<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 6, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WHITTMAN-HART, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7379 36-3797833
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) No.)
</TABLE>
311 SOUTH WACKER DRIVE, SUITE 3500, CHICAGO, ILLINOIS 60606-6618; (312) 922-9200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT F. BERNARD
CHIEF EXECUTIVE OFFICER
WHITTMAN-HART, INC.
311 SOUTH WACKER DRIVE, SUITE 3500, CHICAGO, ILLINOIS 60606-6618; (312) 922-9200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
DOUGLAS R. NEWKIRK MATTHEW S. BROWN
J. TODD ARKEBAUER MARK D. WOOD
SACHNOFF & WEAVER, LTD. KATTEN MUCHIN & ZAVIS
30 S. WACKER DRIVE, 29TH FLOOR 525 W. MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60606-7484 CHICAGO, ILLINOIS 60661
(312) 207-1000 (312) 902-5200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION
TO BE REGISTERED (1) (2) (2) FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value.......... 2,070,000 $29.75 $61,582,500 $21,235
</TABLE>
(1) Includes 270,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933 on the basis of the average
high and low prices of the Common Stock on the Nasdaq National Market on
July 31, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 6, 1996
PROSPECTUS
, 1996
1,800,000 SHARES
WHITTMAN-HART, INC.
S
COMMON STOCK
Of the 1,800,000 shares of Common Stock being offered hereby, 1,035,000
shares are being sold by Whittman-Hart, Inc. ("Whittman-Hart" or the "Company")
and 765,000 shares are being sold by the Selling Stockholders. See "Principal
and Selling Stockholders." The Company will not receive any part of the proceeds
from the sale of shares by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the symbol
"WHIT." On August 2, 1996, the last reported sale price of the Common Stock was
$29 7/8 per share. See "Price Range of Common Stock."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total (3)..................... $ $ $ $
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) SEE "UNDERWRITING" FOR INDEMNIFICATION ARRANGEMENTS WITH THE UNDERWRITERS.
(2) BEFORE DEDUCTING EXPENSES ESTIMATED AT $500,000, WHICH WILL BE PAID BY THE
COMPANY.
(3) CERTAIN SELLING STOCKHOLDERS HAVE GRANTED TO THE UNDERWRITERS A 30-DAY
OPTION TO PURCHASE UP TO 270,000 ADDITIONAL SHARES AT THE PRICE TO THE
PUBLIC LESS UNDERWRITING DISCOUNTS AND COMMISSIONS, SOLELY TO COVER OVER-
ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE TOTAL PRICE TO
THE PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS, PROCEEDS TO THE COMPANY
AND PROCEEDS TO THE SELLING STOCKHOLDERS WILL BE $ , $ , $ AND
$ , RESPECTIVELY. SEE "PRINCIPAL AND SELLING STOCKHOLDERS" AND
"UNDERWRITING."
The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
various prior conditions, including their right to reject orders in whole or in
part. It is expected that delivery of share certificates will be made in New
York, New York, on or about , 1996.
DONALDSON, LUFKIN & JENRETTE VOLPE, WELTY & COMPANY
SECURITIES CORPORATION
<PAGE>
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES. WHEN USED IN THIS PROSPECTUS, THE WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," AND "EXPECT" AND SIMILAR EXPRESSIONS AS
THEY RELATE TO THE COMPANY OR ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED IN, OR IMPLIED BY, THESE FORWARD-LOOKING STATEMENTS.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE
DISCUSSED IN "RISK FACTORS."
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS AND CERTAIN SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
------------------------
Whittman-Hart-Registered Trademark-, Making Information Technology
Work-Registered Trademark- and We Are IT-SM- are service marks of the Company.
Windows-Registered Trademark- is a registered trademark of Microsoft
Corporation. All other trademarks, service marks and trade names referred to in
this Prospectus are the property of their respective owners.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE
FINANCIAL STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS
PROSPECTUS: (I) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED; (II) GIVES RETROACTIVE EFFECT TO A 4 FOR 1 SPLIT OF THE SHARES OF
COMMON STOCK, $.001 PAR VALUE PER SHARE (THE "COMMON STOCK"), EFFECTED ON APRIL
3, 1996; AND (III) REFLECTS THE CONVERSION OF THE COMPANY'S REDEEMABLE
CONVERTIBLE PREFERRED STOCK, $.001 PAR VALUE PER SHARE (THE "REDEEMABLE
PREFERRED STOCK") INTO 956,074 SHARES OF COMMON STOCK ON MAY 2, 1996. UNLESS
OTHERWISE INDICATED, ALL REFERENCES TO THE "COMPANY" OR "WHITTMAN-HART" INCLUDE
THE AFFILIATED ENTITIES INVOLVED IN THE REORGANIZATION DESCRIBED IN "THE
COMPANY."
THE COMPANY
Whittman-Hart, Inc. ("Whittman-Hart" or the "Company") provides strategic
information technology ("IT") services designed to improve its clients'
productivity and competitive position. The Company offers its clients a single
source for a comprehensive range of services required to successfully design,
develop and implement integrated computer systems projects in diverse computing
environments. Among the services offered by the Company are systems integration,
strategic IT planning, software development, packaged software implementation
(such as SAP's R/3 client/server application software), business process
reengineering, organizational change management, networking and connectivity,
conventional and multimedia documentation and training, design and
implementation of workgroup solutions (such as Lotus Notes) and design and
implementation of electronic commerce solutions (such as intranet/Internet and
EDI).
Whittman-Hart's marketing efforts focus on middle market companies ranging
from $50 million to $500 million in annual revenues and divisions of Fortune
1000 companies. Whittman-Hart serves clients in a broad range of industries,
including communications, consumer products, distribution, diversified services,
financial services, insurance, manufacturing, pharmaceuticals, professional
services, retail and technology. The Company employs consultants with business
experience in these areas to enhance its ability to understand industry-specific
business issues and develop unbiased IT solutions to address these issues. The
number of clients billed by the Company has grown from 338 in 1993 to 492 in
1995. The Company believes that it has established significant ongoing
relationships with many of its clients.
The demand for IT consulting services has increased rapidly in recent years
and is continuing to grow because: (i) businesses and other organizations are
becoming more reliant on IT for their competitive success; (ii) companies are
migrating from centralized, mainframe-based computer systems to distributed
client/server environments; (iii) widespread organizational downsizing requires
improved business process efficiencies; (iv) IT solutions have become more
complex; and (v) organizations do not generally possess the quantity and variety
of IT skills needed to execute complex IT projects. Whittman-Hart has competed
successfully in this environment, experiencing a compound annual revenue growth
rate of 46% over the past three fiscal years. For fiscal year 1995, the
Company's revenues were $49.8 million, an increase of 69% from $29.5 million in
fiscal year 1994. Revenues for the six months ended June 30, 1996 were $38.9
million, an increase of 82% from $21.4 million in the corresponding 1995 period.
From June 30, 1995 to June 30, 1996, the number of consultants increased 69%
from 425 to 718.
Whittman-Hart sells and delivers its services through a network of six
branch offices located in Chicago, Indianapolis, Denver, Cincinnati, Milwaukee
and Dallas. The Company has developed a national branch expansion strategy and
has begun replicating its business model in additional major domestic markets.
Expansion plans for 1996 include a Dallas branch, opened in January 1996, and an
additional branch, scheduled to open in late 1996. In support of its growth
strategy, Whittman-Hart has made significant investments in its business and
systems infrastructure, recruiting organization, training methodologies and
marketing programs, all of which the Company believes will be necessary to
support a significantly larger organization. The Company's growth strategy
includes the following elements: (i) expanding service capabilities; (ii)
increasing client penetration by cross-selling additional services; (iii)
acquiring other firms to facilitate entry into new geographic markets or
increase technical expertise; and (iv) seeking strategic relationships to share
technical and industry knowledge and pursue joint marketing opportunities.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.............. 1,035,000 shares
Common Stock offered by the Selling 765,000 shares
Stockholders.....................................
Common Stock to be outstanding after the 9,987,472 shares (1)
offering.........................................
Use of proceeds.................................. General corporate purposes, including
working capital, branch expansion and
possible acquisitions of related
businesses.
Nasdaq National Market symbol.................... WHIT
</TABLE>
- ------------------------
(1) Excludes: (i) options outstanding on the date hereof to purchase 914,334
shares at a weighted average exercise price of $6.76; (ii) 1,126,706 shares
reserved for issuance upon exercise of options that may be granted in the
future under the Company's 1995 Incentive Stock Plan; and (iii) 400,000
shares reserved for issuance under the Company's Employee Stock Purchase
Plan. See "Management -- Stock Plans," "Description of Capital Stock" and
Note 10 of Notes to Financial Statements.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues....................................... $ 17,881 $ 18,632 $ 23,422 $ 29,543 $ 49,822 $ 21,412 $ 38,863
Gross profit................................... 6,849 7,395 9,593 11,816 19,430 8,282 15,501
Operating income............................... 177 713 1,037 1,175 1,713 905 2,539
Net income..................................... 8 693 1,100 1,100 1,780 806 1,745
Net income per share........................... $0.22
Shares used in computing net income per
share......................................... 7,806
Pro forma net income (2)....................... 8 679 1,073 855 1,114 504
Pro forma net income per share (2)(3).......... $0.16 $0.07
Shares used in computing pro forma net income
per share (3)................................. 7,065 7,149
Supplementary pro forma net income per share
(4)........................................... $0.17
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED(5)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term investments............................... $ 33,109 $ 61,829
Working capital.................................................................... 40,649 69,369
Total assets....................................................................... 54,152 82,872
Total stockholders' equity......................................................... 45,524 74,244
</TABLE>
- ------------------------
(1) Certain reclassifications have been made to prior year amounts to conform
to the 1995 presentation. See Note 2 of Notes to Financial Statements.
(2) Reflects federal and additional state income tax expense that would have
been required had the Company and its predecessors operated as a C
corporation for all periods presented.
(3) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net income per share.
(4) Adjusted to give effect to the retirement of two promissory notes totaling
$1,666,500, resulting in a reduction of interest expense of $153,000 (pro
forma net income effect of $92,000 assuming a pro forma effective tax rate
of 40%) as if the Company's initial public offering had occurred on January
1, 1995. Shares used in computing supplementary pro forma net income per
share were increased by 111,996 to approximate the number of shares sold in
the Company's initial public offering to yield net proceeds to retire these
notes. See "Use of Proceeds."
(5) Adjusted to give effect to the sale of 1,035,000 shares of Common Stock
offered by the Company hereby at an assumed public offering price of
$29 7/8 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, INVESTORS
SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN CONNECTION WITH AN INVESTMENT
IN THE SHARES OF COMMON STOCK OFFERED HEREBY (THE "SHARES").
ATTRACTION AND RETENTION OF EMPLOYEES
The Company's business involves the delivery of professional services and is
labor-intensive. The Company's success depends in large part upon its ability to
attract, develop, motivate and retain highly skilled technical employees.
Qualified technical employees are in great demand and are likely to remain a
limited resource for the foreseeable future. There can be no assurance that the
Company will be able to attract and retain sufficient numbers of highly skilled
technical employees in the future. The Company has historically experienced
turnover rates which it believes are consistent with industry norms. An increase
in this rate could have a material adverse effect on the Company's business,
operating results and financial condition, including its ability to secure and
complete engagements. See "Business -- Human Resources."
MANAGEMENT OF GROWTH
The Company is currently experiencing rapid growth that has strained, and
could continue to strain, the Company's managerial and other resources. From
June 30, 1995 through June 30, 1996, the number of consultants increased from
425 to 718 and further significant increases are anticipated during the current
year. The Company opened a Dallas branch in January 1996, and plans to open an
additional branch in late 1996. The Company also intends to open additional
offices in the future. The Company's ability to manage the growth of its
operations will require it to continue to improve its operational, financial and
other internal systems and to attract, develop, motivate and retain its
employees. If the Company's management is unable to manage growth or new
employees are unable to achieve anticipated performance levels, the Company's
business, operating results and financial condition could be materially and
adversely affected.
PROJECT RISKS
Many of the Company's engagements involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be difficult
to quantify. The Company's failure or inability to meet a client's expectations
in the performance of its services could result in a material adverse change to
the client's operations and therefore could give rise to claims against the
Company or damage the Company's reputation, adversely affecting its business,
operating results and financial condition.
VARIABILITY OF QUARTERLY OPERATING RESULTS
Variations in the Company's revenues and operating results occur from time
to time as a result of a number of factors, such as the significance of client
engagements commenced and completed during a quarter, the number of business
days in a quarter, timing of branch and service line expansion activities, the
timing of corporate expenditures and employee hiring and utilization rates. The
timing of revenues is difficult to forecast because the Company's sales cycle
can be relatively long and may depend on factors such as the size and scope of
assignments and general economic conditions. Because a high percentage of the
Company's expenses are relatively fixed, a variation in the number of client
assignments or the timing of the initiation or the completion of client
assignments, particularly at or near the end of any quarter, can cause
significant variations in operating results from quarter to quarter and could
result in losses to the Company. In addition the Company's engagements generally
are terminable by the client without penalty. Although the number of consultants
can be adjusted to correspond to the number of active projects, the Company must
maintain a sufficient number of senior consultants to oversee existing client
projects and assist with the Company's sales force in securing new client
assignments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
COMPETITION
The market for IT services includes a large number of competitors, is
subject to rapid change and is highly competitive. Primary competitors include
participants from a variety of market segments, including "Big Six" accounting
firms, systems consulting and implementation firms, application software firms,
service groups of computer equipment companies, facilities management companies,
general management consulting firms and programming companies. Many of these
competitors have significantly greater financial,
5
<PAGE>
technical and marketing resources and greater name recognition than the Company.
In addition, the Company competes with its clients' internal resources,
particularly where these resources represent a fixed cost to the client. Such
competition may impose additional pricing pressures on the Company. There can be
no assurance that the Company will compete successfully with its existing
competitors or with any new competitors. See "Business -- Competition."
RELIANCE ON KEY EXECUTIVES
The success of the Company is highly dependent upon the efforts and
abilities of its executive officers, particularly Mr. Robert Bernard, the
Company's founder and Chief Executive Officer. Although these executives have
entered into employment agreements containing noncompetition, nondisclosure and
nonsolicitation covenants, these contracts do not guarantee that these
individuals will continue their employment with the Company. The loss of the
services of any of these key executives for any reason could have a material
adverse effect upon the Company's business, operating results and financial
condition. See "Management -- Employment Agreements."
CONCENTRATION OF REVENUES
The Company derives a significant portion of its revenues from a relatively
limited number of clients. For example during fiscal year 1995 and the first six
months of 1996, revenues from the Company's ten most significant clients
accounted for approximately 33% of its revenues, and its largest client
accounted for approximately 10% and 8% of the Company's revenues, respectively.
There can be no assurance that these clients will continue to engage the Company
for additional projects or do so at the same revenue levels. Clients engage the
Company on an assignment-by-assignment basis, and a client can generally
terminate an assignment at any time without penalty. The loss of any significant
client could have a material adverse effect on the Company's business, operating
results and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Clients and
Representative Solutions."
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW SOLUTIONS
The Company's success will depend in part on its ability to develop IT
solutions that keep pace with continuing changes in IT, evolving industry
standards and changing client preferences. There can be no assurance that the
Company will be successful in adequately addressing these developments on a
timely basis or that, if these developments are addressed, the Company will be
successful in the marketplace. In addition, there can be no assurance that
products or technologies developed by others will not render the Company's
services uncompetitive or obsolete. The Company's failure to address these
developments could have a material adverse effect on the Company's business,
operating results and financial condition.
RISKS RELATED TO POSSIBLE ACQUISITIONS
The Company may expand its operations through the acquisition of additional
businesses. There can be no assurance that the Company will be able to identify,
acquire or profitably manage additional businesses or successfully integrate any
acquired businesses into the Company without substantial expenses, delays or
other operational or financial problems. Further, acquisitions may involve a
number of special risks or effects, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events or
circumstances, legal liabilities and amortization of acquired intangible assets
and other one-time or ongoing acquisition related expenses, some or all of which
could have a material adverse effect on the Company's business, operating
results and financial condition. Client satisfaction or performance problems at
a single acquired firm could have a material adverse impact on the reputation of
the Company as a whole. In addition, there can be no assurance that acquired
businesses, if any, will achieve anticipated revenues and earnings. The failure
of the Company to manage its acquisition strategy successfully could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Growth Strategy."
CONTROL BY PRINCIPAL STOCKHOLDER
After completion of this offering, Mr. Bernard will beneficially own
approximately 40.1% of the Company's outstanding shares of Common Stock. As a
result, Mr. Bernard will, as a practical matter,
6
<PAGE>
continue to be able to control the outcome of matters requiring a stockholder
vote, including the election of the members of the Board of Directors, thereby
controlling the affairs and management of the Company. Such control could
adversely affect the market price of the Common Stock or delay or prevent a
change in control of the Company. See "Principal and Selling Stockholders."
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent upon certain methodologies it utilizes in
designing, installing and integrating computer software and systems and other
proprietary intellectual property rights. The Company's business includes the
development of custom software in connection with specific client engagements.
Ownership of such software is generally assigned to the client. The Company also
develops certain foundation and application software products, or software
"tools," which remain the property of the Company.
The Company relies upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect its
proprietary rights and the proprietary rights of third parties from whom the
Company licenses intellectual property. The Company enters into confidentiality
agreements with its employees and limits distribution of proprietary
information. There can be no assurance that the steps taken by the Company in
this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights.
Although the Company believes that its services do not infringe on the
intellectual property rights of others and that it has all rights necessary to
utilize the intellectual property employed in its business, the Company is
subject to the risk of claims alleging infringement of third-party intellectual
property rights. Any such claims could require the Company to spend significant
sums in litigation, pay damages, develop non-infringing intellectual property or
acquire licenses to the intellectual property which is the subject of asserted
infringement. See "Business -- Intellectual Property Rights."
FIXED-BID PROJECTS
The Company undertakes certain projects billed on a fixed-bid basis, which
is distinguishable from the Company's principal method of billing on a time and
materials basis, and undertakes other projects on a fee-capped basis. The
failure of the Company to complete such projects within budget or below the cap
would expose the Company to risks associated with cost overruns, which could
have a material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
LIMITED TRADING HISTORY OF COMMON STOCK; STOCK PRICE VOLATILITY
The Common Stock first became publicly traded on May 3, 1996 after the
Company's initial public offering at $16 per share. Between May 3, 1996 and
August 2, 1996, the closing sale price has ranged from a low of $23 5/8 per
share to a high of $41 1/2 per share. The market price of the Common Stock could
continue to fluctuate substantially due to a variety of factors, including
quarterly fluctuations in results of operations, adverse circumstances affecting
the introduction or market acceptance of new products and services offered by
the Company, announcements of new products and services by competitors, changes
in the IT environment, changes in earnings estimates by analysts, changes in
accounting principles, sales of Common Stock by existing holders, loss of key
personnel and other factors. The market price for the Company's Common Stock may
also be affected by the Company's ability to meet analysts' expectations, and
any failure to meet such expectations, even if minor, could have a material
adverse effect on the market price of the Company's Common Stock. In addition,
the stock market is subject to extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
these companies. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. Any such litigation instigated against
the Company could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect on the
Company's business, operating results and financial condition. See "Price Range
of Common Stock."
7
<PAGE>
SIGNIFICANT UNALLOCATED NET PROCEEDS
None of the anticipated net proceeds of this offering is designated for
specific uses. Therefore, the Board of Directors of the Company will have broad
discretion with respect to the use of the net proceeds of this offering. See
"Use of Proceeds."
CERTAIN ANTI-TAKEOVER EFFECTS
The Company's Certificate of Incorporation and By-Laws and the Delaware
General Corporation Law include provisions that may be deemed to have
anti-takeover effects and may delay, defer or prevent a takeover attempt that
stockholders might consider in their best interests. These include By-Law
provisions under which only the Chairman of the Board or the President may call
meetings of stockholders and certain advance notice procedures for nominating
candidates for election to the Board of Directors. Directors of the Company are
divided into three classes and are elected to serve staggered three-year terms.
The Board of Directors of the Company is empowered to issue up to 3,000,000
shares of preferred stock and to determine the price, rights, preferences and
privileges of such shares, without any further stockholder action. The existence
of this "blank-check" preferred stock could render more difficult or discourage
an attempt to obtain control of the Company by means of a tender offer, merger,
proxy contest or otherwise. In addition, this "blank-check" preferred stock, and
any issuance thereof, may have an adverse effect on the market price of the
Company's Common Stock. See "Management -- Directors and Executive Officers" and
"Description of Capital Stock -- Delaware Law and Certain Certificate of
Incorporation and By-Law Provisions; Anti-Takeover Effects."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after completion of this offering, the Company will have
9,987,472 shares of Common Stock outstanding, of which the 1,800,000 shares sold
pursuant to this offering as well as the 3,105,000 shares sold in the initial
public offering will be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), except those shares acquired by affiliates of the Company. Holders of the
remaining shares will be eligible to sell such shares pursuant to Rule 144
("Rule 144") under the Securities Act at prescribed times and subject to the
manner of sale, volume, notice and information restrictions of Rule 144. The
Company has granted certain institutional investors and their transferees and
Messrs. Bernard and Szofer certain demand and piggyback registration rights
covering an aggregate of 830,296 shares of Common Stock (1,100,296 shares if the
Underwriter's over-allotment option is exercised in full). In addition, 872,334
shares of Common Stock (88,479 of which are currently exercisable) are issuable
upon the exercise of outstanding stock options, which shares have been
registered by the Company under the Securities Act and after issuance upon
exercise will be freely tradeable without restriction. The Company, together
with certain of its stockholders (holding in the aggregate 602,761 shares of
Common Stock upon consummation of this offering), have agreed not to offer,
sell, contract to sell or otherwise dispose of, directly or indirectly, any
Common Stock, or any securities convertible into or exchangeable or exercisable
for Common Stock, until October 30, 1996, without the prior consent of
Donaldson, Lufkin & Jenrette Securities Corporation. Sales of substantial
amounts of such shares in the public market or the availability of such shares
for future sale could adversely affect the market price of the shares of Common
Stock and the Company's ability to raise additional capital at a price favorable
to the Company. See "Shares Eligible for Future Sale" and "Underwriting."
8
<PAGE>
THE COMPANY
From its inception in 1984 to December 31, 1995, the Company's business was
owned by Whittman-Hart, L.P., a Delaware limited partnership ("LP"), and
operated by employees of Whittman-Hart Corporation II, a Delaware corporation
("Corporation II"), pursuant to a client service agreement. The general partner
of LP was Whittman-Hart, Ltd., a Delaware corporation ("Limited") of which 94%
was owned by Mr. Bernard and 6% was owned by Edward Szofer, the Company's Chief
Operating Officer. The limited partners of LP were Corporation II, Mr. Bernard
and, after August 1995, F-WH Corporation ("Frontenac") and PVP-WH Corporation
("Platinum"). The stockholders of Corporation II included officers and certain
other employees of the Company. Frontenac and Platinum acquired their interests
in LP in August 1995 pursuant to their purchases of $4.0 million and $1.5
million, respectively, of convertible preferred equity units. See "Certain
Transactions."
Effective December 31, 1995, the Company restructured itself in a
transaction (the "Reorganization") pursuant to which the partners of LP (other
than Corporation II) became the stockholders of Corporation II, Corporation II
became the successor to all of the assets, liabilities and business of LP and
the client service agreement between LP and Corporation II was canceled. The
convertible preferred and common equity units in LP were converted into a like
number of shares of Redeemable Preferred Stock and Common Stock, respectively,
of Corporation II, and Corporation II changed its name to Whittman-Hart, Inc.,
the issuer in this offering.
Prior to the Reorganization, the portion of the Company's earnings
attributable to the operations of LP was taxed, for federal and certain state
income tax purposes, directly to the partners of LP rather than to the Company.
The Company has made cash distributions to Mr. Bernard aggregating $179,476 for
the purpose of enabling him to pay federal and state income taxes for fiscal
1995 attributable to LP's taxable income, and in connection with the
Reorganization the Company declared, and in April 1996 paid, a final
distribution to the Company's predecessor partners aggregating $860,646 for the
purpose of enabling them to pay federal and state income taxes for fiscal year
1995 attributable to LP's taxable income and to the tax consequences of the
Reorganization (collectively, the "Tax Distributions"). From and after the date
of the Reorganization, all earnings of the Company will be subject to federal
and state corporate income taxes.
The Company maintains its principal executive offices at 311 South Wacker
Drive, Suite 3500, Chicago, Illinois 60606. The Company's telephone number is
(312) 922-9200 and its Internet address is http:// www.whittman-hart.com. The
Company's Web site is not a part of this Prospectus.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Shares are
approximately $28.7 million, based on an assumed price to the public of $29 7/8
per share and after deducting estimated Underwriters' discounts and commissions
and estimated offering expenses. The principal purposes of this offering are to
increase the Company's equity capital and financial flexibility and provide
working capital to fund the Company's growth strategy. See "Business -- Growth
Strategy" and "-- Operational Investments."
The Company anticipates that the net proceeds of this offering will be used
primarily for general corporate purposes, including working capital, branch
expansion and possible acquisitions of related businesses. There can be no
assurances that the Company will open any new offices or that it will make any
acquisitions. As of the date of this Prospectus, the Company has no agreements,
understanding or commitments regarding the acquisition of any other business.
Pending such uses, the Company intends to invest the net proceeds from this
offering in investment grade, short-term, interest-bearing securities.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. See "Principal and Selling Stockholders."
9
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "WHIT" since May 3, 1996. The following table sets forth, for
the periods indicated, the range of high and low closing sale prices for the
Common Stock as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1996
Second Quarter (from May 3, 1996).................................................... $ 41 1/2 $ 24 1/2
Third Quarter (through August 2, 1996)............................................... 34 1/4 23 5/8
</TABLE>
On August 2, 1996, the last reported sale price of the Common Stock was
$29 7/8 per share. At August 2, 1996, the Company had approximately 45
stockholders of record.
DIVIDEND POLICY
Other than the Tax Distributions made in connection with the Reorganization,
the Company has never made any distributions with respect to its equity
securities. The Company does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. The Company currently intends to retain
future earnings to fund the development and growth of its business.
CAPITALIZATION
The following table sets forth the capitalization of the Company: (i) as of
June 30, 1996 and (ii) as adjusted to reflect the sale of 1,035,000 shares of
Common Stock offered by the Company in this offering at an assumed public
offering price of $29 7/8 per share and the application of the estimated net
proceeds therefrom. As of June 30, 1996, the Company had no long-term debt. The
information set forth below should be read in conjunction with the Financial
Statements and related Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Long-term debt............................................................................ $ -- $ --
Stockholders' equity:
Preferred stock, $.001 par value; 3,000,000 shares authorized, none issued and
outstanding............................................................................ -- --
Common stock, $.001 par value; 15,000,000 shares authorized, 8,959,210 issued on an
actual basis; 9,994,210 issued as adjusted (1)......................................... 9 10
Additional paid-in capital................................................................ 43,757 72,476
Retained earnings......................................................................... 1,795 1,795
Deferred compensation..................................................................... (13) (13 )
Common stock held in treasury, at cost; 7,698 shares...................................... (24) (24 )
--------- -----------
Total common stockholders' equity......................................................... 45,524 74,244
--------- -----------
Total capitalization.................................................................... $ 45,524 $ 74,244
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Excludes: (i) an aggregate of 911,294 shares issuable upon the exercise of
stock options outstanding at June 30, 1996; (ii) 1,126,706 shares reserved
for issuance upon exercise of options that may be granted in the future
under the Company's 1995 Incentive Stock Plan; and (iii) 400,000 shares
reserved for issuance under the Company's Employee Stock Purchase Plan. See
"Management -- Stock Plans," "Description of Capital Stock" and Note 10 of
Notes to Financial Statements.
10
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data for the fiscal years 1991 through 1995
are derived from the Company's Financial Statements and related Notes thereto
that have been audited by KPMG Peat Marwick LLP, independent accountants. The
statements of operations and the balance sheet data as set forth below for, and
as of the end of, each of the six-month periods ended June 30, 1995 and 1996
have been derived from unaudited financial statements of the Company which, in
the opinion of management, include all adjustments that are necessary for a fair
statement of the results of the interim periods, and all such adjustments are of
a normal recurring nature. The selected financial data for the six months ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full year. The selected financial data set forth below should be read in
conjunction with the Financial Statements and related Notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------
1991 1992 1993 1994 1995 1995
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues.............................................. $ 17,881 $ 18,632 $ 23,422 $ 29,543 $ 49,822 $ 21,412
Cost of services...................................... 11,032 11,237 13,829 17,727 30,392 13,130
--------- --------- --------- --------- --------- ---------
Gross profit........................................ 6,849 7,395 9,593 11,816 19,430 8,282
Costs and expenses:
Selling............................................. 1,026 946 1,073 1,431 2,497 1,104
Recruiting.......................................... 665 471 769 1,121 2,181 1,014
General and administrative.......................... 4,981 5,265 6,714 8,089 13,039 5,259
--------- --------- --------- --------- --------- ---------
Total costs and expenses.......................... 6,672 6,682 8,556 10,641 17,717 7,377
--------- --------- --------- --------- --------- ---------
Operating income...................................... 177 713 1,037 1,175 1,713 905
Other income (expense)................................ (167) (18) 66 (36) 17 (99)
--------- --------- --------- --------- --------- ---------
Income before income taxes............................ 10 695 1,103 1,139 1,730 806
Income taxes.......................................... 2 2 3 29 (50) --
--------- --------- --------- --------- --------- ---------
Net income............................................ 8 693 1,100 1,110 1,780 806
Net income per share..................................
Shares used in computing net income per share.........
Pro forma adjustment to provision for income taxes
(2).................................................. -- 14 27 255 666 302
--------- --------- --------- --------- --------- ---------
Pro forma net income(2)............................... $ 8 $ 679 $ 1,073 $ 855 $ 1,114 $ 504
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Pro forma net income per share (2)(3)................. $ 0.16 $ 0.07
--------- ---------
--------- ---------
Shares used in computing pro forma net income per
share................................................ 7,065 7,149
--------- ---------
--------- ---------
Supplementary pro forma net income per share
(unaudited) (4)...................................... $ 0.17
---------
---------
<CAPTION>
1996
<S> <C>
STATEMENT OF OPERATIONS DATA: (1)
Revenues.............................................. $ 38,863
Cost of services...................................... 23,362
---------
Gross profit........................................ 15,501
Costs and expenses:
Selling............................................. 1,710
Recruiting.......................................... 1,607
General and administrative.......................... 9,645
---------
Total costs and expenses.......................... 12,962
---------
Operating income...................................... 2,539
Other income (expense)................................ 304
---------
Income before income taxes............................ 2,843
Income taxes.......................................... 1,098
---------
Net income............................................ 1,745
---------
---------
Net income per share.................................. $ 0.22
---------
---------
Shares used in computing net income per share......... 7,806
---------
---------
Pro forma adjustment to provision for income taxes
(2)..................................................
Pro forma net income(2)...............................
Pro forma net income per share (2)(3).................
Shares used in computing pro forma net income per
share................................................
Supplementary pro forma net income per share
(unaudited) (4)......................................
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------------------ JUNE 30,
PRO FORMA ---------
1991 1992 1993 1994 1995 1995(5) 1995
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments.................................. $ 493 $ -- $ -- $ -- $ 4,083 $ 4,083 $ --
Working capital (deficit)..................... (1,646) (1,514) (210) 613 4,196 4,196 1,143
Total assets.................................. 4,211 3,808 4,797 7,246 17,229 17,229 8,748
Long-term debt, less current portion.......... 2,145 1,044 610 1,600 1,135 1,135 1,735
Redeemable convertible preferred stock........ -- -- -- -- 5,584 -- --
Total stockholders' equity (deficit).......... (2,770) (1,700) (188) 992 271 5,855 1,696
<CAPTION>
1996
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments.................................. $ 33,109
Working capital (deficit)..................... 40,649
Total assets.................................. 54,152
Long-term debt, less current portion.......... --
Redeemable convertible preferred stock........ --
Total stockholders' equity (deficit).......... 45,524
</TABLE>
- ------------------------------
(1) Certain reclassifications have been made to prior year amounts to conform to
the 1995 presentation. See Note 2 of Notes to Financial Statements.
(2) Reflects federal and additional state income tax expense that would have
been required had the Company and its predecessors operated as a C
corporation for all periods presented.
(3) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net income per share.
(4) Adjusted to give effect to the retirement of two promissory notes totaling
$1,666,500, resulting in a reduction of interest expense of $153,000 (pro
forma net income effect of $92,000 assuming a pro forma effective tax rate
of 40%) as if the Company's initial public offering had occurred on January
1, 1995. Shares used in computing supplementary pro forma net income per
share were increased by 111,996 to approximate the number of shares sold in
the Company's initial public offering to yield net proceeds to retire these
notes. See "Use of Proceeds."
(5) Gives effect to conversion of the Redeemable Preferred Stock as of December
31, 1995.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING SECTION OF THE PROSPECTUS, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES.
WHEN USED IN THIS SECTION, THE WORDS "ANTICIPATE," "BELIEVE," "ESTIMATE," AND
"EXPECT" AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT
ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED IN, OR IMPLIED BY, THESE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE
THOSE DISCUSSED IN "RISK FACTORS."
OVERVIEW
Whittman-Hart is an IT services company that provides strategic IT business
solutions designed to improve its clients' productivity and competitive
position. The Company was founded in 1984 and has experienced revenue growth
every year since inception.
Whittman-Hart's revenues are generated primarily from professional fees,
which are generally billed at a contracted hourly rate and are recognized as
services are provided. Over the last three years, at least 90% of the Company's
revenues have been generated on a time and materials basis. The Company's
services may also be provided on a fixed-bid or fee-capped basis, which subjects
the Company to the risk of cost overruns. Fixed-bid revenue is recognized by the
percentage of completion method. The Company typically bills on a weekly basis
to monitor client satisfaction and manage its outstanding accounts receivable
balances. The Company's most significant cost is project personnel cost, which
consists of consultant salaries and benefits. Thus, the Company's financial
performance is primarily based upon billing margin (billable hourly rate less
the consultant's hourly cost) and personnel utilization rates (billable hours
divided by paid hours).
To date, the Company has been able to maintain its billing margins by
offsetting increases in consultant salaries with increases in its hourly rates.
Because most of the Company's engagements are on a time and materials basis,
increases in its cost of services are generally passed along to the Company's
clients and, accordingly, do not have a significant impact on the Company's
financial results. In addition, the Company attempts to control expenses that
are not passed through to its clients. Furthermore, profitability is improved by
tying significant incentive compensation to achieving performance goals.
The Company establishes standard billing guidelines based on the type of
service offered. Actual billing rates are established on a project by project
basis and may vary from the standard guidelines. Over the last three years, the
Company's average revenue per assignment hour has steadily increased. The growth
in average revenue per assignment hour reflects a higher percentage of
value-added services, such as client/ server software implementations (E.G.,
SAP), workgroup projects (E.G., Lotus Notes) and solutions-oriented and
strategic consulting projects.
Whittman-Hart manages its personnel utilization rates by monitoring project
requirements and timetables. The number of consultants assigned to a project
will vary according to the size, complexity, duration and demands of the
project. Project terminations, completions and scheduling delays may result in
periods when consultants are not fully utilized. An unanticipated termination of
a project could result in a higher than expected number of unassigned
consultants or, if the Company were to terminate such consultants, increased
severance expenses. Although the number of the Company's consultants can be
adjusted to correspond to the number of active projects, Whittman-Hart must
maintain a sufficient number of senior consultants to oversee existing client
projects and assist the Company's sales force in securing new client
assignments. Whittman-Hart consultants are subject to employment-at-will
contracts, which may be terminated upon two weeks' notice without penalty or
further expense to the Company.
The Company's historical revenue growth is partly attributable to the growth
of its branch network, which consisted of five branch offices and several client
support centers as of December 31, 1995, and an additional branch office, opened
in Dallas in the first quarter of 1996. Each of the Company's branches has
generated annual revenue and gross margin growth since inception. In addition,
the Company has also
12
<PAGE>
increased revenues by expanding its existing service lines to include higher
value-added service capabilities, such as SAP and Lotus Notes implementation
services, and by increasing the number of clients billed by the Company from 338
in 1993 to 492 in 1995.
In 1995 the Company made one-time infrastructure expenditures in the third
and fourth quarters totaling $1.1 million. These expenditures were included in
general and administrative expenses and were incurred in connection with: (i)
developing a new employee orientation program; (ii) developing the Company's
branch expansion methodology; (iii) training the Company's field task force,
which is responsible for opening the Company's new branch locations; and (iv)
developing the Company's integrated marketing campaign, designed to strengthen
the Whittman-Hart brand name in its branch locations. See "Business --
Operational Investments."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of revenues and the percentage
change in each line item between comparative periods:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES PERIOD-TO-PERIOD
--------------------------------------------------------------- PERCENTAGE
CHANGES
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE -------------
30,
------------------------------------- ------------- 1994 COMPARED
1993 1994 1995 1995 1996 TO 1993
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. 100% 100% 100% 100% 100% 26%
Cost of services...................... 59 60 61 61 60 28
--- --- --- --- ---
Gross profit........................ 41 40 39 39 40 23
Costs and expenses:
Selling............................. 5 5 5 5 4 33
Recruiting.......................... 3 4 4 5 4 46
General and administrative.......... 29 27 26 25 25 20
--- --- --- --- ---
Total costs and expenses.......... 37 36 35 35 33 24
--- --- --- --- ---
Operating income...................... 4 4 4 4 7 13
Other income (expense)................ 1 -- -- -- -- *
--- --- --- --- ---
Income before income taxes............ 5 4 4 4 7 3
Income taxes.......................... -- -- -- -- 3 *
--- --- --- --- ---
Net income............................ 5% 4% 4% 4% 4% 1
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
JUNE 30, 1996
1995 COMPARED COMPARED
TO 1994 TO JUNE 30, 1995
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. 69% 82%
Cost of services...................... 71 78
Gross profit........................ 64 87
Costs and expenses:
Selling............................. 74 55
Recruiting.......................... 95 58
General and administrative.......... 61 83
Total costs and expenses.......... 67 76
Operating income...................... 46 181
Other income (expense)................ * *
Income before income taxes............ 52 253
Income taxes.......................... * *
Net income............................ 60 117
</TABLE>
- ------------------------
*Not meaningful.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO JUNE 30, 1995
REVENUES. Revenues increased 82% to $38.9 million in the first six months
of 1996 from $21.4 million for the first six months of 1995. Each of the
Company's five established branch offices experienced revenue growth in excess
of 75% for the first six months of 1996 as compared to the first six months of
1995. Revenues from the Company's ten most significant clients grew 76%, but as
a percentage of revenues remained constant at approximately 33%.
GROSS PROFIT. Gross profit consists of revenues less cost of services,
which includes consultant salaries and benefits. Gross profit increased 87% to
$15.5 million in the first six months of 1996 from $8.3 million in the first six
months of 1995. Gross profit as a percentage of revenues increased to 40% in the
first six months of 1996 from 39% in the comparable 1995 period. The Company
continued to benefit from prior investments made in newer branches and business
units.
SELLING EXPENSES. Selling expenses include the salaries, benefits,
commissions, travel, entertainment and all other direct costs associated with
the Company's direct sales force. Selling expenses increased 55% to $1.7 million
in the first six months of 1996 from $1.1 million in the first six months of
1995. As a percentage of
13
<PAGE>
revenues, selling expenses decreased to 4% in the first six months of 1996 as
compared to 5% for the comparable period in 1995. The decrease is attributable
to a change in the structure of the sales commission plan. Selling expenses have
a large variable component relating to revenue growth, and therefore are
expected to remain relatively constant as a percentage of revenues in the
future.
RECRUITING EXPENSES. Recruiting expenses consist of costs related to hiring
new personnel. These costs include the salaries, benefits, bonuses and other
direct costs of in-house recruiters, outside recruiting agency fees, sign-on
bonuses, relocation fees and advertising costs. Recruiting expenses increased
58% to $1.6 million in the first six months of 1996 from $1.0 million in the
first six months of 1995. As a percentage of revenues, recruiting expenses
decreased to 4% in the first six months of 1996 from 5% in the comparable 1995
period. The number of consultants increased 69% to 718 as of June 30, 1996 from
425 as of June 30, 1995, while total recruiting costs per hire remained constant
at approximately $5,700.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include salaries and benefits of management and support personnel, facilities
costs, training, travel, outside professional fees and all other branch and
corporate costs. General and administrative expenses increased 83% to $9.6
million in the first six months of 1996 from $5.3 million in the first six
months of 1995. The increase is primarily attributable to a general increase in
corporate costs (approximately 25% of such increase), increased numbers of
branch management personnel to support the growth of new business units and
newer branch locations (approximately 14% of such increase), increased personal
computer leasing due to the rollout of laptop computers for consultants
(approximately 19% of such increase) and the establishment of a new Dallas
branch office (approximately 13% of such increase). As a percentage of revenues,
general and administrative costs remained constant at 25%.
OTHER INCOME (EXPENSE). Other income (expense) increased $0.4 million in
both the second quarter and first six months of 1996 as compared to the same
periods in 1995. The increase is primarily attributable to interest earned on
investments of available net proceeds from the Company's initial public
offering.
INCOME TAXES. Income tax expense was $1.1 (effective rate of 39%) million
in the first six months of 1996 as compared to $0.3 million (effective rate of
37%) provided on a pro forma basis in the first six months of 1995. Prior to
December 31, 1995, the Company operated as a partnership. The pro forma tax
adjustment for the first six months of 1995 represents federal and additional
state income tax expense that would have been required had the Company operated
as a C corporation during that period.
1995 COMPARED TO 1994
REVENUES. Revenues increased 69% to $49.8 million in 1995 from $29.5
million in 1994. Each of the Company's five branch offices experienced revenue
growth in excess of 50% for 1995 compared to 1994. Revenues from the Company's
ten most significant clients grew 67%, but as a percentage of total revenues
remained constant at approximately 33%. Expansion of the Company's existing
service offerings, primarily client/server, business consulting and Novell
LAN/WAN networking services, accounted for approximately 75% of the revenue
increase, while the addition of new service offerings such as SAP, Lotus Notes
and enterprise services accounted for the remaining 25% of the revenue increase.
GROSS PROFIT. Gross profit increased 64% to $19.4 million in 1995 from
$11.8 million in 1994. Gross profit as a percentage of revenues declined to 39%
in 1995 from 40% in 1994. This decrease is attributable to the 16% start-up
margin associated with the Company's new SAP practice, which is expected to
yield higher margins in the future. Excluding the low start-up margins
associated with the SAP practice, 1995 gross profit as a percentage of revenues
would have been 40%.
SELLING EXPENSES. Selling expenses increased 74% to $2.5 million in 1995
from $1.4 million in 1994. The Company's selling expenses, as a percentage of
revenues, remained constant at approximately 5%.
RECRUITING EXPENSES. Recruiting expenses increased 95% to $2.2 million in
1995 from $1.1 million in 1994, but as a percentage of revenues remained
constant at 4%. This increase in recruiting expenses was a
14
<PAGE>
result of expanded hiring activity in preparation for anticipated employee
requirements in 1996. The number of consultants increased 69% to 511 as of
December 31, 1995 from 302 as of December 31, 1994, while total recruiting costs
per hire remained constant at approximately $6,500.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 61% to $13.0 million in 1995 from $8.1 million in 1994. This increase
is primarily attributable to significant one-time infrastructure additions
(approximately 22% of such increase), the establishment of new corporate and
Chicago branch office facilities (approximately 17% of such increase), increased
personal computer leasing (approximately 16% of such increase) and development
of a new SAP business unit (approximately 9% of such increase). As a percentage
of revenues, general and administrative expenses declined to 26% in 1995 from
27% in 1994.
The one-time infrastructure additions in 1995 were made primarily in the
fourth quarter to support significantly higher anticipated growth. These costs
included the establishment of a branch expansion team, additional SAP
investments and the development of the Company's integrated marketing campaign.
Excluding these $1.1 million charges to general and administrative expenses, the
Company's general and administrative expenses as a percentage of revenues in
1995 would have been 24%.
1994 COMPARED TO 1993
REVENUES. Revenues increased 26% to $29.5 million in 1994 from $23.4
million in 1993. The Company's largest branch locations, Chicago and
Indianapolis, grew by approximately 20%. The Denver and Milwaukee branches,
which were opened in 1993, experienced combined revenue growth of approximately
180%. The opening of the Cincinnati branch in the second half of 1994, combined
with the establishment of two additional client support centers in Evansville
and Peoria, contributed an additional $1.0 million to revenues. During 1994, the
Company continued to expand its service offerings and geographical reach and
increase its number of client relationships, which reduced the share of revenues
from its ten most significant clients. Revenues from the Company's ten most
significant clients, expressed as a percentage of total revenues, declined to
34% in 1994 from 49% in 1993.
GROSS PROFIT. Gross profit increased 23% to $11.8 million in 1994 from $9.6
million in 1993. Gross profit as a percentage of revenues declined to 40% in
1994 from 41% in 1993. This decrease was a result of the higher direct costs
associated with the Chicago branch's establishment of two new practice areas
(client server and electronic commerce) as well as additional expenditures to
establish more specialized subgroups within its Business Consulting and
Documentation and Training business units.
SELLING EXPENSES. Selling expenses increased 33% to $1.4 million in 1994
from $1.1 million in 1993. As a percentage of revenues, selling expenses
remained relatively constant at 5%.
RECRUITING EXPENSES. Recruiting expenses increased 46% to $1.1 million in
1994 from $0.8 million in 1993 and as a percentage of revenues increased to 4%
in 1994 from 3% in 1993. This increase in recruiting expenses resulted from
expanded hiring activity in the second half of 1994 in preparation for
anticipated employee requirements in 1995. The number of consultants increased
33% to 302 as of December 31, 1994 from 227 as of December 31, 1993, while total
recruiting costs per hire decreased to approximately $6,500 in 1994 from
approximately $7,100 in 1993.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 20% to $8.1 million in 1994 from $6.7 million in 1993. The increase is
primarily attributable to the development of internal systems and networks
(approximately 21% of such increase), expanded marketing efforts (approximately
18% of such increase), higher travel related costs (approximately 18% of such
increase) and increased computer spending (approximately 16% of such increase).
As a percentage of revenues, general and administrative expenses declined to 27%
in 1994 from 29% in 1993.
15
<PAGE>
UNAUDITED QUARTERLY RESULTS
The following tables set forth certain unaudited quarterly operating
information for each of the eight quarters ending with the quarter ended June
30, 1996, both in dollars and as a percentage of total revenues. These data have
been prepared on the same basis as the audited financial statements contained
elsewhere in this Prospectus and include all adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the
information for the periods presented, when read in conjunction with the
Company's Financial Statements and related Notes thereto. Results for any
previous fiscal quarter are not necessarily indicative of results for the full
year or for any future quarter.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31,
1994 1994 1995 1995 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $ 7,561 $ 8,500 $ 9,672 $ 11,740 $ 13,194 $ 15,216 $ 17,794
Cost of services.................. 4,658 5,172 5,946 7,184 7,993 9,269 10,675
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit.................... 2,903 3,328 3,726 4,556 5,201 5,947 7,119
Costs and expenses:
Selling......................... 368 389 528 576 660 733 799
Recruiting...................... 340 352 479 535 643 524 734
General and administrative...... 2,017 2,218 2,330 2,929 3,343 4,437 4,468
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses...... 2,725 2,959 3,337 4,040 4,646 5,694 6,001
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income.................. 178 369 389 516 555 253 1,118
Other income (expense)............ (7) 39 (58) (41) 48 68 (5)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes........ 171 408 331 475 603 321 1,113
Income taxes...................... 4 12 -- -- -- (50) 445
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income........................ 167 396 331 475 603 371 668
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31,
1994 1994 1995 1995 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... 100% 100% 100% 100% 100% 100% 100%
Cost of services.................. 62 61 62 61 61 61 60
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit.................... 38 39 38 39 39 39 40
Costs and expenses:
Selling......................... 5 5 5 5 5 5 5
Recruiting...................... 4 4 5 5 5 3 4
General and administrative...... 27 26 24 25 25 29 25
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses...... 36 35 34 35 35 37 34
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income.................. 2 4 4 4 4 2 6
Other income (expense)............ * 1 (1) * 1 * *
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes........ 2 5 3 4 5 2 6
Income taxes...................... * * -- -- -- * 2
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income........................ 2% 5% 3% 4% 5% 2% 4%
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
JUNE 30,
1996
<S> <C>
Revenues.......................... $ 21,069
Cost of services.................. 12,687
-----------
Gross profit.................... 8,382
Costs and expenses:
Selling......................... 911
Recruiting...................... 873
General and administrative...... 5,177
-----------
Total costs and expenses...... 6,961
-----------
Operating income.................. 1,421
Other income (expense)............ 309
-----------
Income before income taxes........ 1,730
Income taxes...................... 653
-----------
Net income........................ 1,077
-----------
-----------
JUNE 30,
1996
<S> <C>
Revenues.......................... 100%
Cost of services.................. 60
-----------
Gross profit.................... 40
Costs and expenses:
Selling......................... 4
Recruiting...................... 4
General and administrative...... 25
-----------
Total costs and expenses...... 33
-----------
Operating income.................. 7
Other income (expense)............ 1
-----------
Income before income taxes........ 8
Income taxes...................... 3
-----------
Net income........................ 5%
-----------
-----------
</TABLE>
- ------------------------------
* Less than one percent.
The Company has achieved revenue growth in each of its last eight quarters.
Variations in the Company's revenues and operating results occur from time to
time as a result of a number of factors, such as the significance of client
engagements commenced and completed during a quarter, the number of business
days in a quarter, timing of branch and service line expansion activities, the
timing of corporate expenditures and employee hiring and utilization rates. For
example, operating income decreased to $0.3 million for the quarter ended
December 31, 1995 from $0.6 million in the prior quarter. This decrease was
principally a result of the commencement of $1.1 million in infrastructure
expenditures. Despite the significant number of holidays in the fourth quarter,
the Company's results are largely unaffected because its compensation plans have
been designed to reward participants based on the achievement of their annual
profit goals.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering in May 1996, the Company's primary
source of liquidity had been operating cash flow, periodically supplemented by
borrowings under the Company's revolving credit and term facilities with a
commercial bank. The Company has a Loan Agreement under which it may apply for
up to $5.0 million of credit with interest, at the Company's option, at LIBOR
plus 1.5% or the lender's prime rate. There were no borrowings under this Loan
Agreement as of July 31, 1996. The Company's Loan Agreement expires on April 30,
1997.
On May 8, 1996, the Company completed an initial public offering of its
Common Stock which resulted in net proceeds to the Company of $37.8 million. A
portion of the proceeds from the initial public offering were used to retire the
Company's term facilities. The Company believes the net proceeds from the sale
of Common Stock offered hereby, together with existing sources of liquidity and
funds generated from operations, will provide adequate cash to fund its
anticipated cash needs, including funding the Company's growth strategy, at
least through the next twelve months.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, was issued in October 1995. The Company will be
required to adopt the new standard no later than fiscal 1996, although early
adoption is permitted. This standard establishes the fair value based method
(the "FAS 123 Method") rather than the intrinsic value based method as the
preferred accounting methodology for stock-based compensation arrangements.
Entities are allowed to: (i) continue to use the intrinsic value based
methodology in their basic financial statements and provide in the footnotes pro
forma net income and earnings per share information as if the FAS 123 Method had
been adopted; or (ii) adopt the FAS 123 Method. Adoption of the FAS 123 Method
would result in higher compensation cost for the Company.
17
<PAGE>
BUSINESS
SUMMARY
Whittman-Hart is an information technology ("IT") services company that
provides strategic IT business solutions designed to improve its clients'
productivity and competitive position. The Company offers its clients a single
source for a comprehensive range of services required to successfully design,
develop and implement integrated computer systems projects in the client/server,
open systems, midrange and mainframe computing environments. Among the services
offered by the Company are systems integration, strategic IT planning, software
development, packaged software implementation (such as SAP's R/3 client/ server
application software), business process reengineering, organizational change
management, networking and connectivity, conventional and multimedia
documentation and training, design and implementation of workgroup solutions
(such as Lotus Notes) and design and implementation of electronic commerce
solutions (such as intranet/Internet and electronic data interchange). The
Company believes this breadth of services fosters long-term client
relationships, affords cross-selling opportunities and minimizes the Company's
dependence on any single technology.
Whittman-Hart's marketing efforts focus on middle market companies ranging
from $50 million to $500 million in annual revenues and divisions of Fortune
1000 companies. Whittman-Hart serves clients in a broad range of industries,
including communications, consumer products, distribution, diversified services,
financial services, insurance, manufacturing, pharmaceuticals, professional
services, retail and technology. The Company employs consultants with business
experience in these areas to enhance its ability to understand industry-specific
business issues and develop unbiased IT solutions to address these issues. The
number of clients billed by the Company in a given year has grown from 338 in
1993 to 492 in 1995. Many of these clients have maintained ongoing relationships
with Whittman-Hart over multiple years, spanning a variety of projects and
services. The Company believes that it has established significant ongoing
relationships with many of its clients.
The demand for IT consulting services has increased rapidly in recent years.
Whittman-Hart has competed successfully in this environment, experiencing a
compound annual revenue growth rate of 46% over the past three fiscal years. For
fiscal year 1995, Whittman-Hart's revenues were $49.8 million, an increase of
69% from $29.5 million in fiscal year 1994. For the six months ended June 30,
1996, the Company's revenues were $38.9 million, an increase of 82% from $21.4
million in the corresponding 1995 period. From June 30, 1995 to June 30, 1996,
the number of consultants increased 69% from 425 to 718.
Whittman-Hart sells and delivers its services through a network of six
branch offices located in Chicago, Indianapolis, Milwaukee, Denver, Cincinnati
and Dallas. Based on its experience operating the existing branches, the Company
has developed a branch expansion model. The Company intends to leverage this
model through its national branch expansion strategy. The Company opened a
Dallas branch in January 1996, and an additional branch is scheduled to open in
late 1996. In support of its growth strategy, Whittman-Hart has made significant
investments in its business and systems infrastructure, recruiting organization,
training methodologies and marketing programs, all of which the Company believes
will be necessary to support a significantly larger organization.
INDUSTRY BACKGROUND
Many businesses today are facing intense competition, accelerating
technological change, personnel downsizing and widespread business process
reengineering. Increasingly, these companies are turning to IT solutions to
address these issues and to compete more effectively. As a result, the ability
of an organization to integrate and deploy new information technologies has
become critical.
Although many companies have recognized the importance of IT systems and
products to compete in this business climate, the process of designing,
developing and implementing IT solutions has become increasingly complex.
Companies are continuing to migrate away from centralized mainframes running
proprietary software toward decentralized, scalable architectures based on
personal computers, client/server architectures, local and wide area networks,
shared databases and packaged application software. These
18
<PAGE>
advances have greatly enhanced the ability of companies to benefit from the
application of IT. Consequently, the number of companies desiring to use IT in
new ways and the number of end users within these organizations are rising
rapidly.
As a result of the variety and complexity of these new technologies, IT
managers must integrate and manage "open systems" and "distributed computing
environments" consisting of multiple computing platforms, operating systems,
databases and networking protocols, and must implement off-the-shelf software
applications to support business objectives. Companies must also continually
keep pace with new developments, which often render existing equipment and
internal skills obsolete. At the same time, external economic factors have
forced organizations to focus on core competencies and trim workforces in the IT
management area. Accordingly, these organizations often lack the quantity or
variety of IT skills necessary to design and develop IT solutions. IT managers
are charged with developing and supporting increasingly complex IT systems and
applications of significant strategic value while working under budgetary,
personnel and expertise constraints within their own organizations.
Due to the foregoing factors, demand for IT services has grown
significantly. According to industry sources, the worldwide market for IT
services was estimated at $185 billion in 1995, with a projected market of $292
billion for 2000. The domestic IT services market is projected to grow from $75
billion in 1995 to $130 billion in 2000. Currently, substantially all of the
Company's revenues are derived from IT consulting and planning services and IT
implementation and integration services, two segments within the overall IT
services industry. It is estimated that the domestic market for IT consulting
and planning services will nearly double from roughly $9 billion in 1995 to more
than $18 billion in 2000. The worldwide market for IT consulting and planning
services is estimated to have been $20 billion in 1995, with a forecast of $38
billion by 2000. Domestic IT implementation and integration services revenues
are estimated to have been $20 billion in 1995, with a forecast of $35 billion
by 2000. The worldwide market for IT implementation and integration services is
estimated to have been $49 billion in 1995, with a forecast of $81 billion by
2000.
The Company believes the demand for IT services is particularly strong among
middle market companies, which typically lack the time and technical resources
to satisfy all of their IT needs internally. These companies must often rely on
IT service providers to help implement and manage their systems. However, many
middle market companies must rely on multiple providers for their IT needs.
Generally, larger IT service providers do not target these companies and smaller
IT service providers often lack sufficient breadth of services or industry
knowledge to satisfy these companies' needs. The Company believes this reliance
on multiple service providers creates multiple relationships which are more
difficult and less cost-effective to manage and can adversely impact the quality
and compatibility of IT solutions. Further, many smaller IT service providers
have a financial incentive to recommend a particular hardware and software
provider, which may not be optimal or best of breed for the client's IT problem.
THE WHITTMAN-HART SOLUTION
The Whittman-Hart solution is designed to enable middle market companies and
divisions of Fortune 1000 companies to use IT as a more effective business tool.
The following are key attributes of the Whittman-Hart solution:
SOLVE CRITICAL BUSINESS PROBLEMS. The Company focuses on providing IT
solutions that address strategic business issues, such as increasing
productivity, reducing costs, improving customer service and using data more
effectively. To maintain this focus, Whittman-Hart employs senior consultants
and other professionals who have relevant experience in specific industries,
including communications, consumer products, distribution, diversified services,
financial services, insurance, manufacturing, pharmaceuticals, professional
services, retail and technology. In addition to this industry focus, the
Company's professionals provide a high level of technical competency. To this
end, Whittman-Hart has developed systems, methodologies and an environment to
attract, develop, motivate and retain professionals with the highest levels of
technical skills.
PROVIDE WIDE RANGE OF IT SERVICES. Because many of its clients have
multiple IT needs, the Company provides a wide range of IT services that are
organized under nine individual business units, with each business unit
addressing a specific area of IT and specific IT problems. This structure
enables the Company
19
<PAGE>
to be a single source provider of IT services while maintaining advanced skill
sets offered by each business unit. In response to the rapidly changing nature
of IT, the Company regularly evaluates emerging technologies and their potential
benefit as new services to clients. Based on these evaluations, the Company may
develop additional business units or expand the service lines of existing
business units to enhance the Company's ability to support its clients' ongoing
IT requirements.
OFFER LOCAL PRESENCE. By delivering its services to clients through a
geographically dispersed branch network, the Company demonstrates its commitment
to each local market and enhances its ability to attract skilled, locally-based
consultants. This branch network also increases efficiencies to clients by
enhancing responsiveness and minimizing travel expense. Furthermore,
Whittman-Hart believes that local branch offices establish greater name
recognition for the Company and increase referrals for its services within the
potential client base in that locale. As a result, the Company believes it has a
competitive advantage when competing against firms that do not maintain a local
presence.
IMPLEMENT UNBIASED SOLUTIONS. To ensure its clients receive the optimal IT
solution for their business needs, the Company implements solutions that are
unbiased as to specific hardware or software providers. The Company offers an
objective viewpoint and assessment of the advantages and disadvantages of each
particular IT solution, including packaged software applications, platforms and
operating systems. Consistent with this approach, the Company avoids the bias of
generating significant revenue from promoting third-party products. By offering
its services independently, Whittman-Hart is able to take a flexible approach to
its clients' business problems and provide them with a best of breed IT
solution.
GROWTH STRATEGY
The Company's goal is to become its clients' preferred and single source
provider of a wide range of IT services. The Company's strategy to achieve this
goal includes the following elements:
EXPAND GEOGRAPHIC PRESENCE. Whittman-Hart plans to expand by opening
additional branches in targeted geographic locations. The Company uses an
evaluation methodology to identify cities that possess the characteristics
needed to support a successful branch operation. The Company believes at least
25 domestic cities satisfy its branch expansion criteria. The Company opened a
Dallas branch in January 1996, and an additional branch is scheduled to open in
late 1996. In addition, the Company plans to begin evaluating selected
international markets during 1996.
BROADEN SERVICE LINES. Whittman-Hart believes that it can increase its
revenues from existing clients and attract new clients by expanding its range of
IT services. To advance this strategy, the Company maintains a Technology Review
Board that is responsible for identifying, evaluating and recommending new IT
service opportunities. Recent additions to the service line have focused on
value-added services, including intranet services within the Electronic Commerce
business unit (added in 1996) and other services within the Company's Workgroup
Technologies and SAP Center of Expertise business units (both added in 1995).
The Company plans to add new business units and expand the service offerings
within its existing business units in order to offer clients access to a more
comprehensive range of services.
LEVERAGE EXISTING CLIENT BASE. Whittman-Hart believes it can sustain growth
in its existing branches by continuing to establish and maintain long-term
client relationships. The access and goodwill offered by these relationships
provide the Company with significant advantages over its competitors in
marketing additional services and solutions to such clients. The Company also
believes its long-term client relationships and ability to address its clients'
needs throughout the life cycle of their IT systems distinguish the Company from
many of its competitors and provide the opportunity to become a preferred
provider of IT solutions for a broad range of its existing and new clients.
PURSUE STRATEGIC ACQUISITIONS AND AGREEMENTS WITH BUSINESS PARTNERS. Given
the highly fragmented nature of the IT services marketplace, the Company
believes significant acquisition opportunities exist. On an ongoing basis
Whittman-Hart evaluates potential acquisition candidates to expand its branch
office network, increase its technical expertise or provide other competitive
advantages. In addition, Whittman-Hart may seek to form strategic relationships
with business partners to share technical and industry
20
<PAGE>
knowledge and pursue joint marketing opportunities. The Company has established
business partner relationships with SAP America, Inc., International Business
Machines Corporation, Lotus Corporation, Microsoft Corporation, Novell, Inc,
Oracle Corporation and Sybase, Inc. These relationships typically allow the
Company to gain access to training, product support and the technology developed
by these partners. The training programs often enable Company employees to
become certified in a given technology. Establishing these relationships allows
the Company to use the business partner's name and the "business partner"
designation in marketing the Company's services. These relationships also
facilitate the Company's pursuit of marketing opportunities with the business
partners.
The business partner relationships do not require the Company to use
technology developed by the business partners in implementing IT solutions for
clients. Nonetheless, the Company may be retained by a client based in part upon
one or more of the Company's business partner relationships. Although the
Company is not obligated to resell products offered by the business partners, in
the event it does so, it is generally entitled to purchase discounts on products
purchased for resale. It is the Company's current practice to pass any such
discounts on to the clients to whom the business partner products are resold.
OPERATIONAL INVESTMENTS
Over the past several years, the Company has invested in the development of
systems, methodologies, training programs and infrastructure. The Company
believes that it is positioned to leverage these investments into a larger
organization. Whittman-Hart is pursuing its strategy to become a leading single
source provider of IT services through a diverse national branch network by
utilizing the following operational investments:
GEOGRAPHIC EXPANSION MODULE. Under Whittman-Hart's branch expansion
methodology and related database, the Company evaluates and prioritizes
geographic markets based on, among other things, the estimated number of
potential clients and the overall business environment. This methodology also
identifies the appropriate mix of service offerings in such markets. The
implementation phase of the expansion module is managed by a field task force, a
team of professionals representing each of the major functions of a branch
office who relocate to the new site before and during the branch opening in
order to efficiently replicate the Company's branch model and assure ongoing
compliance with the Company's policies, procedures and performance standards.
This methodology includes an automated tracking system that enables the Company
to monitor project status and control project expenses.
RECRUITING MODULE. In order to address the strong demand for qualified
consultants in the IT services industry, the Company has developed a recruiting
system and database that facilitates the rapid identification of skill-specific
employee candidates and the efficient processing of a large number of
applicants. This system resulted in a reduction in recruiting expenses from
approximately $7,100 per hire in 1993 to approximately $6,500 per hire in 1995.
During this period, the number of recruiting personnel increased from four to
fifteen.
PROPRIETARY TRAINING MODULE. Whittman-Hart has invested in a training
curriculum and methodology known as the Whittman-Hart Institute for Strategic
Education ("WHISE"). The Company employs a "virtual" university approach to its
training by using conventional university teaching methods while taking
advantage of multimedia and computer-based training and tools, as well as
self-study programs. The Company believes the WHISE curriculum and methodology
enable it to train employees efficiently and effectively.
INFORMATION SYSTEMS. In order to enhance the efficiency of its business
operations, Whittman-Hart has invested in the Whittman-Hart Information Network,
a Lotus Notes-based collection of integrated applications, including an
executive information system, a prospect database, a proposal tracking and
development system, e-mail and a wide-area network linking the Company's
employees through remote access. Substantially all of the development expenses
for these information systems have been incurred.
INTEGRATED MARKETING CAMPAIGN. The Company has designed and produced an
integrated marketing campaign, including a series of radio, print and direct
mail advertisements, collateral materials and the Company's Internet site
(http://www.whittman-hart.com). The campaign is designed to strengthen the
21
<PAGE>
Whittman-Hart brand name and generate new clients and employee candidates.
Substantially all of the development expenses have been incurred for this
marketing program, which can be deployed on a market-by-market basis as new
branches are opened.
SERVICES
Whittman-Hart offers its clients a single source for a comprehensive range
of IT services required to successfully design, develop and implement integrated
IT solutions in diverse computing environments. These services are delivered
through the Company's nine business units, which consist of Business Consulting,
IT Architecture, IT Services, IT Engineering, SAP Center of Expertise,
Electronic Commerce, Workgroup Technologies, Documentation and Training and
Integrated Services. In addition, through its Technology Review Board the
Company regularly evaluates emerging IT services and new software products and,
based on its findings, may add new business units or expand the service lines or
skill sets of existing business units.
The Company believes that successful implementation of a major systems
project requires a wide range of skills and a comprehensive methodology for
delivering these skills in an efficient and effective manner. Accordingly, the
Company employs senior consultants who possess industry-specific knowledge and a
broad range of technical expertise. In addition, the Company has developed a
methodology for delivering these skills, which includes in-depth consultation
with the client and development of a well-defined blueprint and specific
timetable for the project. To coordinate these skills, the Company's Primary
Relationship Manager ("PRM") acts as an advisor and liaison between the client
and the members of each of the Company's business units involved in the project.
22
<PAGE>
Set forth below is a list of the services and skills provided by each business
unit:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
BUSINESS UNIT DESCRIPTION OF SERVICES & SKILLS
- ----------------------------------------------------------------------------------------
BUSINESS SERVICES
CONSULTING v Information systems plans
v Requirements definition
v Packaged software evaluation and implementation
v Custom systems design and implementation
v Business process reengineering
v Organizational change management
SKILLS
v General business knowledge: strategic planning, identification of
critical success factors, business needs assessment and profit and
loss, asset and cash management
v Industry knowledge: industry structure, competition, trends and
regulatory environment
v Industry specialization: financial services, retail, health care,
manufacturing and insurance
v Functional knowledge: customer service, accounting, human
resources, payroll and logistics
v Application package knowledge: Baan, Computer Associates, J.D.
Edwards, JBA, Marcam, Oracle, PeopleSoft, QAD, SAP, System Software
Associates and others
v Project definition: goals, milestones, deliverables, budgets,
skills needed and staffing
v Overall project management and delivery
v Quality assurance
IT ARCHITECTURE SERVICES
v IT strategic planning
v IT designs and blueprints
v IT migrations
v IT departmental and career planning
SKILLS
v Client/server, systems and network management, end-user tools,
legacy environments, 3rd and 4th GL, CASE, object oriented
technology and intranet/Internet
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
BUSINESS UNIT DESCRIPTION OF SERVICES & SKILLS
- ----------------------------------------------------------------------------------------
IT SERVICES SERVICES
v Custom software design, development and enhancements
v Packaged software interfaces, conversions and enhancements
v System implementations, conversions, interfaces and integration
v System reengineering
v Year 2000
v MIS management
v Data warehousing, OLAP, data management, data modeling and
database administration
v Legacy data and application migration
v Technology education and training
v Multimedia planning, design and implementation
SKILLS
v Development languages, tools and environments: C/C++, Visual
Basic, Powerbuilder, Gupta, Delphi, Access, FoxPro, Cobol, RPG,
Oracle Developer/2000, SSA AS/SET, JBA Guidelines, JD Edwards
World Vision, SYNON, Obsydian, SmallTalk, Progress, Dynasty and
Antares
v Databases: Oracle, Sybase, Informix, DB2, DB2/400, Ingres, SQL
Server, Redbrick and ESSBASE
v Data modeling tools: S-Designor, Bachman, Silverrun, System
Architect, IEF, ERwin and ADW
v EIS tools: Cognos Powerplay, Oracle Express, Pilot Lightship,
Microstrategy, Information Advantage, Forest and Trees and
Showcase
v Multimedia: Authorware, Toolbook, Director, Photoshop,
Illustrator, Freehand, StrataVision Pro, RAD, Media 100, Digi Design
Protools, Visual Basic and C++
IT ENGINEERING SERVICES
v Communications and connectivity planning, design and
implementation
v Systems and network management
v Networking: LANs and WANs
v Cooperative processing and communications programming
v Site planning and implementation
v Performance tuning and capacity planning
v Disaster recovery planning and testing
SKILLS
v Operating systems: UNIX, Windows NT, OS/400, MVS, Windows 95,
Macintosh, DOS, Novell Netware, OS/2 LAN Server and NT Server
v Network management: Bay, Cisco, Netview, SunNet Manager,
SystemView and OpenView
v Middleware: Tuxedo, MQ Series, ODBC, APPC, CI and Sockets
v Protocols: TCP/IP, IPX/SPX, APPN/SNA, OSI and Net BIOS
v Languages: C/C++, CL, BAL, RPG and COBOL
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
BUSINESS UNIT DESCRIPTION OF SERVICES & SKILLS
- ----------------------------------------------------------------------------------------
SAP CENTER OF SERVICES
EXPERTISE v Business process reengineering/improvement
v Project planning, definition and management
v Rapid and focused SAP implementations
SKILLS
v Application configuration and prototyping: Financial Accounting,
Controlling, Sales and Distribution, Materials Management and
Production Planning
v BASIS: ABAP/4, SAPscript, ALE, CATT, security, database and OS
integration
ELECTRONIC
COMMERCE SERVICES
v Intranet/Internet and World Wide Web ("WWW") planning, design and
implementation
v Electronic data interchange ("EDI") planning, design and
implementation
v Automated data capture planning, design and implementation
SKILLS
v WWW: Netscape Navigator, Netscape Servers, Live3D, Java, HTTP and
HTML
v EDI: Premenos, Gentran, ExTol, St. Paul Software and Supply Tech
WORKGROUP SERVICES
TECHNOLOGIES v Workgroup application planning, design and implementation
v Workflow improvement
v Information management and knowledge processing
v Collaborative computing
SKILLS
v Lotus Notes and InterNotes
v Groupware products: Microsoft Exchange, DEC Teamlinks, Netscape
Collabra Share, Novell Groupwise and XcelleNet
DOCUMENTATION & SERVICES
TRAINING v User and technical documentation and training
v Employee productivity improvement and knowledge transfer support
v Systems development and implementation support
v Document management
SKILLS
v Documentation development: MS Word, WordPerfect, Lotus Ami Pro,
Lotus WordPro, Ventura Publisher, FrameMaker, Aldus PageMaker and
Quark Xpress
v On-line: Doc-to-Help, RoboHelp, ForeHelp, Master Help, AS/400 UIM,
OS/2 IPF, Help Desk Kit, HTML and SGML
v Graphics: ABC Flowcharter, all Clear, MetaDesign and EasyFlow
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
BUSINESS UNIT DESCRIPTION OF SERVICES & SKILLS
- ----------------------------------------------------------------------------------------
INTEGRATED
SERVICES SERVICES
v Project management and implementation services for the development
of facilities across all industries, including commercial,
industrial and retail
v Comprehensive project assistance for the expansion or
reengineering of existing office space, site planning, due diligence
and development of out-of-ground facilities, planning and build
out of computer and telecom rooms
SKILLS
v Project planning and management, budget planning and management
and quality control
v Contractor/vendor selection and management, contract requirements
development, negotiation and implementation
v Punch-list development
v Move-in coordination
v Project close-out coordination and documentation
</TABLE>
26
<PAGE>
CLIENTS AND REPRESENTATIVE SOLUTIONS
Whittman-Hart's clients consist primarily of middle market companies ranging
from $50 million to $500 million in annual revenues and divisions of Fortune
1000 companies. The number of clients billed by the Company in a given year has
grown from 338 in 1993 to 492 in 1995. Many of these clients have maintained
ongoing relationships with Whittman-Hart over many years, spanning multiple
projects and services. The Company believes that it has established significant
ongoing relationships with many of its clients.
Whittman-Hart's ten most significant clients accounted for approximately 33%
of its revenues during 1995 and the first six months of 1996. With the exception
of Novus Services, Inc. which accounted for approximately 10% of the Company's
revenues in 1995, no one client represented more than 10% of Whittman-Hart's
firm-wide revenues. Annual revenues from each of the Company's ten largest
clients in 1995 ranged from approximately $1.0 million to $5.0 million.
Whittman-Hart has served clients in a broad range of industries, including the
following:
<TABLE>
<S> <C> <C>
COMMUNICATIONS CONSUMER PRODUCTS DISTRIBUTION
- -------------------------------- -------------------------------- ----------------------------------
Advantis Helene Curtis Inc. Amway Corporation
Ameritech Custom Business Jockey International Inc. Boise Cascade Office Products
NBC Television Stations Division Kraft General Foods, Inc. Corp.
Western Publishing Company, Inc. NutraSweet Company The HAVI Group L.P.
Sutter Home Winery, Inc. Robert Bosch Corporation
DIVERSIFIED SERVICES FINANCIAL SERVICES INSURANCE
- -------------------------------- -------------------------------- ----------------------------------
Amoco Corporation American National Bank and Trust AMA Insurance Agency, Inc.
Budget Rent A Car Corporation Company of Chicago AON Corporation
Steamboat Ski & Resort Banc One Services Corporation Blue Cross/Blue Shield of Illinois
Corporation First National Bank of Chicago Continental Casualty Company (CNA)
WMX Technologies and Services, Novus Services, Inc. State Farm Mutual Automobile
Inc. Zurich-Kemper Investments Insurance Company
MANUFACTURING PHARMACEUTICALS PROFESSIONAL SERVICES
- -------------------------------- -------------------------------- ----------------------------------
Caterpillar Inc. Abbott Laboratories Manpower International Inc.
Dana Corporation Bristol-Myers Squibb Company Sidley & Austin
FMC Corporation Eli Lilly and Company Winston & Strawn
General Binding Corporation
Reynolds Metals Company
Union Carbide Corporation
</TABLE>
<TABLE>
<S> <C>
RETAIL TECHNOLOGY
- ---------------------------------------------- ----------------------------------------------
Circuit City Stores, Inc. Molex Inc.
Pleasant Company Pentax Technologies Corp.
Walgreen Co. PLATINUM technology, inc.
</TABLE>
Examples of Whittman-Hart's major engagements include the following:
ENTERPRISE-WIDE IMPLEMENTATION OF SAP'S R/3 SOFTWARE FOR COMPUTER
PERIPHERALS DISTRIBUTOR. An international distributor of peripheral computer
equipment determined that its existing IT systems did not meet functional
requirements and could not support the Company's growth strategy. Whittman-Hart
was engaged to work with management to rapidly develop and implement a new
system based on SAP's R/3 software product and an Oracle database operating on
an HP UNIX platform with a Banyan Vines Network. Timing was critical since the
IT solution had to support new product lines scheduled for introduction.
Although SAP implementations generally require 7 to 24 months to complete,
Whittman-Hart was retained to deliver the enterprisewide solution in only 90
days. Whittman-Hart used its rapid implementation methodology, and its
27
<PAGE>
consultants' business experience, to work with management to define business
requirements, to identify the SAP modules to implement and to help reengineer
the client's business processes. In 45 days, Whittman-Hart delivered fully
configured prototypes of the client's key financial, distribution and management
modules. During the remaining 45 days, Whittman-Hart worked with the client's
MIS department in executing data conversion, integration testing and end-user
training to maximize productivity and user acceptance of the system. As a
result, Whittman-Hart helped the client implement a flexible, scalable and
integrated solution on time and on budget.
INTEGRATION OF INFORMATION TECHNOLOGIES FOR INTERNATIONAL OFFICE PRODUCTS
DISTRIBUTOR. An international direct mail and office products distributor
retained Whittman-Hart for several strategic technology projects. Consultants
from Whittman-Hart's Business Consulting, IT Architecture, IT Engineering, and
Electronic Commerce business units were deployed to implement new order entry,
inventory control and product shipping software. Concurrently, Whittman-Hart's
IT architects guided the re-design and migration of the client's IT systems from
a mainframe environment to a midrange, distributed network environment. The
implemented software provided integrated management of inventory within the
client's national network of warehouses and improved customer service and order
fill rates. Whittman-Hart Electronic Commerce consultants designed and
implemented an EDI system to integrate vendors with the client's inventory
management system. The Company's IT engineers designed and implemented the
AS/400 and LAN communications systems and enhanced the order entry system to use
CD-ROM technology to enable customers to directly order products from their
desktops. Whittman-Hart's Electronic Commerce consultants currently are
converting the client's CD-based catalogue into an Internet version based on
World Wide Web technology.
DEVELOPMENT OF LOTUS NOTES-BASED SALES SUPPORT APPLICATION FOR SERVICES
PROVIDER. A major services provider engaged Whittman-Hart to develop a
comprehensive sales and marketing support application using Lotus Notes to
streamline its sales process and enhance sales and customer service.
Whittman-Hart's Workgroup consultants, with guidance and support from its IT
Architecture consultants, designed the application and managed the project.
Whittman-Hart's IT Services consultants performed front-end and back-end
database application development in Visual Basic and data migrations between
Oracle and Lotus Notes databases. Whittman-Hart's Documentation and Training
consultants developed and implemented a program to train more than 400 users
located in a five-state region on the new application in a seven-month period.
The new application retrieves data from several legacy systems (primarily
mainframes), centralizes the collection and distribution of account information,
allows for remote access by system users, fosters communication between sales
teams and departments and facilitates better account management.
SALES AND MARKETING
Whittman-Hart markets and provides its services directly through its branch
offices and client support centers. In addition, Whittman-Hart has developed and
tested an advertising campaign in its branch markets. The campaign includes
print, direct mail and radio advertising, combined with local seminars, trade
shows, public relations and collateral materials.
Sources of new client relationships include referrals, telemarketing and
Whittman-Hart's integrated marketing campaign. The Company's sales organization
is supported by its prospect database, which includes the names of companies and
decision makers in each targeted geographic market. This proprietary Lotus
Notes-based information system, a component of the Whittman-Hart Information
Network, also allows Whittman-Hart employees to access the Company's skills
database and project portfolio.
Whittman-Hart account executives establish contact with targeted prospects
to create awareness, understanding and preference for the Company. Account
executives also identify general client needs and introduce the appropriate IT
consultant or team of IT consultants led by a PRM to help develop the initial
proposal. The PRM, typically a senior level manager, is assigned to the account
to establish a long-term relationship. The PRM serves as the client's primary
source of IT advice and overall coordinator of Whittman-Hart's multiple service
offerings to the client.
28
<PAGE>
In addition to its branch locations, the Company maintains several client
support centers. These centers consist of small offices, usually located in
smaller or more remote markets, which the Company maintains to support the needs
of an existing client or clients near that location.
HUMAN RESOURCES
The Company's success depends in large part upon its ability to attract,
develop, motivate and retain highly skilled technical employees. Qualified
technical employees are in great demand and are likely to remain a limited
resource for the foreseeable future. Whittman-Hart dedicates significant
resources to recruiting consultants with both IT consulting and industry
experience. Many consultants are selected from among the largest and most
successful IT, accounting and other professional services organizations. Each
candidate is screened through detailed interviews by Whittman-Hart's recruiting
personnel, technical interviews by consultants and an appraisal by
Whittman-Hart's managers. As of June 30, 1996, the Company employed
approximately 858 employees, of whom approximately 718 were consultants.
Whittman-Hart has implemented a number of distinctive human resources
programs. For example, the Company's performance-based incentive compensation
program provides guidelines for career development, encourages development of
skills, provides a tool to manage the employee development process and
establishes compensation guidelines. Whittman-Hart has also developed its WHISE
training module to guide consultants through a progression of skill and
competency development programs. As part of this module, the Company reimburses
employees for education and training, provides computer-based training curricula
and provides access to the Company's Technology Center where employees can gain
hands-on experience with a diverse array of computing environments. In addition,
Whittman-Hart has developed a centralized new employee orientation program that
features multimedia presentations and a computer-based training program. See
"Business -- Operational Investments -- Proprietary Training Module."
None of the Company's employees are subject to a collective bargaining
arrangement. Whittman-Hart has entered into employment agreements, which
(without substantial penalty) are terminable upon two weeks notice, with
virtually all of its sales, recruiting and technical personnel containing
noncompetition, nondisclosure and nonsolicitation covenants. Although most
consultants are Company employees, the Company does engage consultants as
independent contractors from time to time.
COMPETITION
The market for IT services includes a large number of competitors, is
subject to rapid change and is highly competitive. Primary competitors include
participants from a variety of market segments, including "Big Six" accounting
firms, systems consulting and implementation firms, application software firms,
service groups of computer equipment companies, facilities management companies,
general management consulting firms and programming companies. Many of these
competitors have significantly greater financial, technical and marketing
resources and greater name recognition than the Company. In addition, the
Company competes with its clients' internal resources, particularly where these
resources represent a fixed cost to the client. Such competition may impose
additional pricing pressures on the Company. See "Risk Factors -- Competition."
The Company believes that the principal competitive factors in the IT
services market include breadth of services offered, technical expertise,
knowledge and experience in the industry, price, perceived value, quality of
service and responsiveness to client needs and speed in delivering IT solutions.
INTELLECTUAL PROPERTY RIGHTS
Whittman-Hart's success has resulted, in part, from its methodologies and
other proprietary intellectual property rights. The Company relies upon a
combination of nondisclosure and other contractual arrangements and trade
secret, copyright and trademark laws to protect its proprietary rights and the
proprietary rights of third parties from whom the Company licenses intellectual
property. The Company enters into confidentiality agreements with its employees
and limits distribution of proprietary information. There can
29
<PAGE>
be no assurance that the steps taken by the Company in this regard will be
adequate to deter misappropriation of proprietary information or that the
Company will be able to detect unauthorized use and take appropriate steps to
enforce its intellectual property rights. See "Risk Factors -- Intellectual
Property Rights."
Software developed by Whittman-Hart in connection with a client engagement
is typically assigned to the client. In limited situations, the Company may
retain ownership, or obtain a license from its client, which permits
Whittman-Hart or a third party to market the software for the joint benefit of
the client and Whittman-Hart or for the sole benefit of Whittman-Hart.
"Whittman-Hart-Registered Trademark-" and "Making Information Technology
Work-Registered Trademark-" are registered service marks of Whittman-Hart. The
Company is also in the process of registering its slogan "We Are IT-SM-" with
the U.S. Patent and Trademark Office. The Company holds no patents or registered
copyrights, and has no present intention of making any copyright or patent
applications.
PROPERTY
Whittman-Hart's principal executive offices are located at 311 South Wacker
Drive, Chicago, Illinois. The Company's lease on these premises covers 40,000
square feet and expires October 31, 2004. The Company also leases facilities in
Indianapolis, Milwaukee, Denver, Cincinnati, Peoria, Ft. Wayne and Dallas. See
Note 5 of Notes to Financial Statements. Whittman-Hart anticipates that
additional space will be required as its business expands and believes that it
will be able to obtain suitable space as needed.
LEGAL PROCEEDINGS
Whittman-Hart is not involved in any material legal proceedings.
30
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their respective
ages and positions as of June 30, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Robert F. Bernard.................................... 35 Chairman of the Board, President and Chief Executive
Officer
Edward V. Szofer..................................... 36 Director, Vice President, Chief Operating Officer and
Secretary
Kevin M. Gaskey...................................... 37 Chief Financial Officer and Treasurer
Susan B. Reardon..................................... 40 Director of Human Resources
Glen A. Metelmann.................................... 53 Director of Marketing and Sales
Robert F. Steel (1)(2)............................... 41 Director
Paul D. Carbery (1)(2)............................... 35 Director
Lawrence P. Roches (1)(2)............................ 44 Director
</TABLE>
- ------------------------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
ROBERT F. BERNARD, the founder of the Company, has served as a director of
the Company and as Chairman, President and Chief Executive Officer of the
Company since its inception in 1984. He was selected as the KPMG Illinois High
Tech Entrepreneur of the Year in 1992.
EDWARD V. SZOFER has served as a director of the Company since August 1995
and has been Vice President and Chief Operating Officer since January 1994 and
Secretary since May 1996. From 1984 to December 1993, Mr. Szofer held various
management positions with the Company in operations. Mr. Szofer was employed as
a consultant in the Management Information Consulting division of Arthur
Andersen & Co. prior to joining the Company.
KEVIN M. GASKEY has served as the Chief Financial Officer and Treasurer of
the Company since April 1990. Mr. Gaskey, a certified public accountant, joined
the Company with over nine years of financial experience from his prior
positions with KPMG Peat Marwick LLP, Beatrice Companies, Inc. and Baxter
International, Inc.
SUSAN B. REARDON has served as the Company's Director of Human Resources
since February 1990. From June 1987 to January 1990, she established the human
resource function at the Company. Prior to joining the Company, Ms. Reardon
served as Human Resources Manager at TTX Co., a Chicago-based transportation
equipment leasing company.
GLEN A. METELMANN has served as the Company's Director of Marketing and
Sales since March 1990. Prior to 1990 he was Vice President, Director of
Marketing and a member of the Administrative Committee of Lake Shore Bancorp.,
Inc. Mr. Metelmann had previously been employed in the sales organizations of
Unisys Corporation and Xerox Corp.
ROBERT F. STEEL has served as a director of the Company since August 1995.
He served as Secretary from January 1996 to May 1996. Since 1977, Mr. Steel has
served in various positions with K.A. Steel Chemicals Inc., a chemical
processing firm, most recently as President, Chief Executive Officer and
Director. Mr. Steel also serves as an officer and director of several other
privately held companies.
31
<PAGE>
PAUL D. CARBERY has served as a director of the Company since August 1995.
Mr. Carbery has been a general partner of Frontenac Company, a private equity
investment management partnership, since June 1993 and was an associate of that
firm from September 1989 to June 1993. He also serves as a director of Eagle
River Interactive, Inc. as well as several privately held companies.
LAWRENCE P. ROCHES has served as a director of the Company since August
1995. He has been the Chief Executive Officer and a director of Melson
Technologies, Inc., a provider of investment management systems for securities,
mortgage loans and real estate portfolios since September 1994. From November
1991 to August 1994, he was employed as the Vice President of Marketing of
ShipNet Systems, Inc., an information services company. From October 1985 to May
1991, Mr. Roches was employed as Vice President of Technology and Chief Services
Officer of System Software Associates, Inc., a software company.
The Company's By-Laws and Certificate of Incorporation provide for the
Company's Board of Directors to be comprised of as many directors as are
designated from time to time by the Board of Directors. The Board is currently
comprised of five members. Each director holds office until his successor is
duly elected and qualified, or until his earlier death, resignation or removal.
The Company's Certificate of Incorporation and By-Laws provide that the Board of
Directors be classified into three classes. Messrs. Roches and Steel serve in
the class the term of which expires in 1997; Messrs. Carbery and Szofer serve in
the class the term of which expires in 1998; and Mr. Bernard serves in the class
the term of which expires in 1999. Upon the expiration of the term of each class
of directors, directors comprising such class will be elected for a three-year
term at the next succeeding annual meeting of stockholders.
Two of the Company's current directors, Messrs. Carbery and Steel, were
nominated and elected to the Company's Board of Directors in accordance with a
stockholders agreement as designees of Frontenac and Platinum, respectively. See
"Certain Transactions." There are currently no voting agreements in effect
regarding the election of directors. Executive officers of the Company are
appointed by, and serve at the discretion of, the Board of Directors. There are
no family relationships among any of the executive officers or directors of the
Company.
BOARD COMMITTEES
The Board of Directors established a Compensation Committee and an Audit
Committee in December 1995. The Compensation Committee, consisting of Messrs.
Carbery, Roches and Steel, makes recommendations concerning the salaries and
incentive compensation of employees of the Company. The Audit Committee,
consisting of Messrs. Carbery, Roches and Steel, is responsible for reviewing
the results and scope of audits and other services provided by the Company's
independent auditors and reviewing the Company's internal controls.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the Compensation Committee, all decisions relating to
executive compensation were made by the Company's Management Committee. Mr.
Bernard, the Company's Chairman, President and Chief Executive Officer, and Mr.
Szofer, the Company's Vice President and Chief Operating Officer, both served as
members of the Company's Management Committee and in such capacity participated
in deliberations concerning executive compensation during 1995.
DIRECTOR COMPENSATION
Except for Mr. Roches, directors do not receive any compensation for their
services, although directors are reimbursed for their reasonable out-of-pocket
expenses incurred in attending meetings. In 1996, Mr. Roches was granted a
nonqualified option to acquire 8,000 shares of Common Stock at an exercise price
of $4.63 per share.
32
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
annual and long-term compensation earned for the fiscal year ended December 31,
1995 for the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer
(collectively, with the Chief Executive Officer, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE FOR 1995
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS (1)
-------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER OPTIONS (#) COMPENSATION (2)
<S> <C> <C> <C> <C> <C>
Robert F. Bernard ................... $ 360,000 $ -- $ 103,446(3) -- $ --
Chairman of the Board,
President and Chief Executive
Officer
Edward V. Szofer .................... 199,000 25,000 -- 57,852 500
Vice President and Chief
Operating Officer
Kevin M. Gaskey ..................... 160,500 141,250(4) -- 62,000 500
Chief Financial Officer and
Treasurer
Susan B. Reardon .................... 132,500 27,000 -- 54,000 500
Director of Human Resources
Glen A. Metelmann ................... 135,000 20,400 -- 55,048 500
Director of Marketing and Sales
</TABLE>
- ------------------------------
(1) The Company did not issue any restricted stock or grant any stock
appreciation rights in 1995. None of the Named Executive Officers held any
restricted stock as of December 31, 1995.
(2) Represents matching payments under the Company's 401(k) Plan.
(3) Represents amounts paid as reimbursement for income tax liabilities
incurred as a result of the Company's predecessors' earnings. See "The
Company."
(4) Represents a cash bonus of $41,250 and the issuance of 30,900 shares of
Common Stock on February 15, 1995.
33
<PAGE>
The following table sets forth certain information with respect to the grant
of incentive stock options ("ISOs") and nonqualified stock options ("NQSOs") by
the Company during 1995 to the Named Executive Officers.
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES ANNUAL RATES OF
UNDERLYING % OF TOTAL STOCK PRICE
OPTIONS OPTIONS APPRECIATION FOR
GRANTED (1) GRANTED TO EXERCISE OPTION TERM (4)
-------------------- EMPLOYEES PRICE EXPIRATION ----------------------
NAME ISO NQSO IN YEAR (2) ($/SH) (3) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Robert F. Bernard................. -- -- --% $ -- $ -- $ --
Edward V. Szofer.................. 3,852 54,000 6.4 6.49 12/31/05 236,124 598,386
Kevin M. Gaskey................... 62,000 6.8 6.49 12/31/05 253,055 641,290
---
Susan B. Reardon.................. -- 54,000 5.9 6.49 12/31/05 220,402 558,543
Glen A. Metelmann................. 1,048 54,000 6.0 6.49 12/31/05 224,680 569,383
</TABLE>
- ------------------------
(1) All options were granted on December 31, 1995. The ISOs vest in thirds on
the first three anniversaries of the stock option grant. The NQSOs vest 10%
upon grant and 22.5% on each of the first four anniversaries of the stock
option grant, respectively, except that options to purchase 8,000 shares
granted to Mr. Gaskey vested immediately upon grant.
(2) Based on an aggregate of 910,856 options granted in 1995 to employees of
the Company, including the Named Executive Officers.
(3) The exercise price equals the fair market value of Common Stock as
determined by the Board of Directors on that date, based on a valuation
prepared by Broadview Associates. The exercise price is payable in cash or,
subject to certain limitations, by delivery of shares of Common Stock.
(4) The potential realizable value is calculated based on the term of the
option at the time of grant (ten years). Stock price appreciation of 5% and
10% is based on the fair value at the time of grant and assumes that the
option is exercised at the exercise price and sold on the last day of its
term at the appreciated price, pursuant to rules promulgated by the
Securities and Exchange Commission. The potential realizable value does not
represent the Company's prediction of its stock price performance. This
table does not take into account appreciation for the fair value of the
Common Stock from the date of grant to date. There can be no assurance that
the actual stock price appreciation over the ten-year option will be at the
assumed 5% and 10% levels or at any other defined level. If for purposes of
this calculation the fair market value of the Common Stock on the date of
grant was assumed to have equaled the price to the public in the Company's
initial public offering, the potential realizable value of the options
calculated would substantially exceed the potential realizable values shown
in the table.
The following table sets forth certain information with respect to the value
of options held at December 31, 1995 by the Named Executive Officers who held
options during 1995. The Named Executive Officers did not exercise any options
to purchase Common Stock during 1995.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995 (1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Robert F. Bernard......................................... -- -- $ -- $ --
Edward V. Szofer.......................................... 5,400 52,452 0 0
Kevin M. Gaskey........................................... 13,400 48,600 0 0
Susan B. Reardon.......................................... 5,400 48,600 0 0
Glen A. Metelmann......................................... 5,400 49,648 0 0
</TABLE>
- ------------------------------
(1) Until May 3, 1996, the Common Stock was not publicly traded. The Board of
Directors, in connection with grants of stock options from time to time,
determines the fair market value of the Common Stock as of the grant date.
For purposes of calculating the value recognized at year end, the Board of
Directors has used the Broadview Associates determination of fair market
value as of December 31, 1995.
34
<PAGE>
EMPLOYMENT AGREEMENTS
The Company is a party to substantially identical employment contracts with
Messrs. Bernard, Szofer, Gaskey and Metelmann and Ms. Reardon, pursuant to which
each of those individuals serves as an executive of the Company at compensation
levels and terms to be agreed upon between those individuals and the Company.
These agreements provide that upon termination of employment by the Company,
other than for Cause (as defined in the agreements) or retirement, the Company
shall pay the officer an amount equal to twice the executive's annual base
compensation in effect at the time of termination in the case of Messrs. Bernard
and Szofer and one year in the case of Messrs. Gaskey and Metelmann and Ms.
Reardon. The agreements also provide that in the event of a Change in Control
(as defined in the agreements) and the occurrence of certain events, and to the
extent deductible under then applicable tax laws, the Company shall pay such
executives a payment equal to two times the sum of: (i) the executives' most
recent base annual compensation in effect at the date of the Change in Control;
and (ii) the cash value of purchasing on an individual basis insurance
protection (including dependent coverage) that is equal to the coverage then in
effect with respect to the Company's health insurance plan, based upon the cost
of such insurance coverage for a six-month period following the Change in
Control date. Mr. Bernard's employment agreement does not provide for payments
in the event of a Change in Control. Each of these executives is subject to
noncompetition, nonsolicitation and nondisclosure covenants.
STOCK PLANS
EMPLOYEE STOCK PURCHASE PLAN. The Company has reserved an aggregate of
400,000 shares of Common Stock for issuance under the Company's Employee Stock
Purchase Plan (the "Purchase Plan"). Such shares may be authorized but unissued
Common Stock, treasury shares or Common Stock purchased in the open market. The
Purchase Plan is intended to qualify under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), and will permit eligible employees of the
Company who have completed five full calendar months of service to purchase
Common Stock through payroll deductions of up to 20% of their total cash
compensation, provided that no employee may purchase more than $20,000 worth of
stock in any calendar year. The Purchase Plan has two six-month offering
periods, beginning on April 1 and September 1 of each year, with the first
offering period commencing on May 3, 1996. The Purchase Price (as defined in the
Purchase Plan) of Common Stock purchased under the Purchase Plan equals 90% of
the market value of the Common Stock (as calculated in the Purchase Plan) on the
first or last day of an offering period, whichever is lower. The Purchase Plan
is administered by the Compensation Committee. The Board is able to amend or
terminate the Purchase Plan at any time. However, the Board may not, without
stockholder approval, modify the Purchase Plan if stockholder approval of the
amendment is required for the Purchase Plan to continue to comply with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Section 423 of the Code.
ESOP. The Company sponsors an Employee Stock Ownership Plan (the "ESOP"),
covering substantially all employees of the Company. As of June 30, 1996, the
ESOP owned 245,194 shares of Common Stock. The Company does not intend to make
future contributions to the ESOP. See Note 8 of Notes to Financial Statements.
1995 INCENTIVE STOCK PLAN. The Company has reserved an aggregate of
2,000,000 shares of Common Stock for issuance under the 1995 Incentive Stock
Plan, as amended (the "Incentive Stock Plan"), which may be granted to employees
and officers of the Company. The maximum number of shares that may be subject to
awards granted to any participant in any fiscal year is 88,084 shares. The
Incentive Stock Plan is administered by the Compensation Committee. The
Incentive Stock Plan provides for awards, which may consist of Common Stock,
restricted shares of Common Stock, NQSOs and ISOs to purchase shares of Common
Stock, performance awards and stock appreciation rights ("SARs").
The exercise price for options may be paid: (i) in cash; (ii) by
surrendering shares already owned by the optionee; or (iii) if the Compensation
Committee so determines by instructing a broker to sell enough of the optionee's
exercised shares to deliver to the Company sufficient sales proceeds to pay the
exercise price. The exercise price per share of Common Stock may not be less
than 85% (100% in the case of an ISO) of the mean of the highest and lowest
sales price for the Common Stock last reported on the Nasdaq National
35
<PAGE>
Market on the date the stock option is granted. The base value of an SAR will
equal not less than 85% of the market value of a share of Common Stock on the
grant date. Options and SARs to be granted under the Incentive Stock Plan must
be exercised within fifteen years from the date of grant (ten years in the case
of ISOs) and will generally vest in annual installments as determined by the
Compensation Committee. In the case of any eligible employee who owns or is
deemed to own stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company, the exercise price of any ISOs granted
under the Incentive Stock Plan may not be less than 110% of the fair market
value of the Common Stock on the date of grant and the exercise period may not
exceed five years from the date of grant.
The Board of Directors can terminate or amend the Incentive Stock Plan at
any time, except that no such action generally will be able to adversely affect
any right or obligation regarding any awards previously made under the Incentive
Stock Plan without the consent of the recipient. In addition, no amendment may
be effective without the prior approval of stockholders, if such approval is
required for the Incentive Stock Plan to continue to comply with applicable
regulations of the Securities and Exchange Commission (the "Commission"). In the
event of any changes in the capital structure of the Company, such as a stock
dividend or split-up, the Board of Directors must make equitable adjustments to
outstanding unexercised awards and to the provisions of the Incentive Stock Plan
so that the net value of the award is not changed. If the Company becomes a
party to a merger, reorganization, liquidation or similar transaction, the Board
of Directors may make such arrangements it deems advisable regarding outstanding
awards, such as substituting new awards for outstanding awards, assuming
outstanding awards or terminating or paying for outstanding awards.
At July 31, 1996, ISOs for 50,904 shares and NQSOs for 821,430 shares were
outstanding under the Incentive Stock Plan.
36
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 31, 1996, as adjusted to reflect the sale
of the shares offered hereby, by: (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock; (ii) each
of the Company's directors; (iii) each of the Named Executive Officers; (iv) all
directors and executive officers of the Company as a group; and (v) each of the
Selling Stockholders. Unless otherwise indicated in the footnotes to the table
set forth below, each person or entity named below has (a) an address in care of
the Company's principal executive offices, and (b) to the Company's knowledge,
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such holder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING NUMBER OF AFTER OFFERING (1)
----------------------- SHARES -----------------------
NUMBER OF BEING NUMBER OF
NAME SHARES PERCENT OFFERED SHARES PERCENT
<S> <C> <C> <C> <C> <C>
Robert F. Bernard........................................... 4,278,332 47.8% 277,320 4,001,012 40.1%
Frontenac VI Limited Partnership (2)........................ 589,037 6.6 294,520 294,517 2.9
Paul D. Carbery (3)......................................... 589,037 6.6 294,520 294,517 2.9
Lawrence P. Roches (4)...................................... 2,000 * -- 2,000 *
Robert F. Steel (5)......................................... 0 * 0 0 *
Edward V. Szofer (4)........................................ 225,563 2.5 10,000 215,563 2.2
Platinum Venture Partners II, L.P. ......................... 123,865 1.4 68,800 55,065 *
Platinum Venture Partners I, L.P. .......................... 108,382 1.2 60,200 48,182 *
Kevin M. Gaskey (4)......................................... 68,205 * 9,780 58,425 *
Susan B. Reardon (4)........................................ 37,809 * -- 37,809 *
Glen A. Metelmann (4)....................................... 37,809 * 15,000 22,809 *
Murray L. Horwitz (4)....................................... 22,802 * 9,380 13,422 *
Ronald C. Lavery (4)........................................ 43,839 * 20,000 23,839 *
All executive officers and directors as a group (8 persons) 5,238,755 58.5 4,632,135 46.2
(5)........................................................ 606,620
</TABLE>
- ------------------------------
* Less than 1%.
(1) Assumes no exercise of the Underwriters' over-allotment option. In the event
such option is exercised in full, the following stockholders will sell
pursuant to such option the number of shares of Common Stock following their
names and, after this offering, will beneficially own the number and
percentage of shares of Common Stock following their names:
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AFTER OFFERING
------------------------
SHARES TO NUMBER OF
BE SOLD SHARES PERCENT
<S> <C> <C> <C>
Robert F. Bernard................................................ 60,520 3,940,492 39.5%
Frontenac VI Limited Partnership................................. 146,480 148,037 1.5
Platinum Venture Partners II, L.P. .............................. 33,600 21,465 *
Platinum Venture Partners I, L.P. ............................... 29,400 18,782 *
</TABLE>
(2) The address of Frontenac VI Limited Partnership is 135 S. LaSalle Street,
Chicago, Illinois 60603.
(3) Mr. Carbery, a director of the Company, is a general partner of Frontenac
Company, which is the general partner of Frontenac VI Limited Partnership.
As such, Mr. Carbery may be deemed to beneficially own the 589,037 shares of
Common Stock beneficially owned by Frontenac VI Limited Partnership. Mr.
Carbery disclaims beneficial ownership of these shares within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934 ("Exchange Act").
(4) Includes shares of Common Stock which can be acquired through the exercise
of options within 60 days of July 31, 1996, as follows: Edward V. Szofer --
5,443 shares; Kevin M. Gaskey -- 13,425 shares; Susan B. Reardon -- 5,429
shares; Glen A. Metelmann -- 5,429 shares; Lawrence P. Roches -- 2,000
shares; Murray L. Horwitz -- 5,422 shares; Ronald C. Lavery -- 5,439 shares;
and all executive officers and directors as a group -- 31,726 shares.
(5) Mr. Steel, a director of the Company, is a limited partner of Platinum
Venture Partners I, L.P. and Platinum Venture Partners II, L.P. As such, Mr.
Steel may be deemed to beneficially own the 108,382 shares of the Common
Stock beneficially owned by Platinum Venture Partners I, L.P. and the
123,865 shares of the Common Stock beneficially owned by Platinum Venture
Partners II, L.P. Mr. Steel disclaims beneficial ownership of these shares
within the meaning of Rule 13d-3 under the Exchange Act.
37
<PAGE>
CERTAIN TRANSACTIONS
In August 1995, Frontenac purchased 173,832 preferred equity units in LP for
$4.0 million and Platinum purchased 65,187 preferred equity units in LP for $1.5
million. The preferred equity units were converted into a like number of shares
of Redeemable Preferred Stock in connection with the Reorganization, and such
shares were converted into 956,074 shares of Common Stock immediately prior to
the consummation of the Company's initial public offering. See "The Company."
Contemporaneously with Frontenac's and Platinum's investment in preferred equity
units, the Company redeemed 260,748 common equity units owned by Mr. Bernard at
a redemption price of $5.75 per unit, or a total of $1.5 million.
Frontenac and Platinum were granted certain registration rights with respect
to the preferred equity units and any securities issuable upon conversion of the
preferred equity units. They were also granted certain other rights, including:
(i) the right to each designate one member to the Company's five person Board of
Directors; (ii) certain class voting rights; (iii) certain preferences upon
liquidation, dissolution or winding up of the Company; (iv) a preferred dividend
accrual of 10% per annum payable upon redemption of the preferred equity units;
and (v) certain rights of first refusal and co-sale rights involving existing
management securities. In addition, Frontenac, Platinum, Limited and each of
Messrs. Bernard and Szofer entered into a Voting Agreement whereby the parties,
other than Limited, agreed to vote in favor of the others' respective designees
to the Board of Directors. The preferential rights, including those enumerated
above, and the Voting Agreement, terminated immediately prior to the
consummation of the Company's initial public offering.
During the time when the Company's business was conducted as a partnership,
various loans were made among Mr. Bernard, Limited and LP, all of which have
been repaid. As of December 31, 1995, loans by the Company to Mr. Bernard
aggregated $326,356 and bore interest at the per annum rate of prime less 2%.
These loans were made to enable Mr. Bernard to make certain payments owed by him
to an affiliate of the Company. Also as of December 31, 1995, loans from Mr.
Bernard to the Company aggregated $317,413 and bore interest at the per annum
rate of 10%. These loans were made for working capital and other general
corporate purposes. Subsequent to December 31, 1995, the loans were offset
against each other and the remaining balance owed by Mr. Bernard to the Company
was paid in full.
In 1995 the Company acquired a 50% ownership interest in Sleep Relief
L.L.C., an Illinois limited liability company ("Sleep Relief"). Sleep Relief
develops and markets sleep laboratory software products and provides consulting,
education and risk assessment services to providers involved in the practice of
sleep medicine as well as organizations seeking to identify sleep disorders in
targeted populations. Recently, Sleep Relief entered into an agreement with
HealthDyne Technologies, Inc. to distribute Sleep Relief's sleep management
software and related documents. In consideration of its ownership interest, the
Company made a nominal capital investment in Sleep Relief and committed to
provide up to $150,000 in technical and administrative support and to match
capital contributions made by other interested parties, provided an appraisal
determines that the value of Sleep Relief will increase by the value of the
Company's contribution. Mr. Bernard serves on Sleep Relief's Management
Committee.
38
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 15,000,000 shares of
Common Stock, par value $.001 per share, and 3,000,000 shares of preferred
stock, $.001 par value per share, to be issued from time to time by the Board of
Directors as shares of one or more classes or series ("Blank Check Preferred").
The Company currently has outstanding 8,952,472 shares of Common Stock, and no
shares of Blank Check Preferred. Upon completion of this offering, the Company
will have outstanding 9,987,472 shares of Common Stock and no shares of Blank
Check Preferred. As of August 2, 1996, there were 45 holders of record of Common
Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then-outstanding shares of preferred stock, the
holders of the Common Stock are entitled to such dividends as may be declared at
the discretion of the Board of Directors out of funds legally available
therefor. See "Dividend Policy." Holders of Common Stock are entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities and any preferential liquidation rights of any
preferred stock then outstanding. The holders of Common Stock have no preemptive
rights to purchase shares of capital stock of the Company. Shares of Common
Stock are not subject to any redemption provisions and are not convertible into
any other securities of the Company. All outstanding shares of Common Stock are,
and the shares of Common Stock to be issued pursuant to this offering will be,
upon payment therefor, duly authorized, validly issued, fully paid and
non-assessable.
The Common Stock is listed on the Nasdaq National Market under the symbol
"WHIT."
PREFERRED STOCK
Subject to the provisions of the Company's Certificate of Incorporation and
limitations prescribed by law, the Board of Directors is expressly authorized to
adopt resolutions to issue shares of Blank Check Preferred, to fix the number of
such shares and to change the number of such shares constituting any series, and
to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of Blank
Check Preferred, in each case without any further action or vote by the
stockholders. The Company has no current plans to issue any shares of Blank
Check Preferred.
DELAWARE LAW AND CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS;
ANTI-TAKEOVER EFFECTS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or the business combination is approved in a
prescribed manner, or certain other conditions are satisfied. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation and By-Laws provide that the
directors of the Company shall be classified into three classes, with staggered
three-year terms. See "Management -- Directors and Executive Officers." Any
director may be removed only for cause upon the affirmative vote of at least 66%
of the shares entitled to vote for the election of directors.
The Company's By-Laws provide that for nominations for the Board of
Directors or for other business to be properly brought by a stockholder before a
meeting of stockholders, the stockholder must first have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a notice must
generally be delivered not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's
39
<PAGE>
annual meeting. The notice must contain, among other things, certain information
about the stockholder delivering the notice and, as applicable, background
information about each nominee or a description of the proposed business to be
brought before the meeting.
The Company's By-Laws provide that special meetings of stockholders may be
called only by the Chairman of the Board of Directors or the President of the
Company. These provisions could have the effect of delaying until the next
annual stockholders meeting stockholder actions which are favored by the holders
of a majority of the outstanding voting securities of the Company.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from acquiring,
control of the Company.
The existence of Blank Check Preferred enables the Board of Directors to
render more difficult or to discourage an attempt to obtain control of the
Company by means of a tender offer, proxy contest, merger or otherwise, thereby
protecting the continuity of the Company's management. The issuance of Blank
Check Preferred pursuant to the Board of Directors' authority described above
may adversely affect the rights of the holders of Common Stock. For example,
Blank Check Preferred issued by the Company may rank prior to the Common Stock
as to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of Common Stock. Accordingly,
the issuance of Blank Check Preferred may discourage bids for the Common Stock
or may otherwise adversely affect the market price of the Common Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation contains certain provisions
permitted under the DGCL relating to the liability of directors. These
provisions eliminate a director's personal liability for monetary damages
resulting from a breach of fiduciary duty, except in certain circumstances
involving certain wrongful acts, such as: (i) for any breach of the director's
duty of loyalty to the Company or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) under Section 174 of the DGCL; or (iv) for any transaction from
which the director derives an improper personal benefit. These provisions do not
limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's fiduciary duty. These provisions will not alter a
director's liability under federal securities laws. The Company's Certificate of
Incorporation and By-Laws also contain provisions indemnifying the directors and
officers of the Company to the fullest extent permitted by the DGCL. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors and officers.
REGISTRATION RIGHTS
Under the terms of a Registration Agreement dated as of December 31, 1995
(the "1995 Registration Agreement"), among Frontenac, Platinum (collectively,
the "1995 Investors") and the Company, at any time after May 8, 1996 (the
closing date of the Company's initial public offering), the holders of a
majority of the Registrable Stock (as defined therein), have the right to
require the Company to register any or all of the Registrable Stock, subject to
the conditions and limitations contained in the 1995 Registration Agreement. In
addition, under the terms of a Registration Agreement dated May 8, 1996 (the
"1996 Registration Agreement" and together with the 1995 Registration Agreement,
the "Registration Agreements"), among the Company, Mr. Bernard and Mr. Szofer
(Mr. Bernard and Mr. Szofer, together with the 1995 Investors, the "Investors"),
at any time after May 8, 1997, each of Mr. Bernard and Mr. Szofer have the right
to require the Company to register 122,680 and 50,000 of their shares of Common
Stock, respectively, subject to the conditions and limitations contained in the
1996 Registration Agreement.
In addition, pursuant to the Registration Agreements and the conditions and
limitations set forth therein, the Company is required to: (i) pay all
associated Registration Expenses (as defined therein) in connection with certain
registrations; (ii) use its best efforts to effect such registrations; and (iii)
indemnify the Investors and certain of their affiliates against certain
liabilities, including liabilities under the Securities Act, in connection with
the registration of their shares.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Harris Trust and
Savings Bank.
40
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 9,987,472 shares of
Common Stock outstanding. Of these shares, the 1,800,000 shares sold in this
offering and the 3,105,000 shares issued in the Company's initial public
offering will be freely tradeable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined under the Securities Act ("Affiliates"),
may generally only be sold in compliance with the limitations of Rule 144
described below.
All of the remaining shares of Common Stock (the "Restricted Shares")
constitute restricted securities under Rule 144. Of these "Restricted Shares,"
approximately 5,081,512 will be subject to a lock-up period expiring on October
30, 1996 (the "Lock-Up Period"). Following the Lock-Up Period, 602,761 of the
Restricted Shares will immediately become eligible for sale, subject, however,
in the case of 336,388 shares, to the volume limitations and restrictions (other
than the holding period requirement) of Rule 144. The remaining 4,478,751
Restricted Shares will become eligible for sale under Rule 144 at various times
between February and December of 1997. See "Underwriting."
In general, under Rule 144 of the Securities Act as currently in effect, a
person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least two years, including a person who may be deemed
an Affiliate of the Company, is entitled to sell within any three-month period a
number of shares of Common Stock that does not exceed the greater of 1% of the
then outstanding shares of Common Stock or the average weekly trading volume of
the Common Stock as reported on the Nasdaq National Market during the four
calendar weeks preceding such sale. Sales under Rule 144 are subject to certain
restrictions relating to manner of sale, notice and the availability of current
public information about the Company. In addition, under Rule 144(k), a person
who is not an Affiliate of the Company at any time 90 days preceding a sale, and
who has beneficially owned shares for at least three years, would be entitled to
sell such shares without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144. The Commission has
proposed to amend the holding period required by Rule 144 to permit sales of
"restricted" securities after one year rather than two years (and two years
rather than three years for "non-affiliates" under Rule 144(k)).
At June 30, 1996, options to purchase a total of 914,334 shares of Common
Stock were outstanding, (all of which options, other than options to purchase
42,000 shares, were granted under the Incentive Stock Plan), of which options to
purchase 98,879 shares were then exercisable. An additional 1,126,706 shares of
Common Stock were available for future option grants or direct issuances under
the Incentive Stock Plan, and 400,000 shares of Common Stock were available for
direct issuances under the Purchase Plan. See "Management -- Stock Plans." All
2,000,000 shares issuable upon exercise of options granted or to be granted
under the Incentive Stock Plan and 400,000 shares issuable under the Purchase
Plan are registered on a Form S-8. When issued by the Company, such shares will
be freely tradeable, except that, if held by an Affiliate, such shares will be
subject to the volume limitations and restrictions (other than the holding
period requirement) of Rule 144.
The Company has granted Frontenac and Platinum and their transferees demand
and piggyback registration rights covering an aggregate of 432,532 shares. These
registration rights will become exercisable after expiration of the Lock-Up
Period. The Company has also granted Messrs. Bernard and Szofer demand and
piggyback registration rights covering an aggregate of 172,680 shares. The
demand registration rights for Messrs. Bernard and Szofer are not exercisable
until May 8, 1997. When and as these rights are exercised, additional shares
will become available for sale upon the effectiveness of a registration
statement filed pursuant to exercise of such rights. See "Description of Capital
Stock -- Registration Rights."
41
<PAGE>
UNDERWRITING
Subject to certain terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom Donaldson, Lufkin &
Jenrette Securities Corporation and Volpe, Welty & Company are acting as
Representatives, have severally agreed to purchase from the Company and the
Selling Stockholders, and the Company and such Selling Stockholders have agreed
severally to sell to each of the Underwriters, an aggregate of 1,800,000 shares
of Common Stock at the public offering price per share less the underwriting
discounts and commissions set forth on the cover of this Prospectus. The number
of shares of Common Stock that each Underwriter has agreed to purchase is set
forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..................................................
Volpe, Welty & Company...............................................................................
----------
Total.............................................................................................. 1,800,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the Shares offered hereby are subject to approval of
certain legal matters by their counsel and to certain other conditions. If any
of the Shares are purchased by the Underwriters pursuant to the Underwriting
Agreement, the Underwriters are obligated to purchase all of the Shares (other
than those covered by the over-allotment option described below).
The Company and the Selling Stockholders have been advised by the
Underwriters that they propose to offer the Shares to the public initially at
the price to the public set forth on the cover page of this Prospectus and to
certain dealers at such price, less a concession not in excess of $ per
Share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per Share to certain other dealers. After this offering,
the offering price and other selling terms may be changed by the Underwriters.
Pursuant to the Underwriting Agreement, certain Selling Stockholders have
granted to the Underwriters an option, exercisable not later than 30 calendar
days from the date of the Underwriting Agreement, to purchase up to 270,000
additional Shares at the offering price set forth on the cover page of this
Prospectus, less the underwriting discounts and commissions, solely to cover
over-allotments.
To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of the option shares as the number of Shares to be purchased by it
shown in the above table bears to the total number of Shares shown in the above
table, such Selling Stockholders will be obligated, pursuant to the option, to
sell such Shares to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the Shares
offered hereby. If purchased, the Underwriters will sell such additional 270,000
Shares on the same terms as those on which the Shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
The Company, the Selling Stockholders, the executive officers and directors
of the Company and certain employees of the Company have each agreed that during
the Lock-Up Period they will not, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, sell, offer to sell,
contract to sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, other than the Shares, except that the
42
<PAGE>
Company may issue shares upon the exercise of stock options granted prior to May
2, 1996, and may grant additional options under its stock option and other
employee compensation plans, provided that, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, such options shall not be
exercisable during the Lock-Up Period.
In connection with the offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Common Stock on
the Nasdaq National Market immediately prior to the commencement of sales, in
accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of, among other things, displaying bids on the Nasdaq National Market
limited by the bid prices of independent market makers and purchases limited by
such prices and effected in response to order flow. Net purchases by a passive
market maker on each day are limited to a specified percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period, and all passive market making activity must be
discontinued when such limit is reached. Passive market making may stabilize the
market price of the Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The legality of the issuance of the shares offered hereby will be passed
upon for the Company by Sachnoff & Weaver, Ltd., Chicago, Illinois. Certain
legal matters will be passed upon for the Underwriters by Katten Muchin & Zavis,
Chicago, Illinois.
EXPERTS
The Financial Statements and Schedule of the Company as of December 31, 1995
and 1994, and for each of the years in the three-year period ended December 31,
1995 included herein and elsewhere in the Registration Statement, have been
included herein in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act, with respect to the Shares. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement,
including the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract, agreement or any other document
referred to herein are not necessarily complete; with respect to each such
contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of
either of them or any part thereof may be obtained from such office, upon
payment of the fees prescribed by the Commission. The Registration Statement,
including the exhibits and schedules thereto, is also available on the
Commission's Web site at http://www.sec.gov.
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy material and other
information concerning the Company can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The
43
<PAGE>
Company's Common Stock is listed in the Nasdaq National Market, and such
reports, proxy material and other information can also be inspected at the
offices of The Nasdaq Stock Market, Inc., 1735 K Street, N.W., Washington, D.C.
20549.
Copies of reports, proxy and information statements and other information
regarding registrants that file electronically are available on the Commission's
Web site.
44
<PAGE>
WHITTMAN-HART, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report............................................................................... F-2
Balance Sheets at December 31, 1994 and 1995............................................................... F-3
Statements of Earnings for the years ended December 31, 1993, 1994 and 1995................................ F-4
Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and 1995.................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.............................. F-6
Notes to Financial Statements.............................................................................. F-7
Unaudited Pro Forma Condensed Statements of Earnings....................................................... F-12
Balance Sheet at December 31, 1995 and June 30, 1996 (unaudited)........................................... F-13
Statements of Earnings for the six months ended June 30, 1995 and 1996 (unaudited)......................... F-14
Statements of Cash Flows for the six months ended June 30, 1995 and 1996 (unaudited)....................... F-15
Notes to Unaudited Financial Statements.................................................................... F-16
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Whittman-Hart, Inc.:
We have audited the accompanying balance sheets of Whittman-Hart, Inc. as of
December 31, 1994 and 1995, and the related statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Whittman-Hart, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 19, 1996
except for paragraph two of Note 13, which
is as of April 3, 1996
F-2
<PAGE>
WHITTMAN-HART, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
UNAUDITED 1995
PRO FORMA (NOTE
1994 1995 13)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ -- $4,083,178 $ 4,083,178
Trade accounts receivable, net of allowance for doubtful accounts of
$346,874 and $100,000 in 1994 and 1995, respectively................. 4,131,255 8,785,240 8,785,240
Other receivables..................................................... 490,200 63,060 63,060
Prepaid expenses and other............................................ 164,414 481,831 481,831
Notes and interest receivable -- stockholder.......................... 307,964 326,356 326,356
Notes and interest receivable -- executives........................... 46,000 106,355 106,355
Deferred income taxes................................................. -- 50,000 50,000
--------- ---------- ---------------
Total current assets................................................ 5,139,833 13,896,020 13,896,020
Property and equipment, at cost:
Office furniture and equipment........................................ 2,002,419 2,497,413 2,497,413
Computer equipment and software....................................... 750,078 2,019,435 2,019,435
Automobiles........................................................... 107,735 107,735 107,735
Leasehold improvements................................................ -- 147,039 147,039
--------- ---------- ---------------
2,860,232 4,771,622 4,771,622
Less accumulated depreciation and amortization........................ (973,346) (1,574,292) (1,574,292)
--------- ---------- ---------------
Net property and equipment.............................................. 1,886,886 3,197,330 3,197,330
Notes receivable -- executives.......................................... 60,000 51,500 51,500
Long-term note receivable............................................... 100,000 -- --
Other................................................................... 58,844 84,117 84,117
--------- ---------- ---------------
Total assets........................................................ $7,245,563 $17,228,967 $17,228,967
--------- ---------- ---------------
--------- ---------- ---------------
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
Current liabilities:
Current maturities of long-term debt.................................. $ 395,111 $ 550,363 $ 550,363
Notes payable -- stockholder.......................................... -- 317,413 317,413
Checks issued in excess of bank balance............................... 121,802 -- --
Accounts payable...................................................... 445,383 1,264,048 1,264,048
Accrued compensation and related costs................................ 2,686,899 5,843,859 5,843,859
Other accrued liabilities............................................. 726,126 542,541 542,541
Distributions payable................................................. -- 860,646 860,646
Other current liabilities............................................. 151,745 321,375 321,375
--------- ---------- ---------------
Total current liabilities........................................... 4,527,066 9,700,245 9,700,245
Long term debt, less current maturities................................. 1,282,719 1,134,729 1,134,729
Long-term notes payable -- stockholder.................................. 317,413 -- --
Deferred rent........................................................... 126,756 538,934 538,934
--------- ---------- ---------------
Total liabilities................................................... 6,253,954 11,373,908 11,373,908
Redeemable convertible preferred stock, 10%, $.001 par value, 239,019
shares authorized, issued and outstanding (redemption value
$5,683,334); none issued and outstanding pro forma..................... -- 5,583,843 --
Stockholders' equity:
Preferred stock, $.001 par value; 3,000,000 shares authorized, none
issued and outstanding............................................... -- -- --
Common stock, $.001 par value; 15,000,000 shares authorized, 5,539,420
and 5,371,372 shares issued in 1994 and 1995; 6,327,446 shares issued
pro forma............................................................ 5,539 5,371 6,327
Additional paid-in capital............................................ 990,300 289,943 5,872,830
Retained earnings..................................................... -- -- --
--------- ---------- ---------------
995,839 295,314 5,879,157
Common stock held in treasury, at cost; 1,618 and 7,698 shares in 1994
and 1995............................................................. (4,230) (24,098) (24,098)
--------- ---------- ---------------
Total stockholders' equity.......................................... 991,609 271,216 5,855,059
--------- ---------- ---------------
Total liabilities and stockholders' equity........................ $7,245,563 $17,228,967 $17,228,967
--------- ---------- ---------------
--------- ---------- ---------------
</TABLE>
See accompanying Notes to Financial Statements.
F-3
<PAGE>
WHITTMAN-HART, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Revenues............................................................ $ 23,422,300 $ 29,543,250 $ 49,822,060
Cost of services.................................................... 13,829,120 17,727,690 30,392,200
------------- ------------- -------------
Gross profit...................................................... 9,593,180 11,815,560 19,429,860
Costs and expenses:
Selling........................................................... 1,073,410 1,431,030 2,497,100
Recruiting........................................................ 768,900 1,120,750 2,181,293
General and administrative........................................ 6,714,315 8,088,921 13,038,560
------------- ------------- -------------
Total costs and expenses........................................ 8,556,625 10,640,701 17,716,953
------------- ------------- -------------
Operating income.................................................... 1,036,555 1,174,859 1,712,907
Other income (expense):
Interest expense.................................................. (174,520) (101,060) (214,620)
Interest income................................................... 18,690 20,980 98,850
Other, net........................................................ 221,764 44,723 133,030
------------- ------------- -------------
Total other income (expense).................................... 65,934 (35,357) 17,260
------------- ------------- -------------
Income before income taxes.......................................... 1,102,489 1,139,502 1,730,167
Income taxes (note 6)............................................... 2,563 29,349 (50,000)
------------- ------------- -------------
Net income.......................................................... $ 1,099,926 $ 1,110,153 $ 1,780,167
------------- ------------- -------------
------------- ------------- -------------
Pro forma income data (unaudited) (note 6):
Net income as reported............................................ $ 1,099,926 $ 1,110,153 $ 1,780,167
Pro forma adjustment to provision for income taxes................ 27,366 254,880 666,593
------------- ------------- -------------
Pro forma net income.............................................. $ 1,072,560 $ 855,273 $ 1,113,574
------------- ------------- -------------
------------- ------------- -------------
Pro forma net income per share.................................... $0.16
-------------
-------------
</TABLE>
See accompanying Notes to Financial Statements.
F-4
<PAGE>
WHITTMAN-HART, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
TREASURY STOCK AT
PREFERRED STOCK COMMON STOCK ADDITIONAL COST
---------------------- ---------------------- PAID-IN RETAINED --------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992..... -- $ -- 1,314,241 $ 1,314 $(1,694,429) $ -- (875) $ (6,842)
Retroactive restatement for a 4
for 1 stock split in the form of
a common stock dividend
effective April 3, 1996......... 3,942,723 3,943 (3,943) -- (2,625) --
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
As restated...................... -- -- 5,256,964 5,257 (1,698,372) -- (3,500) (6,842)
Partnership income before
business combination............ 1,099,926
Purchase of common stock......... (13,860) (29,793)
Issuance of common stock......... 282,456 282 441,826
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
Balance at December 31, 1993..... -- -- 5,539,420 5,539 (156,620) -- (17,360) (36,635)
Partnership income before
business combination............ 1,110,153
Purchase of common stock......... (26,069) (68,239)
Issuance of common stock......... 36,767 41,811 100,644
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
Balance at December 31, 1994..... -- -- 5,539,420 5,539 990,300 -- (1,618) (4,230)
Partnership income before
business combination............ 1,730,167
Net income after business
combination..................... 50,000
Purchase of common stock......... (6,080) (19,868)
Issuance of common stock......... 92,700 93 249,907
Purchase and retirement of common
stock........................... (260,748) (261) (1,499,739)
Partnership capital
distributions................... (1,040,122)
Redeemable convertible preferred
stock dividends................. (133,334) (50,000)
Accretion of redeemable
convertible preferred stock
issuance costs.................. (7,236)
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
Balance at December 31, 1995..... -- $ -- 5,371,372 $ 5,371 $ 289,943 $ -- (7,698) $ (24,098)
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
--------- ----------- --------- ----------- ---------- ----------- --------- ---------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
<S> <C>
Balance at December 31, 1992..... $(1,699,957)
Retroactive restatement for a 4
for 1 stock split in the form of
a common stock dividend
effective April 3, 1996......... --
------------
As restated...................... (1,699,957)
Partnership income before
business combination............ 1,099,926
Purchase of common stock......... (29,793)
Issuance of common stock......... 442,108
------------
Balance at December 31, 1993..... (187,716)
Partnership income before
business combination............ 1,110,153
Purchase of common stock......... (68,239)
Issuance of common stock......... 137,411
------------
Balance at December 31, 1994..... 991,609
Partnership income before
business combination............ 1,730,167
Net income after business
combination..................... 50,000
Purchase of common stock......... (19,868)
Issuance of common stock......... 250,000
Purchase and retirement of common
stock........................... (1,500,000)
Partnership capital
distributions................... (1,040,122)
Redeemable convertible preferred
stock dividends................. (183,334)
Accretion of redeemable
convertible preferred stock
issuance costs.................. (7,236)
------------
Balance at December 31, 1995..... $ 271,216
------------
------------
</TABLE>
See accompanying Notes to Financial Statements.
F-5
<PAGE>
WHITTMAN-HART, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................... $ 1,099,926 $ 1,110,153 $ 1,780,167
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 232,753 340,699 600,946
Gain on disposition of property and equipment.......................... (1,398) -- --
ESOP expense........................................................... 175,000 137,411 --
Executive stock expense................................................ 116,701 29,168 241,668
Changes in assets and liabilities:
Receivables.......................................................... (1,007,277) (986,471) (4,226,845)
Deferred income taxes................................................ -- -- (50,000)
Prepaid expenses and other........................................... 15,521 (67,544) (317,417)
Notes receivable..................................................... (177,823) (127,874) 29,753
Other assets......................................................... 14,899 6,321 (25,273)
Accounts payable..................................................... 9,594 67,412 818,665
Accrued compensation and related costs............................... 962,993 131,814 3,165,292
Other accrued liabilities............................................ 4,535 651,339 (183,585)
Deferred rent........................................................ (139,183) (83,312) 412,178
Other current liabilities............................................ (109,030) (257,057) 169,630
----------- ----------- -----------
Net cash provided by operating activities................................ 1,197,211 952,059 2,415,179
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment..................................... (49,668) (1,717,907) (1,911,390)
Proceeds from disposition of property and equipment.................... 24,379 -- --
----------- ----------- -----------
Net cash used in investing activities.................................... (25,289) (1,717,907) (1,911,390)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net
of issuance costs..................................................... -- -- 5,393,273
Proceeds from issuance of bank debt.................................... -- 1,650,000 500,000
Payments on bank debt.................................................. (1,230,637) (456,220) (492,738)
Payments on related party debt......................................... (50,000) (265,000) --
Purchase of common stock............................................... (29,793) (68,239) (1,519,868)
Partnership capital distributions...................................... -- -- (179,476)
Checks issued in excess of bank balance................................ 138,508 (94,693) (121,802)
----------- ----------- -----------
Net cash provided by (used in) financing activities...................... (1,171,922) 765,848 3,579,389
----------- ----------- -----------
Net increase in cash and cash equivalents................................ -- -- 4,083,178
Cash and cash equivalents at beginning of year........................... -- -- --
----------- ----------- -----------
Cash and cash equivalents at end of year................................. $ -- $ -- $ 4,083,178
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid.......................................................... $ 174,394 $ 82,060 $ 225,480
Supplemental disclosures of noncash investing and financing activities:
Issuance of common stock to ESOP....................................... 175,000 137,411 --
Settlement of lease obligation in exchange for furniture............... -- 104,231 --
Issuance of common stock to executives................................. 267,108 -- 250,000
Automobile acquired in exchange for note............................... 40,000 -- --
Partnership capital distribution payable............................... -- -- 860,646
Accretion of redeemable convertible preferred stock dividends and
issuance costs........................................................ -- -- 190,570
</TABLE>
See accompanying Notes to Financial Statements.
F-6
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995
1. DESCRIPTION OF BUSINESS
Whittman-Hart, Inc. (the "Company") provides a wide range of information
technology consulting services to a variety of industries that utilize any
combination of open system, client/server, midrange and enterprise
architectures. Primary industries include manufacturing, distribution, retail,
financial markets, telecommunications, insurance and healthcare throughout the
United States.
The Company's business was previously owned by Whittman-Hart, L.P. ("LP"), a
Delaware limited partnership, and operated by employees of Whittman-Hart
Corporation II ("Corporation II"), a Delaware corporation, pursuant to a client
service agreement. Corporation II's operations consisted solely of revenues and
expenses related to its client service agreement with LP. The Company was a
limited partner in LP. Corporation II's revenues and LP's related expenses
associated with the client service agreement have been eliminated in the
accompanying financial statements. Partnership income before business
combination as reported in the statements of stockholders' equity represents
LP's undistributed earnings.
Effective December 31, 1995, the Company issued common and redeemable
convertible preferred stock in exchange for the remaining partnership interests
of LP. The exchange represents a combination of entities under common control
and has been accounted for on an "as-if" pooling-of-interests basis, with the
accompanying financial statements restated for all periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are recognized as the related services are performed.
PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method based on the
estimated useful lives, ranging from two to seven years, of the various classes
of property. Amortization of leasehold improvements is computed over the shorter
of the lease term or estimated useful life of the asset.
CASH EQUIVALENTS
Cash equivalents consist of Eurodollar time deposits which mature in seven
days.
INCOME TAXES
Income taxes, including pro forma calculations, are accounted for in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("Statement 109"). Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
F-7
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET INCOME PER SHARE
Pro forma net income per common and common equivalent share is computed
based on the weighted average of 7,064,886 common and common equivalent shares
(redeemable convertible preferred stock, 10%, $.001 par value ("Redeemable
Preferred Stock") and stock options) outstanding during the year.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common and common equivalent shares issued during the twelve months
immediately preceding the initial public offering date (using the treasury stock
method and the initial public offering price per share) have been included in
the calculation of common and common equivalent shares as if they were
outstanding for the entire period presented.
RECLASSIFICATIONS
Certain 1993 and 1994 balances have been reclassified to conform to the 1995
presentation.
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK
During 1995, the Company issued 239,019 shares of Redeemable Preferred Stock
which have a preference value equal to $23.01 per share plus all accrued but
unpaid dividends. Dividends of $183,334 were accreted in 1995. Each share of
Redeemable Preferred Stock is convertible into four shares of common stock
subject to adjustments for anti-dilution. The holders of the Redeemable
Preferred Stock are entitled to one vote for each share of common stock into
which such holders' Redeemable Preferred Stock may be converted. The Redeemable
Preferred Stock was recorded at fair value on the date of issuance less issue
costs. The excess of the preference value over the carrying value is being
accreted by periodic charges to additional paid-in capital over the life of the
issue. Accretion of issue costs were $7,236 in 1995.
Each holder of the Redeemable Preferred Stock may elect to require the
Company to redeem such holder's Redeemable Preferred Stock at its preference
value at any time after certain events have occurred or July 31, 2000. All
Redeemable Preferred Stock shall automatically convert to common stock
immediately prior to the closing of a sale of common stock pursuant to a
registration statement declared effective by the Securities and Exchange
Commission if the aggregate sales proceeds exceed certain levels. Upon the
conversion of any Redeemable Preferred Stock into common stock, any accrued and
unpaid dividends shall be canceled.
4. DEBT OBLIGATIONS
LINE OF CREDIT
The Company has a line of credit with a bank which expires on July 31, 1996
and provides a maximum borrowing of $2,000,000. Borrowings are limited to 80% of
eligible accounts receivable and bear interest at the bank's prime rate or the
London Interbank Offered Rate (LIBOR) plus 1.5%. No borrowings were outstanding
at December 31, 1995.
F-8
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
4. DEBT OBLIGATIONS (CONTINUED)
LONG TERM DEBT
Long-term debt obligations at December 31, 1994 and 1995 are:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Promissory note payable to bank, interest at the bank's prime rate or LIBOR
plus 1.5%, due in monthly installments of principal and interest through
October 31, 1999, secured by the accounts receivable and specific furniture
and equipment of the Company............................................... $ 1,650,000 $ 1,292,500
Promissory note payable to bank, interest at the bank's prime rate or LIBOR
plus 1.5%, due in monthly installments of principal and interest through
February 28, 1998, secured by the accounts receivable and specific
furniture and equipment of the Company..................................... -- 374,000
Installment note payable, interest at 7.85%, due in monthly installments of
$995 through August 1997. Note is secured by an automobile................. 27,830 18,592
------------ ------------
Total long-term debt........................................................ 1,677,830 1,685,092
Less current maturities..................................................... 395,111 550,363
------------ ------------
Total....................................................................... $ 1,282,719 $ 1,134,729
------------ ------------
------------ ------------
</TABLE>
The Company may elect to convert the interest rate on its installment notes
and its line of credit from the bank's prime rate (8.5% at December 31, 1995) to
LIBOR plus 1.5%. The Company has the option to select a LIBOR interest period of
either 30, 60, or 90 days. At December 31, 1995, the Company had long-term debt
of $1,625,000 outstanding under a LIBOR rate agreement at an interest rate of
7.43%.
The aggregate maturities for long-term debt and related-party debt (note 11)
are as follows:
<TABLE>
<CAPTION>
RELATED
YEAR LONG-TERM DEBT PARTY TOTAL
<S> <C> <C> <C>
1996 $ 550,363 $ 317,413 $ 867,776
1997 505,729 -- 505,729
1998 354,000 -- 354,000
1999 275,000 -- 275,000
-------------- ------------ ------------
$ 1,685,092 $ 317,413 $ 2,002,505
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
Under its most restrictive credit agreements, the Company is required to
maintain tangible net worth, debt-to-equity and cash flow ratios.
5. LEASE COMMITMENTS
The Company leases its office facilities and certain equipment under
operating lease arrangements which expire at various dates through October 2004.
F-9
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
5. LEASE COMMITMENTS (CONTINUED)
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
$1,050,950, $1,251,420 and $2,631,720, respectively. The future minimum annual
lease payments under noncancelable long-term leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
<S> <C>
1996 $ 932,381
1997 956,796
1998 943,896
1999 961,411
2000 861,633
Thereafter 3,301,382
------------
$ 7,957,499
------------
------------
</TABLE>
6. INCOME TAXES
The Company's business was previously owned and operated by LP; therefore,
federal income tax liabilities were the responsibility of the partners. Income
taxes are comprised of certain state income taxes of LP and federal and state
income taxes of the Company. The pro forma income tax adjustments included in
the statements of earnings represent federal and the additional state income tax
expense that would have been required had the Company operated as a C
corporation for all periods presented.
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at December 31, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts................................ $ 39,280
Accrued liabilities............................................ 112,070
---------
Total deferred tax assets........................................ 151,350
Deferred tax liability --
Property and equipment......................................... (101,350)
---------
Net deferred tax asset........................................... $ 50,000
---------
---------
</TABLE>
7. EXECUTIVE STOCK PLAN
The Company's Executive Stock Plan (the "Plan") is used to reward selected
executives for future services. Under the Plan, executives are awarded common
stock that vests over a specified period. In the event employment is terminated
prior to vesting, the executive will not be entitled to receive the common
stock. Executive stock expense reported in the statements of earnings amounted
to $116,701, $29,168 and $241,668 in 1993, 1994 and 1995, respectively.
8. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors an Employee Stock Ownership Plan ("ESOP") which covers
substantially all employees over the age of 21 who have completed one year of
service. Annual ESOP contributions are determined at the discretion of the
Company's Board of Directors. Plan participants become fully vested after
completing four years of service. ESOP contributions reported in the statements
of earnings amounted to $175,000 and $137,411 in 1993 and 1994, respectively.
There were no contributions in 1995. The ESOP held 255,802 shares of common
stock at December 31, 1994 and 1995.
F-10
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
9. 401(K) RETIREMENT PLAN
The Company's 401(k) plan covers all employees who have reached 21 years of
age. Participants may contribute up to 12% of their eligible compensation. The
Company matches participant contributions as defined within the plan. Company
contributions amounted to $87,337, $92,100 and $183,857 in 1993, 1994 and 1995,
respectively.
10. STOCK OPTIONS
In 1995, the Company adopted a stock option plan under which certain
employees may be granted the right to purchase shares of common stock at the
fair market value on the date of grant. Stock options may be exercised only to
the extent they have vested in accordance with provisions determined by the
Board of Directors.
During 1995, stock options were granted to purchase 880,856 and 30,000
shares of the Company's common stock at exercise prices of $6.49 and $3.29,
respectively. At December 31, 1995, all of the options granted were outstanding
and options to purchase 90,080 shares of the Company's common stock were
exercisable.
11. RELATED-PARTY TRANSACTIONS
Notes receivable from a stockholder bear interest at 2% below the prime rate
and are due on demand. Additionally, notes receivable from executives bear
interest at the prime rate and are due on various dates through August 1998.
Unsecured notes payable to a stockholder bear interest at 10% and are due on
December 31, 1996.
12. REVENUES FROM SIGNIFICANT CLIENTS
In 1993 and 1995, one client accounted for approximately 10% of the
Company's total revenues.
13. SUBSEQUENT EVENTS
During February 1996, the notes receivable -- stockholder and notes payable
- -- stockholder (note 11) were repaid.
The Company's Board of Directors approved a 4 for 1 split of common stock in
the form of a stock dividend effective April 3, 1996. All common share and per
share amounts have been adjusted retroactively to give effect to the stock
split. Additionally, on April 3, 1996, the Company filed an Amendment to its
Certificate of Incorporation effecting an increase in the number of authorized
shares of common stock to 15,000,000 and authorizing 3,000,000 shares of
preferred stock. The authorized numbers of shares have been adjusted to give
effect to these increases.
In connection with the Company's initial public offering, 239,019 shares of
Redeemable Preferred Stock will be converted into 956,074 shares of common
stock.
A portion of the proceeds of the Company's initial public offering will be
used to retire two promissory notes totaling $1,666,500.
F-11
<PAGE>
WHITTMAN-HART, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1993, 1994 AND 1995
13. SUBSEQUENT EVENTS (CONTINUED)
PRO FORMA CONDENSED FINANCIAL STATEMENTS OF
WHITTMAN-HART, INC.
UNAUDITED PRO FORMA CONDENSED
STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE DATA)
The following unaudited pro forma condensed statements of earnings represent
the historical results of operations of the Company for 1995, adjusted to
reflect the application of the net proceeds of the Company's initial public
offering to repay certain indebtedness resulting in a reduction in interest
expense as if such transaction had occurred at the beginning of the period
presented. The pro forma condensed statement of earnings is not necessarily
indicative of what the Company's statement of earnings would have been had such
transaction occurred at the beginning of the year.
<TABLE>
<CAPTION>
SUPPLEMENTARY
AS REPORTED ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Revenues.............................................................. $ 49,822 $ 49,822
Cost of services...................................................... 30,392 30,392
------------ --------------
Gross profit........................................................ 19,430 19,430
Costs and expenses.................................................... 17,717 17,717
Operating income...................................................... 1,713 1,713
Other income (expense)................................................ 17 $ 153(1) 170
------------ ----------- --------------
Income before taxes................................................... 1,730 153 1,883
Income taxes.......................................................... (50) (50)
------------ ----------- --------------
Net income............................................................ $ 1,780 $ 153 $ 1,933
Pro forma adjustment to provision for income taxes.................... 666 61(2) 727
------------ ----------- --------------
Pro forma net income.................................................. 1,114 92 1,206
------------ ----------- --------------
------------ ----------- --------------
Pro forma net income per share........................................ $ 0.16 $ 0.17
------------ --------------
------------ --------------
Weighted average common and common equivalent shares outstanding...... 7,064,886 7,176,882
------------ --------------
------------ --------------
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
(1) This adjustment shows the effect on interest expense for the year as if two
promissory notes totaling $1,666,500 that will be repaid with the proceeds
of the Company's initial public offering were repaid at the beginning of the
year.
(2) This adjustment reflects the pro forma effect of income taxes on the
increase in income assuming a pro forma effective tax rate of 40%.
See accompanying notes to unaudited pro forma condensed financial statements.
F-12
<PAGE>
WHITTMAN-HART, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, 1996
1995 (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $4,083,178 2$6,101,651
Short-term investments.............................................................. -- 7,006,924
Trade accounts receivable, net of allowance for doubtful accounts of $100,000 and
$211,533 in 1995 and 1996, respectively............................................ 8,785,240 14,099,238
Other receivables................................................................... 63,060 138,892
Prepaid expenses and other.......................................................... 481,831 1,106,444
Notes and interest receivable -- stockholder........................................ 326,356 --
Notes and interest receivable -- executives......................................... 106,355 69,756
Deferred income taxes............................................................... 50,000 50,000
------------ -----------
Total current assets.............................................................. 13,896,020 48,572,905
Property and equipment, at cost:
Office furniture and equipment...................................................... 2,497,413 3,608,268
Computer equipment and software..................................................... 2,019,435 3,146,737
Automobiles......................................................................... 107,735 60,612
Leasehold improvements.............................................................. 147,039 445,442
------------ -----------
4,771,622 7,261,059
Less accumulated depreciation and amortization...................................... (1,574,292) (1,984,184)
------------ -----------
Net property and equipment............................................................ 3,197,330 5,276,875
Notes receivable -- executives........................................................ 51,500 163,367
Other................................................................................. 84,117 139,147
------------ -----------
Total assets...................................................................... $17,228,967 5$4,152,294
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................................................ $ 550,363 $ --
Notes payable -- stockholder........................................................ 317,413 --
Accounts payable.................................................................... 1,264,048 446,888
Accrued compensation and related costs.............................................. 5,843,859 6,587,362
Income taxes payable................................................................ -- 112,608
Other accrued liabilities........................................................... 542,541 637,069
Distributions payable............................................................... 860,646 --
Other current liabilities........................................................... 321,375 139,751
------------ -----------
Total current liabilities......................................................... 9,700,245 7,923,678
Long-term debt, less current maturities............................................... 1,134,729 --
Deferred rent......................................................................... 538,934 704,973
------------ -----------
Total liabilities................................................................. 11,373,908 8,628,651
Redeemable convertible preferred stock, 10%, $.001 par value; 239,019 shares
authorized, issued and outstanding (redemption value $5,683,334)..................... 5,583,843 --
Stockholders' equity:
Preferred stock, $.001 par value; 3,000,000 shares authorized, none issued and
outstanding........................................................................ -- --
Common stock, $.001 par value; 15,000,000 authorized, 5,371,372 and 8,959,210 shares
issued in 1995 and 1996, respectively.............................................. 5,371 8,959
Additional paid-in capital.......................................................... 289,943 43,757,131
Retained earnings................................................................... -- 1,794,688
Deferred compensation............................................................... -- (13,037)
------------ -----------
295,314 45,547,741
Common stock held in treasury, at cost, 7,698 shares in 1995 and 1996............... (24,098) (24,098)
------------ -----------
Total stockholders' equity........................................................ 271,216 45,523,643
------------ -----------
Total liabilities and stockholders' equity...................................... $17,228,967 5$4,152,294
------------ -----------
------------ -----------
</TABLE>
See accompanying Notes to Unaudited Financial Statements.
F-13
<PAGE>
WHITTMAN-HART, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1995(UNAUDITED)1996
<S> <C> <C>
Revenues........................................................................... $ 21,411,930 $ 38,862,750
Cost of services................................................................... 13,130,040 23,361,980
------------- -------------
Gross profit..................................................................... 8,281,890 15,500,770
Costs and expenses:
Selling.......................................................................... 1,104,320 1,709,540
Recruiting....................................................................... 1,014,320 1,607,030
General and administrative....................................................... 5,258,774 9,645,222
------------- -------------
Total costs and expenses....................................................... 7,377,414 12,961,792
------------- -------------
Operating income................................................................... 904,476 2,538,978
Other income (expense):
Interest expense................................................................. (102,780) (47,400)
Interest income.................................................................. 17,400 268,720
Other, net....................................................................... (13,390) 83,080
------------- -------------
Total other income (expense)................................................... (98,770) 304,400
------------- -------------
Income before income taxes......................................................... 805,706 2,843,378
Income taxes....................................................................... -- 1,098,690
------------- -------------
Net income......................................................................... $ 805,706 $ 1,744,688
------------- -------------
------------- -------------
Net income per share............................................................... $ 0.22
-------------
-------------
Shares used in computing net income per share...................................... 7,805,738
-------------
-------------
Pro forma income data:
Net income as reported........................................................... $ 805,706
Pro forma adjustment to provision for income taxes............................... 301,701
-------------
Pro forma net income............................................................. $ 504,005
-------------
-------------
Pro forma net income per share................................................... $ 0.07
-------------
-------------
Shares used in computing pro forma net income per share.......................... 7,148,917
-------------
-------------
</TABLE>
See accompanying Notes to Unaudited Financial Statements.
F-14
<PAGE>
WHITTMAN-HART, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1995(UNAUDITED)1996
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................................ $ 805,706 $ 1,744,688
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization................................................... 227,178 488,975
Gain on disposition of property and equipment................................... -- (12,607)
Executive stock expense......................................................... 180,656 29,213
Changes in assets and liabilities:
Receivables................................................................... (2,040,749) (5,389,830)
Prepaid expenses and other.................................................... 91,252 (624,613)
Notes receivable.............................................................. (14,704) 251,088
Other assets.................................................................. (75,300) (55,030)
Accounts payable.............................................................. (438,532) (817,160)
Accrued compensation and related costs........................................ 986,643 816,420
Income taxes payable.......................................................... -- 112,608
Other accrued liabilities..................................................... (327,273) 94,528
Deferred rent................................................................. 158,481 166,039
Other current liabilities..................................................... 99,200 (181,624)
------------- -------------
Net cash used in operating activities............................................... (347,442) (3,377,305)
------------- -------------
Cash flows from investing activities:
Purchase of short-term investments................................................ -- (7,006,924)
Purchase of property and equipment................................................ (567,807) (2,597,172)
Proceeds from disposition of property and equipment............................... -- 43,122
------------- -------------
Net cash used in investing activities............................................... (567,807) (9,560,974)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of bank debt............................................... 500,000 48,775
Payments on bank debt............................................................. (239,457) (1,733,867)
Payments on related party debt.................................................... -- (317,413)
Proceeds from issuance of common stock, net of issuance costs..................... -- 37,819,903
Purchase of common stock.......................................................... (19,868) --
Partnership capital distributions................................................. (81,022) (860,646)
Checks issued in excess of bank balance........................................... 755,596 --
------------- -------------
Net cash provided by financing activities........................................... 915,249 34,956,752
------------- -------------
Net increase in cash and cash equivalents........................................... -- 22,018,473
------------- -------------
Cash and cash equivalents at beginning of period.................................... -- 4,083,178
------------- -------------
Cash and cash equivalents at end of period.......................................... $ -- $ 26,101,651
------------- -------------
------------- -------------
Supplemental disclosures of cash flow information:
Interest paid..................................................................... $ 110,087 $ 58,181
Income taxes paid................................................................. -- 986,082
Supplemental disclosure of noncash investing and financing activities:
Issuance of common stock to executives............................................ 100,000 102,130
</TABLE>
See accompanying Notes to Unaudited Financial Statements.
F-15
<PAGE>
WHITTMAN-HART, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Whittman-Hart,
Inc. (the "Company") have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission and should be read in conjunction with
the Company's audited financial statements and notes thereto set forth elsewhere
herein. The information furnished herein includes all adjustments which are, in
the opinion of management, necessary for a fair presentation of results for
these interim periods, and all such adjustments are of a normal recurring
nature.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
2. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are comprised of certain highly liquid investments with
maturities of less than three months. Short-term investments consist of debt
securities with maturities beyond three months but less than twelve months. The
short-term investments are classified as available-for-sale under the provisions
of Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Accordingly, these investments are
stated at fair value.
3. COMPUTATION OF NET INCOME AND PRO FORMA NET INCOME PER SHARE
Net income and pro forma net income per common and common equivalent share
are computed based on the weighted average of common and common equivalent
shares (redeemable convertible preferred stock and stock options) outstanding
during the period.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common and common equivalent shares issued during the twelve months
immediately preceding the initial public offering date (using the treasury stock
method and the initial public offering price per share) have been included in
the calculation of common and common equivalent shares as if they were
outstanding for all periods presented.
4. INCOME TAXES
Prior to December 31, 1995, the Company's business was owned and operated by
Whittman-Hart, L.P., a Delaware limited partnership, therefore, federal and
certain state income tax liabilities were the responsibility of the partners.
The pro forma tax adjustment for the six months ended June 30, 1995 represents
federal and additional state income tax expense that would have been required
had the Company operated as a C corporation during that period.
5. STOCKHOLDERS' EQUITY
The Company's Board of Directors approved a 4 for 1 split of the common
stock in the form of a stock dividend effective April 3, 1996. All common share
and per share amounts have been adjusted retroactively to give effect to the
stock split. Additionally, on April 3, 1996, the Company filed an Amendment to
its Certificate of Incorporation effecting an increase in the number of
authorized shares of common stock to 15,000,000 and authorizing 3,000,000 shares
of preferred stock. The authorized numbers of shares have been adjusted to give
effect to these increases.
On May 8, 1996, the Company completed an initial public offering of its
common stock in which 2,600,000 shares were sold by the Company, resulting in
net proceeds of approximately $37.8 million. In connection with such offering,
239,019 shares of redeemable convertible preferred stock were converted into
956,074 shares of common stock. All accrued and unpaid dividends related to the
redeemable convertible preferred stock were canceled upon the conversion to
common stock.
F-16
<PAGE>
WHITTMAN-HART, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996 AND 1995
6. STOCK OPTIONS
In 1995, the Company adopted a stock option plan under which certain
employees may be granted the right to purchase shares of common stock at the
fair market value on the date of grant. Stock options may be exercised only to
the extent they have vested in accordance with provisions determined by the
Board of Directors. In addition, the Company has from time to time granted stock
options outside of the stock option plan. Stock option transactions for the six
months ended June 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
SHARES PRICE
<S> <C> <C>
Outstanding on December 31, 1995......................... 910,856 $3.29 - 6.49
Granted.................................................. 24,260 4.63 - 36.00
Canceled................................................. (23,822) 6.49
--------- --------------
Outstanding on June 30, 1996............................. 911,294 $3.29 - 36.00
--------- --------------
--------- --------------
</TABLE>
Options to purchase 99,439 shares of the Company's common stock were
exercisable at June 30, 1996.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE SELLING
STOCKHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
The Company.................................... 9
Use of Proceeds................................ 9
Price Range of Common Stock.................... 10
Dividend Policy................................ 10
Capitalization................................. 10
Selected Financial Data........................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 12
Business....................................... 18
Management..................................... 31
Principal and Selling Stockholders............. 37
Certain Transactions........................... 38
Description of Capital Stock................... 39
Shares Eligible for Future Sale................ 41
Underwriting................................... 42
Legal Matters.................................. 43
Experts........................................ 43
Additional Information......................... 43
Index to Financial Statements.................. F-1
</TABLE>
1,800,000 SHARES
S
WHITTMAN-HART, INC.
COMMON STOCK
-------------------------------------
P R O S P E C T U S
-------------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
VOLPE, WELTY & COMPANY
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 21,235
NASD filing fee................................................... 6,658
Nasdaq National Market additional listing fee..................... 17,500
Accountants' fees and expenses.................................... 55,000
Blue Sky fees and expenses........................................ 20,000
Legal fees and expenses........................................... 60,000
Printing expenses................................................. 75,000
Miscellaneous expenses............................................ 244,607
---------
Total........................................................... $ 500,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company, being incorporated under the General Corporation Law of the
State of Delaware (the "DGCL"), is empowered by Section 145 of the DGCL, subject
to the procedures and limitations stated therein, to indemnify any person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
any threatened, pending or completed action, suit or proceeding to which such
person is made a party or threatened to be made a party by reason of the fact
that he or she is or was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise. Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
The Company's Certificate of Incorporation and By-Laws contain provisions
that require the Company to indemnify its directors and officers to the fullest
extent permitted by Delaware law.
Article Eighth of the Company's Certificate of Incorporation eliminates, to
the fullest extent permitted by paragraph (7) of subsection (b) of Section 102
of the DGCL, as the same may be amended or supplemented, or any corresponding
provision of the DGCL, the personal liability of directors. That paragraph
allows corporations incorporated under the DGCL to eliminate the personal
liability of a director to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director. However, that paragraph
does not allow corporations to limit the liability of a director: (i) for any
breach of his or her duty of loyalty to the corporation or its stockholders;
(ii) for acts or omission not in good faith or which involve intentional
misconduct or a knowing violations of law; (iii) for unlawful payment of a
dividend or unlawful stock purchase or redemption; or (iv) for any transaction
for which the director derived an improper personal benefit.
The Company maintains liability insurance for its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information as to securities of the Company issued or
sold by the Company since July 1, 1993 that were not registered under the
Securities Act of 1933, as amended (the "Securities Act"). No underwriters were
involved, and there were no underwriting discounts or commissions. The following
information reflects a 4 for 1 stock split of all outstanding shares of Common
Stock.
II-1
<PAGE>
Since July 1, 1993, a total of 325,064 shares of Common Stock have been
issued to nine employees of the Company, the consideration for which was past
employment services to the Company. All such issuances were made pursuant to the
exemptions from registration provided by Section 4(2) of the Securities Act and/
or Rule 701 thereunder.
Since July 1, 1993, a total of 255,802 shares of Common Stock have been
issued to the Company's Employee Stock Ownership Plan. All such issuances were
made pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
On August 29, 1995, 239,019 preferred equity units in Whittman-Hart L.P.
("LP") were issued to PVP-WH Corporation and F-WH Corporation. Both of these
persons were accredited investors and all issuances were pursuant to the
exemption from registration provided by Section 4(2) of the Securities Act.
On December 31, 1995, in connection with the Reorganization as described in
the Registration Statement, 3,340,683 shares of Common Stock of the Company were
issued to Whittman-Hart, Ltd. ("Limited") in exchange for the transfer to the
Company of common equity units of LP formerly held by Limited, 239,019 shares of
Preferred Stock of the Company were issued to PVP-WH Corporation and F-WH
Corporation in exchange for the transfer to the Company of preferred equity
units of LP formerly held by those two investors and 573,283 shares of Common
Stock of the Company were issued to Robert F. Bernard in exchange for the
transfer to the Company of common equity units of LP formerly held by Mr.
Bernard. All of these persons were accredited investors and all issuances were
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act.
On May 2, 1996, 956,074 shares of Common Stock were issued to PVP-WH
Corporation and F-WH Corporation in exchange for 239,019 shares of Preferred
Stock pursuant to the exemption from registration provided by Section 3(a)(9) of
the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
.11 Form of Underwriting Agreement.
2.1 Unit Contribution Agreement dated as of December 28, 1995 among Robert Bernard,
F-WH Corporation, PVP-WH Corporation, Whittman-Hart General Partner, Ltd. and Whittman-Hart, Inc.*
3.1 Amended and Restated Certificate of Incorporation of the Company.*
3.2 Second Amended and Restated By-Laws of the Company.*
4.1 Specimen stock certificate representing Common Stock.*
5.1 Opinion of Sachnoff & Weaver, Ltd.
10.1 Executive Employment Agreement between the Company and Robert F. Bernard effective as of June 15,
1995.*
10.2 Executive Employment Agreement between the Company and Edward V. Szofer effective as of June 15,
1995.*
10.3 Executive Employment Agreement between the Company and Kevin M. Gaskey effective as of June 15,
1995.*
10.4 Executive Employment Agreement between the Company and Susan B. Reardon effective as of June 15,
1995.*
10.5 Executive Employment Agreement between the Company and Glen A. Metelmann effective as of June 15,
1995.*
10.6 Form of Employment Agreement (Manager).*
10.7 Form of Employment Agreement (Consultant).*
10.8 1995 Incentive Stock Plan dated December 29, 1995.*
10.9 Employee Stock Purchase Plan.*
10.10 Whittman-Hart Corporation II Employee Stock Ownership Plan.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
10.11 Lease for 311 S. Wacker Drive, Chicago, Illinois.*
<C> <S>
10.12 Stockholders Agreement among Robert F. Bernard, Edward V. Szofer, F-WH Corporation, PVP-WH
Corporation, Whittman-Hart General Partner, Ltd. and the Company dated December 31, 1995.*
10.13 Registration Agreement between the Company, F-WH Corporation and PVP-WH Corporation dated as of
December 31, 1995.*
10.14 Form of Registration Agreement among the Company, Robert F. Bernard and Edward V. Szofer.*
10.15 Loan and Security Agreement by and between American National Bank and Trust Company of Chicago and
Whittman-Hart L.P. dated as of August 1, 1994, as amended and related LIBOR Borrowing Agreement
dated July 21, 1995.*
10.16 Loan Agreement by and between American National Bank and Trust Company of Chicago and the Company
dated as of July 25, 1996.
10.17 Promissory Note (Unsecured) by the Company dated July 25, 1996 in the amount of $5,000,000 in favor
of American National Bank and Trust Company of Chicago.
10.18 London Interbank Offered Rate Borrowing Agreement executed by the Company and accepted by American
National Bank and Trust Company of Chicago on July 25, 1996.
11.1 Statement Regarding Computation of Per Share Earnings.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Sachnoff & Weaver, Ltd. (contained in its opinion filed as Exhibit 5.1 hereto).
24.1 Powers of Attorney (included as part of signature page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated herein by reference to Whittman-Hart, Inc. Registration Statement
on Form S-1 (No. 333-1778), which was declared effective by the Commission on
May 2, 1996.
(b) Financial Statement Schedule:
Report of Independent Auditors
Schedule II: Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter had been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon
II-3
<PAGE>
Rule 430A and contained in a form of Prospectus filed by the Company
pursuant to Rule 424(b)(1) or (4) of 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time it was
declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Chicago, Illinois on August 5, 1996.
WHITTMAN-HART, INC.
By: /s/ ROBERT F. BERNARD
-----------------------------------
Robert F. Bernard
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS ROBERT F. BERNARD AND KEVIN M. GASKEY, AND EACH
OF THEM SINGLY, AS HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS WITH FULL
POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND
STEAD, IN ANY AND ALL CAPACITIES TO SIGN THE REGISTRATION STATEMENT FILED
HEREWITH AND ANY OR ALL AMENDMENTS TO SAID REGISTRATION STATEMENT (INCLUDING
POST-EFFECTIVE AMENDMENTS AND REGISTRATION STATEMENTS FILED PURSUANT TO RULE
462(B) UNDER THE SECURITIES ACT OF 1933, AND ANY OR ALL AMENDMENTS THERETO), AND
TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS THE FULL POWER AND AUTHORITY TO DO AND PERFORM EACH
AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
FOREGOING, AS FULL TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR HIS OR HER SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 5th day of August, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ ROBERT F. BERNARD
------------------------------------------- President, Chief Executive Officer and Chairman of the
Robert F. Bernard Board of Directors (Principal Executive Officer)
/s/ KEVIN M. GASKEY
------------------------------------------- Chief Financial Officer and Treasurer (Principal
Kevin M. Gaskey Financial and Accounting Officer)
/s/ EDWARD V. SZOFER
------------------------------------------- Director
Edward V. Szofer
/s/ PAUL D. CARBERY
------------------------------------------- Director
Paul D. Carbery
/s/ ROBERT F. STEEL
------------------------------------------- Director
Robert F. Steel
/s/ LARRY P. ROCHES
------------------------------------------- Director
Larry P. Roches
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
.11 Form of Underwriting Agreement...............................................................
5.1 Opinion of Sachnoff & Weaver, Ltd............................................................
10.16 Loan Agreement by and between American National Bank and Trust Company of Chicago and the
Company dated as of July 25, 1996...........................................................
10.17 Promissory Note (Unsecured) by the Company dated July 25, 1996 in the amount of $5,000,000 in
favor of American National Bank and Trust Company of Chicago................................
10.18 London Interbank Offered Rate Borrowing Agreement executed by the Company and accepted by
American National Bank and Trust Company of Chicago on July 25, 1996........................
11.1 Statement Regarding Computation of Per Share Earnings........................................
23.1 Consent of KPMG Peat Marwick LLP.............................................................
23.2 Consent of Sachnoff & Weaver, Ltd. (contained in its opinion filed as Exhibit 5.1 hereto).
24.1 Powers of Attorney (included as part of signature page).
27.1 Financial Data Schedule. ....................................................................
</TABLE>
<PAGE>
1,800,000 Shares(1)
WHITTMAN-HART, INC.
Common Stock
UNDERWRITING AGREEMENT
August __, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
VOLPE, WELTY & COMPANY
As representatives of the several underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Gentlemen & Ladies:
WHITTMAN-HART, INC., a Delaware corporation (the "COMPANY"), and the
Selling Stockholders named on Schedule II hereto (collectively, the "SELLING
STOCKHOLDERS") severally, and not jointly, propose to sell an aggregate of
1,800,000 shares of the Company's common stock, par value $0.001 per share,
of the Company (the "FIRM SHARES"), to the several underwriters named in
Schedule I hereto (the "UNDERWRITERS"). The Firm Shares consist of 1,035,000
shares to be issued and sold by the Company and 765,000 shares to be sold by
the Selling Stockholders. The Selling Stockholders designated in Schedule II
hereto also propose to sell to the several Underwriters not more than 270,000
additional shares of the Company's common stock, par value $0.001 per share,
of the Company (the "OPTION SHARES"), if and to the extent requested by the
Underwriters as provided in Section 2 hereof. The Firm Shares and the Option
Shares are herein collectively called the "SHARES." The shares of common
stock of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the "COMMON STOCK." The
Company and the Selling Stockholders are hereinafter collectively called the
"SELLERS."
- --------------------
(1) Plus an option to purchase up to 270,000 additional shares from
certain of the Selling Stockholders to cover over-allotments.
<PAGE>
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"ACT"), a registration statement on Form S-1 (File No. 333-_____) including a
prospectus relating to the Shares, which may be amended in accordance herewith.
The term "REGISTRATION STATEMENT" as used in this Agreement shall mean such
registration statement, including all exhibits thereto, all financial statements
therein, all documents incorporated by reference therein and all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, in the form in which it became effective, and, in the event
of any amendment thereto after the effective date of such registration statement
(herein called the "EFFECTIVE DATE"), shall also mean (from and after the
effectiveness of such amendment) such registration statement as so amended. The
term "PROSPECTUS" as used in this Agreement shall mean the prospectus, including
the documents incorporated by reference therein, relating to the Shares first
filed with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such
filing is required, as included in the Registration Statement) and, in the event
of any supplement or amendment to such prospectus after the Effective Date,
shall also mean (from and after the filing of such supplement with the
Commission or of the effectiveness of such amendment) such prospectus as so
supplemented or amended. The term "PRELIMINARY PROSPECTUS" as used in this
Agreement shall mean each preliminary prospectus included in such registration
statement prior to the time it becomes effective.
2. AGREEMENTS TO SELL AND PURCHASE; OTHER COVENANTS.
(a) Firm Shares. On the basis of the representations and warranties
contained in this Agreement, and subject to its terms and conditions, (i)
the Company agrees to issue and sell 1,035,000 Firm Shares, (ii) each
Selling Stockholders agrees, severally and not jointly, to sell the number
of Firm Shares set opposite such Selling Stockholder's name in Schedule II
hereto, and (iii) each Underwriter agrees, severally and not jointly, to
purchase from each Seller at a price per share of $_____ (the "PURCHASE
PRICE") the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) which bears the same proportion to
the total number of Firm Shares to be sold by such Seller as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I
bears to the total number of Firm Shares.
(b) Option Shares. On the basis of the representations and
warranties contained in this Agreement, and subject to the terms and
conditions herein, (i) each Selling Stockholder designated in Schedule II
hereto agrees, severally and not jointly, to sell the number of Options
Shares set forth opposite such Selling Stockholder's name in Schedule II
hereto, and (ii) the Underwriters shall have the right, but not the
obligation, to purchase, severally and not jointly, up to an aggregate of
270,000 Option Shares from such Selling Stockholders at the Purchase Price.
Option Shares may be purchased solely for the purpose of covering over-
allotments made in connection with
2
<PAGE>
the offering of the Firm Shares. The Underwriters may exercise their right
to purchase Option Shares in whole or in part from time to time by giving
written notice thereof to the Company and Robert F. Bernard or Kevin M.
Gaskey, the attorneys-in-fact for the Selling Stockholders (the
"ATTORNEYS"), within 30 days after the date of this Agreement. You shall
give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Option Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof. The date
specified in any such notice shall be a business day (i) no earlier than
the Closing Date (as hereinafter defined), (ii) no later than ten business
days after such notice has been given and (iii) no earlier than two
business days after such notice has been given. The number of Option
Shares which the Underwriters elect to purchase shall be provided by the
Selling Stockholders designated in Schedule II hereto in proportion to the
respective maximum numbers of Option Shares which such Selling Stockholders
have agreed to sell. If any Option Shares are to be purchased, each
Underwriter, severally and not jointly, agrees to purchase from each
Selling Stockholder the number of Option Shares (subject to such
adjustments to eliminate fractional shares as you may determine) which
bears the same proportion to the total number of Option Shares to be
purchased from such Selling Stockholder as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule I bears to the
total number of Firm Shares.
(c) Lock-Up. The Company agrees, and each Selling Stockholder
agrees, severally and not jointly and solely with respect to his, her or
itself and his, her or its Shares, and the Company shall, concurrently with
the execution of this Agreement, deliver an agreement (a "LOCK-UP
AGREEMENT") executed by each of the directors and officers of the Company
who is not a Selling Stockholder, pursuant to which each such person agrees
not to offer, sell, contract to sell, pledge, grant any option to purchase,
or otherwise dispose of any Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock or in any other manner
transfer all or any portion of the economic consequences associated with
the ownership of such Common Stock, except to the Underwriters pursuant to
this Agreement, for a period commencing no later than the date of the
Prospectus and ending October 29, 1996 (the "LOCK-UP PERIOD"), without the
prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"); provided, however, that no director or officer who
executed and delivered to you a Lock-Up Agreement in connection with the
Company's initial public offering shall be required to execute a Lock-Up
Agreement pursuant to this Agreement. Notwithstanding the foregoing,
during the Lock-Up Period (i) the Company may grant stock options pursuant
to its Incentive Stock Plan (as such term is defined in the Prospectus);
provided that any such options granted pursuant to such Plan shall not by
their terms be exercisable during the Lock-Up Period, (ii) the Company may
issue shares of its Common Stock upon the exercise of options outstanding
on May 2, 1996, and (iii) any person signing an agreement pursuant to this
section 2(c) shall be permitted to transfer shares of Common Stock by gift
to any person who signs and delivers to you an agreement to hold such
transferred Common Stock on the same terms during the remainder of the
Lock-Up Period.
3
<PAGE>
3. TERMS OF PUBLIC OFFERING. The Sellers are advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the Effective Date of the Registration
Statement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
4. DELIVERY AND PAYMENT. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at 10:00 A.M., New York City time, on
August __, 1996 (the "CLOSING DATE"), at the offices of Sachnoff & Weaver, Ltd.,
30 South Wacker Drive, Suite 2900, Chicago, Illinois. The Closing Date and the
location of delivery of and the form of payment for the Firm Shares may be
varied by agreement between you and the Sellers.
Delivery to the Underwriters of and payment for any Option Shares to
be purchased by the Underwriters shall be made at the offices of Sachnoff &
Weaver, Ltd., 30 South Wacker Drive, Suite 2900, Chicago, Illinois at 10:00
A.M., New York City time, on the date specified in the applicable exercise
notice given by you pursuant to Section 2 (an "OPTION CLOSING DATE"). Any such
Option Closing Date and the location of delivery of and the form of payment for
such Option Shares may be varied by agreement between you and the Sellers.
Payment for the Shares purchased from the Company shall be made to the
Company or its order, and payment for the Shares purchased from the Selling
Stockholders shall be made to the Custodian (as defined herein), for the account
of the Selling Stockholders, in each case in same day funds. Such payment shall
be made against delivery of certificates for the Shares to you for the
respective accounts of the several Underwriters as set forth below, against
receipt therefor signed by you. Certificates for the Shares shall be registered
in such names and issued in such denominations as you shall request in writing
not later than two full business days prior to the Closing Date or an Option
Closing Date, as the case may be. Such certificates shall be made available to
you for inspection not later than 9:30 A.M., New York City time, on the business
day next preceding the Closing Date or an Option Closing Date, as the case may
be. Certificates in definitive form evidencing the Shares shall be delivered to
you on the Closing Date or an Option Closing Date, as the case may be, with any
transfer taxes thereon duly paid by the respective Sellers, for the respective
accounts of the several Underwriters, against payment of the Purchase Price
therefor by certified or official bank checks payable in same day funds to the
order of the Custodian for the account of the applicable Sellers.
5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To use its best efforts to cause the Registration Statement to
become effective at the earliest possible time.
(b) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to it becomes effective, (ii) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the
4
<PAGE>
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement (a "STOP ORDER") or the initiation of any proceeding
for such purpose, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for offer
or sale in any jurisdiction, or with respect to the initiation of any
proceeding for such purposes, and (v) of the happening of any event during
the period referred to in paragraph (e) below which makes any statement of
a material fact made in the Registration Statement or the Prospectus untrue
or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue a Stop
Order, the Company will make every reasonable effort to obtain the
withdrawal or lifting of such order at the earliest possible time.
(c) To furnish to you, without charge, three signed copies of the
Registration Statement as first filed with the Commission and of each
amendment to it, including all exhibits, and to furnish to you and each
Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
to make any amendment or supplement to the Prospectus of which you shall
not previously have been advised or to which you shall reasonably object;
and to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause the
same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel
for the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, to furnish to each
Underwriter and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer
may reasonably request; provided, however, that delivery of copies of the
Prospectus (as amended or supplemented and including any incorporated
documents) more than six months after the date of this Agreement shall be
at the expense of the Underwriter requesting such delivery.
(f) If during the period specified, and subject to the proviso in
paragraph (e), any event shall occur as a result of which, in the opinion
of counsel for the Company and counsel for the Underwriters it becomes
necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus
is delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the Prospectus to comply with any law, forthwith to prepare
and file with
5
<PAGE>
the Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented, will
not in the light of the circumstances when it is so delivered, be
misleading, or so that the Prospectus will comply with law, and to furnish
to each Underwriter and to such dealers as you shall specify, such number
of copies thereof as such Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale under the state securities
or Blue Sky laws of such jurisdictions as you may request, to continue such
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may
be necessary in order to effect such registration or qualification;
provided, however, that the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in any
jurisdiction.
(h) To mail and make generally available to its stockholders not
later than the 45th day following the end of the fifth fiscal quarter
occurring after the Effective Date an earnings statement in accordance with
Section 11(a) of the Act and Rule 158 thereunder, and to advise you in
writing when such statement has been so made available.
(i) During the period of five years after the date of this Agreement,
(i) to mail as soon as reasonably practicable after the end of each fiscal
year to the record holders of its Common Stock a financial report of the
Company, and its subsidiaries, if any, on a consolidated basis (and a
similar financial report of all unconsolidated subsidiaries, if any), all
such financial reports to include a consolidated balance sheet, a
consolidated statement of operations, a consolidated statement of cash
flows and a consolidated statement of stockholders' equity as of the end of
and for such fiscal year, together with comparable information as of the
end of and for the preceding year, certified by independent certified
public accountants, and (ii) to mail and make generally available as soon
as practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a consolidated
statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the
corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), to furnish to you
as soon as available a copy of each report or other publicly available
information of the Company mailed to the holders of Common Stock or filed
with the Commission and such other publicly available information
concerning the Company and its subsidiaries, if any, as you may reasonably
request.
6
<PAGE>
(k) To pay all costs, expenses, fees and taxes incident to (i) the
preparation, printing, filing and distribution under the Act of the
Registration Statement (including financial statements and exhibits), each
Preliminary Prospectus and all amendments and supplements to any of them
prior to or during the period and subject to the proviso specified in
paragraph (e), (ii) the printing and delivery of the Prospectus and all
amendments or supplements to it during the period specified in paragraph
(e), (iii) the printing and delivery of this Agreement, the Preliminary and
Supplemental Blue Sky Memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with
the offering of the Shares (including in each case any disbursements of
counsel for the Underwriters relating to such printing and delivery), (iv)
the registration or qualification of the Shares for offer and sale under
the securities or Blue Sky laws of the several states (including in each
case the reasonable fees and disbursements of counsel for the Underwriters
relating to such registration or qualification and memoranda relating
thereto), (v) filings and clearance with the National Association of
Securities Dealers, Inc. ("NASD") in connection with the offering
(including the disbursements of counsel for the Underwriters relating to
such filing and clearance), (vi) the listing of the Shares on the Nasdaq
National Market, (vii) furnishing such copies of the Registration
Statement, the Prospectus and all amendments and supplements thereto as may
be requested for use in connection with the offering or sale of the Shares
by the Underwriters or by dealers to whom Shares may be sold and (viii) the
performance by the Sellers of their other obligations under this Agreement.
It is understood, however, that except as provided in this Section, Section
8 entitled "Indemnity and Contribution" and the third paragraph of Section
12 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, their travel and
entertainment expenses, stock transfer taxes payable on resale of any of
the Shares by them, any advertising expenses connected with any offers they
may make, including, but not limited to, the "tombstone" advertisement and
expenses associated with the preparation of prospectus memorabilia.
(l) To use its best efforts to maintain the inclusion of the Common
Stock on the Nasdaq National Market (or on a national securities exchange)
for a period of five years after the effective date of the Registration
Statement.
(m) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company
prior to the Closing Date or any Option Closing Date, as the case may be,
and to satisfy all conditions precedent to the delivery of the Shares.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no Stop Order is
in effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
7
<PAGE>
(b) (i) Each part of the Registration Statement, when such part
became effective, did not contain and each such part, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii)
the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Act and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(c) Each Preliminary Prospectus filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that this representation
and warranty does not apply to statements or omissions in such Preliminary
Prospectus based upon information relating to any underwriter furnished to
the Company in writing by such Underwriter through you expressly for use
therein.
(d) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on its
business as it is currently being conducted and to own, lease and operate
its properties, and is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, prospects, results of
operations or financial condition of the Company (a "MATERIAL ADVERSE
EFFECT").
(e) The Company does not have any subsidiaries. Except as disclosed
in the Prospectus, the Company does not own shares of stock or interests in
any other corporation, association or organization.
(f) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been
duly authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights; and the Shares to be
issued and sold by the Company hereunder have been duly authorized and,
when issued and delivered to the Underwriters against payment therefor
8
<PAGE>
as provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(g) The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained in
the Prospectus.
(h) The Company is not in violation of its charter or by-laws, and
the Company and its "PREDECESSORS" (which for purposes of this Agreement
shall mean Whittman-Hart L.P. and Whittman-Hart, Ltd.) are not in default
in the performance of any obligation, agreement or condition contained in
any bond, debenture, note or other evidence of indebtedness or in any other
agreement, indenture or instrument to which the Company or any of its
Predecessors is a party or by which it or any of its Predecessors or their
respective property is bound, which default could have a Material Adverse
Effect.
(i) This Agreement has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, except (A) as rights to indemnity
and contribution may be limited by applicable laws and considerations of
public policy, (B) as may be limited by the effects of applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar laws affecting rights and remedies of creditors generally, and (C)
as may be limited by the effects of general principles of equity
(including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing), whether applied by a court of law or equity.
The execution, delivery and performance of this Agreement, compliance by
the Company with all the provisions hereof and the consummation of the
transactions contemplated hereby will not require any consent, approval,
authorization or other order of, or filing with, any court, regulatory
body, administrative agency or other governmental body (except as such may
be required under the securities or Blue Sky laws of the various states)
and will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, (x) the charter or by-laws of the
Company or (y) any agreement, indenture or other instrument to which it is
a party or by which it or its properties are bound, or violate or conflict
with (z) any laws, administrative regulations or rulings or court decrees
applicable to the Company or its property, except in the cases of (y) and
(z) such conflicts, breaches, defaults, violations or conflicts which could
not have a Material Adverse Effect.
(j) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
its Predecessors is a party or of which any of their respective properties
are subject and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated. No contract or document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement is
not so described or filed as required.
9
<PAGE>
(k) Neither the Company nor its Predecessors has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL
LAWS"), nor to the best of the Company's knowledge, any federal or state
law relating to discrimination in the hiring, promotion or pay of employees
nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in any
Material Adverse Effect.
(l) The Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("PERMITS"), if
any, including, without limitation, under any applicable Environmental
Laws, as are necessary in all material respects, to own, lease and operate
its respective properties and to conduct its business; the Company has
fulfilled and performed all of its material obligations with respect to
such Permits and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the holder of any such
Permit; and, except as described in the Prospectus, such Permits contain no
restrictions that are materially burdensome to the Company.
(m) Except as otherwise set forth in the Prospectus or such as are
not material to the business, prospects, financial condition or results of
operations of the Company, the Company has good title to all property and
assets described in the Registration Statement as being owned by it, free
and clear of all liens, claims, encumbrances and restrictions, except liens
for taxes not yet due and payable. All leases to which the Company is a
party are valid and binding upon the Company and, to the best of the
Company's knowledge, upon the respective lessors thereunder and no default
has occurred or is continuing thereunder on the part of the Company and, to
the best of the Company's knowledge, on the part of the respective lessors,
which might result in any Material Adverse Effect, and the Company enjoys
peaceful and undisturbed possession under all such leases to which any of
them is a party as lessee with such exceptions as do not materially
interfere with the use made by the Company.
(n) The Company maintains the insurance set forth in the Certificate
of Insurance dated __________, 1996 previously furnished to you.
(o) KPMG Peat Marwick LLP are independent public accountants with
respect to the Company as required by the Act.
(p) The Company owns or possesses adequate rights with respect to the
use of all trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names and
copyrights (collectively, "INTELLECTUAL PROPERTY") described or referred to
in the Prospectus as owned or used by it, or which are necessary for the
conduct of its business as described in the Prospectus, other than
Intellectual Property the lack of which would not reasonably be expected to
result in a
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Material Adverse Effect, and no such rights as are material to the business
and prospects of the Company expire or are subject to termination at the
election of another party without cause or the Company's consent at a time
or under circumstances which would have a Material Adverse Effect. The
Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, patent rights,
inventions, trade secrets, know-how, proprietary techniques, including
processes and substances, trademarks, service marks, trade names or
copyrights which, singly or in the aggregate, if the subject of an
unfavorable ruling or filing, would reasonably be expected to result in a
Material Adverse Effect.
(q) The Company is not involved in any labor dispute which, either
individually or in the aggregate, would reasonably be expected to result in
a Material Adverse Effect, nor, to the knowledge of the Company, is any
such dispute threatened.
(r) The Company's outstanding Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is listed on the Nasdaq National
Market.
(s) The Company has filed all federal, state, local and foreign
income and other tax returns which have been required to be filed (or have
obtained any required extensions in connection therewith); all such returns
are complete, accurate and correct in all material respects and the Company
and its Predecessors have paid all taxes indicated by said returns and all
assessments received by any of them to the extent that such taxes have
become due and are not being contested in good faith.
(t) The financial statements, together with related schedules and
notes, forming part of the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company and its Predecessors on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which
they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as otherwise
disclosed therein; and the other financial and statistical information and
data set forth in the Registration Statement and the Prospectus (and any
amendment or supplement thereto) is, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements
and the books and records of the Company.
(u) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(v) Except as disclosed in the Prospectus, no holder of any security
of the Company has any right to require registration of shares of Common
Stock or any other security of the Company.
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(w) There are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or liens
related to or entitling any person to purchase or otherwise to acquire any
shares of the capital stock of, or other ownership interest in, the Company
except as otherwise disclosed in the Registration Statement.
(x) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(y) Except as disclosed in the Prospectus, the Company has not paid
any dividends to any holders of the capital stock of the Company.
(z) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
(aa) To the best of the Company's knowledge, no officer, director or
five percent stockholder of the Company has an "association" or
"affiliation" with any member of the NASD, within the meaning of Article
III, Section 44 of the Rules of Fair Practice of the NASD.
(bb) The reorganization contemplated by the Unit Contribution
Agreement dated December 28, 1995 (the "CONTRIBUTION AGREEMENT"), among
Robert Bernard, F-WH Corporation, a Delaware corporation, PVP-WH
Corporation, a Delaware corporation, Whittman-Hart General Partner, Ltd., a
Delaware corporation, and the Company has been duly and validly consummated
and has become effective under applicable law. No consent, approval,
authorization or order of any government or governmental agency which had
jurisdiction over any of the parties to the Contribution Agreement or over
their respective properties was required for the execution and delivery of
the Contribution Agreement and the consummation of the transactions
contemplated thereby, except for such consents, approvals, authorizations
or orders as have been duly and timely received or obtained. The
performance of the Contribution Agreement and the consummation of the
transactions therein contemplated did not result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
(i) any bond, debenture, note or other evidence of indebtedness, indenture,
mortgage, deed of trust or loan agreement, or under any material lease,
contract, joint venture or other agreement, in each case to the best of the
Company's knowledge, to which any of the parties to the Contribution
Agreement was a party or by which any of such parties or their respective
properties were bound, (ii) the charter or by-laws of any of the parties to
the Contribution Agreement, or (iii) any law or, to the best of the
Company's knowledge, order of any court which had jurisdiction over any of
the parties to the Contribution Agreement or over their respective
properties.
7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder severally represents, warrants and, with respect to
paragraph 7(i) below, covenants
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and agrees, in each case solely with respect to him, her or itself and his, her
or its Shares, to and with each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on
the Closing Date (and Option Closing Date, if applicable) will have, good
and clear title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests and claims whatsoever.
(b) Upon delivery of and payment for the Shares to be sold by such
Selling Stockholder pursuant to this Agreement, good and clear title to
such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests and claims whatsoever.
(c) Such Selling Stockholder has, and on the Closing Date will have,
full legal right, power and authority to enter into this Agreement and the
Custody Agreement between such Selling Stockholder and Harris Trust &
Savings Bank, as Custodian (the "CUSTODY AGREEMENT") and to sell, assign,
transfer and deliver such Shares in the manner provided herein and therein,
and this Agreement and the Custody Agreement, have been duly authorized,
executed and delivered by or on behalf of such Selling Stockholder and each
of this Agreement and the Custody Agreement is a valid and binding
agreement of such Selling Stockholder enforceable in accordance with its
terms, except (A) as rights to indemnity and contribution may be limited by
applicable laws and considerations of public policy, (B) as may be limited
by the effects of applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting rights and
remedies of creditors generally, and (C) as may be limited by the effects
of general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), whether applied
by a court of law or equity.
(d) The power of attorney signed by such Selling Stockholder
appointing the Attorneys, or either one of them, as such Selling
Stockholder's attorneys-in-fact to the extent set forth therein with regard
to the transactions contemplated hereby and by the Registration Statement
and the Custody Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Stockholder and is a valid and binding
instrument of such Selling Stockholder enforceable in accordance with its
terms, except (A) as rights to indemnity and contribution may be limited by
applicable laws and considerations of public policy, (B) as may be limited
by the effects of applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting rights and
remedies of creditors generally, and (C) as may be limited by the effects
of general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), whether applied
by a court of law or equity, and, pursuant to such power of attorney, such
Selling Stockholder has authorized the Attorneys, or either one of them, to
execute and deliver on his behalf this
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Agreement and any other document necessary or desirable in connection with
transactions contemplated hereby and to deliver the Shares to be sold by
such Selling Stockholder pursuant to this Agreement.
(e) Such Selling Stockholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Shares pursuant to the distribution contemplated by this Agreement, and
other than as permitted by the Act, the Selling Stockholder has not
distributed and will not distribute any prospectus or other offering
material in connection with the offering and sale of the Shares.
(f) The execution, delivery and performance of this Agreement by such
Selling Stockholder, compliance by such Selling Stockholder with all the
provisions hereof and the consummation of the transactions contemplated
hereby will not require any consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other governmental
body (except as such may be required under the Act, state securities laws
or Blue Sky laws) and will not conflict with or constitute a breach of any
of the terms or provisions of, or a default under, (x) organizational
documents of such Selling Stockholder, if not an individual, or (y) any
agreement, indenture or other instrument to which such Selling Stockholder
is a party or by which such Selling Stockholder or property of such Selling
Stockholder is bound, or violate or conflict with (z) any law,
administrative regulation or ruling or court decree applicable to such
Selling Stockholder or property of such Selling Stockholder, except in the
cases of (y) and (z), conflicts, breaches, defaults, or violations which
would not have a Material Adverse Effect on such Selling Stockholder or
his, her or its ability to consummate the transactions contemplated hereby.
(g) Certificates in negotiable form for the Shares to be sold by such
Selling Stockholder have been placed in custody under the Custody Agreement
with Harris Trust & Savings Bank (the "CUSTODIAN") for delivery under this
Agreement. Such Selling Stockholder specifically agrees that the Shares
represented by the certificates so held in custody for such Selling
Stockholder are subject to the interests of the several Underwriters and
the Company, that the arrangements made by such Selling Stockholder for
such custody, including the power of attorney referenced in such Custody
Agreement, are to that extent irrevocable, and that the obligations of such
Selling Stockholder shall not be terminated by any act of such Selling
Stockholder or by operation of law, whether by the death or incapacity of
such Selling Stockholder (or, in the case of a Selling Stockholder that is
not an individual, the dissolution or liquidation of such Selling
Stockholder) or the occurrence of any other event; if any such death,
incapacity, dissolution, liquidation or other such event should occur
before the delivery of such Shares hereunder, certificates for such Shares
shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, dissolution,
liquidation or other event had not occurred, regardless of whether the
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Custodian shall have received notice of such death, incapacity,
dissolution, liquidation or other event.
(h) Such information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to such
Selling Stockholder does not, and will not on the Closing Date (and any
Option Closing Date, if applicable), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of
circumstances under which they were made, not misleading.
(i) If, at any time during the period described in paragraph 5(e)
hereof, there is any change in the information referred to in paragraph
7(h) above with respect to such Selling Stockholder, such Selling
Stockholder will immediately notify you and the Company of such change.
8. INDEMNIFICATION. (a) The Company and each Selling Stockholder,
jointly and severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims, damages,
liabilities and judgments ("LOSSES"), joint or several, to which such
indemnified parties or any of them may become subject under the Act, the
Exchange Act, state securities laws, common law or otherwise, and the Company
and the Selling Stockholders jointly and severally agree to reimburse each such
Underwriter and controlling person for any legal or other expenses (including,
except as otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such Losses or in connection with any investigation or
inquiry of, or other proceeding which may be brought against, the respective
indemnified parties, in each case arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in or
incorporated by reference into the Registration Statement (including the
Prospectus as part thereof) or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any untrue statement or alleged untrue statement of a material fact
contained or incorporated by reference into any Preliminary Prospectus or the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment thereof or supplement thereto) or the omission or
alleged omission to state therein a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (1) the indemnity agreements of the
Company and the Selling Stockholders contained in this paragraph (a) shall not
apply with respect to any statement or omission if such statement or omission
was made in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Underwriter for use in any
Preliminary Prospectus or the Registration Statement or the Prospectus or any
such amendment thereof or supplement thereto; (2) the indemnity agreements of
the Company and the Selling Stockholders contained in this Section 8(a) and the
contribution provided for in Section 8(d), with respect to any Preliminary
Prospectus or
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the Prospectus, shall not inure to the benefit of any Underwriter or controlling
person of such Underwriter from whom the person asserting any Losses purchased
the Shares which are the subject thereof, if at or prior to the written
confirmation of the sale of such Shares a copy of the most recent Prospectus (or
the Prospectus as most recently amended or supplemented) was not sent or
delivered to such person and the untrue statement or omission of a material fact
was corrected in such Prospectus (or Prospectus as amended or supplemented),
unless such failure was the result of noncompliance by the Company with Section
5(e) hereof; (3) the aggregate liability of any Selling Stockholder pursuant to
the provisions of this paragraph (a) and paragraph (d) below shall be limited to
an amount equal to the aggregate price at which the Shares sold by such Selling
Stockholder hereunder were offered to the public; and (4) the indemnity
agreements of the Selling Stockholders (other than Robert F. Bernard, Edward V.
Szofer and Kevin M. Gaskey) contained in this paragraph (a) shall apply solely
with respect to statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of such
Selling Stockholder.
(b) In case any action shall be brought against any Underwriter or
any person controlling such Underwriter, based upon any Preliminary Prospectus,
the Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the Company or
the Selling Stockholders, such Underwriter shall promptly notify the Company and
the Selling Stockholders, as appropriate, in writing and the Company and the
Selling Stockholders shall assume the defense thereof, including the employment
of counsel reasonably satisfactory to such indemnified party and payment of all
reasonable fees and expenses of such counsel. Any Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the employment of such counsel has been specifically authorized in
writing by the Company and the Selling Stockholders, (ii) the Company and the
Selling Stockholders shall have failed to assume the defense and employ counsel
or (iii) the named parties to any such action (including any impleaded parties)
include both such Underwriter or such controlling person and the Company or any
Selling Stockholder, as the case may be, and such Underwriter or such
controlling person shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Company or the Selling Stockholders, as the case may be
(in which case the Company and the Selling Stockholders shall not have the right
to assume the defense of such action on behalf of such Underwriter or such
controlling person, it being understood, however, that the Company and the
Selling Stockholders shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such Underwriters and controlling persons, which firm
shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation and that all such reasonable fees and expenses shall be reimbursed
as they are incurred). A Seller shall not be liable for any settlement of any
such action effected without the written consent of such Seller but if settled
with the written consent of such Seller, such Seller agrees to indemnify and
hold harmless any
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Underwriter and any such controlling person from and against any loss or
liability as provided by such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and an indemnified party shall have
requested the indemnifying party to reimburse the indemnified party for such
reasonable fees and expenses of counsel as incurred, such indemnifying party
agrees that it shall be liable for any settlement of any action effected without
its written consent if (i) such settlement is entered into more than thirty
business days after the receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall have failed to reimburse the
indemnified party in accordance with such request for reimbursement prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, any person controlling the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, controlling such Selling Stockholder within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Sellers to each Underwriter but
only with reference to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Preliminary Prospectus. In case
any action shall be brought against the Company, any of its directors, any such
officer or any person controlling the Company or any Selling Stockholder or any
person controlling such Selling Stockholder based on the Registration Statement,
the Prospectus or any Preliminary Prospectus and in respect of which indemnity
may be sought against any Underwriter, the Underwriter shall have the rights and
duties given to the Sellers and the Company, its directors, any such officers
and any person controlling the Company and the Selling Stockholders and any
person controlling such Selling Stockholders shall have the rights and duties
given to the Underwriter, in each case by Section 8(b) hereof, MUTATIS MUTANDIS.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any Losses referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such Losses, (i) in such proportion as is appropriate to reflect
the relative benefits received by the Sellers on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Sellers and
the Underwriters in connection with the statements or omissions which resulted
in such Losses, as well as any other relevant equitable considerations. The
relative benefits received by the Sellers and the Underwriters shall be deemed
to be in the same proportion as the total net proceeds from
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the offering (before deducting expenses) received by the Sellers, and the total
underwriting discounts and commissions received by the Underwriters, bear to the
total price to the public of the Shares, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Sellers and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Company, the
Selling Stockholders or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the Losses
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8(d) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder and
not joint.
(e) Each Seller hereby designates Whittman-Hart, Inc., a Delaware
corporation, 311 South Wacker Drive, Suite 3500, Chicago, Illinois 60606-6618,
as its authorized agent, upon which process may be served in any action, suit or
proceeding which may be instituted in any state or federal court in the State of
New York by any Underwriter or person controlling an Underwriter asserting a
claim for indemnification or contribution under or pursuant to this Section 8,
and each Seller will accept the jurisdiction of such court in such action, and
waives, to the fullest extent permitted by applicable law, any defense based
upon lack of personal jurisdiction or venue. A copy of any such process shall
be sent or given to such Seller, at the address for notices specified in Section
13 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
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(a) All the representations and warranties of the Company contained
in this Agreement shall be true and correct on the Closing Date with the
same force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or at
such later date and time as you may approve in writing, and at the Closing
Date no Stop Order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending before or contemplated by the
Commission.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company, (ii) since the date of the
latest balance sheet included in the Registration Statement and the
Prospectus, there shall not have been any change, or any development
involving a prospective material adverse change, in the capital stock or in
the long-term debt of the Company from that set forth in the Registration
Statement and Prospectus, (iii) the Company and its Predecessors shall have
no liability or obligation, direct or contingent, which is material to the
Company other than those reflected in the Registration Statement and the
Prospectus and (iv) on the Closing Date you shall have received a
certificate dated the Closing Date, signed by Robert F. Bernard and Kevin
M. Gaskey, in their capacities as the Chief Executive Officer and Chief
Financial Officer of the Company, confirming the matters set forth in
paragraphs (a), (b), and (c) of this Section 9.
(d) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date, and you shall have received a certificate to such effect,
dated the Closing Date, from each Selling Stockholder.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Sachnoff & Weaver, Ltd., Chicago, Illinois, counsel for the
Company and the Selling Stockholders ("SACHNOFF & WEAVER"), to the effect
that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and
authority required to carry on its business as it is currently being
conducted and to own, lease and operate its properties;
(ii) the Company is duly qualified and is in good standing
as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its
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business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a Material Adverse Effect;
(iii) all the outstanding shares of Common Stock (including
the Shares to be sold by the Selling Stockholders) have been duly
authorized and validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights;
(iv) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and when issued and delivered to the
Underwriters against payment therefor as provided by this Agreement,
will have been validly issued and will be fully paid and
non-assessable, and the issuance of such Shares is not subject to any
preemptive or similar rights;
(v) this Agreement has been duly authorized, executed and
delivered by the Company and each of the Selling Stockholders and is a
valid and binding agreement of the Company and each Selling
Stockholder enforceable in accordance with its terms, except (A) as
rights to indemnity and contribution may be limited by applicable laws
and considerations of public policy, (B) as may be limited by the
effects of applicable bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting rights and
remedies of creditors generally, and (C) as may be limited by the
effects of general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and
fair dealing), whether applied by a court of law or equity;
(vi) the authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof
contained in the Prospectus;
(vii) the Registration Statement has become effective under
the Act, no Stop Order suspending its effectiveness has been issued
and no proceedings for that purpose are, to the knowledge of such
counsel, pending before or contemplated by the Commission;
(viii) the statements under the caption "Description of
Capital Stock" in the Prospectus and Items 14 and 15 of Part II of the
Registration Statement, insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to
such legal matters, documents and proceedings;
(ix) the Company is not in violation of its charter or
by-laws and, to the best of such counsel's knowledge, the Company is
not in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence
of indebtedness or in any other agreement, indenture or
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instrument material to the conduct of the business of the Company, to
which the Company is a party or by which it or its property is bound;
(x) the execution, delivery and performance of this
Agreement by the Company and each Selling Stockholder, compliance by
the Company and each Selling Stockholder with all the provisions
hereof and the consummation of the transactions contemplated hereby
will not require any consent, approval, authorization or other order
of any court, regulatory body, administrative agency or other
governmental body (except as such may be required under the Act or
other securities or Blue Sky laws) and will not conflict with or
constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or the organizational
documents of any Selling Stockholder that is not an individual or, to
the best of such counsel's knowledge, any material agreement,
indenture or other instrument to which the Company or any Selling
Stockholder is a party or by which the Company or any Selling
Stockholder or their respective properties are bound, or violate or
conflict with any laws, administrative regulations or, to the best of
such counsel's knowledge, rulings or court decrees applicable to the
Company or any Selling Stockholder or their respective properties;
(xi) to the best of such counsel's knowledge, there are no
legal or governmental proceeding pending or threatened to which the
Company or any of its Predecessors is a party or to which any of their
respective property is subject which is required to be described in
the Registration Statement or the Prospectus and is not so described,
nor to the best of such counsel's knowledge, is there any contract or
other document which is required to be described in the Registration
Statement or the Prospectus or is required to be filed as an exhibit
to the Registration Statement which is not described or filed as
required;
(xii) the Company has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities, including,
without limitation, under any applicable Environmental Laws, as are
necessary to own, lease and operate its respective properties and to
conduct its business in all material respects in the manner described
in the Prospectus;
(xiii) the Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(xiv) to the best of such counsel's knowledge, except as
indicated in the Prospectus, no holder of any security of the Company
has any right to require registration of shares of Common Stock or any
other security of the Company;
(xv) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for financial statements and
notes thereto, supporting
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<PAGE>
schedules and other financial information included therein, as to
which no opinion need be expressed) comply as to form in all material
respects with the Act;
(xvi) the Custody Agreement has been duly authorized,
executed and delivered by each Selling Stockholder and is a valid and
binding agreement of such Selling Stockholder enforceable in
accordance with its terms' except (A) as rights to indemnity and
contribution may be limited by applicable laws and considerations of
public policy, (B) as may be limited by the effects of applicable
bankruptcy, insolvency, reorganization, receivership, moratorium and
other similar laws affecting rights and remedies of creditors
generally, and (C) as may be limited by the effects of general
principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing), whether
applied by a court of law or equity;
(xvii) each Selling Stockholder has full legal right, power
and authority, and any approval required by law (other than any
approval imposed by the applicable state securities and Blue Sky laws)
to sell, assign, transfer and deliver the Shares to be sold by such
Selling Stockholder in the manner provided in this Agreement and the
Custody Agreement;
(xviii) delivery of the Shares to be sold by each Selling
Stockholder to the Underwriters against payment therefor as provided
in this Agreement will pass title to such Shares free and clear of any
adverse claim, assuming that each Underwriter purchases the Shares in
good faith without notice of any adverse claim;
(xix) the power of attorney signed by each Selling
Stockholder appointing the Attorneys, or either of them, as his
attorneys-in-fact to the extent set forth therein with regard to the
transactions contemplated hereby and by the Registration Statement has
been duly authorized, executed and delivered by or on behalf of such
Selling Stockholder and is a valid and binding instrument of such
Selling Stockholder enforceable in accordance with its terms, except
(A) as rights to indemnity and contribution may be limited by
applicable laws and considerations of public policy, (B) as may be
limited by the effects of applicable bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws
affecting rights and remedies of creditors generally, and (C) as may
be limited by the effects of general principles of equity (including,
without limitation, concepts of materiality, reasonableness, good
faith and fair dealing), whether applied by a court of law or equity,
and pursuant to such power of attorney, each of the Selling
Stockholders has authorized the Attorneys, or either of them, to
execute and deliver on their behalf this Agreement and any other
document necessary or desirable in connection with transactions
contemplated hereby and to deliver the Shares to be sold by such
Selling Stockholder pursuant to this Agreement;
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<PAGE>
(xx) to the best of such counsel's knowledge, all leases to which
the Company is a party are valid and binding upon the Company, except
(A) as may be limited by the effects of applicable bankruptcy,
insolvency, reorganization, receivership, moratorium and other similar
laws affecting rights and remedies of creditors generally, and (B) as
may be limited by the effects of general principles of equity
(including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing), whether applied by a
court of law or equity, and no default on the part of the Company has
occurred or is continuing thereunder, which might result in any
material adverse change in the business, financial condition or
results of operations of the Company, and the Company presently enjoys
peaceful and undisturbed possession under all such leases to which it
is a party as lessee with such exceptions as do not materially
interfere with the use made by the Company; and
(xxi) the reorganization contemplated by the Contribution
Agreement has been duly and validly consummated and has become
effective under applicable law; no consent, approval, authorization or
order of any government or governmental agency which had jurisdiction
over any of the parties to the Contribution Agreement or over their
respective properties was required for the execution and delivery of
the Contribution Agreement and the consummation of the transactions
contemplated thereby, except for such consents, approvals,
authorizations or orders as have been duly and timely received or
obtained; and the performance of the Contribution Agreement and the
consummation of the transactions therein contemplated did not result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, (i) any bond, debenture, note or other
evidence of indebtedness, indenture, mortgage, deed of trust or loan
agreement, or any material lease, contract, joint venture or other
agreement, in each case to the best of such counsel's knowledge, to
which any of the parties to the Contribution Agreement was a party or
by which any of such parties or their respective properties were
bound, (ii) the charter or by-laws of any of the parties to the
Contribution Agreement, or (iii) any law or, to the best of such
counsel's knowledge, order of any court which had jurisdiction over
any of the parties to the Contribution Agreement or over their
respective properties.
Such counsel shall further state that, based upon their participation
in the preparation of the Registration Statement and the Prospectus, and
any amendment or supplement thereto, and upon their review and discussions
of the contents thereof, but without independent check or verification
except as specified, nothing has come to their attention that has caused
them to believe that the Registration Statement (except for financial
statements and notes thereto and financial statement schedules included
therein), at the time it became effective, contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
the Prospectus (except for financial statements and notes thereto and
financial statement schedules included therein) or any amendment or
supplement thereto, at the date the Registration Statement became effective
or at the Closing Date, contained an untrue statement of a material fact or
23
<PAGE>
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
The opinion of Sachnoff & Weaver described in paragraph (e) above
shall be rendered to you at the request of the Company and the Selling
Stockholders and shall so state therein. In rendering such opinion,
Sachnoff & Weaver may rely upon the opinion of McDermott, Will & Emery as
to the matters set forth in subparagraph (xxi), and upon opinions of
Hopkins & Sutter as to certain matters regarding certain of the Selling
Stockholders, provided in each such case however, that Sachnoff & Weaver
indicates that it is so relying, identifies the firm upon whose it opinion
it is relying, indicates that it believes it is reasonable in so relying
and provides the Underwriters with a copy of the opinion so relied upon.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Katten Muchin & Zavis, counsel for the Underwriters, as to
the matters referred to in clauses (iv), (v) (but only with respect to the
Company) and (viii) (but only with respect to the statements under the
captions "Description of Capital Stock" and "Underwriting") and (xv) of the
foregoing paragraph (e). Said counsel shall also provide negative
assurances regarding the contents of the Prospectus substantially similar
to those provided by counsel to the Company.
(g) You shall have received from KPMG Peat Marwick LLP a letter or
letters, in form and substance reasonably satisfactory to you and your
counsel addressed to the Underwriters and dated the Closing Date and any
later date on which Option Shares are purchased, confirming that they are
independent public accountants with respect to the Company within the
meaning of the Act and based upon the procedures described in their letter
delivered to you concurrently with the execution of this Agreement (herein
called the "ORIGINAL LETTER"), but carried out to a date not more than five
business days prior to the Closing Date or such later date on which Option
Shares are purchased, as the case may be, (i) confirming, to the extent
true, that the statements and conclusions set forth in the Original Letter
are accurate as of the Closing Date or such later date, as the case may be,
and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter, or their knowledge thereof,
after the date of the Original Letter or to reflect the availability of
more recent financial statements, data or information. If such Original
Letter discloses any material adverse decreases or increases, as the case
may be, in the items specified therein which are not set forth in or
contemplated by the Prospectus, or if the subsequent letter or letters to
be delivered at the Closing discloses any material adverse change in the
statements and conclusions set forth in the Original Letter, which in
either case, in the reasonable judgment of the Underwriters, makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the terms and in the manner contemplated by the
Prospectus, this Agreement and all obligations of the Underwriters
hereunder may be terminated by the Representatives by notifying the Company
in the manner and with the effect provided below in Section 12 of this
Agreement.
24
<PAGE>
(h) The Company and the Selling Stockholders shall not have failed at
or prior to the Closing Date to perform or comply in any material respect
with any of the agreements herein contained and required to be performed or
complied with by the Company at or prior to the Closing Date.
(i) On or prior to the Closing Date, you shall have received written
Lock-Up Agreements in the form and from the persons contemplated by Section
2(c) hereof.
The several obligations of the Underwriters to purchase any Option Shares
hereunder are subject to the delivery to you on the applicable Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of such Option
Shares and other matters related to the issuance of such Option Shares.
10. TERMINATION.
(a) This Agreement may be terminated at any time prior to the Closing
Date by you by written notice to the Sellers if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or development involving a prospective material adverse change in
the condition, financial or otherwise, of the Company or the earnings,
affairs, or business prospects of the Company, whether or not arising in
the ordinary course of business, which would, in your judgment, make it
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or change
in economic conditions or in the financial markets of the United States or
elsewhere that, in your judgment, is material and adverse and would, in
your judgment, make it impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus, (iii) the suspension or
material limitation of trading in securities on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market or
limitation on prices for securities on either such exchange or the Nasdaq
National Market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of
any court or other governmental authority which in your opinion materially
and adversely affects, or will materially and adversely affect, the
business or operations of the Company, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a
material adverse effect on the financial markets in the United States.
(b) If on the Closing Date or on an Option Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to
purchase the Firm Shares or Option Shares, as the case may be, which it or
they have agreed to purchase hereunder on such date and the aggregate
number of Firm Shares or Option Shares, as the case may be, which such
defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase is not more than one-tenth of the total
number of Shares to be purchased on such
25
<PAGE>
date by all Underwriters, each non-defaulting Underwriter shall be
obligated severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I bears to the total number of Firm
Shares which all the non-defaulting Underwriters, as the case may be, have
agreed to purchase, or in such other proportion as you may specify, to
purchase the Firm Shares or Option Shares, as the case may be, which such
defaulting Underwriter or Underwriters, as the case may be, agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall
the number of Firm Shares or Option Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth
of such number of Firm Shares or Option Shares, as the case may be, without
the written consent of such Underwriter. If on the Closing Date or on an
Option Closing Date, as the case may be, any Underwriter or Underwriters
shall fail or refuse to purchase Firm Shares, or Option Shares, as the case
may be, and the aggregate number of Firm Shares or Option Shares, as the
case may be, with respect to which such default occurs is more than
one-tenth of the aggregate number of Shares to be purchased on such date by
all Underwriters and arrangements satisfactory to you and the applicable
Sellers for purchase of such Shares are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter and the applicable Sellers. Nothing in this
Agreement shall relieve any Underwriter so defaulting from liability
therefor. In any such case which does not result in termination of this
Agreement, either you or the Sellers shall have the right to postpone the
Closing Date or the applicable Option Closing Date, as the case may be, but
in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in
respect of any default of any such Underwriter under this Agreement.
11. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling Stockholder
severally agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes with respect to
the Shares to be sold by such Selling Stockholder; and
(b) To take all reasonable actions in cooperation with the Company and
the Underwriters to cause the Registration Statement to become effective at
the earliest possible time, to do and perform all things to be done and
performed under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares pursuant to this
Agreement.
12. MISCELLANEOUS. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to Whittman-
Hart, Inc., 311 South Wacker Drive, Suite 3500, Chicago, Illinois 60606-6618,
(b) if to the Selling Stockholders, to the Attorneys c/o the Company, 311 South
Wacker Drive, Suite 3500, Chicago, Illinois 6060-6618 and (c) if to any
Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
26
<PAGE>
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other covenants of the Selling Stockholders, the Company, its
officers and directors and of the several Underwriters set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter or by or on behalf of the Sellers, the officers or directors of
the Company or any controlling person of the Sellers, (ii) acceptance of the
Shares and payment for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Sellers to comply with the terms or to
fulfill any of the conditions of this Agreement, or if this Agreement is
terminated pursuant to Section 10 hereof due to a default hereunder or violation
of the Act or Exchange Act by the Company, other than (in either case) by reason
of a default hereunder by any of the Underwriters, the Sellers agree to
reimburse the several Underwriters for all out-of-pocket expenses (including the
fees and disbursements of counsel) reasonably incurred by them, which expense
reimbursement shall constitute the Underwriters' sole remedy hereunder in such
circumstances.
Except as otherwise expressly provided herein, this Agreement has been
and is made solely for the benefit of and shall be binding upon the Sellers, the
Underwriters, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "SUCCESSORS AND ASSIGNS" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York, without giving effect to its conflicts
of law principles.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
* * * * *
27
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
WHITTMAN-HART, INC.
By:
-------------------------------------
Title:
----------------------------------
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE II HERETO
By:
-------------------------------------
Attorney-in-Fact
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
VOLPE, WELTY & COMPANY
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
--------------------------------
Title:
-----------------------------
28
<PAGE>
SCHEDULE I
NUMBER OF
FIRM SHARES
NAME BEING SOLD
---- -----------
Donaldson, Lufkin & Jenrette Securities Corporation ............
Volpe Welty & Company ..........................................
---------------
TOTAL 1,800,000
--------------
--------------
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<PAGE>
SCHEDULE II
SELLING STOCKHOLDERS
NUMBER OF NUMBER OF
FIRM SHARES OPTION SHARES
NAME BEING SOLD BEING SOLD
- ---- ---------- -------------
----------- -------------
Total ................................. 765,000 270,000
----------- -------------
----------- -------------
<PAGE>
August 5, 1996
Whittman-Hart
311 South Wacker Drive, Suite 3500
Chicago, Illinois 60606-6618
Ladies and Gentlemen:
We have acted as counsel to Whittman-Hart, Inc., a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-1 (the
"Registration Statement"), filed by the Company under the Securities Act of
1933, as amended, with the Securities and Exchange Commission (the
"Commission"), relating to the sale of up to 2,070,000 shares (the "Shares") of
the Company's Common Stock, par value $.001 per share. We have examined the
Registration Statement and the form of Underwriting Agreement filed with the
Commission as an exhibit to the Registration Statement (the "Underwriting
Agreement"). In addition, we have reviewed such other documents and have made
such further investigations as we have deemed necessary to enable us to express
the opinion hereinafter set forth.
We hereby advise you that in our opinion the Shares have been duly
authorized by the Company and, upon payment and delivery in accordance with the
Underwriting Agreement, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Registration Statement. In giving this consent, we do not
hereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission.
Very truly yours,
/s/ Sachnoff & Weaver, Ltd.
--------------------------------
SACHNOFF & WEAVER, LTD.
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), dated as of the 25th day of July,
1996, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
("BANK"), a national banking association with its principal place of business at
33 North LaSalle Street, Chicago, Illinois 60690, and WHITMAN-HART, INC.,
("Borrower"), a Delaware corporation with its principal place of business at
311 South Wacker Drive, Suite 3500, Chicago, IL 60606-6618, has reference to the
following facts and circumstances:
Pursuant to Borrower's request, Bank heretofore, now and from time to time
hereafter, has and/or may loan or advance monies, extend credit and/or extend
other financial accommodations to or for the benefit of Borrower.
NOW THEREFORE, in consideration of the terms and conditions set forth
herein and of any loan or extensions of credit heretofore, now or hereafter made
to or for the benefit of Borrower by Bank, the parties hereto agree as follows:
1. DEFINITIONS AND TERMS
1.1 When used herein, the words, terms and/or phrases set forth below
shall have the following meanings:
A. "BORROWER'S LIABILITIES": all obligations and liabilities of Borrower
to bank (including without limitation all debts, claims, indebtedness
and attorneys' fees and expenses as provided for in Paragraph 6.11)
whether primary, secondary, direct, contingent, fixed or otherwise,
including Rate Hedging Obligations (as defined in subparagraph I
herein), heretofore, now and/or from time to time hereafter owing, due
or payable, however evidenced, created, incurred, acquired or owing
and however arising, whether under this Agreement or the "Other
Agreements" (hereinafter defined) or by operation of law or otherwise.
B. "INDEBTEDNESS": (i) indebtedness for borrowed money or for the
deferred purchase price of property or services; (ii) obligations as
lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital
leases; (iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) or (ii) above; and (iv) liabilities with
respect to unfunded vested benefits under plans covered by Title IV of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and in effect from time to time.
C. "OTHER AGREEMENTS": all agreements, instruments and documents,
including without limitation, guaranties, mortgages, deeds of trust,
notes, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases,
<PAGE>
subordination agreements, financing statements and all other written
matter heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower and delivered to Bank.
D. "PERSONS.": any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, entity, party or government
(whether national, federal, state, county, city, municipal, or
otherwise, including without limitation, any instrumentality,
division, agency, body or department thereof).
E. "RATE HEDGING OBLIGATIONS": shall mean any and all obligations of the
Borrower, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor),
under (i) any and all agreements designed to protect the Borrower from
the fluctuations of interest rates, exchange rates, or forward rates
applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to: interest rate swap
agreements, dollar-denominated or cross-currency interest rate
exchange agreements, forward currency exchange agreements, interest
rate cap, floor or collar agreements, forward rate currency agreements
or agreements relating to interest rate options, puts and warrants and
(ii) any and all agreements relating to cancellations, buy backs,
reversals, terminations or assignments of any of the foregoing.
1.2 Except as otherwise defined in this Agreement or the Other Agreements,
all words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefor (if any) in the Illinois Uniform Commercial Code.
2. LOANS
2.1 Loans made by bank to borrower pursuant to this Agreement shall be
evidenced by notes or other instruments issued or made by Borrower to Bank.
Except as otherwise provided in this Agreement or in any notes executed and
delivered by Borrower to Bank in connection herewith, the principal portion of
Borrower's Liabilities shall be payable by Borrower to Bank on the maturity
date(s) described in any such note(s) (as the same may be amended or renewed).
All costs, fees and expenses payable hereunder or under the Other Agreements,
shall be payable by Borrower to Bank on demand, in either case at Bank's
principal place of business or such other place as bank shall specify in writing
to Borrower.
2.2 Each loan made by Bank to Borrower pursuant to this Agreement or the
Other Agreements shall constitute an automatic warranty and representation by
Borrower to Bank that there does not then exist an "Event of Default" (as
hereinafter defined) or any event or condition which with notice, lapse of time
and/or the making of such loan would constitute an Event of Default.
2.3 This Agreement shall be in effect until all of Borrower's Liabilities
have been paid in full and any and all commitments of Bank to make loans have
terminated.
2
<PAGE>
2.4 Bank's commitment to loan shall expire on the earlier of (i) the date
on which Borrower's Liabilities mature under the terms of any note given by
Borrower to Bank, or (ii) the occurrence of an Event of Default pursuant to
Section 5 hereof.
3. NEGATIVE PLEDGE
3.1 Borrower shall not, and shall not permit any of its subsidiaries to
create, incur, permit, or suffer to exist any lien upon any of its property or
assets, now owned or hereafter acquired, except for the following permitted
liens: (a) pledges or deposits made to secure payment of worker's compensation
insurance; (b) liens imposed by mandatory provisions of law such as for
materialmen, mechanics, warehousemen and other liens arising in the ordinary
course of business; (c) liens for taxes, assessments and governmental charges of
levies imposed upon the Borrower's income or profits or property, if the same
are not yet due and payable or if the same are being contested in good faith and
as to which adequate cash reserves have been provided; (d) liens arising out of
good faith deposits in connection with tenders, leases, real estate bids or
contracts (other than contracts involving the borrowing of money), pledges, or
deposits to secure (or in lieu of) surety, stay, appeal or customs bonds and
deposits to secure the payment of taxes, assessments, customs duties or similar
charges; (e) encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, provided that such items do not impair
the use of such property for the purposes intended, and none of which is
violated by existing or proposed structures or land use; and (f) liens
previously disclosed to Bank against Borrower held by any other bank.
4. WARRANTIES, REPRESENTATIONS AND COVENANTS; GENERAL
4.1 Borrower warrants and represents to and covenants with Bank that: (a)
Borrower has the right, power and capacity and is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and the Other
Agreements; (b) the execution, delivery and/or performance by Borrower of this
Agreement and the Other Agreements shall not, by the lapse of time, the giving
of notice otherwise, constitute a violation of any applicable law or a breach of
any provision contained in Borrower's Articles of Incorporation, By-Laws,
Articles of Partnership, Articles of Organization, Operating Agreement or
similar document, or contained in any agreement, instrument or document to which
Borrower is now or hereafter a party or by which it is or may be bound; (c)
Borrower is now and at all times hereafter, shall be solvent and generally
paying its debts as they mature and Borrower now owns and shall at all times
hereafter own property which, at a fair valuation, is greater than the sum of
its debts; (d) Borrower is not and will not be during the term hereof in
violation of any applicable federal, state or local statute, regulation or
ordinance that, in any respect materially and adversely affects its business,
property, assets, operations or condition, financial or otherwise; and (e)
Borrower is not in default with respect to any indenture, loan agreement,
mortgage, deed or other similar agreement relating to the borrowing of monies to
which it is a party or by which it is bound.
4.2 Borrower warrants and represents to and covenants with Bank that
Borrower shall not, without Bank's prior written consent thereto: (a) enter into
any transaction not in the ordinary course of business which materially and
adversely affects Borrower's ability to repay Borrower's Liabilities, any other
obligations and liabilities of Borrower; (b) other than as specifically
permitted in or contemplated by this Agreement or the Other Agreements,
encumber, pledge, mortgage, sell, lease or otherwise dispose of or transfer,
whether by sale, loan, distribution, merger, consolidation
3
<PAGE>
or otherwise, any of Borrower's assets; and (c) incur Indebtedness except
renewals or extensions of existing Indebtedness and interest thereon, and except
Indebtedness that is unsecured and is to Persons who execute and deliver to Bank
in form and substance acceptable to Bank and its counsel subordination
agreements subordinating their claims against Borrower therefore to the payment
of Borrower's Liabilities.
4.3 Borrower warrants and represents to and covenants with Bank that
Borrower shall furnish to Bank: (a) as soon as available but not later than
ninety (90) days after the close of each fiscal year of Borrower, financial
statements, which shall include, but not be limited to, balance sheets, income
statements and statements of cash flow of Borrower prepared in accordance with
generally accepted accounting principles, consistently applied, audited by a
firm of independent certified public accountants selected by Borrower and
acceptable to Bank; (b) as soon as available but not later than thirty (30) days
after the end of each quarter hereafter, financial statements of Borrower
certified by Borrower to be prepared in accordance with generally accepted
accounting principles fairly present the financial position and results of
operations of Borrower for such period; and (c) such other data and information
(financial and otherwise) as Bank, from time to time, may request.
4.4 Borrower warrants and represents to and covenants with Bank that
Borrower shall not permit its Debt (Total liabilities minus subordinated
debt) to "Tangible Net Worth" (as hereinafter defined) ratio to be exceed
1.0:1.0. Tangible Net Worth shall mean the value of the tangible assets of
Borrower as determined in accordance with the generally accepted accounting
principles after subtracting therefrom the aggregate amount of any intangible
assets of Borrower as determined in accordance with generally accepted
accounting principles, including without limitation, prepaid expenses, other
accounts receivable, goodwill, franchises, licenses, patents, trademarks,
tradenames, copyrights and brand names, minus the aggregate of all contingent
and non-contingent liabilities of Borrower.
4.5 Borrower warrants and represents to and covenants with Bank that
Borrower shall, at all times, maintain a minimum "Cash Flow Coverage" ratio of
1.30x. Cash Flow Coverage shall mean net earnings before taxes plus interest
expense, depreciation expense, amortization expense and other non-cash expense,
minus any amount of capital expenditures not financed by long-term debt; divided
by contractual principal payments and interest expense (inclusive of indirect
contractual principal payments and interest expense) plus any income tax
payments or shareholder distributions.
5. DEFAULT
5.1 The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Agreement: (a) if
Borrower fails to pay any of Borrower's Liabilities when due and payable or
declared due and payable (whether by scheduled maturity, required payment,
acceleration, demand or otherwise) after five (5) days notice; (b) if Borrower
fails or neglects to perform, keep or observe any term, provision, condition,
covenant, warranty or representation contained in this Agreement or any of the
Other Agreements after thirty (30) days notice; (c) occurrence of a default or
Event of Default under any of the Other Agreements heretofore, now or at any
time hereafter delivered by or on behalf of Borrower to Bank; (d) occurrence of
a default or an Event of Default under any agreement, instrument or document
heretofore, now or at any time hereafter delivered to Bank by any guarantor of
4
<PAGE>
Borrower's Liabilities or by any Person which has granted to Bank a security
interest or lien in and to some or all of such Person's real or personal
property to secure the payment of Borrower's Liabilities; (e) if any of
Borrower's assets are attached, seized, subjected to a writ, or are levied upon
or become subject to any lien or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; (f) if a notice of
lien, levy or assessment is filed of record or given to Borrower with respect to
all or any of Borrower's assets by any federal, state, local department or
agency not released within thirty (30) days; (g) if Borrower or any guarantor of
Borrower's Liabilities becomes insolvent or generally fails to pay or admits in
writing its inability to pay debts as they become due, if a petition under Title
II of the United States Code or any similar law or regulation is filed by or
against Borrower or any such guarantor, if Borrower or any such guarantor shall
make an assignment for the benefit of creditors, if any case or proceeding is
filed by or against Borrower or any such guarantor for its dissolution or
liquidation, or if Borrower or any such guarantor is enjoined, restrained or in
any way prevented by court order from conducting all or any material part of its
business affairs; (h) the death or incompetency of Borrower or any guarantor of
Borrower's Liabilities, or the appointment of a conservator for all or any
portion of Borrower's assets; (i) the revocation, termination, or cancellation
of any guaranty of Borrower's Liabilities without written consent of Bank; (j)
if a contribution failure occurs with respect to any pension plan maintained by
Borrower or any corporation, trade or business that is, along with Borrower, a
member of a controlled group of corporations or controlled group of trades or
businesses (as described in Sections 414(b) and (c) of the Internal Revenue Code
of 1986 or Section 4001 of ERISA) sufficient to give rise to a lien under
Section 302(f) of ERISA; (k) if Borrower or any guarantor of Borrower's
Liabilities is in default in the payment of any obligations, indebtedness or
other liabilities to any third party and such default is declared and is not
cured within the time, if any, specified therefor in any agreement governing the
same; (l) if any material statement, report of certificate made or delivered by
Borrower, any of Borrower's partners, officers, employees or agents or any
guarantor of Borrower's Liabilities is not true and correct; or (m) if Bank is
reasonably insecure.
5.2 All of Bank's rights and remedies under this Agreement and the Other
Agreements are cumulative and non-exclusive.
5.3 Upon an Event of Default or the occurrence of any one of the events
described in Paragraph 5.1, without notice by Bank to or demand by Bank of
Borrower, Bank shall have no further obligation to and may then forthwith cease
advancing monies or extending credit to or for the benefit of Borrower under
this Agreement and the Other Agreements. Upon an Event of Default, without
notice by Bank to Borrower, Borrower's Liabilities shall be due and payable,
forthwith.
5.4 Any notice required to be given by Bank to Borrower deposited in the
United States mail, postage prepaid shall be delivered by registered or
certified mail to the address specified at the beginning of this Agreement not
less than ten (10) days prior to such proposed action, shall constitute
commercially reasonable and fair notice to Borrower thereof.
5.5 Under an Event of Default Borrower waives and releases any cause of
action and claim against Bank's possession or collection of the monies,
reserves, deposits, deposit accounts and interest or dividends thereof, cash or
cash equivalents, collectively the "Monies", in conjunction with this Loan
Agreement.
5
<PAGE>
6. GENERAL
6.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities and Borrower agrees that Bank shall have the continuing
exclusive right to apply and re-apply any and all such payments in such manner
as Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records.
6.2 This Agreement and the Other Agreements shall be binding upon and
inure to the benefit of the heirs, representatives, successors and assigns of
Borrower and Bank.
6.3 Bank's failure to require strict performance by Borrower of any
provision of this Agreement shall not waive, affect or diminish any right of
Bank thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Bank of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not suspend, waive or affect any
other Event of Default by Borrower under this Agreement or the Other
Agreements, whether the same is prior or subsequent thereto and whether of
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in this
Agreement or the Other Agreements and no Event of Default by Borrower under
this Agreement or the Other Agreements shall be deemed to have been suspended
or waived by Bank unless such suspension or waiver is by an instrument in
writing signed by an officer of Bank and directed to Borrower specifying such
suspension or waiver.
6.4 If any provision of this Agreement or the Other Agreements or the
application thereof to any person, entity or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the Other Agreements and the
application of such provision to other Persons, or circumstances will not be
affected thereby and the provisions of this Agreement and the Other Agreements
shall be severable in any such instance.
6.5 Borrower hereby appoints Bank as Borrower's agent and attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any agreement, instrument or document which Bank may
reasonably deem necessary or advisable to accomplish the purposes hereof which
appointment is irrevocable and coupled with an interest. All monies paid for
the purposes herein, and all costs, fees and expenses paid or incurred in
connection therewith, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand.
6.6 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to receive
by virtue of any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any and all
agreements, instruments or documents at any time held by Bank on which Borrower
may in any way be liable.
6.7 Except as otherwise provided in the Other Agreements, if any provision
contained in this Agreement is in conflict with, or inconsistent with any
provision in the Other Agreements, the provision of this Agreement shall
control.
6
<PAGE>
6.8 The terms and provisions of this Agreement and the Other Agreements
shall supersede any prior agreement or understanding of the parties hereto, and
contain the entire agreement of the parties hereto with respect to the matters
covered herein. This Agreement and the Other Agreements may not be modified,
altered, or amended except by an agreement in writing signed by Borrower and
Bank. This Agreement shall continue in full force and effect so long as any
portion or component of Borrower's Liabilities shall be outstanding. All of
Borrower's warranties, representations, undertakings, and covenants contained in
this Agreement or the Other Agreements shall survive the termination or
cancellation of the same. Should a claim ("Recovery Claim") be made upon the
Bank at any time for recovery of any amount received by the Bank in payment of
Borrower's Liabilities (whether received from Borrower or otherwise) and should
the Bank repay all or part of said amount by reason of (1) any judgment, decree
or order of any court or administrative body having jurisdiction over Bank or
any of its property; (2) any settlement or compromise of any such Recovery Claim
effected by the Bank with the claimant (including Borrower), this Agreement and
the security interests granted Bank hereunder shall continue in effect with
respect to the amount so repaid to the same extent as if such amount had never
originally been received by the Bank, notwithstanding any prior termination of
this Agreement, the return of this Agreement to Borrower, or the cancellation of
any note or other instrument evidencing Borrower's Liabilities.
6.9 This Agreement and the Other Agreements shall be governed and
controlled by the internal laws of the State of Illinois and not the law of
conflicts.
6.10 If at any time or times hereafter, whether or not Borrower's
Liabilities are outstanding at such time, Bank: (a) employs counsel for advice
or other representation, (i) with respect to this Agreement, the Other
Agreements or the administration of Borrower's Liabilities, (ii) to represent
Bank in any litigation, arbitration contest, dispute, suit or proceeding or to
commence, defend or intervene or to take any other action in or with respect to
any litigation, contest, dispute, suit or proceeding (whether instituted by
Bank, Borrower or any other Person ) in any way or respect relating to this
Agreement, the Other Agreements, or Borrower's affairs, or (iii) to enforce any
rights of Bank against Borrower or any other Person which may be obligated to
Bank by virtue of this Agreement or the Other Agreements; (b) takes any action
with respect to administration of Borrower's Liabilities; and/or (c) attempts to
or enforces any of Bank's rights or remedies under this Agreement or the Other
Agreements, the reasonable costs, fees and expenses incurred by Bank with
respect to the foregoing, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand.
6.11 BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE
ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS AGREEMENT OR THE OTHER AGREEMENTS SHALL BE
LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF
ILLINOIS, AND BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY
LITIGATION BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
7
<PAGE>
6.12 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER AGREEMENTS, OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR (II) ARISING FROM
ANY DISPUTE OR CONTROVERSY ARISING IN CONNECTION WITH OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT, AND AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the Agreement has been duly executed as of the day and
year specified at the beginning hereof.
BORROWER:
WHITTMAN-HART,INC., a
Delaware corporation
By: /s/ Kevin M. Gaskey
----------------------------------
Kevin M. Gaskey, Chief Financial Officer
Accepted this 25th day of July, 1996, at Bank's principal place of business
in the City of Chicago, State of Illinois.
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By: /s/ Andrew P. Salski
----------------------------------
Print or Type Name: Andrew P. Salski
----------------
Its: 2nd Vice President
-------------------------------
8
<PAGE>
[LOGO] American National Bank
and Trust Company of Chicago
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROMISSORY NOTE (UNSECURED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$5,000,000.00
Chicago, Illinois July 25, 1996
Due April 30, 1997
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) ("Borrower"), promises to pay to the order of AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO ("Bank"), at its principal place of business in
Chicago, Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of FIVE MILLION AND NO/100 DOLLARS, or such lesser
principal sum as may then be owed by Borrower to Bank hereunder.
Borrower's obligations and liabilities to Bank under this Note
("Borrower's Liabilities") shall be due and payable on April 30, 1997.
The unpaid principal balance of Borrower's Liabilities due hereunder
shall bear interest from the date of disbursement until paid, computed as
follows: AT A DAILY RATE EQUAL TO THE DAILY RATE EQUIVALENT OF 0.0% PER ANNUM
(computed on the basis of a 360-day year and actual days elapsed) in excess of
the rate of interest announced or published publicly from time to time by Bank
as its prime or base rate of interest (the "Base Rate"), or at 1.5% in excess of
LIBOR, as elected from time to time by Borrower as set forth on the LONDON
INTERBANK OFFERING RATE AGREEMENT, which is attached hereto and made a part of
this Note; PROVIDED, HOWEVER, that in the event that any of Borrower's
Liabilities are not paid when due, the unpaid amount of Borrower's Liabilities
shall bear interest after the due date until paid at a rate equal to the sum of
the rate that would otherwise be in effect plus 3%.
The rate of interest to be charged by Bank to Borrower shall fluctuate
hereafter from time to time concurrently with, and in an amount equal to, each
increase or decrease in the Base Rate, whichever is applicable.
Accrued interest shall be payable by Borrower to Bank on the same day of
each month, and at maturity, commencing with the last day of August, 1996 or as
billed by Bank to Borrower, at Bank's principal place of business, or at such
other place as Bank may designate from time to time hereafter. After maturity,
accrued interest on all of Borrower's Liabilities shall be payable on demand.
Borrower warrants and represents to Bank that Borrower shall use the
proceeds represented by this Note solely for proper business purposes and
consistently with all applicable laws and statutes.
Any deposits or other sums at any time credited by or payable or due
from Bank to Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the possession or control
of Bank or its bailee for any purpose, may be reduced to cash and applied by
Bank to or setoff by Bank against Borrower's Liabilities.
The occurrence of any one of the following events shall constitute a
default by the Borrower ("Event of Default") under this Note: (a) if Borrower
fails to pay any of Borrower's Liabilities when due and payable or declared due
and payable (whether by scheduled maturity, required payment, acceleration,
demand or otherwise) with five (5) days notice; (b) if Borrower or any guarantor
of any of Borrower's Liabilities fails or neglects to perform, keep or observe
any term, provision, condition, covenant, warranty or representation contained
in this Note, with thirty (30) days notice; (c) occurrence of a default or an
event of default under any agreement, instrument or document heretofore, now or
at any time hereafter delivered by or on behalf of Borrower to Bank; (d) if any
of Borrower's assets are attached, seized, subjected to a writ, or are levied
upon or become subject to any lien or come within the possession of any
receiver, trustee, custodian or assignee for the
<PAGE>
benefit of creditors; (e) if a notice of lien, levy or assessment is filed of
record or given to Borrower with respect to all or any of Borrower's assets by
any federal, state or local department or agency; (f) if Borrower or any
guarantor of Borrower's Liabilities becomes insolvent or generally fails to pay
or admits in writing its inability to pay debts as they become due, if a
petition under Title 11 of the United States Code or any similar law or
regulation is filed by or against Borrower or any such guarantor, if Borrower or
any such guarantor shall make an assignment for the benefit of creditors, if any
case or proceeding is filed by or against Borrower or any such guarantor for its
dissolution or liquidation, or if Borrower or any such guarantor is enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business affairs; (g) the death or incompetency of Borrower
or any guarantor of Borrower's Liabilities, or the appointment of a conservator
for all or any portion of Borrower's assets; (h) the revocation, termination or
cancellation of any guaranty of Borrower's Liabilities without written consent
of Bank; (i) if a contribution failure occurs with respect to any pension plan
maintained by Borrower or any corporation, trade or business that is, along with
Borrower, a member of a controlled group of corporations or a controlled group
of trades or businesses (as described in Sections 414(b) and (c) of the Internal
Revenue Code of 1986 or Section 4001 of the Employee Retirement Income Security
Act of 1974, as amended, "ERISA") sufficient to give rise to a lien under
Section 302(f) of ERISA; (j) if Borrower or any guarantor of Borrower's
Liabilities is in default in the payment of any obligations, indebtedness or
other liabilities to any third party and such default is declared and is not
cured within the time, if any, specified therefor in any agreement governing the
same; (k) if any material statement, report or certificate made or delivered by
Borrower, any of Borrower's partners, officers, employees or agents or any
guarantor of Borrower's Liabilities is not true and correct; or (l) if Bank is
reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option, without
notice by Bank to or demand by Bank of Borrower, all of Borrower's Liabilities
shall be immediately due and payable.
All of Bank's rights and remedies under this Note are cumulative and
non-exclusive. The acceptance by Bank of any partial payment made hereunder
after the time when any of Borrower's Liabilities become due and payable will
not establish a custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower of any
provision of this Note shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Any waiver of
an Event of Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment, demand and
protest and notice of presentment, protest, default, non-payment, maturity,
release, compromise, settlement, extension or renewal of this Note, and hereby
ratify and confirm whatever Bank may do in this regard. Borrower further waives
any and all notice or demand to which Borrower might be entitled with respect to
this Note by virtue of any applicable statute or law (to the extent permitted by
law).
Borrower agrees to pay, immediately upon demand by Bank, any and all
costs, fees and expenses (including reasonable attorneys' fees, costs and
expenses) incurred by Bank (i) in enforcing any of Bank's rights hereunder, and
(ii) in representing Bank in any litigation, contest, suit or dispute, or to
commence, defend or intervene or to take any action with respect to any
litigation, contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note or Borrower's Liabilities,
and to the extent not paid the same shall become part of Borrower's Liabilities.
This Note shall be deemed to have been submitted by Borrower to Bank and
to have been made at Bank's principal place of business. This Note shall be
governed and controlled by the internal laws of the State of Illinois and not
the law of conflicts.
Advances under this Note may be made by Bank upon oral or written
request of any person authorized to make such requests on behalf of Borrower
("Authorized Person"). Borrower agrees that Bank may act on requests which Bank
in good faith believes to be made by an Authorized Person, regardless of whether
such requests are in fact made by an Authorized Person. Any such advance shall
be conclusively presumed to have been made by Bank to or for the benefit of
Borrower. Borrower does hereby irrevocably confirm, ratify and approve all such
advances by Bank and agrees to indemnify Bank against any and all losses and
expenses (including reasonable attorneys' fees) and shall hold Bank harmless
with respect thereto.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
<PAGE>
WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS NOTE SHALL BE
LITIGATED IN COURTS HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT
AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN
CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR
(II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO
THIS NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES
THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
BORROWER:
WHITTMAN-HART, INC., a
311 South Wacker Drive, Suite 3500 Delaware corporation
- -----------------------------------
Chicago, Illinois 60606-6618 By: /s/ Kevin M. Gaskey
- ----------------------------------- --------------------------------
Address Kevin M. Gaskey,
Chief Financial Officer
36-3298997
- -----------------------------------
FEIN OR SSN
<PAGE>
LONDON INTERBANK OFFERED RATE BORROWING AGREEMENT
A. Borrower has requested and Bank has agreed to extend an
interest rate option of 1.5% per annum in excess of the LIBOR;
and
B. Borrower has executed a Promissory Note (Unsecured) dated July
25, 1996, in the amount of $5,000,000.00 in favor of Bank (the
"Note") which reflects the LIBOR option.
NOW THEREFORE, in consideration of any loan, advnace, extension of
credit and/or other financial accommodation at any time made by bank to or for
the benefit of Borrower, and of the promises set forth herein, the parties
hereto agree as follows:
1. DEFINITIONS AND TERMS
1.1 The following words, terms and/or phrases shall have the
meanings set forth thereafter and such meanings shall be applicable to the
singular and plural form thereof; whenever the context so requires, the use of
"it" in reference to Borrower shall mean Borrower as identified at the beginning
of this Agreement:
(a) "AMORTIZATION DATE": the dates specified in the Note
when principal payments are due.
(b) "BORROWING": any portion of Borrower's liabilities
bearing interest at LIBOR.
(c) "BUSINESS DAY": any day on which Bank is open for
regular business.
(d) "EVENT OF DEFAULT": the definition ascribed to this term
in the Note.
(e) "INTEREST PERIOD": the period commencing on the date a
LIBOR Loan is made and ending, as the Borrower may
select, 30, 60 or 90 days thereafter.
(f) "LIBOR LOANS": any principal portion of Borrower's
liabilities bearing interest at LIBOR.
(g) "LIBOR MARGIN": 1.5%
(h) "MATURITY DATE": the date specified in the Note upon
which the Borrower's libilities are due and payable in
full.
1.2 Any terms or phrases not specificially defined in this
Agreement shall have the meanings ascribed to them in the Note.
2. MANNER OF LIBOR ELECTION
2.1 Borrower may elect to cause all or a portion of the principal
outstanding on the Notes to bear interest at a daily rate equal to the daily
rate equivalent of 1.5% in excess of LIBOR, subject to the following conditions:
(a) Not more than five (5) nor less than two (2) Business Days
prior to the requested date of any LIBOR Borrowing, Borrower
shall deliver to Bank an irrevocable written or telephonic
notice setting forth the requested date and amount of such
Borrowing (which amount shall not be less than $500,000.00 and,
if in excess of $500,000.00, shall be in integral multiples of
$500,000.00) and the requested Interest Period of such
Borrowing;
(b) The LIBOR used in computing the interest rate applicable to
such Borrowing shall be the LIBOR as quoted by Bank to Borrower
as being in effect for the date of such Borrowing plus
<PAGE>
the LIBOR Margin, computed on the basis of a 360-day year and
actual days elapsed, and shall be fixed for the requested
period of such Borrowing;
(c) Such Borrowing may not be prepaid prior to the expiration of
the requested Interest Period of such Borrowing and shall be
repaid in full on the last day of the requested Interest Period
of such Borrowing;
(d) With respect to any Borrowing of LIBOR Loans, Borrower may not
select an Interest Period that extends beyond the Maturity Date
of the Note; and
(e) With repect to any Borrowing of LIBOR Loans under the Note,
Borrower may not select an Interest Period that extends beyond
any Amortization Date unless, after giving effect to such
requested Borrowing, the aggregate unpaid principal amount of
such Loans having Maturity Dates after such Amortization Date
does not exceed the aggregate principal amount of the Note
scheduled to be outstanding after such Amortization Date.
2.2 In the event Borrower fails to give notice pursuant to Section
2.1(a) above of the reborrowing of the principal amount of any maturing LIBOR
Borrowing and has not notified the Bank by 10:00 a.m. (Chicago time) on the day
such Borrowing matures that it intends to renew such Borrowing, then Borrower
shall be deemed to have requested a Borrowing of Base or Prime Rate Loans (as
defined in the Note) on such day in the amount of the maturing Borrowing.
3. GENERAL PROVISIONS
3.1 FUNDING INDEMNITY. In the event Bank shall incur any loss,
cost or expense (including, without limitation, any loss of profit, and any
loss, cost or expense incurred by reason of the liquidation or re-employment of
deposits or other funds acquired by such Bank to fund or maintain any LIBOR Loan
or the relending or reinvesting of such deposits or amounts paid or prepaid to
such Bank) as a result of:
(a) any payment or prepayment of a LIBOR Loan on a date other than
the last day of its Interest Period,
(b) any failure by Borrower to borrow a LIBOR Loan on the date
specified in a notice given pursuant to Section 2.1 hereof,
(c) any failure by Borrower to make any payment of principal on any
LIBOR Loan when due (whether by acceleration or otherwise), or
(d) any acceleration of the maturity of a LIBOR Loan as a result of
the occurrence of any Event of Default,
then, upon the demand of Bank, Borrower shall pay to Bank such amount as will
reimburse Bank for such loss, cost or expense. If Bank makes such a claim for
compensation, it shall provide to Borrower a certificate executed by an officer
of Bank setting forth the amount of such loss, cost or expense in reasonable
detail (including an explanation of the basis for the computation of such loss,
cost or expense) and the amounts shown on such certificate if reasonably
calculated shall be conclusive.
3.2 AVAILABILITY OF LIBOR LOANS. If Bank determines that
maintenance of its Loans would violate any applicable law, rule, regulation,
or directive, whether or not having the force of law, or if Bank determines
that deposits of a type and maturity appropriate to match fund LIBOR Loans
are not available to it then Bank shall forthwith give notice thereof to
Borrower, whereupon, until Bank notifies Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the Bank
to make LIBOR Loans shall be suspended.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER:
WHITTMAN-HART, INC., a Delaware corporation
By: /s/ Kevin M. Gaskey
------------------------------------------
Kevin M. Gaskey, Chief Financial Officer
Accepted this 25th day of July, 1996, at Bank's principal place of
business in the City of Chicago, State of Illinois.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Andrew P. Salski
------------------------------------------
Its: Second Vice President
-----------------------------------------
<PAGE>
EXHIBIT 11.1
WHITTMAN-HART, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $ 1,077,056 $ 475,000 $ 1,744,688 $ 805,706
Pro forma adjustment to provision for income taxes -- 173,701 -- 301,701
----------- ---------- ----------- ----------
Net income attributable to common stock (pro
forma in 1995) $ 1,077,056 $ 301,299 $ 1,744,688 $ 504,005
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Weighted average common shares outstanding 7,701,024 5,654,422 6,548,231 5,645,453
Effect of stock options calculated according to the
treasury stock method 669,662 547,390 611,369 547,390
Conversion of redeemable preferred stock 336,202 956,074 646,138 956,074
----------- ---------- ----------- ----------
Weighted average common and common equivalent
shares outstanding 8,706,888 7,157,886 7,805,738 7,148,917
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
Net income per share (pro forma in 1995) $ 0.12 $ 0.04 $ 0.22 $ 0.07
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
</TABLE>
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors and Stockholders
Whittman-Hart, Inc.:
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Selected Financial Data" and "Experts" in the
Prospectus.
/S/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
August 5, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1996 AND THE STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 26,102
<SECURITIES> 7,007
<RECEIVABLES> 14,311
<ALLOWANCES> 212
<INVENTORY> 0
<CURRENT-ASSETS> 48,573
<PP&E> 7,261
<DEPRECIATION> 1,984
<TOTAL-ASSETS> 54,152
<CURRENT-LIABILITIES> 7,924
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 45,515
<TOTAL-LIABILITY-AND-EQUITY> 54,152
<SALES> 0
<TOTAL-REVENUES> 38,863
<CGS> 0
<TOTAL-COSTS> 23,362
<OTHER-EXPENSES> 12,962
<LOSS-PROVISION> 237
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 2,843
<INCOME-TAX> 1,099
<INCOME-CONTINUING> 1,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,745
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
