<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WHITTMAN-HART, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3797833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification 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:
MARK D. WOOD, ESQ.
KATTEN MUCHIN ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2)
<S> <C> <C> <C>
Common Stock, par value $.001 per share... 909,983 shares $42.50 $38,674,278
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, par value $.001 per share... $10,210
</TABLE>
(1) Pursuant to Rule 416(a) under the Securities Act of 1933, the number of
shares of common stock registered hereby is subject to adjustment to prevent
dilution resulting from stock splits, stock dividends or similar
transactions.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of Regulation C under the Securities Act of 1933 on the basis
of the average of the high and low prices of our common stock as reported on
the Nasdaq National Market on January 27, 2000.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 28, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
909,983 SHARES
WHITTMAN-HART, INC.
COMMON STOCK
The selling stockholders described in this prospectus may offer and sell
from time to time an aggregate of up to 909,983 shares of our common stock. The
selling stockholders may sell the stock on terms to be determined at the time of
sale. We will not receive any proceeds from this offering.
------------------------
Our common stock is quoted on the Nasdaq National Market under the symbol
"WHIT." On January 27, 2000, the closing sale price of our common stock on the
Nasdaq National Market was $39.56 per share. Our address is 311 South Wacker
Drive, Suite 3500, Chicago, Illinois 60606, and our telephone number is (312)
922-9200.
On December 12, 1999, we entered into a merger agreement with USWeb/CKS.
Under the agreement, a subsidiary of ours will merge with and into USWeb/CKS,
with USWeb/CKS continuing as the surviving corporation. If we complete the
merger, USWeb/CKS stockholders will receive 0.865 of a share of our common stock
for each share of USWeb/CKS common stock they own. We cannot complete the merger
unless the stockholders of USWeb/CKS approve the merger proposal, our
stockholders approve the issuance of shares in the merger, the increase in the
number of our shares authorized and a number of other conditions are satisfied
or waived.
SEE "RISK FACTORS" ON PAGE 1 TO READ ABOUT CERTAIN FACTORS YOU SHOULD
CONSIDER BEFORE BUYING OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Prospectus dated
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
RISK FACTORS................................................ 1
UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS........ 8
WHITTMAN-HART............................................... 9
THE USWEB/CKS MERGER........................................ 10
USE OF PROCEEDS............................................. 11
THE SELLING STOCKHOLDERS.................................... 11
PLAN OF DISTRIBUTION........................................ 13
ABOUT THIS PROSPECTUS....................................... 14
WHERE YOU CAN FIND MORE INFORMATION......................... 14
LEGAL MATTERS............................................... 15
EXPERTS..................................................... 15
</TABLE>
i
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW,
AND ALL THE OTHER INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK. WE
HAVE SEPARATED THE RISKS INTO TWO GROUPS: RISKS RELATING TO OUR PROPOSED MERGER
WITH USWEB CORPORATION AND RISKS RELATING TO WHITTMAN-HART AND, ASSUMING THAT
THE MERGER IS COMPLETED, THE COMBINED COMPANY WHICH WOULD RESULT FROM THE
MERGER.
RISKS RELATING TO THE MERGER
INTEGRATING WHITTMAN-HART AND USWEB/CKS MAY BE DIFFICULT
After the merger, the combined company will need to efficiently and promptly
integrate the two companies' operations to achieve the anticipated benefits of
the merger. Failure to successfully integrate our businesses could have a
negative effect on the combined company and prevent us from achieving the
anticipated benefits of the merger.
Certain key elements of our businesses need to be integrated, including:
- management and other professional personnel;
- technical and creative service offerings;
- sales and marketing efforts; and
- financial, accounting and other operational controls, procedures,
information systems and policies.
The integration process will be further complicated by the need to integrate
widely dispersed operations, multiple executive offices and different corporate
cultures. This integration may not be accomplished in an efficient or effective
manner, if at all. The integration process will require the dedication of
management and other personnel, which may distract their attention from the
conduct of day-to-day business activities. The integration of Whittman-Hart and
USWeb/CKS will be made more difficult by the large number of other businesses
recently acquired by the two companies and the continuing challenges of
integrating some of these businesses. Finally, neither of us has attempted an
acquisition with the scope or magnitude of the planned merger. Expenses
associated with ongoing integration of the companies are likely to have a
negative effect on operating results of the combined entity at least through
December 31, 2000.
IF THE MERGER IS NOT COMPLETED, OUR STOCK PRICE COULD DECLINE
The obligations of Whittman-Hart and USWeb/CKS to complete the merger are
subject to the satisfaction or waiver of certain conditions, including:
- the continued effectiveness of the registration statement on Form S-4 we
filed with the SEC on January 13, 2000, and any amendment to that
registration statement;
- the approval by USWeb/CKS stockholders of the merger and the merger
agreement;
- the approval by our stockholders of the issuance of shares of our common
stock to USWeb/CKS stockholders in connection with the merger;
- the absence of any injunction or order preventing the completion of the
merger;
- the expiration or termination of any waiting period under U.S. or foreign
antitrust laws; and
- the receipt by each party of an opinion of tax counsel that the merger
will qualify as a tax-free reorganization.
1
<PAGE>
The obligation of USWeb/CKS to complete the merger is also subject to the
satisfaction by us or the waiver by USWeb/CKS of the following conditions:
- the representations and warranties we made in the merger agreement must be
true and correct in all material respects;
- we must have performed in all material respects all obligations we are
required to perform under the merger agreement at or before the closing of
the merger; and
- there shall not have been any event or development which has resulted or
could reasonably be likely to result in a material adverse effect on us.
Our obligation to complete the merger is also subject to the satisfaction by
USWeb/CKS or the waiver by us of the following conditions:
- the representations and warranties USWeb/CKS made in the merger agreement
must be true and correct in all material respects;
- USWeb/CKS must have performed in all material respects all obligations it
is required to perform under the merger agreement at or before the closing
of the merger; and
- there shall not have been any event or development which has resulted or
could reasonably be likely to result in a material adverse effect on
USWeb/CKS.
These conditions might not be satisfied or waived and the merger might not
be completed. Noncompletion of the merger would likely have a negative effect on
our stock trading price.
WE COULD LOSE CLIENTS AS A RESULT OF UNCERTAINTY REGARDING THE MERGER
Uncertainty regarding the merger and the ability of Whittman-Hart and
USWeb/CKS to effectively integrate their operations without significant
reduction in quality of service could lead some customers to select other
vendors. The loss of business from significant clients could have a negative
effect on the combined company's business.
RISKS RELATING TO WHITTMAN-HART AND THE COMBINED COMPANY
WE MUST RETAIN KEY PERSONNEL AND THEY MUST WORK TOGETHER EFFECTIVELY
The success of the combined company will depend upon the retention of senior
executives and other key employees who are critical to the continued
advancement, development and support of our services, ongoing sales and
marketing efforts. The loss of the services of any key personnel or of any
significant group of employees could negatively affect the combined company's
business and prospects. As often occurs with mergers of technology/services
companies, during the pre-merger and integration phases competitors may
intensify their efforts to recruit key employees. Employee uncertainty regarding
the effects of the merger could also cause increased turnover. The recent
decline in stock prices of both Whittman-Hart and USWeb/CKS may have the effect
of decreasing the incentive value of stock options or other equity held by
employees and thereby increase the risk of employee turnover. The combined
company may not be able to retain key creative, technical, sales or marketing
personnel before or after the merger. The combined company's success largely
depends on the ability of its executive officers and other members of senior
management to operate effectively in their roles in the newly combined company.
If the combined company's management does not succeed in their roles or the
combined company is not able to efficiently allocate management responsibilities
and cause its officers and senior managers to operate effectively as a group,
its business could be negatively affected.
2
<PAGE>
WE MUST BUILD RECOGNITION AND CUSTOMER ACCEPTANCE OF NEW BRANDS
Whittman-Hart and USWeb/CKS have each invested significant efforts in
building brand recognition and customer acceptance of their brand names.
Whittman-Hart believes that transferring market acceptance for the Whittman-Hart
and USWeb/CKS brands to the combined company brands will be an important aspect
of the combined company's efforts to retain and attract clients. Promoting and
maintaining the combined company brands will depend largely on the success of
the combined company's marketing efforts and the ability of the combined company
to provide high quality, reliable and cost-effective services. These efforts
will require significant expenses, which will affect the combined company's
results of operations. In addition, although Whittman-Hart intends to centralize
the combined company's marketing efforts, a significant part of its client
services will continue to be provided through individual consulting offices.
Client dissatisfaction with the performance of a single office could diminish
the value of the combined company brands.
OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH MAY LEAD TO REDUCED PRICES FOR OUR
STOCK
Whittman-Hart's operating results have fluctuated in the past and the
combined company's operating results are likely to fluctuate in the future as a
result of a variety of factors, many of which will be outside of the combined
company's control. Some of these factors include:
- timing of the completion, material reduction or cancellation of major
projects or the loss of a major client;
- the amount and timing of the receipt of new business;
- timing of hiring or loss of personnel;
- the cost and timing of the opening or closing of an office;
- the amount and the relative mix of high-margin creative or strategy
consulting projects as compared to lower margin projects;
- capital expenditures and other costs relating to the expansion of
operations;
- the level of demand for Intranet, Extranet and Web site development;
- the productivity of consultants;
- the ability to maintain adequate staffing to service clients effectively;
- the cost of advertising and related media;
- the amount and timing of expenditures by clients for professional
services;
- the introduction of new products or services by competitors;
- pricing changes in the industry;
- the relative mix of lower cost full-time employees versus higher cost
independent contractors;
- technical difficulties with respect to the use of the Internet;
- economic conditions specific to Internet technology usage;
- government regulation and legal developments regarding the use of the
Internet; and
- general economic conditions.
The combined company may also experience seasonality in its business,
resulting in diminished revenues as a consequence of decreased demand for
professional services during summer and year-end vacation and holiday periods.
Due to all of these factors, the combined company's operating results in any
3
<PAGE>
given quarter may fall below the expectations of securities analysts and
investors. In such event, the trading price of the combined company's common
stock would likely be significantly and negatively affected and litigation may
ensue.
Whittman-Hart's and USWeb/CKS's historical financial data is of limited
value in planning future operating expenses. Accordingly, the combined company's
expense levels will be based in part on its expectations concerning future
revenues and will be fixed to a large extent. The combined company will be
unable to adjust spending in a timely manner to compensate for any unexpected
shortfall in revenues. Accordingly, a significant shortfall in demand for
services could have an immediate and significant negative effect on the combined
company's business and results of operations.
OUR STOCK PRICES ARE VOLATILE AND THE COMBINED COMPANY'S STOCK COULD DECLINE IN
VALUE
The stock market, which has recently been at or near historic highs, has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies and
that often have been unrelated to the operating performance of those 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. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which would have a negative
effect on the combined company's business, financial condition and results of
operations.
THE MERGER WILL DILUTE YOUR PERCENTAGE OWNERSHIP
The merger will dilute the percentage ownership held by our stockholders in
the combined company when compared to their ownership prior to the merger. Based
upon the estimated capitalization of Whittman-Hart and USWeb/CKS as of
January 25, 2000, approximately 81,482,000 shares of common stock will be issued
in the merger, and the Whittman-Hart stockholders will hold approximately 43% of
the outstanding shares of the combined company's common stock after giving
effect to such issuance. Each of Whittman-Hart and USWeb/CKS have outstanding a
large number of options to purchase common stock of their company, many of which
have exercise prices significantly below the market price of each company's
respective common stock as of the date of this prospectus. When the merger is
completed, the USWeb/CKS options will be converted into options to purchase
shares of common stock in the combined company. To the extent these options are
exercised, there will be further dilution. Pursuant to its prior acquisition
agreements, USWeb/CKS may be required to issue substantial additional "earn out"
stock to the former stockholders of acquired companies as well as stock options
and stock bonuses to the employees of the acquired companies who have remained
employees of USWeb/CKS. These obligations will continue following the merger.
4
<PAGE>
TO SUCCEED, WE MUST RECRUIT AND RETAIN SKILLED PROFESSIONALS, WHO ARE IN SHORT
SUPPLY
The combined company's business of delivering Internet professional services
is labor intensive. Accordingly, its success depends in large part on its
ability to identify, hire, train and retain consulting professionals who can
provide the Internet strategy, technology, and marketing and creative skills
required by clients. The inability to attract and retain the necessary
technical, marketing and managerial personnel would have a negative effect on
the combined company's business. There is currently a shortage of such
personnel, and this shortage is likely to continue for the foreseeable future.
The combined company will encounter intense competition for qualified personnel
from other companies, and may not be able to identify, hire, train or retain
other highly qualified technical, marketing and managerial personnel in the
future.
OUR SUCCESS DEPENDS ON OUR ABILITY TO MANAGE GROWTH
Whittman-Hart has experienced recent rapid growth and is subject to the
risks inherent in the expansion and growth of a business enterprise. This
significant growth, if sustained, will continue to place a substantial strain on
its operational and administrative resources and to increase the level of
responsibility for its existing and new management personnel. To manage its
growth effectively, Whittman-Hart will need to further develop its operating,
MIS, accounting and financial systems and to expand, train and manage its
employee base. The management skills and systems currently in place may not be
adequate if the combined company continues to grow.
OUR INTERNATIONAL OPERATIONS ARE DIFFICULT TO MANAGE
Upon completion of the merger, the combined company will have 27 offices
outside the United States. If revenues from international consulting offices are
not adequate to offset the expenses of establishing and maintaining
international operations and of localizing the combined company's marketing
programs, the combined company's business and results of operations could be
negatively affected. In addition to the uncertainty as to the combined company's
ability to generate revenues from foreign operations and expand its
international presence, there are certain risks inherent in doing business on an
international level, including any of the following factors which could
negatively affect the combined company's international operations:
- unexpected changes in regulatory requirements, export and import
restrictions, tariffs and other trade barriers;
- difficulties in staffing and managing foreign operations;
- potentially adverse differences in business customs, practices and norms;
- longer payment cycles;
- problems in collecting accounts receivable;
- political instability;
- fluctuations in currency exchange rates;
- software piracy;
- seasonal reductions in business activity; and
- potentially adverse tax consequences.
5
<PAGE>
THE MARKET IN WHICH WE COMPETE IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS TO
ENTRY
The market for Internet professional services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change. The
combined company expects competition to intensify and increase in the future.
The combined company's competitors can be divided into several groups:
- large information technology consulting service providers such as Andersen
Consulting, Cambridge Technology Partners and Electronic Data Systems
Corporation;
- the consulting divisions of computer hardware vendors such as
International Business Machines Corporation, Compaq Computer Corp. and
Hewlett-Packard Company;
- Internet integrators and Web presence providers such as Agency.com, iXL
Enterprises, Inc., Organic Online, Inc., Proxicom Inc., Sapient
Corporation, Scient Corporation, and Viant Corporation; and
- advertising and media agencies such as Ogilvy & Mather, Young & Rubicam,
and Foote, Cone & Belding.
Many of the combined company's current and potential competitors have longer
operating histories, larger installed customer bases, longer relationships with
clients and significantly greater financial, technical, marketing and public
relations resources than the combined company and could decide at any time to
increase their resource commitments to the combined company's target markets. In
addition, the market for Intranet, Extranet and Web site development is
relatively new and subject to continuing definition, and, as a result, may
better position the combined company's competitors to compete in this market as
it matures. As a strategic response to changes in the competitive environment,
the combined company may from time to time make pricing, service, technology or
marketing decisions or business or technology acquisitions that could have a
negative effect on the combined company's business and results of operations.
In addition, the combined company's ability to maintain its existing client
relationships and generate new clients will depend to a significant degree on
the quality of its services and its reputation among its clients and potential
clients, as compared with its competitors. To the extent the combined company
loses clients to its competitors because of dissatisfaction with the combined
company's services or its reputation is negatively affected for any other
reason, the combined company's business could be negatively affected.
There are relatively low barriers to entry into the combined company's
business. Because professional services firms such as Whittman-Hart rely on the
skill of their personnel and the quality of their client service, we have no
patented technology that would preclude or inhibit competitors from entering
their markets. The combined company is likely to face additional competition
from new entrants into the market in the future. Existing or future competitors
may develop or offer services that provide significant performance, price,
creative or other advantages over those offered by the combined company, which
could have a negative effect on the combined company's business and prospects.
WE RELY ON STRATEGIC RELATIONSHIPS THAT COULD BE TERMINATED EASILY
The combined company will have a number of strategic relationships with
leading hardware and software companies, including 3Com Corporation, J.D.
Edwards & Company, Microsoft Corporation, Novell, Inc., and Siebel
Systems, Inc. The loss of any one of these strategic relationships would deprive
the combined company of the opportunity to gain early access to leading-edge
technology, cooperatively market products with the vendor, cross-sell additional
services and gain enhanced access to vendor training and support. Maintenance of
the combined company's strategic relationships is based primarily on an ongoing
mutual business opportunity and a good overall working relationship. The legal
contracts associated with these relationships would not be sufficient to force
the strategic relationship to continue
6
<PAGE>
effectively if the strategic partner wanted to terminate the relationship. In
the event that any strategic relationship is terminated, the combined company's
business may be negatively affected.
INTERNET ECONOMY AND THE MARKET FOR E-COMMERCE SOLUTIONS IS STILL DEVELOPING
We expect the combined company to derive a substantial portion of its
revenues from services that depend upon the adoption of Internet solutions and
the continued development of the World Wide Web, the Internet and e-commerce.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and volume of traffic. The Internet
infrastructure may not continue to be able to support the demands placed on it
by this continued growth. In addition, critical issues concerning the use of
Internet and e-commerce solutions, including security, reliability, cost, ease
of deployment and administration and quality of service, remain unresolved and
may affect the acceptance of these technologies to operate a business, expand
product marketing, improve corporate communications and increase business
efficiencies. The adoption of Internet solutions for these purposes can be
capital intensive and generally requires the acceptance of a new way of
conducting business and exchanging information. If critical issues concerning
the ability of Internet solutions to improve business positioning and processes
are not resolved or if the necessary infrastructure is not developed, the
combined company's business and prospects will be negatively affected.
Even if these issues are resolved, businesses may not elect to outsource the
design, development and maintenance of their Web sites to Internet professional
services firms. If independent providers of Internet professional services prove
to be unreliable, ineffective or too expensive, or if software companies develop
tools that are sufficiently user-friendly and cost-effective, enterprises may
choose to design, develop or maintain all or part of their Intranets, Extranets
or Web sites themselves. If the market for such services does not continue to
develop or develops more slowly than expected, or if the combined company's
services do not achieve market acceptance, its business will be negatively
affected.
THE INFRINGEMENT OR MISUSE OF INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BUSINESS
Whittman-Hart regards its intellectual property rights, such as copyrights,
trademarks, trade secrets, practices and tools, as important to the success of
the combined company. To protect its intellectual property rights, Whittman-Hart
relies on a combination of trademark and copyright law, trade secret protection
and confidentiality agreements and other contractual arrangements with their
employees, affiliates, clients, strategic partners, acquisition targets and
others. Effective trademark, copyright and trade secret protection may not be
available in every country in which the combined company intends to offer its
services. The steps taken by Whittman-Hart to protect its intellectual property
rights may not be adequate, third parties may infringe or misappropriate the
combined company's intellectual property rights or the combined company may not
be able to detect unauthorized use and take appropriate steps to enforce its
rights. In addition, other parties may assert infringement claims against the
combined company. Such claims, regardless of merit, could result in the
expenditure of significant financial and managerial resources. Further, an
increasing number of patents are being issued to third parties regarding
Internet business processes. Future patents may limit the combined company's
ability to use processes covered by such patents or expose the combined company
to claims of patent infringement or otherwise require the combined company to
seek to obtain related licenses. Such licenses may not be available on
acceptable terms. The failure to obtain such licenses on acceptable terms could
have a negative effect on the combined company's business.
IF WE DO NOT PERFORM TO OUR CLIENTS' EXPECTATIONS, WE FACE POTENTIAL LIABILITY
Many of our consulting engagements involve the development, implementation
and maintenance of applications that are critical to the operations of our
clients' businesses. The combined company's failure or inability to meet a
client's expectations in the performance of its services could injure the
combined company's business reputation or result in a claim for substantial
damages against the combined company,
7
<PAGE>
regardless of its responsibility for such failure. In addition, we possess
technologies and content that may include confidential or proprietary client
information. Although we have implemented policies to prevent such client
information from being disclosed to unauthorized parties or used
inappropriately, any such unauthorized disclosure or use could result in a claim
for substantial damages. We have attempted to contractually limit our damages
arising from negligent acts, errors, mistakes or omissions in rendering
professional services. However, these contractual protections may not be
enforceable or may not otherwise protect the combined company from liability for
damages. Although we maintain general liability insurance coverage, including
coverage for errors and omissions, such coverage may not continue to be
available on reasonable terms or may not be available in amounts sufficient to
cover one or more large claims, or the insurer may disclaim coverage as to any
future claim. The successful assertion of one or more large claims against the
combined company that are not covered by insurance or result in changes to any
of our insurance policies, including premium increases or deductible or
coinsurance requirements, could negatively affect the combined company's
business and financial condition.
ONE STOCKHOLDER WILL HAVE SIGNIFICANT INFLUENCE OVER THE COMBINED COMPANY
Robert Bernard, who will be the Chief Executive Officer and President of the
combined company, will beneficially own approximately 9% of the combined
company's common stock immediately following the merger. As a result,
Mr. Bernard will be able to exercise significant influence over matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Such concentration of ownership may also
have the effect of delaying or preventing a change in control of the combined
company.
THE ORGANIZATIONAL DOCUMENTS OF THE COMBINED COMPANY AND CURRENT DELAWARE LAW
MAY DETER POTENTIALLY BENEFICIAL TAKEOVER ATTEMPTS
The combined 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, deter 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. The combined company's
directors will be divided into three classes and elected to serve staggered
three-year terms. The combined company's board of directors will be 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 combined
company by means of a tender offer, merger, proxy contest or otherwise. In
addition, this "blank-check" preferred stock, and any issuance thereof, may
significantly decrease the market price of the common stock.
UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference "forward-looking
statements" within the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 about Whittman-Hart's business and the expected
impact of the merger. These statements include, among others:
- statements concerning the benefits that Whittman-Hart expects will result
from its business activities;
- statements concerning the potential advantages and strategic opportunities
that Whittman-Hart expects will result from the merger; and
- other statements of Whittman-Hart's expectations, beliefs, future plans
and strategies, anticipated developments and other matters that are not
historical facts.
8
<PAGE>
These statements may be made expressly in this document, or may be
incorporated by reference to other documents Whittman-Hart has filed with the
SEC. You can find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," or similar expressions used
in this prospectus or incorporated by reference in this prospectus.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause actual results to be materially and adversely
different from any future results expressed or implied in those statements. Some
of the key factors that could cause such different results are included in those
risks, uncertainties and risk factors identified, among other places, under
"Risk Factors" beginning on page 1 of this prospectus and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated by reference.
We caution you not to place undue reliance on the statements, which speak
only as of the date of this prospectus or, in the case of documents incorporated
by reference, the date of the document.
The cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that we, or any person acting on our behalf, may issue. We undertake
no obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
WHITTMAN-HART
Whittman-Hart provides enterprise-wide e-business solutions to help clients
improve performance and create competitive advantage. Our solutions give
companies the insight and technology they need to evolve in increasingly
competitive markets. We employ an integrated approach focused on delivering four
client outcomes we call Envision, Engage, Empower, Extend(TM).
DIGITAL STRATEGY SOLUTIONS. We help clients envision integrated Internet
solutions that transform business plans and strategies into processes, systems
and applications. We educate clients' executive management teams and assist them
in developing a shared vision of the e-business model. Our digital strategy
solutions also include detailed assessment of the client's market position,
existing systems, available resources and strategic requirements and translating
these requirements into Internet and business architectures.
CUSTOMER FACING SOLUTIONS. These solutions help our e-business clients
create online experiences that attract, engage and retain customers. Our
e-business marketing solutions are designed to open market channels and generate
communications that build mind share, market share and brand impact. Our
customer relationship management solutions address marketing, sales and customer
service and include channel management, profiling and personalization,
business-to-business and business-to-consumer e-commerce, back-office
integration, and electronic customer service.
KNOWLEDGE STRATEGY SOLUTIONS. Whittman-Hart's knowledge strategy solutions
empower our clients and their employees with the skills, processes and systems
required to turn passive data into positive decisions. Knowledge strategy
solutions include web-enabled business intelligence and knowledge management
systems, employee development processes and self-service human resources
systems.
SUPPLY CHAIN SOLUTIONS. Our supply chain solutions are designed to help
clients extend their enterprises to generate value at each stage of the
suppliers-to-consumer process. Supply chain solutions include sourcing,
procurement cycle, e-warehousing, collaborative design, customer order
fulfillment, outsourcing facilitation, customer self-service, transportation
management and collaborative planning, forecasting and replenishment.
9
<PAGE>
Our marketing efforts target growing and middle-market companies from
startup to $1 billion in annual revenues, as well as divisions and departments
of the Fortune 500. We serve clients in a broad range of industries including
communications, consumer products, distribution, financial services, insurance,
manufacturing, pharmaceuticals, professional services, retail and technology.
Our business model focuses on providing local and Internet-hosted services to
our clients and developing close and long-lasting relationships with them, and
many of our clients have worked with us for several years spanning a variety of
projects and services. We believe that our ability to provide innovative
solutions is enhanced by our strategic relationships with leading vendors such
as Broadvision, Exodus, IBM, Microsoft, Novell and Oracle.
Headquartered in Chicago, we have approximately 3,900 employees in 23 branch
offices throughout the United States and the United Kingdom. Our Web site can be
found at WWW.WHITTMAN-HART.COM.
THE USWEB/CKS MERGER
On December 12, 1999, we entered into a merger agreement with USWeb/CKS.
Under the agreement, a subsidiary of ours will merge with and into USWeb/CKS,
with USWeb/CKS continuing as the surviving corporation.
If we complete the merger, USWeb/CKS stockholders will receive 0.865 of a
share of our common stock, or the exchange ratio, for each share of USWeb/CKS
common stock they own. All outstanding options and warrants to purchase
USWeb/CKS common stock will be assumed by us and converted into options or
warrants to purchase our common stock based on the exchange ratio. Based upon an
estimate of approximately 94,199,000 shares of USWeb/CKS common stock issued and
outstanding as of January 25, 2000, approximately 81,482,000 shares of our
common stock will be issued to holders of USWeb/CKS common stock in the merger.
The existing holders of USWeb/CKS common stock will hold approximately 57% of
the combined company's common stock issued and outstanding after the merger. The
existing holders of our common stock will hold approximately 43% of the combined
company's common stock issued and outstanding after the merger.
The merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware or at such later time as is
specified in the Certificate of Merger. Assuming all conditions to the merger
are met or waived, we anticipate that the effective time of the merger will be
in late February or early March 2000.
Following the merger, the board of directors of the combined company will
consist of nine directors: Robert Bernard, Chairman and Chief Executive Officer
of Whittman-Hart; Robert Shaw, Chief Executive Officer of USWeb/CKS; four
additional directors named by Whittman-Hart, all of whom are currently directors
of Whittman-Hart: Paul D. Carbery, a general partner of Frontenac Company, W.
Barry Moore, Vice Chairman of Kurt Salmon Associates, David P. Storch, Chief
Executive Officer of AAR Corp., and Edward F. Szofer, President of
Whittman-Hart; and three additional directors to be named by USWeb/ CKS.
Mr. Bernard will be Chief Executive Officer and President of the combined
company and Mr. Shaw will be the Chairman of the board of directors of the
combined company. Robert Clarkson, Chief Operating Officer of USWeb/CKS, and
Bert Young, Chief Financial Officer of Whittman-Hart, will continue in the same
positions with the combined company.
We cannot complete the merger unless the stockholders of USWeb/CKS approve
the merger proposal, our stockholders approve the issuance of shares in the
merger and the increase in the number of our shares authorized and a number of
other conditions are satisfied or waived. See "Risk Factors--Risks Relating to
the Merger--If the merger is not completed, our stock price could decline."
10
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling stockholders.
THE SELLING STOCKHOLDERS
The following table is based upon data furnished to us by the selling
stockholders and sets forth certain information regarding each selling
stockholder, including:
- the name of the selling stockholder;
- the beneficial ownership and percentage ownership of common stock of the
selling stockholder as of January 21, 2000; and
- the maximum number of shares of common stock offered by the selling
stockholder.
The number of shares that may be actually sold by each selling stockholder
will be determined by the selling stockholder. Because each selling stockholder
may sell all, some or none of the shares of common stock that it owns, we cannot
estimate the number of shares of common stock that will be owned by each selling
stockholder upon termination of the offering.
Under Rule 416 of the Securities Act, each selling stockholder may also
offer and sell additional shares of common stock issued to it as a result of
stock splits, stock dividends and anti-dilution provisions.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
BENEFICIALLY BENEFICIALLY NUMBER OF
OWNED PRIOR OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER TO OFFERING OFFERING OFFERED
- ------------------- ---------------- ----------------- ------------
<S> <C> <C> <C>
Michael J. DeNunzio(1)............................ 292,859 * 146,430
Peter Monkewicz(1)................................ 292,859 * 146,430
Pierre St-Jacques(1).............................. 292,859 * 146,430
Anthony Peter DeNunzio, Sr.(1).................... 54,911 * 27,456
Victor S. Faraci(1)............................... 54,911 * 27,456
Michael Anthony DeNunzio(1)....................... 54,911 * 27,456
Davies Family Irrevocable Trust(1)................ 54,911 * 27,456
Mark Robinson(2).................................. 72,372 * 72,372
Steven Anderson(2)................................ 72,372 * 72,372
David Kilpatrick(2)............................... 72,372 * 72,372
Daniel Keating(2)................................. 72,372 * 72,372
Tony J. Batting(2)................................ 900 * 900
Zag Asghar(2)..................................... 900 * 900
Philip Brine(2)................................... 4,502 * 4,502
Desmond Butcher(2)................................ 1,351 * 1,351
Fiona Cannons(2).................................. 1,351 * 1,351
Nicholas Garnett(2)............................... 4,502 * 4,502
Sean Hoban(2)..................................... 4,502 * 4,502
Xerxes Hodivala(2)................................ 4,734 * 4,734
Roger Jones(2).................................... 1,801 * 1,801
Rukash Kumar(2)................................... 2,701 * 2,701
Jane Marsh(2)..................................... 1,351 * 1,351
Ben Nicholson(2).................................. 2,701 * 2,701
Gary Piper(2)..................................... 1,351 * 1,351
Geoff Pople(2).................................... 4,900 * 4,900
David Scott(2).................................... 4,502 * 4,502
Kevin Sulley(2)................................... 2,701 * 2,701
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
BENEFICIALLY BENEFICIALLY NUMBER OF
OWNED PRIOR OWNED PRIOR TO SHARES BEING
SELLING STOCKHOLDER TO OFFERING OFFERING OFFERED
- ------------------- ---------------- ----------------- ------------
<S> <C> <C> <C>
Ryan J. Ward(2)................................... 2,701 * 2,701
Rachi Weerasinghe(2).............................. 1,801 * 1,801
Anthony Woods(2).................................. 1,801 * 1,801
Stephen Graham(2)................................. 500 * 500
David Hope(2)..................................... 1,000 * 1,000
Stewart Gabriel(2)................................ 751 * 751
Gary Atkinson(2).................................. 219 * 219
Timothy A. Buckley(2)............................. 156 * 156
David Carrighan(2)................................ 7,825 * 7,825
Mark Clewett(2)................................... 468 * 468
Karen A. Edwards(2)............................... 156 * 156
John Gray(2)...................................... 314 * 314
Tim Hopper(2)..................................... 939 * 939
Paul Johnson(2)................................... 469 * 469
Andrew Lamont(2).................................. 62 * 62
Chris Moss(2)..................................... 156 * 156
Phillip R. Thompson(2)............................ 46 * 46
Didier Steven(3).................................. 1,873 * 1,873
Richard Schwartz(3)............................... 375 * 375
Tom Deshan(3)..................................... 937 * 937
Mike Katz(3)...................................... 750 * 750
Mike Zeto(3)...................................... 188 * 188
Sam Strevens(3)................................... 562 * 562
Scott Thon(3)..................................... 2,582 * 2,582
</TABLE>
- ------------------------
* Less than 1%.
(1) In November 1999, we acquired Four Points Digital L.L.C., an Illinois
company. In connection with this acquisition, we issued 1,098,221 shares of
our common stock to these selling stockholders in exchange for their shares
of Four Points Digital stock. We granted these selling stockholders rights
to register one half of the shares of our common stock they received in
connection with this acquisition. The shares of common stock to be sold
under this prospectus are the shares of common stock for which these selling
stockholders have registration rights.
(2) In November 1999, we acquired Fulcrum Solutions Limited, an English company.
In connection with this acquisition, we issued 353,602 shares of our common
stock to these selling stockholders in exchange for their shares of Fulcrum
Solutions Limited stock. We granted these selling stockholders rights to
register the shares of our common stock they received in connection with the
acquisition. The shares of common stock to be sold under this prospectus are
the shares of common stock for which these selling stockholders have
registration rights.
(3) In December 1999, we acquired Fulcrum Solutions, Inc., a Delaware
corporation. In connection with this acquisition we issued 7,267 shares of
our common stock to these selling stockholders in exchange for their shares
of Fulcrum Solutions, Inc. stock. We granted these selling stockholders
rights to register the shares of our common stock they received in
connection with the acquisition. The shares of common stock to be sold under
this prospectus are the shares of common stock for which these selling
stockholders have registration rights.
12
<PAGE>
PLAN OF DISTRIBUTION
Sales of the shares being sold by the selling stockholders are for the
selling stockholders' own accounts. We will not receive any proceeds from the
sale of the shares offered hereby.
The selling stockholders have advised us that:
- the shares may be sold by the selling stockholders or their pledgees,
donees, transferees or successors in interest, on the Nasdaq National
Market, in sales occurring in the public market of that market quotation
system, in privately negotiated transactions, through the writing of
options on shares, short sales or in a combination of these transactions;
- each sale may be made either at market prices prevailing at the time of
the sale or at negotiated prices;
- some or all of the shares may be sold through brokers, dealers,
underwriters or agents acting on behalf of the selling stockholder or to
dealers for resale by the dealers; and
- in connection with these sales, brokers, dealers, underwriters or agents
may receive compensation in the form of discounts and commissions from the
selling stockholders and may receive commissions from the purchasers of
shares for whom they act as broker or agent, which discounts and
commissions may be less than or exceed those customary in the types of
transactions involved. Any broker, dealer or agent participating in any
sale may be deemed to be an "underwriter" within the meaning of the
Securities Act and will be required to deliver a copy of this prospectus
to any person who purchases any common stock from or through the broker,
dealer, agent or underwriter. We have been advised that, as of the date
hereof, the selling stockholders have not made any arrangements with any
broker, dealer, agent or underwriter for the sale of their common stock.
In offering the common stock covered by this prospectus, the selling
stockholders and any broker-dealers who execute sales for the selling
stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with the sales, and any profits realized by the
selling stockholder and the compensation of the broker-dealer may be deemed to
be underwriting discounts and commissions. In addition, any common stock covered
by this prospectus which qualifies for sale pursuant to Rule 144 may be sold
under Rule 144 rather than under this prospectus.
In some states, to comply with state securities laws, the selling
stockholders may sell the shares of common stock only (1) through registered or
licensed brokers or dealers or (2) if the shares have been registered or
qualified for sale in the state or an exemption from registration or
qualification is available and is complied with.
Under applicable rules and regulations under Regulation M under the
Securities Exchange Act, any person engaged in the distribution of our common
stock may not simultaneously engage in market making activities, subject to
exceptions, with respect to our common stock for a specified period set forth in
Regulation M prior to the commencement of the distribution and until its
completion. In addition, the selling stockholders will be subject to the
applicable provisions of the Securities Act and the Securities Exchange Act and
the rules and regulations under those acts, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the selling stockholders. These restrictions may
affect the marketability of our common stock.
If necessary, with respect to a particular offer, we will set forth in an
accompanying prospectus supplement, a post-effective amendment to the
registration statement of which this prospectus is a part, the specific shares
of our common stock to be sold, the purchase price and public offering price,
the name of any agent, dealer or underwriter and any applicable commissions or
discounts.
13
<PAGE>
We will pay substantially all of the expenses incurred by the selling
stockholders, other than underwriting discounts or commissions, and us incident
to the offering and sale of the shares of common stock under this prospectus.
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement that we have filed
with the SEC using a "shelf registration" process. You should read this
prospectus and any supplement together with the additional information described
under "Where You Can Find More Information."
You should rely only on the information provided or incorporated by
reference in this prospectus or any supplement. We have not authorized anyone
else to provide you with additional or different information. Our common stock
is not being offered in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of the prospectus or supplement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we file with the SEC at:
- the public reference room of the SEC, Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549; or
- the public reference facilities of the SEC's regional offices at Seven
World Trade Center, 13(th) Floor, New York, New York 10048 or Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Some of these locations may charge a prescribed or modest fee for copies.
You may obtain information on the operation of the SEC public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. In addition, you may
access any document we file with the SEC on its web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to another document we file separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file with the SEC later will automatically update and
supersede this information. The following documents filed by us and any future
filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act, until the selling stockholders sell all of the common
stock offered hereby, are incorporated by reference in this prospectus:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
- Our Current Reports on Form 8-K filed on May 10, 1999, October 15, 1999,
December 15, 1999, January 26, 2000 and January 28, 2000; and
- Our Registration Statement on Form S-4 (No. 333-94565).
You may request a copy of these filings, at no cost, by writing or
telephoning us at Whittman-Hart, Inc., 311 South Wacker Drive, Suite 3500,
Chicago, Illinois 60606; telephone number (312) 922-9200; Attention: Investor
Relations.
14
<PAGE>
LEGAL MATTERS
Katten Muchin Zavis, Chicago, Illinois will pass upon the validity of the
shares of common stock offered under this prospectus for us.
EXPERTS
The consolidated financial statements and consolidated financial statement
schedule of valuation and qualifying accounts of Whittman-Hart as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998 have been incorporated by reference in this prospectus
and in the registration statement in reliance upon the reports of KPMG LLP,
independent certified public accountants, and upon the authority of that firm as
experts in accounting and auditing.
The audited historical financial statements of USWeb Corporation included in
the Current Report on Form 8-K dated January 28, 2000 have been incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses (other than the SEC registration
fee and the Nasdaq Listing Fees and Expenses) of the issuance and distribution
of the securities being registered, all of which will be paid by the Company.
<TABLE>
<S> <C>
SEC registration fee........................................ $11,621
Fees and expenses of counsel................................ $10,000
Fees and expenses of accountants............................ $10,000
Nasdaq Listing Fees and Expenses............................ $26,572
Miscellaneous............................................... $ 1,807
-------
Total................................................... $60,000
=======
</TABLE>
We have agreed to pay all expenses (other than underwriting discounts and
selling commissions, brokerage fees and transfer taxes, if any, and the fees and
expenses of counsel and other advisors to the selling stockholders) in
connection with the registration and sale of the shares being offered by the
selling stockholders under this prospectus.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ten of the Company's Amended and Restated Certificate of
Incorporation, filed as Exhibit 3.1, and Article Eight of the Company's by-laws,
filed as Exhibit 3.2, provide that the Company shall indemnify its directors and
officers to the full extent permitted by the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities arising under the
Securities Act of 1933. In addition, Article Eight of the Company's Amended and
Restated Certificate of Incorporation provides that a director of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of his or her fiduciary duty as a director, except for
liability (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 General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derives an improper personal benefit.
Reference is made to Section 45 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
The Company has obtained an insurance policy which will entitle the Company
to be reimbursed for certain indemnity payments it is required or permitted to
make to its directors and officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 12, 1999
by and among Whittman-Hart, Inc., Uniwhale, Inc, a wholly
owned subsidiary of Whittman-Hart and
USWeb/CKS, incorporated herein by reference to the
Company's Registration Statement on Form S-4
(No. 333-94565).
2.2 Exchange Agreement dated as of November 11, 1999 by and
among Whittman-Hart, Inc. and the members of Four Points
Digital, L.L.C.
2.3 Merger Agreement dated as of November 27, 1999 by and among
the persons listed on Schedule 1 attached thereto and
Whittman-Hart, Inc.
2.4 Acquisition Agreement dated as of November 27, 1999 by and
among Whittman-Hart, Inc. and the shareholders of Fulcrum
Solutions, Inc., as supplemented by the Supplement to
Acquisition Agreement dated as of December 30, 1999 by and
among Whittman-Hart, Inc. and the shareholders of Fulcrum
Solutions, Inc.
4.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.2 Second Amended and Restated By-Laws of the Company,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.3 Specimen stock certificate representing Common Stock,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
5.1 Opinion of Katten Muchin Zavis as to the validity of the
securities being registered.
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
ITEM 17. UNDERTAKINGS
(1) The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(d) For purposes of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference in the registration statement 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-2
<PAGE>
(2) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, offices 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 Securities
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 has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on the 26th day of
January, 2000.
<TABLE>
<S> <C> <C>
WHITMAN-HART, INC.
By: /s/ BERT B. YOUNG
-----------------------------------------
Bert B. Young
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert F. Bernard and Bert B. Young and each of them his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-3 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the SEC under the Securities Act, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as each might or could do in
person, hereby ratifying and confirming each act that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of January, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROBERT F. BERNARD Chief Executive Officer and Chairman of the
------------------------------------------- Board of Directors (principal executive
Robert F. Bernard officer)
/s/ BERT B. YOUNG
------------------------------------------- Chief Financial Officer (principal financial
Bert B. Young and accounting officer)
/s/ EDWARD V. SZOFER
------------------------------------------- Director, President and Secretary
Edward V. Szofer
/s/ PAUL D. CARBERY
------------------------------------------- Director
Paul D. Carbery
/s/ W. BARRY MOORE
------------------------------------------- Director
W. Barry Moore
/s/ LARRY P. ROCHES
------------------------------------------- Director
Larry P. Roches
/s/ ROBERT F. STEEL
------------------------------------------- Director
Robert F. Steel
/s/ DAVID P. STORCH
------------------------------------------- Director
David P. Storch
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 12, 1999
by and among Whittman-Hart, Inc., Uniwhale, Inc, a wholly
owned subsidiary of Whittman-Hart and USWeb/CKS,
incorporated herein by reference to the Company's
Registration Statement on Form S-4 (No. 333-94565).
2.2 Exchange Agreement dated as of November 11, 1999 by and
among Whittman-Hart, Inc. and the members of Four Points
Digital, L.L.C.
2.3 Merger Agreement dated as of November 27, 1999 by and among
the persons listed on Schedule 1 attached thereto and
Whittman-Hart, Inc.
2.4 Acquisition Agreement dated as of November 27, 1999 by and
among Whittman-Hart, Inc. and the shareholders of Fulcrum
Solutions, Inc., as supplemented by the Supplement to
Acquisition Agreement dated as of December 30, 1999 by and
among Whittman-Hart, Inc. and the shareholders of Fulcrum
Solutions, Inc.
4.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.2 Second Amended and Restated By-Laws of the Company,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.3 Specimen stock certificate representing Common Stock,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
5.1 Opinion of Katten Muchin Zavis as to the validity of the
securities being registered.
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
<PAGE>
EXCHANGE AGREEMENT
This Agreement is made this 11th day of November, 1999 by and among
Whittman-Hart, Inc., a Delaware corporation ("WHI"), the members of Four
Points Digital, L.L.C., an Illinois limited liability company ("Four
Points"), (each individually a "Member" and collectively, the "Members"), and
Michael Anthony DeNunzio, Victor S. Faraci and Anthony Peter DeNunzio (the
"Beneficiaries"), beneficiaries, respectively, of the following Members:
PaineWebber Incorporated ("Paine Webber") as Custodian of Individual
Retirement Account of Victor S. Faraci, PaineWebber as Custodian of
Individual Retirement Account of Michael Anthony DeNunzio, and PaineWebber as
Custodian of Individual Retirement Account of Anthony Peter DeNunzio (the
"IRAs"). The Members, the Beneficiaries and WHI are collectively referred to
herein as the "Parties".
BACKGROUND
Four Points is engaged in the business of developing and selling online
marketing and electronic commerce programs, web site development, and other
consulting and systems integration (the "Business");
WHI desires to acquire from the Members all of the outstanding Interests
and other rights (collectively, "Membership Rights") in Four Points in
exchange for capital stock of WHI;
The Members and the Beneficiaries own beneficially and of record all of
the outstanding Membership Rights of Four Points and desire to transfer their
Membership Rights to WHI in exchange for shares of common stock in WHI;
NOW, THEREFORE, in consideration of the premises and promises made
herein, the Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"ADJUSTED NET WORTH" means (i) all assets of Four Points excluding
receivables more than 90 days old minus (ii) all liabilities of Four Points
(other than legal and accounting expenses up to $202,248 an investment
banking fee payable to AdMedia Partners, Inc., an aggregate amount up to
$995,875 payable under the Non-Solicitation and Release Agreements, a
financial advisory fee payable to Doug Belzer up to $120,000, all to the
extent incurred by Four Points but unpaid in connection with the transactions
contemplated hereby), determined in accordance with GAAP.
"AFFILIATE" of a Party shall mean:
(a) any corporation, partnership, trust or other entity which
controls, is controlled by, or is under common control with such
Party;
(b) as to Four Points, the Members and the Beneficiaries; and
1
<PAGE>
(c) as to the Members and the Beneficiaries, any Beneficiary or
any immediate family member not more remote than first cousin
"BENEFIT PLANS" has the meaning set forth in Schedule 3.21.
"BUSINESS" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in SECTION 2.1 below.
"CLOSING DATE" has the meaning set forth in Section 2.1 below.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations promulgated thereunder.
"DISPUTE NOTICE" has the meaning set forth in Section 2.6.
"EXCHANGE CONSIDERATION" has the meaning set forth in SECTION 2.4 below.
"EXCHANGE CONSIDERATION ADJUSTMENT" has the meaning set forth in SECTION
2.6.
"EXCHANGE RATIO" means a fraction: (i) the numerator of which shall be
$38,218,218 and (ii) the denominator of which shall be the Stock Price.
"FINANCIAL STATEMENTS" has the meaning set forth in Schedule 3.14.
"401(k) PLAN" has the meaning set forth in SECTION 5.9 below.
"GAAP" means generally accepted accounting principles in effect in the
United States of America as utilized by Four Points on a consistent basis.
"HELD BACK SHARES" has the meaning set forth in SECTION 2.5.
"INDEPENDENT AUDITOR" has the meaning set forth in SECTION 2.6.
"INSURANCE" has the meaning set forth in Schedule 3.9.
"INTELLECTUAL PROPERTY" has the meaning set forth in f Schedule 3.17.
"INVESTMENTS" has the meaning set forth in Schedule 3.8.
"INTEREST" means any Person's relative share of the profits and losses
of and rights to receive distributions from, Four Points.
"KNOWLEDGE" means actual knowledge of Michael J. DeNunzio, Peter
Monkewicz, Pierre St-Jacques, Victor S. Faraci and Anthony Peter DeNunzio
following due inquiry including review and participation in preparation of the
Schedule 3 to this Agreement, and the actual knowledge of the other Members.
2
<PAGE>
"LAWS" means all laws, statutes, codes, rules, regulations, ordinances
or other requirements applicable to the Business
"LICENSES AND PERMITS" has the meaning set forth in Schedule 3.23.
"MATERIAL CONTRACT" has the meaning ascribed in Schedule 3.24.
"MATERIAL ADVERSE EFFECT" means an adverse effect which is material to
the business or properties of Four Points as a whole.
"MEMBERS' REPRESENTATIVE" has the meaning set forth in SECTION 12.12
below.
"MEMBERSHIP RIGHTS" has the meaning set forth in the preface above.
"MILLENIAL DATES" has the meaning set forth in Schedule 3.32.
"NET WORTH ADJUSTMENT PROPOSAL" has the meaning set forth in
SECTION 2.6(b) below.
"NON-SOLICITATION AND RELEASE AGREEMENTS" has the meaning set forth in
SECTION 6.2(f) below.
"NW DISPUTE NOTICE" has the meaning set forth in SECTION 2.6(b) below.
"ORDINARY COURSE OR ORDINARY COURSE OF BUSINESS: means the ordinary course
of business consistent with the past custom and practice (including with
respect to quantity and frequency).
"OWNED SOFTWARE" has the meaning set forth in Schedule 3.18.
"PARTICULAR INDEMNIFIED MATTER" has the meaning set forth in Section 8.1.
"PERSON" means and includes any individual, corporation, partnership,
association, limited liability company, trust, estate or other entity.
"PRELIMINARY SETTLEMENT STATEMENT" has the meaning set forth in
SECTION 2.6(b) below.
"REGISTER", "REGISTERED" AND "REGISTRATION" refer to a registration of
the offering and sale of securities effected by preparing and filing a
registration statement in compliance with the Securities Act and the
declaration or ordering of the effectiveness of such registration statement.
"REGISTRATION SHARES" has the meaning set forth in SECTION 10.1 below.
"REGISTRATION STATEMENT" has the meaning set forth in SECTION 10.1 below.
"RESOLUTION" means (i) as to a Net Worth Adjustment Proposal for an
Exchange Consideration Adjustment, and agreement of WHI and the Members'
Representative, the passage of 60 days following a Net Worth Adjustment
Proposal without the delivery of a Dispute Notice or other determination
pursuant to SECTION 2.6, (ii) as to a claimed WHI Indemnification Amount,
agreement of WHI and the Members' Representative or final court judgement not
3
<PAGE>
subject to further appeal, or (iii) with respect to the Held Back Shares,
the passage of both 60 days following an initial claim of indemnification and
30 days following a second notice thereof (which may be made at any time
within or after the 60 day period following the first notice) without a
response by the other Party, and "RESOLVED" means any such matter which has
had a Resolution.
"RETURNS" has the meaning set forth in Schedule 3.29.
"RULE 144" has the meaning set forth in SECTION 9.3 below.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, claim, charge or lien of any kind or character, direct or
indirect, whether accrued, absolute, contingent or otherwise.
"SOFTWARE" has the meaning set forth in Schedule 3.18.
"SPECIAL HOLDBACK" has the meaning set forth in SECTION 2.5(b) below.
"STOCK PRICE" means $34.80.
"TAX CLAIM" has the meaning set forth in SECTION 11.2(a) below.
"TAXES" has the meaning set forth in Schedule 3.29.
"TAX RECORDS" has the meaning set forth in SECTION 11.3 below.
"THIRD PARTY LICENSES" has the meaning set forth in Schedule 3.18.
"THIRD PARTY SOFTWARE" has the meaning set forth in Schedule 3.18.
"WARRANTIES" has the meaning set forth in Schedule 3.26.
"WHI INDEMNIFICATION AMOUNT" has the meaning set forth in SECTION 8.3
below.
"WHI SHARES" has the meaning set forth in SECTION 2.4 below.
ARTICLE II
EXCHANGE OF SHARES; CLOSING
2.1 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of McDermott, Will
& Emery, commencing at 9:00 a.m. local time on the third business day
following the satisfaction or waiver of all conditions to
-4-
<PAGE>
the obligations of the Parties to consummate the transactions contemplated
hereby or such other date as the Parties may mutually determine (the "Closing
Date"). The Parties intend that the Closing shall occur on or prior to
November 12, 1999.
2.2. ACTIONS AT THE CLOSING. At the Closing, (a) the Members shall
deliver, and shall cause Four Points to deliver, to WHI the various
certificates, instruments and documents referred to in SECTION 6.1 below, and
(b) WHI shall deliver to the Members the various certificates, instruments
and documents referred to in SECTION 6.2 below.
2.3. DELIVERY OF FOUR POINTS MEMBERSHIP RIGHTS. Each of the Members
agrees to and will sell, convey, transfer, assign and deliver to WHI at the
Closing (as defined in SECTION 2.1), on the terms and subject to the
conditions set forth in this Agreement, all his or her Membership Rights in
Four Points. After execution of this Agreement and prior to the close of
business on the Closing Date, no transfers of Membership Rights in Four
Points shall be registered other than as contemplated by this Agreement.
2.4. EXCHANGE FOR WHI SHARES. At and as of the Closing Date, WHI shall
issue to the Members in exchange for their Membership Rights (the "Exchange
Consideration") a number of shares of WHI's common stock ("WHI Shares") equal
to the Exchange Ratio multiplied by the percentage Membership Rights held by
each such Member (not exceeding 100% in the aggregate) in Four Points
(provided that no fractional shares shall be issued, and the value of any
fractional shares, valued at the Stock Price shall be payable in cash).
2.5. HOLD BACK.
(a) Subject to the provisions of SECTIONS 2.5(b) and 2.5(c), WHI
shall hold back from the Members, WHI Shares which constitute in
aggregate 10% of the total number of WHI Shares issued to the Members
("Held Back Shares"), with executed stock powers. Such holdback shall
be made on a pro rata basis so that 10% of each Member's portion of the
Exchange Consideration is held back. It is understood and agreed that
the Held Back Shares shall not be taken from the Registration Shares,
but rather shall be taken from the 50% of the WHI Shares that are not
among the Registration Shares. WHI may cause a number of Held Back
Shares (valued at the Stock Price) to be surrendered and cancelled in
satisfaction of any Exchange Consideration Adjustment or WHI
Indemnification Amount; provided, however, that except as provided in
SECTION 2.5(b), the Held Back Shares may be utilized to satisfy claims
for Exchange Consideration Adjustments and WHI Indemnification Amounts
for breach of representations and warranties regarding the existence
and/or value of assets and liabilities reflected on the Financial
Statements only if such claims are asserted by WHI by the earlier of (i)
one year following the Closing Date or (ii) the date of the issuance of
the first audited statements reflecting combined operations of Four
Points and WHI; provided further that WHI may only exercise such rights
after (A) there has been a Resolution. The Members grant WHI a security
interest in the Held Back Shares to secure claims for WHI
Indemnification Amounts and the Exchange Consideration Adjustment. Any
surrender of shares under this clause shall be effected on a pro-rata
basis among the Members. If there is a dispute regarding any Exchange
Consideration Adjustment alleged to be due which is not Resolved, in no
event shall any Held Back Shares be taken by WHI for surrender in
satisfaction of such
-5-
<PAGE>
Exchange Consideration Adjustment unless and until there is a Resolution
thereof. If there is a dispute regarding any WHI Indemnification Amount
alleged to be due which is not Resolved, in no event shall any Held Back
Shares be taken by WHI for surrender in satisfaction of such disputed
WHI Indemnification Amount unless and until there is a Resolution
thereof.
If as of the earlier of (i) the date of release of the audited
financial statements of WHI reflecting combined operations of Four
Points and WHI and (ii) the one-year anniversary of the Closing, there
is no dispute pending regarding an Exchange Consideration Adjustment or
claimed WHI Indemnification Amount (including for any Particular
Indemnified Matters) which have not been Resolved and satisfied through
the Held Back Shares, any remaining Held Back Shares will be released by
WHI to the Members on a pro rata basis. If, however, there is a dispute
pending regarding an Exchange Consideration Adjustment or claimed WHI
Indemnification Amount (including for any Particular Indemnified Matter)
which has not been Resolved and satisfied through the Held Back Shares
prior to the earlier of (i) the date of release of the audited financial
statements of WHI reflecting combined operations of Four Points and WHI
and (ii) the one-year anniversary of the Closing, then a number of Held
Back Shares reasonably sufficient (taking into consideration market
factors) to satisfy the maximum potential recovery for the Particular
Indemnified Matters and reasonably sufficient (taking into consideration
market factors) to satisfy any other claimed WHI Indemnification Amount
or pending Net Worth Adjustment Proposal ("Special Holdback") shall
continue to be held by WHI until such time that the disputes or open
Particular Indemnified Matters have been Resolved. If any such
Resolution results in an Exchange Consideration Adjustment or a right of
WHI to a WHI Indemnification Amount, then WHI shall cause a number of
shares of the Special Holdback (valued at the Stock Price) to be
surrendered and cancelled pursuant to SECTION 2.4(a) toward satisfaction
of such Exchange Consideration Adjustment or WHI Indemnification Amount.
If all claimed WHI Indemnification Amounts and any Net Worth Adjustment
Proposals have been Resolved and shares remain in the Special Holdback
after application by WHI toward any Resolved Net Worth Adjustment
Proposal or claimed WHI Indemnification Amount, the remaining shares (or
any cash held in escrow as provided below) shall be released to the
Members on a pro rata basis without unreasonable delay. If a Special
Holdback is made pursuant to this SECTION 2.5(b), any Held Back Shares
not subject to surrender in excess of the Special Holdback shall be
released to the Members. In the event of a Special Holdback, WHI shall
permit the Members to sell the Held Back Shares on a national securities
exchange or the Nasdaq Stock Market effected through a broker approved
by WHI, provided that WHI is reasonably satisfied that the arrangements
for such sales preserve its rights to the Held Back Shares or the
proceeds thereof for the purposes of this Section 2.5, including that
WHI be given a duly executed power of attorney in form reasonably
satisfactory to WHI to conduct all such sales, at the expense of the
Members. Such proceeds shall be segregated and, provided that WHI
receives sufficient taxpayer identification information signed by the
Members beneficially owning the Held Back Shares, deposited into a
separate interest bearing account in a federally insured bank chosen by
WHI and identified as the property of the Shareholders over which WHI
has control only pursuant to this Agreement. In the event of any such
sales all of WHI's
-6-
<PAGE>
rights to the proceeds of the Held Back Shares and interest thereon shall be
the same as its rights to the Held Back Shares hereunder.
(b) WHI agrees to hold and dispose of the Held Back Shares solely in
accordance with this SECTION 2.5. The Held Back Shares deposited by Members
pursuant hereto shall, until caused WHI to be surrendered and cancelled or
released to the Members pursuant to the terms hereof, remain registered in
the name of such Members, and such Members shall be entitled to vote the same
and WHI will take all reasonable steps to allow and facilitate the exercise
of such rights. Except for tax-free dividends paid in stock declared with
respect to the Held Back Shares pursuant to Section 305(a) of the Code, the
Members shall be entitled to receive any cash dividends, dividends payable in
securities or distributions of any kind made in respect of the Held Back
Shares. Any shares issued pursuant to a stock dividend or stock split with
respect to the Held Back Shares shall continue to be held during the period
the Held Back Shares are held by WHI pursuant hereto. Any certificates
received by the Members on account of stock dividends or stock splits with
respect to the Held Back Shares shall be promptly delivered to WHI. In the
event of any meeting of stockholders of WHI during the period in which the
Held Back Shares are held by WHI pursuant hereto, WHI shall send to each
Member promptly copies of any notices, proxies and proxy material in
connection with such meeting. Any claim made by WHI to any of the Held Back
Shares may only be made in good faith upon a reasonable basis in accordance
with WHI's rights under this Agreement. To make any claim to any of the
Held Back Shares, WHI must deliver to the Members' Representative written
notice specifying the basis upon which such claim is based, and the number of
Held Back Shares WHI believes is reasonably sufficient (taking into
consideration market factors) to satisfy the maximum potential recovery that
may be satisfied from the Special Holdback for the Particular Indemnified
Matters and reasonably sufficient (taking into consideration market factors)
to satisfy any other claimed WHI Indemnification Amount or pending Net Worth
Adjustment Proposal ("Special Holdback") an estimate of the dollars of such
claim and the number of Held Back Shares corresponding to such amount. Any
Held Back Shares that are not the subject of a timely notice so delivered
shall not be in dispute.
2.6. REIMBURSEMENT BY MEMBERS FOR FOUR POINTS NET LIABILITIES.
(a) ADJUSTMENT TO EXCHANGE CONSIDERATION. The Exchange Consideration is
premised upon the Adjusted Net Worth being at least $1,272,453 at the Closing
Date. In the event that the Adjusted Net Worth on the Closing Date is less
than $1,272,453, then the Exchange Consideration shall be reduced by a number
of WHI Shares equal to (x) the difference between the Adjusted Net Worth on
the Closing Date and $1,272,453 (y) divided by the Stock Price ("Exchange
Consideration Adjustment") (or if any additional amount is later determined
to be owed under this SECTION 2.6, WHI shall be entitled to set off against
Held Back Shares in accordance with SECTION 2.5).
(b) CALCULATION OF ADJUSTED NET WORTH. On the Closing Date, the Members
shall deliver to WHI a preliminary statement based on the October 31, 1999
balance sheet (the "Preliminary Settlement Statement") (see Schedule 2.6(b))
setting forth their estimate of the amount of Adjusted Net Worth, which shall
be the basis for any adjustment under
-7-
<PAGE>
SECTION 2.6(a). If at any time thereafter (but not later than the earlier of
one year following the Closing Date or the date of the issuance of the first
audited statements reflecting combined operations of Four Points and WHI),
WHI reasonably believes that the Preliminary Settlement Statement did not
fully describe Adjusted Net Worth on the Closing Date, then WHI may deliver
to the Members' Representative a statement (the "Net Worth Adjustment
Proposal") setting forth in detail its proposed adjustments to Adjusted Net
Worth on the Closing Date. WHI shall provide the Members' Representative and
his representatives with full access to all assets, records and work papers
necessary to compute and verify the accuracy of the Net Worth Adjustment
Proposal. This Net Worth Adjustment Proposal as delivered to the Members'
Representative shall be final for purposes of this Agreement unless, within
sixty (60) days after delivery to the Members' Representative, he shall
deliver to WHI a notice setting forth in detail his disagreement with the Net
Worth Adjustment Proposal ("NW Dispute Notice"). After delivery of a NW
Dispute Notice, WHI and the Members' Representative shall promptly negotiate
in good faith with respect to the subject of the NW Dispute Notice, and if
they are unable to reach an agreement within forty-five (45) days after
receipt by WHI of the NW Dispute Notice, the dispute (but only such disputed
items) shall be submitted to the Independent Auditor. The Independent
Auditor shall not have authority to re-determine any matter except those that
are in dispute. The Independent Auditor shall be directed to issue a final
and binding decision within sixty (60) days of submission of the NW
Dispute Notice, as to the issues of disagreement referred to in the NW Dispute
Notice and not resolved by the parties. The Independent Auditor shall
determine in its sole discretion to what extent it shall consult with the
Parties and the extent to which each side shall be entitled to submit
information, data, documents and materials it may believe pertinent to the
dispute. The Net Worth Adjustment Proposal, as so adjusted by agreement of
WHI and the Members' Representative or by the Independent Auditor (if
required), shall be final and binding on the parties.
(c) PRELIMINARY SETTLEMENT STATEMENT, NET WORTH ADJUSTMENT PROPOSAL AND
RELATED PROCEDURES. The Preliminary Settlement Statement, Adjusted Net Worth
on the Closing Date and Net Worth Adjustment Proposal shall be prepared in
accordance with GAAP, including the amount of all reserves.
The "Independent Auditor" shall mean one of the "Big Five U.S. public
accounting firms with no material relationship to either of the Parties
chosen by agreement of the Parties, or if they are unable to agree, shall
mean one of the "Big Five" firms with no such material relationship chosen by
lot. The fees and expenses of the Independent Auditor shall be equitably
allocated by the Independent Auditor based upon his decision. The decision
of the Independent Auditor with respect to a Net Worth Adjustment Proposal
shall be final and binding on the parties.
The full force and effect of the representations and warranties shall in
no way be diminished by the Preliminary Settlement Statement, a Net Worth
Adjustment Proposal or the determination of the Independent Auditor, provided
that neither the Members nor the Beneficiaries shall be liable for any breach
of representation or warranty to the extent that any liability giving rise to
the breach is fully reflected in the calculation of Adjusted
-8-
<PAGE>
Net Worth, as finally determined by agreement of the Members'
Representative and WHI or otherwise pursuant to this SECTION 2.6.
2.7. EMPLOYEE OPTIONS. After the Closing Date, WHI shall grant to the
employees of Four Points a number of WHI employee stock options commensurate
with their positions, as determined by the WHI compensation committee in its
sole discretion.
2.8 ACCOUNTING. It is the intention of the Parties that the
transactions contemplated herein shall constitute for accounting purposes a
pooling of interests business combination. The Parties agree to take no
position at any time which is inconsistent with such intention, except as
otherwise required by law. It is understood that none of the Parties warrant
to any of the others that the intended treatment will be obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MEMBERS AND BENEFICIARIES
The Members and the Beneficiaries jointly and severally represent and
warrant to WHI that the statements contained in Schedule 3 are accurate,
correct and complete as of the date of this Agreement and as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout Schedule 3). WHI acknowledges that the
detailed representations and warranties by the Members and Beneficiaries set
forth in this Agreement have been carefully negotiated and prepared by the
Parties. Neither the Members nor the Beneficiaries make any representations
and warranties with respect to any projections, forecasts, or forward-looking
information otherwise provided to WHI (other than for the limited purposes of
agreeing to the liquidated damages amounts provided for in Section 8.6).
There is no assurance that any such projected or forecasted results will be
achieved. Except as to those matters expressly covered by the representations
and warranties set forth in this Agreement and in any of the schedules or
exhibits to this Agreement or in any of documents described in Section 6.1 of
this Agreement, the Members and the Beneficiaries disclaim all
representation and warranties whether expressed or implied, as to any other
information or matters. WHI acknowledges that neither the Members nor the
Beneficiaries nor anyone else acting in their behalf has made any
representation or warranty, expressed or implied, as to the accuracy or
completeness of any information which is not included or referred to in this
Agreement or any of the schedules or exhibits to this Agreement or in any of
documents described in Section 6.1 of this Agreement, and neither the Members
nor the Beneficiaries nor anyone else acting in their behalf shall have or be
subject to any liability to WHI or any Affiliate of WHI, resulting from the
distribution of any such information to, or use of any such information by,
WHI, any Affiliate thereof, or any of their agents, consultants, accountants,
counsel or representatives. Without limitation of the forgoing, to the extent
that any offering memoranda or summaries prepared by Four Points or the
Members (or anyone acting in their behalf) are or have been provided to WHI,
WHI acknowledges and agrees that no representation or warranty is made by the
Members or the Beneficiaries as to the accuracy or completeness of such
memoranda or summaries. Nothing in Schedule 3 shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however,
unless the disclosure identifies the exception with reasonable
- 9 -
<PAGE>
particularity. Without limiting the foregoing, the mere listing of a document
or other item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHI
WHI represents and warrants to the Members and the Beneficiaries that
the statements contained in Schedule 4 are accurate, correct and complete as
of the date of this Agreement and as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this
Agreement throughout Schedule 4). Without limiting the foregoing, the mere
listing of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or
other item itself.
ARTICLE V
COVENANTS
The Parties agree as follows with respect to the period from and after
the execution of this Agreement.
5.1. GENERAL. Each of the Parties shall use its or her best efforts to
take all action and to do, or to cause to be done, all things necessary or
advisable to consummate and make effective the transactions contemplated by
this Agreement.
5.2. NOTICES AND CONSENTS. The Members shall, and shall cause Four
Points to, give any required notices to third parties, and shall obtain any
third-party consents necessary to ensure the continued effectiveness of all
Material Contracts or otherwise necessary or advisable in connection with the
matters pertaining to Four Points disclosed in the Schedules. The Members
shall, and shall cause Four Points to, obtain the prior approval of WHI as to
the form and content of each such notice and consent, which consent shall not
be unreasonably withheld or delayed. WHI shall use commercially reasonable
efforts to procure the release and/or termination of any personal guarantees
or other personal undertakings of the Members regarding any indebtedness
(including any capitalized lease obligations) or other liability or
obligation of Four Points set forth on SCHEDULE 5.2 attached hereto at the
earliest possible date. Without limiting the generality of the foregoing, WHI
shall (at, or as soon as possible after, the Closing) use such efforts to
replace the letter of credit supplied by the Members to secure Four Points'
performance under Four Points' Chicago real estate lease.
5.3 REGULATORY MATTERS AND APPROVALS. Each of the Parties will take any
action that may be necessary or reasonably deemed advisable in connection
with any other notices to, filings with, and authorizations, consents and
approvals of governments and governmental agencies that it may be required to
give, make or obtain.
- 10 -
<PAGE>
5.4 OPERATION OF BUSINESS. Except as specifically set forth below or
elsewhere in this Agreement, the Members shall not (including in their
capacity, where applicable, as Managers and/or officers of Four Points)
permit Four Points to engage in any practice, take any action, embark on any
course of inaction, or enter into any transaction outside the Ordinary Course
of Business in each case until the Closing Date. Without limiting the
generality of the foregoing until the Closing Date:
(a) the Members shall not permit Four Points to authorize or
effect any change in its Articles of Organization or Operating
Agreement or pass further regulations or resolutions inconsistent
therewith;
(b) the Members shall not permit Four Points to grant any
options, warrants, or other rights to purchase or obtain any of its
Membership Rights or issue, sell, or otherwise dispose of any of its
Membership Rights;
(c) the Members shall not permit Four Points to redeem,
repurchase, or otherwise acquire any of its Membership Rights, pay
cash dividends or make any other distributions during the period
beginning upon the execution of this Agreement and ending upon the
earlier of (i) Closing or (ii) termination of this Agreement;
(d) the Members shall not permit Four Points to create, incur,
assume or guarantee any indebtedness (including any capitalized
lease obligations) or other obligation or liability other than in the
Ordinary Course of Business, provided, however, Four Points may
incur reasonable fees and expenses, to the extent provided in
SECTION 12.11 in connection with this Agreement and the transactions
contemplated hereby;
(e) the Members shall not permit Four Points to impose or
permit any new or additional Security Interest upon any of its
assets;
(f) the Members shall not permit Four Points to make any
capital expenditures or capital investment in, make any loan to, or
acquire the securities or assets of any other person;
(g) the Members shall not permit Four Points to make any change
in employment terms for any of its Managers, officers or employees;
(h) the Members shall not permit Four Points to enter into any
agreement that requires the payment of royalties or similar
arrangements, or renew any existing arrangements;
(i) the Members shall not permit Four Points to change its
fiscal year;
(j) the Members shall not permit Four Points to dispose of any
assets used in the Business other than in the ordinary course of
business;
(k) the Members shall not permit Four Points to commit to any
of the foregoing;
-11-
<PAGE>
(l) the Members shall cause Four Points to use its best efforts
to cause Four Points to preserve, protect and maintain the Business,
maintain and keep in effect all insurance on assets and property,
preserve intact the organization and reputation of the Business,
keep available the services of present executives, employees and
agents of the Business, and preserve the goodwill of suppliers,
subcontractors, customers and others having business relationships
with the Business through the Closing.
5.5 FULL ACCESS. Until the Closing Date, the Members shall cause
Four Points to permit representatives of WHI to have full access to all
premises, properties, books, records, contracts, tax records, documents and
third parties with relationships with Four Points, all on reasonable notice,
provided, however, that WHI will only contract third parties after receiving
approval from the Members of the manner, timing and form of any contract,
such approval not to be unreasonably withheld or delayed.
5.6 NOTICE OF DEVELOPMENTS. Until the Closing Date, the Members
shall give prompt written notice to WHI of any material development affecting
the assets, liabilities, business, financial condition, operations, results
or prospects of Four Points. Each Party shall give prompt written notice to
the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement.
5.7 EXCLUSIVITY. Neither the Members nor any person on their behalf
shall, nor shall the Members permit Four Points to, entertain, discuss,
solicit or respond to any offer or inquiry to purchase a signigicant portion
of Four Points' assets or capital stock, directly or indirectly, or effect
any business combination with Four Points during the period beginning upon
the execution of this Agreement and ending upon the earlier of (i) Closing or
(ii) termination of this Agreement. The Members shall notify WHI immediately
if any person makes any proposal, offer, inquiry or contact with respect to
any of the foregoing.
5.8 ACCOUNTING TREATMENT. The Members at any time will not, and will
not permit Four Points prior to the Closing to, take any action restricted or
fail to take any action required pursuant to Article IX after the date
hereof, to cause such transactions not to be accounted for as pooling of
interests business combinations.
5.9 FOUR POINTS 401(k) PLAN. Prior to Closing, Members shall cause
Four Points to (a) adopt resolutions of its Managers to terminate the Four
Points 401(k) Plan (""401(k) Plan") effective prior to Closing, and (b)
accumulate and provide to WHI the data necessary to complete IRS Form 5310
with respect to such termination of the 401(k) Plan.
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
6.1 CONDITIONS TO OBLIGATION OF WHI. The obligation of WHI to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) the Members shall have caused Four Points to have procured
all of the third party consents specified in SECTION 5.2 above;
-12-
<PAGE>
(b) the representations and warranties set forth in Article III
above shall be true and correct at and as of the Closing Date;
(c) the Members shall have performed and complied with all of
their covenants hereunder through the Closing.
(d) no action, suit or proceeding shall be in effect, pending
or threatened before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge
would (i) prevent consummation of any of the transactions contemplated
by this Agreement, or (ii) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation;
(e) the Parties shall have received all other required
authorizations, consents, and approvals of governments and governmental
agencies;
(f) WHI shall have received duly executed stock powers or
assignments in favor of WHI in respect of all Four Points Interests
together with all Four Points Interests;
(g) WHI shall have received the resignations, effective as of
the Closing Date (except as otherwise agreed), of each Manager and
officer of Four Points and a release from each officer and Manager in
the form of Exhibit A hereto;
(h) all amounts owed to Four Points by any Member or Beneficiary
of Four Points (or their Affiliates) shall have been paid in full;
(i) WHI shall have received the Inducement Agreement from
each of the Members in the form of Exhibit B hereto;
(j) Messrs. De Nunzio, Monkewicz and St-Jacques shall have
entered into an Employment Agreement with WHI in the form attached hereto
as Exhibit C;
(k) WHI shall have received a letter from each of the Members and
Beneficiaries relating to "pooling of interests" criteria in the form
attached hereto as Exhibit D;
(l) all actions to be taken by Four Points or the Members in
connection with consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to
effect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to WHI;
(m) WHI shall received from Schwartz & Freeman, counsel to Four
Points and the Members, an opinion in the form of Exhibit E attached
hereto, addressed to WHI and dated as the Closing Date;
(n) WHI shall have been advised by its auditors that to their
knowledge after due and diligent inquiry of management, there have been
no transactions or events with respect to Four Points which would, and
the ownership structure and attributes of Four Points and the Members
would not, proscribe the transactions contemplated hereby, if
-13-
<PAGE>
consummated, from being accounted for as pooling of interests business
combinations;
(o) URL transfer form, in form and substance satisfactory to WHI; and
(p) WHI shall have received resolutions, certified by the Secretary
of Four Points, of its Managers and the Members, authorizing this
Agreement and the transactions contemplated hereby.
WHI may waive in writing any condition specified in this SECTION 6.1.
6.2. CONDITIONS TO OBLIGATION OF THE MEMBERS. The obligation of the
Members to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article IV
above shall be true and correct at and as of the Closing Date;
(b) WHI shall have performed and complied with all of its
covenants hereunder through the Closing;
(c) no action, suit or proceeding shall be in effect, pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state or local jurisdiction wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation;
(d) the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies;
(e) WHI shall have entered into an Employment Agreement in
the form attached hereto as Exhibit C with Messrs. De Nunzio, Monkewicz
and St-Jacques;
(f) Each of the individuals listed on Schedule 6.2(f) and WHI
shall have entered into executed and delivered to WHI a Non-Solicitation
and Release Agreement in the respective forms of Exhibit 6.2(i)-(viii)
(the "Non-Solicitation and Release Agreements") attached hereto, and WHI
shall have countersigned each such Agreement and delivered to the
Members' Representative on behalf of the Members an executed original of
each such Agreement along with the respective payments called for
therein;
(g) WHI shall have issued stock certificates for all the WHI
Shares (including the Held Back Shares) for delivery (excluding the Held
Back Shares, copies of which shall be provided) to the Members upon
closing;
(h) Four Points shall have received from McDermott, Will & Emery,
an opinion in the form of Exhibit F attached hereto, addressed to the
members and dated as of the Closing Date;
-14-
<PAGE>
(i) WHI shall have paid on behalf of Four Points: (a) $120,000 to
Doug Belzer for financial advisory fees; (b) $559,341 to AdMedia Partners,
Inc. for investment banking fees; (c) $10,000 to Victor Faraci for
accounting fees; and (d) $995,875 to the individuals listed on Schedule
6.2(f) payable under the Non-Solicitation and Release Agreements;
(j) Schwartz & Freeman shall have received one or more checks from
WHI and/or Four Points for an aggregate of $200,000; and
(k) all actions to be taken by WHI in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Members.
The Members may waive in writing any condition specified in this SECTION 6.2.
ARTICLE VII
TERMINATION
7.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate this
Agreement as provided below:
(a) the Parties may terminate this Agreement by joint written consent
at any time prior to the Closing Date;
(b) WHI may terminate this Agreement by giving written notice to the
Members at any time prior to the Closing Date in the event that any Member
is in breach of any representation, warranty, covenant or agreement
contained in this Agreement in any material respect, the Members have been
notified of such breach and the breach has not been cured within fifteen
(15) days of such notice;
(c) WHI may terminate this Agreement by giving written notice to the
Members at any time prior to the Closing Date, if the Closing shall not have
occurred on or before November 15, 1999 by reason of the failure of any
condition precedent under SECTION 6.1 hereof (unless the failure results
primarily from WHI breaching any representation, warranty, covenant or
agreement contained in this Agreement);
(d) The Members may terminate this Agreement by giving written notice
to WHI at any time prior to the Closing Date in the event that WHI is in
breach of any representation, warranty, covenant or agreement contained in
this Agreement in any material respect. WHI has been notified of such breach
and the breach has not been cured within fifteen (15) days of such notice;
or
(e) The Members may terminate this Agreement by giving written notice
to WHI at any time prior to the Closing Date, if the Closing shall not have
occurred on or before November 15, 1999 by reason of the failure of any
condition precedent under SECTION 6.2
-15-
<PAGE>
hereof (unless this failure results primarily from Members breaching any
representation, warranty, covenant or agreement contained in this Agreement).
7.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 7.1 above, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party, provided
that the confidentiality provisions contained in that certain letter between
AdMedia Partners, Inc. (as Four Points' representative) and WHI dated June 30,
1999 shall survive the termination of this Agreement.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement or in any document delivered pursuant hereto
shall be deemed to be material and to have been relied upon by the Parties
hereto. All covenants and agreements shall survive the Closing and shall be
fully effective and enforceable until the covenant or agreement has been
fully performed. All representations and warranties shall survive the Closing
for a period of one year provided that claims for WHI Indemnification Amounts
for breach of representations or warranties regarding the existence and/or
value of assets and liabilities reflected on the Financial Statements must be
asserted by WHI by the date of the issuance of the first audited statements
reflecting combined operations of Four Points and WHI. A failure of the
representations and warranties set forth on Schedule 3.22 due to (i) faulty
information being provided on employee benefit tax filings, (ii) improper
corporate procedures regarding the adoption of employee benefit plans, (iii)
the failure of Four Points to have and properly maintain in compliance with
ERISA (x) insurance contracts for the funding of the Four Points 401(k) plan
or (y) the group term life and accidental death and dismemberment insurance
policies identified on Schedule 3.22, and (iv) any failure to timely filing
the annual information returns required under the Code and ERISA on Form 5500
(collectively, (i) through (iv), the "Particular Indemnified Matters") will
survive the Closing until the expiration of any applicable statute of
limitations. Notwithstanding anything to the contrary contained herein, the
representations and warranties made by any Party to this Agreement shall not
be affected by any investigation, verification or examination by any other
Party or by anyone on behalf of any such Party in connection with their due
diligence review or otherwise.
8.2 INDEMNIFICATION BY WHI. WHI shall indemnify and hold the Members and
the Beneficiaries harmless from and against any and all loss, cost, damage,
diminution in value, expense (including court costs and attorneys' fees)
suit, action, claim, deficiency, liability or obligation related to, caused
by or arising from (i) any breach of any representation or warranty in
Article IV or failure to fulfill any covenant or agreement of WHI contained
herein, and (ii) any and all claims of third parties made based upon facts
alleged that, if true, would have constituted such a breach or failure, and
(iii) any breach of WHI's covenant in Section 5.2 to use commercially
reasonable efforts to procure the release and/or termination of any personal
guarantees or other personal undertakings of the Members regarding any
indebtedness (including any capitalized lease obligations) or other liability
or obligation of Four Points set forth on SCHEDULE 5.2 attached hereto at the
earliest possible date or any failure of WHI or Four Points to pay such
obligations, and (iv) any claim by AdMedia Partners, Inc. for a brokers fee
pursuant to
-16-
<PAGE>
the June 18, 1999 letter agreement between Four Points and AdMedia. The
amount to which the Members shall be entitled hereunder which has not been
paid to the Members shall be referred to as the "Member Indemnification
Amount."
8.3 INDEMNIFICATION BY THE MEMBERS AND THE BENEFICIARIES. From and after
the Closing, subject to the limitations set forth in this Article VIII, the
Members and the Beneficiaries shall indemnify and hold WHI harmless from and
against any and all loss, cost, damage, diminution of value, expense
(including court costs and attorney's fees), suit, action, claim,
deficiency, liability or obligation related to, caused by or arising from
(i) any breach of representation or warranty in Article III or failure to
fulfill any covenant or agreement of the Members or the Beneficiaries
contained herein, (ii) any and all claims of third parties made based upon
facts alleged that, if true, would have constituted such a misrepresentation,
breach or failure, (iii) any liability or expense arising out of any
Particular Indemnified Matter, or (iv) if Four Points does not provide all
the information required by SECTION 5.9 and WHI waives this covenant as a
condition of Closing (such waiver to be evidenced by the actual Closing),
then the out of pocket attorneys fees and other expenses incurred in
completing all matters required for assuring compliance and termination of
the 401(k) Plan. The amount to which WHI shall be entitled hereunder which
has not been paid to WHI shall be referred to as the "WHI Indemnification
Amount."
8.4 NOTICE AND DEFENSE OF CLAIMS. Each indemnified Party agrees to give
the indemnifying Party prompt written notice of any event or matter for which
such indemnified Party intends to assert a right of Indemnification under
this Agreement; provided that any failure to provide such notice shall not
reduce the amount of indemnification to which the indemnified party is
otherwise entitled, except to the extent that such failure prejudices the
indemnifying party. If a third party claim is made for which an indemnified
party is entitled to indemnification pursuant to this Article VIII, then the
indemnifying party shall be entitled to participate in the defense of such
claim, and if the amount claimed pursuant to such third party claim, or the
potential liability arising out of such third party claim (in the judgement
of indemnified party), does not, after taking into account all other
indemnification obligations pursuant to SECTION 8.5 and if the indemnifying
party so chooses, and providing that the indemnifying party acknowledges its
obligations to indemnify the indemnified party for the entire amount claimed
by the third party, then the indemnifying party may assume primary
responsibility for the defense of such claim with counsel selected by the
indemnifying party and not reasonably objected to by the indemnified party.
If the indemnifying party assumes the defense of a third party claim as set
forth in this paragraph, then (i) in no event shall the indemnified party
admit any liability with respect to, or settle, compromise of discharge, any
such claim without the indemnifying party's prior written consent, which
shall not be unreasonably withheld, (ii) the indemnified Party shall be
entitled to participate in, but not control, the defense of such claim with
its own counsel at its own expense, and (iii) in no event shall the
indemnifying Party enter into any settlement or compromise without the
written consent of the indemnified Party, which shall not be unreasonably
withheld. If the indemnifying party does not assume the defense of any such
claim, the indemnified party may defend such claim in a manner as it may deem
appropriate (including, but not limited to, settling such claim on such terms
as the indemnified party may deem appropriate). Any claim by either Party for
indemnification hereunder (other than with respect to any Particular
Indemnified Matter must be asserted in writing prior to the earlier of the
first anniversary of the Closing Date or the date of the issuance of the
first audited statements
-17-
<PAGE>
reflecting combined operations of Four Points and WHI. Any claim for any
Particular Indemnified Matter must be asserted in writing prior expiration of
any applicable statute of limitations.
8.5 LIMITATION OF LIABILITY.
(a) Notwithstanding anything to the contrary contained herein,
(i) except as provided in subparagraph (ii) of this SECTION
8.5(a), the Members shall not have any liability to WHI for
indemnification hereunder until the total WHI Indemnification Amount
exceeds $100,000, whereupon the full amount of the WHI Indemnification
Amount shall be payable;
(ii) the limitation on liability in subparagraph (i) shall not
apply to (a) any liability due to a breach of the representations and
warranties set forth in Schedule 3.4 or the last two sentences of the
first paragraph of Schedule 3.14, (b) any Particular Indemnified
Matters, (c) any liability due to a breach of representations or
warranties concerning tax liability, (d) matters described in
SECTION 8.6, and (e) any liability due to the Members' breach of the
covenants in SECTION 5.9; and
(iii) except as provided in subparagraph (iv) of this SECTION
8.5(a), the WHI shall not have any liability to the Members for
breaches of representations or warranties until the total Member
Indemnification Amount exceeds $100,000, whereupon the full amount of
the Member Indemnification Amount shall be payable; and
(iv) the limitation on liability in subparagraph (iii) shall not
apply to (a) any breach of WHI's covenant in Section 5.2 to use
commercially reasonable efforts to procure the release and/or
termination of any personal guarantees or other personal undertakings of
the Members regarding any indebtedness (including any capitalized lease
obligations) or other liaiblity or obligation of Four Points set forth
on SCHEDULE 5.2 attached hereto at the earliest possible date or any
failure of WHI or Four Points to pay such obligations, and (b) any
claim by AdMedia Partners, Inc. for a brokers fee pursuant to the
June 18, 1999 letter agreement between Four Points and AdMedia.
(b) Any indemnification or recovery by WHI under Article VIII of this
Agreement, any agreement or instrument contemplated hereby, any document
relating hereto or thereto or any Exhibit or Schedule to this Agreement or
otherwise relating to the transactions contemplated hereby shall not exceed
an amount equal to the sum of the total number of WHI Shares issued to the
Members at Closing multiplied by the Stock Price. This limitation shall
apply both (i) individually to each Member (including the respective
Beneficiaries of any Members), so that his or its maximum liability would be
the number of WHI Shares issued to him or the entity as to which he is
Beneficiary in connection herewith multiplied by the Stock Price, and (ii) in
the aggregate as to all of the Members, so that the maximum liability of the
Members collectively would be the
-18-
<PAGE>
aggregate number of WHI Shares issued to them as a group multiplied
by an amount equal to the Stock Price.
(c) Any recovery payable under Article VIII hereof shall be
calculated after giving effect to (A) any proceeds received from
insurance policies paid for by Four Points prior to the Closing and
(B) the actual realized tax benefit to WHI or Four Points resulting
from the damage, loss, liability or expense that is the subject of
the indemnity; PROVIDED that to the extent that any tax benefit is
realized in a tax year other than the year in which the indemnity is
payable, the Indemnified Parties shall be obligated to make their
indemnification payments without regard to such benefit and WHI
shall reimburse the Indemnifying Members only in the amount of such
realized tax benefit in the year in which it is realized. For
purposes of this Article VIII, an actual realized tax benefit is an
actual reduction in taxes payable net of loss tax benefits or a
refund of taxes previously paid net of loss tax benefits.
8.6 LIQUIDATED DAMAGES. The Parties acknowledge that it would be
difficult, if not impossible, to determine damages for certain breaches of
representations and warranties. Accordingly, the Parties agree that as
liquidated damages, (i) for any breach of the representations and warranties
contained in Schedules 3.19(b) and 3.24 resulting in the loss or substantial
impairment of any customer relationship identified on EXHIBIT G attached
hereto, the WHI Indemnification Amount shall be an amount equal to the
product of (x) 04% of 12 months of projected revenue (calculated by
annualizing the projected "Currently Booked" revenues for such customer set
forth on EXHIBIT G) for each customer multiplied by (y) a fraction, the
numerator of which shall be the number of months remaining in the contract
term for each such customer (but in any event not less than 12 months) and
the denominator of which shall be 12; and (ii) for any breach of Schedule
3.20 due to the overstatement of the number of active employees, the WHI
Indemnification Amount shall be equal to 300% of any missing employee's
annual compensation or, if such employee's annual compensation cannot be
determined, 300% of the average consultant compensation.
8.7 EXCLUSIVE REMEDY. Except in the case of fraud, in the event of
a breach of this Agreement by WHI or the Members, including the breach by
such party of any representation or warranty made in this Agreement or the
failure to perform any obligation to be performed by such party pursuant to
this Agreement, the remedies of the indemnitee, and the procedures to be
followed by the indemnitee, shall be solely and exclusively those specified in
this Article VIII.
8.8 ACTION TAKEN AS CUSTODIAN. Paine Webber as custodian is a
broker/dealer, and is holding the shares which are registered in its name
solely for the benefit of its account holder as directed custodian and not
for its own benefit or account. Notwithstanding anything herein to the
contrary, each party to this Agreement, by his, her or its execution hereof,
hereby agrees and acknowledges the foregoing and agrees and acknowledges that
Paine Webber is not in its individual capacity acting or refraining from
acting nor making any representation, warranty, covenant or agreement
hereunder. Paine Webber has executed and delivered this Agreement, not in its
individual capacity as signatory, buy solely as the custodian of the IRAs at
the direction of the beneficial owners of the shares. Paine Webber does not
undertake nor shall it have any individual liability or obligation of any
nature whatsoever by virtue of the execution and delivery of this Agreement
or the representations, covenants or warranties contained herein. Each
-19-
<PAGE>
beneficiary of the IRA by his, her or its execution hereof, hereby agrees to
indemnify and hold harmless Paine Webber as the custodian of his, her or its
IRA from and against any and all loss, costs, damages, expenses (including
court costs and attorneys' fees), claims, liabilities or obligations suffered
or incurred by Paine Webber in connection with any aspect of this Agreement
or any related transactions. Each party to the Agreement hereby agrees to
hold harmless Paine Webber from claims of such party only, in connection with
any aspect of this Agreement or any related transaction and agrees not to sue
Paine Webber as custodian for any claim arising in connection with any aspect
of this Agreement or any related transactions other than a willful breach of
its obligations under this Agreement as directed custodian.
ARTICLE IX
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Closing Date of WHI Shares:
9.1 DISPOSITION OF SHARES.
(a) The Members acknowledge that they may be deemed to be
"affiliates" of Four Points for purposes of qualifying the
transactions contemplated hereby as pooling of interests business
combinations under applicable accounting and regulations. Each of
the Members agrees that prior to Closing they will not dispose of
any Interests of Four Points, and following the Closing they will
not sell, transfer or otherwise dispose of any of their WHI Shares
until such time as final results of operations of WHI covering at
least 30 days of combined operations of WHI and Four Points have
been published, which WHI anticipates, but does not represent or
warrant, will be on or before January 15, 2000.
(b) The Members agree that they will not sell, transfer or
otherwise dispose of any WHI Shares distributed to them, except
pursuant to (i) an exemption from the registration requirements
under the Securities Act, which does not require the filing by WHI
with the SEC of any registration statement, offering circular or
other document, in which case, each such Member shall first supply
to WHI an opinion of counsel, (which counsel and opinions shall be
satisfactory to WHI) that such exemption is available, or (ii) an
effective registration statement filed by WHI with the SEC under the
Securities Act.
(c) The Members agree that any sale of WHI Shares shall be
effected through a broker approved by WHI.
9.2 LEGENDS. The certificates representing WHI Shares shall bear
the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN ADDITION, SHAREHOLDERS
ACKNOWLEDGE THAT THE WHI SHARES BEING ACQUIRED BY THEM HAVE BEEN ISSUED UNDER
APPLICABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER
EXCEPT.
-20-
<PAGE>
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS OF ANY STATE WITH RESPECT THERETO,
OR IN ACCORDANCE WITH AN OPINION OF COUNSEL (WHI OR OTHER) IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE, AND ALSO MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
BY THE HOLDER WITHOUT COMPLIANCE WITH THE SECURITIES AND EXCHANGE
COMMISSION'S ACCOUNTING SERIES RELEASES 130 AND 135. LEGENDS SHALL BE AFFIXED
TO ALL SHARES RECEIVED TO THIS EFFECT.
WHI may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates in accordance with federal securities laws.
9.3. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS.
WHI will (a) use reasonable efforts to have available adequate current public
information with respect to WHI as is required pursuant to Rule 144(c) in
connection with the sale and transfer by the Members under Rule 144
promulgated under the Securities Act of 1993, as amended ("Rule 144") during
the two year period after the Closing, (b) direct the transfer agent of WHI's
common stock to remove the restrictive legend provided for in SECTION 9.2 and
to deliver such certificates to a purchaser of WHI Shares from any Member in
connection with a sale under Rule 144, and (c) cause such shares of WHI
common stock to be received by such purchaser to be listed on the Nasdaq
Stock Market.
ARTICLE X
REGISTRATION RIGHTS
10.1. REGISTRATION RIGHTS FOR WHI SHARES: FILING OF REGISTRATION
STATEMENT. WHI will utilize its reasonable best efforts to cause a
Registration Statement of Form S-3 (or such other form that WHI is permitted
to use under the Securities Act if it is not eligible to use Form S-3) under
the Securities Act to become effective within 7 days of the date of final
results of operations of WHI covering at least 30 days of combined operations
of WHI and Four Points have been published, for the purpose of registering
50% of the WHI Shares to be issued hereunder to each Member (the
"Registration Shares") for resale by a Holder thereof (the "Registration
Statement") and use reasonable efforts to cause such Registration Statement
to be declared effective. For purposes of this ARTICLE X, a person is deemed
to be a "Holder" of Registration Shares whenever such person is the record
owner of Registration Shares. The Registration Shares shall not include any
of the Held Back Shares.
10.2. EXPENSES OF REGISTRATION. WHI shall pay all expenses incurred by
WHI in connection with the registration, qualification and/or exemption of
the Registration Shares, including any SEC and state securities law
registration and filing fees, printing expenses, fees and disbursements of
WHI's counsel and accountants, transfer agents' and registrars' fees, fees
and disbursements of experts used by WHI in connection with such
registration, qualification and/or exemption, and expenses incidental to any
amendment or supplement to the Registration Statement or prospectuses
contained therein. WHI shall not, however, be liable for any sales,
-21-
<PAGE>
broker's or underwriting commissions upon sale by any Holder of any of the
Registration Shares.
10.3 FURNISHING OF DOCUMENTS. WHI shall furnish to the Holders such
reasonable number of copies of the Registration Statement, such prospectuses
as are contained in the Registration Statement and such other documents as
the Holders may reasonably request in order to facilitate the offering of the
Registration Shares.
10.4 AMENDMENTS AND SUPPLEMENTS: RESTRICTIONS ON USE. WHI shall prepare
and promptly file with the SEC and promptly notify the Holders of the filing
of such amendments or supplements to the Registration Statement or
prospectuses contained therein as may be necessary to correct any statements
or omissions if, at the time when a prospectus relating to the Registration
Shares is required to be delivered under the Securities Act, any event shall
have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, provided, however, that WHI shall be entitled to delay any such
filing and the use of the prospectus if WHI determines that such filing or
use would impede, delay, or interfere with any significant financing,
acquisition, or other transaction involving WHI, or require disclosure of
material information which WHI has a bona fide business purpose for
preserving as confidential. WHI shall also advise the Holders promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of the Registration
Statement or the initiation or threatening of any proceeding for that purpose
and promptly use its reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued.
10.5 DURATION. WHI shall maintain the effectiveness of the Registration
Statement until the first anniversary of the Closing Date. WHI's obligations
contained in this ARTICLE X shall terminate on the later of (i) the first
anniversary of the Closing Date and (ii) the first date the Members are able
to sell Registration Shares pursuant to Rule 144.
10.6 FURTHER INFORMATION. If Registration Shares owned by a Holder are
included in any registration, such Holder shall furnish WHI such information
regarding itself as WHI may reasonably request and as shall be required in
connection with any registration, qualification or compliance referred to in
this Agreement.
ARTICLE XI
TAX RETURNS
11.1. RETURNS. The Members shall prepare or cause to be prepared and
file or cause to be filed at their cost with the appropriate Tax authorities
all Returns required to be filed on behalf of Four Points for any taxable
period (or portion thereof) ending on or before the Closing Date. The Members
shall allow WHI an opportunity to review and comment upon any such Return at
least thirty (30) days prior to its filing. The Members will take no position
on any such Returns that is inconsistent with Four Points' past custom and
practice, except to the extent that such position is either required by law
or a taxing authority. The Members shall not make any amendment to any Return
that may affect the liability of Four Points or WHI without WHI's prior
written
-22-
<PAGE>
consent. In the event that the parties cannot agree as to any disputed item
on any Return within ten (10) business days after WHI gives the Members'
Representative a notice of objections, the parties shall jointly select a
firm of nationally recognized independent accountants (or, if they cannot
agree on the selection of such a firm within 5 business days, then WHI and
the Members' Representative shall, within an additional 3 business days, each
select their own nationally recognized independent accounting firm, which two
firms shall select a third nationally recognized accounting firm) to resolve
the dispute within an additional 5 business days. Such firm's determination
shall be final and binding on the parties, and any expenses relating to the
engagement of such firm shall be paid half by WHI and half by the Members.
11.2. TAX AUDITS RELATING TO FOUR POINTS.
(a) WHI shall promptly notify the Members' Representative in
writing of the commencement of any claim, audit, examination, or other
proposed change or adjustment of which it or any of its affiliates has
been informed of by any taxing authority that may affect the liability
of the Members under SECTION 8.3 (a "Tax Claim"). Such notice shall
describe the asserted Tax Claim in reasonable detail and shall include
copies of any notices and other documents received from any taxing
authority in respect of any such asserted Tax Claim. Failure of WHI to
comply with the notification requirement set forth in the preceding
two sentences shall not relieve the Members of their indemnification
obligations with respect to such liabilities, except to the extent that
the Members were prejudiced by such failure.
(b) The Members shall have the right to control any audits of or
administrative or court proceedings relating to income Tax Returns for
taxable periods of Four Points that would solely affect the Members. In
such matters, the Members shall have the right to employ counsel of
their own choice and WHI (and its counsel) shall have the right, at
their own expense, to participate in any audits or other proceedings,
and the Members shall have the right to settle issues and take any other
actions in connection with such audits or proceedings. Notwithstanding
the foregoing, the Members shall not be entitled to settle, either
administratively or after the commencement of litigation, any claim for
Taxes of Four Points, or otherwise bind Four Points, if such settlement
would adversely affect WHI (including, without limitation, the imposition
of income tax deficiencies, a change of accounting method, the reduction
of asset basis or cost adjustments, the lengthening of any amortization
or depreciation periods, the denial of amortization or depreciation
deductions or the reduction of loss or credit carry forwards), without
the prior written consent of WHI, which consent shall not be
unreasonably withheld.
(c) WHI shall have the right to control any audits of or
administrative or court proceedings relating to taxable periods of Four
Points that affect the liability of Four Points for Taxes relating to
taxable periods beginning after the Closing Date.
11.3. COOPERATION REGARDING TAX MATTERS. The Parties hereto shall
provide such necessary information as any other Party hereto may reasonably
request in connection with the preparation of such Party's Returns, or to
respond to or contest any audit, prosecute any claim for refund or credit or
otherwise satisfy any legal requirement relating to Taxes or which may affect
the liability of the Members under SECTION 8.3, including providing powers of
attorney to the
-23-
<PAGE>
Members' accountants, attorneys or other authorized representatives. WHI
recognizes that the Members and their agents and representatives may, from
time to time after the Closing Date, need access to accounting and tax books,
records and other information held by WHI, or information with respect to the
assets of Four Points, or operations, events, transactions or other items
occurring or accruing on or prior to the Closing Date ("Tax Records"). WHI
therefore agrees that it will retain, or cause Four Points to retain, all
such Tax Records until after the expiration of the applicable period of
assessment of Tax (including any extensions thereof) and agrees to give the
Members and their agents and representatives a reasonable opportunity to
inspect, review and make copies of the Tax Records.
ARTICLE XII
MISCELLANEOUS
12.1. PRESS RELEASES AND ANNOUNCEMENTS. During the period beginning
upon full execution of this Agreement and ending upon the earlier of (i) Closing
or (ii) termination of this Agreement, no Party shall issue any press
release, public announcement or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that the foregoing shall not prohibit disclosure
to a Party's attorneys, accountants, lenders or financial advisors (who shall
be bound by this provision), nor shall the foregoing prohibit WHI from making
any public disclosure it believes in good faith is required by law. After
Closing, WHI shall be entitled to make the first public disclosure regarding
the subject matter of this Agreement and WHI's consent shall be required
prior to any public disclosures made by the Members.
12.2. WAIVER OF RIGHTS OF FIRST REFUSAL, ETC. Each of the Members and
the Beneficiaries, constituting all the Members of Four Points, hereby waive
any and all (i) notice requirements set forth in Sections 7.1 and 7.2 of the
Operating Agreement of Four Points, dated as of January 21, 1997 (the
"Operating Agreement"), (ii) piggyback rights and rights of first refusal
pursuant to Sections 7.2 and 7.3, respectively, of the Operating Agreement,
and (iii) any other options set forth in, and granted pursuant to the
Operating Agreement; and the Operating Agreement shall and hereby is deemed
amended to the fullest extent necessary to permit the transactions
contemplated in this Agreement.
12.3. NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
12.4. ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements or representations by or among the
Parties, written or oral, that may have related in any way to the subject
matter hereof, including but not limited to the letter of intent dated
September 16, 1999 except as otherwise set forth in SECTION 7.2 hereof.
12.5. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
heirs, executors, personal representatives, successors and permitted assigns.
Other than WHI, no Party may assign either
-24-
<PAGE>
this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the other Parties; provided that in the
event of an assignment by WHI, the assignor shall remain liable for all of
the obligations hereunder transferred to the Assignee. In no event shall any
assignment of this Agreement be made by WHI prior to Closing to a party other
than an Affiliate of WHI.
12.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed as original but all of which
together will constitute one and the same instrument. Any reference herein to
an agreement or contract shall be deemed to refer also to the other (such
terms being interchangeable) and shall include commitments and
understandings, whether written or oral, including all amendments thereto.
12.7 HEADINGS; MEANING. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement. The term "including" shall
be interpreted to mean "including with limitation."
12.8 NOTICES. All notices, requests, demands, claims and other
communications hereunder must be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then three (3) business days after) it is sent by facsimile, overnight
courier, or registered or certified mail, return receipt requested, postage
prepaid, and addressed to the intended recipient as set forth below:
If to the Members: Michael J. DeNunzio
863 West Buckingham Place, Unit #3
Chicago, Illinois 60657
Peter Monkewicz
3331 North Oakley
Chicago, Illinois 60618
Pierre St-Jacques
1000 West Washington Boulevard, Unit 401
Chicago, Illinois 60607
Victor S. Faraci IRA
c/o Paine Webber as Custodian
425 North Martingale Road, Suite 1600
Schaumburg, Illinois 60173-2214
Attn: Dave Greenwald
Michael Anthony DeNunzio IRA
c/o Paine Webber as Custodian
425 North Martingale Road, Suite 1600
Schaumburg, Illinois 60173-2214
Attn: Dave Greenwald
-25-
<PAGE>
Anthony Peter DeNunzio IRA
c/o Paine Webber as Custodian
425 North Martingale Road, Suite 1600
Schaumburg, Illinois 60173-2214
Attn: Dave Greenwald
Davies Family Irrevocable Trust
c/o Victor S. Faraci
Davies Family Irrevocable Trust
c/o Victor S. Faraci
500 West Central Road
Suite 102
Mount Prospect, IL 60056
Copies to: William A. Kummerer
Schwartz & Freeman
402 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Fax: 312/222-0800
If to WHI: Whittman-Hart, Inc.
311 South Wacker Drive, Suite 3500
Chicago, Illinois 60606-6618
Attn: Edward V. Szofer, President
Fax: 312/913-3050
Copies to: Whittman-Hart, Inc.
311 South Wacker Drive
Chicago, Illinois 60606-6618
Attn: David Shelow, Esq.
Fax: 312/913-6650
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
Attn: Neal J. White, P.C.
Fax: 312/984-3669
Any Party may give any notice, request, demand, claim or other communications
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any Party may change its
address by giving the other Parties notice in the manner herein set forth.
-26-
<PAGE>
12.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Illinois.
12.10. AMENDMENTS AND WAIVERS. The Parties may mutually amend any
provision of this Agreement at any time prior to the Closing Date. No
amendment or waiver of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the appropriate Parties. No waiver
by any Party of any misrepresentation or breach of warranty, covenant or
agreement hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent misrepresentation or breach of warranty, covenant or
agreement hereunder.
12.11. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified.
12.12. EXPENSES. Except as otherwise specifically set forth herein,
WHI will bear the costs and expenses (including legal fees and expenses) of
WHI and incurred in connection with this Agreement and the transactions
contemplated hereby, and WHI shall bear the following costs and expenses of
the Members and Four Points incurred in connection with this Agreement and
the transactions contemplated hereby: (i) legal and accounting expenses of
$202,248; (ii) the investment banking fees of AdMedia Partners, Inc. pursuant
to the June 18, 1999 letter agreement between Four Points and AdMedia; (iii)
a financial advisory fee to Doug Belzer of $120,000; and (iv) payments to the
individuals listed on Schedule 6.2(f) of $995,875. The Members shall bear all
of their other costs and expenses.
12.13. MEMBERS' REPRESENTATIVE. Michael J. DeNunzio, or if he shall be
unable or unwilling at any time to so serve, Peter Monkewicz (the
"Alternative Representative"), is hereby irrevocably appointed
attorney-in-fact, and authorized and empowered to act, for and on behalf of
any of all of the Members (with full power of substitution in the premises)
in connection with the indemnity provisions of Article VIII as they relate to
the Members generally, the Exchange Consideration Adjustment provisions of
SECTION 2.6, Article VII, the notice provisions of this Agreement, the
determination of the satisfaction or waiver of the Closing conditions of
Article VI and such other matters (other than any amendment or modification
of this Agreement) as are reasonably necessary for the consummation of the
transactions contemplated hereby (the above-named representative together
with the Alternate Representative being referred to herein as the "Members'
Representative"). By his execution hereof, Michael J. DeNunzio hereby accepts
such appointment and agrees to act as the Members' Representative hereunder.
WHI and its representatives and agents shall be entitled to rely on such
appointment and treat such Members' Representative as the duly appointed
attorney-in-fact of each Member. Each Member, by such Member's execution
hereof, confirms such appointment and authority and acknowledges and agrees
that such appointment is irrevocable and coupled with an interest, it being
understood that
-27-
<PAGE>
the willingness of WHI to enter into this Agreement is based, in part, on the
appointment of a representative to act on behalf of the Members. Each Member,
for such Member and for such Member's successors and assigns, hereby agrees
to indemnify the Members' Representative, and to hold the Members'
Representative harmless from, any and all actions and forbearances that the
Members' Representative may take in his capacity as such, except for such
actions and forbearances as constitute gross negligence or willful misconduct
on the part of the Members' Representative.
12.14. CIVIL LIABILITY UNDER RICO. The Parties hereby waive all rights
to pursue civil remedies to which they may be entitled or may become entitled
with respect to this Agreement and the transactions contemplated hereby
against the other Parties hereto under the Racketeer Influenced and Corrupt
Organization Act of 1970, as amended, including specifically any rights to
treble damages which may be available to them pursuant to 18 U.S.C. Section
1964(c).
12.15. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
-28-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
/s/ Michael J. DeNunzio
-------------------------------
Michael J. DeNunzio
/s/ Peter Monkewicz
-------------------------------
Peter Monkewicz
/s/ Pierre St-Jacques
-------------------------------
Pierre St-Jacques
Victor S. Faraci IRA
By: Paine Webber as Custodian
/s/ Dave Greenwald
----------------------------
Michael Anthony DeNunzio IRA
By: Paine Webber as Custodian
/s/ Dave Greenwald
----------------------------
Anthony Peter DeNunzio IRA
By: Paine Webber as Custodian
/s/ Dave Greenwald
----------------------------
Davies Family Irrevocable Trust
By: /s/ Linda Callero
----------------------------
Trustee
Whittman-Hart, Inc.
By: /s/ Robert F. Bernard
----------------------------
-29-
<PAGE>
BENEFICIARIES
By: /s/ Michael Anthony DeNunzio
----------------------------
Michael Anthony DeNunzio
By: /s/ Victor S. Faraci
----------------------------
Victor S. Faraci
By: /s/ Anthony Peter DeNunzio
----------------------------
Anthony Peter DeNunzio
-30-
<PAGE>
DATED November 27, 1999
MARK ROBINSON AND OTHERS
(THE "VENDORS")
WHITTMAN-HART INC.
(THE "PURCHASER")
MERGER AGREEMENT
MCDERMOTT, WILL & EMERY
7 BISHOPSGATE
LONDON
EC2N 3AQ
TEL: 0207 577 6900
FAX: 0207 577 6950
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Interpretation . . . . . . . . . . . . . . . . . . . . . .2
2. Sale of shares . . . . . . . . . . . . . . . . . . . . . .6
3. Consideration. . . . . . . . . . . . . . . . . . . . . . .6
4. Completion . . . . . . . . . . . . . . . . . . . . . . . .7
5. Warranties . . . . . . . . . . . . . . . . . . . . . . . .8
6. Confidentiality Undertaking. . . . . . . . . . . . . . . 11
7. Announcements. . . . . . . . . . . . . . . . . . . . . . 12
8. Registration of Consideration Shares . . . . . . . . . . 13
9. Shareholders Agreement . . . . . . . . . . . . . . . . . 13
10. Provisions relating to this Agreement. . . . . . . . . . 15
11. Law and Jurisdiction . . . . . . . . . . . . . . . . . . 18
SCHEDULE 1 : THE VENDORS . . . . . . . . . . . . . . . . . . . 20
SCHEDULE 2 : PART I - THE COMPANY. . . . . . . . . . . . . . . 29
SCHEDULE 2 : PART II - THE SUBSIDIARIES. . . . . . . . . . . . 30
SCHEDULE 3 : WARRANTIES. . . . . . . . . . . . . . . . . . . . 32
SCHEDULE 4 : TAX . . . . . . . . . . . . . . . . . . . . . . . 55
SCHEDULE 5 : PARTICULARS OF PREMISES . . . . . . . . . . . . . 69
SCHEDULE 6 : EARN OUT PAYMENTS . . . . . . . . . . . . . . . . 72
SCHEDULE 7 : WARRANTORS' AND PURCHASER'S PROTECTION. . . . . . 77
</TABLE>
<PAGE>
THIS AGREEMENT is dated November 27, 1999 and made
BETWEEN:
(1) THE PERSONS whose names and addresses are as set out in the first column of
Schedule 1 (the "VENDORS"); and
(2) WHITTMAN-HART INC. (the "PURCHASER"), a company organised under the laws of
Delaware having its principal place of business at 311 South Wacker Drive,
Suite 3500, Chicago, Illinois.
BACKGROUND:
(A) The Vendors wish to merge the operations of Fulcrum Solutions Limited and
its subsidiaries with the UK operations of the Purchaser.
(B) The Vendors and the Purchaser wish the merger to be accomplished by the
acquisition of the entire issued A shares, B shares, D Shares and E Shares
in the share capital of Fulcrum Solutions Limited in return for common
stock in the Purchaser and cash and subject to the terms of this Agreement.
(C) The Purchaser will also acquire all the common stock in Fulcrum Solutions
Inc. not owned by the Company under a separate share sale agreement to be
entered into on the date hereof.
(D) A further US$497,589 will be applied to purchase 29,653 options in
Whittman-Hart, Inc. at US$16.78 per option for the benefit of the existing
optionholders of the Company.
THE PARTIES AGREE THAT:
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement where the context admits:
"AFFILIATE" means, in relation to a body corporate, any subsidiary or
holding company of such body corporate, and any subsidiary of any such
holding company for the time being.
"AGREED FORM" means, in relation to any document, a document in the terms
signed or initialled by or on behalf of the Purchaser and the
Representatives for identification.
"AUDITED ACCOUNTS" means the audited consolidated balance sheet of the
Company and the Subsidiaries made up as at the Balance Sheet Date and the
audited consolidated profit and loss account of the Company and the
Subsidiaries in respect of
2
<PAGE>
the financial year ended on the Balance Sheet Date including, in each case,
the notes thereto and the directors' report and auditors' report.
"BALANCE SHEET DATE" means 30 September 1999.
"BASE CONSIDERATION" shall have the meaning given in clause 3:
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which banks
are open for ordinary banking business in London.
"COMPANY" means Fulcrum Solutions Limited a company registered in England
and Wales under number 03331163 and incorporated on 11 March 1997 as a
private company limited by shares under the Companies Acts.
"COMPANIES ACTS" means statutes from time to time in force concerning
companies including (without limitation) the Companies Act 1985, the
Companies Act 1989, Part V of the Criminal Justice Act 1993 and the
Companies Consolidation (Consequential Provisions) Act 1985.
"COMPLETION" means completion of the sale and purchase of the Sale Shares
in accordance with clause 5.
"COMPLETION DATE" means 27th November 1999.
"CONSIDERATION" means the consideration to be paid for the Sale Shares in
accordance with clause 3.1.
"CONSIDERATION SHARES" means the unregistered common stock in the Purchaser
to be issued to the Vendors in accordance with clause 4 and/or schedule 6;
"DIRECTORS" means in relation to the Company or any of the Subsidiaries,
its directors or officers, as the case may be named in schedule 2 and
"CONTINUING DIRECTORS" or "CONTINUING OFFICERS" means the persons named in
part I of schedule 2 as continuing directors or officers of the Company
respectively following Completion.
"DISCLOSURE LETTER" means the letter dated the date hereof written and
delivered by or on behalf of the Warrantors to the Purchaser in Agreed
Form.
"EARN-OUT PAYMENTS" means the amounts calculated and paid to the Vendors in
accordance with the provisions of schedule 6.
"ENCUMBRANCE" includes any interest or equity of any person (including any
right to acquire, option or right of pre-emption) any mortgage, charge,
pledge, lien, assignment, hypothecation, security interest (including any
created by law), title retention or other security agreement or arrangement
and any rental, hire purchase, credit sale, or other agreement for payment
on deferred terms.
3
<PAGE>
"FSI" means Fulcrum Solutions Inc. a company organised under the laws of
Delaware having its principal place of business at 885 Third Avenue, New
York, New York 10022.
"PREMISES" means the land and premises particulars of which are set out in
schedule 5.
"PURCHASER'S DISCLOSURE LETTER" means the letter dated the date hereof
written and delivered by or on behalf of the Purchaser to the Vendors in
Agreed Form.
"PURCHASER'S GROUP" means the Purchaser and each of its Affiliates
including, after Completion, the Company and each of the Subsidiaries.
"PURCHASERS' SOLICITORS" means McDermott, Will & Emery of 7 Bishopsgate,
London, EC2N 3AQ.
"RETENTION" shall have the meaning given in clause 5.5.
"RELEVANT CLAIM" shall have the meaning given in Schedule 7.
"REPRESENTATIVES" shall mean the persons referred to in clause 10.9.2 or
such other persons notified to the Purchaser in accordance with clause
10.9.3.
"SALE SHARES" means the shares to be bought and sold pursuant to clause 2.1
being all the issued shares in the capital of the Company.
"STOCK VALUE EQUIVALENT" means, as regards the Base Consideration 337,262
Consideration Shares, as regards the Retention 16,340 Consideration Shares
and as regards the Earn Out Payments such number of Consideration Shares
which when multiplied by the average of the closing price for common stock
in the Purchaser for fifteen (15) Business Days up to and including the
fifth Business Day prior to the relevant date as at which the amount is
determined that equals the amount due to be paid and satisfied by the issue
of Consideration Shares under this Agreement.
"SUBSIDIARIES" means the companies details of which are set out in part II
of schedule 2.
"TAX DEED" means the deed in Agreed Form relating to taxation, to be
executed and delivered on the date of this Agreement.
"VENDOR DIRECTORS" means those persons nominated by the Vendors as
directors pursuant to paragraph 8 of schedule 6.
"VENDORS' SOLICITORS" means Wilde Sapte of 1 Fleet Place, London EC4M 7WS.
"WARRANTIES" means the warranties by the Vendors implied by the words "with
full title guarantee" in clause 2.1 and the Warranties set out in schedules
3 and 4, and all other warranties, covenants and indemnities contained in
this Agreement or implied by law, but shall not include any of the
warranties contained in the Tax Deed.
4
<PAGE>
"WARRANTORS" means Mark Robinson, Steven Anderson, David Kilpatrick and
Daniel Keating.
1.2 CONSTRUCTION OF CERTAIN REFERENCES
In this Agreement, where the context admits:
1.2.1 words and phrases the definitions of which are contained or
referred to in Part XXVI Companies Act 1985 shall be construed as
having the meanings thereby attributed to them;
1.2.2 references to, or to any provision of, any treaty, statute,
directive, regulation, decision, order, instrument, by-law, or
any other law of, or having effect in, any jurisdiction ("LAWS")
shall be construed also as references to all other Laws made
under the Law referred to, and to all such Laws as amended,
re-enacted, consolidated or replaced or as their application is
modified by other Laws as at the date of this Agreement;
1.2.3 where any statement is to the effect that the Warrantors or the
Purchaser are not aware of any matter or circumstance, or is a
statement qualified by the expression "SO FAR AS THE WARRANTORS
ARE AWARE", "TO THE BEST OF THE WARRANTORS' KNOWLEDGE AND BELIEF"
or "SO FAR AS THE PURCHASER IS AWARE" any similar expression,
that statement shall be deemed to include an additional statement
that it has been made after due and careful enquiry;
1.2.4 references to clauses and schedules are references to clauses of
and schedules to this Agreement, references to paragraphs are,
unless otherwise stated, references to paragraphs of the schedule
in which the reference appears, and references to this Agreement
include the schedules;
1.2.5 references to the singular shall include the plural and vice
versa and references to the masculine, the feminine and the
neuter shall include all such genders;
1.2.6 "PERSON" includes any individual, partnership, body corporate,
corporation sole or aggregate, state or agency of a state, and
any unincorporated association or organisation, in each case
whether or not having separate legal personality; and
1.2.7 "COMPANY" includes any body corporate.
1.2.8 references to the Vendors or Warrantors include a reference to
each of them.
1.3 JOINT AND SEVERAL LIABILITIES
All warranties, representations, indemnities, covenants, agreements and
obligations given or entered into by more than one person in this Agreement
are unless otherwise expressed given or entered into jointly and severally.
5
<PAGE>
1.4 HEADINGS
The headings and sub-headings are inserted for convenience only and shall
not affect the construction of this Agreement.
1.5 SCHEDULES
Each of the schedules shall have effect as if set out herein.
2. SALE OF SHARES
2.1 SALE AND PURCHASE
Subject to the terms of this Agreement, each of the Vendors shall sell with
full title guarantee, free from all Encumbrances and together with all
rights now or hereafter attaching thereto, the number of Sale Shares set
opposite his name in the second column of schedule 1, and the Purchaser
shall purchase all such Sale Shares, consisting of 1,742,997 A Shares of 1p
each, 58,911 B shares of 10p each, 333,480 D Shares of 1p each and
23,343,600 E Shares of 0.01p each.
2.2 NO SALE OF PART ONLY
Neither the Vendors nor the Purchaser shall be obliged to complete the sale
and purchase of any of the Sale Shares unless the sale and purchase of all
the Sale Shares is completed simultaneously.
2.3 WAIVER OF PRE-EMPTION RIGHTS
Each of the Vendors hereby waives any pre-emption rights he may have
relating to the Sale Shares whether conferred by the Company's Memorandum
and Articles of Association or otherwise.
3. Consideration
3.1 AMOUNT
The total consideration for the Sale Shares shall be the sum of:
3.1.1 US$1,935,385 in cash and 337,262 Consideration Shares to be
issued under Clause 4.4 ("Base Consideration");
3.1.2 the 16,340 Consideration Shares to be issued, in accordance with
clause 5.5 ("Retention"); and
3.1.3 the Earn-Out Payments
6
<PAGE>
Such consideration shall be apportioned among the Vendors, unless otherwise
specified, in accordance with the appropriate percentage as set out in
schedule 1.
4. COMPLETION
4.1 DATE AND PLACE OF COMPLETION
Completion shall take place at the offices of the Vendors' Solicitors on
the Completion Date.
4.2 VENDORS' OBLIGATIONS
On Completion the Vendors shall subject to the due performance by the
Purchaser of its obligations under clause 4.3:
4.2.1 deliver to the Purchaser:
(a) transfers of the Sale Shares duly executed by the registered
holders thereof in favour of the Purchaser or its nominees
together with the relative share certificates or an indemnity in
respect of any missing certificates;
(b) such waivers or consents as the Purchaser may require to enable
the Purchaser or its nominees to be registered as holders of the
Sale Shares; and
(c) certified copy powers of attorney in the Agreed Form;
4.2.2 procure that the Directors (other than the Continuing Directors)
and the secretary or secretaries of the Company and the
Subsidiaries retire from all their offices with the Company and
the Subsidiaries, each delivering to the Purchaser a deed (in the
Agreed Form) made out in favour of the Company and/or the
Subsidiaries acknowledging that he has no claim outstanding for
compensation or otherwise;
4.2.3 deliver to the Purchaser as agent for the Company and the
Subsidiaries other than FSI all the statutory and other books of
the Company and each of the Subsidiaries (other than FSI) and
its/their certificate(s) of incorporation, any certificates of
incorporation on change of name and common seal(s), certificates
or indemnities in respect of all issued shares in the capital of
each of the Subsidiaries; and
4.2.4 deliver the Tax Deed duly executed by each of the Vendors;
4.2.5 procure board meetings of the Company and of each of the
Subsidiaries other than FSI to be held at which there shall be:
7
<PAGE>
(a) passed a resolution to approve, in the case of the Company, the
transfers of the Sale Shares and (subject only to due stamping)
to register, in the register of members, the Purchaser as the
holder of the Sale Shares;
(b) appointed as directors and/or secretary such persons as the
Purchaser may nominate, such appointments to take effect
immediately; and
(c) tendered and accepted the resignations and acknowledgements of
the directors and secretaries referred to in clause 4.2.2 each
such acceptance to take effect at the close of the meeting.
4.3 PURCHASER'S OBLIGATIONS
On Completion the Purchaser shall:
4.3.1 pay such part of the Base Consideration to be satisfied in cash
to the Vendors as set out in schedule 1 for the Sale Shares as
provided by clause 3, by way of telegraphic transfer of funds for
the same day value to the client account of the Vendors'
Solicitors (Bank: National Westminster plc, Account Number:
01759108 and Sort Code: 50-00-00); and
4.3.2 deliver the Tax Deed duly executed by the Purchaser.
4.4 CONSIDERATION SHARES
The Purchaser shall as soon as practicable, in any event no later than ten
(10) Business Days after the Completion Date procure the issue of the
Consideration Shares in respect of the Base Consideration to each of the
Vendors, in accordance with the amounts set out in schedule 1.
4.5 VENDOR DIRECTORS
The Purchaser shall as soon as practicable after completion procure that
the Vendor Directors are appointed to the board of Whittman-Hart Limited.
5. WARRANTIES
5.1 GENERAL
5.1.1 The Vendors hereby severally warrant and represent to and for the
benefit of the Purchaser the Warranties as set out in paragraphs
3.1 and 3.2 of Schedule 3.
5.1.2 The Warrantors hereby jointly and severally warrant to the
Purchaser in the terms of the Warranties subject to the
provisions of this Agreement and in particular the exclusions and
limitations in schedule 7.
8
<PAGE>
5.1.3 Any sum payable by the Warrantors or the Vendors in respect of
any breach of the Warranties shall be treated as a reduction in
the Consideration.
5.2 DISCLOSURE
The Warranties are given subject to facts and matters fairly disclosed in
or by this Agreement or in the Disclosure Letter with sufficient details to
identify the nature and scope of the matter disclosed and the Purchaser
shall accordingly have no claim in respect of any of the Warranties in
relation to any fact or matter so disclosed.
5.3 WARRANTIES TO BE INDEPENDENT
Each of the Warranties shall be separate and independent and, save as
expressly provided, shall not be limited by reference to any other Warranty
or anything in this Agreement.
5.4 PURCHASER'S REMEDIES
5.4.1 The parties acknowledge that they have not been induced to enter
into this Agreement by, and that they do not in connection with
this Agreement or its subject matter rely on, any representation,
warranty, promise or assurance by the each other or any other
person save for those contained in this Agreement and the Tax
Deed.
5.4.2 Nothing in this clause 5.4 shall exclude or affect any right or
remedy available to either party in respect of fraud.
5.5 RETENTION
5.5.1 The amount of the Retention shall:
(a) be released to the Warrantors by issue of the Stock Value
Equivalent of US$690,283 being 16,340 Consideration Shares on 31
March 2001 provided that no Relevant Claim is notified to the
Warrantors in accordance with the provisions of schedule 7; or
(b) be reduced by the amount of any Relevant Claim notified in
accordance with the provisions of schedule 7 to the Warrantors
and released to the Warrantors on 31 March 2001; or
(c) be extinguished but without prejudice to the rights of the
Purchaser in respect of its rights and remedies under this
Agreement if during the period prior to 31 March 2001 a Relevant
Claim in excess of the Retention is notified to the Warrantors in
accordance with the provisions of schedule 7.
5.5.2 If the liability of the Warrantors (as the same is defined in
paragraph 2.3 of schedule 7) in respect of a Relevant Claim for
which the whole or part of the Retention is reduced or
extinguished in accordance with Clause 5.5.1, is:
9
<PAGE>
(a) less than the amount by which the Retention is reduced, the
Purchaser shall release to the Warrantors the difference between
the Retention received and the liability of the Warrantors; or
(b) greater than the amount by which the Retention is reduced, the
Warrantors shall pay the Purchaser the difference between the
Retention received and the liability of the Warrantors.
5.6 INDEMNITY
5.6.1 Clause 5.2 shall not apply to this clause 5.6.
5.6.2 In the event that a Relevant Claim arises or the Company, its
Subsidiaries or the Purchaser suffers any loss as a result of:
(a) a breach or breaches of the Warranty referred to in paragraphs 4,
8.1 and 8.5 of schedule 3;
(b) any dividend or other distribution having been declared or paid
other wise than in accordance with the memorandum or articles of
association of the Company or any of its subsidiaries and/or in
accordance with the Companies Acts;
(c) the litigation or dispute with or claims made by Goldstar
Publications Limited and Euphony, insofar as any amounts finally
settled or in respect of which judgment or order is given, exceed
any professional indemnity insurance
the Warrantors shall jointly and severally indemnify and hold harmless
the Purchaser from and against any and all loss, damage, levy, fine,
penalty, costs, expenses liability (including legal costs) caused by
or arising from or incurred as a result of such breach, acts or
omissions by the Company or any of its Subsidiaries.
5.6.3 Notwithstanding the provisions of schedule 7, the Warrantors
shall jointly and severally indemnify and hold harmless the
Purchaser against 50 per cent. of any and all loss, damage, levy,
fine, penalty, costs (including legal costs), expenses or
liability caused by or arising from or incurred as a result of
any breach, act or omission or failure in respect of the law
applicable to and terms of including maintenance of insurance in
respect thereof all "welfare benefit plans" (as defined in
section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), "employee pension benefit plans" (as
defined in section 3(2) of ERISA) bonus, profit sharing, deferred
compensation incentive or other compensation plans or agreements,
and other employee fringe benefit plans whether funded or
unfunded, qualified or unqualified maintained or contributed to
for the benefit of any of the employees of FSI including, for the
avoidance of doubt, the 401(k) plan.
10
<PAGE>
5.6.4 The indemnities set out in this clause 5.6 shall be satisfied in
the first place by reducing or extinguishing the Retention.
5.7 WARRANTIES BY PURCHASER
5.7.1 The Purchaser warrants to each of the Vendors as follows:
(a) the Purchaser has the requisite power and authority to enter into
and perform this Agreement;
(b) this Agreement will, when executed, constitute binding
obligations of the Purchaser in accordance with their respective
terms; and
(c) subject to the provisions of schedule 7, so far as the Purchaser
is aware there is nothing material in the context of this
transaction affecting the business of Whittman-Hart Limited that
would cause a reasonable vendor not to have entered into this
Agreement on the terms of the Earn Out provisions set out in
schedule 6.
5.7.2 PURCHASER'S DISCLOSURE
The Purchasers' warranty referred to in clause 5.7.1(c) is given
subject to facts and matters fairly disclosed in or by this
Agreement or in the Purchaser's Disclosure Letter with sufficient
details to identify the nature and scope of the matter disclosed
and the Vendors shall accordingly have no claim in respect of
such warranty in relation to any fact or matters so disclosed.
6. Confidentiality Undertaking
6.1 CONFIDENTIALITY
Subject to clause 6.2 and to clause 7, each party:-
6.1.1 shall treat as strictly confidential information obtained or
received by it as a result of negotiating, entering into or
performing its obligations under this Agreement which relates to
the negotiation of, or the provisions or subject matter of, this
Agreement or to any other party ("CONFIDENTIAL INFORMATION"); and
6.1.2 shall not, except with the prior written consent of each other
party (which shall not be unreasonably withheld or delayed),
publish or otherwise disclose to any person any Confidential
Information.
6.2 PERMITTED DISCLOSURES
Clause 6.1 shall not apply if and to the extent that the party disclosing
Confidential Information can demonstrate that:
11
<PAGE>
6.2.1 such disclosure is required by law or by any securities exchange
or regulatory or governmental body having jurisdiction over it (
including but not limited to the Securities and Exchange
Commission, the Panel on Take-overs and Mergers and the Serious
Fraud Office) and whether or not the requirement has the force of
law; or
6.2.2 the Confidential Information concerned was lawfully in its
possession (as evidenced by written records) prior to its being
obtained or received as described in clause 6.1.1; or
6.2.3 the Confidential Information concerned has come into the public
domain other than through its fault or the fault of any person to
whom such Confidential Information has been disclosed in
accordance with clause 6.1.2.
6.3 CONTINUANCE OF RESTRICTIONS
The restrictions contained in this clause 6 shall survive Completion and
shall continue without limit of time.
7. ANNOUNCEMENTS
7.1 RESTRICTIONS
Subject to clauses 7.2 and 7.4, and whether or not any restriction
contained in clause 6 applies, no party to this Agreement shall make any
announcement, (including, without limitation any communication to the
public, to any customers or suppliers of the Company, or to all or any of
the employees of the Company) concerning the provisions or subject matter
of this Agreement or containing any information about any other party
without the prior written approval of the others (which shall not be
unreasonably withheld or delayed).
7.2 PERMITTED ANNOUNCEMENTS
Clause 7.1 shall not apply if and to the extent that such announcement is
required by law or by any securities exchange or regulatory or governmental
body having jurisdiction over it (including but not limited to the
Securities and Exchange Commission, the Panel on Takeovers and Mergers and
the Serious Fraud Office) and whether or not the requirement has the force
of law and provided that any such announcement shall be made only after
consultation with the other parties.
7.3 CONTINUANCE OF RESTRICTIONS
The restrictions contained in this clause 7 shall survive Completion and
shall continue without limit of time.
7.4 ANNOUNCEMENTS TO CUSTOMERS AND SUPPLIERS
12
<PAGE>
The Vendors and the Purchaser shall as soon as practicable after Completion
procure that a joint announcement in the Agreed Form of the sale and
purchase of the Sale Shares is made to the customers and suppliers of the
Company and each Subsidiary.
13
<PAGE>
8. REGISTRATION OF CONSIDERATION SHARES
8.1 Consideration Each issue of the Consideration Shares whether in
satisfaction of the Base, Retention or each Earn Out Payment shall not be
registered (and shall be exempt from registration) under the United States
Securities Act of 1933, as amended (the "Securities Act").
8.2 Each Vendor acknowledges that the Consideration Shares have not been
registered under the Securities Act and are being acquired for investment
purposes and without a view to distribution thereof (as the terms
"investment" and "distribution" are recognised under the Securities Act).
8.3 Each Vendor who is a United States resident or citizen covenants with the
Purchaser that he will not attempt to sell or otherwise dispose of any of
the Consideration Shares issued unless the sale or disposal is registered
under the Securities Act or is exempt from registration thereunder. Each
Vendor who is neither a United States resident nor United States citizen
recognises that the Consideration Shares are being issued to him in
reliance on the exemption afforded by Regulation S of the Rules and
Regulations under the Securities Act and that such shares may not be
offered or sold in the United States or to US persons (as defined in
Regulations) for a period of 12 months from the date of issue or until
prior registration of the Consideration Shares is effected under the
Securities Act or an exemption from such registration is available.
8.4 The Purchaser shall at its expense use its reasonable endeavours to cause
the registration of the Consideration Shares under Form S-3 under the
Securities Act as soon as practicable after the issue of the Consideration
Shares to the Vendors and maintain such registration for a period of one
year from their issue provided that the Purchaser shall be entitled to
delay any such filing and the use by the Purchaser of the prospectus or
Registration Statement (as defined in the Securities Act) if it is
reasonably determined that such filing or use would impede, delay or
interfere with any significant financing, acquisition, or other transaction
involving the Purchaser or require disclosure of material information which
the Purchaser has a bona fide business purpose for preserving
confidentiality.
8.5 Subject to clause 8.4, in the event that a Vendor wishes to sell or
otherwise dispose of any Consideration Shares, he shall only do so through
a broker nominated by the Purchaser from time to time.
8.6 The certificates representing the Consideration Shares shall bear a legend
reflecting the limitations and restrictions set out in this clause 8 and
the Purchaser may in accordance with the Securities Act, prevent or halt
any transfer by placing stop orders with its transfer agents with respect
to such certificates.
9. SHAREHOLDERS AGREEMENT
David Kilpatrick, Daniel Keating, Mark Robinson and Steven Anderson hereby
agree that the Shareholders Agreement made among themselves relating to the
business of the Company is hereby terminated and any antecedent or future
claims that any of
14
<PAGE>
them may have as shareholders of the Company or otherwise under the
agreement against each other or the Company is hereby waived.
15
<PAGE>
10. PROVISIONS RELATING TO THIS AGREEMENT
10.1 SUCCESSORS AND ASSIGNS
10.2 This Agreement shall be binding upon and enure for the benefit of the
successors of the parties but shall not be assignable save that the
Purchaser may assign this Agreement to any member within the Purchaser's
Group.
10.3 WHOLE AGREEMENT AND VARIATIONS
10.3.1 This Agreement, together with any documents referred to in it,
constitutes the whole agreement between the parties relating to
its subject matter and supersedes and extinguishes any prior
drafts, agreements, and undertakings, whether in writing or oral,
relating to such subject matter.
10.3.2 No variation of this Agreement shall be effective unless made in
writing and signed by each of the parties.
10.4 AGREEMENT SURVIVES COMPLETION
The Warranties and all other provisions of this Agreement, in so far as the
same shall not have been performed at Completion, shall remain in full
force and effect notwithstanding Completion.
10.5 RIGHTS ETC CUMULATIVE AND OTHER MATTERS
10.5.1 The rights, powers, privileges and remedies provided in this
Agreement are cumulative and are not exclusive of any rights,
powers, privileges or remedies provided by law or otherwise.
10.5.2 No failure to exercise nor any delay in exercising any right,
power, privilege or remedy under this Agreement shall in any way
impair or affect the exercise thereof or operate as a waiver
thereof in whole or in part.
10.5.3 No single or partial exercise of any right, power, privilege or
remedy under this Agreement shall prevent any further or other
exercise thereof or the exercise of any other right, power,
privilege or remedy.
10.6 INVALIDITY
If any provision of this Agreement shall be held to be illegal, void,
invalid or unenforceable under the laws of any jurisdiction, the legality,
validity and enforceability of the remainder of this Agreement in that
jurisdiction shall not be affected, and the legality, validity and
enforceability of the whole of this Agreement in any other jurisdiction
shall not be affected.
16
<PAGE>
10.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, which shall
together constitute one agreement. Any party may enter into this Agreement
by signing any such counterpart.
10.8 COSTS
Save as otherwise expressly provided herein, each party shall bear its own
costs arising out of or in connection with the preparation, negotiation and
completion of the sale and purchase as set out in this Agreement.
10.9 NOTICES
10.9.1 Any notice or other communication required to be given under this
Agreement or in connection with the matters contemplated by it
shall, except where otherwise specifically provided, be in
writing in the English language and shall be addressed as
provided in clause 10.9.2 and may be:
(a) personally delivered, in which case it shall be deemed to have
been given upon delivery at the relevant address; or
(b) if within the United Kingdom, sent by first class pre-paid post,
in which case it shall be deemed to have been given two (2)
Business Days after the date of posting; or
(c) if from or to any place outside the United Kingdom, sent by
pre-paid priority airmail, in which case it shall be deemed to
have been given seven (7) Business Days after the date of
posting; or
(d) sent by fax, in which case it shall be deemed to have been given
when despatched, subject to confirmation of uninterrupted
transmission by a transmission report provided that any notice
despatched by fax after 17.00 hours (at the place where such fax
is to be received) on any day shall be deemed to have been
received at 09.00 on the next Business Day.
10.9.2 The addresses and other details of the parties referred to in
clause 10.9.1 are, subject to clause 10.9.3:
FOR THE VENDORS:
To the Representatives:
Name: Steven Anderson
Address: 56 Gordon Avenue, Stanmore, Middlesex
17
<PAGE>
HA7 3QH
Name: David Kilpatrick
Address: 41 Colet Gardens, Hammersmith, London
W14 9DL
Name: Daniel Keating
Address: 2A Dorset Road, London SW19 3HA
Name: Mark Robinson
Address: 107 Nork Way, Banstead, Surrey SM7 1HN
FOR THE PURCHASER:
Name: Whittman-Hart Inc.
For the attention of: David Shelow
Address: 311 South Wacker Drive, Suite 3500, Chicago,
Illinois 60606-6618
Fax number: (+1) 312 602 6152
With copies to:
Name: Whittman-Hart Limited
For the attention of: Ken Kinsella
Address 1 Riverside, Manbre Road, London W6 9WA
Fax Number: 0208 741 0046
10.9.3 Any party to this Agreement may notify the other parties of any
change to its address or other details specified in clause 10.9.2
provided that such notification shall only be effective on the
date specified in such notice or five (5) Business Days after the
notice is given, whichever is later.
10.9.4 For the avoidance of doubt, any communication required to be
given to any or all of the Vendors shall be deemed to be validly
given if given to the Representatives in accordance with clause
10.9.1 and each Vendor to which any communications relates shall
be deemed to have received such communications on the 5th
Business Day after the communication is received by the
Representatives.
18
<PAGE>
10.9.5 Without prejudice to clause 10.9.4, upon receipt of any notice or
other communication hereunder, the Representatives who have
received the same shall confer with and appoint one of their
number to pass the said notice or communication to each of the
other Vendors on the day of receipt of the same by the
Representatives or as soon as practicable thereafter.
10.9.6 Without prejudice to clause 10.9.4, if any Vendor shall have
occasion to address any notice or other communication to the
Purchaser, he or she shall discuss the same with the
Representatives who shall nominate one of their number to give
such notice or communication to the Purchaser.
10.10 FURTHER ASSURANCE
At any time after completion, each Vendor shall, at the request of the
Purchaser, execute or procure the execution of such documents and do or
procure the doing of such acts and things as the Purchaser may lawfully and
reasonably require for the purpose of vesting the Sale Shares in the
Purchaser or its nominees and giving to the Purchaser the full benefit of
all the provisions of this Agreement.
11. LAW AND JURISDICTION
11.1 ENGLISH LAW
This Agreement shall be governed by, and construed in accordance with,
English law.
11.2 JURISDICTION
In relation to any legal action or proceedings to enforce this Agreement or
arising out of or in connection with this Agreement ("PROCEEDINGS") each of
the parties irrevocably submits to the jurisdiction of the English courts
and waives any objection to Proceedings in such courts on the grounds of
venue or on the grounds that the Proceedings have been brought in an
inconvenient forum.
11.3 PROCESS AGENT
The Purchaser appoints Whittman-Hart Limited of 1 Riverside, Manbre Road,
London W6 9WA as its process agent to receive on its behalf service of
process in any proceedings in England. Service upon the process agent shall
be good service upon the Purchaser whether or not it is forwarded to and
received by the Purchaser. If for any reason the process agent ceases to
be able to act as process agent, or no longer has an address in England,
the Purchaser irrevocably agrees to appoint a substitute process agent with
an address in England acceptable to the Representatives and to deliver to
the Representatives a copy of the substitute process agent's acceptance of
that appointment within twenty (20) Business Days. In the event that the
Purchaser fails to appoint a substitute process agent, it shall be
effective service for the Vendors to serve the process upon the last known
address in England of the last known process
19
<PAGE>
agent for the Purchaser notified to the Representatives, notwithstanding
that such process agent is no longer found at such address or has ceased
to act.
AS WITNESS the hands of the duly authorised representatives of the parties on
the date first before written.
20
<PAGE>
SCHEDULE 1 : THE VENDORS
<TABLE>
<CAPTION>
Names and Addresses of No. of Sale Shares Appropriate Base Consideration Retention
Vendors held Percentage (%) Amount
Gross Cash Gross Consideration (no. of
Shares Consideration
Shares)
(US$)
<S> <C> <C> <C> <C> <C>
Mark Robinson 416,630 A shares 19.806106 396,122 72,372 4,085
107 Nork Way 83,370 D shares
Banstead 5,835,900 E shares
Surrey SM7 1HN
Steven Anderson 416,630 A shares 19.806106 396,122 72,372 4,085
56 Gordon Avenue 83,370 D shares
Stanmore 5,835,900 E shares
Middlesex HA7 3QH
David Kilpatrick 416,630 A shares 19.806106 396,122 72,372 4,085
41 Colet Gardens 83,370 D shares
Hammersmith 5,835,900 E shares
London W14 9DL
Daniel Keating 416,630 A shares 19.806106 396,122 72,372 4,085
2A Dorset Road 83,370 D shares
London SW19 3HA 5,835,900 E shares
21
<PAGE>
Tony J Batting 1,000 B shares 0.246395 4,928 900
2 Foxgroves
Walton on Thames
KT12 2AT
Zag Asghar 1,000 B shares 0.246395 4,928 900
Wootton Grange Farmhouse
Warwick Road
Kenilworth
Warwickshire CV8 1FE
Philip Brine 5,000 B shares 1.231976 24,640 4,502
Brook House, 3 Plowden Park
Aston Rowant
Oxfordshire OX9 5SX
Desmond Butcher 1,500 B shares 0.369593 7,392 1,351
7 Park Road
Brentwood
Essex CM14 4TX
Fiona Cannons 1,500 B shares 0.369593 7,392 1,351
2 Foxgroves
Walton on Thames
Surrey KT12 2AT
22
<PAGE>
Nicholas Garnett 5,000 B shares 1.231976 24,640 4,502
Holly Cottage
106 Brighton Road
Godalming
Surrey GU7 1PL
Sean Hoban 5,000 B shares 1.231976 24,640 4,502
19 Durham Road
East Finchley
London N2 9DP
Xerxes Hodivala 5,257 B shares 1.295299 25,906 4,734
15 Heathfield North
Twickenham
Middlesex TW2 5TR
Roger Jones 2,000 B shares 0.492790 9,856 1,801
4 Litchfield Way
Onslow
Guildford
Surrey GU2 5QL
23
<PAGE>
Rukash Kumar 3,000 B shares 0.739185 14,784 2,701
22 Home Farm Close
Thames Ditton
Surrey KT7 0HZ
Jane Marsh 1,500 B shares 0.369593 7,392 1,351
Flat 2, 5 Cranes Park
Surbiton
Surrey KT5 8AB
Ben Nicholson 3,000 B shares 0.739185 14,784 2,701
Dutch Barge "Anny"
16 South Wharf Road
London W2 1PQ
Gary Piper 1,500 B shares 0.369593 7,392 1,351
51 Stanwell New Road
Staines
Middlesex TW18 4HY
Geoff Pople 5,444 B shares 1.341375 26,828 4,900
8 Bective Road
Putney
London SW15 2QA
24
<PAGE>
David Scott 5,000 B shares 1.231976 24,640 4,502
23 Chiltern Avenue
Amersham
Buckinghamshire HP6 5AE
Kevin Sulley 3,000 B shares 0.739185 14,784 2,701
36 Almond Close
Barkham
Wokingham
Berkshire RG41 4UU
Ryan J Ward 3,000 B shares 0.739185 14,784 2,701
January Cottage
217 Courthouse Road
Maidenhead
Berkshire SL6 6HP
Rachi Weerasinghe 2,000 B shares 0.492790 9,856 1,801
27 Rushett Road
Long Ditton
Surrey KT6 0UX
Anthony Woods 2,000 B shares 0.492790 9,856 1,801
51b St Giles
Oxford OX1 3LU
25
<PAGE>
Stephen Graham 2,929 A shares 0.136721 2,734 500
69 Balerno Road 84 B shares
Balerno
Edinburgh EH14 7GB
David Hope 5,859 A shares 0.273729 5,474 1000
22 Hillview 169 B shares
Blackhall
Edinburgh EH4 2AF
Stewart Gabriel 4,394 A shares 0.205348 4,106 751
15 Davidson Road 127 B shares
Craigleith
Edinburgh EH4 2PE
Gary Atkinson 1282 A shares 0.059900 1,198 219
44 Old Kiln Road 37 B shares
Grotton
Saddleworth
Oldham OL4 5RZ
26
<PAGE>
Timothy A Buckley 916 A shares 0.042691 854 156
18 Helmshore Road 26 B shares
Holcombe
Bury
Lancashire BL8 4PN
David Carrighan 45,801 A shares 2.141492 42,830 7,825
The Barn 1,328 B shares
Shepcroft Lane
Stretton
Warrington
Cheshire
Mark Clewett 2,748 A shares 0.128319 2,566 468
11 Compton Road 79 B shares
Buxton
Derbyshire SK17 9DN
Karen A Edwards 916 A shares 0.042691 854 156
6 Green Villa Park 26 B shares
Wilmslow
Cheshire SK9 6EJ
27
<PAGE>
John Gray 1,832 A shares 0.085629 1,712 314
31 Regency House 53 B shares
Whitworth Street
Manchester M1 3NY
Tim Hopper 5,496 A shares 0.256886 5,137 939
The Lodge 159 B shares
Altrincham Grammar
School for Girls
Cavendish Road
Bowden
Altrincham WA14 2NL
Paul Johnson 2,748 A shares 0.128319 2,566 469
Apartment 27 79 B shares
The Old Court House
Encombe Place
Manchester M3 6EJ
Andrew Lamont 366 A shares 0.016962 339 62
22 Wellburn Close 10 B shares
Bolton BL3 3RL
28
<PAGE>
Chris Moss 916 A shares 0.042691 854 156
2 Giantswood Lane 26 B shares
Congleton
Cheshire CW12 2HQ
Philip R Thompson 274 A shares 0.012579 251 46
14 Kent Close 7 B shares
Pudsey
West Yorkshire LS28 9EY
Discretionary earn out
element -- 3.230769 -- --
-------- ---------- -------
100.00 1,935,385 353,602
-------- ---------- -------
</TABLE>
29
<PAGE>
SCHEDULE 2 : PART I - THE COMPANY
Name: Fulcrum Solutions Limited
Number: 03331163
Registered Office: Ebury Gate
23 Lower Belgrave Street
London SW1W 0NR
Authorised Capital: L40,000
Issued Capital: L33,990.51 divided into
1,742,997 A Shares of 1p each
58,911 B Shares of 10p each
500,004 C Shares of 1p
333,480 D Shares of 1p
23,343,600 E Shares of 0.01p
Directors: Steven Anderson
Daniel Keating
Annika Robinson
David Kilpatrick
Mark Robinson
Secretary: Annika Robinson
Accounting Reference Date: 30 September
Auditors: KPMG of 1 Puddle Dock
Blackfriars
London EC4V 3PD
Continuing Directors: Mark Robinson
David Kilpatrick
30
<PAGE>
SCHEDULE 2 : PART II - THE SUBSIDIARIES
Name: Fulcrum Solutions (North) Limited
Number: 03503022
Registered Office: Ebury Gate
23 Lower Belgrave Road
London SW1W 0NR
Authorised Capital: L15,000
Issued Capital: L11,674.67 comprising 1,167,467 ordinary shares of 1p
each
Registered Shareholders: Fulcrum Solutions Limited
Beneficial owner of
issued capital: Fulcrum Solutions Limited
Directors: Steven Anderson
David Carrighan
Secretary: Annika Robinson
Accounting Reference Date: 30 September
Auditors: KPMG
1 Puddle Dock
Blackfriars
London EC4V 3PD
Name: Fulcrum Solutions (Scotland) Limited
Number: 03356700
Registered Office: 23 Lower Belgrave Street
London SW1W 0NR
Authorised Capital: L15,000
Issued Capital: L9,125 comprising 912,500 ordinary shares of 1p each
Registered Shareholders: Fulcrum Solutions (North) Limited
Beneficial owner of
issued capital: Fulcrum Solutions (North) Limited
31
<PAGE>
Directors: Steven Anderson
David Carrighan
David Hope
Daniel Keating
Secretary: Annika Robinson
Accounting Reference Date: 30 September
Auditors: KPMG
1 Puddle Dock
Blackfriars
London EC4V 3PD
Name: Fulcrum Solutions Inc.
Principal place of
Business: 1209 Orange Street
Wilmington
Delaware
Authorised Capital: $1,000 divided into 75,000 Class A Voting common
stock of $0.01 each and 25,000 Class B Non-Voting
common stock at $0.01 each
Issued Capital: US$925 divided into 75,000 Class A Voting common
stock and 22,500 Class B Non-Voting stock
Registered Shareholders: Fulcrum Solutions Limited
Didier Steven
Richard Schwartz
Tom Deshan
Mike Katz
Mike Zeto
Sam Strevens
Scott Thon
President: Daniel Keating
Chief Operating Officer: David Kilpatrick
Secretary: Annika Robinson
32
<PAGE>
SCHEDULE 3 : WARRANTIES
1. INTERPRETATION
1.1 Definitions
In this schedule, where the context admits:
"COMPUTER SYSTEMS" means the Hardware, Software and Data.
"DATA" means any data or information used by or for the benefit of the
Company at any time and stored electronically at any time.
"HARDWARE" means any computer equipment used by or for the benefit of the
Company at any time including, without limitation, parts of computer
equipment such as firmware, screens, terminals, keyboards, disks and
including without limitation, cabling and other peripheral and associated
electronic equipment but excluding all Software.
"INTELLECTUAL PROPERTY" means patents, trade marks, service marks, rights
(registered or unregistered) in any designs; applications for any of the
foregoing; trade or business names; copyright (including rights in computer
software) and topography rights; know-how; secret formulae and processes;
lists of suppliers and customers and other confidential and proprietary
knowledge and information; rights protecting goodwill and reputation;
database rights and all rights and forms of protection of a similar nature
to any of the foregoing or having equivalent effect anywhere in the world
and all rights under licences and consents in respect of any of the rights
and forms of protection mentioned in this definition.
"SOFTWARE" means any set of instructions for execution by a computer
processor used by or for the benefit of the Company at any time
irrespective of application, language or medium.
"SOFTWARE PRODUCTS" means any software and associated documentation and
materials, which is now or has at any previous time been supplied by the
Company.
1.2 CONSTRUCTION
Construction
In this schedule where the context admits:-
1.2.1 any question whether a person is connected with another shall be
determined in accordance with Section 839 Income and Corporation
Taxes Act 1988, (subject to the deletion of the words from
"Except" to "arrangements" in sub-section (4)
33
<PAGE>
thereof) which shall apply in relation to this schedule as it
applies in relation to that Act;
1.2.2 references to the "COMPANY" shall include each of the
Subsidiaries except for FSI;
1.2.3 reference to any Act, statutory instrument, regulation, bye-law
or other requirement of English law and to any English legal term
for any action, remedy, method of judicial proceeding, legal
document, legal status, court, official or any legal concept or
thing shall in respect of any jurisdiction other than England be
deemed to include that which most nearly approximates in that
jurisdiction to the English legal term; and
1.2.4 where, in this schedule 3, a term is defined in and for the
purposes of a particular paragraph, the relevant definition shall
apply, where the context admits, for all other purposes of this
schedule.
2. WARRANTIES AND REPRESENTATIONS
2.1 The Vendors hereby severally warrant and represent to and for the benefit
of the Purchaser Warranties as set out in paragraphs 3.1 and 3.2 of this
schedule.
2.2 The Warrantors hereby jointly and severally warrant and represent to and
for the benefit of the Purchaser as set out in the following paragraphs
(other than paragraphs 3.1 and 3.2) of this Schedule.
3. THE COMPANY AND THE VENDORS
3.1 CAPACITY
Each of the Vendors has full power and authority to enter into and perform
this Agreement, and may execute and deliver this Agreement and perform his
obligations under this Agreement without requiring or obtaining the consent
of its shareholders or of any other person, authority or body and this
Agreement constitutes valid and binding obligations of the Vendors in
accordance with its terms.
3.2 OWNERSHIP OF SALE SHARES
Each of the Vendors is the registered and sole beneficial owner of the
number of Sale Shares set out against his name in schedule 1 free from any
Encumbrances.
3.3 LIABILITIES OWING TO OR BY VENDORS
There is not outstanding any indebtedness or other liability (actual or
contingent) owing by the Company to any Warrantor or to any Director or any
person connected with any of them, nor is there any indebtedness owing to
the Company by any such person.
34
<PAGE>
3.4 COMPETING INTERESTS
None of the Warrantors nor any person connected with any of them has any
interest, direct or indirect, in any business other than that now carried
on by the Company which is or is likely to be or become competitive with
the business or any proposed business of the Company save as the registered
holder or beneficial owner of not more than 5 per cent. of any class of
securities of any company which is listed in the Official List of the
London Stock Exchange Limited or listed or quoted on any other recognised
stock exchange.
4. THE COMPANY'S CONSTITUTION
4.1 SHARE CAPITAL
The Sale Shares comprise the whole of the issued and allotted A Shares, B
Shares, D Shares and E Shares in the share capital of the Company and
schedule 2 contains true particulars of the authorised and issued share
capital of the Subsidiaries and all the shares there shown as issued are in
issue fully paid and are beneficially owned and registered as set out
therein free from any Encumbrances.
4.2 OPTIONS ETC.
No person has the right (whether exercisable now or in the future and
whether contingent or not) to call for the allotment, issue, sale, transfer
or conversion of any share or loan capital of the Company under any option
or other agreement (including conversion rights and rights of pre-emption).
4.3 MEMORANDUM AND ARTICLES
The copy of the memorandum and articles of association of the Company
annexed to the Disclosure Letter is true and complete and has embodied
therein or annexed thereto a copy of every resolution or agreement as is
required by law to be embodied in or annexed to it, and sets out completely
the rights and restrictions attaching to each class of authorised share
capital of the Company.
4.4 COMPANY RESOLUTIONS
Neither the Company nor any class of its members has passed any resolution
(other than resolutions relating to business at annual general meetings)
which was not special business.
5. THE COMPANY AND ITS INVESTMENTS
5.1 PARTICULARS OF THE COMPANY AND SUBSIDIARIES
The particulars of the Company and the Subsidiaries set out in schedule 2
are true and complete and the Company has no other subsidiaries.
35
<PAGE>
5.2 INVESTMENTS, ASSOCIATIONS AND BRANCHES
The Company:-
5.2.1 is not the holder or beneficial owner of, and has not agreed to
acquire, any share or other capital of any other company or
corporation (whether incorporated in the United Kingdom or
elsewhere) other than of the Subsidiaries;
5.2.2 is not, and has not agreed to become, a member of any
partnership, joint venture, consortium or other unincorporated
association, body or undertaking in which it is to participate
with any other in any business or investment; and
5.2.3 has no branch, agency or place of business outside England and no
permanent establishment (as that expression is defined in the
relevant double taxation relief orders current at the date of
this Agreement) outside the United Kingdom.
6. THE COMPANY AND THE LAW
6.1 COMPLIANCE WITH LAWS
The Company has conducted its business in all material respects in
accordance with all applicable laws and regulations of the United Kingdom,
and any relevant foreign country or authority.
6.2 LICENCES ETC
6.2.1 The Company has obtained all licences, consents, permits,
approvals and authorisations required to be granted by third
parties in order for the Company to carry on effectively any
aspect of its business in the places and in the manner in which
such business is now carried on by the Company and all such
licences, consents, permits approvals and authorisations are in
full force and effect and are not limited in duration or subject
to onerous conditions.
6.2.2 So far as the Warrantors are aware all reports, returns and
information required by law or as a condition of any licence,
consent, permit, approval or other authorisation to be made or
given to any person or authority in connection with the Company's
business have been made or given to the appropriate person or
authority.
6.3 BREACH OF STATUTORY PROVISIONS
The Company has not committed, or omitted to do, any act or thing the
commission or omission of which is, or could be, in contravention of any
Act, Order, Regulation, or the like in the United Kingdom or elsewhere
which is punishable by fine or other penalty and no notice or communication
has been received with respect to any alleged, actual or potential
violation of or failure to comply with, any of the same.
36
<PAGE>
6.4 LITIGATION
6.4.1 Neither the Company nor any of its officers or agents nor any of
its employees is engaged in or the subject of any litigation or
arbitration administrative or criminal proceedings whether as
plaintiff, defendant or otherwise, which adversely affects or is
likely to have an adverse effect on the Company's business and/or
the ability of the Company or any purchaser to carry on the
Company's business in the same manner and to the same extent as
previously carried on.
6.4.2 No litigation or arbitration or administrative or criminal
proceedings are pending or threatened or expected by or against
the Company or any of its officers, agents or employees; and so
far as the Warrantors are aware there are no facts or
circumstances likely to give rise to any such litigation or
arbitration or administrative or criminal proceedings.
6.4.3 Neither the Company nor any of its officers or employees has been
a party to any undertaking or assurance given to any court or
governmental agency or the subject of any injunction which is
still in force.
6.5 FAIR TRADING
6.5.1 So far as the Warrantors are aware no agreement, practice or
arrangement carried on by the Company or to which the Company is
or since incorporation has been a party:
(a) is or ought to be or ought to have been registered in accordance
with the provisions of the Restrictive Trade Practices Acts 1976
and 1977 or contravenes the provisions of the Resale Prices Act
1976 or is or has been the subject of any enquiry, complaint,
investigation or proceeding under any of those Acts; or
(b) is or has been the subject of an enquiry, complaint,
investigation, reference or report under the Fair Trading Act
1973 (or any previous legislation relating to monopolies or
mergers) or the Competition Act 1980 or constitutes an
anti-competitive practice within the meaning of the 1980 Act; or
(c) infringes Article 81 of the Treaty of Rome establishing the
European Economic Community or constitutes an abuse of dominant
position contrary to Article 82 of the said Treaty or infringes
any regulation or other enactment made under Article 83 and/or
Article 235 of the said Treaty or is or has been the subject of
any enquiry, complaint, investigation or proceeding in respect
thereof; or
37
<PAGE>
(d) has been notified to the Directorate General of Competition of
the Commission of the European Communities and/or to the EFTA
Surveillance Authority; or
(e) is by virtue of its terms or by virtue of any practice for the
time being carried on in connection therewith a "Consumer Trade
Practice" within the meaning of section 13 Fair Trading Act 1973
and susceptible to or under reference to the Consumer Protection
Advisory Committee or the subject matter of a report to the
Secretary of State or the subject matter of an Order by the
Secretary of State under the provisions of Part II of that Act;
or
(f) infringes any other competition, restrictive trade practice,
anti-trust, fair trading or consumer protection law or
legislation applicable in any jurisdiction in which the Company
has assets or carries on business.
6.5.2 The Company has not given and so far as the Warrantors are aware,
there has been no default or contravention of any assurance or
undertaking (written or oral) to the Restrictive Practices Court
or the Director General of Fair Trading, the Secretary of State
for Trade and Industry, the European Commission, the EFTA
Surveillance Authority or the Court of Justice of the European
Communities, or to any other court, person or body and is not
subject to or in default or contravention of any Article, Act,
decision, regulation, order or other instrument or undertaking
relating to any matter referred to in this paragraph 6.5.
6.6 PRODUCT LIABILITY
6.6.1 The Company has not, sold or supplied any product or service
which:-
(a) does not comply in any material respect with any warranty or
representation, express or implied, made by or on behalf of the
Company in respect of it or with all laws, regulations, standards
and requirements applicable to it; or
(b) was sold or supplied on terms that the Company accepts an
obligation to service or repair or replace such products after
delivery.
6.7 INDUCEMENTS
So far as the Warrantors are aware no officer, agent or employee of the
Company has paid any bribe (monetary or otherwise) or used any of the
Company's assets unlawfully to obtain an advantage for any person.
7. THE COMPANY'S AND WARRANTORS' SOLVENCY
7.1 WINDING-UP
38
<PAGE>
No order has been made, petition presented or resolution passed for the
winding up of the Company and no meeting has been convened for the purpose
of winding up the Company. None of the Warrantors is bankrupt, or the
subject of any bankruptcy proceedings. The Company has not been a party to
any transaction which could be avoided in a winding up.
7.2 ADMINISTRATION AND RECEIVERSHIP
No steps have been taken for the appointment of an administrator or
receiver (including an administrative receiver) of all or any part of the
Company's or any of the Warrantors' assets.
7.3 COMPOSITIONS
Neither the Company nor any of the Warrantors has made or proposed any
arrangement or composition with its or his creditors or any class of its or
his creditors.
7.4 INSOLVENCY
Neither the Company nor any of the Warrantors is insolvent, or unable to
pay its or his debts within the meaning of the insolvency legislation
applicable to the Company and the Warrantors respectively and neither the
Company nor any of the Warrantors has stopped paying its or his debts as
they fall due.
7.5 UNSATISFIED JUDGMENTS
No distress, execution or other process has been levied against the Company
or action taken to repossess goods in the Company's possession which has
not been satisfied in full. No unsatisfied judgment is outstanding against
the Company.
7.6 FLOATING CHARGES
No floating charge created by the Company has crystallised and, so far as
the Warrantors are aware, there are no circumstances likely to cause such a
floating charge to crystallise.
7.7 ANALOGOUS EVENTS
No event analogous to any of the foregoing has occurred in any foreign
jurisdiction in which the Company carries on business.
8. THE COMPANY'S ACCOUNTS AND RECORDS
8.1 Books and records
All accounts, books, ledgers, financial and other records of whatsoever
kind ("RECORDS") of the Company:
39
<PAGE>
8.1.1 have been fully, properly and accurately maintained on a
consistent basis are up to date and in the possession and control
of the Company and contain true, complete and accurate records of
all matters required by law to be entered therein;
8.1.2 do not contain or reflect any material inaccuracies or
discrepancies; and
8.1.3 give and reflect a materially complete and accurate view of the
financial, contractual and trading position of the Company and of
its fixed and current assets and liabilities (actual and
contingent) debtors and creditors (as appropriate) and all other
matters which ought or would normally be expected to appear
therein
and no notice or allegation that any of the records is incorrect or should
be rectified has been received.
8.2 ACCOUNTS
The Audited Accounts
8.2.1 were prepared in accordance with the requirements of all relevant
statutes and accounting practices generally accepted in the
United Kingdom or the United States, as the case may be at the
time they were audited and commonly adopted by companies carrying
on businesses similar to the Company's (including all applicable
Statements of Standard Accounting Practice and Financial
Reporting Standards);
8.2.2 show a true and fair view of the assets and liabilities of the
Company as at, and the profits of the Company for the accounting
reference period ended on, the Balance Sheet Date;
8.2.3 are not affected by any unusual or non-recurring items;
8.2.4 in the case of consolidated financial statements, show a true and
fair view of the state of affairs of the Company and the
Subsidiaries as a whole; and
8.2.5 apply bases and policies of accounting which have been
consistently applied in the audited financial statements of the
Company and, in the case of the Company and the Subsidiaries, in
the audited consolidated financial statements for the previous
accounting reference periods ending on the Balance Sheet Date.
8.3 PROFITS
The profits of the Company for the financial years prior to the Balance
Sheet Date as shown by the Audited Accounts and the audited accounts for
such previous years and the trend of profits thereby shown have not (save
as fairly disclosed in such accounts) been affected by the inclusion of
non-recurring items of income or expenditure, by
40
<PAGE>
transactions of an abnormal or unusual nature or entered into otherwise
than on normal commercial terms or by any other factors rendering such
profits for all or any of those periods exceptionally high or low.
8.4 PROVISION FOR LIABILITIES
Full provision has been made in the Audited Accounts for all material
liabilities of the Company outstanding at the Balance Sheet Date and
adequate provision (or note) in accordance with generally accepted
accounting principles in the United Kingdom and the United States, as the
case may be at the time they were audited, has been made therein for all
other liabilities of the Company then outstanding whether contingent,
quantified, disputed or not including (without limitation) the cost of any
work or material for which payment has been received or credit taken, any
future loss which may arise in connection with uncompleted contracts and
any claims against the Company in respect of completed contracts.
8.5 RETURNS
The Company has complied with the provisions of the Companies Acts and all
returns, particulars, resolutions and other documents required under any
legislation to be delivered on behalf of the Company to the Registrar of
Companies or to any other authority whatsoever have been properly made and
delivered. All such documents delivered to the Registrar of Companies or
to any other authority whatsoever, whether or not required by law, were
true and accurate when so delivered and the Company has not received
notification of the levy of any fine or penalty for non-compliance by the
Company or any director of the Company.
9. THE COMPANY'S BUSINESS AND THE EFFECT OF THE SALE
9.1 BUSINESS SINCE THE BALANCE SHEET DATE
Since the Balance Sheet Date:
9.1.1 the Company has carried on its business in the ordinary and usual
course so as to maintain it as a going concern;
9.1.2 there has been no material deterioration in the financial
position or turnover of the Company;
9.1.3 there has been no significant event or occurrence (including, but
not limited to the loss of any significant customer or supplier)
which has had a material adverse affect on the Company's business
or its value or profitability;
9.1.4 the Company has not borrowed or raised any money or taken any
form of financial facility (whether pursuant to a factoring
arrangement or otherwise);
41
<PAGE>
9.1.5 the Company has paid its creditors in accordance with their
respective credit terms or (if not) within the time periods
usually applicable to such creditors and save as disclosed there
are no debts outstanding by the Company which have been due for
more than four weeks;
9.1.6 there has been no unusual change in the Company's work in
progress;
9.1.7 the Company has not entered into, or agreed to enter into, any
commitment to acquire or dispose of on capital account any asset
of a value in excess of L10,000 or equivalent;
9.1.8 no share or loan capital has been issued or agreed to be issued
by the Company;
9.1.9 no distribution of capital or income has been declared, made or
paid in respect of any share capital of the Company and
(excluding fluctuations in overdrawn current accounts with
bankers) no loan or share capital of the Company has been repaid
in whole or part or has become liable to be repaid in whole or
part; and
9.1.10 no substantial customer or supplier of the Company has in the
period of 6 months preceding the date of this Agreement ceased
or reduced the level of its trade with or supplies to the Company
or indicated an intention to do any of the foregoing.
9.2 WORKING CAPITAL
Having regard to existing bank and other facilities, the Company has
sufficient working capital for the purposes of continuing to carry on its
business in its present form and at its present level of turnover for the
foreseeable future and for the purposes of performing in accordance with
their respective terms all orders, projects and contractual obligations
which have been placed with, or undertaken by, the Company.
9.3 COMMISSION
No one is entitled to receive from the Company any finder's fee, brokerage,
or other commission in connection with this Agreement or the sale and
purchase of shares in the Company.
9.4 CONSEQUENCE OF SHARE ACQUISITION BY THE PURCHASER
The acquisition of the Sale Shares by the Purchaser and compliance with the
terms of this Agreement will not:
9.4.1 So far as the Warrantors are aware, cause the Company to lose the
benefit of any licence, consent, permit, approval or
authorisation (public or private) or any right or privilege it
presently enjoys or relieve any person of any obligation to the
Company (whether contractual or otherwise) or enable any
42
<PAGE>
person to determine any such obligation or any contractual right
or benefit now enjoyed by the Company or to exercise any right
whether under an agreement with the Company or otherwise;
9.4.2 result in any present indebtedness of the Company becoming due or
capable of being declared due and payable prior to its stated
maturity;
9.4.3 so far as the Warrantors are aware result in a breach of, or
constitute a default under any order, judgement or decree of any
court or government agency by which the Company is bound or
subject; and
9.4.4 so far as the Warrantors are aware result in a breach of, or
constitute a default under the terms, conditions or provisions of
any agreement, understanding, arrangement or instrument
(including, but not limited to, any of the Company's contracts)
and, to the best of the knowledge and belief of the Warrantors, the
Company's relationships with clients, customers, suppliers and employees
will not be adversely affected thereby and the Warrantors are not aware of
any circumstances (whether or not connected with the Purchaser or the sale
of the Sale Shares hereunder) indicating that, nor has it been informed or
is otherwise aware that any person who now has business dealings with the
Company would or might cease to do so from and after Completion.
9.5 GRANTS
The Company has not applied for or received any grant or other financial
assistance from any supranational, national or local authority or
government agency.
9.6 INSURANCES
9.6.1 Full particulars of all the insurance policies (including,
without limitation, the limit and basis of cover under each
policy and the amount of the applicable excess) in which the
Company has an interest (the "COMPANY'S INSURANCES") are given in
the Disclosure Letter.
9.6.2 All the Company's Insurances are in full force and effect and
will be maintained in full force without alteration pending
Completion and all premiums have been paid on time. So far as the
Warrantors are aware there are no circumstances which might lead
to any liability under any of the Company's Insurances being
avoided by the insurers or the premiums being increased. The
Company's Insurances contain no special or unusual terms,
restrictions or rates of premium. There is no claim outstanding
under any of the Company's Insurances nor are the Warrantors
aware of any circumstances likely to give rise to a claim or of
any circumstances which might cause any of the insurers to refuse
to renew them.
9.7 TRADING NAME
43
<PAGE>
The Company does not trade under any name other than its corporate name.
10. THE COMPANY'S ASSETS
10.1 NET TANGIBLE ASSET VALUE
The value of the net tangible assets of the Company at the date of this
Agreement and Completion determined in accordance with the same accounting
policies as those applied in the Audited Accounts (and on the basis that
each fixed asset is valued at a figure no greater than the value attributed
to it in the Audited Accounts or, in the case of any fixed asset acquired
by the Company after the Balance Sheet Date, at a figure no greater than
cost) is not/will not be less than the value of the net tangible assets of
the Company at the Balance Sheet Date as shown in the Audited Accounts.
10.2 ASSETS AND CHARGES
10.2.1 Except for current assets disposed of by the Company in the
ordinary course of its business, the Company is the owner legally
and beneficially of and has good title to all assets included in
the Audited Accounts and all assets which have been acquired by
the Company since the Balance Sheet Date and no Encumbrance is
outstanding nor is there any agreement or commitment to give or
create any Encumbrance over or in respect of the whole or any
part of the Company's assets, undertaking, goodwill or uncalled
capital and no claim has been made by any person that he is
entitled to any such Encumbrance.
10.2.2 Since the Balance Sheet Date, save for disposals in the ordinary
course of its business, the assets of the Company have been in
the possession of, or under the control of, the Company.
10.3 DEBTS
Save to the extent of the provision or reserve therefor contained or
reflected in the Audited Accounts, any debts owed to the Company as
recorded in the Company's books and records are good and collectable in the
ordinary course of business and will realise their full face value within
three months after Completion. The rights of the Company in respect of
such debts are valid and enforceable and are not subject to any defence,
right of set-off or counter-claim, withholding or other deduction and no
act has been done or omission permitted whereby any of them has ceased or
might cease to be valid and enforceable in whole or in part. No amount
included in the Audited Accounts as owing to the Company at the Balance
Sheet Date has been realised for an amount less than the value at which it
was included in the Audited Accounts or is now regarded by the Warrantors
as irrecoverable in whole or in part. The Company has not factored or
discounted any of its debts or other receivables or agreed to do so.
10.4 FIXED ASSETS
44
<PAGE>
All fixed assets of the Company including, without limitation, all fixed
and movable plant and machinery, vehicles, Computer Systems and other
equipment used in, or in connection with, the business of the Company:
10.4.1 are in good repair and condition (taking into account their age
and level of use), are in satisfactory working order and have
been regularly and properly serviced and maintained and none is
dangerous, inefficient, obsolete or in need of renewal or
replacement;
10.4.2 are not unsafe, dangerous or in such a physical condition as to
contravene the Health & Safety at Work etc Act 1974; and
10.4.3 are not surplus to the Company's current or proposed
requirements.
10.5 INTELLECTUAL PROPERTY RIGHTS
10.5.1 The Company is the sole legal and beneficial owner free from
Encumbrances of the Intellectual Property referred to in the
Disclosure Letter and owns no other Intellectual Property.
10.5.2 All the Intellectual Property rights owned or used by the Company
are valid and enforceable and so far as the Warrantors are aware
nothing has been done, omitted or permitted whereby any of them
has ceased or might cease to be valid and enforceable.
10.5.3 So far as the Warrantors are aware none of the processes or
products of the Company infringes any Intellectual Property or
any right of any other person relating to Intellectual Property
or involves the unlicensed use of confidential information
disclosed to the Company by any person in circumstances which
might entitle that person to make a claim against the Company.
10.5.4 There are no outstanding claims against the Company for
infringement of any Intellectual Property or of any rights
relating to it used (or which has been used) by the Company and
during the last three years no such claims have been settled by
the giving of any undertakings which remain in force.
10.5.5 Confidential information and know-how used by the Company is kept
strictly confidential and the Company operates and fully complies
with procedures which maintain such confidentiality. The
Warrantors are not aware of any such confidentiality having been
breached. The Company has not disclosed (except in the ordinary
course of its business) any of its know-how, trade secrets or
list of customers to any other person.
10.5.6 All application and renewal fees, costs, charges, taxes and other
steps required for the maintenance or protection of the
Intellectual Property have been duly paid on time or taken and
none of such rights are subject to any existing challenge or
attack by a third party or competent authority and there
45
<PAGE>
are no outstanding patent office or trade marks registry
deadlines which expire within three months of Completion.
10.5.7 The Company, if required to do so, was registered under the Data
Protection Act 1984 and is registered under the Data Protection
Act 1998 and has complied with the data protection principles set
out in such Acts.
10.6 COMPUTER SYSTEMS
10.6.1 The Hardware has been satisfactorily maintained and supported and
has the benefit of an appropriate maintenance and support
agreement terminable by the contractor by not less than 24 months
notice.
10.6.2 Disaster recovery plans are in effect and are adequate to ensure
that the Hardware, Software and Data can be replaced or
substituted without material disruption to the business of the
Company.
10.6.3 So far as the Warrantors are aware in the event that any person
providing maintenance or support services for the Hardware,
Software and Data ceases or is unable to do so, the Company has
all necessary rights and information to procure the carrying out
of such services by employees or by a third party without undue
expense or delay.
10.6.4 The Company has sufficient technically competent and trained
employees to ensure proper handling, operation, monitoring and
use of its computer systems.
10.6.5 The Company has adequate procedures to ensure internal and
external security of the Hardware, Software and Data, including
(without limitation) procedures for preventing unauthorised
access, preventing the introduction of a virus, taking and
storing on-site and off-site back-up copies of Software and Data.
10.6.6 Where any of the records of the Company are stored
electronically, the Company is the owner of all hardware and
software licences necessary to enable it to keep, copy, maintain
and use such records in the course of its business and does not
share any hardware or software relating to the records with any
person.
10.6.7 So far as the Warrantors are aware the Company owns, and is in
possession and control of, original copies of all the manuals,
guides, instruction books and technical documents (including any
corrections and updates) required to operate effectively the
Hardware and the Software.
10.6.8 The Hardware and Software have never unduly interrupted or
hindered the running or operation of the Company's business, and
have no defects in operation which so affect the Company's
business.
46
<PAGE>
10.6.9 The Hardware is the absolute property of the Company free from
encumbrances.
11. PREMISES
11.1 TITLE TO PREMISES
11.1.1 The particulars of the Premises shown in schedule 5 are true and
correct. Except as shown the Company has no other interest in
land and does not occupy any other land or premises and has not
entered into any agreement to acquire or dispose of any land or
premises or any interest therein which has not been completed.
11.1.2 So far as the Warrantors are aware the owner of each of the
Premises shown in schedule 5 is solely legally and beneficially
entitled to and has good and marketable title to and exclusive
occupation of such Premises.
11.1.3 So far as the Warrantors are aware each of the Premises is held
free from any mortgage or charge (whether legal or equitable,
fixed or floating), encumbrance, lease, sub-lease, tenancy,
licence or right of occupation, rent charge, exception,
reservation, easement, quasi-easement or privilege (or agreement
for any of the same) in favour of a third party.
11.1.4 The leases, sub-leases, tenancies, licences, or agreements for
any of the same under which the Premises are held are valid and
subsisting against all persons, including any person in whom any
superior estate or interest is vested.
11.1.5 So far as the Warrantors are aware there are appurtenant to each
of the Premises all rights and easements necessary for its
current use and enjoyment (without restriction as to time or
otherwise) and the access for each of the Premises is over roads
which the Warrantors believe have been adopted by the local
authority and maintained at public expense.
11.1.6 So far as the Warrantors are aware the Company has not entered
into positive covenants or personal obligations (whether in a
conveyance, transfer or assignment to it or otherwise).
11.2 MATTERS AFFECTING PREMISES
11.2.1 So far as the Warrantors are aware none of the Premises or any
part thereof is affected by any of the following matters or is to
the knowledge of the Warrantors likely to become so affected:
(a) any outstanding dispute, notice or complaint or any exception,
reservation, right, covenant, restriction or condition which is
of an unusual nature or which affects or might in the future
affect the use of any of the Premises for the purpose for which
it is now used (the
47
<PAGE>
"CURRENT USE") or which affects or might in the future affect the
value of the Premises;
(b) any notice, order, demand, requirement or proposal of which the
owner has notice or of which the Warrantors are aware made or
issued by or on behalf of any government or statutory authority,
department or body for acquisition, clearance, demolition or
closing, the carrying out of any work upon any building, the
modification of any planning permission, the discontinuance of
any use or the imposition of any building or improvement line,
the alteration of any road or footpath or which otherwise affects
any of the Premises or their current use or value;
(c) any commutation or agreement for the commutation of rent or
payment of rent in advance of the due dates of payment thereof;
(d) any outstanding claim or liability (contingent or otherwise)
whether under the Planning Acts (as that expression is defined in
the Town and Country Planning Act 1990) or otherwise.
11.2.2 So far as the Warrantors are aware each of the Premises is in a
good state of repair and condition and fit for the current use.
11.2.3 So far as the Warrantors are aware all restrictions, conditions
and covenants (including any imposed by or pursuant to any lease,
sub-lease, tenancy or agreement for any of the same and whether
the Company is the landlord or tenant thereunder and any arising
in relation to any superior title) affecting any of the Premises
have been observed and performed and so far as the Warrantors are
aware no notice of any breach of any of the same has been
received or is to the Warrantors' knowledge likely to be
received.
11.2.4 So far as the Warrantors are aware the current use of the
Premises and all machinery and equipment therein and the conduct
of any business therein complies in all material respects with
all relevant statutes and regulations and all necessary licences
and consents required thereunder have been obtained.
11.2.5 Any necessary action to protect the interests of the Company has
been taken under the Landlord and Tenant Act 1954 and in relation
to rent review provisions in relation to each lease, sub-lease,
tenancy or agreement for any of the same in respect of which the
Company is the landlord or the tenant thereunder and all
appropriate time limits have been complied with and no rent
reviews are outstanding at the date hereof or exercisable prior
to Completion.
11.3 OUTSTANDING PREMISES LIABILITIES
So far as the Warrantors are aware except in relation to the Premises, the
Company has no liabilities (actual or contingent) arising out of the
conveyance, transfer, lease,
48
<PAGE>
tenancy, licence, agreement or other document relating to land or premises
or an interest in land or premises, including, without limitation,
leasehold premises assigned or otherwise disposed of.
12. THE COMPANY'S CONTRACTS
12.1 NO OTHER CONTRACTS
There are not in force in relation to the Company's business, assets or
undertaking any agreements, undertakings, understandings, arrangements or
other engagements, whether written or oral, to which any of the Warrantors
or any person connected with any of them is a party or of which it has the
benefit or to which it is otherwise subject, the benefit of which would be
required to be assigned to or otherwise vested in the Company to enable the
Company to carry on its business and/or to enjoy all the rights and
privileges attaching thereto and/or to any of its assets and undertaking in
the same manner and scope and to the same extent and on the same basis as
the Company has carried on business or enjoyed such rights prior to the
date hereof.
12.2 THE COMPANY'S CONTRACTS
Each of the Company's contracts annexed to and/or listed in the Disclosure
Letter is valid and binding and no notice of termination of any such
contract has been received or served by the Company.
12.3 CONTRACTUAL ARRANGEMENTS
The Company is not a party to or subject to any agreement, transaction,
obligation, commitment, understanding, arrangement or liability which:
12.3.1 so far as the Warrantors are aware cannot readily be fulfilled or
performed by the Company on time and without undue or unusual
expenditure of money or effort; or
12.3.2 involves or is likely to involve obligations, restrictions,
expenditure or receipts of an unusual, onerous or exceptional
nature; or
12.3.3 is in the nature of an agency, distribution, franchise or
management agreement; or
12.3.4 requires the Company to pay any commission, finder's fee, royalty
or the like; or
12.3.5 involves liabilities which may fluctuate in accordance with an
index or rate of currency exchange or interest or movements in
the price of any securities or commodities; or
12.3.6 is a contract for the supply of assets to the Company on hire,
lease, hire purchase, credit or deferred payment terms; or
49
<PAGE>
12.3.7 is dependent on the guarantee or covenant of or security provided
by any other person; or
12.3.8 is a contract for the sale of shares or assets comprising a
business undertaking which contains warranties or indemnities
under which the Company still has a remaining liability or
obligation; or
12.3.9 can be terminated as a result of any change in the underlying
ownership or control of the Company, or would be materially
affected by such change; or
12.3.10 is in any way otherwise than in the ordinary course of the
Company's business.
12.4 SUBSTANTIAL OR SIGNIFICANT CONTRACTS
No contract, agreement, transaction, obligation, commitment, understanding,
arrangement or liability entered into by the Company and now outstanding or
unperformed involves any of the following:
12.4.1 obligations on the part of the Company which will cause or are
likely to cause the Company to incur expenditure or an obligation
to pay money in excess of L10,000; or
12.4.2 the supply by the Company of services to any one customer such
that the value of such supplies exceeds or is likely to exceed 5
per cent. of the total turnover of the Company in the financial
year ending 30 September 1999.
12.5 DEFAULTS
12.5.1 The Company is not in default under any agreement to which it is
a party, and the Company is not aware of any invalidity or
grounds for termination, avoidance, rescission or repudiation of
any agreement to which the Company is a party which, in any such
case, would be material in the context of the financial or
trading position of the Company nor (so far as the Warrantors are
aware) are there any circumstances likely to give rise to any
such event.
12.5.2 Full details of any customers (or any persons to whom the Company
in the course of business has supplied goods and services in the
12 months ending on the date hereof) who have defaulted in the
payment when due of any monies to the Company are specified in
the Disclosure Letter.
12.6 SURETIES
No Vendor nor any third party has given any guarantee of or security for,
any overdraft loan, loan facility or off-balance sheet financing granted to
the Company nor has the Company given any guarantee of or security for any
overdraft loan, loan
50
<PAGE>
facility or off-balance sheet financing granted to any of the Warrantors or
any person connected with any of them and there is not now outstanding in
respect of the Company any guarantee or warranty or agreement for indemnity
or for suretyship given by or for the accommodation of the Company or in
respect of the Company's business.
12.7 POWERS OF ATTORNEY
No power of attorney given by the Company (other than to the holder of an
encumbrance solely to facilitate its enforcement) which would enable any
person other than persons employed by the Company to enter into contracts
or commitments in the course of their duties to enter into contracts or
commitments on behalf of the Company, is now in force.
12.8 INSIDER CONTRACTS
12.8.1 There is not outstanding any agreement or arrangement to which
the Company is a party and in which
(a) any of the Warrantors,
(b) any person beneficially interested in the Company's share
capital,
(c) any Director or officer, or
(d) any person connected with any of them,
is or has been interested, whether directly or indirectly.
12.8.2 The Company is not a party to, nor have its profits or financial
position during such period been affected by, any agreement or
arrangement which is not entirely of an arm's length nature.
12.8.3 All costs incurred by the Company have been charged to the
Company and not borne by any of the Warrantors or any person
connected with any of them or any other person.
12.9 DEBTS
There are no debts owing by or to the Company other than debts which have
arisen in the ordinary course of business, nor has the Company lent any
money which has not been repaid.
12.10 OPTIONS AND GUARANTEES
The Company is not a party to any option or pre-emption right, and it has
not given any guarantee, suretyship, comfort letter or any other obligation
(whatever called) to pay, provide funds or take action in the event of
default in the payment of any
51
<PAGE>
indebtedness of any other person or in the performance of any obligation of
any other person.
12.11 TENDERS, ETC.
No offer, tender, or the like is outstanding which is capable of being
converted into an obligation of the Company by an acceptance or other act
of some other person and the Company is not in negotiations with, nor has
it put proposals forward or entered into discussions with any customer or
supplier for the renewal of any existing business or acquisition of any new
business.
13. THE COMPANY AND ITS BANKERS
13.1 BORROWINGS
The total amount borrowed by the Company from its bankers does not exceed
its facilities and the total amount borrowed by the Company from whatsoever
source does not exceed any limitation on its borrowing contained in its
articles of association or bye-laws as the case may be, or in any debenture
or loan stock deed or other instrument.
13.2 CONTINUANCE OF FACILITIES
Full and accurate details of all overdrafts, loans or other financial
facilities outstanding or available to the Company are given in the
Disclosure Letter and true and correct copies of all documents relating
thereto are annexed to the Disclosure Letter and neither the Warrantors nor
the Company has done anything whereby the continuance of any such
facilities in full force and effect might be affected or prejudiced.
13.3 OFF-BALANCE SHEET FINANCING
The Company has not engaged in any borrowing or financing not required to
be reflected in the Audited Accounts.
13.4 BANK ACCOUNTS
Full and accurate particulars of all the bank and deposit accounts of the
Company and of the credit or debit balances on such accounts as at a date
(the "STATEMENT DATE") not more than seven days before the date of this
Agreement are given in the Disclosure Letter. Since the Statement Date
there have been no payments out of any such accounts except for routine
payments in the ordinary course of the Company's business and the balances
on such accounts are not now substantially different from the balances
shown as at the Statement Date.
14. DIRECTORS AND EMPLOYEES
52
<PAGE>
14.1 DIRECTORS
Schedule 2 show the full names of and offices held by each person who is a
director of the Company and no other person is a director or shadow
director of the Company.
14.2 EMPLOYEES
14.2.1 The individuals, details of whom are given in or annexed to the
Disclosure Letter (the "EMPLOYEES") are all employed by the
Company at the date of this Agreement. There are no other
individuals employed by the Company at the date of this
Agreement.
14.2.2 All contracts of service of any of the Employees (including for
these purposes the directors referred to in paragraph 14.1) are
terminable on not more than three months notice without
compensation (other than compensation, payable in accordance with
the Employment Rights Act 1996).
14.2.3 The particulars shown in the Disclosure Letter show true and
complete details of the names, ages and lengths of continuous
service of all of the Employees and by reference to each of the
Employees remuneration payable and other benefits provided by the
Company or which the Company is bound to provide (whether now or
in the future) to each category of the Employees at Completion or
any person connected with any such person and (without limiting
the generality of the foregoing) include particulars of all
profit sharing, incentive, bonus, commission arrangements and any
other benefit to which any such category of the Employees is
entitled or which is regularly provided or made available to them
(including details of their notice period and their entitlement
to holiday) in any case whether legally binding on the Company or
not.
14.2.4 There are no subsisting contracts for the provision by any person
of any consultancy services to the Company.
14.2.5 None of the Employees has given notice terminating his contract
of employment.
14.2.6 None of the Employees is under notice of dismissal.
14.2.7 None of the Employees has any outstanding dispute with the
Company in connection with or arising from his employment nor is
there any liability outstanding to such persons except for
remuneration or other benefits accruing due and no such
remuneration or other benefit which has fallen due for payment
has not been paid.
14.2.8 During the period of six months ending with the execution of this
Agreement the Company has not directly or indirectly terminated
the employment of any person employed in or by the Company.
53
<PAGE>
14.2.9 None of the Employees belongs or has belonged at any material
time to an independent trade union recognised by the Company.
14.2.10 There are no employee representatives representing all or any of
the Employees.
14.2.11 The Company has complied with all of its statutory obligations to
inform and consult appropriate representatives as required by
law.
14.2.12 There is no plan, scheme, commitment, policy, custom or practice
(whether legally binding or not) relating to redundancy affecting
any of the Employees more generous than the statutory redundancy
requirements.
14.2.13 All plans for the provision of benefits to the Employees comply
in all respects with all relevant statutes, regulations and other
laws and all necessary consents in relation to such plans have
been obtained and all governmental filings in relation to such
plans have been made.
14.2.14 There are no loans owed by any of the Employees to the Company.
14.2.15 Since the Balance Sheet Date no change has been made in (i) the
rate of remuneration, or the emoluments or pension benefits or
other contractual benefits, of any officer of the Company or any
of the Employees or (ii) the terms of engagement of any such
officer or any of the Employees.
14.2.16 There are no training schemes, arrangements or proposals whether
past or present in respect of which a levy may become payable by
the Company under the Industrial Training Act 1982 (as amended by
the Employment Act 1989) and pending Completion no such schemes,
arrangements or proposals will be established or undertaken.
14.2.17 There is no outstanding undischarged liability to pay to any
governmental or regulatory authority in any jurisdiction any
contribution, taxation or other duty arising in connection with
the employment or engagement of any of the Employees.
14.2.18 None of the Employees will become entitled by virtue of their
contract of service to any payment or enhancement in or
improvement to their remuneration, benefits or terms and
conditions of service only by reason of the execution of this
Agreement or of completion of the sale and purchase under or
pursuant to this Agreement.
14.2.19 The Company has not in the last 12 months, entered into any
informal or formal agreement to amend or change the terms or
conditions of employment of any of the officers of the Company or
any of the Employees (whether such amendment or change is to take
the effect prior to or after Completion).
14.3 SERVICE CONTRACTS
54
<PAGE>
There is not outstanding any contract of service between the Company and
any of its directors, officers or employees which is not terminable by the
Company without compensation (other than any compensation payable by
statute) on not more than three months notice given at any time.
14.4 DISPUTES WITH EMPLOYEES
There is no:
14.4.1 outstanding or threatened claim by any person who is now or has
been an employee of the Company or any dispute outstanding with
any of the said persons or with any unions or any other body
representing all or any of them in relation to their employment
by the Company or of any circumstances likely to give rise to any
such dispute;
14.4.2 industrial action involving any employee, whether official or
unofficial, currently occurring or threatened; or
14.4.3 industrial relations matter which has been referred to ACAS or
any similar governmental agency in the applicable jursidiction
for advice, conciliation or arbitration.
1. PENSIONS AND OTHER BENEFITS
There is not in operation as at date of this Agreement, and there has not
been in operation at any time prior to the date of this Agreement, any
agreement, arrangement, custom or practice for the payment of, or payment
of a contribution towards, a pension, allowance, lump sum or other similar
benefit on retirement, death, termination of employment (whether voluntary
or not) or during periods of sickness or disablement (whether during
service or after retirement), for the benefit of an employee or director or
their respective dependents.
2. FULCRUM SOLUTIONS INC.
So far as the Warrantors are aware, there is nothing material in the
context of this transaction affecting the business of Fulcrum Solutions
Inc. that would cause a reasonable purchaser not to have entered into this
Agreement and the agreement to sell and purchase the common stock in FSI
referred to in recital (C), on their respective terms.
3. MISCELLANEOUS
All information contained or referred to in the Disclosure Letter or in any
annexure thereto or which has otherwise been disclosed by or on behalf of
the Warrantors to the Purchaser on or prior to the date hereof is true and
accurate in all material respects and the Warrantors are not aware of any
other fact or matter which renders any such information misleading because
of any omission, ambiguity or for any other reason.
55
<PAGE>
SCHEDULE 4 : TAX
1. INTERPRETATION
In this schedule, where the context admits:
"TAX" includes (without limitation) corporation tax, advance corporation
tax, the charge under Section 419 Taxes Act 1988, income tax, capital gains
tax, the charge under Section 601(2) Taxes Act 1988, value added tax,
excise duties, the charge to tax under Schedule 9A Value Added Tax Act
1994, customs and other import duties, inheritance tax, stamp duty, stamp
duty reserve tax, capital duties, national insurance contributions, local
authority council taxes, petroleum revenue tax, foreign taxation and
duties, amounts payable in consideration for the surrender of group relief
or advance corporation tax or refunds pursuant to Section 102 Finance Act
1989 and any payment whatsoever which the Company may be or become bound to
make to any person as a result of the operation of any enactment relating
to any such taxes or duties and all penalties, charges and interest
relating to any of the foregoing or resulting from a failure to comply with
the provisions of any enactment relating to taxation;
"TAXES ACT 1988" means Income and Corporation Taxes Act 1988;
"TCGA 1992" means the Taxation of Chargeable Gains Act 1992;
"VALUE ADDED TAX" and "VAT" mean value added tax as provided for in the
Value Added Tax Act 1994 and legislation supplemental thereto or replacing,
modifying or consolidating it;
references to income or profits or gains earned, accrued or received shall
include income or profits or gains treated as earned, accrued or received
for the purposes of any legislation; and
references to the "COMPANY" include each of the Subsidiaries.
2. TAXATION WARRANTIES AND REPRESENTATIONS
The Warrantors hereby jointly and severally warrant and represent to and
for the benefit of the Purchaser in the terms set out in the following
paragraphs of this schedule 4.
3. GENERAL TAXATION MATTERS
3.1 RESIDENCE
The Company is and always has been resident for Tax purposes only in the
jurisdiction in which it is incorporated.
56
<PAGE>
3.2 TAX PROVISIONS
Full provision or reserve has been made in the Audited Accounts for all Tax
liable to be assessed on the Company or for which it is accountable in
respect of income, profits or gains earned, accrued or received on or
before the Balance Sheet Date and any event on or before the Balance Sheet
Date including distributions made down to such date or provided for in the
Audited Accounts and full provision has been made in the Audited Accounts
for deferred Tax calculated in accordance with generally accepted
accounting principles.
3.3 RETURNS
The Company has properly and punctually made all returns and provided all
information required for Tax purposes and none of such returns is disputed
by the Inland Revenue or the Internal Revenue Services, as the case may be,
or any other authority concerned (in the United Kingdom or elsewhere) and
the Vendors are not aware that any dispute is likely, or that any event has
occurred which would or might give rise to a payment under the Tax Deed.
3.4 PAYMENT OF TAX
3.4.1 The Company has duly and punctually paid all Tax which it has
become liable to pay and is under no liability to pay any penalty
or interest in connection with any claim for Tax and has not paid
any Tax which it was and is not properly due to pay.
3.4.2 The Company is not and never has been liable to pay corporation
tax in accordance with the Corporate Tax (Instalment Payments)
Regulations 1990.
3.5 AUDITS
The Company has not in the last six years received any visit or inspection
from any Tax authority.
3.6 SPECIAL ARRANGEMENTS AND CONCESSIONS
3.6.1 Full details of any special arrangements and concessions
(including, without limitation, any arrangements and concessions
relating to the taxation of foreign exchange gains and losses
and/or financial instruments and/or loan relationships) which
relate to or affect the Company and which have been made with any
Tax authority or relied upon by the Company, in either case
within the last seven years, are set out in the Disclosure
Letter.
3.6.2 The Company has not taken any action which has had, or might
have, the result of prejudicing or disturbing any such special
arrangement or concession.
57
<PAGE>
4. DISTRIBUTIONS AND PAYMENTS
4.1 DISTRIBUTIONS
4.1.1 No distribution within the meaning of Sections 209, 210 and 212
Taxes Act 1988 has been made by the Company except dividends
shown in its audited accounts nor is the Company bound to make
any such distribution.
4.1.2 No securities (within the meaning of Section 254(1) Taxes Act
1988) issued by the Company and remaining in issue at the date
hereof were issued in such circumstances that the interest
payable thereon falls to be treated as a distribution under
Section 209(2)(e)(iii) Taxes Act 1988.
4.1.3 The Company has not made or received any distribution which is an
exempt distribution within Section 213 Taxes Act 1988.
4.1.4 The Company has not received any capital distribution to which
the provisions of Section 189 TCGA 1992 could apply.
4.1.5 The Company has not used any credit, relief or set off that may
be disallowed pursuant to Section 237 Taxes Act 1988.
4.1.6 The Company has not issued any share capital, nor granted options
or rights to any person which entitles that person to require the
issue of any share capital to which the provision of Section 249
Taxes Act 1988 could apply.
4.1.7 The Company has not since incorporation:-
(a) treated as franked investment income any qualifying distribution
received which would fall to be treated as if it were a foreign
income dividend pursuant to the provisions of schedule 7 of the
Finance Act 1997; or
(b) made any qualifying distribution which would fall to be treated
as a foreign income dividend pursuant to the provisions of
schedule 7 of the Finance Act 1997.
4.2 GROUP INCOME
The Disclosure Letter contains particulars of all elections made by the
Company under Section 247 Taxes Act 1988 and the Company has not paid any
dividend without paying advance corporation tax or made any payment without
deduction of income tax in the circumstances specified in sub-section (6)
of that section. In respect of each such election the conditions of
Section 247 Taxes Act 1988 have at all times and continue to be satisfied.
58
<PAGE>
4.3 SURRENDER OF ADVANCE CORPORATION TAX
The Disclosure Letter contains particulars of all arrangements and
agreements to which the Company is or has been a party relating to
surrenders of advance corporation tax made or received by the Company under
Section 240 Taxes Act 1988 and:
4.3.1 the Company has not paid nor is liable to pay any amount in
excess of the advance corporation tax surrendered to it nor for
the benefit of any advance corporation tax which is or may become
incapable of set off against the Company's liability to
corporation tax;
4.3.2 the Company has received all payments due to it under any such
arrangement or agreement for all surrenders of advance
corporation tax made by it; and
4.3.3 save in respect of this Agreement, there have not been in
existence in relation to the Company any such arrangements as are
referred to in Section 240(11) Taxes Act 1988.
4.4 ACT CARRY FORWARD
There has been no major change in the business of the Company within the
meaning of Section 245 Taxes Act 1988.
4.5 SURPLUS ACT
The Company does not have and has not had at any time since immediately
before 6 April 1999 any unrelieved surplus advance corporation tax within
the meaning give to that term by Section 32 Finance Act 1988.
4.6 PAYMENTS UNDER DEDUCTION
All payments by the Company to any person which ought to have been made
under deduction of Tax have been so made and the Company has (if required
by law to do so) provided certificates of deduction to such person and
accounted to the Inland Revenue for the Tax so deducted.
4.7 PAYMENTS AND DISALLOWANCES
No rents, interest, annual payments or other sums of an income nature paid
or payable by the Company or which the Company is under an obligation to
pay in the future are wholly or partially disallowable as deductions or
charges in computing profits for the purposes of corporation tax by reason
of the provisions of Sections 74, 125, 338, 577, 577A, 779 to 784, and 787
Taxes Act 1988 or otherwise.
59
<PAGE>
5. LOSSES
5.1 GROUP RELIEF
5.1.1 The Disclosure Letter contains particulars of all arrangements
and agreements relating to group relief to which the Company is
or has been a party and:
(a) all claims by the Company for group relief were when made and are
now valid and have been or will be allowed by way of relief from
corporation tax;
(b) the Company has not made nor is liable to make any payment under
any such arrangement or agreement save in consideration for the
surrender of group relief allowable to the Company by way of
relief from corporation tax and equivalent to the Tax for which
the Company would have been liable had it not been for the
surrender;
(c) the Company has received all payments due to it under any such
arrangement or agreement for surrender of group relief made by it
and no such payment is liable to be repaid;
(d) the Company is not a dual resident investing company within the
meaning of Section 404 Taxes Act 1988; and
(e) save in respect of this Agreement, there have not been in
existence in relation to the Company any such arrangements as are
referred to in Section 410 Taxes Act 1988.
5.2 TAX LOSSES
There has not within the three years preceding the date hereof been a major
change in the business of the Company within the meaning of Section 768
Taxes Act 1988.
6. CLOSE COMPANIES
6.1 CLOSE COMPANY
6.1.1 The Company is not and has never been a close company.
6.1.2 No distribution within Section 418 Taxes Act 1988 has been made
by the Company.
6.1.3 The Company has not made (and will not be deemed to have made)
any loan or advance to a participator or an associate of a
participator so as to become liable to make any payment under
Section 419 Taxes Act 1988.
6.1.4 The Company is not, and has not since 31 March 1989 been, a close
investment holding company within the meaning of Section 13A
Taxes Act 1988.
60
<PAGE>
6.1.5 The Company has not expended or applied any sum liable to be
regarded as income available for distribution pursuant to
paragraph 8 schedule 19 Taxes Act 1988 (first business loans) and
is not bound (contingently or otherwise) to expend or apply any
such sum.
7. ANTI-AVOIDANCE
7.1 SECTION 765 TAXES ACT 1988
The Company has not without the prior consent of the Treasury been a party
to any transaction for which consent under Section 765 Taxes Act 1988 was
required. Where such consent would have been required but for the
provisions of Section 765A(1) Taxes Act 1988, the Company has complied in
full with the requirements of The Movements of Capital (Required
Information) Regulations 1990 and a copy of the notification required
pursuant thereto is annexed to the Disclosure Letter.
7.2 CONTROLLED FOREIGN COMPANIES
7.2.1 The Company has no interest in the share capital of any company
not resident in the United Kingdom for taxation purposes (or
which is treated for the purposes of any double taxation
convention as not being so resident) which is controlled by
persons resident in the United Kingdom for taxation purposes and
in which the Company has 10 per cent or more of the voting rights
(a "CONTROLLED FOREIGN COMPANY").
7.2.2 No enquiries have been made or intimated by the Inland Revenue in
respect of any Controlled Foreign Company.
7.2.3 No direction has been made by the Board of Inland Revenue under
Section 747 Taxes Act 1988 in respect of any Controlled Foreign
Company.
7.2.4 Section 748(1) Taxes Act 1988 applies to each Controlled Foreign
Company.
7.3 ANTI-AVOIDANCE
7.3.1 The Company has not at any time entered into or been a party to a
transaction or series of transactions either:
(a) containing steps inserted without any commercial or business
purpose; or
(b) being transactions to which any of the following provisions could
apply:
Sections 703, 729, 730, 737, 739, 770 to 774, 776, 779, 780, 781
or 786 Taxes Act 1988 or schedule 28AA Taxes Act 1988 or
schedule 9 paragraph 13 Finance Act 1996 without in the
appropriate cases, having received clearance in respect thereof
from the Inland Revenue.
61
<PAGE>
7.3.2 The Company has never been requested to furnish information
pursuant to notices served under Sections 745 or 778 Taxes Act
1988.
8. CAPITAL ASSETS
8.1 BASE VALUES
8.1.1 The Disclosure Letter contains full and accurate particulars of:
(a) the extent to which the book value of an asset or a particular
class of assets as shown in the Audited Accounts is in excess of
either:-
(1) the amount falling to be deducted under Section 38 TCGA
1992 from the consideration receivable on a disposal of
that asset, or
(2) the balance of the qualifying expenditure attributable to
that asset or pool of assets, as the case may be, brought
forward into the accounting period in which Completion will
occur and save to the extent disclosed, no such excess
exists; and
(b) the extent to which provision for Tax in respect of such excess
has been made in the Audited Accounts.
8.1.2 No election under Section 35 TCGA 1992 is in effect in relation
to the Company and full particulars are given in the Disclosure
Letter of the first relevant disposal for the purposes of the
said Section 35.
8.1.3 The Disclosure Letter contains full and accurate particulars of
all assets held by the Company on or after 6 April 1988 in
respect of which relief is or would be available under schedule 4
TCGA 1992 upon disposal.
8.2 ROLL-OVER RELIEF
The Disclosure Letter contains full and accurate particulars of all claims
made by the Company under Sections 152 to 156, s.158, ss.242 to 245, s.247
or Section 248 TCGA 1992 and no such claim or other claim has been made by
any other person (in particular pursuant to Section 165 or Section 175 TCGA
1992) which affects or could affect the amount or value of the
consideration for the acquisition of any asset by the Company taken into
account in calculating liability to corporation tax on chargeable gains on
a subsequent disposal.
8.3 PRE-ENTRY LOSSES
The Disclosure Letter contains details of all pre-entry losses falling
within paragraph 1(2)(a) schedule 7A TCGA 1992 which have, or will have,
accrued to the Company prior to Completion and details of all assets which,
if disposed of on Completion, would give rise to an allowable loss.
62
<PAGE>
8.4 DEPRECIATORY TRANSACTIONS
No loss which might accrue on the disposal by the Company of any share in
or security of any company is liable to be reduced by virtue of any
depreciatory transaction within the meaning of Section 176 and Section 177
TCGA 1992 nor is any expenditure on any share or security liable to be
reduced under Section 125 TCGA 1992.
8.5 VALUE SHIFTING
The Company does not hold, and has not held, any shares upon the disposal
of which Section 31 or 32 TCGA 1992 could apply.
8.6 CONNECTED PARTY AND INTRA-GROUP TRANSACTIONS
8.6.1 The Company has not disposed of or acquired any asset to or from
any person connected with it within Section 839 Taxes Act 1988 or
in circumstances such that the provision of s.17 TCGA 1992 could
apply to such disposal or acquisition.
8.6.2 The Company has not acquired any asset (past or present) from any
other company then belonging to the same group of companies as
the Company within the meaning of Section 170(2) to (14) TCGA
1992.
8.6.3 The Company has not made, and is not entitled to make, a claim
pursuant to Section 172 TCGA 1992.
8.7 GROUP RECONSTRUCTIONS
The Company has not been party to any scheme of reconstruction or
reorganisation to which the provisions of Section 139 TCGA 1992, Section
703 Taxes Act 1988 or to which Section 343 Taxes Act 1988 could apply.
8.8 CHARGEABLE POLICIES
The Company has not acquired benefits under any policy of assurance
otherwise than as original beneficial owner.
8.9 GAINS ACCRUING TO NON-RESIDENT COMPANIES OR TRUSTS
There has not accrued any gain in respect of which the Company may be
liable to corporation tax on chargeable gains by virtue of the provisions
of Section 13 or Section 87 TCGA 1992.
8.10 COMPANY MIGRATION
8.10.1 The Company is not a dual resident company for the purposes of
Section 139(3) or Section 160 or Section 188 TCGA 1992.
63
<PAGE>
8.10.2 There are no circumstances pursuant to which the Company may
become liable to tax pursuant to Section 185 (Deemed disposal of
assets on company ceasing to be resident in U.K.), Section 186
(Deemed disposal of assets on company ceasing to be liable to
U.K. tax), Section 187 (Postponement of charge on deemed
disposal) TCGA 1992 or Section 132 (Liability of other persons
for unpaid tax) Finance Act 1988 or Section 191 TCGA 1992
(Non-payment of tax by non-resident companies).
9. CLAIMS, ELECTIONS AND CLEARANCES
9.1 CLAIMS BY THE COMPANY
The Company has made no claim under any of the following:
9.1.1 Section 279 TCGA 1992 (assets situated outside the United
Kingdom);
9.1.2 Section 24(2) TCGA 1992 (assets of negligible value);
9.1.3 Section 280 TCGA 1992 (tax on chargeable gains payable by
installments);
9.1.4 Sections 242 and 243 Taxes Act 1988 (surplus franked investment
income); or
9.1.5 Section 584 Taxes Act 1988 (unremittable income arising outside
the United Kingdom).
9.2 ELECTIONS
The Disclosure Letter contains full particulars of all elections made by
the Company under the following provisions:
9.2.1 Section 524, 527 and 534 Taxes Act 1988 (lump sum receipts for
patents and copyright);
9.2.2 Section 37 Capital Allowances Act 1990 (short life assets); and
9.2.3 Section 11 Capital Allowances Act 1990 (leasehold interests).
9.3 CLEARANCES
There are annexed to the Disclosure Letter copies of all correspondence
relating to applications for clearance under any enactment relating to Tax.
All facts and circumstances material to such applications for clearance
were disclosed in such applications.
10. MISCELLANEOUS
10.1 ASSESSMENT OF TAX ON LESSEES
No notice pursuant to Section 23 Taxes Act 1988 has been served on the
Company.
64
<PAGE>
10.2 LEASEHOLDS
The Company is not liable to Tax under the provisions of Sections 34, 35
and 36 Taxes Act 1988 nor does it own any leasehold interest to which the
said Section 35 may apply.
10.3 FOREIGN EXCHANGE GAINS AND LOSSES
10.3.1 No exchange gain or loss of the Company has been calculated in
accordance with schedule 15 Finance Act 1993 and regulations made
thereunder.
10.3.2 The Disclosure Letter contains full details of all claims to
defer unrealised exchange gains made by the Company pursuant to
Section 139 Finance Act 1993.
10.3.3 The Disclosure Letter contains details of all debts to which the
provisions of Chapter II of Part II Finance Act 1993 do not apply
by virtue of Regulation 3 of the Exchange Gains and Losses
(Transitional Provisions) Regulations 1994.
10.3.4 The Company has not received any direction as referred to in
Section 136(1)(d) or Section 136A(7)(b) Finance Act 1993.
10.4 FINANCIAL INSTRUMENTS
10.4.1 The Company has not entered into any transaction for which the
provisions of Section 165, Section 166 and Section 167 Finance
Act 1994 could apply.
10.4.2 The Disclosure Letter contains full details of all qualifying
contracts with non resident persons for the purposes of
Section 168 Finance Act 1994.
10.5 FINANCE LEASES
The Company is not a party to any finance lease to which Schedule 12
Finance Act 1997 would apply.
10.6 LOAN RELATIONSHIPS
10.6.1 The Company applies an authorised accruals method of accounting
(as that term is defined in Section 85 Finance Act 1996) in
respect of all loan relationships (as that term is defined in
Section 81 Finance Act 1996) to which it is a party.
10.6.2 The Disclosure Letter contains full and accurate particulars of
any loan relationship to which the Company is a party, whether as
debtor or creditor, where any other party to that loan
relationship is connected with the Company for the purposes of
Chapter II of Part IV Finance Act 1996.
65
<PAGE>
10.6.3 The Disclosure Letter contains full and accurate particulars of
any loan relationship to which the Company is a party and to
which Section 92 or Section 93 Finance Act 1996 applies.
10.6.4 The Disclosure Letter contains full and accurate particulars of
any debtor relationship (as that term is defined in Section 103
Finance Act 1996) of the Company which relates to a relevant
discounted security (as that term is defined in paragraph 3 of
schedule 13 Finance Act 1996) to which paragraph 17 or paragraph
18 of schedule 9 Finance Act 1996 applies.
10.6.5 The Company has not entered into any transaction to which
paragraph 11(1) of schedule 9 Finance Act 1996 applies.
10.6.6 The Company has not been, and is not entitled to be, released
from any liability which arises under a debtor relationship of
that Company.
10.6.7 The Disclosure Letter contains full and accurate particulars of
(I) any loan relationship to which the Company is a party,
whether as debtor or creditor, to which paragraph 8 of schedule
15 Finance Act 1996 has applied or will apply on the occurrence
of a relevant event (as defined in paragraph 8(2)) in respect
thereof; (ii) in each case, the amount of any deemed chargeable
gain or deemed allowable loss which has arisen or will arise in
consequence of that relevant event; and (iii) any election made
pursuant to paragraph 9 of schedule 15 Finance Act 1996.
11. TAXATION OF EMPLOYEES AND AGENTS
11.1 P.A.Y.E.
The Company has properly operated the Pay As You Earn system, deducting tax
as required by law from all payments to or treated as made to employees and
ex-employees of the Company and punctually accounted to the Inland Revenue
for all tax so deducted and all returns required pursuant to Section 203
Taxes Act 1988 and regulations made thereunder have been punctually made
and are accurate and complete in all respects.
11.2 DISPENSATIONS AND P.A.Y.E AUDITS
The Disclosure Letter contains full details of all dispensations obtained
by the Company and all details of any visit from the Audit Office of the
Inland Revenue within the last six years including full details of any
settlement made pursuant thereto.
11.3 BENEFITS FOR EMPLOYEES
11.3.1 The Company has not made any payment to or provided any benefit
for any officer or employee or ex-officer or ex-employee of the
Company which is not allowable as a deduction in calculating the
profits of the Company for taxation purposes.
66
<PAGE>
11.3.2 The Company has not issued any shares in the circumstances
described in Section 138(1) Taxes Act 1988 and has complied
with Section 139(5) Taxes Act 1988.
11.3.3 The Company has not issued any shares in the circumstances
described in Section 77(1) and has complied with Section 85
Finance Act 1988.
11.3.4 The Company has not made any payment to which Section 313 Taxes
Act 1988 applies.
11.4 SLAVE COMPANIES
Any payment made to or for the direct or indirect benefit of any person
who is or might be regarded by any taxation authority as an employee of
the Company is made to such person direct and is not made to any company
or other entity associated with that person.
11.5 SUB-CONTRACTORS
11.6 The Company is not and never has been either a contractor or a
sub-contractor for the purposes of Chapter IV Part XIII Taxes Act 1988.
11.7 NATIONAL INSURANCE
The Company has paid all national insurance contributions for which it
is liable and has kept proper books and records relating to the same and
has not been a party to any scheme or arrangement to avoid any liability
to account for primary or secondary national insurance contributions.
12. STAMP DUTIES
12.1 STAMP DUTY
The Company has duly paid or has procured to be paid all stamp duty on
documents to which it is a party or in which it is interested and which
are liable to stamp duty.
12.2 STAMP DUTY RESERVE TAX
The Company has made all returns and paid all stamp duty reserve tax in
respect of any transaction in securities to which it has been a party or
in respect of which it is liable to account for stamp duty reserve tax.
13. VALUE ADDED TAX
13.1 COMPLIANCE
67
<PAGE>
The Company has complied with all statutory provisions and regulations
relating to value added tax and has duly paid or provided for all
amounts of value added tax for which the Company is liable.
13.2 TAXABLE SUPPLIES
All supplies made by the Company are taxable supplies and the Company is
not and will not be denied credit for any input tax by reason of the
operation of Section 26 Value Added Tax Act 1994 and regulations made
thereunder.
13.3 INPUT TAX
All input tax for which the Company has claimed credit has been paid by
the Company in respect of supplies made to it relating to goods or
services used or to be used for the purpose of the Company's business.
13.4 VAT GROUPS
The Company is not and has not been, for value added tax purposes a
member of any group of companies (other than that comprising the Company
and the Subsidiaries alone) and no act or transaction has been effected
in consequence whereof the Company is or may be held liable for any
value added tax chargeable against some other company except where that
other company is a Subsidiary.
13.5 SECTION 8 SUPPLIES
No supplies have been made to the Company to which the provisions of
Section 8 Value Added Tax Act 1994 might apply;
13.6 OFFENCES
The Company has not committed any offence contrary to Section 60 or
Section 72 Value Added Tax Act 1994, nor has it received any penalty
liability notice pursuant to Section 64(3), surcharge liability notice
pursuant to Section 59, or written warning issued pursuant to Section
76(2) of that Act.
13.7 LIABILITY TO REGISTER
The Company has not been and is not liable to be registered for value
added tax otherwise than pursuant to the provisions of paragraph 1
schedule 1 Value Added Tax Act 1994.
13.8 SECURITY
The Company has not been required to give security under paragraph 4
schedule 11 Value Added Tax Act 1994.
13.9 ELECTIONS
68
<PAGE>
The Disclosure Letter contains details and copies of all elections,
together with the relevant notification, made by the Company pursuant to
paragraph 2 schedule 10 Value Added Tax Act 1994.
13.10 DEVELOPERS
The Company is not and has not since 1 August 1989 been in relation to
any land, building or civil engineering work a developer within the
meaning of paragraph 5(5) schedule 10 Value Added Tax Act 1994.
13.11 INTEREST
The Company has not paid and is not liable to pay any interest pursuant
to Section 74 Value Added Tax Act 1994.
13.12 CAPITAL GOODS SCHEME
The Disclosure Letter contains full details of any assets of the Company
to which the provisions of Part XV Value Added Tax Regulations 1995 (the
Capital Goods Scheme) apply and in particular:
13.12.1 the identity (including in the case of leasehold property, the
term of years), date of acquisition and cost of the asset; and
13.12.2 the proportion of input tax for which credit has been claimed
(either provisionally or finally in a tax year and stating
which).
14. INHERITANCE TAX AND GIFTS
14.1 POWERS OF SALE FOR INHERITANCE TAX PURPOSES
There are not in existence any circumstances whereby any such power as
is mentioned in Section 212 Inheritance Tax Act 1984 could be exercised
in relation to any shares in, securities of, or assets of, the Company.
14.2 GIFTS
14.2.1 The Company is not liable to be assessed to corporation tax on
chargeable gains or to inheritance tax as donor or donee of any
gift or transferor or transferee of value.
14.2.2 The Company has not been a party to associated operations in
relation to a transfer of value within the meaning of
Section 268 Inheritance Tax Act 1984.
14.2.3 No Inland Revenue charge (as defined in Section 237 Inheritance
Tax Act 1984) is outstanding over any asset of the Company or in
relation to any shares in the capital of the Company.
69
<PAGE>
14.2.4 The Company has not received any asset as mentioned in Section
282 TCGA 1992.
70
<PAGE>
SCHEDULE 5 : PARTICULARS OF PREMISES
FREEHOLD PREMISES WITH REGISTERED TITLES
There are no Freehold Properties
71
<PAGE>
LEASEHOLD PREMISES WITH REGISTERED TITLES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THERE ARE NO LEASEHOLD PREMISES WITH REGISTERED TITLES
LEASHOLD PREMISES WITH UNREGISTERED TITLES
<S> <C> <C> <C> <C> <C>
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
Demised Premises Present Tenant Date of and parties to Term Current principal yearly Current use
lease rent
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
Suite 9, Fulcrum Solutions 24.11.98 12 months L10,500 Offices
Grosvenor House, Limited (1) Andrew Paul
45 The Downs Jenkins
Altrincham (2) Fulcrum
Solutions Limited
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
Suite 10, Fulcrum Solutions 24.11.98 12 months L10,500 Offices
Grosvenor House, Limited (1) Andrew Paul
45 The Downs Jenkins
Altrincham (2) Fulcrum
Solutions Limited
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
</TABLE>
72
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
Demised Premises Present Tenant Date of and parties to Term Current principal yearly Current use
lease rent
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
2nd Floor Fulcrum Solutions 24.06.97 to 23.12.03 -- Offices
Ebury Gate Limited (1) Premier Oil Plc
Lower Belgrave (2) Fulcrum Solutions
Street Limited
London
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
Ground Floor Fulcrum Solutions 02.08.99 5 years from L51,000 Offices
10/12 Young Street (Scotland) Limited (1) Barra (UK) Limited 02.08.99
Edinburgh (2) Fulcrum Solutions
(Scotland) Limited
- -------------------- ---------------------- -------------------------- -------------- ---------------------------- ----------------
</TABLE>
73
<PAGE>
SCHEDULE 6 : EARN OUT PAYMENTS
1. The Earn Out Payments shall be calculated in accordance with the
provisions of this schedule 6 and paid to each of the Vendors,
pro-rata to their holding of Sale Shares as set out in the second
column of schedule 1 ("Appropriate Percentage").
2. In this schedule, where the context admits:
"EARN OUT PERIOD" means each and any of the periods from the
Completion Date to 31 December 2000 and the accounting periods
ending 31 December 2001 and 2002;
"EARN OUT LEVEL" means the amount set out opposite the relevant
Operating Income Target in paragraph 3;
"EXCHANGE RATE" means the US$1.62 to L1;
"UNADJUSTED OPERATING INCOME" means (subject to paragraph 5 below) for
each Earn Out Period the profits before interest and tax arising from
Ordinary Activities as stated in the Relevant Accounts;
"OPERATING INCOME ADJUSTMENTS" shall mean the following:
there shall be excluded in the Operating Income:
(i) all payments, charges or expenses for allocation of management,
office overheads, executive, general and administrative expenses
or other charges or expenses of the Purchaser, if any unless
normally and historically incurred on behalf of the Company, its
Subsidiaries and Whittman-Hart Limited;
(ii) any National Insurance Contribution paid by the Company upon the
exercise of any options by employees of the Company pursuant to
an unapproved scheme relating to shares in the Purchaser; and
(iii) any capitalised leasehold improvements and all other
capitalised facility costs which are not recoverable in the
course of Ordinary Activities; but
there shall be included in the Operating Income:
(iv) any such payments, charges or expenses directly relating or
capable of being allocated to the conduct of Ordinary Activities
or the operation, administration and management of the Ordinary
Activities;
(v) all gross profits derived from contracts won or business
conducted by an employee of Fulcrum Solutions Inc., but for the
benefit and on behalf of the Purchaser's Group; and
74
<PAGE>
(vi) the amount of any payment made to the Purchaser under Clauses
5.6.2 or 5.6.3.
"OPERATING INCOME TARGET" means the targets as to the Operating Income
for each Earn Out Period set out in paragraph 3;
"OPERATING INCOME" shall be ascertained as follows:-;
(a) For each month during an Earn Out Period, two directors of the
Company of whom one is and one is not a Vendor Director shall
agree the Operating Income Adjustments for that month in respect
of each of the Company, its Subsidiaries and Whittman-Hart
Limited within 15 Business Days of the end of the month.
(b) As soon as practicable, in any event no later than 90 days after
the end of an Earn Out Period, the Purchaser shall procure that
the Relevant Accounts are prepared and approved.
(c) The Unadjusted Operating Income shall be adjusted by the
application of the aggregate monthly Operating Income
Adjustments agreed pursuant to paragraph (a) and such adjusted
figure shall be the "Operating Income" for that Earn Out Period.
(d) In the event that the two directors referred to in paragraph (a)
are unable to agree the monthly Operating Income Adjustments
within 15 Business Days of the end of a month, the matter shall
be referred to all directors of the Company who shall use their
best endeavours in good faith to agree the monthly Operating
Income Adjustments within 10 Business Days of the matter being
referred to them.
(e) In the event that the directors referred to in paragraph (d) are
unable to agree the monthly Operating Income Adjustments within
the 10 Business Day period, the dispute shall be referred to the
executive committee of the Purchaser for determination within 10
Business Days of the matter being referred to it.
(f) In the event that the monthly Operating Income Adjustments are
not determined within the 10 Business Day period pursuant to
paragraph (e), either the Purchaser or the Vendor Directors may
by notice to the other, refer the dispute to the auditors for
the time being of the Company who shall act as an Expert and
whose decision shall be final and binding on the parties. All
costs relating to such determination shall be borne equally
between the Purchaser and the Vendors in the absence of any
direction by the Expert.
"ORDINARY ACTIVITIES" means the business of the Company and its
Subsidiaries as at the Completion Date and the business of
Whittman-Hart Limited both prior to and after its transfer to the
Company after Completion;
75
<PAGE>
"RELEVANT ACCOUNTS" means the audited financial statements of the
Company and the Subsidiaries and Whittman-Hart Limited made up to the
end of each Earn Out Period prepared in accordance accounting
practices generally accepted in the United Kingdom or the United
States, as the case may be, applying bases and policies which have
been consistently applied in audited financial statements previously
applied by the Company, its Subsidiaries and Whittman-Hart Limited;
3. The Operating Income Levels and Earn Out Levels for each Earn Out
Period are as follows:
<TABLE>
<CAPTION>
EARN OUT PERIOD ENDING 31 DECEMBER 2000:
Operating Income Target Earn Out Levels
(US$million) (US$million)
<S> <C>
8.10 16.0
7.49 14.0
6.75 10.0
6.00 5.0
4.51 0
EARN OUT PERIOD ENDING 31 DECEMBER 2001:
Operating Income Targets Earn Out Levels
(US$million) (US$million)
14.70 21.0
13.46 16.0
11.67 8.0
9.86 4.0
8.97 0
EARN OUT PERIOD ENDING 31 DECEMBER 2002:
Operating Income Target Earn Out Levels
(US$million) (US$million)
21.50 15.0
76
<PAGE>
20.10 10.0
19.23 7.0
17.49 3.0
15.72 0
</TABLE>
4. For each Earn Out Period, the Earn Out Payment shall be:
4.1 in the case of the Operating Income (rounded up or down to the nearest
ten thousand pounds sterling), expressed in US Dollars in accordance
with the Exchange Rate, for the relevant Earn Out Period equalling an
Earn Out Target, the Earn Out Level; or
4.2 in the case of the Operating Income (rounded up or down to the nearest
ten thousand pounds sterling), expressed in US Dollars in accordance
with the Exchange Rate, for the relevant Earn Out Period when
expressed as a percentage of the Operating Income Target, falling
between two Operating Income Levels, the prorated amount of the
relevant band of the Earn Out Level; or
4.3 in the case of the Operating Income (rounded up or down to the nearest
ten thousand pounds sterling), expressed in US Dollars in accordance
with the Exchange Rate, for the relevant Earn Out Period being above
the highest Operating Income Target, the sum of the highest Earn Out
Level plus 50% of the amount by which the Operating Income for that
Earn Out Period ("Earn Out Bonus") exceeds the highest Operating
Income Target for that Earn Out Period.
5. In any Earn Out Period the Operating Income for that period will be
used to calculate performance against the Earn Out Target. If the
Operating Income exceeds the highest Operating Income Target for that
period then the surplus will first be carried back to any previous
period where the highest Operating Income Target was missed and used
to re-calculate the Earn Out Level for that period. Following such
carry back, the Operating Income surplus in that current period will
be re-calculated as stated in paragraph (c) of the definition of
Operating Income. If the Operating Income is below the highest
Operating Income Target for the period then any excess from previous
periods will be carried forward and used in the Earn Out calculation
for that current year, subject to the prior application of any
previous carry back. Any Earn Out Bonus previously paid on carried
forward Operating Income will be subtracted from the revised Earn Out
Payment.
6. The Purchaser shall satisfy the Earn Out Payment due to the Vendors by
issuing the Stock Value Equivalent as at the end of the relevant Earn
Out Period of the amount of the Earn Out Payment.
7. The following provisions are to apply throughout the Earn Out Periods:
77
<PAGE>
7.1 The Vendors may by notice in writing addressed to the Company appoint,
remove and replace two directors of the board of the Company and
Whittman Hart Limited ("Vendor Directors") such directors to be
appointed after prior consultation with and with the approval of the
Purchaser, such approval not be to unreasonably withheld.
7.2 The Purchaser will not without the written consent of the Vendors
initiate or implement any action with the intention of materially
prejudicing or frustrating the achievement of the Operating Income
Targets provided that nothing in this paragraph 7.2 shall prevent the
Purchaser from taking any action through acquisitions or otherwise for
the long term benefit of the Company, its Subsidiaries and/or
Whittman-Hart Limited.
7.3 Separate accounts covering the combined operations of the Company, its
Subsidiaries and Whittman-Hart Limited shall until otherwise agreed by
the parties be maintained at all times notwithstanding the acquisition
of any further companies or businesses and their merger with any such
entities.
7.4 The Purchaser shall use its reasonable endeavours to ensure that all
non-UK personnel of Whittman-Hart Limited have, at all relevant times,
valid visas and work permits provided that the Purchaser shall not be
liable under this paragraph 7.4 if any such visa or work permit is
revoked or otherwise not renewed for reasons beyond its reasonable
control, including for the avoidance of doubt, any changes to the
relevant law or regulation or application of any governmental
discretion or any action or omission by the relevant personnel giving
rise to such revocation or non-renewal.
7.5 Subject to any third party consent or any terms of any bank facilities
or other funding arrangements, the Purchaser will provide that such
working capital and other financial resources set out in a budget in
respect of Ordinary Activities for each Earn Out Period to be adopted
by the directors of the Company and approved by the Purchaser, are
made available in timely fashion to the Company, its Subsidiaries and
Whittman-Hart Limited.
8.1 The Purchaser may at any time during any Earn Out Period in its
absolute discretion notify the Vendors that the Earn Out Targets shall
no longer apply and the Vendors shall be entitled to all subsequent
Earn Out Payments calculated on the basis that the maximum Earn Out
Target is deemed to have been achieved in each Earn Out Period and
paid in accordance with paragraph 6.
8.2 Immediately upon the service of the notice referred to in paragraph
8.1, the covenants set out in paragraph 7 shall no longer apply.
78
<PAGE>
SCHEDULE 7 : WARRANTORS' AND PURCHASER'S PROTECTION
1. INTERPRETATION
In this schedule where the context admits "RELEVANT CLAIM" means any
claim in connection with any of the Warranties, the Indemnities or the
Tax Deed and any claim in connection with the Warranty set out in
paragraph 16 of schedule 3 shall mean a "US RELEVANT CLAIM".
2. FINANCIAL LIMITS
2.1 AGGREGATE LIMIT
The aggregate liability of the Warrantors in respect of this Agreement
and the Tax Deed and all claims relating thereto shall be limited to
the Consideration as finally determined and received by the
Warrantors.
2.2 THRESHOLDS
2.2.1 The Warrantors shall not be liable in respect of a Relevant
Claim other than a US Relevant Claim unless:-
(a) the liability of the Warrantors in respect of that Relevant
Claim (ignoring any liability for costs, expenses and
interest) exceeds US$15,000; and
(b) the aggregate liability (not counting for any purpose any
liability below US$15,000) of the Warrantors in respect of all
Relevant Claims exceeds US$200,000 in which case the
Warrantors shall be liable for the whole and not just the
amount by which the aggregate liability exceeds such amount.
2.2.2 The Warrantors shall not be liable in respect of US Relevant
Claims unless the liability in respect of such US Relevant
Claims exceed US$100,000.
2.2.3 The Purchaser shall not be liable in respect of claims in
connection with clause 5.7.1(c) unless such claims exceed
US$400,000.
2.3 LIABILITY
For the purpose of paragraph 2.2 the liability of the Warrantors in
respect of a Relevant Claim or a US Relevant Claim or the Purchaser in
respect of a claim under clause 5.7.1(c), as the case may be, shall
mean the amount in respect of such claim for which the Warrantors or
Purchaser, as the case may be, admit liability in writing or are found
to be liable by a court of competent jurisdiction.
3. TIME LIMITS
3.1 NOTICE TO WARRANTORS OR PURCHASER
79
<PAGE>
3.1.1 The Warrantors shall have no liability in respect of any
Relevant Claim (other than a US Relevant Claim) unless the
Purchaser shall have given notice in writing to the Warrantors
of such claim specifying (in reasonable detail) the matter
which gives rise to the claim, the nature of the claim and the
amount claimed in respect thereof (detailing the Purchaser's
calculation of the loss thereby alleged to have been suffered
by it), such notice to be given as soon as reasonably
practicable and in any event not later than 31 March 2002 in
the case of the Warranties set out in Schedule 3 other than in
respect of a US Relevant Claim, 7 years after the date of
Completion in respect of a relevant claim under Schedule 4
or the Tax Deed.
3.1.2 The Warrantors shall have no liability in respect of a US
Relevant Claim unless the Purchaser shall have given notice in
writing to the Warrantors of such claim specifying (in
reasonable detail) the matter which gives rise to the claim,
the nature of the claim and the amount in respect thereof
(detailing the Purchaser's calculation of the loss thereby
alleged to have suffered by it) such notice to be given as
soon as reasonably practicable and in any event no later than
the date referred to in paragraph 3.1.3.
3.1.3 The Purchaser shall have no liability in respect of a claim in
connection with clause 5.7.1(c) unless the Vendors shall have
given notice in writing to the Purchaser of such claim
specifying (in reasonable detail) the matter which gives rise
to the claim, the nature of the claim and the amount in
respect thereof (detailing the Vendors' calculation of the
loss thereby alleged to have suffered by them) such notice to
be given as soon as reasonably practicable and in any event no
later than 3 months after the approval of the audited
accounts for Whittman-Hart Limited by its board of directors
for the year ending 31 December 1999.
3.2 COMMENCEMENT OF PROCEEDINGS
All and any liability of the Warrantors in respect of any Relevant
Claim notified to the Representatives in accordance with paragraph
3.1 shall (if such claim has not previously been satisfied, settled
or withdrawn) be extinguished on the expiry of nine months from the
date of such notification in the case of the Warranties set out in
schedule 3 and six months after the seventh anniversary of the
date of Completion Date in the case of the Warranties set out in
Schedule 4 or the Tax Deed unless the Purchaser shall within such
period have issued and validly served on the Warrantors proceedings
in respect of such claim.
3.3 EXCESS PROVISIONS, OVERVALUES, UNDERVALUES AND WRITTEN-OFF AMOUNTS
3.4 If and to the extent that:
3.4.1 the amount of any allowance, provision or reserve (other than
any provision or reserve for Tax) made in the Audited Accounts
or otherwise taken into
80
<PAGE>
account or reflected therein is found to be in excess of the
matter for which such allowance, provision or reserve was
made; or
3.4.2 any asset is found to have been included at an undervalue in
the Audited Accounts or any liability (other than any
liability for Tax) is found to have been included at an
overvalue in the Audited Accounts; or
3.4.3 any sum is received by the Company or any Subsidiary which has
previously been written off as irrecoverable in its accounts,
then the amount of any such excess, undervalue, overvalue or receipt
as the case may be (the "EXCESS AMOUNT") shall be credited against and
applied in relieving the Warrantors from any liability they would
otherwise incur in respect of any claims under the Warranties, or at
the option of the Warrantors shall be credited against and applied in
or towards satisfaction of any claims which the Purchaser may have
against the Warrantors under the Tax Deed.
4. ACCOUNTING BASES ETC.
The Warrantors shall not be liable in respect of any claim under the
Warranties or to the extent that it arises or is increased as a result
of any change after Completion in the accounting bases, policies,
practices or methods applied in preparing any accounts or valuing any
assets or liabilities of the Company from those used in preparing the
Audited Accounts save to the extent necessary to bring such policies
etc into line with generally accepted accounting practice.
5. ACTS OF PURCHASER OR VENDORS ETC.
Neither the Warrantors nor the Purchaser, as the case may be, shall be
liable in respect of a claim under the Warranties or clause 5.7.1(c),
as the case may be, to the extent that the claim is attributable (in
whole or in part) to any voluntary act, omission or transaction
carried out by or at the request of or with the consent of the
Purchaser or any of its Affiliates or the Vendors, as the case may be,
or any of their respective successors in title or assigns on or after
Completion other than any such act, omission or transaction carried
out in the ordinary and proper course of business.
6. RECOVERY FROM THIRD PARTIES
6.1 COVERED LOSSES
Neither the Warrantors nor the Purchaser, as the case may be, shall be
liable in respect of any claim under the Warranties or clause 5.7.1(c)
as the case may be, to the extent that the claim relates to a Covered
Loss. A Covered Loss means:
6.1.1 any loss which is covered by and recovered under any insurance
in force at the relevant time for the benefit of the Company
any of its Subsidiaries or Whittman-Hart Limited, as the case
may be;
81
<PAGE>
6.1.2 any loss in respect of which the Company or any of the
Subsidiaries or Whittman-Hart Limited has any other right of
recovery against, or indemnity from, any person other than the
Warrantors or the Purchaser, (whether under any provision of
law, contract or otherwise howsoever) provided that in respect
of a claim made by the Purchaser, the Purchaser need not take
any action which the Purchaser or the Company reasonably
considers to be materially prejudicial to its commercial
interests.
6.2 ACCOUNTING TO WARRANTORS
6.2.1 If the Warrantors pay to or for the benefit of the Purchaser,
the Company or any Subsidiary an amount in respect of any
claim under the Warranties and the Company or any Subsidiary
or any member of the Purchaser's Group subsequently receives
from any other person any payment or benefit in respect of the
matter giving rise to such claim, the Purchaser shall
thereupon pay to the Warrantors an amount equal to the payment
or benefit received (except to any extent that the liability
of the Warrantors in respect of the Relevant Claim was reduced
to take account of such payment or benefit).
6.2.2 If the Purchaser pays to or for the benefit of any Vendor an
amount in respect of any claim under clause 5.7.1(c) and the
Vendors subsequently receive from any other person any payment
or benefit in respect of the matter giving rise to such claim,
the Vendors shall thereupon pay to the Purchaser an amount
equal to the payment or benefit received (except to any
extent that liability of the Purchaser in respect of such
claim was reduced to take account of such benefit or payment).
7. RELATED BENEFITS
In assessing any damages or other amounts payable in respect of a
claim under the Warranties or clause 5.7.1(c) there shall be taken
into account any related savings or other net benefits which become
available to the Purchaser or the Vendors.
8. NO DUPLICATION OF RECOVERY
8.1 LOSS OTHERWISE COMPENSATED
Neither the Warrantors nor the Purchaser shall be liable in respect of
any claim under the Warranties or clause 5.7.1(c) to the extent that
the subject of the claim has been or is made good or is otherwise
compensated for without cost to the Purchaser or the Vendors as the
case may be.
8.2 NO DOUBLE RECOVERY
Neither the Purchaser nor the Vendors shall be entitled to recover
damages or otherwise obtain reimbursement or restitution more than
once in respect of the same loss.
82
<PAGE>
9. CONDUCT OF CLAIMS
9.1 If either the Purchaser or the Vendors, as the case may be, become
aware of a claim made against it or them that may constitute a
Relevant Claim or a US Relevant Claim for which the Warrantors may
be liable, or a claim in respect of clause 5.7.1(c), as the case may
be, for which the Purchaser may be liable, the Vendors or the
Purchaser, as the case may be, shall:
(a) notify the Warrantors or the Purchaser, as the case may be, as
soon as practicable of the matter and consult with the
Warrantors or the Purchaser, as the case may be, in good faith
with respect to the matter; and
(b) if the matter becomes or has become the subject of proceedings
then the Purchaser shall consult with the Warrantors in good
faith or vice versa to achieve the best possible resolution of
such proceedings.
9.2 In respect of claims referred to in paragraph 9.1 the Warrantors or
the Purchaser, as the case may be, shall provide any assistance
(including the provision of information) as reasonably may be
requested and required by the Purchaser or the Warrantors, as the
case may be, in dealing with such claim and the conduct of it.
83
<PAGE>
Signed by ) /s/ Mark Robinson
MARK ROBINSON ) ...........................................
Signed by ) /s/ Steven Anderson
STEVEN ANDERSON ) ...........................................
Signed by ) /s/ David Kilpatrick
DAVID KILPATRICK ) ...........................................
Signed by ) /s/ Daniel Keating
DANIEL KEATING ) ...........................................
Signed by as ) /s/ David Kilpatrick
attorney for TONY J BATTING ) ...........................................
Signed by as ) /s/ David Kilpatrick
attorney for ZAG ASGHAR ) ...........................................
Signed by as ) /s/ David Kilpatrick
attorney for PHILIP BRINE ) ...........................................
Signed by as ) /s/ David Kilpatrick
attorney for DESMOND BUTCHER ) ...........................................
<PAGE>
Signed by as ) /s/ Mark Robinson
attorney for FIONA CANNONS ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for NICHOLAS GARNETT ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for SEAN HOBAN ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for XERXES HODIVALA ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for ROGER JONES ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for RUKASH KUMAR ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for JANE MARSH ) ...........................................
<PAGE>
Signed by as ) /s/ Steven Anderson
attorney for BEN NICHOLSON ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for GARY PIPER ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for GEOFF POPLE ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for DAVID SCOTT ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for KEVIN SULLEY ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for RYAN J WARD ) ...........................................
Signed by as ) /s/ Steven Anderson
attorney for RACHI WEERASINGHE ) ...........................................
<PAGE>
Signed by as ) /s/ Mark Robinson
attorney for ANTHONY WOODS ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for STEPHEN GRAHAM ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for DAVID HOPE ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for STEWART GABRIEL ) ...........................................
Signed as a Deed by as ) /s/ Mark Robinson
attorney for GARY ATKINSON ) ...........................................
Signed by as ) /s/ Mark Robinson
attorney for TIMOTHY A. BUCKLEY ) ...........................................
<PAGE>
Signed by as ) /s/ Daniel Keating
attorney for DAVID CARRIGHAN ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for MARK CLEWETT ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for KAREN A. EDWARDS ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for JOHN GRAY ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for TIM HOPPER ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for PAUL JOHNSON ) ...........................................
Signed by as ) /s/ Daniel Keating
attorney for ANDREW LAMONT ) ...........................................
<PAGE>
Signed by as ) /s/ David Kilpatrick
attorney for CHRIS MOSS ) ...........................................
Signed by as ) /s/ David Kilpatrick
attorney for PHILIP R. THOMPSON ) ...........................................
Signed by )
For and on )
behalf of ) /s/ Edward V. Szofer /s/ Bert B. Young
WHITTMAN-HART INC. )......................................
Duly authorised representative
<PAGE>
ACQUISITION AGREEMENT
This Agreement is made this 27th day of November 1999 by and among
Whittman-Hart, Inc., a Delaware corporation ("WHI"), and the undersigned
shareholders (the "Shareholders") of Fulcrum Solutions, Inc., a Delaware
corporation ("Fulcrum").
BACKGROUND
The Shareholders own the number of shares of Class B Common Stock of
Fulcrum set forth after their respective names on Exhibit A hereto (the
"Shares");
WHI desires to acquire, and the Shareholders desire to sell, all of the
Shares owned by the Shareholders
NOW, THEREFORE, in consideration of the premises and promises made
herein, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"CLOSING" has the meaning set forth in SECTION 2.1 below.
"CLOSING DATE" has the meaning set forth in SECTION 2.1 below.
ARTICLE II
ACQUISITION OF SHARES; CLOSING
2.1 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place not later than 31 December
1999 (the "Closing Date").
2.2 ACQUISITION OF SHARES. Each of the Shareholders hereby sell his
Shares, and WHI hereby purchases such Shares, for the total consideration of
US $565,462 to be paid to the Shareholders pro rata to their holding of
Shares such consideration to be apportioned between cash and WHI Shares by
agreement between WHI and the Shareholders on or before the Closing Date. The
Shareholders shall receive such part of the consideration to be satisfied in
cash on the Closing Date, less all amounts owing by the Shareholder to
Fulcrum on account of the unpaid purchase price for the Shares and less
mandatory withholding on account of this transaction (the acceleration of
vesting of their Shares). In the event that the consideration is satisfied by
the issue of WHI Shares, then the number of such shares shall be calculated
by using the price of US $42.245 per WHI Share. The Shareholders shall
deliver to WHI all share certificates for their shares of Fulcrum, endorsed
for transfer or with duly endorsed stock powers, at the closing, and WHI
shall deliver certificates for the WHI shares described on Exhibit A as soon
as practicable
- 1 -
<PAGE>
after the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder severally represents and warrants to WHI that such
Shareholder has full record and beneficial title to his Shares as set forth on
Exhibit A, free of all liens, claims and encumbrances, except for pledge of
Shares to Fulcrum to be satisfied by setoff of such Shareholder's liability for
the Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WHI
WHI represents and warrants to the Shareholders that the (i)
purchase of the Shares has been duly authorized and that this Agreement is
the valid and binding agreement of WHI and (ii) the shares of WHI's Common
Stock issuable under this Agreement have been duly authorized and when issued
in accordance with this Agreement shall be validly issued, fully paid and
nonassessable and are free and clear of any liens arising from WHI.
ARTICLE V
SECURITIES LAW MATTERS
The parties agree as follows with respect to the sale or other
disposition after Closing Date of WHI Shares:
5.1 DISPOSITION OF SHARES. Each Shareholder acknowledges that the
WHI Shares issued to him have been issued without registration based upon an
exemption under Section 4(2) of the Securities Act. Each Shareholder agrees
that he will not sell, transfer or otherwise dispose of any WHI Shares issued
to him, except pursuant to (i) an exemption from the registration
requirements under the Securities Act, in which case, each such Shareholder
shall first supply to WHI an opinion of counsel (which counsel and opinions
shall be reasonably satisfactory to WHI) that such exemption is available, or
(ii) an effective registration statement filed by WHI with the Securities
Exchange Commission under the Securities Act.
5.2 LEGENDS. The certificates representing WHI Shares shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT, AND IN COMPLIANCE WITH
APPLICABLE SECURITIES LAWS OF ANY STATE WITH
- 2 -
<PAGE>
RESPECT THERETO, OR IN ACCORDANCE WITH AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE.
WHI may, unless a registration statement is in effect covering such shares,
place stop transfer orders with its transfer agents with respect to such
certificates to the extent required by federal securities laws.
5.3 OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE LISTINGS.
WHI will (a) use make available adequate current public information with
respect to WHI as is required pursuant to Rule 144(c) in connection with the
sale and transfer by the Shareholders under Rule 144 promulgated under the
Securities Act of 1993, as amended ("Rule 144") during the two year period
after the Closing Date, (b) direct the transfer agent of WHI's common stock
to remove the restrictive legend provided for in SECTION 5.2 and to deliver
certificates without a legend to a purchaser of WHI Shares from any
Shareholder in connection with a sale under Rule 144, and (c) cause such
shares of WHI common stock to be received by such purchaser to be listed on
the Nasdaq Stock Market.
ARTICLE VII
REGISTRATION RIGHTS
7.1 REGISTRATION RIGHTS FOR WHI; FILING OF REGISTRATION STATEMENT.
The Shareholders shall obtain the benefit of the registration rights being
provided to the Vendors of Fulcrum Solutions, Limited via the Merger
Agreement with WHI dated the date hereof, set forth as an Exhibit hereto.
7.2 AMENDMENTS AND SUPPLEMENTS; RESTRICTIONS ON USE. WHI shall be
entitled to delay the filing of such amendments and supplements to the
Registration Statement and the use of the prospectus if WHI determines that
such filing or use would impede, delay, or interfere with any significant
financing, acquisition, or other transaction involving WHI, or require
disclosure of material information which WHI has a bona fide business purpose
for preserving as confidential. WHI shall also advise the Shareholders
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such stop order should be
issued. Following the lifting of such suspension, WHI shall promptly file
such documents or take such other action as shall be required to make the
prospectus current.
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to
- 3 -
<PAGE>
have been relied upon by the parties hereto. All covenants and agreements
shall survive the Closing and shall be fully effective and enforceable until
the covenant or agreement has been fully performed. All representations and
warranties shall survive the Closing.
8.2 PRESS RELEASES AND ANNOUNCEMENTS. During the period beginning
upon full execution of this Agreement and ending upon the earlier of (i)
Closing or (ii) termination of this Agreement, no Party shall issue any press
release, public announcement or public disclosure relating to the subject
matter of this Agreement without the prior written approval of the other
parties; provided, however, that the foregoing shall not prohibit disclosure
to a party's attorneys, accountants, lenders or financial advisors (who shall
be bound by this provision), nor shall the foregoing prohibit WHI from making
any public disclosure it believes in good faith is required by law. After
Closing, WHI shall be entitled to make the first public disclosure regarding
the subject matter of this Agreement and WHI's consent shall be required
prior to any public disclosures made by the Shareholders.
8.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
8.4 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or
among the parties, written or oral, that may have related in any way to the
subject matter hereof.
8.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
heirs, successors and permitted assigns. Other than WHI, no Party may assign
either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other parties; provided
that in the event of an assignment by WHI, the assignor shall remain liable
for all of the obligations hereunder transferred to the Assignee. In no event
shall any assignment of this Agreement be made by WHI prior to Closing to a
party other than an Affiliate of WHI.
8.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. Any reference herein to
an agreement or contract shall be deemed to refer also to the other (such
terms being interchangeable) and shall include commitments and
understandings, whether written or oral, including all amendments thereto.
8.7 HEADINGS; MEANING. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement. The term "including" shall
be interpreted to mean "including without limitation."
8.8 NOTICES. All notices, requests, demands, claims and other
communications hereunder must be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date three business days after dispatch by certified or
registered mail, return receipt requested, if mailed, in each case delivered,
sent or mailed to such party, postage prepaid, and addressed to the intended
recipient as set forth below:
- 4 -
<PAGE>
If to the Shareholders: To the address set forth in Exhibit A.
If to WHI:
Whittman-Hart, Inc.
311 South Wacker Drive
Suite 3500
Chicago, IL 60606-6618
Attention: Edward V. Szofer, President
Fax No.: (312) 913-3050
Copies to:
Whittman-Hart, Inc. Neal J. White, P.C.
311 South Wacker Drive McDermott, Will & Emery
Chicago, Illinois 60606-6618 227 West Monroe Street
Attention: David Shelow, Esq. Chicago, Illinois 60606
Fax No.: (312) 913-6650 Fax No.: (312) 984-3669
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any Party may change its
address by giving the other parties notice in the manner herein set forth.
9.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.
9.10 AMENDMENTS AND WAIVERS. The parties may mutually amend any
provision of this Agreement at any time prior to the Closing Date. No
amendment or waiver of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by the appropriate parties. No waiver
by any Party of any misrepresentation or breach of warranty, covenant or
agreement hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent misrepresentation or breach of warranty, covenant or
agreement hereunder.
9.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction. If the final judgment of
a court of competent jurisdiction declares that any term or provision hereof
is invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and
- 5 -
<PAGE>
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable
as so modified.
9.12 EXPENSES. Each party shall bear its own costs concerning this
Agreement.
9.13 INCORPORATION OF EXHIBIT. The Exhibit identified in this Agreement
is incorporated herein by reference and made a part hereof.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
- 7 -
<PAGE>
WHITTMAN-HART, INC.
By: /s/ Edward V. Szofer
---------------------
By:
---------------------
<PAGE>
DIDIER STEVEN
by his attorney
/s/ David Kilpatrick
--------------------
RICHARD SCHWARTZ
by his attorney
/s/ David Kilpatrick
--------------------
TOM DESHAN
by his attorney
/s/ David Kilpatrick
--------------------
MIKE KATZ
by his attorney
/s/ David Kilpatrick
--------------------
MIKE ZETO
by his attorney
/s/ David Kilpatrick
--------------------
SAM STREVENS
by his attorney
/s/ David Kilpatrick
--------------------
SCOTT THON
by his attorney
/s/ David Kilpatrick
--------------------
<PAGE>
EXHIBIT A
SHAREHOLDER OWNERSHIP AND CONSIDERATION
<TABLE>
<CAPTION>
SHAREHOLDER FULCRUM SHARES Consideration (US$)
OWNED
<S> <C> <C>
Didier Steven 5,000 B Common Stock
102 E 30 Apt 5
NY 10016
USA
Richard Schwartz 1,000 B Common Stock
69 Jessup Road
Warwick
NY 10990
USA
Tom Deshan 2,500 B Common Stock
251 Forest Ave
Glen Ridge
NJ 07028
USA
Mike Katz 2,000 B Common Stock
205 Hudson Street
Apartment 401
Hoboken
NJ 07030
USA
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER FULCRUM SHARES Consideration
OWNED (US$)
<S> <C> <C>
Mike Zeto 500 B Common Stock
39 Dogwood Lane
New Providence
NJ 07974
USA
Sam Strevens 1,500 B Common Stock
508 West End Avenue
Apt 5B
New York
NY 10024
USA
Scott Thon 10,000 B Common Stock
28 Beach Flint Way
Victor
NY 14564
USA
</TABLE>
<PAGE>
SUPPLEMENT TO ACQUISITION AGREEMENT
This Supplemental Agreement is made this 30th day of December 1999
by and among Whittman-Hart, Inc., a Delaware corporation ("WHI"), and the
undersigned shareholders (the "Shareholders") of Fulcrum Solutions, Inc., a
Delaware corporation ("Fulcrum").
BACKGROUND
The parties executed an Acquisition Agreement dated November 27,
1999 ("Agreement") pursuant to which the Shareholders agreed to sell and WHI
agreed to purchase the number of shares of Class B Common Stock of Fulcrum
set forth after their respective names on Exhibit A hereto (the "Shares"),
for a total consideration of US $565,462 to be paid to the Shareholders pro
rata to their holding of Shares such consideration to be apportioned between
cash and WHI Shares by agreement between WHI and the Shareholders on or
before the Closing Date.
WHEREAS, the parties desire document that apportionment agreement;
NOW, THEREFORE, in consideration of the premises and promises made
herein, the parties agree as follows:
1. APPORTIONMENT AGREEMENT. It is agreed that the apportionment of
the purchase price is as set forth on Exhibit A. The Shareholders shall
receive such part of the consideration to be satisfied in cash on the Closing
Date, less all amounts owing by the Shareholder to Fulcrum on account of the
unpaid purchase price for the Shares and less mandatory withholding on
account of this transaction (the acceleration of vesting of their Shares).
Pursuant to the Agreement, the number of such shares has been calculated by
using the price of US $42.245 per WHI Share. On the date hereof, the
Shareholders are delivering to WHI all share certificates for their shares of
Fulcrum, endorsed for transfer or with duly endorsed stock powers. As soon as
practicable, WHI shall deliver certificates for the WHI shares described on
Exhibit A.
IN WITNESS WHEREOF, the parties hereto have executed this
Supplemental Agreement as of the date first above written.
WHITTMAN-HART, INC.
By: /s/ Edward V. Szofer
---------------------
<PAGE>
continuation of signature page to Supplemental Agreement
DIDIER STEVEN
by his attorney
/s/ David Kilpatrick
--------------------
RICHARD SCHWARTZ
by his attorney
/s/ David Kilpatrick
--------------------
TOM DESHAN
by his attorney
/s/ David Kilpatrick
--------------------
MIKE KATZ
by his attorney
/s/ David Kilpatrick
--------------------
MIKE ZETO
by his attorney
/s/ David Kilpatrick
--------------------
SAM STREVENS
by his attorney
/s/ David Kilpatrick
--------------------
SCOTT THON
by his attorney
/s/ David Kilpatrick
--------------------
<PAGE>
Exhibit A - see Excel spread sheet attached.
<PAGE>
Exhibit 5.1
January 28, 2000
Whittman-Hart, Inc.
311 South Wacker Drive
Suite 3500
Chicago, Illinois 60606
Ladies and Gentlemen:
We have acted as counsel for Whittman-Hart, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to (i) 1,098,221
shares (the "Four Points Shares") of the Company's Common Stock, par value
$.001 per share ("Common Stock"), issued to the members of Four Points
Digital, L.L.C. pursuant to that certain Exchange Agreement, dated as of
November 11, 1999, by and between Four Points Digital, L.L.C. and the Company
(the "Four Points Agreement"); (ii) 353,602 shares of Common Stock (the
"November Fulcrum Shares") issued to the stockholders of Fulcrum Solutions
Limited pursuant to that certain Merger Agreement, dated as of November 27,
1999, by and between the persons listed on Schedule 1 attached thereto and
the Company (the "November Fulcrum Agreement"); and (iii) 7,267 shares of
Common Stock (the "December Fulcrum Shares," and, together with the Four
Points Shares and the November Fulcrum Shares, the "Shares") issued to the
shareholders of Fulcrum Solutions, Inc. pursuant to that certain Acquisition
Agreement, dated as of November 27, 1999, by and among Whittman-Hart, Inc. and
the shareholders of Fulcrum Solutions, Inc., as supplemented by the
Supplement to Acquisition Agreement, dated as of December 30, 1999, by and
among Whittman-Hart, Inc. and the shareholders of Fulcrum Solutions, Inc.
(the "December Fulcrum Agreement").
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and
upon affidavits, certificates and written statements of directors, officers
and employees of, and the transfer agent for, the Company. We have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including
(a) the Registration Statement, (b) the Amended and Restated Certificate of
Incorporation of the Company, (c) the Second Amended and Restated By-Laws of
the Company, (d) resolutions adopted by the
<PAGE>
Whittman-Hart, Inc.
January 28, 2000
Page 2
Board of Directors of the Company, (e) the Four Points Agreement, (f) the
November Fulcrum Agreement and (g) the December Fulcrum Agreement.
In connection with this opinion, we have assumed the legal capacity of
all natural persons, the accuracy and completeness of all documents and
records that we have reviewed, the genuineness of all signatures, the
authenticity of the documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as
certified, conformed or reproduced copies.
Based upon and subject to the foregoing, it is our opinion that the
Shares are validly issued, fully paid and nonassessable.
Our opinion expressed above is limited to the General Corporation Law of
the State of Delaware, the applicable provisions of the Delaware constitution
and the reported judicial decisions interpreting such laws and we do not
express any opinion concerning any other laws. This opinion is given as of
the date hereof and we assume no obligation to advise you of changes that may
hereafter be brought to our attention.
We hereby consent to the use of our name under the heading "Legal
Matters" in the prospectus forming a part of the Registration Statement and
to use of this opinion for filing as Exhibit 5.1 to the Registration
Statement. In giving this consent, we do not thereby admit that we are
included in the category of persons whose consent is required under Section 7
of the Act or the related rules and regulations thereunder.
Very truly yours,
/s/ KATTEN MUCHIN ZAVIS
<PAGE>
Exhibit 23.1
CONSENT OF KPMG LLP
The Board of Directors
Whittman-Hart, Inc.:
We consent to the incorporation by reference in this Registration Statement
on Form S-3 of Whittman-Hart, Inc. of our reports dated January 14, 1999,
relating to the consolidated balance sheets of Whittman-Hart, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of earnings, stockholders' equity and comprehensive income, and
cash flows for each of the years in the three-year period ended December 31,
1998, and the related consolidated financial statement schedule of valuation
and qualifying accounts, which reports appear in the December 31, 1998 annual
report on Form 10-K of Whittman-Hart, Inc. We also consent to the reference
to our firm under the heading "Experts" in such Registration Statement.
/s/ KPMG LLP
Chicago, Illinois
January 26, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
FOR USWEB CORPORATION
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Whittman-Hart, Inc. of our report dated January 25,
1999 relating to the financial statements of USWeb Corporation, which appears
in the Current Report on Form 8-K of Whittman-Hart, Inc. dated January 28,
2000.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 28, 2000
