for
all affected Notes equal to 5% or more of the aggregate amount of such interest payment on account of all of the affected Notes, the
Company may give the holders of all affected Notes irrevocable written notice (each, a “ Tax Prepayment Notice ”) of the prepayment
of such affected Notes on a specified prepayment date (which shall be a Business Day not less than 30 days nor more than 60 days after
the date of such notice) and the circumstances giving rise to the obligation of the Company to make any Additional Payments and the
amount thereof and stating that all of the affected Notes shall be prepaid on the date of such prepayment at 100% of the principal
amount so prepaid together with interest accrued thereon to the date of such prepayment for each such Note, except in the case of an
affected Note if the holder of such Note shall, by written notice given to the Company no more than 20 days after receipt of the Tax
Prepayment Notice, reject such prepayment of such Note (each, a “ Rejection Notice ”). The
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form of Rejection Notice shall also accompany the Tax Prepayment Notice and shall state with respect to each Note covered thereby
that execution and delivery thereof by the holder of such Note shall operate as a permanent waiver of such holder’s right to receive the
Additional Payments arising as a result of the circumstances described in the Tax Prepayment Notice in respect of all future payments of
interest on such Note (but not of such holder’s right to receive any Additional Payments that arise out of circumstances not described in
the Tax Prepayment Notice or which exceed the amount of the Additional Payment described in the Tax Prepayment Notice), which
waiver shall be binding upon all subsequent transferees of such Note. The Tax Prepayment Notice having been given as aforesaid to
each holder of the affected Notes, the principal amount of such Notes together with interest accrued thereon to the date of such
prepayment shall become due and payable on such prepayment date, except in the case of Notes the holders of which shall timely give a
Rejection Notice as aforesaid.
(b) No prepayment of the Notes pursuant to this Section 8.3 shall affect the obligation of the Company to pay Additional
Payments in respect of any payment made on or prior to the date of such prepayment. For purposes of this Section 8.3, any holder of
more than one affected Note may act separately with respect to each affected Note so held (with the effect that a holder of more than
one affected Note may accept such offer with respect to one or more affected Notes so held and reject such offer with respect to one or
more other affected Notes so held).
(c) The Company may not offer to prepay or prepay Notes pursuant to this Section 8.3 (i) if a Default or Event of Default then
exists, (ii) until the Company shall have taken commercially reasonable steps to mitigate the requirement to make the related Additional
Payments or (iii) if the obligation to make such Additional Payments directly results or resulted from actions taken by the Company or
any Subsidiary (other than actions required to be taken under applicable law), and any Tax Prepayment Notice given pursuant to this
Section 8.3 shall certify to the foregoing and describe such mitigation steps, if any.
(d) For purposes of this Section 8.3: “ Additional Payments ” means additional amounts required to be paid to a holder of any
Note by the Company or the Parent Guarantor pursuant to Section 13 by reason of a Change in Tax Law; and a “ Change in Tax Law ”
means (individually or collectively with one or more prior changes) (i) an amendment to, or change in, any law, treaty, rule or regulation
of the United States of America, the United Kingdom or Bermuda after the date of the Closing, or an amendment to, or change in, an
official interpretation or application of such law, treaty, rule or regulation after the date of the Closing, which amendment or change is
in force and continuing and meets the opinion and certification requirements described below or (ii) in the case of any other jurisdiction
that becomes a Taxing Jurisdiction after the date of the Closing, an amendment to, or change in, any law, treaty, rule or regulation of
such jurisdiction, or an amendment to, or change in, an official interpretation or
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application of such law, treaty, rule or regulation, in any case after such jurisdiction shall have become a Taxing Jurisdiction, which
amendment or change is in force and continuing and meets such opinion and certification requirements. No such amendment or change
shall constitute a Change in Tax Law unless the same would in the opinion of the Company (which shall be evidenced by an Officer’s
Certificate of the Company and supported by a written opinion of counsel (or other tax advisor(s)) having recognized expertise in the
field of taxation in the Taxing Jurisdiction, both of which shall be delivered to all holders of the Notes prior to or concurrently with the
Tax Prepayment Notice in respect of such Change in Tax Law) affect the deduction or require the withholding of any Tax imposed by
such Taxing Jurisdiction on any payment payable on the Notes.
8.4.
Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes (regardless of series) at the time outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
8.5.
Maturity; Surrender, Etc.
In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature
and become due and payable on the date fixed for such prepayment (which shall be a Business Day), together with interest on such principal
amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay
such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such
principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.
8.6.
Purchase of Notes.
Neither the Company nor the Parent Guarantor will and nor will they permit any Affiliate which it directly or indirectly controls to
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment
of the Notes in accordance with this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or the Parent
Guarantor or an Affiliate which either directly or indirectly controls pro rata to the holders of all Notes at the time outstanding upon the same
terms and conditions (except to the extent necessary to reflect differences in the interest rates and maturities of the Notes of different series),
which offer shall remain outstanding for a reasonable period of time (not to be less than 15 days); provided , that any such offer shall provide
each holder with sufficient information to enable it to make an informed decision with respect to such offer. If the holders of more than 50% of
the principal amount of the Notes then outstanding accept
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any such offer made pursuant to the foregoing subpart (b), the Company or the Parent Guarantor shall promptly notify the remaining holders of
such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give
each such remaining holder at least 5 Business Days from its receipt of such notice to accept such offer. A failure by a holder of Notes to
respond to an offer to purchase made pursuant to subpart (b) of this Section 8.6 shall be deemed to constitute a rejection of such offer by such
holder. The Company will promptly cancel all Notes acquired by it or the Parent Guarantor or any Affiliate which either directly or indirectly
controls pursuant to any payment or prepayment of Notes pursuant to this Agreement and no Notes may be issued in substitution or exchange
for any such Notes.
8.7.
Make-Whole Amount.
The term “ Make-Whole Amount ” means, with respect to any Note of any series, an amount equal to the excess, if any, of the
Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may not in any event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
“ Applicable Percentage ” means 0.50% (50 basis points).
“ Called Principal ” means, with respect to any Note of any series, the principal of such Note that is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.
“ Discounted Value ” means, with respect to the Called Principal of any Note of any series, the amount obtained by discounting
all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement
Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.
“Reinvestment Yield” means, with respect to the Called Principal of any Note of any series, the sum of the (x) Applicable
Percentage plus (y) the yield to maturity implied by the ask-side yield(s) reported as of 10:00 a.m. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as “Page PX1” (or such
other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on-the-run U.S.
Treasury securities (“Reported”) having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement
Date. If there are no such U.S. Treasury securities Reported having a maturity equal to such Remaining Average Life, then such implied
yield to maturity will be determined by (a) converting U.S. Treasury bill quotations to bond equivalent yields in accordance with
accepted financial practice and
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(b) interpolating linearly between the ask-side yields Reported for the applicable most recently issued actively traded on-the-run U.S.
Treasury securities with the maturities (1) closest to and greater than such Remaining Average Life and (2) closest to and less than such
Remaining Average Life. The Reinvestment Yield shall be rounded to the number of decimal places as appears in the interest rate of the
applicable Note.
If such yields are not Reported or the yields Reported as of such time are not ascertainable (including by way of interpolation),
then “Reinvestment Yield” means, with respect to the Called Principal of any Note, the sum of (x) the Applicable Percentage plus
(y) the yield to maturity implied by the U.S. Treasury constant maturity yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (or any comparable successor publication) for the U.S. Treasury constant maturity having a term equal to the
Remaining Average Life of such Called Principal as of such Settlement Date. If there is no such U.S. Treasury constant maturity having
a term equal to such Remaining Average Life, such implied yield to maturity will be determined by interpolating linearly between
(1) the U.S. Treasury constant maturity so reported with the term closest to and greater than such Remaining Average Life and (2) the
U.S. Treasury constant maturity so reported with the term closest to and less than such Remaining Average Life. The Reinvestment
Yield shall be rounded to the number of decimal places as appears in the interest rate of the applicable Note.
“Remaining Average Life” means, with respect to any Called Principal, the number of years obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment
with respect to such Called Principal by (b) the number of years, computed on the basis of a 360-day year comprised of twelve 30-day
months and calculated to two decimal places, that will elapse between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note of any series, all payments of such
Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of
such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest
payments are due to be made under the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the
amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Sections 8.2 or 12.1.
“Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context
requires.
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8.8.
Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding, (x) subject to clause (y), any payment of interest on any
Note that is due on a date that is not a Business Day shall be made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding Business Day; and (y) any payment of principal of or Make-Whole
Amount on any Note (including principal due on the maturity date of such Note) that is due on a date that is not a Business Day shall be made
on the next succeeding Business Day and shall include the additional days elapsed in the computation of interest payable on such next
succeeding Business Day.
8.9.
Prepayment in Connection with a Noteholder Sanctions Event.
(a) Upon the Company’s receipt of notice from any Affected Noteholder that a Noteholder Sanctions Event has occurred (which
notice shall refer specifically to this Section 8.9(a) and describe in reasonable detail such Noteholder Sanctions Event), the Company
shall promptly, and in any event within 15 Business Days, make an offer (the “ Sanctions Prepayment Offer ”) to prepay the entire
unpaid principal amount of Notes held by such Affected Noteholder (the “ Affected Notes ”), together with interest thereon to the
prepayment date selected by the Company with respect to each Affected Note but without payment of any Make-Whole Amount with
respect thereto, which prepayment shall be on a Business Day not less than 30 days and not more than 60 days after the date of the
Sanctions Prepayment Offer (the “ Sanctions Prepayment Date ”). Such Sanctions Prepayment Offer shall provide that such Affected
Noteholder notify the Company in writing by a stated date (the “ Sanctions Prepayment Response Date ”), which date is not later than
10 Business Days prior to the stated Sanctions Prepayment Date, of its acceptance or rejection of such prepayment offer. If such
Affected Noteholder does not notify the Company as provided above, then such holder shall be deemed to have accepted such offer.
(b) Subject to the provisions of subparagraphs (c) and (d) of this Section 8.9, the Company shall prepay on the Sanctions
Prepayment Date the entire unpaid principal amount of the Affected Notes held by such Affected Noteholder who has accepted (or been
deemed to have accepted) such prepayment offer (in accordance with subparagraph (a)), together with interest thereon to the Sanctions
Prepayment Date with respect to each such Affected Note, but without payment of any Make-Whole Amount with respect thereto.
(c) If a Noteholder Sanctions Event has occurred but the Company and/or its Controlled Entities have taken such action(s) in
relation to their activities so as to remedy such Noteholder Sanctions Event (with the effect that a
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Noteholder Sanctions Event no longer exists, as reasonably determined by such Affected Noteholder) prior to the Sanctions Prepayment
Date, then the Company shall no longer be obliged to prepay such Affected Notes in relation to such Noteholder Sanctions Event. If the
Company and/or its Controlled Entities shall undertake any actions to remedy any such Noteholder Sanctions Event, the Company shall
keep the holders reasonably and timely informed of such actions and the results thereof.
(d) If any Affected Noteholder that has given written notice to the Company of its acceptance of (or has been deemed to have
accepted) the Company’s prepayment offer in accordance with subparagraph (a) also gives notice to the Company prior to the relevant
Sanctions Prepayment Date that it has determined (in its sole discretion) that it requires clearance from any Governmental Authority in
order to receive a prepayment pursuant to this Section 8.9, the principal amount of each Note held by such Affected Noteholder,
together with interest accrued thereon to the date of prepayment, shall become due and payable on the later to occur of (i) such
Sanctions Prepayment Date and (ii) the date that is 10 Business Days after such Affected Noteholder gives notice to the Company that it
is entitled to receive a prepayment pursuant to this Section 8.9 (which may include payment to an escrow account designated by such
Affected Noteholder to be held in escrow for the benefit of such Affected Noteholder until such Affected Noteholder obtains such
clearance from such Governmental Authority, provided , however , that interest shall not continue to accrue following such payment to
such escrow account), and in any event, any such delay in accordance with the foregoing clause (ii) shall not be deemed to give rise to
any Default or Event of Default.
(e) Promptly, and in any event within 10 Business Days, after the Company’s receipt of notice from any Affected Noteholder that
a Noteholder Sanctions Event shall have occurred with respect to such Affected Noteholder, the Company shall forward a copy of such
notice to each other holder of Notes.
(f) The foregoing provisions of this Section 8.9 shall be in addition to any rights or remedies available to any holder of Notes that
may arise under this Agreement as a result of the occurrence of a Noteholder Sanctions Event; provided , that, if the Notes shall have
been declared due and payable pursuant to Section 12.1 as a result of the events, conditions or actions of the Company or its Controlled
Entities that gave rise to a Noteholder Sanctions Event, the remedies set forth in Section 12 shall control.
8.10. Change of Control Prepayment Offer.
(a) Promptly upon becoming aware that a Change of Control has occurred, and in any event not later than 15 days after becoming
aware of the Change of Control, the Company shall give written notice (the “ Company Notice ”) of such fact to all holders of the
Notes. The Company Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable
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detail, (ii) refer to this Section 8.10 and the rights of the holders hereunder and (iii) contain an offer by the Company to prepay the entire
unpaid principal amount of Notes held by each holder at 100% of the principal amount of such Notes at par (and without any
make-whole, premium, penalty, Make-Whole Amount whatsoever or howsoever described), together with interest accrued thereon to
the prepayment date selected by the Company, which prepayment shall be on a date specified in the Company Notice, which date shall
be a Business Day not more than 60 days after such Company Notice is given should any agreement to the contrary not be reached
among the Company and each of the holders of the Notes.
(b) On the prepayment date specified in the Company Notice, the entire unpaid principal amount of the Notes held by each holder
of Notes which has accepted such prepayment offer, together with interest accrued thereon to the prepayment date (but without any
make-whole, premium, penalty, Make-Whole Amount whatsoever or howsoever described), shall become due and payable.
(c) For purposes of this Section 8.10:
(i) a “ Change of Control ” occurs if any Person or group of Persons acting in concert gains control of the Parent Guarantor;
and
(ii) for the purpose of sub-part (i) above only, “ control ” means the power (whether by way of ownership of shares, proxy,
contract, agency or otherwise) to: (A) cast, or control the casting of, more than one-half of the maximum number of votes that
might be cast at a general meeting of the Parent Guarantor; or (B) appoint or remove all, or the majority, of the directors or other
equivalent officers of the Parent Guarantor; or (C) the holding of more than one-half of the issued share capital of the Parent
Guarantor (directly or indirectly) (excluding any part of that issued share capital that carries no right to participate beyond a
specified amount in a distribution of either profits or capital). Also, for the purpose of sub-part (i) above, “ acting in concert ”
means, a group of Persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate,
through the acquisition by any of them, either directly or indirectly, of shares in the Parent Guarantor to obtain or consolidate
control of the Parent Guarantor.
9.
AFFIRMATIVE COVENANTS.
The Parent Guarantor and, to the extent provided herein, the Company covenants that so long as any of the Notes are outstanding:
9.1.
Compliance with Law.
Without limiting Section 10.9, the Parent Guarantor will, and will cause each of its Subsidiaries to, comply with all laws,
ordinances or governmental rules or regulations to which each of them is subject, (including, without limitation, ERISA, the
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USA Patriot Act and Environmental Laws), and will obtain and maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain
or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
9.2.
Insurance.
The Parent Guarantor will, and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and
in such amounts as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly
situated.
9.3.
Maintenance of Properties.
Subject to Sections 10.2 and 10.3, the Parent Guarantor will, and will cause each of its Subsidiaries to, maintain and keep, or cause
to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that
the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Parent
Guarantor or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Parent Guarantor has concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4.
Payment of Taxes and Claims.
The Parent Guarantor will, and will cause each of its Subsidiaries to, file all income or similar tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental
charges or levies imposed on them or any of their properties, assets, income or franchises, to the extent the same have become due and payable
and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on
properties or assets of the Parent Guarantor or any Subsidiary, provided that neither the Parent Guarantor nor any Subsidiary need pay any such
tax, assessment, charge, levy or claim if (i) the amount, applicability or validity thereof is contested by the Parent Guarantor or such Subsidiary
on a timely basis in good faith and in appropriate proceedings, and the Parent Guarantor or a Subsidiary has established adequate reserves
therefor in accordance with GAAP on the books of the Parent Guarantor or such Subsidiary or (ii) the nonpayment of all such taxes,
assessments, charges, levies and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
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9.5.
Corporate Existence, Etc.
Subject to Section 10.2, each of the Company and the Parent Guarantor will at all times preserve and keep in full force and effect
its corporate (or similar) existence. Subject to Sections 10.2 and 10.3, the Parent Guarantor will at all times preserve and keep in full force and
effect the corporate existence of each of its Subsidiaries (unless merged into the Parent Guarantor or a Subsidiary) and all rights and franchises
of the Parent Guarantor and its Subsidiaries unless, in the good faith judgment of the Parent Guarantor, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse
Effect.
9.6.
Books and Records.
The Parent Guarantor will, and will cause each of its Subsidiaries to, maintain proper books of record and account in conformity
with GAAP and all applicable requirements of any Governmental Authority having legal or regulatory jurisdiction over the Parent Guarantor or
such Subsidiary, as the case may be.
9.7.
Priority of Obligations.
The Parent Guarantor and the Company will ensure that its payment obligations under this Agreement and, with respect to the
Company only, the Notes will at all times rank at least pari passu in right of payment, without preference or priority, with all other of its
unsecured and unsubordinated Financial Indebtedness, except for such Financial Indebtedness as would be preferred by operation of
bankruptcy, insolvency, liquidation or similar laws of general application. The Parent Guarantor will ensure that the payment obligations of
each Subsidiary Guarantor under its respective Subsidiary Guarantee Deed will at all times rank at least pari passu in right of payment with all
other unsecured and unsubordinated Financial Indebtedness of such Subsidiary Guarantor, except for such Financial Indebtedness as would be
preferred by operation of bankruptcy, insolvency, liquidation or similar laws of general application.
9.8.
Subsidiary Guarantors.
(a) The Parent Guarantor may, at its election (but subject to Section 9.8(c)), at any time or from time to time, cause any Subsidiary
which is not then a Subsidiary Guarantor to become a Subsidiary Guarantor if the following conditions are satisfied:
(i) each holder of a Note shall have received an executed Subsidiary Guarantee Deed from such new Subsidiary Guarantor;
(ii) each holder of a Note shall have received an opinion or opinions of counsel in all applicable jurisdictions to the
combined effect that such Subsidiary Guarantee Deed of such new Subsidiary Guarantor has been duly authorized, executed and
delivered by such new Subsidiary
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Guarantor and constitutes a legal, valid and binding obligation enforceable against such new Subsidiary Guarantor in accordance
with its terms, all as subject to any exceptions and assumptions of the type set forth in the opinions referenced in Section 4.4 and
as are reasonable under the circumstances;
(iii) each holder of a Note shall have received a certificate of the Secretary or a Director (or other appropriate officer or
person) of the new Subsidiary Guarantor as to due authorization, charter documents, board resolutions and the incumbency of
officers;
(iv) each holder of a Note shall have received evidence of the appointment of the Company (or any successor to the duties
thereof) as such new Subsidiary Guarantor’s agent to receive, for it and on its behalf service of process in England with respect
thereto; and
(v) each holder of a Note shall have received a certificate of a Responsible Officer of the Company certifying that at such
time and immediately after giving effect to such Subsidiary Guarantee Deed no Default or Event of Default shall have occurred
and be continuing.
(b) Subject to Section 9.8(c), at the election of the Parent Guarantor and by written notice to each holder of a Note, any Subsidiary
Guarantor may be discharged from all of its obligations and liabilities under its Subsidiary Guarantee Deed and shall be automatically
released from its obligations thereunder without the need for the execution or delivery of any other document by the holders or any other
Person, provided , in each case, that (i) after giving effect to such release no Default or Event of Default shall have occurred and be
continuing, (ii) no amount is then due and payable under such Subsidiary Guarantee Deed, and (iii) each holder of a Note shall have
received a certificate of a Responsible Officer to the foregoing effect and setting forth the information (including reasonably detailed
computations) reasonably required to establish compliance with the foregoing requirements, and provided further in each case that the
highest consideration paid or provided (if any) to any creditor under any Principal Bank Facility for the release of such Subsidiary
Guarantor from its obligations under such Principal Bank Facility is paid pro rata to each holder of a Note at substantially the same time
and on equivalent terms.
(c) The Parent Guarantor agrees that so long as any Subsidiary is a borrower or guarantor under or with respect to the Principal
Bank Facility such Subsidiary shall at all such times be a Subsidiary Guarantor.
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10.
NEGATIVE COVENANTS.
The Parent Guarantor and, to the extent provided herein, the Company covenant that so long as any of the Notes are outstanding:
10.1. Transactions with Affiliates.
The Parent Guarantor will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or group of
related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any
service) with any Affiliate (other than the Parent Guarantor or another Subsidiary), except pursuant to the reasonable requirements of the Parent
Guarantor’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Parent Guarantor or such Subsidiary than
would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate. For the avoidance of doubt, any and all purchases
and sales of shares with an employee benefit trust are not prohibited by the terms of this Section 10.1.
10.2. Merger, Consolidation, Etc.
The Parent Guarantor will not, and will not permit the Company or any Subsidiary Guarantor to, consolidate with or merge or
amalgamate with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions
to any Person, other than as permitted under Section 10.3, provided however , that:
(a) the Company or the Parent Guarantor may consolidate or merge with, or sell, lease or otherwise dispose of all or substantially
all of its assets to, any other Person if (i) either (A) the Company or the Parent Guarantor shall be the surviving or continuing Person, or
(B) the surviving, continuing or resulting Person that purchases, leases or otherwise acquires all or substantially all of the assets of the
Company or the Parent Guarantor, as the case may be, (1) is a solvent corporation or limited liability company incorporated under the
laws of any Permitted Jurisdiction and (2) expressly assumes the obligations of the Company or the Parent Guarantor, as the case may
be, hereunder and, in the case of the Company, under the Notes, in a writing which is in form and substance reasonably satisfactory to
the Required Holders, and (ii) at the time of such transaction and after giving effect thereto no Default or Event of Default shall have
occurred and be continuing;
(b) any Subsidiary Guarantor may consolidate or merge with, or sell, lease or otherwise dispose of all or substantially all of its
assets to, any other Person if (i) either (A) the Company, the Parent Guarantor or the Subsidiary Guarantor shall be the surviving or
continuing Person, or (B) the surviving, continuing or resulting Person that purchases, leases or otherwise acquires all or substantially
all of the assets of the Subsidiary Guarantor (1) is a solvent corporation or limited liability company and (2) expressly assumes the
obligations of the Subsidiary Guarantor under the Subsidiary Guarantee Deed to which it is a party, in a writing which is in form and
substance reasonably satisfactory to the Required Holders, and (ii) at the time of such transaction and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing;
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(c) the Company, the Parent Guarantor and any Subsidiary Guarantor may sell, lease or otherwise dispose of their respective assets
in accordance with the provisions of Section 10.3, and
provided, further , that in the event of a merger, consolidation or sale described in subparagraph (i)(B) of Section 10.2(a) or subparagraph (i)(B)
of Section 10.2(b):
(1) the holders of Notes shall have received an opinion of independent counsel to the surviving Person as to (i) the due
organization, valid existence and, if legally applicable, good standing of the surviving Person, (ii) the due authorization, execution and
delivery of any required assumption agreement by the surviving Person and (iii) the valid, binding and enforceable nature of the
obligations of the surviving Person under such assumption agreement subject to reasonable and customary exceptions, assumptions
and/or qualifications under the circumstances; and
(2) the holders of Notes shall have received each then existing Subsidiary Guarantor’s (or the surviving Person’s in a merger or
consolidation involving a Subsidiary Guarantor, if appropriate) unconditional and irrevocable confirmation and reaffirmation as to its
obligations under its respective Subsidiary Guarantee Deed, pursuant to a writing in form and substance reasonably satisfactory to the
Required Holders.
No such conveyance, transfer or lease of substantially all of the assets of the Company, the Parent Guarantor or any Subsidiary Guarantor shall
have the effect of releasing the Company, the Parent Guarantor or such Subsidiary Guarantor or any successor corporation or limited liability
company that shall theretofore have become such in the manner prescribed in this Section 10.2 from its liability under this Agreement, the
Notes or any Subsidiary Guarantee Deed, as applicable.
10.3. Sale of Assets.
The Parent Guarantor will not and will not permit any Subsidiary to, directly or indirectly, sell, lease, transfer or otherwise dispose
of (each, or any combination thereof, being a “ Disposition ”) any of its assets unless, after giving effect to such proposed Disposition, the
aggregate net book value of all assets of the Group that were the subject of Dispositions made during the 365-day period ending on the date of
such proposed Disposition does not exceed 10% of Consolidated Total Assets (to be determined as of the last date of the semiannual fiscal
period then most recently ended), provided that the following Dispositions (or portions thereof) shall not be taken into account for purposes of
this Section 10.3:
(a) Dispositions made in the ordinary course of business;
37
(b) Dispositions of assets from one member of the Group to another member of the Group (including any Person which
immediately following such Disposition becomes a member of the Group);
(c) Dispositions of assets or businesses on arm’s length terms in return for other assets of comparable or greater value or
businesses of a similar nature with comparable or greater value or earnings generation potential;
(d) Dispositions of any surplus, obsolete, redundant or worn-out assets not required for the efficient operations of the business of
the Group;
(e) Dispositions made pursuant to, and in full compliance with, Section 10.2;
(f) Dispositions of assets acquired in an acquisition subsequent to Closing if (i) such assets are outside the principal business areas
to which the assets acquired, taken as a whole, relate, and (ii) such assets are sold or disposed of for cash or any other consideration
which represents the fair market value thereof;
(g) Dispositions of cash for purposes not otherwise prohibited by this Agreement and on arm’s length terms; and
(h) Dispositions for fair value to the extent that the net proceeds of such Dispositions (or an amount equal thereto) are and/or were
used within 365 days before and/or after the date thereof for either or both of (but for the avoidance of doubt recognizing that not all
such proceeds must be so used):
(i) investment in or the purchase, acquisition, development, redevelopment or construction of assets or businesses which are
to be used or useful in the business of the Parent Guarantor or any Subsidiary (or the payment of Financial Indebtedness incurred
in relation to the same, so long as such Financial Indebtedness was incurred within 365 days before and/or after the date of the
Disposition in question); or
(ii) the repayment of outstanding unsubordinated Financial Indebtedness of the Parent Guarantor or any Subsidiary (other
than Financial Indebtedness owing to the Parent Guarantor, any Subsidiary or any Affiliate which the Parent Guarantor directly or
indirectly controls); provided that any such repayment or prepayment of Financial Indebtedness shall at or about the same time
include an offer, which offer shall be on the same terms and conditions as to each holder of a Note and shall remain outstanding
for at least 30 days (and the requirements of this clause (h)(ii) shall be deemed satisfied if such offer is made and, to the extent
accepted, consummated), from the Company or the Parent Guarantor to the holders of all outstanding Notes, to prepay a pro rata
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portion of such Notes, such pro rata portion of the Notes to be calculated by multiplying (A) the aggregate amount of such
proceeds to be so used in such repayment or prepayment of unsubordinated Financial Indebtedness (including the Notes) by (B) a
fraction, the numerator of which is the aggregate principal amount of the Notes outstanding and the denominator of which is the
aggregate principal amount of all unsubordinated Financial Indebtedness of the Group outstanding (including the Notes, but
excluding Financial Indebtedness owing to the Parent Guarantor, any Subsidiary or any Affiliate which the Parent Guarantor
directly or indirectly controls, and in each case calculated immediately prior to such repayment or prepayment); provided further ,
however , that any prepayment of the Notes pursuant to any such offer shall in all cases be at par without any make-whole,
premium, penalty, Make-Whole Amount whatsoever or howsoever described.
10.4. Liens.
The Parent Guarantor will not and will not permit any Subsidiary to create, assume, incur or permit to exist any Lien upon or with
respect to any property, whether now owned or hereafter acquired, unless the Notes shall be substantially concurrently secured equally and
ratably with the obligation or obligations secured by such Lien pursuant to documentation in form and substance reasonably satisfactory to the
Required Holders, provided that nothing in this Section 10.4 shall prohibit:
(a) Liens arising by operation of law and in the ordinary course of trading and Liens for taxes, assessments or other governmental
charges or levies, either not yet due and payable or to the extent that nonpayment thereof is permitted by the proviso to Section 9.4;
(b) Liens created by or resulting from any litigation or legal proceeding which is effectively stayed while the underlying claims are
being contested in good faith by appropriate proceedings and with respect to which the Parent Guarantor has established adequate
reserves on its books in accordance with GAAP;
(c) Liens incidental to the normal conduct of the business of the Parent Guarantor or any Subsidiary (including, but not limited to,
Liens in connection with worker’s compensation, social security, unemployment insurance and other like laws, warehousemen’s and
attorneys’ liens and statutory landlords’ liens, Liens encumbering goods and documents of title with respect to such goods, any rights of
setoff and other Liens arising by operation of law) and Liens to secure the performance of bids, tenders or trade contracts, or to secure
statutory or planning obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of
business, in each such case, not in connection with the borrowing of money;
39
(d) any netting or set-off arrangement entered into by any member of the Group in the ordinary course of its banking arrangements
either (i) for the purpose of netting debt and credit balances; or (ii) as part of that bank’s standard terms and conditions;
(e) Liens existing on the date of the Closing and described in Schedule 5.15, except to the extent the principal amount secured by
that Lien exceeds the amount stated in such Schedule 5.15;
(f) Liens securing Financial Indebtedness of any member of the Group owing to another member of the Group which is not a
Finance Subsidiary;
(g) any Lien on an asset (including any asset of any Person at the time such Person becomes a member of the Group) acquired by a
member of the Group after the date of this Agreement and in existence at the time of such acquisition but only to the extent that the
principal amount secured by that Lien has not been incurred or increased in contemplation of, or since, such acquisition;
(h) any Lien incurred after the Closing given to secure Financial Indebtedness incurred after the Closing in connection with the
acquisition (including an acquisition pursuant to a finance lease arrangement), modification, improvement, development or
redevelopment of any property, asset (or documents of title thereto) or part thereof (the “ New Property ”) which is useful and intended
to be used in carrying on the business of the Company or one or more of its Subsidiaries, including, without limitation, Liens existing on
such New Property at the time of acquisition thereof, whether or not such existing Liens were given to secure the payment of the
purchase price of the New Property to which they attach provided that (i) the Lien shall attach solely to the New Property acquired,
modified, improved, developed or redeveloped, (ii) the portion of such Financial Indebtedness permitted to be secured pursuant to the
provisions of this clause (h) shall not exceed the lesser of the total purchase price and the fair market value of such New Property at the
time of acquisition, modification, improvement, development or redevelopment of such New Property (as determined in good faith by a
Senior Financial Officer), and (iii) such Lien is created or assumed with respect of such New Property at the time of, or within 365 days
of such acquisition, modification, improvement, development or redevelopment;
(i) leases, subleases, minor encumbrances, covenants, easements or reservations, or for rights-of-way, utilities and other similar
purposes or zoning and other restrictions as to the use of real properties, minor survey exceptions and the like, provided that the
aggregate of such Liens do not materially detract from the value of such property;
(j) any title transfer, conditional sale or retention of title arrangement entered into by the Parent Guarantor or any Subsidiary in the
normal course of its
40
trading activities on the counterparty’s standard or usual terms and any Lien created or subsisting in the ordinary course of business (in
connection with the provision of documentary letters of credit) and not in connection with the borrowing of money over documents of
title, insurance policies or sale contracts in relation to commercial goods to secure the purchase price of such goods;
(k) extensions, renewals, refinancings or replacements of any Lien permitted by clauses (e), (g) and (h) above, provided that such
extension, renewal, refinancing or replacement is in respect of the same property and the principal amount of such Financial
Indebtedness outstanding immediately before giving effect to such extension, renewal, refinancing or replacement is not increased; and
(l) Liens not otherwise permitted by clauses (a) through (k) above securing Financial Indebtedness of one or more members of the
Group, provided that after giving effect thereto the sum (without duplication) of (i) the aggregate outstanding principal amount of
Financial Indebtedness secured by all such Liens permitted by this clause (l) plus (ii) the aggregate outstanding principal amount of
Financial Indebtedness permitted by Section 10.5(f) does not exceed 10% of Consolidated Total Assets determined as of the last date of
the semiannual fiscal period then most recently ended, provided further that, notwithstanding the foregoing, the Parent Guarantor will
not, and will not permit any Subsidiary to, grant any Liens securing Financial Indebtedness outstanding under or pursuant to the
Principal Bank Facility pursuant to this Section 10.4(l) unless and until all obligations of the Company and the Parent Guarantor under
this Agreement and, in the case of the Company, the Notes shall concurrently be secured equally and ratably with such Financial
Indebtedness pursuant to documentation in form and substance reasonably satisfactory to the Required Holders.
10.5. Limitation on Subsidiary Financial Indebtedness.
The Parent Guarantor will not permit any Subsidiary (other than the Company and any Subsidiary Guarantor) to create, assume,
incur or guarantee or otherwise be or become liable in respect of any Financial Indebtedness other than:
(a) Financial Indebtedness owed to another member of the Group;
(b) Acquired Subsidiary Financial Indebtedness;
(c) Finance Subsidiary Financial Indebtedness;
(d) Financial Indebtedness of any Subsidiary set forth in Schedule 5.15, and the extension, renewal, or replacement of such
Financial Indebtedness, but only to the extent that the outstanding principal amount of such Financial Indebtedness shall not be
increased;
(e) Financial Indebtedness of a Subsidiary which is secured by any Lien permitted pursuant to the provisions of Section 10.4(g);
and
41
(f) Financial Indebtedness not otherwise permitted by the foregoing clauses (a) through (e) above, provided that after giving effect
thereto the sum (without duplication) of (i) the aggregate principal amount of all unpaid Financial Indebtedness permitted pursuant to
this clause (f) plus (ii) the aggregate unpaid principal amount of all Financial Indebtedness secured by Liens permitted by
Section 10.4(l) does not exceed 10% of Consolidated Total Assets determined as of the last date of the semiannual fiscal period then
most recently ended (and for purposes of this clause (f) any Subsidiary Guarantor which is discharged from its Subsidiary Guarantee
Deed pursuant to Section 9.8(b) shall be deemed to have incurred all of its remaining Financial Indebtedness on the date such Subsidiary
Guarantee Deed is discharged).
10.6. Interest Coverage Ratio.
The Parent Guarantor will not permit the ratio of Consolidated EBITDA to Consolidated Net Finance Charges as at the end of
each Relevant Period to be less than 4.00 to 1.00.
10.7. Consolidated Leverage Ratio.
The Parent Guarantor will not permit the ratio of Consolidated Net Debt to Consolidated EBITDA as measured at the end of each
Relevant Period to be greater than 3.00 to 1.00; provided, however , that the Parent Guarantor shall have the right, in accordance with the
following sentence, to raise this ratio to 3.50 to 1.00 (the “ Elevated Ratio ”) for not more than two (2) consecutive semi-annual periods ending
on the last day of a Relevant Period following a Significant Acquisition (each an “ Elevated Period ”) so long as the Notes are outstanding;
provided further, however, that the Parent Guarantor may not apply the Elevated Ratio to more than a total of three (3) non-consecutive
Elevated Periods. Upon application of the Elevated Ratio, as contemplated by the preceding proviso, the Parent Guarantor must deliver to each
of the holders of the Notes a written notice from a Senior Financial Officer (a) stating that the Parent Guarantor is applying the Elevated Ratio
(and specifying the applicable Elevated Period and the ending date thereof) and (b) confirming that during such Elevated Period each Note then
outstanding, if the ratio of Consolidated Net Debt to Consolidated EBITDA for any semi-annual fiscal period as at the end of any Relevant
Period occurring during an Elevated Period is greater than 3.00 to 1.00, but not more than 3.50 to 1.00 shall, for such semi-annual fiscal period
during that Elevated Period, accrue interest at a rate which is 25 basis points (0.25%) higher than the coupon rate of such Note (the “ Elevated
Interest Rate ”). Additional interest resulting from the application of the Elevated Interest Rate with respect to any Note shall (x) accrue for
any applicable semi-annual period(s) in question (including retroactively, as applicable) and (y) become due and payable to the holder of such
Note on the earlier of (i) the next interest payment date with respect to such Note or (ii) the date such Note shall have become due and payable
as a result of its maturity or acceleration. For the avoidance of doubt, in the event that the Parent Guarantor elects to apply the Elevated Ratio,
then as at the end of the Relevant Period immediately succeeding the end of the Elevated Period during which such Elevated Ratio was applied,
the Parent Guarantor will not permit the ratio of Consolidated Net Debt to Consolidated EBITDA to be greater than 3.00 to 1.00 as aforesaid.
42
10.8. Line of Business.
The Parent Guarantor will not and will not permit any Subsidiary to engage in any business if, as a result, the general nature of the
business in which the Parent Guarantor and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the
general nature of the business in which the Parent Guarantor and its Subsidiaries, taken as a whole, are engaged on the date of this Agreement
as described in the Disclosure Documents (including any other businesses and activities reasonably related thereto).
10.9. Economic Sanctions, Etc.
The Parent Guarantor will not and will not permit any Controlled Entity to (a) become (including by virtue of being owned or
controlled by a Blocked Person), own or control a Blocked Person or (b) directly or indirectly have any investment in or engage in any dealing
or transaction (including any investment, dealing or transaction involving the proceeds of the Notes) with any Person if such investment,
dealing or transaction would be in violation of, or could result in the imposition of sanctions under, any U.S. Economic Sanctions Laws
applicable to the Parent Guarantor or such Controlled Entity, except, in the case of this clause (b), to the extent that such violation or sanctions,
if imposed, could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
11.
EVENTS OF DEFAULT.
An “ Event of Default ” shall exist if any of the following conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; provided that such failure shall
not be an Event of Default if it occurs solely from any technical or administrative difficulties relating solely to the transfer of such
amount and such failure is remedied within five (5) Business Days after the due date for payment; or
(b) the Company defaults in the payment of any interest on any Note or any amount payable pursuant to Section 13 for more than
five (5) Business Days after the same becomes due and payable; or
(c) the Company or the Parent Guarantor defaults in the performance of or compliance with any term contained in Sections
7.1(d),10.6 or 10.7; or
43
(d) the Company or the Parent Guarantor, as applicable defaults in the performance of or compliance with any term contained
herein (other than those referred to in Sections 11(a), (b) and (c)) and such default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the Company or the Parent Guarantor receiving written notice
of such default from any holder of a Note (any such written notice to be identified as a “notice of default” and to refer specifically to this
Section 11(d)); or
(e) any representation or warranty made in writing by or on behalf of the Company or the Parent Guarantor, a Subsidiary
Guarantor or by any officer thereof in this Agreement, a Subsidiary Guarantee Deed or in any writing furnished in connection with the
transactions contemplated hereby or thereby proves to have been false or incorrect in any material respect on the date as of which made;
or
(f) (i) the Company, the Parent Guarantor or any Subsidiary is in default (as principal or as guarantor or other surety) in the
payment of any principal of or premium or make-whole amount or interest on any Financial Indebtedness that is outstanding in an
aggregate principal amount of at least U.S.$25,000,000 (or its equivalent in the relevant currency of payment) beyond any period of
grace provided with respect thereto, or (ii) the Company, the Parent Guarantor or any Subsidiary is in default in the performance of or
compliance with any term of any evidence of any Financial Indebtedness in an aggregate outstanding principal amount of at least
U.S.$25,000,000 (or its equivalent in the relevant currency of payment) or of any mortgage, indenture or other agreement relating
thereto or any other condition exists (and in all cases other than as a result of (A) any condition which is in the nature of a Change of
Control (in which event the terms and provisions of Section 8.10 shall govern) or (B) the acquisition by a member of the Group of a
Subsidiary, which acquisition resulted in a default under any Financial Indebtedness of such Subsidiary due to the fact that the
Subsidiary was acquired by such member of the Group, but only so long as such default is cured or otherwise no longer outstanding on
the 30th day following the acquisition of such Subsidiary), and as a consequence of such default or condition such Financial
Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Financial Indebtedness to be), due
and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than (A) the passage of time or the right of the holder of Financial Indebtedness to convert
such Financial Indebtedness into equity interests, (B) as a result of any condition which is in the nature of a Change of Control (in which
event the terms and provisions of Section 8.10 shall govern) or (C) as a result of the acquisition by a member of the Group of a
Subsidiary, which acquisition resulted in a default under any Financial Indebtedness of such Subsidiary due to the fact that the
Subsidiary was acquired by such member of the Group, but only so long as such default is cured or otherwise no longer
44
outstanding on the 30th day following the acquisition of such Subsidiary), (x) the Company, the Parent Guarantor or any Subsidiary has
become obligated to purchase or repay Financial Indebtedness before its regular maturity or before its regularly scheduled dates of
payment in an aggregate outstanding principal amount of at least U.S.$25,000,000 (or its equivalent in the relevant currency of
payment), or (y) one or more Persons have the right to require the Company, the Parent Guarantor or any Subsidiary so to purchase or
repay such Financial Indebtedness; or
(g) the Company, the Parent Guarantor or any Material Subsidiary (i) is generally not paying, or admits in writing its inability to
pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction (in each case other than in connection with a solvent liquidation of a
Material Subsidiary), (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property (other than in
connection with a solvent liquidation of a Material Subsidiary), (v) is adjudicated as insolvent or to be liquidated (other than in
connection with a solvent liquidation of a Material Subsidiary), or (vi) takes corporate action for the purpose of any of the foregoing
(other than in connection with a solvent liquidation of a Material Subsidiary); or
(h) a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by the Company, the
Parent Guarantor or any of its Material Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, the Parent Guarantor or any of its Material
Subsidiaries, or any such petition shall be filed against the Company, the Parent Guarantor or any of its Material Subsidiaries and such
petition shall not be dismissed within 60 days; or
(i) any event occurs with respect to the Company, the Parent Guarantor or any Material Subsidiary which under the laws of any
jurisdiction is analogous to any of the events described in Section 11(g) or (h), provided that the applicable grace period, if any, which
shall apply shall be the one applicable to the relevant proceeding which most closely corresponds to the proceeding described in
Section 11(g) or (h); or
(j) (i) any default shall occur under any Subsidiary Guarantee Deed or any Subsidiary Guarantee Deed shall cease to be in full
force and effect for any
45
reason whatsoever (except as otherwise permitted hereunder and under such Subsidiary Guarantee Deed), including, without limitation,
a determination by any Governmental Authority that such Subsidiary Guarantee Deed is invalid, void or unenforceable or (ii) any
Subsidiary Guarantor shall contest or deny in writing the validity or enforceability of any of its obligations under its Subsidiary
Guarantee Deed; or
(k) a final judgment or judgments for the payment of money aggregating in excess of U.S.$25,000,000 (or its equivalent in the
relevant currency of payment) are rendered against one or more of the Company, the Parent Guarantor and its Subsidiaries and which
judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days
after the expiration of such stay; or
(l) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the
Parent Guarantor or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the sum of (x) the aggregate
“amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, plus (y) the amount (if any) by which the aggregate present value of accrued benefit liabilities
under all funded Non-U.S. Plans exceeds the aggregate current value of the assets of such Non-U.S. Plans allocable to such liabilities,
shall exceed an amount that could reasonably be expected to have a Material Adverse Effect, (iv) the Parent Guarantor or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, (v) the Parent Guarantor or any ERISA Affiliate withdraws from any
Multiemployer Plan, (vi) the Parent Guarantor or any Subsidiary establishes or amends any employee welfare benefit plan that provides
post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder, (vii) the
Parent Guarantor or any Subsidiary fails to administer or maintain a Non-U.S. Plan in compliance with the requirements of any and all
applicable laws, statutes, rules, regulations or court orders or any Non-U.S. Plan is involuntarily terminated or wound up or (viii) the
Parent Guarantor or any Subsidiary becomes subject to the imposition of a financial penalty (which for this purpose shall mean any tax,
penalty or other liability, whether by way of indemnity or otherwise) with respect to one or more Non-U.S. Plans; and any such event or
events described in clauses (i) through (viii) above, either individually or together with any other such event or events, could reasonably
be expected to have a Material Adverse Effect.
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As used in Section 11(l), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned
to such terms in section 3 of ERISA.
12.
REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Company, the Parent Guarantor or any Subsidiary Guarantor described in
Section 11(g), (h) or (i) (other than an Event of Default described in clause (i) of Section 11(g) or described in clause (vi) of
Section 11(g) by virtue of the fact that such clause encompasses clause (i) of Section 11(g)) has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at their option, by notice or
notices to the Company, declare all the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in Section 11(a) or (b) has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare
all the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon (including interest
accrued thereon in respect of any series of the Notes at the Default Rate for such series, if applicable) and (y) the Make-Whole Amount
determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in
each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and
the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the
Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right
under such circumstances.
12.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have
been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and
enforce the rights of such holder by an action at law, suit in equity
47
or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note or in any Subsidiary
Guarantee Deed, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
12.3. Rescission.
At any time after any Notes have been declared due and payable pursuant to Section 12.1(b) or (c), the Required Holders, by
written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue
interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by
reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default Rate for the applicable series, (b) neither the Company nor any other
Person shall have paid any amounts that have become due solely by reason of such declaration, (c) all Events of Default and Defaults, other
than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to
Section 18, and (d) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission
and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent
thereon.
12.4. No Waivers or Election of Remedies, Expenses, Etc.
No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as
a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or remedy conferred by this Agreement, any
Subsidiary Guarantee Deed or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under
Section 16, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys’
fees, expenses and disbursements.
13.
TAX INDEMNIFICATION.
13.1. Gross-up.
All payments whatsoever under this Agreement and the Notes will be made by the Company or the Parent Guarantor in lawful
currency of the United States of America free and clear of, and without liability for withholding or deduction for or on account of, any present
or future Taxes of whatever nature imposed or levied on such payments made to any holder of a Note by or on behalf of any jurisdiction (other
than the jurisdiction in which such holder is resident for tax purposes) (a) in which the Company
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or the Parent Guarantor is incorporated, organized, managed or controlled or otherwise resides for tax purposes or (b) where a branch or office
through which the Company or the Parent Guarantor is acting for purposes of this Agreement is located or from or through which the Company
or the Parent Guarantor is making any payment (or any political subdivision or taxing authority of or in such jurisdiction) (hereinafter a “
Taxing Jurisdiction ”), unless the withholding or deduction of such Tax is required by law or by the interpretation or administration of law.
If any deduction or withholding for any Tax of a Taxing Jurisdiction shall at any time be required in respect of any amounts to be
paid by the Company or the Parent Guarantor under this Agreement or the Notes, the Company or the Parent Guarantor will pay to the relevant
Taxing Jurisdiction the full amount required to be withheld, deducted or otherwise paid before penalties attach thereto or interest accrues
thereon and pay to each holder of a Note such additional amounts as may be necessary in order that the net amounts paid to such holder
pursuant to the terms of this Agreement or the Notes after such deduction, withholding or payment (including, without limitation, any required
deduction or withholding of Tax on or with respect to such additional amount), shall be not less than the amounts then due and payable to such
holder under the terms of this Agreement or the Notes before the assessment of such Tax, provided that no payment of any additional amounts
shall be required to be made:
(a) for or on account of any Tax that would not have been imposed but for the existence of any present or former connection
between such holder (or a fiduciary, settlor, beneficiary, member of, shareholder of, or possessor of a power over, such holder, if such
holder is an estate, trust, partnership or corporation or any Person other than the holder to whom the Notes or any amount payable
thereon is attributable for the purposes of such Tax) and the Taxing Jurisdiction, other than the mere holding of the relevant Note or the
receipt of payments thereunder or in respect thereof, including, without limitation, such holder (or such other Person described in the
above parenthetical) being or having been a citizen or resident thereof, or being or having been present or engaged in trade or business
therein or having or having had an establishment, office, fixed base or branch therein, provided that this exclusion shall not apply with
respect to a Tax that would not have been imposed but for the Company or the Parent Guarantor, as applicable, after the date hereof,
opening an office in, moving an office to, reincorporating in, or changing the Taxing Jurisdiction from or through which payments on
account of this Agreement or the Notes are made to, the Taxing Jurisdiction imposing the relevant Tax;
(b) for or on account of any Tax that would not have been imposed but for the delay or failure by such holder (following a written
request by the Company, the Parent Guarantor or its legal counsel) in the filing with the relevant Taxing Jurisdiction of Forms (as
defined below) that are required to be filed by such holder to avoid or reduce such Taxes (including for such purpose any extensions,
refilings or renewals of filings that may from time to time be required by the relevant Taxing Jurisdiction) and/or in the delay or failure
by such holder
49
to take such other reasonably requested actions by the Company, the Parent Guarantor or their legal counsel in order to mitigate the
amount of any such Tax, provided that the filing of such Forms and/or the taking of such other actions would not (in such holder’s
reasonable judgment) impose any unreasonable burden (in time, resources or otherwise) on such holder or result in any confidential or
proprietary income tax return information being revealed, either directly or indirectly, to any Person and such delay or failure could
have been lawfully avoided by such holder, provided further , that the submission of the HMRC Documents (as defined below) shall not
constitute the imposition of any such unreasonable burden or constitute the disclosure of any confidential or proprietary income tax
return information for the purpose hereof, and provided further , that such holder shall be deemed to have satisfied the requirements of
this clause (b) upon the good faith completion and submission of such Forms (including extensions, refilings or renewals of filings), or
taking of such actions, as may be specified in a written request of the Company or its legal counsel no later than 60 days after receipt by
such holder of such written request (accompanied by copies of such Forms and related instructions, if any, all in the English language or
with an English translation thereof) provided , however , that in the case of a written request from the Company or its legal counsel that
an application be made for an extension or renewal of a direction from Her Majesty’s Revenue & Customs (“ HMRC ”) made pursuant
to an HMRC Form US-Company 2002, HMRC Form Japan 3-DT or similar Form, such holder shall be deemed to have satisfied the
requirements of this clause (b) upon the good faith submission of such application to HMRC not less than six (6) months prior to the
date on which such direction is to expire (subject to the Company’s compliance with the requirement below to provide at least 9 months
but no more than 12 months prior written notice) provided further that such holder shall be deemed to have satisfied the requirements of
this clause (b) upon providing the Company with such holder’s valid HMRC DT Treaty Passport Scheme reference number and Taxing
Jurisdiction in Schedule B of this Agreement;
(c) for or on account of any estate, inheritance, gift, sale, excise, transfer, personal property or similar tax assessment or other
governmental charge;
(d) to any holder of a Note that is registered in the name of a nominee if under the law of the relevant Taxing Jurisdiction (or the
current regulatory interpretation of such law) securities held in the name of a nominee do not qualify for an exemption from the relevant
Tax and the Company shall have given timely notice of such law or interpretation to such holder;
(e) for any Tax imposed under FATCA;
(f) with regard to any holder of a Note to which Section 13.3 applies, for or on account of any Tax that would not have been
imposed but for the breach of the holder of any of the Terms and Conditions;
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(g) in the case where the holder of a Note resident in Japan is no longer able to give the representation in Section 6.3(a), for or on
account of any tax that is imposed or withheld in respect of a payment to the holder of a Note at the rates applicable under the UK/Japan
Treaty (or any rates applicable under any subsequent UK/Japan double tax treaty); or
(h) any combination of clauses (a), (b), (c), (d), (e), (f) and (g) above.
and provided further that :
(x) in no event shall the Company be obligated to pay such additional amounts to any holder of a Note not resident in the United
States of America or Japan in excess of the amounts that the Company would be obligated to pay if such holder had been a resident of
the United States of America or Japan for the purposes of, and fully eligible for the benefits of, any double taxation treaty from time to
time in effect between the United States of America or Japan and the relevant Taxing Jurisdiction, and all necessary formalities had
been completed and all conditions in the treaty had been satisfied for full exemption from Tax imposed on any payment made under this
Agreement by the relevant Taxing Jurisdiction at the time of payment of any amounts under this Agreement;
(y) except in the case where Section 13.3 applies, and notwithstanding any other provisions of this Section 13, in no event shall the
Company be obligated to pay any such additional amounts whatsoever to any holder of a Note resident in the United States of America
or Japan who has failed to (i) (A) file a validly completed and executed HMRC Form US/Company 2002 or HMRC Form Japan 3-DT
and/or other relevant claim form(s) and documentation (collectively, the “ HMRC Documents ” and “ HMRC Document ” shall be
construed accordingly) with the United States Internal Revenue Service and (B) provide full copies thereof (together with evidence of
receipt by the United States Internal Revenue Service) to the Designated Tax Officer, all not less than 120 days prior to the relevant
interest payment date or (ii) (A) file or refile any HMRC Document and any other accompanying document required to be filed with
such HMRC Document with HMRC in order to extend or renew any direction given pursuant to a previously filed HMRC Document
and (B) provide full copies thereof to the Designated Tax Officer, all not less than 120 days prior to the relevant interest payment date;
and
(z) in no event shall the Company be obligated to pay such additional amounts whatsoever to any holder of a Note resident in the
United States of America or Japan and who is not entitled pursuant to the double taxation treaty currently in effect between the United
States of America or Japan and the relevant Taxing Jurisdiction to a full exemption from Tax imposed on any payment made under this
Agreement by the relevant Taxing Jurisdiction and would not be so entitled even if all necessary procedural formalities were completed
and all conditions in the relevant treaty were satisfied for such exemption from such Tax at the time any payment was made or due to be
made under this Agreement.
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13.2. Treaty Clearance.
On or before the date hereof, the Company or its legal counsel will furnish each Purchaser which provides a United States Tax
Identification Number or Japanese Tax Identification Number in Schedule B or its legal counsel with copies of the HMRC Documents (other
than any documents that may be created by the Purchaser and are required to be filed with any HMRC Document) required to be filed pursuant
to Section 13.1(b) above, and in connection with the transfer of any Note the Company or its legal counsel will, within 30 days of the
registration of such transfer, furnish the transferee of such Note with copies of any such HMRC Documents or other Forms (other than any
documents that may be created by the transferee and are required to be filed with any HMRC Document or other Form) then required (such
furnishing of such HMRC Documents or other Forms shall be deemed to be the written request of the Company or its legal counsel required by
Section 13.1(b) so that no further request must be made, and which written request shall be deemed to have been given on the date that such
HMRC Documents or other Forms are furnished to the Purchaser or the transferee of any Note (as the case may be) but no earlier than the date
hereof).
The Company or its legal counsel shall provide to each holder of a Note written notice of the date of expiry of any direction given
pursuant to an HMRC Document at least nine (9) months but no more than twelve (12) months prior to such expiry and, at the time of such
notice, any HMRC Documents then required in respect of any extension, refiling or renewal. The giving of such notice and the provision of any
such HMRC Documents shall be deemed to be the written request of the Company or its legal counsel to make an application for an extension
or renewal of a direction from HMRC made pursuant to an HMRC Document for the purposes of any paragraph of this Section 13 so that no
further request need be made, and such written request shall be deemed to have been given on the date that such notice is received by the holder
of a Note.
Subject to the limitations of Section 13.1(b) and (y) above, by acceptance of any Note, the holder of such Note agrees, that it will
from time to time with reasonable promptness (i) duly complete and deliver to or as reasonably directed by the Company all such forms,
certificates, documents and returns provided to such holder or its legal counsel by the Company or its legal counsel (collectively, together with
instructions for completing the same, “ Forms ”) required to be filed by or on behalf of such holder in order to avoid or reduce any such Tax
pursuant to the provisions of an applicable statute, regulation or administrative practice of the relevant Taxing Jurisdiction or of a tax treaty
between the jurisdiction of the holder of such Note and such Taxing Jurisdiction and (ii) provide the Company with such information with
respect to such holder as the Company may reasonably request in order to complete any such Forms, provided that nothing in this Section 13
shall require any holder to provide information with respect to any such Form or otherwise if in the good faith opinion of such holder such
Form or disclosure of
52
information would involve the disclosure of tax return or other information that is confidential or proprietary to such holder, and provided
further that each such holder shall be deemed to have complied with its obligation under this paragraph with respect to any Form if such Form
shall have been duly completed and delivered by such holder to the Company or mailed to the appropriate taxing authority (which in the case of
a HMRC Form US/Company 2002 or any similar form shall be deemed to occur when such form is submitted to the IRS in accordance with
instructions contained in such form), whichever is applicable, within 60 days following a written request of the Company (which request shall
be accompanied by copies of such Form and English translations of any such Form not in the English language) and, in the case of a transfer of
any Note, at least 90 days prior to the relevant interest payment date; provided that (i) where such Form has been mailed to the appropriate
taxing authority, each such holder shall have provided a copy of such submitted Form to the Company, and a copy of the acknowledgment of
receipt of the Form from the appropriate taxing authority if available or possible to request such acknowledgment of receipt from the
appropriate taxing authority and (ii) each such holder shall have responded to any query relating to such Form from the appropriate taxing
authority within the longer of (1) the applicable time limits (if any such limits exist) and (2) 30 days of receipt of such query by the holder.
13.3. Passport Scheme.
Any Purchaser or other holder of a Note who holds a passport under the HMRC DT Treaty Passport Scheme, and which wishes
the scheme to apply to this Agreement, shall irrevocably include an indication to that effect by including its scheme reference number and its
jurisdiction of tax residence in Schedule B (or, in the case of any transferee of a Note, in the information provided to the Company pursuant to
Section 14.2(a)).
Where a holder of a Note has included its HMRC DT Treaty Passport Scheme reference number and its jurisdiction of tax
residence in Schedule B or in the information provided to the Company pursuant to Section 14.2(a), the Company shall file a duly completed
form DTTP2 in respect of such holder with HMRC no later than 30 days prior to the first interest payment date under the Notes (or, in the case
of any transferee of a Note, within 30 days of completion of the transfer thereof) and shall provide such holder with a copy of that filing.
It shall thereafter be the sole responsibility of the holder of any Note to comply with the Terms and Conditions (other than the
Terms and Conditions for which the Company is responsible), including, without limitation, renewing its passport from time to time and
notifying HMRC of any material change to its form or circumstances.
13.4. Tax Credits, Etc.
If any payment is made by the Company to or for the account of the holder of any Note after deduction for or on account of any
Taxes, and increased payments are made by the Company pursuant to this Section 13, then, if such holder in its discretion (acting reasonably)
determines that it has received, utilized (in the case of a credit or
53
allowance) or been granted a refund of, or credit or allowance with respect to, such Taxes, such holder shall, to the extent that it can do so
without prejudice to the retention of the amount of such refund, credit or allowance, reimburse to the Company the amount of such refund,
credit or allowance as such holder shall, in its discretion (acting reasonably), determine to be attributable to the relevant Taxes or deduction or
withholding. Nothing herein contained shall interfere with the right of the holder of any Note to arrange its tax affairs in whatever manner it
thinks fit and, in particular, no holder of any Note shall be under any obligation to claim relief from its corporate profits or similar tax liability
in respect of such Tax in priority to any other claims, reliefs, credits or deductions available to it or (other than as set forth in Section 13.1(b)
above) oblige any holder of any Note to disclose any information relating to its tax affairs or any computations in respect thereof.
The Company will furnish the holders of Notes, promptly and in any event within 60 days after the date of any payment by the
Company of any Tax in respect of any amounts paid under this Agreement or the Notes, the original tax receipt (or a certificate of Tax
deducted) issued by the relevant taxation or other authorities involved for all amounts paid as aforesaid (or if such original tax receipt (or a
certificate of Tax deducted) is not available or must legally be kept in the possession of the Company, a duly certified copy of the original tax
receipt or any other reasonably satisfactory evidence of payment), together with such other documentary evidence with respect to such
payments as may be reasonably requested from time to time by any holder of a Note.
If the Company is required by any applicable law, as modified by the practice of the taxation or other authority of any relevant
Taxing Jurisdiction, to make any deduction or withholding of any Tax in respect of which the Company would be required to pay any
additional amount under this Section 13, but for any reason (other than the delay or default of the relevant holder of a Note in the making of
any filing of a Form (assuming the holder has not satisfied the requirements of Section 13.3) described above or otherwise) does not make such
deduction or withholding with the result that a liability in respect of such Tax is assessed directly against the holder of any Note, and such
holder pays such liability, then the Company will promptly reimburse such holder for such payment (including any related interest or penalties
to the extent such interest or penalties arise by virtue of a default or delay by the Company) upon demand by such holder accompanied by an
official receipt (or a duly certified copy thereof) issued by the taxation or other authority of the relevant Taxing Jurisdiction.
If the Company makes payment to or for the account of any holder of a Note after deduction for or on account of any Taxes, and
such holder is entitled to a refund of or credit or allowance with respect to the Tax to which such payment is attributable upon the making of a
filing (other than a Form described above except where any such Form may also be used to request any such refund, credit or allowance for
such Tax), then such holder shall, as soon as practicable after receiving written request from the Company (which shall specify in reasonable
detail and supply the refund, credit and/or allowance forms to be filed) use reasonable efforts to complete and deliver such refund, credit and/or
allowance forms to or as directed by the Company, subject, however, to the same limitations with respect to Forms as are set forth above.
54
The obligations of the Company under this Section 13 shall survive the payment or transfer of any Note and the provisions of this
Section 13 shall also apply to successive transferees of the Notes.
13.5. FATCA Information.
By acceptance of any Note, the holder of such Note agrees that such holder will from time to time with reasonable promptness
duly complete and deliver to or as reasonably directed by the Company or the Parent Guarantor or its agent from time to time (i) in the case of
any such holder that is a U.S. Person, such holder’s United States tax identification number or other Forms reasonably requested by the
Company or the Parent Guarantor necessary to establish such holder’s status as a U.S. Person under FATCA and as may otherwise be
necessary for the Company or the Parent Guarantor to comply with its obligations under FATCA and (ii) in the case of any such holder that is
not a U.S. Person, such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation as may be necessary for the Company or the Parent Guarantor to comply with its obligations under FATCA and to
determine that such holder has complied with such holder’s obligations under FATCA or to determine the amount (if any) to deduct and
withhold from any such payment made to such holder. Nothing in this Section 13.5 shall require any holder of Notes to provide information
that is confidential or proprietary to such holder unless such information is prescribed by applicable law for the Company or the Parent
Guarantor to comply with its obligations under FATCA and, in such event, the Company and the Parent Guarantor shall treat such information
as confidential.
14.
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. Registration of Notes.
The Company shall keep at its registered office or principal place of business a register for the registration of the Notes and
registration of transfers of the Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and
address of each transferee of one or more Notes shall be registered in such register. If any holder of one or more Notes is a nominee, then
(a) the name and address of the beneficial owner of such Note or Notes shall also be registered in such register as an owner and holder thereof
and (b) at any such beneficial owner’s option, either such beneficial owner or its nominee may execute any amendment, waiver or consent
pursuant to this Agreement. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge
to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and
correct copy of the names and addresses of all registered holders of Notes.
55
14.2. Transfer and Exchange of Notes; No Transfer to Competitors.
(a) Upon surrender of any Note to the Company at the address and to the attention of the designated officer (all as specified in
Section 19) for registration of transfer or exchange (and in the case of a surrender for registration of transfer accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or such holder’s attorney duly authorized in writing and
accompanied by the relevant name of the beneficial owner, nominee name (if any) for registration of notes, address and other details for
notices of each transferee of such Note or part thereof) within ten Business Days thereafter the Company shall execute and deliver, at
the Company’s expense (except as provided below), one or more new Notes of the same series (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note
shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1(a)(i), Exhibit 1(a)(ii) or
Exhibit 1(a)(iii), as applicable. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid
on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require
payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than U.S.$500,000, provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a denomination of less than U.S.$500,000. Any transferee, by its acceptance of
a Note registered in its name (or the name of its nominee), shall be deemed to have made the representations set forth in Section 6.
(b) Without limiting the foregoing, each Purchaser and each subsequent holder of any Note severally agrees that it will not,
directly or indirectly, resell any Notes purchased by it to a Person which is a Competitor (it being understood that such Purchaser shall
advise any broker or intermediary acting on its behalf that such resale to a Competitor is limited hereby). The Company shall not be
required to recognize any sale or other transfer of a Note to a Competitor and no such transfer shall confer any rights hereunder upon
such transferee.
14.3. Replacement of Notes.
Upon receipt by the Company at the address and to the attention of the designated officer (all as specified in Section 19(iii)) of
evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in
the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation),
and
(a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it ( provided that if the holder of such Note is, or
is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at
56
least U.S.$100,000,000 (or its equivalent in any other currency) or a Qualified Institutional Buyer, such Person’s own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation thereof,
within ten Business Days thereafter the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same series,
dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the
date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
15.
PAYMENTS ON NOTES.
15.1. Place of Payment.
Subject to Section 15.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in London, England at the principal office of JPMorgan Chase Bank N.A. in such jurisdiction. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office
of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.
15.2. Home Office Payment.
So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 15.1
or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, interest
and all other amounts becoming due hereunder by the method and at the address specified for such purpose below such Purchaser’s name in
Schedule B, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after payment, prepayment in full or purchase of any Note, such
Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company pursuant to Section 15.1. Prior to any sale or other disposition of
any Note held by a Purchaser or its nominee, such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon
and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant
to Section 14.2. The Company will afford the benefits of this Section 15.2 to any Institutional Investor that is the direct or indirect transferee of
any Note purchased by a Purchaser under this Agreement and that has made the same agreement relating to such Note as the Purchasers have
made in this Section 15.2.
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16.
EXPENSES, ETC.
16.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including
reasonable attorneys’ fees of one special counsel for all of the holders of the Notes and, if reasonably required by the Required Holders, local or
other counsel for all of the holders of the Notes) incurred by the Purchasers and each other holder of a Note in connection with such
transactions, in connection with any Subsidiary Guarantee Deed and in connection with any amendments, waivers or consents under or in
respect of this Agreement, the Notes or any Subsidiary Guarantee Deed (whether or not such amendment, waiver or consent becomes
effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement, the Notes or any Subsidiary Guarantee Deed or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this Agreement, the Notes or any Subsidiary Guarantee Deed, or by
reason of being a holder of any Note, (b) the costs and expenses, including one financial advisor’s fees for all of the holders of the Notes,
incurred in connection with the insolvency or bankruptcy of the Company, the Parent Guarantor or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the Notes or any Subsidiary Guarantee Deed and (c) the costs and
expenses incurred in connection with the initial filing of this Agreement and all related documents and financial information with the SVO,
provided that such costs and expenses under this clause (c) shall not exceed U.S.$3,000 for each series of Notes. The Company will pay, and
will hold each Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses, if any, of brokers
and finders (other than those, if any, retained by a Purchaser or other holder in connection with its purchase of the Notes).
16.2. Certain Taxes.
The Company agrees to pay all stamp, documentary or similar taxes or fees which may be payable in respect of the execution and
delivery or the enforcement of this Agreement or any Subsidiary Guarantee Deed or the execution and delivery (but not the transfer) or the
enforcement of any of the Notes in the United States of America or the United Kingdom or of any amendment of, or waiver or consent under or
with respect to, this Agreement or of any of the Notes or any Subsidiary Guarantee Deed, and to pay any value added tax due and payable in
respect of reimbursement of costs and expenses by the Company pursuant to this Section 16, and will hold each holder of a Note to the extent
permitted by applicable law harmless against any loss or liability resulting from nonpayment or delay in payment of any such tax or fee
required to be paid by the Company hereunder.
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16.3. Survival.
The obligations of the Company under this Section 16 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.
17.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon
by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a
Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company or the Parent Guarantor pursuant
to this Agreement shall be deemed representations and warranties of the Company or the Parent Guarantor, as the case maybe, under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and the Parent Guarantor and supersede all prior agreements and understandings relating to the subject matter
hereof.
18.
AMENDMENT AND WAIVER.
18.1. Requirements.
This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the Company, the Parent Guarantor and the Required Holders,
except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 22, or any defined term (as it is used therein), will
be effective as to any Purchaser unless consented to by such Purchaser in writing, and (b) no such amendment or waiver may, without the
written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount
of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend Section 8 (except as set forth in the
second sentence of Section 8.2), 11(a), 11(b), 12, 13, 18, 21 or 24.8.
18.2. Solicitation of Holders of Notes.
(a) Solicitation . The Company or the Parent Guarantor will provide each holder of the Notes (irrespective of the amount of Notes
then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to
make an informed and considered decision with
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respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes or any Subsidiary
Guarantee Deed. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant
to the provisions of this Section 18 to each holder of outstanding Notes promptly following the date on which it is executed and
delivered by, or receives the consent or approval of, the requisite holders of Notes.
(b) Payment . Neither the Company nor the Parent Guarantor will directly or indirectly pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, or grant any security or provide other credit support, to any
holder of a Note as consideration for or as an inducement to the entering into by any holder of a Note of any waiver or amendment of
any of the terms and provisions hereof or of the Notes or any Subsidiary Guarantee Deed unless such remuneration is concurrently paid,
or security is concurrently granted or other credit support concurrently provided, on the same terms, ratably to each holder of a Note
then outstanding even if such holder did not consent to such waiver or amendment.
(c) Consent in Contemplation of Transfer . Any consent made pursuant to this Section 18 by a holder of any Note that has
transferred or has agreed to transfer such Note to the Company, the Parent Guarantor any Subsidiary or any Affiliate of the Parent
Guarantor and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force or
effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have
been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under
the same or similar conditions) shall be void and of no force or effect except solely as to such transferring holder.
18.3. Binding Effect, Etc.
Any amendment or waiver consented to as provided in this Section 18 or any Subsidiary Guarantee Deed applies equally to all
holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company, the Parent Guarantor and the
Subsidiary Guarantor party to such Subsidiary Guarantee Deed without regard to whether such Note has been marked to indicate such
amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default
not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company, the Parent Guarantor,
any Subsidiary Guarantor and the holder of any Note nor any delay in exercising any rights hereunder or under any Note or any Subsidiary
Guarantee Deed shall operate as a waiver of any rights of any holder of such Note.
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18.4. Notes Held by Company, Etc.
Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes
then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement, the Notes or any Subsidiary
Guarantee Deed, or have directed the taking of any action provided herein or in the Notes or in any Subsidiary Guarantee Deed to be taken
upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or
indirectly owned by the Company, the Parent Guarantor or any of its Affiliates or any Competitor shall be deemed not to be outstanding.
19.
NOTICES; ENGLISH LANGUAGE.
Except to the extent otherwise provided in Section 7.4, all notices and communications provided for hereunder shall be in writing
and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized international commercial
delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized
international commercial delivery service (with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or its nominee, to such Purchaser or its nominee at the address specified for such communications in
Schedule B, or at such other address as such Purchaser or its nominee shall have specified to the Company and the Parent
Guarantor in writing (together with a hard copy if requested by such Purchaser),
(ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company or to the Parent Guarantor, to the Company or the Parent Guarantor at its address set forth at the
beginning hereof to the attention of General Counsel, or at such other address as the Company or the Parent Guarantor shall have
specified to the holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually received.
Each document, instrument, financial statement, report, notice or other communication delivered in connection with this
Agreement shall be in English or accompanied by an English translation thereof.
This Agreement and the Notes have been prepared and signed in English and the parties hereto agree that the English version
hereof and thereof (to the maximum extent permitted by applicable law) shall be the only version valid for the purpose of the
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interpretation and construction hereof and thereof notwithstanding the preparation of any translation into another language hereof or thereof,
whether official or otherwise or whether prepared in relation to any proceedings wherever they may be brought.
20.
REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by any Purchaser at the Closing (except the Notes themselves), and (c) financial statements,
certificates and other information previously or hereafter furnished to any Purchaser, may be reproduced by such Purchaser by any
photographic, photostatic, electronic, digital or other similar process and such Purchaser may destroy any original document so reproduced.
Each of the Company and the Parent Guarantor agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall
be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by such Purchaser in the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This Section 20 shall not prohibit the Company, the Parent
Guarantor or any holder of a Note from contesting any such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
21.
CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, “ Confidential Information ” means information delivered to any Purchaser or holder of
Notes by or on behalf of the Company, the Parent Guarantor or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement, provided that such term does not include information that (a) was publicly known or otherwise known to
such Purchaser or holder prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such
Purchaser or holder or any person acting on such Purchaser’s or holder’s behalf, (c) otherwise becomes known to such Purchaser or holder
other than through disclosure by or on behalf of the Company, the Parent Guarantor or any Subsidiary, so long as such Purchaser is not aware
that such knowledge became known to it in violation of any confidentiality obligations or other duties binding on the Person disclosing such
information or (d) constitutes financial statements delivered to such Purchaser or holder under Section 7.1 that are otherwise publicly available.
Each Purchaser and each holder of Notes will use such Confidential Information for the administration of the investment represented by the
Notes and not for any other purpose and will maintain the confidentiality of such Confidential Information in accordance with procedures
adopted by such Purchaser or holder in good faith to protect confidential information of third parties delivered to such Purchaser or holder,
provided that such Purchaser or holder may deliver or disclose Confidential Information to (i) its directors, trustees, officers, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment
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represented by its Notes), each of whom agree to hold confidential the Confidential Information substantially in accordance with the terms of
this Section 21, (ii) its auditors, financial advisors and other professional advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 21, (iii) any other Purchaser or holder of any Note, (iv) any Institutional Investor to
which it sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt
of such Confidential Information to be bound by the provisions of this Section 21 and so long as such Person is not a Competitor), (v) any
federal or state regulatory authority having jurisdiction over such Purchaser or holder, provided that if permitted by law, regulation and such
Purchaser’s or holder’s regulators, such Purchaser or holder will give notice to the Company and the Parent of such disclosure within one
(1) Business Day after such disclosure, (vi) on reasonable advance notice to the Company and the Parent Guarantor, the NAIC or the SVO or,
in each case, any similar organization, or any nationally recognized rating agency that requires access to information about such holder’s
investment portfolio, or (vii) on reasonable advance notice to the Company and the Parent Guarantor, any other Person to which such delivery
or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser or
holder, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser or holder is a party
or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser or holder may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such holder’s Notes and this
Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits
of this Section 21 as though it were a party to this Agreement. On reasonable request by the Company or the Parent Guarantor in connection
with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such
holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 21.
In the event that as a condition to receiving access to information relating to the Parent Guarantor or its Subsidiaries in connection
with the transactions contemplated by or otherwise pursuant to this Agreement, any Purchaser or holder of a Note is required to agree to a
confidentiality undertaking (whether through IntraLinks, another secure website, a secure virtual workspace or otherwise) which is different
from this Section 21, this Section 21 shall not be amended thereby and, as between such Purchaser or such holder and the Parent Guarantor
and/or the Company, this Section 21 shall supersede any such other confidentiality undertaking.
22.
SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser of the Notes that it has agreed to
purchase hereunder, by written notice to the Company, which notice shall be signed by both such Purchaser and such Affiliate, shall contain
such Affiliate’s agreement to be bound by this Agreement and shall contain
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a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, any
reference to such Purchaser in this Agreement (other than in this Section 22), shall be deemed to refer to such Affiliate in lieu of such original
Purchaser. In the event that such Affiliate is so substituted as a Purchaser hereunder and such Affiliate thereafter transfers to such original
Purchaser all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, any reference to such Affiliate as
a “Purchaser” in this Agreement (other than in this Section 22), shall no longer be deemed to refer to such Affiliate, but shall refer to such
original Purchaser, and such original Purchaser shall again have all the rights of an original holder of the Notes under this Agreement.
23.
PARENT GUARANTEE.
23.1. Parent Guarantee.
(a) The Parent Guarantor hereby irrevocably, absolutely and unconditionally (i) guarantees to the holders from time to time of the
Notes the full and prompt payment of the principal of all of the Notes and of the interest thereon at the rates therein stipulated (including
interest accruing or becoming owing both prior to and subsequent to the commencement of any bankruptcy, reorganization or similar
proceeding involving the Company or the Parent Guarantor) and any Make-Whole Amounts and any Additional Payments, and all other
amounts payable by the Company under this Agreement in each case when and as the same shall become due and payable, whether by
lapse of time, upon redemption or prepayment, by extension or by acceleration or declaration, or otherwise (including (to the extent
legally enforceable) interest due on overdue payments of principal, Make-Whole Amount, if any, or interest at the rates set forth in the
Notes and any Additional Payments), (ii) guarantees to the holders from time to time of the Notes the full and prompt performance and
observance by the Company of each and all of the obligations, covenants and agreements required to be performed or observed by the
Company under the terms of the Notes and this Agreement, (iii) guarantees to the holders from time to time of the Notes the full and
prompt payment, upon demand by any holder of the Notes, of all reasonable costs and expenses, legal or otherwise (including
reasonable attorneys’ fees) and such expenses, if any, as shall have been expended or incurred in the protection or enforcement of any
right or privilege under the Notes or this Agreement, including, without limitation, in any consultation or action in connection therewith,
and in each and every case irrespective of the validity, regularity, or enforcement of any of the Notes or this Agreement or any of the
terms thereof or of any other like circumstance or circumstances, and (iv) indemnifies each holder from time to time of the Notes
immediately upon demand from and against any cost, loss or liability suffered by that holder if any payment obligations guaranteed by it
becomes unenforceable, invalid or illegal save by reason of the status or action(s) of the holder of the Note itself. The guarantee herein
provided for is a guarantee of immediate and timely payment and full and prompt performance and shall not be deemed to be a
guarantee only of the collectability and in consequence thereof each holder of the Notes may proceed directly against the Parent
Guarantor.
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(b) Principal Obligor. The obligations of the Parent Guarantor hereunder shall be deemed to be undertaken as principal obligor and
not merely as surety.
(c) Continuing Obligations. The obligations of the Parent Guarantor hereunder shall be continuing obligations notwithstanding any
settlement of account or other matter or thing whatsoever and, in particular but without limitation, shall not be considered satisfied by
any intermediate payment or satisfaction of all or any of the Company’s obligations under or in respect of any Note and shall continue
in full force and effect until all sums due from the Company in respect of the Notes have been paid and all other obligations of the
Company thereunder or in respect thereof have been satisfied in full.
23.2. Obligations Absolute and Unconditional.
The obligations of the Parent Guarantor under this Section 23 shall be absolute and unconditional and shall remain in full force
and effect until the entire principal, interest and Make-Whole Amount (if any) on the Notes and all other sums due pursuant to Section 23.1
shall have been fully, finally and indefeasibly paid and such obligations shall not be affected, modified or impaired upon the happening from
time to time of any event or condition, including, without limitation, any of the following, whether or not with notice to or the consent of the
Parent Guarantor:
(a) the power or authority or the lack of power or authority of the Company to issue the Notes or to execute and deliver this
Agreement, and irrespective of the validity of the Notes or this Agreement or of any defense whatsoever that the Company may or
might have to the payment of the Notes (principal, interest and Make-Whole Amount, if any) and any Additional Payments, or to the
performance or observance of any of the provisions or conditions of this Agreement, or the existence or continuance of the Company as
a legal entity;
(b) any failure to present the Notes for payment or to demand payment thereof, or to give the Company or the Parent Guarantor
notice of dishonor for non-payment of the Notes, when and as the same may become due and payable, or notice of any failure on the
part of the Company to do any act or thing or to perform or to keep any covenant or agreement by it to be done, kept or performed under
the terms of the Notes or this Agreement;
(c) the acceptance of any security or any guaranty, the advance of additional money to the Company, any extension of the
obligation of the Notes, either indefinitely or for any period of time, or any other modification in the obligation of the Notes, of this
Agreement or of the Company or the Parent Guarantor thereon, or in connection therewith, or any sale, release, substitution or exchange
of any security;
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(d) any act or failure to act with regard to the Notes or this Agreement;
(e) any action taken under this Agreement in the exercise of any right or power thereby conferred or any failure or omission on the
part of any holder of any Note to first enforce any right or security given under this Agreement or any failure or omission on the part of
any holder of any of the Notes to first enforce any right against the Company;
(f) the waiver, compromise, settlement (other than payment in full in cash by the Company), release or termination of any or all of
the obligations, covenants or agreements of the Company or the Parent Guarantor contained in this Agreement or Notes or the payment,
performance or observance thereof;
(g) the failure to give notice to the Company or the Parent Guarantor of the occurrence of any Default or Event of Default under
the terms and provisions of this Agreement;
(h) the extension of the time for payment of any principal of, or interest (or Make-Whole Amount, if any) on, any Note owing or
payable on such Note or of the time of or for performance of any obligations, covenants or agreements under or arising out of this
Agreement or the extension or the renewal of any thereof;
(i) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in this
Agreement or the Notes, including, without limitation, any increase in the principal amount, interest rate or prepayment amounts;
(j) any failure, omission, delay or lack on the part of the holders of the Notes to enforce, assert or exercise any right, power or
remedy conferred on the holders of the Notes in this Agreement or the Notes or any other act or acts on the part of the holders from time
to time of the Notes;
(k) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling
of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement
under bankruptcy or similar laws, composition with creditors or readjustment of, or other similar procedures affecting the Company, the
Parent Guarantor or any of their assets, or any allegation or contest of the validity of this Agreement or the disaffirmance of this
Agreement in any such proceeding (it being understood that the obligations of the Parent Guarantor under this Agreement shall continue
to be effective or be reinstated, as the case may be, if at any time any payment made with respect to
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the Notes is rescinded or must otherwise be restored or returned by any holder of the Notes upon the insolvency, bankruptcy or
reorganization of the Company or the Parent Guarantor or any other guarantor, all as though such payment had not been made);
(l) the invalidity or unenforceability of the Notes or this Agreement;
(m) the invalidity or unenforceability of the obligations of the Parent Guarantor under this Agreement, the absence of any action to
enforce such obligations of the Parent Guarantor, any waiver or consent by the Parent Guarantor with respect to any of the provisions
hereof or any other circumstances which might otherwise constitute a discharge or defense by the Parent Guarantor, including, without
limitation, any failure or delay in the enforcement of the obligations of the Parent Guarantor with respect to this Agreement or of notice
thereof; or any suit or other action brought by any shareholder or creditor of, or by, the Parent Guarantor or any other Person, for any
reason, including, without limitation, any suit or action in any way attacking or involving any issue, matter or thing in respect of this
Agreement or the Notes or any other agreement;
(n) the default or failure of the Parent Guarantor or the Company fully to perform any of its covenants or obligations set forth in
this Agreement;
(o) the impossibility or illegality of performance on the part of the Company or any other Person of its obligations under the
Notes, this Agreement or any Subsidiary Guarantee Deed;
(p) in respect of the Company or any other Person, any change of circumstances, whether or not foreseen or foreseeable, whether
or not imputable to the Company or any other Person, or other impossibility of performance through fire, explosion, accident, labor
disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotions, acts of God or the public enemy, delays or
failure of suppliers or carriers, inability to obtain materials, action of any regulatory body or agency, change of law or any other causes
affecting performance, or other force majeure, whether or not beyond the control of the Company or any other Person and whether or
not of the kind hereinbefore specified;
(q) any attachment, claim, demand, charge, Lien, order, process, encumbrance or any other happening or event or reason, similar
or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses,
indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against any
Person, or any claims, demands, charges or Liens of any nature, foreseen or unforeseen, incurred by any Person, or against any sums
payable under this Agreement so that such sums would be rendered inadequate or would be unavailable to make the payments herein
provided;
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(r) the failure of the Parent Guarantor to receive any benefit or consideration from or as a result of its execution, delivery and
performance of this Agreement;
(s) any default, failure or delay, willful or otherwise, in the performance by the Company or any other Person of any obligations of
any kind or character whatsoever of the Company or any other Person (including, without limitation, the obligations and undertakings of
the Company or any other Person under the Notes or this Agreement); or
(t) any order, judgment, decree, ruling or regulation (whether or not valid) of any court of any nation or of any political
subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any thereof or any other action,
happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the
performance by any party of its respective obligations under the Notes, this Agreement or any instrument relating thereto;
provided that the specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts,
failures or omissions, though not specifically mentioned above, it being the purpose and intent of this paragraph that the obligations of the
Parent Guarantor hereunder shall be absolute and unconditional and shall not be discharged, impaired or varied except by the payment to the
holders thereof of the principal of, Make-Whole Amount, if any, or any Additional Payments and interest on the Notes, and of all other sums
due and owing to the holders of the Notes pursuant to this Agreement and the Notes, and then only to the extent of such payments. Without
limiting any of the other terms or provisions hereof, it is understood and agreed that in order to hold the Parent Guarantor liable hereunder,
there shall be no obligation on the part of any holder of any Note to resort, in any manner or form, for payment, to the Company or to any other
Person or to the properties or estates of any of the foregoing. All rights of the holder of any Note pursuant thereto or to this Agreement may be
transferred or assigned at any time or from time to time and shall be considered to be transferred or assigned upon the transfer of such Note,
whether with or without the consent of or notice to the Parent Guarantor or the Company. Without limiting the foregoing, it is understood that
repeated and successive demands may be made and recoveries may be had hereunder as and when, from time to time, the Company shall
default under the terms of the Notes or this Agreement and that notwithstanding recovery hereunder for or in respect of any given default or
defaults by the Company under the Notes or this Agreement the obligations of the Parent Guarantor under this Section 23 shall remain in full
force and effect and shall apply to each and every subsequent default.
23.3. Subrogation.
To the extent of any payments made by the Parent Guarantor under this Agreement, the Parent Guarantor shall be subrogated to
the rights of the holder of the Notes receiving such payments, but the Parent Guarantor covenants and agrees that such
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right of subrogation shall be subordinate in right of payment to the rights of any holders of the Notes for which full payment has not been made
or provided for and, to that end, the Parent Guarantor agrees not to claim or enforce any such right of subrogation or any right of set-off or any
other right which may arise on account of any payment made by the Parent Guarantor in accordance with the provisions of this Agreement,
including, without limitation, any right of reimbursement, exoneration, contribution or indemnification and any right to participate in any claim
or remedy of any holder of the Notes against the Company or any other guarantor, whether or not such claim, remedy or right arises in equity
or under contract, statue or common law, including, without limitation, the right to take or receive from the Company or any other guarantor,
directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or
right, unless and until 366 days after all of the Notes owned by Persons other than the Parent Guarantor or any of its Affiliates and all other
sums due or payable under this Agreement have been fully paid and discharged or payment therefor has been provided. If any amount shall be
paid to the Parent Guarantor in violation of the preceding sentence at any time prior to the indefeasible cash payment in full of the Notes and all
other amounts payable under this Agreement, such amounts shall be held in trust for the benefit of the holders of the Notes and shall forthwith
be paid to the holders of the Notes to be credited and applied to the amounts due or to become due with respect to the Notes and all other
amounts payable under this Agreement, whether matured or unmatured.
23.4. Preference.
The Parent Guarantor agrees that to the extent the Company or any other Person makes any payment on the Notes, which payment
or any part thereof is subsequently invalidated, voided, declared to be fraudulent or preferential, set aside, recovered, rescinded or is required to
be retained by or repaid to a trustee, liquidator, administrator, administrative receiver, receiver or any other Person under any bankruptcy code,
common law or equitable cause, then and to the extent of such payment, the obligation or the part thereof intended to be satisfied shall be
revived and continued in full force and effect with respect to the Parent Guarantor’s obligations hereunder, as if said payment had not been
made, to the extent such earlier paid funds have not been retained by any holder of a Note. The liability of the Parent Guarantor hereunder shall
not be reduced or discharged, in whole or in part, by any payment to any holder of the Notes from any source that is thereafter paid, returned or
refunded in whole or in part by reason of the assertion of a claim of any kind relating thereto, including, but not limited to, any claim for breach
of contract, breach of warranty, preference, illegality, invalidity or fraud asserted by any account debtor or by any other Person.
23.5. Marshalling and Accounts.
(a) None of the holders of the Notes shall be under any obligation (i) to marshal any assets in favor of the Parent Guarantor or in
payment of any or all of the liabilities of the Company under or in respect of the Notes and this Agreement or the obligation of the
Parent Guarantor hereunder or (ii) to pursue
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any other remedy that the Parent Guarantor may or may not be able to pursue itself and that may lessen the Parent Guarantor’s burden or
any right to which the Parent Guarantor hereby expressly waives.
(b) Until all amounts which may be or become payable by the Company under or in connection with the Notes have been
irrevocably paid in full while an Event of Default is continuing, any moneys received from the Parent Guarantor under this Agreement
may be held in an interest-bearing bank account.
(c) This guarantee is in addition to and is not in any way prejudiced by any other guarantee (including, without limitation, any
Subsidiary Guarantee Deed) now or subsequently held by a holder of a Note.
24.
MISCELLANEOUS.
24.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.
Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto and their
respective successors and assigns permitted hereby) any legal or equitable right, remedy or claim under or by reason of this Agreement.
24.2. Accounting Terms.
(a) Except as otherwise specifically provided herein, (i) all accounting terms used herein which are not expressly defined in this
Agreement have the meanings respectively given to them in accordance with GAAP as applicable to the Parent Guarantor from time to
time, (ii) all computations made pursuant to this Agreement shall be made in accordance with GAAP as applicable to the Parent
Guarantor from time to time, and (iii) all financial statements deliverable hereunder shall be prepared in accordance with GAAP as
applicable to the Parent Guarantor from time to time.
(b) In the event that any change in GAAP shall (i) cause a Default or Event of Default related to any provision hereof (each an “
Applicable Provision ”) or (ii) result in an indication that a Default or Event of Default related to any Applicable Provision shall occur
in the future, then the parties hereto shall proceed as follows:
(i) such Default or Event of Default shall be tolled or suspended and the Company, the Parent Guarantor and the holders of
all outstanding Notes shall promptly enter into good faith negotiations lasting for a period not to exceed ninety (90) days, pursuant
to which the Company, the Parent Guarantor and the Required Holders shall (if possible) agree to an amendment or waiver of
terms of this Agreement sufficient to eliminate or preempt any such Default or Event of Default; and
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(ii) in the event such good faith negotiations do not result in an amendment or waiver sufficient to eliminate or preempt any
such Default or Event of Default, the Company and the Parent Guarantor shall be entitled to re-determine or determine (as
applicable) compliance with such Applicable Provision on the basis of GAAP in effect on the date of (and as applied by the
Company in connection with) the Group’s most recent consolidated financial statements issued prior to such change in GAAP (“
Pre-Default GAAP ”).
(c) In the event that any re-determination or determination (as applicable) of any Applicable Provision in accordance with
Pre-Default GAAP shall indicate that the Company and the Parent Guarantor is then in compliance with the Applicable Provision on
such basis, no Default nor Event of Default in relation thereto shall be deemed to have occurred (or be continuing) or shall occur
thereafter (as applicable).
24.3. Severability.
Any provision of this Agreement that 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, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other
jurisdiction.
24.4. Construction, Etc.
Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
For the avoidance of doubt, all Schedules and Exhibits attached to this Agreement shall be deemed to be a part hereof.
24.5. Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of
the parties hereto.
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24.6. Governing Law.
This Agreement, and any non-contractual obligations arising out of or in connection with it, shall be governed by and construed in
accordance with English law. This Agreement confers benefits on each holder of a Note or Notes and is intended to be enforceable by each
such holder by virtue of the Contracts (Rights of Third Parties) Act 1999. Subject to the preceding sentence, a Person that is not a party to this
Agreement has no rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.
24.7. Jurisdiction and Process
(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement and
the Notes (including a dispute relating to the existence, validity or termination of this Agreement or any Note or any non-contractual
obligation arising out of or in connection with this Agreement or any Note (a “Dispute” ).
(b) The Company, the Parent Guarantor and the holders agree that the courts of England are the most appropriate and convenient
courts to settle Disputes and accordingly neither the Company nor the Parent Guarantor nor any holder will argue to the contrary.
(c) This Section 24.7 is for the benefit of the holders only. As a result, no holder shall be prevented from taking proceedings
relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the holders may take concurrent proceedings in
any number of jurisdictions.
(d) The Parent Guarantor hereby irrevocably appoints the Company to receive for it, and on its behalf, service of process in
England.
24.8. Obligation to Make Payment in Dollars.
Any payment on account of an amount that is payable hereunder or under the Notes in Dollars which is made to or for the account
of any holder of a Note in any other currency, whether as a result of any judgment or order or the enforcement thereof or the realization of any
security or the liquidation of the Company, the Parent Guarantor or any Subsidiary Guarantor, shall constitute a discharge of the obligation of
the Company, the Parent Guarantor and any Subsidiary Guarantor under this Agreement or the Notes or any Subsidiary Guarantee Deed only to
the extent of the amount of Dollars which such holder could purchase in the foreign exchange markets in London, England, with the amount of
such other currency in accordance with normal banking procedures at the rate of exchange prevailing on the London Banking Day following
receipt of the payment first referred to above. If the amount of Dollars that could be so purchased is less than the amount of Dollars originally
due to such holder, each of the Company and the Parent
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Guarantor agrees to the fullest extent permitted by law, to indemnify and save harmless such holder from and against all loss or damage arising
out of or as a result of such deficiency. This indemnity shall, to the fullest extent permitted by law, constitute an obligation separate and
independent from the other obligations contained in this Agreement and the Notes, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by such holder from time to time and shall continue in full force and effect notwithstanding
any judgment or order for a liquidated sum in respect of an amount due hereunder or under the Notes or under any judgment or order. As used
herein the term “ London Banking Day ” shall mean any day other than Saturday or Sunday or a day on which commercial banks are required
or authorized by law to be closed in London, England.
24.9. IFRS 39.
In determining compliance with the requirements of the financial covenants contained in Section 10, any election by the Parent
Guarantor or the Company to measure any portion of Financial Indebtedness at fair value (as permitted by International Accounting Standard
39 or any similar accounting standard) at balance sheet date, other than to reflect a hedge or swap (or other similar derivative instrument) of
such Financial Indebtedness (including, without limitation, both interest rate and foreign currency hedges and/or swaps), shall be disregarded
and such determination shall be made as if such election had not been made.
*
*
*
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*
*
This Agreement has been executed as a deed by the Parent Guarantor and delivered on the date specified on page 1 hereof.
If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of this Agreement and return it to
the Company and the Parent Guarantor, whereupon this Agreement shall become a binding agreement between you, the Company and the
Parent Guarantor.
Very truly yours,
MARKIT GROUP HOLDINGS LIMITED
B
y
/s/ Jeff Gooch
Jeff Gooch, Chief Financial Officer
Executed as a deed and delivered by MARKIT LTD.
B
y
/s/ Lance Uggla
Lance Uggla, Chief Executive Officer
B
y
/s/ Jeff Gooch
Jeff Gooch, Chief Financial Officer
This Agreement is hereby accepted
and agreed to as of the date thereof.
A MERICAN G ENERAL L IFE I NSURANCE C OMPANY
T HE U NITED S TATES L IFE I NSURANCE C OMPANY IN
THE C ITY OF N EW Y ORK
T HE V ARIABLE A NNUITY L IFE I NSURANCE C
OMPANY
A MERICAN H OME A SSURANCE C OMPANY
N ATIONAL U NION F IRE I NSURANCE C OMPANY OF P
ITTSBURGH , PA
U NITED G UARANTY R ESIDENTIAL I NSURANCE C
OMPANY
By:
AIG Asset Management (U.S.) LLC,
as Investment Adviser
By:
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
M ETROPOLITAN L IFE I NSURANCE C OMPANY
B
y
/s/ Illegible
Name:
Title:
M ET L IFE I NSURANCE K.K.
by MetLife Investment Advisors, LLC, Its Investment
Manager
S YMETRA L IFE I NSURANCE C OMPANY
by MetLife Investment Advisors, LLC, Its Investment
Manager
B
y
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
M ASSACHUSETTS M UTUAL L IFE I NSURANCE C
OMPANY
By:
Babson Capital Management LLC
as Investment Adviser
By:
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
A LLIANZ L IFE I NSURANCE C OMPANY OF N ORTH A
MERICA
A LLIANZ
B
y
G LOBAL R ISKS US I NSURANCE C OMPANY
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
N ATIONWIDE M UTUAL I NSURANCE C OMPANY
N ATIONWIDE I NDEMNITY C OMPANY
B
y
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
G ENWORTH M ORTGAGE I NSURANCE C ORPORATION
B
y
/s/ Illegible
Name:
Title:
G ENWORTH L IFE I NSURANCE C OMPANY
G ENWORTH L IFE AND A NNUITY I NSURANCE C OMPANY
G ENWORTH L IFE I NSURANCE C OMPANY OF N EW Y ORK
B
y
/s/ Illegible
Name:
Title:
This Agreement is hereby accepted
and agreed to as of the date thereof.
P ACIFIC L IFE I NSURANCE C OMPANY
B
y
/s/ Illegible
Name:
Title:
B
y
/s/ Illegible
Name:
Title:
SCHEDULE A
DEFINED TERMS
As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such
term:
“ Acceptable Bank ” means:
(a) any lender under the Principal Bank Facility or an affiliate of such lender;
(b) a bank or financial institution which has a rating for its short term unsecured and non-credit enhanced debt obligations of
“A-1” or higher by Standard & Poor’s Rating Services or “F-1” or higher by Fitch Ratings Ltd or “P-1” or higher by Moody’s Investor Services
Limited or a comparable rating from an internationally recognised credit rating agency; or
(c) any other bank or financial institution approved by the Required Holders.
“ Acquired Subsidiary Financial Indebtedness ” means all Financial Indebtedness of any Person which becomes a Subsidiary
after the date of Closing or is consolidated with or merged into a Subsidiary after the date of Closing and which (a) is outstanding on the date
such Person becomes a Subsidiary (or such Person is at such time contractually bound, in writing to incur such Financial Indebtedness) and
(b) has not been (and is not being) incurred, extended or renewed in contemplation of such Person becoming a Subsidiary.
“ acting in concert ” is defined in Section 8.10.
“ Additional Payments ” is defined in Section 8.3(d).
“ Affected Noteholder ” is defined within the definition of “Noteholder Sanctions Event.”
“ Affected Notes ” is defined in Section 8.9.
“ Affiliate ” means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through
one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and, with respect to the
Company, shall include any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests
of the Parent Guarantor or any Subsidiary or any entity of which the Parent Guarantor and its Subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, 10% or more of any class of voting or equity interests.
“ Agreement ” means this Note Purchase and Guarantee Agreement, including all Schedules and Exhibits attached to this
Agreement, as it may be amended, restated, supplemented or otherwise modified from time to time.
“ Anti-Corruption Laws ” means any law or regulation in a U.S. or any non-U.S. jurisdiction regarding bribery or any other
corrupt activity, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010.
“ Anti-Money Laundering Laws ” means any law or regulation in a U.S. or any non-U.S. jurisdiction in or through which any
member of the Group operates regarding money laundering, drug trafficking, terrorist-related activities or other money laundering predicate
crimes, including the Currency and Foreign Transactions Reporting Act of 1970 (otherwise known as the Bank Secrecy Act) and the USA
PATRIOT Act.
“ Applicable Provision ” is defined in Section 24.2(b).
“ Blocked Person ” means (i) a Person whose name appears on the list of Specially Designated Nationals and Blocked Persons
published by OFAC, (ii) a Person, entity, organization, country or regime that is blocked or a target of sanctions that have been imposed under
U.S. Economic Sanctions Laws or (iii) a Person that is an agent, department or instrumentality of, or is otherwise beneficially owned by,
controlled by or acting on behalf of, directly or indirectly, any Person, entity, organization, country or regime described in clause (i) or (ii).
“ Borrowings ” means Financial Indebtedness other than as set out in paragraph (g) of that definition and excluding, to the extent
included in Financial Indebtedness:
(a) any deferred consideration outstanding as a direct consequence of a dividend or other such distribution;
(b) balance sheet liabilities in respect of share based payment arising under IFRS 2 and/or FRS 20; and
(c) that proportion of the Financial Indebtedness of any Joint Venture and any of its Subsidiaries, which is equivalent to the
proportion of the total shareholding in that Joint Venture constituted by Minority Interests.
“ Business Day ” means (a) for the purposes of Section 8.7 only, any day other than a Saturday, a Sunday or a day on which
commercial banks in New York, New York or London, England are required or authorized to be closed, and (b) for the purposes of any other
provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or
London, England are required or authorized to be closed.
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“ Cash ” means, at any time, cash in hand or at bank and (in the latter case) credited to an account in the name of a member of the
Group with an Acceptable Bank and to which a member of the Group is alone (or together with other members of the Group) beneficially
entitled and for so long as:
(a) that cash is repayable on demand or, in relation to a cash deposit, within seven (7) Business Days of demand;
(b) repayment of that cash is not contingent on the prior discharge of any other indebtedness of any member of the Group or of
any other person whatsoever or on the satisfaction of any other condition;
(c) there is no Lien over that cash except for any Lien permitted under Section 10.4(d); and
(d) the cash is capable of being applied or made available to be applied in repayment or prepayment of Financial Indebtedness
within seven (7) Business Days.
“ Cash Equivalent Investments ” means at any time:
(a) certificates of deposit maturing within six months after the relevant date of calculation and issued by an Acceptable Bank;
(b) any investment in marketable debt obligations issued or guaranteed by the government of the United States of America, the
United Kingdom or Germany or by an instrumentality or agency of any of them having an equivalent credit rating, maturing within one year
after the relevant date of calculation and not convertible or exchangeable to any other security;
(c) commercial paper not convertible or exchangeable to any other security:
(i) for which a recognised trading market exists;
(ii) issued by an issuer incorporated in the United States of America, the United Kingdom or Germany;
(iii) which matures within one year after the relevant date of calculation; and
(iv) which has a credit rating of either “A-1” or higher by Standard & Poor’s Rating Services or “F-1” or higher by Fitch
Ratings Ltd or “P-1” or higher by Moody’s Investor Services Limited or, if no rating is available in respect of the commercial
paper, the issuer of which has, in respect of its long-term unsecured and non-credit enhanced debt obligations, an equivalent rating;
(d) sterling bills of exchange eligible for rediscount at the Bank of England and accepted by an Acceptable Bank (or their
dematerialised equivalent);
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(e) any investment in money market funds (where such funds (i) have a credit rating of either “A-1” or higher by Standard &
Poor’s Rating Services or “F-1” or higher by Fitch Ratings Ltd or “P-1” or higher by Moody’s Investor Services Limited and (ii) invest
substantially all their assets in securities of the types described in paragraphs (a) to (d) above) which can be turned into cash on not more than
30 days’ notice; or
(f) any other debt security approved by the Required Holders,
in each case to which any member of the Group is alone (or together with other members of the Group) beneficially entitled at that time and
which is not issued or guaranteed by any member of the Group or subject to any Lien.
“ Change of Control ” is defined in Section 8.10.
“ CISADA ” means the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, United States Public Law
111195, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.
“ Closing ” is defined in Section 3.
“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time.
“ Company ” is defined in the first paragraph of this Agreement.
“ Company Notice ” is defined in Section 8.10.
“ Competitor ” means any Person (other than any Purchaser) who is substantially engaged in the businesses of the Company or
any Subsidiary as more fully described in the Disclosure Documents and/or other activities reasonably related thereto provided that:
(a) the provision of investment advisory services by a Person to a Plan or Non-U.S. Plan which is owned or controlled by a Person
which would otherwise be a Competitor shall not of itself cause the Person providing such services to be deemed to be a Competitor if
such Person has established procedures which will prevent confidential information supplied to such Person by any member of the
Group from being transmitted or otherwise made available to such Plan or Non-U.S. Plan or Person owning or controlling such Plan or
Non-U.S. Plan; and
(b) in no event shall an Institutional Investor which maintains any passive investment in any Person which is a Competitor be
deemed a Competitor it being agreed that the normal administration of the investment and enforcement thereof shall be deemed not to
cause such Institutional Investor to be a “Competitor”.
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“ Confidential Information ” is defined in Section 21.
“ Consolidated EBIT ” means, in respect of any Relevant Period, the consolidated operating profit of the Finance Group before
taxation:
(a) before deducting any Consolidated Finance Charges;
(b) before taking into account any accrued interest owing to any member of the Finance Group;
(c) before taking into account any Exceptional Items;
(d) after deducting the amount of any profit (or adding back the amount of any loss) of any member of the Finance Group which is
attributable to Minority Interests;
(e) plus or minus the Finance Group’s share of the profits or losses (after finance cost and tax) of Non-Group Entities and after
deducting the amount of any profit of any Non-Group Entity to the extent that the amount of the profit included in the financial
statements of the Group exceeds the amount actually received in cash by members of the Group through distributions by the Non-Group
Entity;
(f) before taking into account any gain or loss arising from an upward or downward revaluation of any other asset;
(g) before taking into account any unrealised gain or loss arising on the currency translation of balances;
(h) after taking into account any realised gain or loss arising on the currency translation of balances; and
(i) before taking into account any adjustments in respect of share based remuneration in accordance with IFRS 2 and/or FRS 20
where the adjustment is in respect of a non cash based charge including such charges arising under the aforementioned accounting
standards as a result of a liquidity round,
in each case, to the extent added, deducted or taken into account, as the case may be, for the purposes of determining operating
profits of the Finance Group before taxation.
“ Consolidated EBITDA ” means, in respect of any Relevant Period, Consolidated EBIT for that Relevant Period after adding
back any amount attributable to the amortisation of intangible assets, including the amortisation of goodwill and the depreciation of
tangible assets of members of the Finance Group, but excluding the proportion of such amortisation and depreciation as is
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attributable to Minority Interests. If a member of the Group acquires, or disposes of, any company, for each Relevant Period which ends
less than 12 months after that company became, or ceased to be, a member of the Group, for the purpose of calculating Consolidated
EBITDA in respect of Section 10.7, the results of that company will be deemed included with (in the case of an acquisition) or excluded
from (in the case of a disposal) those of the rest of the Group for the full duration of the Relevant Period as if that company had become,
or ceased to be, a member of the Group at the start of such Relevant Period.
“ Consolidated Finance Charges ” means, for any Relevant Period, the aggregate amount of the accrued interest, commission,
fees, discounts, prepayment fees, premiums or charges and other finance payments in respect of Borrowings whether paid, payable or
capitalised by any member of the Finance Group (calculated on a consolidated basis) in respect of that Relevant Period:
(a) including the interest (but not the capital) element of payments in respect of Finance Leases;
(b) including any commission, fees, discounts and other finance payments payable by (and deducting any such amounts payable
to) any member of the Finance Group under any interest rate hedging arrangement,
and so that no amount shall be added (or deducted) more than once.
“ Consolidated Net Debt ” means, at any time, the aggregate amount of all obligations of members of the Finance Group for or in
respect of Borrowings at that time but:
(a) excluding any such obligations to any other member of the Finance Group;
(b) including, in the case of Finance Leases only, their capitalised value; and
(c) deducting the aggregate amount of Cash and Cash Equivalent Investments held by any member of the Finance Group at that
time,
and so that no amount shall be included or excluded more than once.
“ Consolidated Net Finance Charges ” means, for any Relevant Period, the Consolidated Finance Charges for that Relevant
Period after deducting any interest payable in that Relevant Period to any member of the Finance Group on any Cash or Cash Equivalent
Investment.
“ Consolidated Total Assets ” means the sum of the assets of the Group as shown in the most recent consolidated financial
statements published by the Parent Guarantor.
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“ 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 contract or otherwise; and the terms “ Controlled ” and “
Controlling ” shall have meanings correlative to the foregoing.
“ Controlled Entity ” means (i) any of the Subsidiaries of the Parent Guarantor and any of their or the Parent Guarantor’s
respective Controlled Affiliates and (ii) if the Parent Guarantor has a parent company, such parent company and its Controlled Affiliates.
“ Default ” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice
or both, become an Event of Default.
“ Default Rate ” means that rate of interest that is the greater of (i) 2.00% per annum above the rate of interest first stated in
clause (a) of the first paragraph of the Notes and (ii) 2.00% over the rate of interest publicly announced by JPMorgan Chase Bank, N.A. in
London, England as its “base” or “prime” rate.
“ Designated Tax Officer ” means the group finance director or the tax director of the Parent Guarantor or the Company.
“ Disclosure Documents ” is defined in Section 5.3.
“ Disposition ” is defined in Section 10.3.
“ Dollars ”, “ U.S.$ ” or “ $ ” means lawful money of the United States of America.
“ Elevated Period ” is defined in Section 10.7.
“ Elevated Ratio ” is defined in Section 10.7.
“ Environmental Laws ” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and
the protection of the environment or the release of any materials into the environment, including but not limited to those related to Hazardous
Materials.
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that is treated as a single employer together with
the Company under section 414 of the Code.
“ Event of Default ” is defined in Section 11.
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“ Exceptional Items ” means any exceptional, one off, non-recurring or extraordinary items.
“ FATCA ” means (a) sections 1471 to 1474 of the Code (or any amended or successor version thereof) or any associated
regulations or other official guidance; (b) any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to
an intergovernmental agreement between the United States and any other jurisdiction, which (in either case) facilitates the implementation of
paragraph (a) of this definition; or (c) any agreement pursuant to the implementation of paragraphs (a) or (b) of this definition with the United
States Internal Revenue Service, the United States government or any governmental or taxation authority in any other jurisdiction.
“ Finance Group ” means the Group and including any Joint Venture which is treated as a subsidiary undertaking under IFRS.
“ Finance Lease ” means any lease or hire purchase contract which would, in accordance with IFRS, be treated as a finance or
capital lease.
“ Finance Subsidiary ” means a Subsidiary which (a) has been formed for the purpose of, and whose primary activities are, the
issuance of debt obligations to Persons other than Affiliates and the lending of net proceeds of such debt obligations to the Parent Guarantor,
the Company and/or any Subsidiary Guarantor and/or any other Subsidiary and activities related thereto, and (b) has no significant assets other
than promissory notes evidencing such loans.
“ Finance Subsidiary Financial Indebtedness ” means any Financial Indebtedness of a Finance Subsidiary, to the extent that the
net proceeds thereof are lent on to the Parent Guarantor, the Company and/or any Subsidiary Guarantor.
“ Financial Half Year Date ” means each 31 December and 30 June.
“ Financial Indebtedness ” means any indebtedness for or in respect of:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;
(c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar
instrument;
(d) the amount of any liability in respect of any Finance Lease;
(e) receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);
(f) any amount raised under any other transaction (including any forward sale or purchase agreement) (but, for the avoidance of
doubt, excluding any liabilities of any member of the Group relating to any post-retirement benefit scheme or health care scheme) having the
commercial effect of a borrowing;
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(g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price
(and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);
(h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any
other instrument issued by a bank or financial institution (but other than trade instruments);
(i) any amount raised by the issue of redeemable shares which are capable of being redeemed (other than at the option of the
issuer) prior to November 4, 2025;
(j) any amount of any liability under an advance or deferred purchase agreement if one of the primary reasons behind the entry
into such agreement is to raise finance (and excluding, for the avoidance of doubt, any earn out provisions which are not intended to raise
finance); and
(k) (without double counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to
in paragraphs (a) to (j) above.
“ Forms ” is defined in Section 13.
“ GAAP ” means (a) with respect to the Parent Guarantor, either (i) generally accepted accounting principles as in effect in United
States of America from time to time as determined by the Parent Guarantor or (ii) IFRS and (b) with respect to any other Person, generally
accepted accounting principles applicable to such Person in its jurisdiction of incorporation or organization from time to time as determined by
such Person (including IFRS if so in effect at the time of determination).
“ Governmental Authority ” means
(a) the government of
(i) the United States of America or Bermuda or the United Kingdom or any State or other political subdivision of either
thereof, or
(ii) any other jurisdiction in the Parent Guarantor, which the Company or any Subsidiary conducts all or any part of its
business, or which asserts jurisdiction over any properties of the Parent Guarantor, the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such
government.
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“ Governmental Official ” means any governmental official or employee, employee of any government-owned or
government-controlled entity, political party, any official of a political party, candidate for political office or official of any public international
organization.
“ Group ” means, at any time, the Parent Guarantor and its Subsidiaries at such time.
“ Hazardous Material ” means any and all pollutants, toxic or hazardous wastes or other substances that might pose a hazard to
health and safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law, including, without limitation, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum, petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized substances.
“ HMRC ” is defined in Section 13.
“ HMRC Document(s) ” is defined in Section 13.
“ holder ” means, with respect to any Note the Person in whose name such Note is registered in the register maintained by the
Company pursuant to Section 14.1; provided, however, that if such Person is a nominee, then for the purposes of Sections 7, 12, 18.2 and 19
and any related definitions in this Schedule B, “holder” shall mean the beneficial owner of such Note whose name and address appears in such
register.
“ Holding Company ” means, in relation to a company or corporation, any other company or corporation in respect of which it is
a Subsidiary.
“ IFRS ” means generally accepted international financial reporting standards as from time to time set forth in the statements of
International Accounting Standards issued by the International Accounting Standards Board.
“ Institutional Investor ” means (a) any Purchaser of a Note, (b) any holder of a Note holding (together with one or more of its
affiliates) more than 5% of the aggregate principal amount of the Notes then outstanding, (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form, and (d) any Related Fund of any holder of any Note.
“ Joint Venture ” means any joint venture entity whether a company, unincorporated firm, undertaking, association, joint venture
or partnership or any other entity.
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“ Lien ” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention
agreement or Finance Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
“ Make-Whole Amount ” is defined in Section 8.7.
“ Material ” means material in relation to the business, operations, affairs, financial condition, assets or properties of the Parent
Guarantor and its Subsidiaries taken as a whole.
“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or
properties of the Parent Guarantor and its Subsidiaries taken as a whole, or (b) the ability of the Parent Guarantor or the Company to perform
its obligations under this Agreement and, with respect to the Company only, the Notes (having regard to any funds which can be made readily
available to it by any other member of the Group), or (c) the ability of any Subsidiary Guarantor to perform its obligations under the Subsidiary
Guarantee Deed to which it is then a party (having regard to any funds which can be made readily available to it by any other member of the
Group) or (d) the validity or enforceability of this Agreement or the Notes or any Subsidiary Guarantee Deed.
“ Material Subsidiary ” means, at any time, a Subsidiary of the Guarantor (excluding for all purposes in this calculation any Joint
Venture and any of its Subsidiaries from time to time (unless any such Joint Venture becomes a Wholly-Owned Subsidiary of the Parent
Guarantor which has earnings before interest, tax, depreciation and amortisation (calculated on the same basis as Consolidated EBITDA) or has
turnover (excluding intra group items) representing 10% or more of the earnings before interest, tax, depreciation and amortisation (calculated
on the same basis as Consolidated EBITDA of the Group) or turnover of the Group calculated on a consolidated basis determined
semi-annually by reference to the most recent Officer’s Certificate supplied by the Parent Guarantor pursuant to Section 7.2.
“ Memorandum ” is defined in Section 5.3.
“ Minority Interests ” means the proportion not held by a member of the Group of any participation, dividend, shareholding or
similar interest, direct or indirect, in any member of the Finance Group from time to time.
“ Multiemployer Plan ” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).
“ NAIC ” means the National Association of Insurance Commissioners or any successor thereto.
A-11
“ New Property ” is defined in Section 10.4(h).
“ Non-Group Entity ” means any investment or entity (which is not itself a member of the Group (including associates and Joint
Ventures)) in which any member of the Group has an ownership interest.
“ Non-U.S. Plan ” means any plan, fund or other similar program that (a) is established or maintained outside the United States of
America by the Company or any Subsidiary primarily for the benefit of employees of the Company or one or more Subsidiaries residing
outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income
in contemplation of retirement or payments to be made upon termination of employment, and (b) is not subject to ERISA or the Code.
“ Noteholder Sanctions Event ” means, with respect to any holder of a Note (an “ Affected Noteholder ”), such holder or any of
its affiliates being in violation of or subject to sanctions (a) under any U.S. Economic Sanctions Laws as a result of the Company or any
Controlled Entity becoming a Blocked Person or, directly or indirectly, having any investment in or engaging in any dealing or transaction
(including any investment, dealing or transaction involving the proceeds of the Notes) with any Blocked Person or (b) under any similar laws,
regulations or orders adopted by any State within the United States as a result of the name of the Company or any Controlled Entity appearing
on a State Sanctions List.
“ Notes ” is defined in Section 1(a).
“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.
“ OFAC Sanctions Program ” means any economic or trade sanction that OFAC is responsible for administering and enforcing.
A list of OFAC Sanctions Programs may be found at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx .
“ Officer’s Certificate ” means a certificate of a Senior Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
“ Original Subsidiary Guarantors ” means each of, and collectively, those Subsidiaries designated as Subsidiary Guarantors on
Schedule 5.4.
“ Parent Guarantor ” is defined in the first paragraph of this Agreement.
“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.
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“ Permitted Jurisdiction ” means (a) the United States of America, any State thereof or the District of Columbia, (b) Bermuda,
(c) the United Kingdom, (d) Canada or any Province thereof, (e) any member of the European Union as of December 31, 2003 (except Greece,
Italy, Portugal and Spain), (f) Jersey, (g) Switzerland, (h) Australia and (h) New Zealand.
“ Person ” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated
organization, business entity or Governmental Authority.
“ Plan ” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title I of ERISA that is or, within the
preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or
required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any
liability.
“ Pre-Default GAAP ” is defined in Section 24.2(b)(ii).
“ Principal Bank Facility ” means that certain U.S.$1,050,000,000 Facility Agreement dated 16 July 2012 as amended and
restated on 21 March 2014 and further amended on 13 June 2014 and further amended on 29 May 2015 between the Company, the Subsidiaries
of the Company listed therein as “Original Borrowers”, the Subsidiaries of the Company listed therein as “Original Guarantors”, Barclays Bank
PLC, HSBC Bank PLC, Royal Bank of Canada and The Royal Bank of Scotland plc, as arrangers and book runners, the financial institutions
listed therein as “Original Lenders” and HSBC Bank, as Agent, as the same may be amended, supplemented or modified from time to time and
any successor, replacement or supplemental syndicated credit facility or bilateral credit facility of the Company entered into to refinance,
replace or supplement the foregoing so long as the principal amount of indebtedness which is permitted to be incurred thereunder is equal to or
in excess of U.S.$250,000,000 (or its equivalent in any other currency), provided that if no credit facility permits indebtedness equal to or in
excess of US$250,000,000 (or its equivalent in any other currency), then the largest credit facility of the Company shall be deemed to be the
Principal Bank Facility.
“ property ” or “ properties ” means, unless otherwise specifically limited, real or personal property of any kind, tangible or
intangible, choate or inchoate.
“ PTE” is defined in Section 6.2(a).
“Purchaser” is defined in the first paragraph of this Agreement; provided that, after Closing, any Purchaser of a Note that ceases
to be the registered holder or a beneficial owner (through a nominee) of such Note as the result of a transfer thereof pursuant to Section 14.2
shall cease to be included within the meaning of “Purchaser” of such Note for the purposes of this Agreement upon such transfer.
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“ Qualified Institutional Buyer ” means any Person who is a “qualified institutional buyer” within the meaning of such term as
set forth in Rule 144A(a)(1) under the Securities Act.
“ Qualifying Holder ” means any Holder of a Note that beneficially owns the interest payable thereon and does not fall within
Article 11(4) of the UK/Japan Treaty.
“ Related Fund ” means, with respect to any holder of any Note, any fund or entity that is an “accredited investor” within the
meaning of Regulation D of the Securities Act and (a) invests in Securities or bank loans, and (b) is advised or managed by such holder, the
same investment advisor as such holder or by an affiliate of such holder or such investment advisor.
“ Relevant Period ” means each period of twelve months ending on or about the last day of the financial year and each period of
twelve months ending on or about each Financial Half Year Date.
“ Required Holders ” means, at any time, the holders of more than 50% in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by Parent Guarantor or the Company or any of their Affiliates or any Competitor).
“ Responsible Officer ” means any Senior Financial Officer, the Secretary, Assistant Secretary and any other officer of Parent
Guarantor or the Company with responsibility for the administration of the relevant portion of this Agreement.
“ Sanctions Prepayment Date ” is defined in Section 8.9(a).
“ Sanctions Prepayment Notice ” is defined in Section 8.9(a).
“ Sanctions Prepayment Offer ” is defined in Section 8.9(a).
“ Sanctions Prepayment Response Date ” is defined in Section 8.9(a).
“ SEC ” means the Securities and Exchange Commission of the United States, or any successor thereto.
“ Securities ” or “ Security ” shall have the meaning specified in Section 2(1) of the Securities Act.
“ Securities Act ” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
“ Senior Financial Officer ” means the Chief Executive Officer, Chief Financial Officer and Group Finance Director of the
Company or the Parent Guarantor.
“ series ” means one or both of the Series A Notes or the Series B Notes , as the context requires.
A-14
“ Series A Notes ” is defined in Section 1(a).
“ Series B Notes ” is defined in Section 1(a).
“ Significant Acquisition ” means the acquisition of assets by the Parent Guarantor, the Company and/or its Subsidiaries (whether
by a single transaction or a number of related transactions whether at the same time or over a period of time) the book value of which assets
equals or exceeds (a) U.S.$250,000,000 (or the equivalent thereof in another relevant currency) in the case of a single transaction or a number
of related transactions, or (b) U.S.$350,000,000 (or the equivalent thereof in another relevant currency) in the case of a number of transactions
(related or unrelated) during any Relevant Period or on a rolling 12-month period.
“ Source ” is defined in Section 6.2.
“ State Sanctions List ” means a list that is adopted by any state Governmental Authority within the United States of America
pertaining to Persons that engage in investment or other commercial activities in Iran or any other country that is a target of economic sanctions
imposed under U.S. Economic Sanctions Laws.
“ Subsidiary ” means, as to any Person, any other Person in which such first Person or one or more of its Subsidiaries or such first
Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such second Person, and any partnership or
joint venture if more than a 50% interest in the profits or capital thereof is owned by such first Person or one or more of its Subsidiaries or such
first Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions
without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a
“Subsidiary” is a reference to a Subsidiary of the Parent Guarantor.
“ Subsidiary Guarantor ” is defined in Section 1(c).
“ Subsidiary Guarantee Deed ” means a Subsidiary Guarantee Deed of any Subsidiary Guarantor, substantially in the form of
Exhibit 1(c).
“ SVO ” means the Securities Valuation Office of the NAIC or any successor to such Office.
“ Tax ” means any tax (whether income, documentary, sales, stamp, registration, issue, capital, property, excise or otherwise),
duty, assessment, levy, impost, fee, compulsory loan, charge or withholding imposed by any Governmental Authority.
“ Taxing Jurisdiction ” is defined in Section 13.
“ Tax Prepayment Notice ” is defined in Section 8.3.
A-15
“ Terms and Conditions ” means the HMRC DT Treaty Passport Scheme Terms and Conditions of July 2011 (or such other
conditions which replace them from time to time).
“ UK/Japan Treaty ” means the UK/Japan Double Tax Treaty effective from January 1, 2007.
“ U.S. Economic Sanctions Laws ” means those laws, executive orders, enabling legislation or regulations administered and
enforced by the United States pursuant to which economic sanctions have been imposed on any Person, entity, organization, country or regime,
including the Trading with the Enemy Act, the International Emergency Economic Powers Act, the Iran Sanctions Act, the Sudan
Accountability and Divestment Act and any other OFAC Sanctions Program.
“ U.S. Person ” has the meaning set forth in Section 7701(a)(30) of the Code.
“ USA Patriot Act ” means United States Public Law 107-56, Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in effect.
“ Wholly-Owned Subsidiary ” means, at any time, any Subsidiary all of the equity interests (except directors’ qualifying shares)
and voting interests of which are owned by any one or more of the Parent Guarantor and the Parent Guarantor’s other Wholly-Owned
Subsidiaries at such time.
A-16
EXHIBIT 1(a)(i)
Form of Series A Note
MARKIT GROUP HOLDINGS LIMITED
3.73% S ERIES A S ENIOR N OTE D UE N OVEMBER 4, 2022
No. RA-[
]
U.S.$[
]
[Date]
PPN:
FOR VALUE RECEIVED, the undersigned, MARKIT GROUP HOLDINGS LIMITED (herein called the “ Company” ), a company
incorporated in England and registered under number 06240773, hereby promises to pay to [
], or registered assigns, the principal sum of
[
] U.S. DOLLARS (or so much thereof as shall not have been prepaid) on November 4, 2022, with interest (computed on the basis
of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the rate of 3.73% per annum from the date hereof, payable
semiannually, on the 4th day of May and November in each year, commencing with the 4th May or 4th November next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount,
payable semi-annually as aforesaid (or, at the option of the registered holder hereof, on demand) at a rate per annum from time to time equal to
the Default Rate.
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the
United States of America at JPMorgan Chase Bank, N.A. or any successor thereto or at such other place as the Company shall have designated
by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the “ Notes ”) issued pursuant to the Note Purchase and Guarantee Agreement,
dated as of November 4, 2015 (as from time to time amended, the “ Note Purchase Agreement ”), by and among the Company, Markit Ltd., a
company incorporated in Bermuda and registered under number 48610 (the “ Parent Guarantor ”) and the respective Purchasers named
therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the
confidentiality provisions set forth in Section 21 of the Note Purchase Agreement and (ii) made the representations set forth in Section 6 of the
Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such
terms in the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer
accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.
The payment of this Note has been guaranteed by the Parent Guarantor and may from time to time be guaranteed by certain Subsidiary
Guarantors.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the
manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.
This Note, and any non-contractual obligation arising out of or in connection with it, shall be governed by and construed in accordance
with English law.
MARKIT GROUP HOLDINGS LIMITED
Name:
Title:
EXHIBIT 1(a)(ii)
Form of Series B Note
MARKIT GROUP HOLDINGS LIMITED
4.05% S ERIES B S ENIOR N OTE D UE N OVEMBER 4, 2025
No. RB-[
U.S.$[
]
]
[Date]
PPN:
FOR VALUE RECEIVED, the undersigned, MARKIT GROUP HOLDINGS LIMITED (herein called the “ Company ”), a company
incorporated in England and registered under number 06240773, hereby promises to pay to [
], or registered assigns, the principal sum of
[
] U.S. DOLLARS (or so much thereof as shall not have been prepaid) on November 4, 2025, with interest (computed on the basis
of a 360-day year of twelve 30-day months) (a) on the unpaid balance hereof at the rate of 4.05% per annum from the date hereof, payable
semiannually, on the 4th day of May and November in each year, commencing with the 4th May or 4th November next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law, on any overdue payment
(including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount,
payable semi-annually as aforesaid (or, at the option of the registered holder hereof, on demand) at a rate per annum from time to time equal to
the Default Rate.
Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the
United States of America at JPMorgan Chase Bank, N.A. or any successor thereto or at such other place as the Company shall have designated
by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of a series of Senior Notes (herein called the “ Notes ”) issued pursuant to the Note Purchase and Guarantee Agreement,
dated as of November 4, 2015 (as from time to time amended, the “ Note Purchase Agreement ”), by and among the Company, Markit Ltd., a
company incorporated in Bermuda and registered under number 48610 (the “ Parent Guarantor ”) and the respective Purchasers named
therein, and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, to have (i) agreed to the
confidentiality provisions set forth in Section 21 of the Note Purchase Agreement and (ii) made the representations set forth in Section 6 of the
Note Purchase Agreement. Unless otherwise indicated, capitalized terms used in this Note shall have the respective meanings ascribed to such
terms in the Note Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer
accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.
This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note
Purchase Agreement, but not otherwise.
The payment of this Note has been guaranteed by the Parent Guarantor and may from time to time be guaranteed by certain Subsidiary
Guarantors.
If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the
manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.
This Note, and any non-contractual obligation arising out of or in connection with it, shall be governed by and construed in accordance
with English law.
MARKIT GROUP HOLDINGS LIMITED
Name:
Title:
EXHIBIT 1(c)
Form of Subsidiary Guarantee Deed
[TO BE REVIEWED AND UPDATED BY LOCAL COUNSEL
IN ORDER TO ACCOUNT FOR ANY LIMITATIONS OR
LEGAL REQUIREMENTS FOR EACH JURISDICTION]
SUBSIDIARY GUARANTEE DEED
Dated as of [
], 20[
]
By
[NAME OF SUBSIDIARY GUARANTOR]
Re:
U.S.$210,000,000
3.73% Series A Senior Notes due November 4, 2022
and
U.S.$290,000,000
4.05% Series B Senior Notes due November 4, 2025
of
MARKIT GROUP HOLDINGS LIMITED
Re:
U.S.$210,000,000
3.73% Series A Senior Notes due November 4, 2022
and
U.S.$290,000,000
4.05% Series B Senior Notes due November 4, 2025
of
MARKIT GROUP HOLDINGS LIMITED
This Subsidiary Guarantee Deed (as may be amended, restated or otherwise modified from time to time, this “ Guarantee Deed ”)
is dated as of [
] [ ], 20[ ] by [
], a [
] organized under the laws of [
] (the “ Guarantor ”).
RECITALS:
A. The Guarantor is a direct or indirect subsidiary of Markit Ltd., a company incorporated in Bermuda and registered under
number 48610 (the “ Parent Guarantor ”).
B. Markit Group Holdings Limited, a company incorporated in England and registered under number 06240773 (the “ Company ”)
is another subsidiary of the Parent Guarantor.
C. In order to provide funds for general corporate purposes, the Company and the Parent Guarantor entered into a Note Purchase
and Guarantee Agreement dated as of November 4, 2015 (as may be amended, restated, or otherwise modified from time to time, the “
Agreement ”) with the institutions named on Schedule B to such Agreement (the “ Purchasers ”), providing for, among other things, the issue
and sale to the Purchasers of U.S.$210,000,000 aggregate principal amount of 3.73% Series A Senior Notes due November 4, 2022 and
U.S.$290,000,000 aggregate principal amount of 4.05% Series B Senior Notes due November 4, 2025 of the Company (collectively, as may be
amended, restated or otherwise modified from time to time, including any such notes of either series issued in substitution therefore pursuant to
Section 14 of the Agreement, the “ Notes ”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto
in the Agreement.
1
D. The Guarantor by reason of its interest in the financing by the Company and the Parent Guarantor of certain outstanding debt
and in order to induce the Purchasers to provide the Company and the Parent Guarantor with necessary funds for general corporate purposes
has agreed to execute this Guarantee Deed.
NOW, THEREFORE, in consideration of the premises and the receipt whereof is hereby acknowledged, the Guarantor does
hereby covenant and agree as follows:
SECTION 1. GUARANTY.
(a) The Guarantor hereby irrevocably, absolutely and unconditionally guarantees to the holders from time to time of the Notes:
(i) the full and prompt payment on demand of the principal of all of the Notes and of the interest thereon at the rate therein stipulated
(including, without limitation, to the extent legally enforceable, interest on any overdue principal, Make-Whole Amount, if any, and
interest at the rates specified in the Notes and interest accruing or becoming owing both prior to and subsequent to the commencement
of any bankruptcy, reorganization or similar proceeding involving the Company or the Parent Guarantor) and the Make-Whole Amount,
if any, and all other amounts owing to the holders from time to time under the Notes and the Agreement when and as the same shall
become due and payable, whether by lapse of time, upon redemption or prepayment, by extension or by acceleration or declaration, or
otherwise, (ii) the full and prompt performance and observance by the Company and the Parent Guarantor of each and all of the
covenants and agreements required to be performed or observed by such Persons under the terms of the Agreement, and (iii) payment,
upon demand by any holder of the Notes, of all costs and expenses, legal or otherwise (including reasonable attorneys’ fees) and such
expenses, if any, as shall have been expended or incurred in the protection or enforcement of any right or privilege under the Agreement
or this Guarantee Deed or in any consultation or action in connection therewith, and in each and every case irrespective of the validity,
regularity, or enforcement of any of the Notes or the Agreement or any of the terms thereof or of any other like circumstance or
circumstances (all of the obligations described in the foregoing clause (i), clause (ii) and clause (iii) being referred to herein as the “
Guaranteed Obligations ”). The guaranty of the Guaranteed Obligations herein provided for is a guaranty of the immediate and timely
payment of the principal, interest and Make-Whole Amount, if any, on the Notes as and when the same are due and payable and shall
not be deemed to be a guaranty only of the collectability of such payments and that in consequence thereof each holder of the Notes may
sue the Guarantor directly upon such Guaranteed Obligations. The Guarantor agrees as a primary obligation to indemnify each
Noteholder from time to time on demand from and against any loss incurred by it as a result of the Agreement, any Notes and/or this
Guarantee Deed being or becoming void, voidable or unenforceable for any reason whatsoever, whether or not known to such
Noteholder, the amount of such loss being the amount which such Noteholder would otherwise have been entitled to recover from the
Guarantor.
2
(b) Principal Obligor. The obligations of the Guarantor hereunder shall be deemed to be undertaken as principal obligor and not
merely as surety.
(c) Continuing Obligations. The obligations of the Guarantor hereunder shall be continuing obligations notwithstanding any
settlement of account or other matter or thing whatsoever and, in particular but without limitation, shall not be considered satisfied by
any intermediate payment or satisfaction of all or any of the Company’s obligations under or in respect of any Note and shall continue
in full force and effect until all sums due from the Company in respect of the Notes have been paid and all other obligations of the
Company thereunder or in respect thereof have been satisfied, in full.
SECTION 2. OBLIGATION ABSOLUTE AND UNCONDITIONAL; TERMINATION.
(a) This Guarantee Deed shall be absolute and unconditional and shall remain in full force and effect until the entire principal,
interest, Make-Whole Amount (if any) on the Notes and all other sums due pursuant to the Agreement and the Notes shall have been
fully, finally and indefeasibly paid and such Guaranteed Obligations shall not be affected, modified or impaired upon the happening
from time to time of any event or condition, including without limitation any of the following, whether or not with notice to or the
consent of the Guarantor:
(i) the power or authority or the lack of power or authority of the Company to issue the Notes or of the Company or the
Parent Guarantor to execute and deliver the Agreement, and irrespective of the validity of the Notes, or the Agreement or of any
defense whatsoever that the Company or the Parent Guarantor may or might have to the payment of the Notes (including, without
limitation, principal, interest, Make-Whole Amount, if any) or to the performance or observance of any of the provisions or
conditions of the Agreement, or the existence or continuance of the Company or the Parent Guarantor as a legal entity;
(ii) any failure to present the Notes for payment or to demand payment thereof, or to give the Guarantor or the Company or
the Parent Guarantor notice of dishonor for non-payment of the Notes, when and as the same may become due and payable, or
notice of any failure on the part of the Company or the Parent Guarantor to do any act or thing or to perform or to keep any
covenant or agreement by either of them to be done, kept or performed under the terms of the Notes or the Agreement;
(iii) additional money lent to the Company or the Parent Guarantor, any extension of the obligation of the Notes, either
indefinitely or for any period of time, or any other modification in the obligation of the Notes or of the Agreement or the Company
or the Parent Guarantor thereon, or in connection therewith, or any sale, release, substitution or exchange of any security;
3
(iv) any act or failure to act with regard to the Notes or the Agreement or anything which might vary the risk of the
Guarantor (including, without limitation, any release or substitution of any one or more of the endorsers or guarantors of the
Guaranteed Obligations);
(v) any action taken under the Agreement in the exercise of any right or power thereby conferred or any failure or omission
on the part of any holder of any Note to first enforce any right or security given under the Agreement or any failure or omission on
the part of any holder of any of the Notes to first enforce any right against the Company or the Parent Guarantor or any other
Subsidiary Guarantor;
(vi) the waiver, compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of
the Company or the Parent Guarantor contained in the Agreement, or of any other Subsidiary Guarantor contained in any other
Subsidiary Guarantee Deed, or of the payment, performance or observance thereof;
(vii) the failure to give notice to the Company, or the Parent Guarantor, the Guarantor or any other Subsidiary Guarantor of
the occurrence of any Default or Event of Default under the terms and provisions of the Agreement;
(viii) the extension of the time for payment of any principal of, or interest (or Make-Whole Amount or any other amount, if
any), on any Note owing or payable on such Note or of the time of or for performance of any obligations, covenants or agreements
under or arising out of the Agreement or the extension or the renewal of any thereof;
(ix) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the
Agreement, the Notes and each Subsidiary Guarantee Deed, including, without limitation, any increase in the principal amount,
interest rate or prepayment amounts;
(x) any failure, omission, delay or lack on the part of the holders of the Notes to enforce, assert or exercise any right, power
or remedy conferred on the holders of the Notes in the Agreement, the Notes or any other Subsidiary Guarantee Deed or any other
act or acts on the part of the holders from time to time of the Notes;
(xi) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets,
marshaling of assets
4
and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement under
bankruptcy or similar laws, composition with creditors or readjustment of, or other similar procedures affecting the Guarantor, or
any other Subsidiary Guarantor, or the Company or the Parent Guarantor or any of the assets of any of them, or any allegation or
contest of the validity of the Agreement or any other Subsidiary Guarantee Deed or the disaffirmance of the Agreement or any
other Subsidiary Guarantee Deed in any such proceeding (it being understood that the obligations of the Guarantor under this
Guarantee Deed shall continue to be effective or be reinstated, as the case may be, if at any time any payment made with respect to
the Notes is rescinded or must otherwise be restored or returned by any holder of the Notes upon the insolvency, bankruptcy or
reorganization of the Company or the Parent Guarantor, the Guarantor or any other Subsidiary Guarantor, all as though such
payment had not been made);
(xii) any event or action that would, in the absence of this clause, result in the release or discharge by operation of law of the
Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guarantee Deed;
(xiii) the invalidity or unenforceability of the Agreement, the Notes and any other Subsidiary Guarantee Deed;
(xiv) the invalidity or unenforceability of the obligations of the Guarantor under this Guarantee Deed, the absence of any
action to enforce such obligations of the Guarantor, any waiver or consent by the Guarantor with respect to any of the provisions
hereof or any other circumstances which might otherwise constitute a discharge or defense by the Guarantor, including, without
limitation, any failure or delay in the enforcement of the obligations of the Guarantor with respect to this Guarantee Deed or of
notice thereof; or any suit or other action brought by any shareholder or creditor of, or by, the Guarantor or any other Person, for
any reason, including, without limitation, any suit or action in any way attacking or involving any issue, matter or thing in respect
of this Guarantee Deed, the Agreement or the Notes or any other agreement;
(xv) the default or failure of any Subsidiary Guarantor fully to perform any of its covenants or obligations set forth in its
respective Subsidiary Guarantee Deed;
(xvi) the impossibility or illegality of performance on the part of the Company, the Parent Guarantor or any other Person of
its obligations under any of the Agreement, the Notes and each Subsidiary Guarantee Deed or any other instruments;
5
(xvii) in respect of the Company, the Parent Guarantor or any other Person, any change of circumstances, whether or not
foreseen or foreseeable, whether or not imputable to the Company, the Parent Guarantor or any other Person, or other
impossibility of performance through fire, explosion, accident, labor disturbance, floods droughts, embargoes, wars (whether or
not declared), civil commotions, acts of God or the public enemy, delays or failure of suppliers or carriers, inability to obtain
materials, action of any regulatory body or agency, change of law or any other causes affecting performance, or other force
majeure, whether or not beyond the control of the Company, the Parent Guarantor or any other Person and whether or not of the
kind hereinbefore specified;
(xviii) any attachment, claim, demand, charge, lien, order, process, encumbrance or any other happening or event or reason,
similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments,
expenses, indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or
against any Person, or any claims, demands, charges or liens of any nature, foreseen or unforeseen, incurred by any Person, or
against any sums payable under this Guarantee Deed, so that such sums would be rendered inadequate or would be unavailable to
make the payments herein provided;
(xix) the failure of the Guarantor to receive any benefit or consideration from or as a result of its execution, delivery and
performance of this Guarantee Deed;
(xx) any sale, exchange, release or surrender of any property at any time pledged or granted as security in respect of the
Guaranteed Obligations, whether so pledged or granted by the Guarantor or another guarantor of the obligations of the Company
and the Parent Guarantor under the Agreement, the Notes and each Subsidiary Guarantee Deed; or
(xxi) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Guarantor in
respect of the obligations of the Guarantor under this Guarantee Deed;
provided that the specific enumeration of the above-mentioned acts, failures or omissions shall not be deemed to exclude any other acts,
failures or omissions, though not specifically mentioned above, it being the purpose and intent of this paragraph that the obligations of the
Guarantor hereunder shall be absolute and unconditional to the extent herein specified and shall not be discharged, impaired or varied except by
the full, final and indefeasible payment to the holders thereof of the principal of, interest on and Make-Whole Amount, if any, and any other
amounts due in respect of the Notes, and then only to the extent of such payments. Without limiting any of the other terms or provisions hereof,
it is understood and agreed that in order to hold the Guarantor liable hereunder,
6
there shall be no obligation on the part of any holder of any Note to resort, in any manner or form, for payment, to the Company, to any other
Person or to the properties or estates of any of the foregoing. All rights of the holder of any Note pursuant thereto or to this Guarantee Deed
may be transferred or assigned at any time or from time to time and shall be considered to be transferred or assigned upon the transfer of such
Note whether with or without the consent of or notice to the Guarantor, the Company or the Parent Guarantor. Without limiting the foregoing,
it is understood that repeated and successive demands may be made and recoveries may be had hereunder as and when, from time to time, the
Company or the Parent Guarantor shall default under the terms of the Notes or the Agreement and that notwithstanding recovery hereunder for
or in respect of any given default or defaults by the Company or the Parent Guarantor under the Notes or the Agreement, this Guarantee Deed
shall remain in full force and effect and shall apply to each and every subsequent default.
(b) To the fullest extent permitted by law, the Guarantor does hereby expressly waive:
(i) all of the matters specified in clause (a) of this Section 2 and any notices in respect thereof;
(ii) notice of acceptance of this Guarantee Deed;
(iii) notice of any purchase or acceptance of the Notes under the Agreement, or the creation, existence or acquisition of any
of the Guaranteed Obligations, subject to the Guarantor’s right to make inquiry of each holder to ascertain the amount of the
Guaranteed Obligations at any reasonable time;
(iv) notice of the amount of the Guaranteed Obligations, subject to the Guarantor’s right to make inquiry of each holder to
ascertain the amount of the Guaranteed Obligations at any reasonable time; and
(v) any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any
time hereafter in force that, but for this waiver, might be applicable to any sale of property of the Guarantor made under any
judgment, order or decree based on this Guarantee Deed, and the Guarantor covenants that it will not at any time insist upon or
plead, or in any manner claim or take the benefit or advantage of any such law.
(c) Each of the rights and remedies granted under this Guarantee Deed to each holder in respect of the Notes held by such holder
may be exercised by such holder without notice to, or the consent of or any other action by, any other holder. Each holder may proceed
to protect and enforce this Guarantee Deed by making the payment hereunder on demand, by suit or suits or proceedings in equity, at
law or in bankruptcy, and whether for the specific performance of any
7
covenant or agreement contained herein or in execution or aid of any power herein granted; or for the recovery of judgment for the
obligations hereby guarantied or for the enforcement of any other proper, legal or equitable remedy available under applicable law.
(d) If any holder shall have instituted any proceeding to enforce any right or remedy under this Guarantee Deed or under any Note
held by such holder and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined
adversely to such holder, then and in every such case each such holder and the Company and the Parent Guarantor shall, except as may
be limited or affected by any determination in such proceeding, be restored severally and respectively to its respective former position
hereunder and thereunder, and thereafter the rights and remedies of such holders shall continue as though no such proceeding had been
instituted.
(e) Notwithstanding anything to the contrary above, the Guarantor, by written notice to each holder of a Note, may terminate this
Guarantee Deed at any time and all obligations hereunder arising after the date of said termination in accordance with Section 9.8 of the
Agreement, provided , that, at the time of and after giving effect to such termination, no Default or Event of Default shall have occurred
and be continuing under the Agreement.
(f) Any term or provision of this Guarantee Deed, the Agreement or of the Notes notwithstanding, if any U.S. federal or state
fraudulent conveyance laws are determined by a court of competent jurisdiction to be applicable to the obligations of a Guarantor
hereunder, such Guarantor’s obligations hereunder shall be limited to the maximum aggregate amount of the obligations that would not
render such Guarantor’s obligations subject to avoidance under applicable U.S. federal or state fraudulent conveyance laws.
[SECTION 2A. LUXEMBOURG GUARANTEE LIMITATIONS.
(a) Notwithstanding anything to the contrary contained in this Guarantee Deed, the aggregate maximum amount payable by any
Guarantor incorporated in Luxembourg, in respect of the aggregate amount of its guarantee or indemnity obligations under this
Guarantee Deed for the obligations of any person which is not its direct or indirect subsidiary shall be limited at any time to an amount
(the “ Amount ”) not exceeding the higher of:
(i)
95 per cent. of such Guarantor’s net assets ( capitaux propres ) and the subordinated debts ( dettes subordonnées ) owed
by such Guarantor (excluding however any amounts borrowed by such Guarantor as per section (b) below) (the “
Guarantor Subordinated Debt ”), as determined by article 34 of the Luxembourg law of December 19, 2002 on the
Register of Commerce and Companies, on accounting and on annual accounts of the companies (the “ 2002 Law ”) at the
date of this Guarantee Deed; and
(ii)
95 per cent. of such Guarantor’s net assets ( capitaux propres ) and the Guarantor Subordinated Debt as determined by
article 34 of the 2002 Law at the date the guarantee is called.
(b) The above limitation shall not apply to any amounts (if any) borrowed by the Company under the Notes where the borrowed
amounts have been directly or indirectly lent or otherwise made available by the Company to a Guarantor which is incorporated in
Luxembourg or to any direct or indirect subsidiary of such Guarantor.]
8
SECTION 3. SUBROGATION PAYMENTS HELD IN TRUST.
(a) To the extent of any payments made under this Guarantee Deed, the Guarantor shall be subrogated to the rights of the holder of
the Notes receiving such payments, but the Guarantor covenants and agrees that such right of subrogation shall be subordinate in right
of payment to the rights of any holders of the Notes for which full payment has not been made or provided for and, to that end, the
Guarantor agrees not to claim or enforce any such right of subrogation or any right of setoff or any other right which may arise on
account of any payment made by the Guarantor in accordance with the provisions of this Guarantee Deed unless and until all of the
Guaranteed Obligations (other than those arising by subrogation as aforesaid) owned by Persons other than the Guarantor and all other
sums due or payable under this Guarantee Deed have been fully paid and discharged or payment therefor has been provided.
(b) If any payment shall be made to the Guarantor by the Company, the Parent Guarantor or any other guarantor of the Notes of
any amounts owing to the Guarantor by the Company, the Parent Guarantor or such other guarantor during any time when the
obligations of the Guarantor hereunder shall have become due and payable, the Guarantor shall hold in trust all such payments for the
benefit of the holders of the Notes.
SECTION 4. PREFERENCE.
The Guarantor agrees that to the extent the Company, the Parent Guarantor or any other Person makes any payment on the
Guaranteed Obligations, which payment or any part thereof is subsequently invalidated, voided, declared to be fraudulent or preferential, set
aside, or is required to be repaid to a trustee, receiver or any other Person under any bankruptcy code, common law, or equitable cause, then
and to the extent of such payment, the obligation or the part thereof intended to be satisfied shall be revived and continued in full force and
effect with respect to the Guarantor’s obligations hereunder, as if said payment had not been made. The liability of the Guarantor hereunder
shall not be reduced or discharged, in whole or in part, by any payment to any holder of the Notes from any source that is thereafter paid,
returned or refunded in whole
9
or in part by reason of the assertion of a claim of any kind relating thereto, including, but not limited to, any claim for breach of contract,
breach of warranty, preference, illegality, invalidity or fraud asserted by any account debtor or by any other Person.
SECTION 5. MARSHALING.
None of the holders of the Notes shall be under any obligation (a) to marshal any assets in favor of the Guarantor or in payment of
any or all of the liabilities of the Company under or in respect of the Notes or the obligation of the Guarantor hereunder or (b) to pursue any
other remedy that the Guarantor may or may not be able to pursue itself and that may lighten the Guarantor’s burden, any right to which the
Guarantor hereby expressly waives.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor represents and warrants to you as follows:
(a) Organization and Authority . The Guarantor is a
duly organized, validly existing and, to the extent such concept is
recognized, in good standing under the laws of its jurisdiction of incorporation; the Guarantor has the corporate (or other appropriate)
power and authority to own its properties and to conduct its business and is duly qualified as a foreign entity and, to the extent such
concept is recognized, is in good standing in each other jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or, to the extent such concept is recognized, in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Transaction Is Legal and Authorized . The issuance of this Guarantee Deed and compliance with all of the provisions of this
Guarantee Deed
(1) are within the corporate (or other) powers of the Guarantor;
(2) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not
conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under the articles of
association, charter or By-laws or other constitutive documents of the Guarantor or any indenture or other agreement or instrument
to which the Guarantor is a party or by which it may be bound or result in the imposition of any Lien on any property of the
Guarantor except in any such cases which could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and
(3) have been duly authorized by proper action on the part of the Guarantor and any required action by the stockholders or
other equity holders of the Guarantor required by law or by the articles of association, charter or By-laws or other constitutive
documents of the Guarantor or otherwise, executed and delivered by the Guarantor and this Guarantee Deed constitutes the legal,
valid and binding obligation, contract and agreement of the Guarantor enforceable in accordance with its terms, except as such
terms may be limited by (i) bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the enforcement of creditors’
rights generally and (ii) equitable principles of general applicability (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
10
(c) Governmental Consent . No approval, consent or withholding of objection on the part of any regulatory body is necessary in
connection with the execution and delivery by the Guarantor of this Guarantee Deed or compliance by the Guarantor with any of the
provisions of this Guarantee Deed.
(d) Commercial Benefit . The Guarantor will derive a commercial benefit from the execution and delivery of this Guarantee Deed.
(e) Solvency . After giving effect to the execution and delivery of this Guarantee Deed and taking into account (i) the likelihood of
being required to perform this Guarantee Deed and (ii) the fact that the Guarantor does not have any intention to defraud any of its
creditors, the Guarantor is solvent and able to pay its debts as and when they become due and payable.
Without in any way limiting the generality of the warranties and representations contained in Section 5 of the Agreement, each of
such warranties and representations is, insofar as it refers to any Subsidiary, true and correct with respect to the Guarantor.
The Guarantor will comply with each of the provisions of Section 9 and Section 10 of the Agreement, and each other covenant and
agreement contained therein, that is applicable to any Subsidiary generally.
[SECTION 7. PAYMENTS FREE AND CLEAR OF TAXES.]
[ Provisions to be inserted for non-U.S. guarantors only ]
7.1
Gross Up .
All payments whatsoever under this Guarantee Deed will be made by the Guarantor in Dollars free and clear of, and without liability or
withholding or deduction
11
for or on account of, any present or future Taxes of whatever nature imposed or levied on such payments made to any holder of Notes by or on
behalf of any jurisdiction (other than the jurisdiction in which such holder is resident for tax purposes) (a) in which the Guarantor is
incorporated, organized, managed or controlled or otherwise resides for tax purposes or (b) where a branch or office through which the
Guarantor is acting for purposes of this Guarantee Deed is located or from or through which the Guarantor is making any payment (or any
political subdivision or taxing authority of or in such jurisdiction) (hereinafter a “ Taxing Jurisdiction ”), unless the withholding or deduction of
such Tax is compelled by law.
If any deduction or withholding for any Tax of a Taxing Jurisdiction shall at any time be required in respect of any amounts to be paid by
the Guarantor under this Guarantee Deed, the Guarantor will pay to the relevant Taxing Jurisdiction the full amount required to be withheld,
deducted or otherwise paid before penalties attach thereto or interest accrues thereon and pay to each holder of a Note such additional amounts
as may be necessary in order that the net amounts paid to such holder pursuant to the terms of this Guarantee Deed after such deduction,
withholding or payment (including, without limitation, any required deduction or withholding of Tax on or with respect to such additional
amount), shall be not less than the amounts then due and payable to such holder under the terms of this Guarantee Deed before the assessment
of such Tax, provided that no payment of any additional amounts shall be required to be made,
(a) for or on account of any Tax that would not have been imposed but for the existence of any present or former connection
between such holder (or a fiduciary, settlor, beneficiary, member of, shareholder of, or possessor of a power over, such holder, if such
holder is an estate, trust, partnership or corporation or any Person other than the holder to whom the Notes or any amount payable
thereon is attributable for the purposes of such Tax) and the Taxing Jurisdiction, other than the mere holding of the relevant Note or the
receipt of payments thereunder or in respect thereof, including, without limitation, such holder (or such other Person described in the
above parenthetical) being or having been a citizen or resident thereof, or being or having been present or engaged in trade or business
therein or having or having had an establishment, office, fixed base or branch therein, provided that this exclusion shall not apply with
respect to a Tax that would not have been imposed but for the Guarantor, after the date of this Guarantee Deed, opening an office in,
moving an office to, reincorporating in, or changing the Taxing Jurisdiction from or through which payments on account of this
Guarantee Deed are made to, the Taxing Jurisdiction imposing the relevant Tax;
(b) for or on account of any Tax that would not have been imposed but for the delay or failure by such holder (following a written
request by the Guarantor or its legal counsel) in the filing with the relevant Taxing Jurisdiction of Forms (as defined below) that are
required to be filed by such holder to avoid or reduce such Taxes (including for such purpose any extensions, refilings or
12
renewals of filings that may from time to time be required by the relevant Taxing Jurisdiction) and/or in the delay or failure by such
holder to take such other reasonably requested actions in order to mitigate the amount of any such Tax, provided that the filing of such
Forms and/or the taking of such other actions would not (in such holder’s reasonable judgment) impose any unreasonable burden (in
time, resources or otherwise) on such holder or result in any confidential or proprietary income tax return information being revealed,
either directly or indirectly, to any Person and such delay or failure could have been lawfully avoided by such holder, provided further ,
that the submission of the HMRC Documents (as defined below) shall not constitute the imposition of any such unreasonable burden or
constitute the disclosure of any confidential or proprietary income tax return information for the purpose hereof, and provided further
that such holder shall be deemed to have satisfied the requirements of this clause (b) upon the good faith completion and submission of
such Forms (including extensions, refilings or renewals of filings), or taking of such actions, as may be specified in a written request of
the Guarantor no later than 60 days after receipt by such holder of such written request (accompanied by copies of such Forms and
related instructions, if any, all in the English language or with an English translation thereof) provided , however , that in the case of a
written request from the Guarantor or its legal counsel that an application be made for an extension or renewal of a direction from Her
Majesty’s Revenue & Customs (“ HMRC ”) made pursuant to an HMRC Form US-Company 2002 or similar Form, such holder shall be
deemed to have satisfied the requirements of this clause (b) upon the good faith submission of such application to HMRC not less than
six (6) months prior to the date on which such direction is to expire (subject to the Guarantor’s compliance with the requirement below
to provide at least 9 months but no more than 12 months prior written notice) provided further that such holder shall be deemed to have
satisfied the requirements of this clause (b) upon providing the Guarantor with such holder’s valid HMRC DT Treaty Passport Scheme
reference number and Taxing Jurisdiction in Schedule B of the Agreement;
(c) for or on account of any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other
governmental charge;
(d) to any holder of a Note that is registered in the name of a nominee if under the law of the relevant Taxing Jurisdiction (or the
current regulatory interpretation of such law) securities held in the name of a nominee do not qualify for an exemption from the relevant
Tax and the Guarantor shall have given timely notice of such law or interpretation to such holder;
(e) for any Tax imposed under FATCA;
(f) with regard to any holder of a Note to which Section 13.3 of the Agreement applies, for or on account of any Tax that would
not have been imposed but for the breach of the holder of any of the Terms and Conditions; or
(g) any combination of clauses (a), (b), (c), (d), (e) and (f) above;
13
and provided further that:
(x) in no event shall the Guarantor be obligated to pay such additional amounts to any holder of a Note not resident in the United
States of America in excess of the amounts that the Guarantor would be obligated to pay if such holder had been a resident of the United
States of America for the purposes of, and fully eligible for the benefits of, any double taxation treaty from time to time in effect
between the United States of America and the relevant Taxing Jurisdiction, and all necessary formalities had been completed and all
conditions in the treaty had been satisfied for full exemption from Tax imposed on any payment made under this Guarantee Deed by the
relevant Taxing Authority at the time of payment of any amounts under this Guarantee Deed;
(y) except in the case where Section 7.3 applies and notwithstanding any other provisions of this Section 7, in no event shall the
Guarantor be obligated to pay any such additional amounts whatsoever to any holder of a Note resident in the United States of America
who has failed to (i) (A) file a validly completed and executed HMRC Form US/Company 2002 and/or other relevant claim form(s) and
documentation (collectively, the “ HMRC Documents ” and “ HMRC Document ” shall be construed accordingly) with the United States
Internal Revenue Service [INSERT LANGUAGE RELEVANT FOR NON-U.S. NOTEHOLDERS] and (B) provide full copies thereof
(together with evidence of receipt by the United States Internal Revenue Service [or other relevant tax authority]) to the Designated Tax
Officer, all not less than 120 days prior to the relevant interest payment date or (ii) (A) file or refile any HMRC Document and any other
accompanying document required to be filed with such HMRC Document with HMRC in order to extend or renew any direction given
pursuant to a previously filed HMRC Document and (B) provide full copies thereof to the Designated Tax Officer, all not less than 120
days prior to the relevant interest payment date; and
(z) in no event shall the Guarantor be obligated to pay such additional amounts whatsoever to any holder of a Note resident in the
United States of America and who is not entitled pursuant to the double taxation treaty currently in effect between the United States of
America [or other relevant jurisdiction] and the relevant Taxing Jurisdiction to a full exemption from Tax imposed on any payment
made under this Guarantee Deed by the relevant Taxing Jurisdiction and would not be so entitled even if all necessary procedural
formalities were completed and all conditions in the relevant treaty were satisfied for such exemption from such Tax at the time any
payment was made or due to be made under this Guarantee Deed.
14
7.2. Treaty Clearance .
At the time any Guarantor is called to act on the guarantee provided hereunder in accordance with the terms of this Guarantee Deed, such
Guarantor or its legal counsel will furnish each Purchaser which provides a United States Tax Identification Number in Schedule B or its legal
counsel with copies of the HMRC Documents (other than any documents that may be created by the Purchaser and are required to be filed with
any HMRC Document) required to be filed pursuant to Section 13.1(b) above, and in connection with the transfer of any Note the Company or
its legal counsel will, within 30 days of the registration of such transfer, furnish the transferee of such Note with copies of any such HMRC
Documents or other Forms (other than any documents that may be created by the transferee and are required to be filed with any HMRC
Document or other Form) then required (such furnishing of such HMRC Documents or other Forms shall be deemed to be the written request
of the Company or its legal counsel required by Section 13.1(b) so that no further request must be made, and which written request shall be
deemed to have been given on the date that such HMRC Documents or other Forms are furnished to the Purchaser or the transferee of any Note
(as the case may be) but no earlier than the date of the Closing).
The Company or its legal counsel shall provide to each holder of a Note written notice of the date of expiry of any direction given
pursuant to an HMRC Document at least nine (9) months but no more than twelve (12) months prior to such expiry and, at the time of such
notice, any HMRC Documents then required in respect of any extension, refiling or renewal. The giving of such notice and the provision of any
such HMRC Documents shall be deemed to be the written request of the Company or its legal counsel to make an application for an extension
or renewal of a direction from HMRC made pursuant to an HMRC Document for the purposes of any paragraph of this Section 13 so that no
further request need be made, and such written request shall be deemed to have been given on the date that such notice is received by the holder
of a Note.
At the time any Guarantor is called to act on the guarantee provided hereunder in accordance with the terms of this Guarantee Deed, such
Guarantor or its legal counsel will furnish each Purchaser or its legal counsel with copies of the appropriate Form (and English translation if
required as aforesaid) currently required to be filed in [
] pursuant to Section 7.1(b), if any (such furnishing of such forms to be
deemed to be the written request of the Guarantor as aforesaid so that no further request must be made, and which such written request and
related filing instructions will be deemed to have been given on the date that such forms are furnished), and in connection with the transfer of
any Note the Guarantor or its legal counsel will furnish the transferee of such Note or its legal counsel with copies of any Form and English
translation then required.
Subject to the limitations of Section 7.1(b) [and (y)] above, by acceptance of any Note, the holder of such Note agrees that it will from
time to time with reasonable promptness (i) duly complete and deliver to or as reasonably directed by the Guarantor all such forms, certificates,
documents and returns provided to such holder or its legal counsel by the Guarantor or its legal counsel (collectively, together with instructions
for completing the same, “ Forms ”) required to be filed by or on behalf of such holder in order to avoid or reduce any such Tax pursuant to the
provisions of an applicable statute,
15
regulation or administrative practice of the relevant Taxing Jurisdiction or of a tax treaty between the United States of America and such
Taxing Jurisdiction and (ii) provide the Guarantor with such information with respect to such holder as the Guarantor may reasonably request
in order to complete any such Forms, provided that nothing in this Section 7 shall require any holder to provide information with respect to any
such Form or otherwise if in the good faith opinion of such holder such Form or disclosure of information would involve the disclosure of tax
return or other information that is confidential or proprietary to such holder, and provided further that each such holder shall be deemed to have
complied with its obligation under this paragraph with respect to any Form if such Form shall have been duly completed and delivered by such
holder to the Guarantor or mailed to the appropriate taxing authority, whichever is applicable, within 60 days following a written request of the
Guarantor (which request shall be accompanied by copies of such Form and English translations of any such Form not in the English language)
and, in the case of a transfer of any Note, at least 90 days prior to the relevant interest payment date; provided that (i) where such Form has
been mailed to the appropriate taxing authority, each such holder shall have provided a copy of such submitted Form to the Guarantor, and a
copy of the acknowledgment of receipt of the Form from the appropriate taxing authority if available or possible to request such
acknowledgment of receipt from the appropriate taxing authority and (ii) each such holder shall have responded to any query relating to such
Form from the appropriate taxing authority within the longer of (1) the applicable time limits (if any such limits exist) and (2) 30 days of
receipt of such query by the holder.
7.3. Passport Scheme .
Any Purchaser or other holder of a Note who holds a passport under the HMRC DT Treaty Passport Scheme (the “ Scheme ”), and who
wishes the Scheme to apply to this Guarantee Deed, shall notify the Guarantors (in accordance with Section 9 hereof) of its Scheme reference
number and its jurisdiction of tax residence. Such notice shall be deemed to have been given by each Purchaser or other holder of a Note to the
extent such information is listed on Schedule B to the Agreement or has been subsequently provided to the Company (whether in connection
with the purchase of a Note from another holder after the date of the Closing or otherwise). At the time any Guarantor is called to act on the
guarantee provided hereunder in accordance with the terms of this Guarantee Deed, such Guarantor shall file a duly completed DTTP2 in
respect of each such holder that has provided such notice (or has been deemed to have provided such notice) with HMRC and shall provide
each such holder with a copy of that filing, provided that such notice is given to such Guarantor prior to the 30th “working day” (as defined in
the Scheme) following the date such Guarantor is so called to act under this Guarantee Deed. For the avoidance of doubt, a Guarantor shall not
be liable for any loss or damage to a holder of Notes if the completed DTTP2 is not filed by a Guarantor within 30 working days of the date a
Guarantor is called to act under this Guarantee Deed as a result of a default or delay of the holder.
It shall thereafter be the sole responsibility of the holder of any Note to comply with the Terms and Conditions (other than the Terms and
Conditions for which the
16
Guarantor is or the Company was responsible) including without limitation renewing its passport from time to time and notifying HMRC of
any material change to its form or circumstances.
7.4. Tax Credits, Etc .
If any payment is made by the Guarantor to or for the account of the holder of any Note after deduction for or on account of any Taxes,
and increased payments are made by the Guarantor pursuant to this Section 7, then, if such holder in its discretion (acting reasonably)
determines that it has received, utilized (in the case of a credit or allowance) or been granted a refund of, or credit or allowance with respect to,
such Taxes, such holder shall, to the extent that it can do so without prejudice to the retention of the amount of such refund, credit or allowance,
reimburse to the Guarantor the amount of such refund, credit or allowance as such holder shall, in its discretion (acting reasonably), determine
to be attributable to the relevant Taxes or deduction or withholding. Nothing herein contained shall interfere with the right of the holder of any
Note to arrange its tax affairs in whatever manner it thinks fit and, in particular, no holder of any Note shall be under any obligation to claim
relief from its corporate profits or similar tax liability in respect of such Tax in priority to any other claims, reliefs, credits or deductions
available to it or (other than as set forth in Section 7.1(b) above) oblige any holder of any Note to disclose any information relating to its tax
affairs or any computations in respect thereof.
The Guarantor will furnish the holders of Notes, promptly and in any event within 60 days after the date of any payment by the Guarantor
of any Tax in respect of any amounts paid under this Guarantee Deed, the original tax receipt (or a certificate of Tax deducted) issued by the
relevant taxation or other authorities involved for all amounts paid as aforesaid (or if such original tax receipt (or a certificate of Tax deducted)
is not available or must legally be kept in the possession of the Guarantor, a duly certified copy of the original tax receipt or any other
reasonably satisfactory evidence of payment), together with such other documentary evidence with respect to such payments as may be
reasonably requested from time to time by any holder of a Note.
If the Guarantor is required by any applicable law, as modified by the practice of the taxation or other authority of any relevant Taxing
Jurisdiction, to make any deduction or withholding of any Tax in respect of which the Guarantor would be required to pay any additional
amount under this Section 7, but for any reason (other than the delay or default of the relevant holder of a Note in the making of any filing of a
Form (assuming the holder has not satisfied the requirements of Section 7.3) described above or otherwise) does not make such deduction or
withholding with the result that a liability in respect of such Tax is assessed directly against the holder of any Note, and such holder pays such
liability, then the Guarantor will promptly reimburse such holder for such payment (including any related interest or penalties to the extent such
interest or penalties arise by virtue of a default or delay by the Guarantor) upon demand by such holder accompanied by an official receipt (or a
duly certified copy thereof) issued by the taxation or other authority of the relevant Taxing Jurisdiction.
17
If the Guarantor makes payment to or for the account of any holder of a Note after deduction for or on account of any Tax and such
holder is entitled to a refund of or credit or allowance with respect to the Tax to which such payment is attributable upon the making of a filing
(other than a Form described above except where any such Form may also be used to request any such refund, credit or allowance for such
Tax), then such holder shall, as soon as practicable after receiving written request from the Guarantor (which shall specify in reasonable detail
and supply the refund, credit and/or allowance forms to be filed) use reasonable efforts to complete and deliver such refund, credit and/or
allowance forms to or as directed by the Guarantor, subject, however, to the same limitations with respect to Forms as are set forth above.
The obligations of the Guarantor under this Section 7 shall survive the payment or transfer of any Note and the provisions of this
Section 7 shall also apply to successive transferees of the Notes.
7.5. FATCA Information .
By acceptance of any Note, the holder of such Note agrees that such holder will from time to time with reasonable promptness duly
complete and deliver to or as reasonably directed by the Guarantor (i) in the case of any such holder that is a U.S. Person, such holder’s United
States tax identification number or other Forms reasonably requested by the Guarantor necessary to establish such holder’s status as a U.S.
Person under FATCA and as may otherwise be necessary for the Guarantor to comply with its obligations under FATCA and (ii) in the case of
any such holder that is not a U.S. Person, such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation as may be necessary for the Guarantor to comply with its obligations
under FATCA and to determine that such holder has complied with such holder’s obligations under FATCA or to determine the amount (if
any) to deduct and withhold from any such payment made to such holder. Nothing in this Section 7.5 shall require any holder of Notes to
provide information that is confidential or proprietary to such holder unless such information is prescribed by applicable law for the Guarantor
to comply with its obligations under FATCA and, in such event, the Guarantor shall treat such information as confidential.
SECTION 8. SUBMISSION TO JURISDICTION.
The Guarantor hereby irrevocably agrees that the courts of England have exclusive jurisdiction to settle any dispute arising out of
or in connection with this Guarantee Deed (including a dispute relating to the existence, validity or termination of this Guarantee Deed or any
non-contractual obligation arising out of or in connection with this Guarantee Deed (a “ Dispute ”)).
(a) The Guarantor agrees that the courts of England are the most appropriate and convenient courts to settle Disputes and
accordingly it will not argue to the contrary.
18
[ For non-English Guarantor : The Guarantor hereby irrevocably appoints the Company as its agent to accept service of process
on its behalf in England (together with any successor to the Company acting in such capacity, the “ Process Agent ”). The Guarantor agrees that
such service upon the Process Agent (i) shall be deemed in every respect effective service of process upon the Guarantor in any such suit,
action or proceeding, (ii) shall, to the fullest extent permitted by applicable law, be taken and held to be valid personal service upon and
personal delivery to the Guarantor, and that failure by the Process Agent to notify the Guarantor of the process will not invalidate the
proceedings that are the subject of such process.
(b) Nothing in this Section 8 shall affect the right of any holder of a Note to serve process in any manner permitted by law, or limit
any right that the holders of any of the Notes may have to bring proceedings against the Guarantor in the courts of any appropriate jurisdiction
or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
SECTION 9. NOTICES.
All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by a recognized overnight delivery
service (with charges prepaid) or (c) by email where the recipient has designated an email address for such purpose. Any such notice must be
sent:
(i) if to a Purchaser, to such Person at the address specified for such communications in Schedule B to the Agreement, or at
such other address as the Purchaser shall have specified to the Company in writing, or
(ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Guarantor, c/o Markit Group Holdings Limited, 4 th Floor, Ropemaker Place, 25 Ropemaker Street, London,
EC24 9LY, to the attention of the General Counsel at such other addresses as the Guarantor shall have specified to the holder of
each Note in writing.
Notices under this Section 9 will be deemed given only when actually received.
SECTION 10. AMENDMENTS AND MODIFICATIONS; SOLICITATION OF NOTEHOLDERS.
(a) This Guarantee Deed may only be amended and compliance therewith waived (either generally or in a particular instance and
either retroactively or prospectively) by an instrument in writing signed by the Guarantor and by the Required Holders; provided , that
without the written consent of the holders of all of the Notes then outstanding, no such amendment or
19
waiver shall be effective which will reduce the scope of the guaranty set forth in this Guarantee Deed or amend the requirements of
Sections 1, 2, 3, 4, 5, 7 or 11 hereof or amend this Section 10. No such amendment or modification shall extend to or affect any
obligation not expressly amended or modified or impair any right consequent thereon.
(b) The Guarantor will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Guarantee Deed unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be
informed thereof by the Guarantor and shall be afforded the opportunity of considering the same and shall be supplied by the Guarantor
with a sufficient information to enable it to make an informed decision with respect thereto. The Guarantor will not, directly or
indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise or grant
any security or provide other credit support, to any holder of the Notes as consideration for or as an inducement to the entering into by
any holder of the Notes of any waiver or amendment of any of the terms and provisions of this Guarantee Deed, the Agreement or the
Notes, unless such remuneration is concurrently paid or security is concurrently granted or other credit support is concurrently provided,
on the same terms, ratably to the holders of all of the Notes then outstanding. Promptly and in any event within 30 days of the date of
execution and delivery of any such waiver or amendment, the Guarantor shall provide a true, correct and complete copy thereof to each
of the holders of the Notes.
(c) Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of
Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Guarantee Deed, or have
directed the taking of any action provided herein to be taken upon the direction of the holders of a specified percentage of the aggregate
principal amount of Notes then outstanding, Notes directly or indirectly owned by the Parent Guarantor, the Company or any of their
Affiliates shall be deemed not to be outstanding.
SECTION 11. PARI PASSU.
The payment obligations of the Guarantor under this Guarantee Deed will at all times rank at least pari passu in right of payment
with all other unsecured and unsubordinated Financial Indebtedness of the Guarantor, except for such Financial Indebtedness as would, by
virtue only of the law in force in the jurisdiction in which the Guarantor is organized, be preferred by operation of bankruptcy, insolvency,
liquidation or similar laws of general application.
SECTION 12. OBLIGATION TO MAKE PAYMENT IN DOLLARS.
Any payment on account of an amount that is payable hereunder, under the Agreement, or under the Notes in Dollars which is
made to or for the account of any
20
holder of Notes in any other currency, whether as a result of any judgment or order or the enforcement thereof or the realization of any security
or the liquidation of the Guarantor, shall constitute a discharge of the obligation of the Guarantor hereunder, under the Agreement or the Notes
only to the extent of the amount of Dollars which such holder could purchase in the foreign exchange markets in London, England, with the
amount of such other currency in accordance with normal banking procedures at the rate of exchange prevailing on the London Banking Day
following receipt of the payment first referred to above. If the amount of Dollars that could be so purchased is less than the amount of Dollars
originally due to such holder, the Guarantor agrees to the fullest extent permitted by law, to indemnify and save harmless such holder from and
against all loss or damage arising out of or as a result of such deficiency. This indemnity shall, to the fullest extent permitted by law, constitute
an obligation separate and independent from the other obligations contained in this Guarantee Deed, in the Agreement and the Notes, shall give
rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by such holder from time to time and shall
continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder, under the
Agreement or under the Notes or under any judgment or order. As used herein the term “ London Banking Day ” shall mean any day other than
Saturday or Sunday or a day on which commercial banks are required or authorized by law to be closed in London, England.
SECTION 13. MISCELLANEOUS.
(a) No remedy herein conferred upon or reserved to any holder of any Note is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this
Guarantee Deed now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any
default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof
but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle any holder
of any Note to exercise any remedy reserved to it under this Guarantee Deed, it shall not be necessary for such holder to physically
produce its Note in any proceedings instituted by it or to give any notice, other than such notice as may be herein expressly required.
(b) In case any one or more of the provisions contained in this Guarantee Deed shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected
or impaired thereby.
(c) This Guarantee Deed shall be binding upon the undersigned Guarantor and its successors and assigns and shall inure to the
benefit of the Purchasers and their respective successors and assigns so long as any of their respective Notes remain outstanding and
unpaid.
21
(d) The Guarantor will maintain an office at the address of the Guarantor referred to in Section 9, where notices, presentations and
demands in respect hereof or of the Guaranteed Obligations may be made upon the Guarantor until such time as the Guarantor shall
notify each holder of any change of location of such office.
(e) This Guarantee Deed, and any non-contractual obligation arising out of or in connection with it, shall be governed by and
construed in accordance with English law.
IN WITNESS WHEREOF, the Guarantor has executed this Guarantee Deed as a deed and delivered it on the date first above
written.
[Name of Guarantor]
By:
Name:
Title
By:
Name:
Title
22
Exhibit 8.1
Subsidiaries of the Registrant
Entity name
Markit Group (Australia) Pty Limited
CoreOne Technologies (Belgium) BVBA
CoreOne Technologies – DeltaOne Solutions, Inc.
Markit Analytics Inc.
Markit Group (Canada) Limited
BOAT Limited
Compliance Technologies International, LLC
CoreOne Technologies Holdings LLC
CoreOneTechnologies LLC
CorrectNet LLC
Information Mosaic, Inc.
Markit CTI Holdings LLC
Markit EDM Inc.
Markit North America, Inc.
Markit on Demand, Inc.
Markit Securities Finance Analytics Inc.
MarkitOne Holdings LLC
MarkitSERV, LLC
Vendata LLC
WSOD Holding Corporation
CoreOne Technologies-DeltaOne Solutions Limited
Information Mosaic (UK) Limited
Markit Analytics (UK) Limited
Markit Economics Limited
Markit EDM Hub Limited
Markit EDM Limited
Markit Equities Limited
Markit Genpact KYC Services Limited
Markit Group (UK) Limited
Markit Group Holdings Limited
Markit Group Limited
Markit Indices Limited
Markit Securities Finance Analytics Consulting Limited
Markit Securities Finance Analytics Limited
Markit Valuations Limited
Markit Valuation Services Limited
MarkitSERV FX Limited
MarkitSERV Holdings Limited
MarkitSERV Limited
Option Computers Limited
RCP Trade Solutions Limtied
Securities Finance Systems Limited
Securities Lending Services Group Limited
Thinkfolio Limited
TradeSTP Limited
CoreOne Technologies (Hong Kong) Limited
Markit Group (Hong Kong) Limited
CoreOne Technologies India Private Limited
Information Mosaic Software Private Limited
Markit India Services Private Limited
Information Mosaic Limited
Markit Group Japan K.K.
Markit Luxembourg Sàrl
Jurisdiction of organisation
Australia
Belgium
California
Canada
Canada
Cayman Islands
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Hong Kong
Hong Kong
India
India
India
Ireland
Japan
Luxembourg
Ownership
Interest
100 %
100 %
100 %
100 %
100 %
100 %
52.8 %
100 %
100 %
100 %
100 %
52.8 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
53.3 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Entity name
Information Mosaic Asia SND. BHD.
Markit NV
ABC Enterprise Systems, Inc.
Transaction Auditing Group, Inc.
Information Mosaic Asia Pte. Ltd.
Markit Asia Pte. Limited
Option Computers Pte. Ltd.
ThinkFolio Pty Limited
Markit WSO Corporation
Jurisdiction of organisation
Malaysia
Netherlands
Nevada
Nevada
Singapore
Singapore
Singapore
South Africa
Texas
Ownership
Interest
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
Exhibit 12.1
CERTIFICATIONS
I, Lance Uggla, certify that:
1.
I have reviewed this annual report on Form 20-F of Markit Ltd.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the company and have:
5.
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d.
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent
functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: March 11, 2016
/s/ Lance Uggla
Lance Uggla
Chief Executive Officer
(Principal Executive Officer)
Exhibit 12.2
CERTIFICATIONS
I, Jeffrey Gooch, certify that:
1.
I have reviewed this annual report on Form 20-F of Markit Ltd.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the company and have:
5.
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d.
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period
covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control
over financial reporting; and
The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent
functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s
internal control over financial reporting.
Date: March 11, 2016
/s/ Jeffrey Gooch
Jeffrey Gooch
Chief Financial Officer
(Principal Financial Officer)
Exhibit 13.1
CERTIFICATION
The certification set forth below is being submitted in connection with the Annual Report on Form 20-F of Markit Ltd. (the “Company”) for the
fiscal year ended December 31, 2015 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code. I, Lance Uggla, certify that, to the best of my
knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Date: March 11, 2016
/s/ Lance Uggla
Lance Uggla
Chief Executive Officer
(Principal Executive Officer)
Exhibit 13.2
CERTIFICATION
The certification set forth below is being submitted in connection with the Annual Report on Form 20-F of Markit Ltd. (the “Company”) for the
fiscal year ended December 31, 2015 (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code. I, Jeffrey Gooch, certify that, to the best of my
knowledge:
1.
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Date: March 11, 2016
/s/ Jeffrey Gooch
Jeffrey Gooch
Chief Financial Officer
(Principal Financial Officer)
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-196877) of Markit Ltd. of our report
dated March 11, 2016 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this
Form 20-F.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
March 11, 2016
PricewaterhouseCoopers LLP, 7 More London Riverside, London, SE1 2RT
T: +44 (0) 2075 835 000, F: +44 (0) 2072 127 500, www.pwc.co.uk