<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 27, 2000
REGISTRATION NO. 333-94565
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
WHITTMAN-HART, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 8742 36-3797833
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Code Number) Identification No.)
incorporation or organization)
</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:
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MATTHEW S. BROWN, ESQ. CAROLYN AVER MARK BONHAM, ESQ.
KATTEN MUCHIN ZAVIS EXECUTIVE VICE PRESIDENT AND STEVE L. CAMAHORT, ESQ.
525 WEST MONROE STREET CHIEF FINANCIAL OFFICER ROBERT T. ISHII, ESQ.
SUITE 1600 USWEB CORPORATION WILSON SONSINI GOODRICH &
CHICAGO, ILLINOIS 60661 410 TOWNSEND STREET ROSATI, P.C.
(312) 902-5200 SAN FRANCISCO, CALIFORNIA 94107 650 PAGE MILL ROAD
(415) 284-7070 PALO ALTO, CALIFORNIA
(650) 493-9300
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective date
registration statement for the same offering: / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
WHITTMAN-HART, INC.
311 SOUTH WACKER DRIVE, SUITE 3500,
CHICAGO, ILLINOIS 60606-6618
------------------------
NOTICE OF SPECIAL MEETING TO BE HELD ON FEBRUARY 28, 2000
---------------------
To our Stockholders:
We will hold a special meeting of the stockholders of Whittman-Hart, Inc. at
11:00 a.m. local time, on Monday, February 28, 2000 at The Whittman-Hart
Institute for Strategic Education, 320 North Elizabeth Street, Chicago, Illinois
60607. At the Whittman-Hart special meeting, we will ask you to vote on:
- A proposal to approve the issuance of shares of common stock to the
stockholders of USWeb Corporation ("USWeb/CKS") pursuant to the Agreement
and Plan of Merger, dated as of December 12, 1999, by and among
Whittman-Hart, Uniwhale, Inc., a wholly owned subsidiary of Whittman-Hart,
and USWeb/CKS, providing for the merger of USWeb/CKS and Uniwhale, after
which USWeb/CKS will become a wholly owned subsidiary of Whittman-Hart;
- A proposal to amend the Whittman-Hart charter to increase the number of
authorized common shares from 75,000,000 shares to 500,000,000 shares.
- A proposal to increase the number of authorized shares of common stock
available for issuance under the Whittman-Hart 1995 Incentive Stock Plan
from 24,000,000 shares to 48,000,000 shares; and
- Any other business that may properly come before the special meeting,
including any adjournment or postponement thereof.
We have fixed the close of business on January 25, 2000, as the record date
for the determination of our stockholders entitled to vote at this special
meeting (including any adjournment or postponement). A list of such stockholders
will be available at the special meeting and will also be available for
inspection by stockholders of record during normal business hours at our
corporate headquarters located at 311 South Wacker Drive, Suite 3500, Chicago,
Illinois, 60606 for 10 days prior to the special meeting.
After careful consideration, the board of directors has determined that the
merger is fair to and in the best interests of Whittman-Hart. YOUR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THESE PROPOSALS SO
THAT WE MAY COMPLETE THE MERGER AND TAKE RELATED ACTIONS.
Approval of the proposal to amend the Whittman-Hart charter requires the
affirmative vote of a majority of the shares of Whittman-Hart common stock
outstanding on the record date. Approval of the other proposals requires the
affirmative vote of a majority of the total votes cast at the special meeting in
person or by proxy. Please sign and promptly return the proxy card in the
enclosed prepaid envelope WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING. You can revoke your proxy at any time before it is voted. Returning
your proxy card will not affect your right to vote in person if you choose to
attend the special meeting. Failure to return a properly executed proxy card or
to vote at the
<PAGE>
special meeting will have the same effect as a vote against the proposal to
amend the Whittman-Hart charter.
FOR THE BOARD OF DIRECTORS
[LOGO]
ROBERT F. BERNARD
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF WHITTMAN-HART COMMON
STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED WHETHER THIS
JOINT PROXY STATEMENT/PROSPECTUS IS ADEQUATE OR ACCURATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus was first mailed to stockholders on or
about January 28, 2000.
Chicago, Illinois
January 26, 2000
<PAGE>
[LOGO]
USWEB CORPORATION
410 TOWNSEND STREET
SAN FRANCISCO, CALIFORNIA 94107
------------------------
NOTICE OF SPECIAL MEETING TO BE HELD ON FEBRUARY 28, 2000
---------------------
To our Stockholders:
We will hold a special meeting of the stockholders of USWeb Corporation
("USWeb/CKS") at 9:00 a.m., local time, on Monday, February 28, 2000 at the
offices of USWeb Corporation, 2880 Lakeside Drive, Suite 300, Santa Clara,
California 95054. At the USWeb/CKS special meeting, we will ask you to vote on:
- A proposal to approve and adopt the 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, and the merger of
USWeb/CKS and Uniwhale, after which USWeb/CKS will become a wholly owned
subsidiary of Whittman-Hart;
- Any other business that may properly come before the special meeting,
including any adjournment or postponement thereof.
We have fixed the close of business on January 25, 2000, as the record date
for the determination of our stockholders entitled to vote at this special
meeting (including any adjournment or postponement). A list of such stockholders
will be available at the special meeting and will also be available for
inspection by stockholders of record during normal business hours at our
corporate headquarters located at 410 Townsend Street, San Francisco, California
94107 for 10 days prior to the date of the special meeting.
After careful consideration, the board of directors has determined that the
merger is fair to and in the best interests of USWeb/CKS's stockholders. YOUR
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THIS
PROPOSAL SO THAT WE MAY COMPLETE THE MERGER.
Approval of the proposal to approve and adopt the merger agreement and the
merger with a subsidiary of Whittman-Hart requires the affirmative vote of a
majority of the shares of USWeb/CKS common stock outstanding on the record date.
Please sign and promptly return the proxy card in the enclosed prepaid envelope
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. You can revoke your
proxy at any time before it is voted. Returning your proxy card
<PAGE>
will not affect your right to vote in person if you choose to attend the special
meeting. Failure to return a properly executed proxy card or to vote at the
special meeting will have the same effect as a vote against the merger agreement
and the merger proposal.
FOR THE BOARD OF DIRECTORS
[LOGO]
ROBERT SHAW
CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF WHITTMAN-HART COMMON
STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER OR DETERMINED WHETHER THIS
JOINT PROXY STATEMENT/PROSPECTUS IS ADEQUATE OR ACCURATE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus was first mailed to stockholders on or
about January 28, 2000.
San Francisco, California
January 26, 2000
<PAGE>
JOINT PROXY STATEMENT/PROSPECTUS JANUARY 26, 2000
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[LOGO] [LOGO]
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MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Whittman-Hart and USWeb/CKS have approved a merger
agreement that provides for the merger of the two companies.
We are currently deciding on a new name for our combined company, which will
have its headquarters in Chicago and additional executive offices in San
Francisco and New York.
Upon completion of the merger, holders of USWeb/CKS common stock will receive
0.865 of a share of Whittman-Hart common stock for each USWeb/CKS share they
own. Whittman-Hart stockholders will continue to own their existing shares after
the merger.
We estimate that Whittman-Hart will issue approximately 81,482,000 shares of
Whittman-Hart common stock to USWeb/CKS stockholders in the merger. These shares
will represent approximately 57% of the outstanding shares of the combined
company's common stock after the merger. Existing Whittman-Hart stockholders
will hold approximately 43% of the outstanding shares of the combined company's
common stock after the merger. In addition, Whittman-Hart will issue shares in
the future to satisfy option, warrant, bonus and earn-out obligations of
USWeb/CKS.
We are asking stockholders of USWeb/CKS to approve the merger agreement and the
merger.
We are asking stockholders of Whittman-Hart to approve:
- the issuance of Whittman-Hart common stock to the stockholders of
USWeb/CKS in the merger,
- an amendment to Whittman-Hart's charter to increase the number of
authorized shares, and
- an amendment to Whittman-Hart's 1995 Incentive Stock Plan to increase the
number of shares of common stock authorized for issuance under the plan.
We cannot complete the merger unless the stockholders of USWeb/CKS approve the
merger proposal and the stockholders of Whittman-Hart approve the issuance of
shares in the merger and the increase in the number of authorized Whittman-Hart
shares. We can complete the merger whether or not the amendment to the
Whittman-Hart 1995 Incentive Stock Plan is approved. PLEASE SEE "RISK FACTORS"
BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD
CONSIDER IN EVALUATING THE MERGER AND THE OTHER PROPOSALS.
------------------------
The dates, times and places of the meetings are:
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For Whittman-Hart stockholders: For USWeb/CKS stockholders:
Monday, February 28, 2000 Monday, February 28, 2000
11:00 a.m., Central Standard Time 9:00 a.m., Pacific Standard Time
The Whittman-Hart Institute for USWeb Corporation
Strategic Education 2880 Lakeside Drive
320 North Elizabeth Street Suite 300
Chicago, Illinois 60607 Santa Clara, California 95054
[LOGO] [LOGO]
Robert F. Bernard Robert Shaw
Chairman and Chief Executive Officer Chief Executive Officer
</TABLE>
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about Whittman-Hart and USWeb/CKS from documents that are
not included in or delivered with this joint proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain documents incorporated by reference in this joint proxy
statement/prospectus by requesting them in writing or by telephone from the
appropriate company at the following addresses and telephone numbers:
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USWeb Corporation Whittman-Hart, Inc.
410 Townsend Street 311 South Wacker Drive
San Francisco, California 94107 Suite 3500
Attention: Investor Relations Chicago, Illinois 60606-6618
(415) 284-7070 Attention: Investor Relations
(312) 922-9200
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY FEBRUARY 21, 2000 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETINGS OF THE STOCKHOLDERS
WHITTMAN-HART AND USWEB/CKS.
See "Where You Can Find More Information" on page 72.
<PAGE>
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE WHITTMAN-HART/USWEB/CKS
MERGER.................................................... 1
SUMMARY..................................................... 4
The Companies........................................... 4
Our Recommendations to Stockholders..................... 4
The Merger.............................................. 5
The USWeb/CKS Special Meeting........................... 7
The Whittman-Hart Special Meeting....................... 8
USWeb/CKS Summary Historical Consolidated Financial
Information............................................ 9
Whittman-Hart Summary Historical Consolidated Financial
Information............................................ 11
Whittman-Hart and USWeb/CKS Unaudited Pro Forma Combined
Financial Statements -- Overview....................... 13
Whittman-Hart and USWeb/CKS Unaudited Pro Forma Combined
Balance Sheet -- September 30, 1999.................... 15
Whittman-Hart and USWeb/CKS Unaudited Pro Forma Combined
Statement of Operations -- Nine Months Ended
September 30, 1999..................................... 16
Whittman-Hart and USWeb/CKS Unaudited Pro Forma Combined
Statement of Operations -- Year Ended December 31,
1998................................................... 17
Whittman-Hart and USWeb/CKS Notes to Unaudited Pro Forma
Combined Financial Statements.......................... 18
Comparative Per Share Data.............................. 20
Comparative Market Price Data........................... 21
Recent Developments..................................... 21
RISK FACTORS................................................ 22
Risks Relating to the Merger............................ 22
Integrating Whittman-Hart and USWeb/CKS may be
difficult........................................... 22
The market prices of our companies' stock prices may
fluctuate, but the exchange ratio is fixed.......... 22
We must retain key personnel and they must work
together effectively................................ 22
We could lose clients as a result of uncertainty
regarding the merger................................ 23
We must build recognition and customer acceptance of
new brands.......................................... 23
The merger will result in substantial costs whether
or not completed.................................... 23
If the merger is not completed the companies' stock
prices could decline................................ 23
Risks Relating to the Combined Company.................. 24
Our quarterly results may fluctuate, which may lead
to reduced prices for our stock..................... 24
Our stock prices are volatile and the combined
company's stock could decline in value.............. 25
The merger will dilute your percentage ownership.... 25
To succeed, we must recruit and retain skilled
professionals, who are in short supply.............. 25
Our success depends on our ability to manage
growth.............................................. 25
Our international operations are difficult to
manage.............................................. 25
The market in which we compete is highly competitive
and has low barriers to entry....................... 26
We rely on strategic relationships that could be
terminated easily................................... 27
The Internet economy and the market for e-commerce
solutions is still developing....................... 27
The infringement or misuse of intellectual property
rights could harm our business...................... 28
If we do not perform to our clients' expectations,
we face potential liability......................... 28
One stockholder will have significant influence over
the combined company................................ 28
The organizational documents of the combined company
and current Delaware law may deter potentially
beneficial takeover attempts........................ 29
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i
<PAGE>
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PAGE
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UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS........ 30
THE USWEB/CKS SPECIAL MEETING............................... 31
Purpose of the USWeb/CKS Special Meeting................ 31
Proxies................................................. 31
Date, Time and Place of Meeting......................... 31
Record Date and Outstanding Shares...................... 31
Vote Required........................................... 31
Revocability of Proxies................................. 32
Proxy Solicitation...................................... 32
THE WHITTMAN-HART SPECIAL MEETING........................... 33
Purpose of the Whittman-Hart Special Meeting............ 33
Proxies................................................. 33
Date, Time and Place of Meeting......................... 33
Record Date and Outstanding Shares...................... 33
Vote Required........................................... 34
Revocability of Proxies................................. 34
Proxy Solicitation...................................... 34
APPROVAL OF THE MERGER...................................... 35
Background of the Merger................................ 35
Joint Reasons for the Merger............................ 36
USWeb/CKS's Reasons for the Merger...................... 37
Whittman-Hart's Reasons for the Merger.................. 38
Board Recommendations................................... 40
Opinion of Morgan Stanley & Co. Incorporated, Financial
Advisor to USWeb/CKS................................... 40
Opinion of Credit Suisse First Boston Corporation,
Financial Advisor to Whittman-Hart..................... 46
Interests of Certain Persons in the Merger.............. 51
Accounting Treatment.................................... 51
Regulatory Matters...................................... 52
Rights of Dissenting USWeb/CKS and Whittman-Hart
Stockholders........................................... 52
Certain Federal Income Tax Consequences................. 52
USWeb/CKS Voting Agreements............................. 54
Whittman-Hart Voting Agreement.......................... 54
USWeb/CKS Affiliate Letters; Restrictions on Sales by
USWeb/CKS Affiliates................................... 54
THE MERGER AGREEMENT........................................ 55
Structure of the Merger................................. 55
Timing of Closing....................................... 55
Consideration to be Received in the Merger.............. 55
Conversion of USWeb/CKS Options and Warrants............ 55
No Fractional Shares.................................... 55
Conversion of USWeb/CKS Common Stock; Procedures for
Exchange of Certificates............................... 55
Certain Conditions...................................... 56
Certain Representations and Warranties.................. 56
Certain Covenants....................................... 57
Termination............................................. 58
Termination Fee......................................... 58
Expenses................................................ 59
AMENDMENT TO THE WHITTMAN-HART CERTIFICATE OF
INCORPORATION............................................. 60
</TABLE>
ii
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AMENDMENT TO THE WHITTMAN-HART 1995 INCENTIVE STOCK PLAN.... 61
Summary of the Plan..................................... 61
Federal Tax Treatment................................... 63
POST-MERGER DIRECTORS AND OFFICERS OF WHITTMAN-HART......... 65
INFORMATION REGARDING THE COMPANIES......................... 67
USWeb/CKS's Business.................................... 67
Whittman-Hart's Business................................ 68
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 69
STOCKHOLDER PROPOSALS....................................... 71
EXPERTS..................................................... 72
LEGAL MATTERS............................................... 72
WHERE YOU CAN FIND MORE INFORMATION......................... 72
</TABLE>
ANNEXES
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Annex A Agreement and Plan of Merger
Annex B Opinion of Morgan Stanley & Co. Incorporated
Annex C Opinion of Credit Suisse First Boston Corporation
Annex D Form of USWeb/CKS Stockholder Agreement
Annex E Whittman-Hart Stockholder Agreement
Annex F Whittman-Hart 1995 Incentive Stock Plan
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE WHITTMAN-HART/USWEB/CKS MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: USWeb/CKS and Whittman-Hart both provide professional services that enable
their customers to engage in e-business. We believe that market forces are
driving our customers to require a comprehensive professional services
solution that can satisfy their e-business needs for technology, strategy,
marketing and creative work. The combined company will have a breadth of
services and scale that can make it the leading provider of professional
services to companies' e-business initiatives. We believe that this merger
will allow us to accelerate long-term growth and provide added stockholder
value. We note that achieving these anticipated benefits is subject to
certain risks discussed on pages 22 to 29. To review the reasons for the
merger and related uncertainties in greater detail, see pages 36 to 40.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: USWEB/CKS STOCKHOLDERS: You will be entitled to receive 0.865 of a share of
Whittman-Hart common stock in exchange for each share of USWeb/CKS common
stock you own. Whittman-Hart will not issue fractional shares. Instead, you
will receive a payment equal to the market value of any fractional share. For
example, if you currently own 100 shares of USWeb/CKS common stock, then
after the merger you will be entitled to receive 86 shares of Whittman-Hart
common stock and a check for the market value of the 0.5 fractional share of
Whittman-Hart common stock.
WHITTMAN-HART STOCKHOLDERS: You will retain the shares of Whittman-Hart
common stock you currently own.
On January 25, 2000, the closing price per share on the Nasdaq National
Market of USWeb/CKS common stock was $45.56 and of Whittman-Hart common
stock was $53.69.
Q: AS A STOCKHOLDER, HOW WILL THE MERGER AFFECT ME?
A: After the merger, you will own shares of a company that will own the combined
businesses of both USWeb/CKS and Whittman-Hart. Each share of stock that you
own will represent a smaller ownership percentage of a significantly larger
company.
Q: WHAT ABOUT FUTURE DIVIDENDS?
A: Historically, neither USWeb/CKS nor Whittman-Hart has paid dividends. We do
not expect that the combined company will pay any dividends in the
foreseeable future.
Q: WHO WILL MANAGE THE COMBINED COMPANY AFTER THE MERGER?
A: 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 V. Szofer, President
of Whittman-Hart; and three additional directors to be named by USWeb/CKS.
Mr. Bernard will serve as the Chief Executive Officer and President of the
combined company and Mr. Shaw will serve as the Chairman of the board of
directors of the combined company.
1
<PAGE>
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
joint proxy statement/ prospectus, indicate on the enclosed proxy card how
you want to vote, and sign and submit your proxy card in the enclosed return
envelope as soon as possible so that your shares may be voted at the special
meetings. If you sign and submit your proxy card but do not indicate how you
want to vote, your shares will be voted in favor of the proposals shown on
the card. IF YOU ABSTAIN OR DO NOT VOTE, IT WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE MERGER AGREEMENT AND MERGER IN THE CASE OF USWEB/CKS AND THE
CHARTER AMENDMENT IN THE CASE OF WHITTMAN-HART. The boards of directors of
USWeb/CKS and Whittman-Hart are not aware of any matters other than those set
forth in this joint proxy statement/ prospectus that will be brought before
their special meetings. If, however, other matters are properly presented at
either special meeting, proxies will be voted in accordance with the
discretion of the holders of such proxies.
Q: IF MY SHARES ARE HELD IN THE NAME OF MY BROKER, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares according to your
directions. Without instructions, your shares will not be voted.
Q: CAN I CHANGE MY VOTE AFTER I HAVE SUBMITTED MY PROXY CARD?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of the following three ways:
- You can send a written notice stating that you would like to revoke your
proxy. Any such notice should be sent to the appropriate company at the
address indicated below in time to be received before the special meeting.
- You can complete and submit a new proxy card prior to or at the special
meeting.
- You can attend the special meeting and vote in person. Simply attending
the meeting, however, will not revoke your proxy; you must vote at the
special meeting.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATE NOW?
A: No. After the merger is completed, we will send USWeb/CKS stockholders
written instructions for exchanging their stock certificates. Whittman-Hart
stockholders will keep their current certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to stockholder approvals, other conditions as described in the
merger agreement, including the expiration or termination of the waiting
periods under U.S. or foreign antitrust laws, must be satisfied or waived. We
hope to complete the merger within a few days after the special meetings.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The exchange of shares by USWeb/CKS stockholders will be tax-free to
USWeb/CKS stockholders for federal income tax purposes, except for taxes on
cash received for a fractional share. The merger will be tax-free to
Whittman-Hart stockholders for federal income tax purposes. To review the tax
consequences to stockholders in greater detail, see pages 52 to 53.
2
<PAGE>
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you would like additional copies of this joint proxy statement/prospectus,
or if you have questions about the merger, you should contact:
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USWEB/CKS STOCKHOLDERS: WHITTMAN-HART STOCKHOLDERS:
USWeb Corporation Whittman-Hart, Inc.
410 Townsend Street 311 South Wacker Drive
San Francisco, California 94107 Suite 3500
Attention: Investor Relations Chicago, Illinois 60606-6618
(415) 284-7070 Attention: Investor Relations
(312) 922-9200
</TABLE>
3
<PAGE>
SUMMARY
FOR YOUR CONVENIENCE, WE HAVE PROVIDED A BRIEF SUMMARY OF INFORMATION
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS SUMMARY HIGHLIGHTS
SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A
MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ
CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO WHICH WE HAVE REFERRED. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 72.
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE
"FORWARD-LOOKING STATEMENTS" WITHIN THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 ABOUT EACH OF WHITTMAN-HART'S AND
USWEB/CKS'S BUSINESSES. THESE STATEMENTS MAY BE MADE EXPRESSLY IN THIS DOCUMENT,
OR MAY BE INCORPORATED BY REFERENCE TO OTHER DOCUMENTS WHITTMAN-HART AND
USWEB/CKS HAVE 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 REPORT OR INCORPORATED BY REFERENCE IN THIS
JOINT PROXY STATEMENT/ PROSPECTUS. ACTUAL RESULTS FOR THE COMPANIES MAY VARY
SIGNIFICANTLY AND ADVERSELY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD AFFECT RESULTS FOR THE TWO BUSINESSES ARE
DISCUSSED IN THE SECTIONS OF THIS JOINT PROXY STATEMENT/PROSPECTUS ENTITLED
"RISK FACTORS" ON PAGE 22 AND "UNCERTAINTIES RELATING TO FORWARD-LOOKING
STATEMENTS" ON PAGE 30.
THE COMPANIES
USWEB CORPORATION
410 Townsend Street
San Francisco, California 94107
(415) 284-7070
USWeb/CKS is a leading Internet professional services firm. USWeb/CKS
provides a comprehensive range of business strategy consulting services,
Internet technology solutions and services, and creative consulting services
such as advanced marketing communications programs. USWeb/CKS professionals
combine their expertise with industry-specific knowledge to help clients build
their businesses in innovative ways.
WHITTMAN-HART, INC.
311 South Wacker Drive, Suite 3500
Chicago, Illinois 60606-6618
(312) 922-9200
Whittman-Hart provides strategic information technology business solutions
designed to improve its clients' productivity and competitive position.
Whittman-Hart offers its clients a single source for a range of services
required to successfully design, develop and implement integrated solutions in
the client/server, open systems, midrange and mainframe computing environments.
OUR RECOMMENDATIONS TO STOCKHOLDERS
TO USWEB/CKS STOCKHOLDERS:
The USWeb/CKS board of directors believes that the merger is in your best
interests and unanimously recommends that you vote "FOR" the proposal to approve
and adopt the merger agreement and the merger.
TO WHITTMAN-HART STOCKHOLDERS:
The board of directors believes that the merger is in Whittman-Hart's best
interests and unanimously recommends that you vote "FOR" the proposals to:
- approve the issuance of shares of common stock to the stockholders of
USWeb/CKS pursuant to the merger agreement;
- approve the proposed amendment of the Whittman-Hart charter to increase
the number of authorized common shares; and
- approve the proposed amendment of the Whittman-Hart 1995 Incentive Stock
Plan to increase the number of shares of common stock available for award
under the plan.
4
<PAGE>
THE MERGER
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus. We encourage you to read the merger agreement because it
is the legal document that governs the merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER (see page 55)--Each share of
USWeb/CKS common stock outstanding before the merger will automatically be
converted into the right to receive 0.865 of a share of Whittman-Hart common
stock in the merger, subject to the payment of cash for fractional shares.
CONVERSION OF USWEB/CKS STOCK OPTIONS AND WARRANTS (see page 55)--All
outstanding options and warrants to purchase USWeb/CKS common stock will be
assumed by Whittman-Hart and converted into options or warrants to purchase
Whittman-Hart common stock based on the exchange ratio of 0.865 of a share of
Whittman-Hart common stock for each share of USWeb/ CKS common stock.
STOCK OWNERSHIP FOLLOWING THE MERGER--Based upon approximately 94,199,000
shares of USWeb/ CKS common stock issued and outstanding as of the record date,
approximately 81,482,000 shares of Whittman-Hart 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 Whittman-Hart common stock will hold approximately 43%
of the combined company's common stock issued and outstanding after the merger.
OPINION OF FINANCIAL ADVISOR TO USWEB/CKS (see page 40)--USWeb/CKS's
financial advisor, Morgan Stanley & Co. Incorporated, delivered a written
opinion to the USWeb/CKS board of directors to the effect that, as of the date
of the opinion and based upon and subject to the matters stated in the opinion,
the exchange ratio was fair from a financial point of view to USWeb/CKS
stockholders. The full text of Morgan Stanley's written opinion is attached to
this joint proxy statement/prospectus as Annex B. We encourage you to read this
opinion carefully in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the review undertaken.
Morgan Stanley's opinion is directed to the USWeb/CKS board of directors and
does not constitute a recommendation to any stockholder as to how to vote on the
merger.
OPINION OF FINANCIAL ADVISOR TO WHITTMAN-HART (see
page 46)--Whittman-Hart's financial advisor, Credit Suisse First Boston
Corporation, delivered a written opinion to the Whittman-Hart board of directors
to the effect that, as of the date of the opinion and based upon and subject to
the matters stated in the opinion, the exchange ratio was fair from a financial
point of view to Whittman-Hart. The full text of Credit Suisse First Boston's
written opinion is attached to this joint proxy statement/prospectus as Annex C.
We encourage you to read this opinion carefully in its entirety for a
description of the procedures followed, assumptions made, matters considered and
limitations on the review undertaken.
Credit Suisse First Boston's opinion is directed to the Whittman-Hart board
of directors and does not constitute a recommendation to any stockholder as to
how to vote in connection with the issuance of shares in the merger.
EFFECTIVE TIME OF THE MERGER (see page 55)--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 within a few days after the
special meetings.
CONDITIONS TO THE MERGER (see page 56)--The completion of the merger depends
upon the satisfaction or waiver of a number of conditions, including:
- the continued effectiveness of the registration statement that includes
this joint proxy statement/prospectus;
- the approval by USWeb/CKS stockholders of the merger and the merger
agreement;
- the approval by Whittman-Hart stockholders of the issuance of shares of
Whittman-
5
<PAGE>
Hart 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.
The obligation of USWeb/CKS to complete the merger is also subject to the
following:
- the representations and warranties of Whittman-Hart are true and correct
in all material respects;
- Whittman-Hart has performed in all material respects all obligations
required to be performed by it under the merger agreement at or before the
closing of the merger; and
- there has not been any event or development which has resulted or could
reasonably be likely to result in a material adverse effect on
Whittman-Hart.
The obligation of Whittman-Hart to complete the merger is also subject to the
following:
- the representations and warranties of USWeb/CKS are true and correct in
all material respects;
- USWeb/CKS has performed in all material respects all obligations required
to be performed by it under the merger agreement at or before the closing
of the merger; and
- there has not been any event or development which has resulted or could
reasonably be likely to result in a material adverse effect on USWeb/CKS.
TERMINATION (see page 58)--The merger agreement may be terminated before the
effective time by USWeb/CKS and Whittman-Hart by mutual consent, or by either
USWeb/CKS or Whittman-Hart if:
- the merger has not been consummated on or before May 31, 2000;
- an injunction or order preventing the completion of the merger shall be in
effect and shall have become final and non-appealable;
- the approval of either party's stockholders has not been obtained, subject
to certain exceptions; or
- a material breach of the other party's representations, warranties or
obligations under the merger agreement has occurred and such breach is not
cured within 20 business days of notice of such breach.
The merger agreement may also be terminated by USWeb/CKS or Whittman-Hart if the
other party's board of directors withdraws or adversely modifies its approval or
recommendation of the merger or the merger agreement, or approves or recommends
any other acquisition proposal, or a tender offer or exchange offer for such
party's outstanding common stock is commenced and such party's board of
directors fails to oppose such offer.
TERMINATION FEE (see page 58)--If the merger agreement is terminated under
certain circumstances, the terminating party will pay to the other party a $150
million non-refundable fee.
MANAGEMENT OF THE COMBINED COMPANY (see page 65)--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 V. 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
6
<PAGE>
Officer of Whittman-Hart, will continue in the same position with the combined
company.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (see page 51)--Some members of
USWeb/CKS's management and board of directors have interests in the merger that
are in addition to their interests as stockholders of USWeb/CKS generally. For
example, several directors and officers of USWeb/CKS will hold positions in the
combined company as described in the previous section.
Upon the completion of the merger, certain unvested stock options held by
Robert Shaw and Carolyn Aver, the Chief Executive Officer and the Chief
Financial Officer of USWeb/CKS, will become exercisable.
In addition, Whittman-Hart will indemnify present and former directors and
officers of USWeb/CKS against all claims arising out of actions and omissions
occuring on or prior to the effective time of the merger to the fullest extent
permitted by law, subject to certain limitations. Whittman-Hart has also agreed
to maintain the current policy of directors' and officers' liability insurance
with respect to these matters for the benefit of USWeb/CKS's directors and
officers. There are limitations on the amount Whittman-Hart is required to spend
to maintain such insurance.
CONDUCT OF BUSINESS--Whittman-Hart and USWeb/CKS are required to conduct
their business in the ordinary course consistent with past practice until the
effective time of the merger and, subject to certain exceptions, may not engage
in material transactions during this period.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES (see page 52)--We have structured
the merger to be a tax-free reorganization for federal income tax purposes. We
have conditioned the merger on receiving legal opinions that no gain or loss
will be recognized by USWeb/CKS stockholders on the exchange of USWeb/CKS common
stock for Whittman-Hart common stock, except to the extent that USWeb/CKS
stockholders receive cash in lieu of fractional shares.
ACCOUNTING TREATMENT (see page 51)--The merger will be accounted for under
the purchase method of accounting.
RIGHTS OF DISSENTING STOCKHOLDERS (see page 52)--Neither USWeb/CKS's nor
Whittman-Hart's stockholders are entitled to exercise dissenters' or appraisal
rights as a result of the merger or to demand payment for their shares under the
Delaware General Corporation Law.
REGISTRATION STATEMENT ON FORM S-8--Promptly following the closing date,
Whittman-Hart will file a Registration Statement on Form S-8 under the
Securities Act covering the shares of Whittman-Hart common stock issuable with
respect to options to purchase USWeb/CKS common stock assumed by Whittman-Hart.
THE USWEB/CKS SPECIAL MEETING
PURPOSE--The purpose of the USWeb/CKS special meeting is to vote on a
proposal to approve the merger agreement and the merger.
USWeb/CKS stockholders may also vote on any other matters that may be properly
brought before the USWeb/CKS special meeting.
RECORD DATE AND VOTE REQUIRED--Only
USWeb/CKS stockholders of record at the close of business on January 25, 2000
are entitled to vote at the USWeb/CKS special meeting. The affirmative vote of a
majority of the outstanding shares of USWeb/CKS common stock is required to
approve the merger proposal. At the close of business on the USWeb/CKS record
date, there were approximately 94,199,000 shares of USWeb/CKS common stock
outstanding.
USWEB/CKS VOTING AGREEMENTS (see page 54)--Whittman-Hart has entered into
agreements with three stockholders of USWeb/CKS requiring them to vote all
shares of USWeb/CKS common stock they beneficially own in favor of the merger. A
form of these agreements is attached as Annex D. In total, these shares
represent approximately 2% of the outstanding USWeb/CKS common stock.
This joint proxy statement/prospectus and the accompanying notice of special
meeting of stockholders was mailed to all USWeb/CKS stockholders of record as of
the USWeb/CKS record date and constitutes notice of the USWeb/CKS special
meeting in conformity with the requirements of the Delaware General Corporation
Law.
7
<PAGE>
THE WHITTMAN-HART SPECIAL MEETING
PURPOSE--The purpose of the Whittman-Hart special meeting is to vote upon
proposals to:
- issue shares of common stock to the stockholders of USWeb/CKS pursuant to
the merger agreement;
- amend the Whittman-Hart charter to increase the number of authorized
common shares from 75,000,000 shares to 500,000,000 shares; and
- amend the Whittman-Hart 1995 Incentive Stock Plan to increase the number
of shares of common stock available for award under the plan from
24,000,000 shares to 48,000,000 shares.
Holders of Whittman-Hart common stock may also vote upon any other matters
that may be properly brought before the Whittman-Hart special meeting.
RECORD DATE AND VOTE REQUIRED--Only Whittman-Hart stockholders of record at
the close of business on January 25, 2000 are entitled to vote at the
Whittman-Hart special meeting. Approval of the proposals to amend the charter of
Whittman-Hart requires the affirmative vote of a majority of the outstanding
shares of Whittman-Hart common stock. Approval of the other proposals requires
the affirmative vote of a majority of the total votes cast at the special
meeting in person or by proxy. Approval of the amendment of Whittman-Hart's 1995
Incentive Stock Plan is not necessary to complete the merger. At the close of
business on the Whittman-Hart record date, there were 62,146,544 shares of
common stock outstanding.
WHITTMAN-HART VOTING AGREEMENT (see page 54)--USWeb/CKS has entered into an
agreement with Robert Bernard, Chairman of the Board and Chief Executive Officer
of Whittman-Hart, which requires Mr. Bernard to vote all shares of Whittman-Hart
common stock he beneficially owns in favor of the proposals. This agreement is
attached as Annex E. These shares represent approximately 21% of the outstanding
Whittman-Hart common stock.
This joint proxy statement/prospectus and the accompanying notice of special
meeting of stockholders was mailed to all Whittman-Hart stockholders of record
as of the Whittman-Hart record date and constitutes notice of the Whittman-Hart
special meeting in conformity with the requirements of the Delaware General
Corporation Law.
------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS IS FIRST BEING MAILED TO WHITTMAN-HART
STOCKHOLDERS AND USWEB/CKS STOCKHOLDERS ON OR ABOUT JANUARY 28, 2000.
8
<PAGE>
USWEB/CKS SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
We are providing the following financial information to aid in your analysis
of the financial aspects of the merger. We derived this summary historical
consolidated financial information of USWeb/CKS as of and for its five years
ended December 31, 1998 from USWeb/CKS's historical audited consolidated
financial statements. The financial data for the nine-month periods ended
September 30, 1998 and 1999 and as of September 30, 1999 is derived from
unaudited consolidated financial statements of USWeb/CKS and includes, in the
opinion of management of USWeb/CKS, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the data for the periods
presented. The following information is only a summary and you should read it in
conjunction with USWeb/CKS's consolidated financial statements and related notes
included in USWeb/CKS's annual reports and other financial information included
in USWeb/CKS's filings with the SEC. See "Where You Can Find More Information"
on page 72.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 324,012 $ 155,952 $ 228,600 $114,302 $66,389 $43,656 $28,992
--------- --------- --------- -------- ------- ------- -------
Cost of revenues:
Services........................................ 199,557 100,353 146,251 74,695 41,323 28,842 18,440
Provision for loss on contract.................. 4,071 2,094 9,994 -- -- -- --
Stock compensation(1)........................... 13,934 9,415 13,037 2,420 -- -- --
--------- --------- --------- -------- ------- ------- -------
Total cost of revenues........................ 217,562 111,862 169,282 77,115 41,323 28,842 18,440
--------- --------- --------- -------- ------- ------- -------
Gross profit...................................... 106,450 44,090 59,318 37,187 25,066 14,814 10,552
--------- --------- --------- -------- ------- ------- -------
Operating expenses:
Marketing, sales and support.................... 29,843 19,600 27,761 23,374 14,963 932 608
General and administrative...................... 56,047 31,223 44,694 27,739 12,633 7,304 4,957
Acquired in-process technology(1)............... 2,212 25,508 25,508 9,472 -- -- --
Stock compensation(1)........................... 27,983 23,962 31,760 6,698 -- -- --
Amortization of intangible assets(1)............ 103,793 45,776 74,538 12,963 74 -- --
Merger and integration costs(2)................. 5,316 -- 28,822 -- -- -- --
Impairment of goodwill.......................... -- -- 11,079 -- -- -- --
--------- --------- --------- -------- ------- ------- -------
Total operating expenses.......................... 225,194 146,069 244,162 80,246 27,670 8,236 5,565
--------- --------- --------- -------- ------- ------- -------
Income (loss) from operations..................... (118,744) (101,979) (184,844) (43,059) (2,604) 6,578 4,987
Interest income, net.............................. 2,732 3,057 4,302 1,706 2,271 296 121
Impairment of investee carried at cost............ -- -- -- (4,000) -- -- --
--------- --------- --------- -------- ------- ------- -------
Income (loss) before income taxes................. (116,012) (98,922) (180,542) (45,353) (333) 6,874 5,108
Provision for income taxes........................ 2,245 5,210 7,739 5,317 3,026 1,065 192
--------- --------- --------- -------- ------- ------- -------
Net income (loss)................................. $(118,257) $(104,132) $(188,281) $(50,670) $(3,359) $ 5,809 $ 4,916
========= ========= ========= ======== ======= ======= =======
Net income (loss) per share(3):
Basic........................................... $ (1.56) $ (1.81) $ (3.07) $ (1.73) $ (0.15) $ 0.42 $ 0.69
========= ========= ========= ======== ======= ======= =======
Diluted......................................... $ (1.56) $ (1.81) $ (3.07) $ (1.73) $ (0.15) $ 0.34 $ 0.51
========= ========= ========= ======== ======= ======= =======
Weighted average shares outstanding(3):
Basic........................................... 75,806 57,531 61,329 29,262 21,803 13,764 7,112
========= ========= ========= ======== ======= ======= =======
Diluted......................................... 75,806 57,531 61,329 29,262 21,803 16,898 9,639
========= ========= ========= ======== ======= ======= =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF ----------------------------------------------------
SEPTEMBER 30, 1999(4) 1998 1997 1996 1995 1994
---------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash equivalents and short-term investments....... $116,636 $101,186 $ 86,397 $ 60,565 $ 4,817 $ 4,314
Total assets...................................... 824,385 403,174 225,711 103,023 23,659 20,596
Working capital................................... 111,357 98,882 89,680 50,919 3,626 3,056
Debt and lease obligations, long-term portion..... 2,633 1,377 1,111 1,161 496 446
Mandatorily redeemable convertible preferred
stock........................................... -- -- -- 16,200 -- --
Stockholders' equity.............................. 575,501 299,872 161,331 48,437 6,350 5,244
</TABLE>
- ------------------------------
(1) Non-cash acquisition-related charges incurred as a result of US Web/CKS's
acquisition program. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Notes 1, 2 and 9 of Notes to
Consolidated Financial Statements which are included in USWeb/CKS's annual
report on Form 10-K for the year ended December 31, 1998. See "Where You Can
Find More Information" on page 72.
(2) Merger and integration charges include direct transaction costs, primarily
for financial advisory and professional fees, and other costs associated
with combining operations of USWeb Corporation and CKS Group.
(3) See Note 1 of Notes to Consolidated Financial Statements, which is included
in USWeb/CKS's annual report on Form 10-K for the year ended December 31,
1998, for a description of per share computation and weighted average shares
outstanding computation. See "Where You Can Find More Information" on
page 72.
(4) On September 3, 1999, USWeb/CKS completed the acquisition of Mitchell
Madison Group (MMG). The results of operations of MMG have been included in
the historical results of operations of USWeb/CKS from the date of the
acquisition through September 30, 1999. The balance sheet of MMG as of
September 30, 1999 has been consolidated with the balance sheet of USWeb/CKS
as of the same date.
10
<PAGE>
WHITTMAN-HART SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
We are providing the following financial information to aid in your analysis
of the financial aspects of the merger. We derived this summary historical
consolidated financial information of Whittman-Hart for its five years ended
December 31, 1998 from Whittman-Hart's historical audited consolidated financial
statements. The financial data for the nine-month periods ended September 30,
1998 and 1999 and as of September 30, 1999 is derived from unaudited
consolidated financial statements of Whittman-Hart and includes, in the opinion
of management of Whittman-Hart, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the data for the periods
presented. The following information is only a summary and you should read it in
conjunction with Whittman-Hart's consolidated financial statements and related
notes included in Whittman-Hart's annual reports and other financial information
included in Whittman-Hart's filings with the SEC. See "Where You Can Find More
Information" on page 72.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:(1)
Revenues....................................... $342,650 $232,638 $307,613 $181,655 $106,702 $62,016 $34,615
Cost of services............................... 192,938 134,397 176,830 108,456 65,383 39,131 20,705
Gross profit................................. 149,712 98,241 130,783 73,199 41,319 22,885 13,910
Costs and expenses:
Selling...................................... 16,322 9,708 12,124 6,746 3,751 2,694 1,431
Recruiting................................... 7,988 8,268 10,509 6,310 3,391 2,472 1,190
General and administrative................... 87,468 59,755 79,334 43,923 26,237 16,169 9,481
Business combination costs................... 4,693 775 775 1,771 -- -- --
-------- -------- -------- -------- -------- ------- -------
Total costs and expenses..................... 116,472 78,865 102,742 58,750 33,379 21,335 12,102
-------- -------- -------- -------- -------- ------- -------
Operating income............................. 33,240 19,376 28,041 14,449 7,940 1,550 1,808
Other income (expense)....................... 5,233 3,946 5,647 3,376 1,360 50 (32)
-------- -------- -------- -------- -------- ------- -------
Income before income taxes................... 38,472 23,322 33,688 17,825 9,300 1,600 1,776
Initial deferred income taxes................ 467 296 676 -- -- -- --
Income tax expense (benefit)................. 17,196 9,931 14,198 7,832 3,422 (33) 43
-------- -------- -------- -------- -------- ------- -------
Net income................................... $ 21,276 $ 13,392 $ 18,814 $ 9,993 $ 5,878 $ 1,633 $ 1,733
-------- -------- -------- -------- -------- ------- -------
PRO FORMA INCOME DATA:
Net income as reported......................... $ 21,276 $ 13,392 $ 18,814 $ 9,993 $ 5,878 $ 1,633 $ 1,733
Pro forma adjustment to provision for income
taxes(2)..................................... -- -- -- -- -- 667 255
-------- -------- -------- -------- -------- ------- -------
Pro forma net income (actual in 1999, 1998,
1997 and 1996)(2)............................ $ 21,276 $ 13,392 $ 18,814 $ 9,993 $ 5,878 $ 966 $ 1,478
======== ======== ======== ======== ======== ======= =======
Pro forma basic earnings per share (actual in
1999, 1998, 1997 and 1996)(3)................ $ .39 $ .26 $ .38 $ .22 $ .16 $ .04 $ .06
======== ======== ======== ======== ======== ======= =======
Pro forma diluted earnings per share (actual in
1999, 1998, 1997 and 1996)(3)................ $ .35 $ .24 $ .35 $ .21 $ .15 $ .03 $ .06
======== ======== ======== ======== ======== ======= =======
Weighted average number of common shares
outstanding.................................. 54,473 50,692 49,424 44,760 36,351 26,034 25,308
======== ======== ======== ======== ======== ======= =======
Weighted average number of common and common
equivalent shares outstanding................ 61,006 55,544 54,258 47,983 40,332 32,048 25,308
======== ======== ======== ======== ======== ======= =======
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
1999 1998 1997 1996 1995 1994
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and short-term and long-term
investments......................................... $166,940 $148,124 $ 67,695 $67,398 $ 4,524 $ --
Working capital....................................... 181,669 144,863 83,105 74,237 4,792 1,519
Total assets.......................................... 319,551 243,020 123,780 94,694 19,582 8,338
Long-term debt, less current portion.................. -- -- 237 23 1,135 1,600
Redeemable convertible preferred stock................ -- -- -- -- 5,584 --
Stockholders' equity.................................. 271,777 207,763 97,755 79,747 808 1,923
</TABLE>
- ------------------------------
(1) Statement of Earnings Data for the years ended December 31, 1994 through
December 31, 1998 excludes the results of operations of Waterfield
Technology Group and BALR, Inc. Statement of Earnings Data for the nine
months ended September 30, 1999 and 1998 includes the results of operations
of these acquisitions as if they were combined for the entire period. These
acquisitions were consummated during 1999 and were accounted for using the
pooling-of-interests method of accounting. Prior years' information has not
been restated to reflect the acquisitions as the acquired businesses,
considered in the aggregate, are not significant.
(2) Reflects federal and additional state income tax expense for 1994 and 1995
that would have been required had Whittman-Hart and its predecessors
operated as a C Corporation for all periods presented.
(3) See Note 3 of Notes to Consolidated Financial Statements, which is included
in Whittman-Hart's annual report on Form 10-K for the year ended
December 31, 1998, for information concerning the computation of pro forma
earnings per share. See "Where You Can Find More Information" on page 72.
12
<PAGE>
WHITTMAN-HART AND USWEB/CKS
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
OVERVIEW
On December 12, 1999, Whittman-Hart and USWeb/CKS entered into a merger
agreement. Under the terms of the merger agreement, and assuming
93,000,000 shares of USWeb/CKS common stock outstanding as of December 31, 1999,
approximately 80,445,000 shares of Whittman-Hart common stock will be exchanged
in the merger for all of the outstanding common stock of USWeb/CKS. In addition,
employee options to purchase approximately 26,865,000 shares of USWeb/CKS common
stock and warrants to purchase approximately 2,388,000 shares of USWeb/CKS
common stock will be assumed by Whittman-Hart and will become options or
warrants to purchase Whittman-Hart common stock based on the exchange ratio.
This transaction will be accounted for as a purchase business combination in
accordance with Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations." Pursuant to the terms of the merger agreement, the stockholders
of USWeb/CKS will receive 0.865 of a share of Whittman-Hart common stock in
exchange for each share of USWeb/CKS common stock held. All outstanding employee
stock options and warrants will be converted into options or warrants to
purchase Whittman-Hart common stock based on the exchange ratio of 0.865 of a
share of Whittman-Hart common stock for each share of USWeb/CKS common stock.
Total consideration for the transaction is estimated as follows:
<TABLE>
<S> <C>
Shares of Whittman-Hart common stock........................ $5,148,000
Options and warrants to purchase Whittman-Hart common
stock..................................................... 1,280,000
Direct acquisition costs.................................... 75,000
----------
$6,503,000
==========
</TABLE>
The value of the options and warrants included in the purchase price was
determined using the Black-Scholes option pricing model.
The Financial Accounting Standards Board (the "FASB") is in the process of
reviewing the existing accounting rules governing employee stock option
accounting, APB Opinion No. 25, "Accounting for Stock Issued to Employees." The
objective of the FASB's project is to issue a FASB interpretation that provides
guidance on certain practice issues related to the application of APB Opinion
No. 25. Included in this project is the treatment of stock options and warrants
exchanged in a purchase business combination. An exposure draft of the
interpretation contemplates that only options that have vested are to be
included in the purchase price. The computation of the component of the purchase
price related to options and warrants may change depending on the FASB's
interpretation.
On September 3, 1999, USWeb/CKS acquired Mitchell Madison Group ("MMG") in a
transaction accounted for as a purchase business combination. Total
consideration for this acquisition was approximately $217,867 comprising $10,000
in cash, 7,210,160 shares of USWeb/CKS common stock valued at $170,882, warrants
to purchase 1,666,500 shares of USWeb/CKS common stock issued to financial
advisors valued at $14,369, and other acquisition costs aggregating
approximately $22,616. The acquisition of MMG also provides for additional
payments of up to 6,810,160 shares of USWeb/CKS common stock payable over a
two-year period.
The accompanying unaudited pro forma combined balance sheet combines the
unaudited consolidated balance sheet of Whittman-Hart as of September 30, 1999,
with the unaudited consolidated balance sheet of USWeb/CKS as of the same date,
and gives effect to the acquisition of USWeb/CKS as if it occurred on such date.
13
<PAGE>
The accompanying unaudited pro forma combined statements of operations
combine Whittman-Hart's statements of operations for the year ended
December 31, 1998, and for the nine months ended September 30, 1999, with the
statements of operations of USWeb/CKS for the same periods and gives effect to
the acquisition as if it occurred on January 1, 1998.
These unaudited pro forma combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of the combined
financial position or results of operations in future periods or the results
that actually would have been realized had Whittman-Hart and USWeb/CKS been a
combined company during the periods presented.
14
<PAGE>
WHITTMAN-HART AND USWEB/CKS
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
PRO FORMA
WHITTMAN-HART USWEB/CKS ADJUSTMENTS COMBINED
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 72,210 $ 82,311 $ -- $ 154,521
Short-term investments.................................. 65,941 34,325 -- 100,266
Accounts receivable, net................................ 79,428 219,691 -- 299,119
Other current assets.................................... 8,228 20,644 -- 28,872
Notes and interest receivable........................... 134 -- -- 134
Deferred tax assets..................................... 1,369 637 -- 2,006
-------- -------- ---------- ----------
Total current assets.................................. 227,310 357,608 -- 584,918
Property and equipment, net............................... 62,023 42,140 -- 104,163
Marketable equity securities.............................. 28,789 37,708 -- 66,497
Intangible assets, net.................................... -- 367,042 5,928,000 (A) 6,295,042
Deferred income taxes and other assets.................... 1,429 19,887 -- 21,316
-------- -------- ---------- ----------
$319,551 $824,385 $5,928,000 $7,071,936
======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 2,445 $ 61,164 $ -- $ 63,609
Accrued expenses........................................ 43,178 123,776 75,000 (B) 241,954
Deferred revenue........................................ 71 40,800 -- 40,871
Income taxes payable.................................... 1,905 4,210 -- 6,115
Borrowings and lease obligations, current............... -- 16,301 -- 16,301
-------- -------- ---------- ----------
Total current liabilities............................. 47,599 246,251 75,000 368,850
Lease obligations, long-term portion...................... -- 2,633 -- 2,633
Deferred taxes liability.................................. 175 -- -- 175
-------- -------- ---------- ----------
47,774 248,884 75,000 371,658
-------- -------- ---------- ----------
Stockholders' equity:
Common Stock............................................ 56 82 -- 138
Additional paid-in-capital.............................. 214,175 902,435 5,853,000 (A) 6,969,610
Accumulated other comprehensive income.................. (4) 38,411 -- 38,407
Deferred compensation................................... (861) -- -- (861)
Accumulated deficit..................................... 58,411 (365,427) -- (307,016)
-------- -------- ---------- ----------
Total stockholders' equity............................ 271,777 575,501 5,853,000 6,700,278
-------- -------- ---------- ----------
$319,551 $824,385 $5,928,000 $7,071,936
======== ======== ========== ==========
</TABLE>
15
<PAGE>
WHITTMAN-HART AND USWEB/CKS
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
USWEB/CKS
-------------------------------------------------- PRO FORMA
WHITTMAN-HART USWEB/CKS MMG ADJUSTMENTS PRO FORMA ADJUSTMENTS COMBINED
-------------- ----------- --------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $342,650 $ 324,012 $ 113,037 $ -- $ 437,049 $ -- $ 779,699
-------- --------- --------- -------- --------- --------- -----------
Cost of revenues:........
Services............... 192,938 199,557 83,576 -- 283,133 -- 476,071
Provision for loss on
contract............. -- 4,071 -- -- 4,071 -- 4,071
Stock compensation..... -- 13,934 -- 45,454 (D) 59,388 -- 59,388
-------- --------- --------- -------- --------- --------- -----------
Total cost of
revenues........... 192,938 217,562 83,576 45,454 346,592 -- 539,530
-------- --------- --------- -------- --------- --------- -----------
Gross profit............. 149,712 106,450 29,461 (45,454) 90,457 -- 240,169
-------- --------- --------- -------- --------- --------- -----------
Operating expenses:
Marketing, sales and
support.............. 16,322 29,843 9,857 -- 39,700 -- 56,022
Recruiting............. 7,989 -- -- -- -- 10,040 (I) 18,029
General and
administrative....... 87,468 56,047 28,060 -- 84,107 (10,040)(I) 161,535
Business combination
costs................ 4,693 5,316 -- -- -- -- 10,009
Acquired in-process
technology........... -- 2,212 -- -- 2,212 -- 2,212
Stock compensation..... -- 27,983 -- 11,364 (D) 39,347 -- 39,347
Amortization of
intangible assets.... -- 103,793 155 27,810 (E) 131,758 635,141 (C) 766,899
-------- --------- --------- -------- --------- --------- -----------
Total operating
expenses........... 116,472 225,194 38,072 39,174 302,440 635,141 1,054,053
-------- --------- --------- -------- --------- --------- -----------
Income (loss) from
operations............. 33,240 (118,744) (8,611) (84,628) (211,983) (635,141) (813,884)
Interest income, net..... 5,232 2,732 343 -- 3,075 -- 8,307
-------- --------- --------- -------- --------- --------- -----------
Income (loss) before
income taxes........... 38,472 (116,012) (8,268) (84,628) (208,908) (635,141) (805,577)
Provision for income
taxes.................. 16,729 2,245 2,677 -- 4,922 -- (H) 21,651
Minority interest........ -- -- (67) 67 (F) -- -- --
Initial deferred income
tax.................... 467 -- -- -- -- -- 467
-------- --------- --------- -------- --------- --------- -----------
Net income (loss).... $ 21,276 $(118,257) $ (11,012) $(84,561) $(213,830) $(635,141) $ (827,695)
======== ========= ========= ======== ========= ========= ===========
Net income (loss) per
share:
Basic.................. $ 0.39 $ (1.56) $ (2.52) $ (6.47)
======== ========= ========= ===========
Diluted................ $ 0.35 $ (1.56) $ (2.52) $ (6.47)
======== ========= ========= ===========
Weighted average shares
outstanding:
Basic.................. 54,473 75,806 84,877 (G) 127,892
======== ========= ========= ===========
Diluted................ 61,006 75,806 84,877 (G) 127,892
======== ========= ========= ===========
</TABLE>
16
<PAGE>
WHITTMAN-HART AND USWEB/CKS
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
USWEB/CKS
------------------------------------------------- PRO FORMA
WHITTMAN-HART USWEB/CKS MMG ADJUSTMENTS PRO FORMA ADJUSTMENTS COMBINED
-------------- ----------- -------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $307,613 $ 228,600 $180,883 $ -- $ 409,483 $ -- $ 717,096
-------- --------- -------- --------- --------- --------- -----------
Cost of revenues:
Services................ 176,830 146,251 122,963 -- 269,214 -- 446,044
Provision for loss on
contract.............. -- 9,994 -- -- 9,994 -- 9,994
Stock compensation...... -- 13,037 -- 68,353 (D) 81,390 -- 81,390
-------- --------- -------- --------- --------- --------- -----------
Total cost of
revenues............ 176,830 169,282 122,963 68,353 360,598 -- 537,428
-------- --------- -------- --------- --------- --------- -----------
Gross profit.............. 130,783 59,318 57,920 (68,353) 48,885 -- 179,668
-------- --------- -------- --------- --------- --------- -----------
Operating expenses:
Marketing, sales and
support............... 12,124 27,761 20,257 -- 48,018 -- 60,142
Recruiting.............. 10,509 -- -- -- -- 9,634 (I) 20,143
General and
administrative........ 79,334 44,694 44,933 -- 89,627 (9,634)(I) 159,327
Business combination
costs................. 775 -- -- -- -- -- 775
Acquired in-process
technology............ -- 25,508 -- -- 25,508 -- 25,508
Stock compensation...... -- 31,760 -- 17,088 (D) 48,848 -- 48,848
Amortization of
intangible assets..... -- 74,538 235 41,819 (E) 116,592 846,854 (C) 963,446
Merger and integration
costs................. -- 28,822 -- -- 28,822 -- 28,822
Impairment of
goodwill.............. -- 11,079 -- -- 11,079 -- 11,079
-------- --------- -------- --------- --------- --------- -----------
Total operating
expenses............ 102,742 244,162 65,425 58,907 368,494 846,854 (1,318,090)
-------- --------- -------- --------- --------- --------- -----------
Income (loss) from
operations.............. 28,041 (184,844) (7,505) (127,260) (319,609) (846,854) (1,138,422)
Interest income, net...... 5,647 4,302 121 -- 4,423 -- 10,070
Impairment of investee
carried at cost......... -- -- -- -- -- -- --
-------- --------- -------- --------- --------- --------- -----------
Income (loss) before
income taxes............ 33,688 (180,542) (7,384) (127,260) (315,186) (846,854) (1,128,352)
Provision for income
taxes................... 14,198 7,739 4,856 -- 12,595 -- (H) 26,793
Minority interest......... -- -- 112 (112)(F) -- -- --
Initial deferred income
tax..................... 676 -- -- -- -- -- 676
-------- --------- -------- --------- --------- --------- -----------
Net income (loss)..... $ 18,814 $(188,281) $(12,128) $(127,372) $(327,781) $(846,854) $(1,155,821)
======== ========= ======== ========= ========= ========= ===========
Net income (loss) per
share:
Basic................... $ 0.38 $ (3.07) $ (4.63) $ (10.44)
======== ========= ========= ===========
Diluted................. $ 0.35 $ (3.07) $ (4.63) $ (10.44)
======== ========= ========= ===========
Weighted average shares
outstanding:
Basic................... 49,424 61,329 70,792 (G) 110,659
======== ========= ========= ===========
Diluted................. 54,258 61,329 70,792 (G) 110,659
======== ========= ========= ===========
</TABLE>
17
<PAGE>
WHITTMAN-HART AND USWEB/CKS
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
PRO FORMA ADJUSTMENTS
On December 12, 1999, Whittman-Hart and USWeb/CKS entered into the merger
agreement, for total consideration of $6,503,000. The acquisition of USWeb/CKS
by Whittman-Hart will be accounted for as a purchase business combination and,
accordingly, the purchase price will be allocated to the tangible and
identifiable intangible assets acquired and liabilities assumed on the basis of
their estimated fair values on the effective date of the merger. The valuation
of the intangible assets acquired will be determined by an independent appraiser
and are expected to include workforce in place and customer lists. Such
valuations and studies are not yet complete. Accordingly, the final allocation
may be different from that reflected below. Assuming that the acquisition of
USWeb/CKS had occurred on September 30, 1999, the purchase price allocation
would have been as follows:
<TABLE>
<S> <C>
Fair value of assets acquired and liabilities assumed....... $ 575,501
Intangible assets........................................... 5,927,979
----------
$6,503,480
==========
</TABLE>
(A) Reflects the excess of acquisition price paid for USWeb/CKS by
Whittman-Hart, over the estimated fair value of net assets acquired.
The excess of purchase price over tangible and identifiable intangible
assets acquired and liabilities assumed will be recorded as goodwill.
Identifiable intangible assets are expected to include workforce in place
and customer lists. An independent valuation of identifiable intangible
assets is currently being performed by an independent appraiser; however,
the valuation has not yet been completed.
(B) Reflects the accrual of estimated costs resulting from the acquisition of
USWeb/CKS by Whittman-Hart. Such costs are estimated to be $75,000, and
include direct transaction costs, primarily for financial advisory and legal
fees, lease termination costs and severance costs. The estimated costs are
reflected in the unaudited pro forma combined balance sheet as a component
of purchase price.
Estimated transaction costs include the following:
<TABLE>
<S> <C>
Financial advisory and other professional fees.............. $52,000
Other....................................................... 23,000
-------
Total..................................................... $75,000
-------
</TABLE>
Actual amounts ultimately incurred could differ from estimated amounts due
to the actual time incurred by professional advisors, including accountants
and attorneys, actual lease termination costs, actual severance costs, and
the final purchase price.
(C) Reflects amortization expense of intangible assets resulting from the
acquisition of USWeb/CKS by Whittman-Hart as if such acquisition had
occurred on January 1, 1998, using estimated useful lives of between 5 and
10 years. A final valuation has not yet been completed, and the actual
amounts allocated to intangible assets and their respective lives may change
depending on the final valuation report issued by an independent appraiser.
(D) Reflects the stock compensation charge related to the issuance of up to
6,810,160 additional shares of USWeb/CKS common stock payable to the MMG
shareholders who remain as employees of USWeb/ CKS on the first and the
second closing date anniversaries of the acquisition of MMG's assets. This
18
<PAGE>
WHITTMAN-HART AND USWEB/CKS
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
PRO FORMA ADJUSTMENTS (CONTINUED)
charge is being amortized over its vesting period of 24 months and is
allocated between cost of revenues and operating expenses based upon
classification of the related employees.
(E) Reflects amortization expense of intangible assets resulting from the
purchase business combination of MMG as if the business combination had
occurred on January 1, 1998, using estimated useful lives of between 5 and
7 years.
(F) Eliminates a 1% minority interest as a result of the purchase of 100% of
MMG's capital ownership.
(G) Pro forma weighted average shares used in the calculation of Whittman-Hart
and USWeb/CKS pro forma combined net loss per share have been computed by
adding Whittman-Hart's historical weighted average shares outstanding to
USWeb/CKS's pro forma weighted average shares outstanding converted to give
effect to the exchange ratio of 0.865.
Pro forma weighted average shares used in the calculation of USWeb/CKS pro
forma combined net loss per share include common stock issued to MMG upon
the acquisition of MMG's assets by USWeb/CKS, as well as additional shares
issuable to MMG employees who remain in the employment of USWeb/CKS at the
first and second closing date anniversaries of the acquisition assuming that
the acquisition took place on January 1, 1998.
(H) No income tax benefit related to the amortization of intangible assets
created by the merger has been recognized in the pro forma combined
statement of operations as the ultimate realization of any benefit is not
certain.
(I) To conform presentation of recruiting expenses.
19
<PAGE>
COMPARATIVE PER SHARE DATA
We have summarized below selected historical per share data of Whittman-Hart
and USWeb/CKS and combined per share data on an unaudited pro forma basis after
giving effect to the merger accounted for using the purchase method of
accounting and assuming that 0.865 of a share of Whittman-Hart common stock was
issued in exchange for each outstanding share of USWeb/CKS common stock (other
than shares owned by Whittman-Hart and its subsidiaries or by USWeb/CKS).
You should read this data in conjunction with each of our historical audited
consolidated financial statements and the related notes, that are included in
each of our Annual Reports and other financial information included in our
filings with the SEC. See "Where You Can Find More Information" on page 72.
This unaudited pro forma combined financial data does not necessarily
indicate the operating results that would have been achieved had the merger been
in effect as of the beginning of the periods presented, or the results of
operations or financial position that we will experience in the future.
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, 1999 1998
------------------- -------------
<S> <C> <C>
HISTORICAL--USWEB/CKS:
Net loss per common share--basic and diluted................ $(1.56) $(3.07)
Book value per share........................................ $ 6.71 $ 4.28
HISTORICAL--WHITTMAN-HART:
Net income per common share--basic.......................... $ 0.39 $ 0.38
Net income per common share--diluted........................ $ 0.35 $ 0.35
Book value per share........................................ $ 4.85 $ 4.03
PRO FORMA COMBINED NET LOSS PER SHARE:
Net loss per Whittman-Hart share--basic and diluted......... $(5.23) $(7.93)
Net loss per equivalent USWeb/CKS share..................... $(4.53) $(6.86)
PRO FORMA COMBINED BOOK VALUE PER SHARE:
Per Whittman-Hart share..................................... $40.17 $ 4.04
Per equivalent USWeb/CKS share.............................. $34.75 $ 3.40
</TABLE>
20
<PAGE>
COMPARATIVE MARKET PRICE DATA
At the close of business on each company's record date, there were
approximately 1,310 holders of record of Whittman-Hart common stock and
approximately 710 holders of record of USWeb/CKS common stock. Following
completion of the merger, USWeb/CKS common stock will cease to be quoted on
Nasdaq.
Neither of us has ever paid any cash dividends on our stock. We anticipate
that the combined company, for the foreseeable future, will retain any earnings
for use in its operations.
On December 10, 1999, the last trading day prior to the announcement of the
execution of the merger agreement, the closing price per share of Whittman-Hart
common stock was $79.25 and the closing price per share of USWeb/CKS common
stock was $50.875. On January 25, 2000, the last trading day prior to the
printing of this joint proxy statement/prospectus, the closing price per share
of Whittman-Hart common stock was $53.688 and the closing price per share of
USWeb/CKS common stock was $45.563. The market prices of shares of Whittman-Hart
common stock and USWeb/CKS common stock are subject to fluctuations. As a
result, Whittman-Hart and USWeb/CKS stockholders are urged to obtain current
market quotations.
To help you in your analysis of the proposed merger, we have included the
following table which sets forth the range of high and low sales prices reported
on the Nasdaq National Market for Whittman-Hart common stock and USWeb/CKS
common stock for the periods indicated:
<TABLE>
<CAPTION>
WHITTMAN-HART USWEB/CKS
COMMON STOCK COMMON STOCK
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Fiscal Year Ended December 31, 1998
First Quarter......................................... $23.375 $13.875 $23.500 $ 9.125
Second Quarter........................................ $24.500 $18.250 $38.750 $15.937
Third Quarter......................................... $25.312 $15.000 $31.000 $ 8.000
Fourth Quarter........................................ $28.250 $13.000 $28.750 $ 7.750
Fiscal Year Ended December 31, 1999
First Quarter......................................... $35.125 $19.500 $47.000 $22.750
Second Quarter........................................ $31.875 $17.000 $42.125 $18.000
Third Quarter......................................... $39.437 $21.750 $34.937 $17.000
Fourth Quarter........................................ $81.125 $35.460 $58.500 $27.625
Fiscal Year Ended December 31, 2000
First Quarter (through January 25, 2000).............. $56.500 $44.688 $47.500 $35.000
</TABLE>
RECENT DEVELOPMENTS
Both Whittman-Hart and USWEB/CKS have issued press releases stating their
results of operations for the fourth quarter of 1999. Each of us has filed this
information with the SEC. See "Where You Can Find More Information" on page 72.
21
<PAGE>
RISK FACTORS
You should consider the following risks in deciding whether to approve the
proposals related to the merger and the merger agreement. These matters should
be considered along with the other information included in this joint proxy
statement/prospectus. We have separated the risks into two groups: risks
relating to the merger and risks relating to the combined company.
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.
THE MARKET PRICES OF OUR COMPANIES' STOCK PRICES MAY FLUCTUATE, BUT THE EXCHANGE
RATIO IS FIXED
As a result of the merger, each outstanding share of USWeb/CKS's common
stock held by the USWeb/CKS stockholders (other than by Whittman-Hart and its
subsidiaries and by USWeb/CKS) will be converted into the right to receive 0.865
of a share of Whittman-Hart common stock. Because the exchange ratio is fixed
and will not increase or decrease with fluctuations in the market price of
Whittman-Hart common stock or USWeb/CKS common stock, the specific value of the
stock to be received by USWeb/CKS stockholders in the merger will depend on the
market price of the Whittman-Hart common stock at the completion of the merger.
We advise USWeb/CKS stockholders to obtain recent market quotations for
Whittman-Hart common stock and USWeb/CKS common stock. You should note that the
Whittman-Hart common stock and USWeb/CKS common stock historically have been
subject to price volatility. We have included the market prices of the
Whittman-Hart common stock and USWeb/CKS common stock as of a recent date in
this joint proxy statement/prospectus on page 21. However, we cannot accurately
predict what the market prices of the Whittman-Hart common stock or USWeb/CKS
common stock will be at the closing date.
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,
22
<PAGE>
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.
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.
WE MUST BUILD RECOGNITION AND CUSTOMER ACCEPTANCE OF NEW BRANDS
We have each invested significant efforts in building brand recognition and
customer acceptance of our brand names. We believe that transferring market
acceptance for the Whittman-Hart and USWeb/CKS brands to the combined company
brands will be an important aspect of its 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 we intend 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.
THE MERGER WILL RESULT IN SUBSTANTIAL COSTS WHETHER OR NOT COMPLETED
The merger will result in significant costs to Whittman-Hart and USWeb/CKS.
Excluding costs associated with combining the operations of the two companies
and costs associated with promoting and maintaining the new brands of the
combined company, which costs are difficult to estimate, direct transaction
costs are estimated at approximately $75 million. We expect these costs to
consist primarily of fees for investment bankers, attorneys, accountants, filing
fees, financial printing, and severance benefits and costs associated with
discontinuing some redundant business activities. The aggregate amount of these
costs may be greater than currently anticipated. The substantial majority of
these costs will be incurred whether or not the merger is completed.
IF THE MERGER IS NOT COMPLETED THE COMPANIES' STOCK PRICES COULD DECLINE
The obligations of Whittman-Hart and USWeb/CKS to complete the merger are
subject to the satisfaction or waiver of certain conditions. See page 56 for a
discussion of these conditions. 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 the stock trading price of one or both parties.
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RISKS RELATING TO THE COMBINED COMPANY
OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH MAY LEAD TO REDUCED PRICES FOR OUR
STOCK
Each of Whittman-Hart's and USWeb/CKS'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
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.
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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 the stockholders of
each of Whittman-Hart and USWeb/CKS in the combined company when compared to
their ownership in each company prior to the merger. Based upon the estimated
capitalization of Whittman-Hart and USWeb/CKS as of the record date,
approximately 81,482,000 shares of common stock will be issued in the merger,
and the USWeb/CKS stockholders will hold approximately 57% 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 joint proxy statement/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.
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
Each of Whittman-Hart and USWeb/CKS 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 our operational and administrative resources and to
increase the level of responsibility for our existing and new management
personnel. To manage our growth effectively, we will need to further develop our
operating, MIS, accounting and financial systems and to expand, train and manage
our 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
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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.
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.
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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 and
USWeb/CKS rely on the skill of their personnel and the quality of their client
service, they 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 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.
THE 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.
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THE INFRINGEMENT OR MISUSE OF INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BUSINESS
Each of Whittman-Hart and USWeb/CKS 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 their intellectual
property rights, Whittman-Hart and USWeb/CKS each rely 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 or USWeb/CKS to protect their 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, regardless of its responsibility for such
failure. In addition, each of us possesses technologies and content that may
include confidential or proprietary client information. Although each of us has
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 each 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 each of us maintains 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 co-insurance 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.
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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.
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UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS
This joint proxy statement/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 and USWeb/CKS's
businesses and the expected impact of the merger. These statements include,
among others:
- statements concerning the benefits that Whittman-Hart and USWeb/CKS expect
will result from their business activities;
- statements concerning the potential advantages and strategic opportunities
that Whittman-Hart and USWeb/CKS expect will result from the merger; and
- other statements of Whittman-Hart's and USWeb/CKS's expectations, beliefs,
future plans and strategies, anticipated developments and other matters
that are not historical facts.
These statements may be made expressly in this document, or may be
incorporated by reference to other documents Whittman-Hart and USWeb/CKS have
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 joint proxy statement/prospectus or incorporated by
reference in this joint proxy statement/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 22 in this document, and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Whittman-Hart Annual Report on Form 10-K for the year ended December 31, 1998,
the USWeb/CKS Annual Report on Form 10-K for the year ended December 31, 1998,
and the USWeb/CKS Quarterly Report on Form 10-Q for the quarter ended September
30, 1999, all of which are incorporated by reference.
Whittman-Hart and USWeb/CKS caution you not to place undue reliance on the
statements, which speak only as of the date of this report 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 Whittman-Hart, USWeb/CKS or persons acting on either company's
behalf may issue. Neither Whittman-Hart nor USWeb/CKS undertakes any 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 joint proxy statement/prospectus or to
reflect the occurrence of unanticipated events.
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THE USWEB/CKS SPECIAL MEETING
PURPOSE OF THE USWEB/CKS SPECIAL MEETING
The purpose of the special meeting of USWeb/CKS's stockholders is to vote on
the proposal to approve and adopt the merger agreement and the merger. Holders
of USWeb/CKS common stock may also vote on any other matters that may come
before the USWeb/CKS special meeting including the approval of any adjournment
or postponement of the special meeting. The merger will occur only if the
proposal is approved.
THE USWEB/CKS BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER, AND RECOMMENDS A VOTE "FOR" ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT AND "FOR" APPROVAL OF THE MERGER.
PROXIES
The USWeb/CKS proxy accompanying this joint proxy statement/prospectus is
being solicited on behalf of the USWeb/CKS board of directors for use at the
USWeb/CKS special meeting. You may vote in person at the meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the meeting. Voting instructions are included on your
proxy card. If you properly give your proxy and submit it to us in time to vote,
one of the individuals named as your proxy will vote your shares as you have
directed. You may vote for or against the proposal submitted at the meeting or
abstain from voting. In order to vote by proxy, complete, sign, date and return
your proxy card in the enclosed envelope. If you hold shares through a broker or
other custodian, please check the voting form used by that firm to see if it
offers telephone or Internet voting. If you submit your proxy but do not make
specific choices, your proxy will follow the board's recommendation and vote
your shares for the merger proposal and in its discretion as to any other
business that may properly come before the meeting.
DATE, TIME AND PLACE OF MEETING
The USWeb/CKS special meeting will be held on Monday, February 28, 2000 at
9:00 a.m., local time, at the offices of USWeb Corporation, 2880 Lakeside Drive,
Suite 300, Santa Clara, California 95054.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of USWeb/CKS common stock at the close of business on
January 25, 2000, the USWeb/CKS record date, are entitled to notice of and to
vote at the USWeb/CKS special meeting. At the close of business on the USWeb/CKS
record date, there were approximately 94,199,000 shares of USWeb/ CKS common
stock outstanding. Each holder of record of USWeb/CKS common stock on the USWeb/
CKS record date will be entitled to one vote for each share held on all matters
to be voted upon at the USWeb/CKS special meeting.
VOTE REQUIRED
A quorum of stockholders is necessary to hold a valid meeting. The presence,
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of USWeb/CKS common stock is necessary to constitute a
quorum. Abstentions and broker "non-votes" count as present for establishing a
quorum. A broker non-vote occurs when a broker is not permitted to vote on that
item without instructions from the beneficial owner of the shares and no
instruction is given. Approval of the USWeb/CKS proposal requires the
affirmative vote of a majority of the shares of USWeb/CKS common stock
outstanding on the record date. Abstentions and broker non-votes have the same
effect as a vote against the USWeb/CKS merger proposal.
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As of the record date for the special meeting, directors and executive
officers of USWeb/CKS held approximately 2,125,000 shares of USWeb/CKS common
stock. All directors and executive officers are expected to vote in favor of the
USWeb/CKS proposals.
MMG LLC, a Cayman Islands limited liability company, owns approximately 7.6%
of the outstanding shares of USWeb/CKS. Each of the three members of the board
of directors of MMG are employees of USWeb/CKS. MMG is expected to vote in favor
of the USWeb/CKS proposals.
Robert Shaw, USWeb/CKS's Chief Executive Officer, Mark Kvamme, Chairman of
the Board of USWeb/CKS, and Robert Hoff, a director of USWeb/CKS, have signed
stockholder agreements with Whittman-Hart, pursuant to which they have agreed to
vote shares of USWeb/CKS common stock they beneficially own, representing
approximately 2% of the total outstanding shares of USWeb/CKS common stock, in
favor of the merger.
REVOCABILITY OF PROXIES
You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date,
- notifying your company's secretary in writing before or at the meeting
that you have revoked your proxy, or
- voting in person at the meeting.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
PROXY SOLICITATION
This joint proxy statement/prospectus was mailed to all USWeb/CKS
stockholders of record on the USWeb/CKS record date and constitutes notice of
the USWeb/CKS special meeting in conformity with the requirements of the
Delaware General Corporation Law.
The cost of the solicitation of proxies from holders of USWeb/CKS common
stock and all related costs will be borne by USWeb/CKS. The companies have
jointly engaged the services of a proxy solicitation firm, the costs of which
will be shared. In addition, USWeb/CKS may reimburse brokerage firms and other
persons representing beneficial owners of its shares for their expenses in
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other employees of USWeb/CKS. No
additional compensation will be paid to directors, officers or other employees
for such services.
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THE WHITTMAN-HART SPECIAL MEETING
PURPOSE OF THE WHITTMAN-HART SPECIAL MEETING
The purpose of the special meeting of Whittman-Hart's stockholders is to
consider and vote upon proposals to:
- approve the merger and the issuance of shares of common stock to the
stockholders of USWeb/CKS pursuant to the merger;
- approve the proposed amendment of the Whittman-Hart charter to increase
the number of authorized common shares from 75,000,000 to 500,000,000;
- approve the proposed amendment to the 1995 Whittman-Hart Incentive Stock
Plan to increase the number of shares of common stock available for award
under the plan from 24,000,000 to 48,000,000; and
- transact any other business that may properly come before the meeting,
including the approval of any adjournment or postponement of the meeting.
The merger will occur only if the proposals to amend the charter and to
issue Whittman-Hart common stock in connection with the merger are approved.
THE WHITTMAN-HART BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER, AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSALS.
PROXIES
The Whittman-Hart proxy accompanying this joint proxy statement/prospectus
is being solicited on behalf of the Whittman-Hart board of directors for use at
the Whittman-Hart special meeting. You may vote in person at your meeting or by
proxy. We recommend you vote by proxy even if you plan to attend the meeting.
You can always change your vote at the meeting. Voting instructions are included
on your proxy card. If you properly give your proxy and submit it to us in time
to vote, one of the individuals named as your proxy will vote your shares as you
have directed. You may vote for or against the proposals submitted at the
meeting or abstain from voting. In order to vote by proxy, complete, sign, date
and return your proxy card in the enclosed envelope. If you hold shares through
a broker or other custodian, please check the voting form used by that firm to
see if it offers telephone or Internet voting. If you submit your proxy but do
not make specific choices, your proxy will follow the board's recommendation and
vote your shares for the proposals and in its discretion as to any other
business that may properly come before the meeting.
DATE, TIME AND PLACE OF MEETING
The Whittman-Hart special meeting will be held on Monday, February 28, 2000
at 10:00 a.m., local time, at The Whittman-Hart Institute for Strategic
Education, 320 North Elizabeth Street, Chicago, Illinois 60607.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Whittman-Hart common stock at the close of
business on January 25, 2000, the record date, are entitled to notice of and to
vote at the Whittman-Hart special meeting. At the close of business on the
Whittman-Hart record date, there were 62,146,544 shares of Whittman-Hart common
stock outstanding. Each holder of record of common stock on the Whittman-Hart
record date will be entitled to one vote on all matters to be voted upon at the
Whittman-Hart special meeting.
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VOTE REQUIRED
A quorum of stockholders is necessary to hold a valid meeting. The presence,
in person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Whittman-Hart common stock is necessary to constitute a
quorum. Abstentions and broker "non-votes" count as present for establishing a
quorum. A broker non-vote occurs when a broker is not permitted to vote on that
item without instructions from the beneficial owner of the shares and no
instruction is given. Approval of the proposal to amend the charter of the
company to increase the number of authorized shares requires the affirmative
vote of a majority of the shares of Whittman-Hart common stock outstanding on
the record date. Abstentions and broker non-votes have the same effect as voting
against amending the charter. Approval of the proposals to issue shares to
USWeb/CKS stockholders in connection with the merger and to increase the number
of authorized shares of common stock available for issuance under the
Whittman-Hart 1995 Incentive Stock Plan requires the affirmative vote of a
majority of the total votes cast at the meeting in person or by proxy.
The completion of the merger is not contingent upon the approval of the
proposal to amend the stock plan.
As of the record date for the special meeting, directors and executive
officers of Whittman-Hart held approximately 13,309,202 shares of Whittman-Hart
common stock. All directors and executive officers are expected to vote in favor
of the Whittman-Hart proposals.
Robert F. Bernard, Whittman-Hart's chairman and chief executive officer, has
signed a stockholder agreement with USWeb/CKS, pursuant to which he has agreed
to vote the shares of Whittman-Hart common stock he beneficially owns,
representing approximately 21% of the total outstanding shares of Whittman-Hart
common stock, in favor of the Whittman-Hart proposals.
REVOCABILITY OF PROXIES
You may revoke your proxy before it is voted by:
- submitting a new proxy with a later date,
- notifying your company's secretary in writing before or at the meeting
that you have revoked your proxy, or
- voting in person at the meeting.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
PROXY SOLICITATION
This joint proxy statement/prospectus was mailed to all Whittman-Hart
stockholders of record on the Whittman-Hart record date and constitutes notice
of the Whittman-Hart special meeting in conformity with the requirements of the
Delaware General Corporation Law.
The cost of the solicitation of proxies from holders of Whittman-Hart common
stock and all related costs will be borne by Whittman-Hart. The companies have
jointly engaged the services of a proxy solicitation firm, the costs of which
will be shared. In addition, Whittman-Hart may reimburse brokerage firms and
other persons representing beneficial owners of its shares for their expenses in
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other employees of
Whittman-Hart. No additional compensation will be paid to directors, officers or
other employees for such services.
34
<PAGE>
APPROVAL OF THE MERGER
BACKGROUND OF THE MERGER
In early November 1999, Robert Shaw, the Chief Executive Officer of
USWeb/CKS, had informal conversations with Robert F. Bernard, the Chairman and
Chief Executive Officer of Whittman-Hart, regarding their businesses and
potential cooperative ventures. These informal conversations led management of
USWeb/CKS and Whittman-Hart to consider a possible merger of the two companies
because of the strategic benefits foreseen by management of both entities.
Management of Whittman-Hart had discussions with its financial advisors
regarding a possible merger transaction.
On November 12, 1999, Mr. Bernard and Bert Young, Chief Financial Officer of
Whittman-Hart, met with Mr. Shaw and Carolyn Aver, Chief Financial Officer of
USWeb/CKS, to discuss the potential for a business combination. At about this
time, officers of USWeb/CKS sought advice from Morgan Stanley & Co. Incorporated
regarding the advisability of a business combination with Whittman-Hart.
On November 18, 1999, Whittman-Hart sent USWeb/CKS a proposed
confidentiality agreement, an information request list and a discussion outline
for a meeting to be held with senior management of the two companies and their
financial advisors. On November 26, 1999, a confidentiality agreement was signed
by each company.
On November 18, 1999, the Whittman-Hart board of directors met to discuss a
possible merger with USWeb/CKS, to receive a briefing on the conversations that
had taken place to date and to consider the proposed terms of such a
transaction. At the conclusion of the meeting, Mr. Bernard was authorized to
continue exploring a possible business combination with USWeb/CKS.
On November 30, 1999, the Whittman-Hart board of directors met to further
discuss a possible merger with USWeb/CKS. At this meeting, Credit Suisse First
Boston Corporation, financial advisor to Whittman-Hart, reviewed with the board
the financial aspects of the potential merger with USWeb/CKS. Katten Muchin
Zavis, counsel to Whittman-Hart, reviewed the directors' responsibilities
associated with considering a business combination.
Beginning on December 1 and continuing through December 3, 1999, management
of USWeb/CKS and Whittman-Hart and their advisors met in Chicago to discuss the
potential combination of the two businesses. During this time, USWeb/CKS also
began its due diligence review of the Whittman-Hart business, which continued
through the week of December 6, 1999.
On December 6, 1999, Mr. Shaw and Ms. Aver held a telephone conference call
with several members of the USWeb/CKS board of directors to discuss the proposed
merger with Whittman-Hart. Mr. Shaw and Ms. Aver explained the background of the
negotiations and reviewed the current status of the negotiations and the
proposed terms of the transaction. Representatives of Morgan Stanley, financial
advisor to USWeb/CKS, discussed the financial aspects of the transaction.
Representatives of Wilson Sonsini Goodrich & Rosati, counsel to USWeb/CKS,
reviewed responsibilities of the board of directors in considering the proposed
transaction. Over the next few days, officers of USWeb/CKS called directors who
were unable to participate in the December 6 conference call to review with
those members the topics discussed in the December 6 conference call. USWeb/CKS
officers also had conversations with individual directors to provide updated
information with respect to the proposed merger.
During the week of December 6, 1999, Whittman-Hart's representatives
conducted a due diligence review of USWeb/CKS's business in Palo Alto,
California, while legal counsel for the parties negotiated the merger agreement.
On December 8, 1999, the Whittman-Hart board of directors held a telephonic
meeting to discuss the current status of the negotiations, due diligence and the
terms and structure of the merger.
On December 11, 1999, the USWeb/CKS board of directors met to discuss a
possible merger with Whittman-Hart, to receive a briefing on the negotiations to
date and review the specific proposed
35
<PAGE>
transaction terms. At this meeting, representatives of Wilson Sonsini
Goodrich & Rosati again reviewed responsibilities of the board of directors in
considering the proposed transaction. Representatives of Morgan Stanley made a
detailed financial presentation to the board relating to the transaction.
Mr. Bernard attended a portion of the meeting to present his view of the
opportunities and issues that would face the combined companies.
On December 11, 1999, the Whittman-Hart board of directors held a telephonic
meeting with representatives of their financial advisors and legal counsel and
discussed the status of negotiations, due diligence review and the terms and
conditions of the merger as set forth in the drafts of the merger agreement
previously provided to the Whittman-Hart board of directors. At this meeting,
Credit Suisse First Boston made a financial presentation relating to the merger
and delivered its oral opinion, which was subsequently confirmed by delivery of
a written opinion, dated December 12, 1999, the date of the merger agreement, to
the effect that as of the date of the opinion and based upon the matters stated
in the opinion, the exchange ratio was fair, from a financial point of view, to
Whittman-Hart. Further, the board's outside counsel explained to the board its
fiduciary duties regarding the merger.
On December 12, 1999, the Whittman-Hart board of directors held a telephonic
meeting, reviewed the proposed transactions and agreements, and approved the
merger agreement with an exchange ratio of 0.865. The USWeb/CKS board of
directors held a telephonic board meeting with their advisors and discussed the
terms and conditions of the merger as set forth in drafts of the merger
agreement previously provided to the USWeb/CKS board of directors. At such
meeting, representatives of Morgan Stanley delivered its oral opinion, which was
subsequently confirmed by delivery of a written opinion dated December 12, 1999,
the date of the merger agreement, as to the fairness from a financial point of
view of the exchange ratio to the USWeb/CKS stockholders. The merger agreement
was approved by the USWeb/ CKS board of directors. The USWeb/CKS board of
directors also reviewed existing agreements concerning the acceleration of
certain stock options held by Mr. Shaw and Ms. Aver. The USWeb/CKS board of
directors determined to effect such acceleration, contingent upon closing of the
merger.
Negotiations regarding the merger agreement continued throughout the day and
evening of December 12, 1999 regarding the final points of the merger agreement,
and the merger agreement and related documents were executed late that evening.
A public announcement of the merger was made on December 13, 1999.
JOINT REASONS FOR THE MERGER
USWeb/CKS is a leading provider of Internet professional services with an
emphasis on the "dot com" and Fortune 500 business-to-consumer marketplace and
offers strong strategy and creative capabilities. Whittman-Hart is a leading
provider of e-commerce solutions to middle market business-to-business clients
and offers strong technical capabilities through its technology consulting
business. The boards of directors of Whittman-Hart and USWeb/CKS independently
concluded that the proposed merger will afford the combined company with the
complementary strengths of the two individual companies. Each of the boards of
directors believes that the merger will create a number of strategic benefits
that will enable the combined company to take advantage of increased market
demand for a variety of Internet professional services. These anticipated
strategic benefits include the following:
- the combined company will be able to provide comprehensive
supplier-to-consumer digital solutions that neither of us could provide
alone;
- the combined company's 8,000 professionals will possess premium talent and
comprehensive skills in the strategy, marketing and creative, and
technology disciplines;
- the combined company's higher market profile, greater financial strength
and increased marketing capability should enable it to respond more
quickly and effectively to the rapid innovation and change and increased
competition and market demands that characterize our industry;
36
<PAGE>
- the combined company's expanded geographic reach, with more than
70 offices worldwide, will enable it to provide local service to global
clients;
- the combined company's expanded scale, flexible delivery capabilities and
breadth of service offerings should position it to take advantage of
increased market demands for multiple digital services from a single
provider;
- the combined company's expanded scale and client base will create
additional opportunities for strategic alliances; and
- the combined company will have the opportunity to leverage an even
stronger executive management team and have better resources to recruit
additional talented personnel.
Whittman-Hart and USWeb/CKS have each identified additional reasons for the
merger, as discussed below. It should be noted, however, that some or all of the
potential benefits of the merger may not be realized. See "Risk Factors"
beginning on page 22.
USWEB/CKS'S REASONS FOR THE MERGER
In addition to the anticipated potential joint benefits described above,
USWeb/CKS's board of directors believes that the following are additional
reasons the merger will be beneficial to USWeb/CKS and for stockholders of
USWeb/CKS to vote "FOR" adoption of the merger agreement;
- the merger is expected to enhance the opportunity to be the leading
provider of Internet professional services;
- the exchange ratio in the merger represented a 34.7% premium over the
closing price for USWeb/ CKS common stock on December 10, 1999, the last
trading day prior to the signing of the merger agreement, as well as 27.6%
and 10.5% premiums over the average exchange ratios for the ten and thirty
trading days ending on December 10, 1999, respectively;
- USWeb/CKS's stockholders should benefit from owning part of a larger and
financially stronger enterprise with greater geographic coverage and
additional management talent;
- USWeb/CKS will be able to leverage the robust multi-office infrastructure
developed by Whittman-Hart; and
- USWeb/CKS will be able to combine its employee training and development
programs with Whittman-Hart's well-developed programs.
In the course of deliberations, the USWeb/CKS board reviewed with USWeb/CKS
management and outside advisors a number of additional factors relevant to the
merger, including:
- historical information concerning Whittman-Hart's and USWeb/CKS's
respective businesses, financial performance and condition, operations,
technology, management and competitive position, including public reports
concerning results of operations during the most recent fiscal year and
fiscal quarter for each company filed with the SEC;
- USWeb/CKS management's view as to the financial condition, results of
operations and businesses of Whittman-Hart and USWeb/CKS before and after
giving effect to the merger based on management due diligence and publicly
available earnings estimates;
- current financial market conditions and historical market prices,
volatility and trading information with respect to Whittman-Hart common
stock and USWeb/CKS common stock;
- the consideration to be received by USWeb/CKS stockholders in the merger
and an analysis of the market value of the Whittman-Hart common stock to
be issued in exchange for each share of USWeb/CKS common stock in light of
comparable merger transactions;
37
<PAGE>
- the terms of the merger agreement, including the parties' representations,
warranties and covenants, and the conditions to the parties' respective
obligations;
- USWeb/CKS management's view as to the prospects of USWeb/CKS as an
independent company;
- USWeb/CKS management's view as to the potential for other third parties to
enter into strategic relationships with or to acquire USWeb/CKS;
- the impact of the merger on USWeb/CKS's customers and employees;
- reports from management, legal advisors and financial advisors as to the
results of their due diligence investigation of Whittman-Hart; and
- the financial presentations by USWeb/CKS management and Morgan Stanley, as
well as Morgan Stanley's opinion, which was subsequently confirmed by
delivery of a written opinion dated December 12, 1999, to the effect that
as of the date of the opinion and based upon and subject to matters stated
in the opinion, the exchange ratio was fair, from a financial point of
view, to the stockholders of USWeb/CKS. A copy of the opinion is attached
hereto as Annex B and stockholders are urged to review it carefully.
USWeb's board of directors also considered the terms of the merger agreement
regarding
USWeb/CKS's rights to consider and negotiate other strategic transaction
proposals, as well as the possible effects of the provisions regarding
termination fees. In addition, USWeb/CKS's board of directors noted that the
merger is expected to be a tax-free transaction. USWeb/CKS's board of directors
also considered various alternatives to the merger, including remaining as an
independent company. USWeb/CKS's board of directors believed that these factors,
including the terms of the merger agreement, supported the board's
recommendation of the merger when viewed together with the risks and potential
benefits of the merger. USWeb/CKS's board of directors also identified and
considered a variety of potentially negative factors in its deliberations
concerning the merger, including, but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized;
- the possibility that the merger might not be completed and the effect of
public announcement of the merger on USWeb/CKS's sales and operating
results, employee retention and recruiting efforts;
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger;
- the risk that despite the efforts of the combined company, key management
and professional personnel might not remain employed by the combined
company;
- the difficulty of managing separate operations at different geographic
locations, including multiple executive offices; and
- the other risks described under "Risk Factors" beginning on page 22 of
this joint proxy statement/ prospectus.
USWeb/CKS's board of directors believed that these risks were outweighed by
the potential benefits of the merger. The foregoing discussion is not exhaustive
of all factors considered by USWeb/CKS's board of directors. Each member of
USWeb/CKS's board may have considered different factors, and USWeb/ CKS's board
evaluated these factors as a whole and did not quantify or otherwise assign
relative weights to factors considered.
WHITTMAN-HART'S REASONS FOR THE MERGER
In addition to the anticipated joint benefits described above, the
Whittman-Hart board of directors believes that the following are additional
specific reasons the merger will be beneficial to Whittman-Hart
38
<PAGE>
and recommends the stockholders of Whittman-Hart vote "FOR" approval of the
merger and related proposals:
- the merger will accelerate the realization of our growth strategy,
including geographic expansion and a broader range of service offerings;
- the size and scope of the merger should allow us to execute our corporate
development goals more quickly and efficiently;
- the merger will enable us to offer existing and new clients increased
depth in strategy, consulting, marketing and creative services; and
- the merger will allow employees to develop expertise in multiple
disciplines and serve a broader group of clients in more diverse
locations.
In addition to the factors set forth above, in the course of its meetings,
the Whittman-Hart board of directors reviewed and considered a wide variety of
information relevant to the merger including:
- information concerning Whittman-Hart's and USWeb/CKS's businesses,
historical financial performance and condition, operations, customers,
competitive positions, prospects and management;
- Whittman-Hart's management's view as to the financial condition, results
of operations and business and financial potential of Whittman-Hart and
USWeb/CKS before and after giving effect to the merger, based on
management's due diligence and publicly available earnings estimates;
- current financial market conditions and historical market prices,
volatility and trading information with respect to the Whittman-Hart
common stock and USWeb/CKS common stock;
- the consideration to be paid to the USWeb/CKS stockholders in the merger
and a comparison of comparable merger transactions;
- the terms of the merger agreement, including the parties' representations,
warranties and covenants, and the conditions to their respective
obligations;
- reports from management, legal advisors and financial advisors as to the
results of their due diligence investigation of USWeb/CKS;
- the potential impact of the merger on customers and employees of
Whittman-Hart and
USWeb/CKS; and
- the financial presentation by Whittman-Hart management and Credit Suisse
First Boston, as well as Credit Suisse First Boston's oral opinion, which
was subsequently confirmed by delivery of a written opinion dated
December 12, 1999, the date of the merger agreement, to the effect that as
of the date of the opinion and based upon and subject to matters stated in
the opinion, the exchange ratio was fair, from a financial point of view,
to Whittman-Hart. A copy of the opinion is attached hereto as Annex C and
stockholders are urged to read it carefully in its entirety.
Whittman-Hart's board of directors also considered the terms of the merger
agreement regarding Whittman-Hart's rights to consider and negotiate other
strategic transaction proposals, as well as the possible effects of the
provisions regarding termination fees. In addition, Whittman-Hart's board of
directors noted that the merger is expected to be a tax-free transaction.
Whittman-Hart's board of directors believed that these factors, including the
terms of the merger agreement, supported the board's recommendation of the
merger when viewed together with the risks and potential benefits of the merger.
Whittman-Hart's board of directors also identified and considered a variety of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized,
39
<PAGE>
- the possibility that the merger might not be completed and the effect of
public announcement of the merger on Whittman-Hart's sales and operating
results, employee retention and recruiting efforts,
- the substantial charges to be incurred in connection with the merger,
including costs of integrating the businesses and transaction expenses
arising from the merger,
- the risk that despite the efforts of the combined company, key management
and professional personnel might not remain employed by the combined
company,
- the difficulty of managing separate operations at different geographic
locations, including multiple executive offices; and
- the other risks described under "Risk Factors" beginning on page 22 of
this joint proxy statement/ prospectus.
Whittman-Hart's board of directors believed that these risks were outweighed
by the potential benefits of the merger.
The foregoing discussion of the factors considered by the Whittman-Hart
board of directors is not intended to be exhaustive but is intended to summarize
the material factors considered by the Whittman-Hart board of directors. In view
of the complexity and variety of factors considered by the Whittman-Hart board
of directors, the Whittman-Hart board of directors did not consider it practical
to quantify or otherwise attempt to assign any relative or specific weights to
the specific factors considered, and individual directors may have given
differing weights to different factors.
BOARD RECOMMENDATIONS
WHITTMAN-HART. The Whittman-Hart board believes that the merger is
advisable and fair to and in the best interests of Whittman-Hart and recommends
to its stockholders that they vote "FOR" all the proposals, including the
issuance of shares of Whittman-Hart common stock in the merger, the Whittman-
Hart charter amendment and the increase in the number of shares of Whittman-Hart
common stock authorized for issuance under the plan.
USWEB/CKS. The USWeb/CKS board believes that the merger is advisable and
fair to and in the best interests of USWeb/CKS stockholders and recommends to
its stockholders that they vote "FOR" the proposal to approve and adopt the
merger agreement and the merger.
OPINION OF MORGAN STANLEY & CO. INCORPORATED, FINANCIAL ADVISOR TO USWEB/CKS
Under an engagement letter dated December 12, 1999, USWeb/CKS retained
Morgan Stanley to provide it with financial advisory services and a financial
fairness opinion in connection with the merger. The USWeb/CKS board of directors
selected Morgan Stanley to act as USWeb/CKS's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation and its knowledge of the
business and affairs of USWeb/CKS. At the meeting of the USWeb/CKS board of
directors on December 12, 1999, Morgan Stanley rendered its oral opinion,
subsequently confirmed in writing, that as of December 12, 1999, based upon and
subject to the various considerations set forth in the opinion, the exchange
ratio pursuant to the merger agreement was fair from a financial point of view
to the holders of common stock of USWeb/CKS.
The full text of the written opinion of Morgan Stanley dated December 12,
1999 is attached as Annex B to this document and sets forth, among other things,
the assumptions made, procedures followed, matters considered and limitations on
the scope of the review undertaken by Morgan Stanley in rendering its opinion.
USWeb/CKS stockholders are urged to, and should, read the opinion carefully and
in its entirety. Morgan Stanley's opinion is directed to the USWeb/CKS board of
directors and addresses only the fairness of the exchange ratio pursuant to the
merger agreement from a financial point of view to the holders of common stock
of USWeb/CKS as of the date of the opinion. It does not address any other
40
<PAGE>
aspect of the merger and does not constitute a recommendation to any holder of
USWeb/CKS common stock as to how to vote at the USWeb/CKS special meeting. The
summary of the opinion of Morgan Stanley set forth in this document, while
materially complete, is qualified in its entirety by reference to the full text
of the opinion.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of USWeb/CKS and Whittman-Hart;
- reviewed certain internal financial statements and other financial and
operating data concerning USWeb/CKS and Whittman-Hart prepared by the
managements of USWeb/CKS and Whittman-Hart, respectively;
- discussed the past and current operations and financial condition and the
prospects of USWeb/CKS, including information relating to certain
strategic, financial and operational benefits anticipated from the merger,
with senior executives of USWeb/CKS;
- discussed the past and current operations and financial condition and the
prospects of Whittman-Hart, including information relating to certain
strategic, financial and operational benefits anticipated from the merger,
with senior executives of Whittman-Hart;
- reviewed the pro forma impact of the merger on the earnings per share of
Whittman-Hart;
- reviewed the reported prices and trading activity for the USWeb/CKS common
stock and Whittman-Hart common stock;
- compared the financial performance of USWeb/CKS and Whittman-Hart and the
prices and trading activity of the USWeb/CKS common stock and
Whittman-Hart common stock with that of certain other publicly-traded
companies and their securities;
- reviewed the contribution of revenues and earnings from USWeb/CKS and
Whittman-Hart to the combined company;
- reviewed and discussed with the senior managements of USWeb/CKS and
Whittman-Hart their strategic rationales for the merger;
- participated in discussions and negotiations among representatives of
USWeb/CKS and Whittman-Hart and their financial and legal advisors;
- reviewed the draft of the merger agreement, dated December 12, 1999, and
certain related agreements; and
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
Morgan Stanley assumed and relied upon, without independent verification,
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. With respect to the internal financial statements and other
financial and operating data, and discussions relating to the strategic,
financial and operational benefits anticipated from the merger provided by
USWeb/CKS and Whittman-Hart, Morgan Stanley assumed that they have, in each
case, been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the prospects of USWeb/CKS and Whittman-Hart. Morgan
Stanley relied upon the assessment by the managements of USWeb/CKS and
Whittman-Hart of their ability to retain key employees of USWeb/CKS and
Whittman-Hart. Morgan Stanley also relied upon, without independent
verification, the assessment by the managements of USWeb/CKS and Whittman-Hart
of:
- the strategic and other benefits expected to result from the merger;
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<PAGE>
- the timing and risks associated with the integration of USWeb/CKS and
Whittman-Hart; and
- the validity of, and risks associated with, USWeb/CKS's and
Whittman-Hart's existing and future technologies, services or business
models.
Morgan Stanley did not make any independent valuation or appraisal of the
assets or liabilities or technology of USWeb/CKS and Whittman-Hart, nor was it
furnished with any such appraisals. In addition, Morgan Stanley assumed that the
merger will be treated as a tax-free reorganization and/or exchange each
pursuant to the Internal Revenue Code of 1986 (as amended) and will be
consummated in accordance with the terms set forth in the draft of the merger
agreement, dated December 12, 1999. Morgan Stanley's opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and
the information made available to Morgan Stanley as of, the date of its opinion.
The following is a brief summary of certain of the analyses performed by
Morgan Stanley in connection with its oral opinion and the preparation of its
opinion letter dated, December 12, 1999. Certain of these summaries of financial
analyses include information presented in tabular format. In order to understand
fully the financial analyses used by Morgan Stanley, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses.
COMPARATIVE STOCK PRICE PERFORMANCE. Morgan Stanley reviewed the stock
price performance of the USWeb/CKS common stock and Whittman-Hart common stock
during the period from December 10, 1998 to December 10, 1999 and compared such
performance with the averages of the following groups of companies during the
same period.
<TABLE>
<CAPTION>
STOCK PRICE PERFORMANCE SINCE
COMPANIES DECEMBER 10, 1998
- --------- -----------------------------
<S> <C>
USWeb/CKS........................................... 161%
Whittman-Hart....................................... 257%
High End/High Growth IT Services Index.............. 336%
Nasdaq Index........................................ 80%
</TABLE>
The High End/High Growth IT Services Index included Scient Corporation,
Sapient Corporation, Razorfish, Inc., Proxicom, Inc., Viant Corporation and
AnswerThink Consulting Group, Inc.
Morgan Stanley noted that each of USWeb/CKS and Whittman-Hart stock prices
had increased more than the Nasdaq index but less than the High End/High Growth
IT Services Index.
PEER GROUP COMPARISON. Morgan Stanley compared certain financial
information of USWeb/CKS and Whittman-Hart with publicly available information
for other companies providing information technology services including the
companies in the High End/High Growth IT Services Index.
For this analysis, Morgan Stanley examined median estimates from securities
research analysts, where appropriate. The following table presents, as of
December 10, 1999, the following statistics:
- the ratio of price to calendar year 2000 estimated earnings per share,
commonly known as EPS; and
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<PAGE>
- the ratio of aggregate value, defined as market capitalization plus total
debt less cash and cash equivalents to calendar year 2000 revenue.
<TABLE>
<CAPTION>
AGGREGATE VALUE TO
CY 2000E CY 2000E
COMPANY P/E REVENUES
- ------- -------- ------------------
<S> <C> <C>
USWeb/CKS.......................................... 74x 7x
Whittman-Hart...................................... 109 9
Scient............................................. 844 30
Sapient............................................ 117 14
Razorfish.......................................... 165 15
Proxicom........................................... 309 19
Viant.............................................. 594 23
AnswerThink........................................ 59 4
Median (excluding USWeb/CKS and Whittman-Hart)..... 237 17
</TABLE>
The analyses reflected in the table above show that as of December 10, 1999:
- USWeb/CKS's common stock price was 74 times estimated calendar year 2000
EPS, as compared to the comparable ratios for Whittman-Hart and the median
of the companies in the High End/High Growth IT Services Index of 109 and
237, respectively; and
- USWeb/CKS's aggregate value was 7 times estimated calendar year 2000
revenue, as compared to the comparable ratios for Whittman-Hart and the
median of the companies in the High End/High Growth IT Services Index of 9
and 17, respectively.
No company utilized in the peer group comparison analysis is identical to
USWeb/CKS or Whittman-Hart. In evaluating the peer groups, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of USWeb/CKS and Whittman-Hart, such as the impact of
competition on the businesses of USWeb/CKS and Whittman-Hart and the industry
generally, industry growth and the absence of any adverse material change in the
financial condition and prospects of USWeb/ CKS and Whittman-Hart or the
industry or in the financial markets in general. Mathematical analysis (such as
determining the average or median) is not in itself a meaningful method of using
peer group data.
SECURITIES RESEARCH ANALYSTS' PRICE TARGETS. Morgan Stanley reviewed and
analyzed future public market trading price targets for USWeb/CKS common stock
and Whittman-Hart common stock prepared and published by securities research
analysts during the period from October 26, 1999 to December 1, 1999, for
USWeb/CKS and from July 27, 1999 to December 1, 1999, for Whittman-Hart. These
targets reflect each analyst's estimate of the future public market trading
price of USWeb/CKS and Whittman-Hart common stock at the end of the particular
time period considered for each estimate. The range of price targets are set
forth below:
<TABLE>
<CAPTION>
PRICE TARGET
-----------------------------------------
LOW HIGH AVERAGE MEDIAN
-------- -------- -------- --------
<S> <C> <C> <C> <C>
USWeb/CKS common stock.................... $40.00 $60.00 $ 50.08 $ 46.00
Whittman-Hart common stock................ 60.00 80.00 72.75 75.00
Ratio..................................... 0.6883x 0.6133x
Exchange ratio premium to ratio........... 26% 41%
</TABLE>
Morgan Stanley noted that the exchange ratio reflected a 26% and 41% premium
to the ratio of the average and median price targets for USWeb/CKS and
Whittman-Hart, respectively.
Morgan Stanley noted that the public market trading price targets published
by the securities research analysts do not necessarily reflect current market
trading prices for USWeb/CKS common stock and
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<PAGE>
Whittman-Hart common stock and that these estimates are subject to
uncertainties, including the future financial performance of USWeb/CKS and
Whittman-Hart and future financial market conditions.
EXCHANGE RATIO ANALYSIS. Morgan Stanley reviewed the ratios of the closing
prices of USWeb/CKS common stock divided by the corresponding prices of
Whittman-Hart common stock over various periods during the twelve month period
ending December 10, 1999. Morgan Stanley examined the premium or discount
represented by the exchange ratio over the average daily exchange ratios over
various periods.
<TABLE>
<CAPTION>
PREMIUM/(DISCOUNT) TO
AVERAGE EXCHANGE RATIO TRANSACTION EXCHANGE RATIO
---------------------- --------------------------
<S> <C> <C>
Last Twelve months................ 0.9971x (13.2%)
Last 120 days..................... 0.8465 2.2
Last 90 days...................... 0.8339 3.7
Last 60 days...................... 0.8383 3.2
Last 30 days...................... 0.7825 10.5
Last 20 days...................... 0.7232 19.6
Last 10 days...................... 0.6781 27.6
Last 5 days....................... 0.6667 29.7
Market (December 10, 1999)........ 0.6420 34.7
</TABLE>
Morgan Stanley noted that the exchange ratio was higher than the average
exchange ratio of the closing prices for all periods analyzed over the last
120 days. Morgan Stanley also noted that the exchange ratio represented an
approximate 35% premium to the closing price as of December 10, 1999.
RELATIVE CONTRIBUTION ANALYSIS. Morgan Stanley analyzed the pro forma
financial contribution of USWeb/CKS and Whittman-Hart to the combined company
assuming consummation of the merger and based on revenue and earnings estimates
from securities research analysts. Morgan Stanley calculated the implied
ownership of the combined company based on these financial contributions and
based on each company's capital structure, including certain shares which may be
issued in the future under existing contracts. The analysis showed, among other
things, the following:
<TABLE>
<CAPTION>
% PRO FORMA OWNERSHIP BY
--------------------------
WHITTMAN-HART USWEB/CKS
------------- ----------
<S> <C> <C>
REVENUE
1999............................................. 43.2% 56.8%
2000............................................. 41.4 58.6
2001............................................. 41.0 59.0
NET INCOME*
1999............................................. 48.8% 51.2%
2000............................................. 37.3 62.7
2001............................................. 37.2 62.8
NET INCOME**
1999............................................. 48.0% 52.0%
2000............................................. 37.2 62.8
2001............................................. 36.6 63.4
</TABLE>
- ------------------------
* Before goodwill and non-cash compensation charges.
** Before depreciation and amortization and non-cash compensation charges.
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<PAGE>
Morgan Stanley noted that the 56.8% ownership implied by the exchange ratio was
a premium to the ownership implied by each company's projected 1999 earnings and
was lower than the ownership implied by the projected earnings for calendar year
2000 and 2001.
PRO FORMA MERGER ANALYSIS. Morgan Stanley analyzed the pro forma impact of
the merger on the combined company's projected earnings per share for calendar
year 2000 both (i) before goodwill and non-cash compensation charges ("EBG") and
(ii) before depreciation, amortization and non-cash compensation charges
("EBDA"). Such analysis was based on earnings projections by securities research
analysts for USWeb/CKS and Whittman-Hart.
- Morgan Stanley observed that the merger would result in earnings per share
accretion for Whittman-Hart, prior to giving effect to any synergies, of
approximately 6% for calendar year 2000 on an EBG and EBDA basis.
- Morgan Stanley observed that the merger would result in earnings per share
dilution for USWeb/ CKS, prior to giving effect to any synergies, of
approximately 3% and 4% for calendar year 2000, respectively, based on an
EBG and EBDA basis.
The preparation of a fairness opinion is a complex process not necessarily
susceptible to partial analysis or summary description. In arriving at its
opinion, Morgan Stanley considered the results of all of its analyses as a whole
and did not attribute any particular weight to any analysis or factor considered
by it. Furthermore, Morgan Stanley believes that selecting any portion of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinion. In addition, Morgan Stanley may have given
various analyses and factors more or less weight than other analyses and
factors, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be Morgan Stanley's
view of the actual value of USWeb/CKS or Whittman-Hart. In performing its
analyses, Morgan Stanley made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of USWeb/CKS or Whittman-Hart. Any estimates
contained in Morgan Stanley's analyses are not necessarily indicative of future
results or actual values, which may be significantly more or less favorable than
those suggested by such estimates.
The analyses performed were prepared solely as part of Morgan Stanley's
analysis of the fairness of the exchange ratio pursuant to the merger agreement
from a financial point of view to the holders of common stock of USWeb/CKS and
were conducted in connection with the delivery of the Morgan Stanley opinion.
The analyses do not purport to be appraisals or to reflect the prices at which
the USWeb/CKS common stock or Whittman-Hart common stock might actually be sold.
The exchange ratio pursuant to the merger agreement was determined through
arm's-length negotiations between USWeb/CKS and Whittman-Hart and was approved
by the USWeb/CKS board of directors. Morgan Stanley provided advice to USWeb/CKS
during such negotiations; however, Morgan Stanley did not recommend any specific
exchange ratio to USWeb/CKS or that any specific exchange ratio constituted the
only appropriate exchange ratio for the merger.
In addition, Morgan Stanley's opinion and presentation to the USWeb/CKS
board of directors was one of many factors taken into consideration by
USWeb/CKS's board of directors in making its decision to approve the merger.
Consequently, Morgan Stanley's analyses as described above should not be viewed
as determinative of the opinion of the USWeb/CKS board of directors with respect
to the exchange ratio or of whether the USWeb/CKS board of directors would have
been willing to agree to a different exchange ratio.
The USWeb/CKS board of directors retained Morgan Stanley based upon Morgan
Stanley's qualifications, experience and expertise. Morgan Stanley is an
internationally recognized investment banking and advisory firm. Morgan Stanley,
as part of its investment banking business, is continuously engaged in the
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<PAGE>
valuation of businesses and securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate, estate and other purposes. In the ordinary course of
Morgan Stanley's trading and brokerage activities, Morgan Stanley or its
affiliates may at any time hold long or short positions, may trade or otherwise
effect transactions, for its own account or for the account of customers in the
securities of USWeb/CKS, Whittman-Hart or any other parties involved in the
transaction.
Under the engagement letter, Morgan Stanley will receive a customary fee for
providing financial advisory services and a financial fairness opinion in
connection with the merger. Morgan Stanley will also be reimbursed for
out-of-pocket expenses. In addition, USWeb/CKS has also agreed to indemnify
Morgan Stanley and its affiliates, their respective directors, officers, agents
and employees and each person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, arising out of Morgan Stanley's
engagement.
OPINION OF CREDIT SUISSE FIRST BOSTON CORPORATION, FINANCIAL ADVISOR TO
WHITTMAN-HART
Credit Suisse First Boston has acted as Whittman-Hart's financial advisor in
connection with the merger. Whittman-Hart selected Credit Suisse First Boston
based on Credit Suisse First Boston's experience, expertise and reputation, and
familiarity with Whittman-Hart's business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, Whittman-Hart
requested that Credit Suisse First Boston evaluate the fairness, from a
financial point of view, to Whittman-Hart of the exchange ratio provided for in
the merger agreement. On December 11, 1999, at a meeting of the Whittman-Hart
board of directors held to evaluate the merger, Credit Suisse First Boston
rendered to the Whittman-Hart board of directors an oral opinion, which opinion
was confirmed by delivery of a written opinion dated December 12, 1999, the date
of the merger agreement, to the effect that, as of the date of the opinion and
based upon and subject to the matters described in the opinion, the exchange
ratio was fair, from a financial point of view, to Whittman-Hart.
The full text of Credit Suisse First Boston's written opinion dated
December 12, 1999 to the Whittman-Hart board of directors, which sets forth the
procedures followed, assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex C and is incorporated into this document
by reference. Holders of Whittman-Hart common stock are urged to, and should,
read this opinion carefully and in its entirety. Credit Suisse First Boston's
opinion is addressed to the Whittman-Hart board of directors and relates only to
the fairness of the exchange ratio from a financial point of view, does not
address any other aspect of the proposed merger or any related transaction and
does not constitute a recommendation to any stockholder as to any matter
relating to the merger. The summary of Credit Suisse First Boston's opinion in
this document is qualified in its entirety by reference to the full text of the
opinion.
In arriving at its opinion, Credit Suisse First Boston reviewed the merger
agreement, as well as publicly available business and financial information
relating to Whittman-Hart and USWeb/CKS. Credit Suisse First Boston also
reviewed other information relating to Whittman-Hart and USWeb/CKS, provided to
or discussed with Credit Suisse First Boston by Whittman-Hart and USWeb/CKS, and
met with the managements of Whittman-Hart and USWeb/CKS to discuss the
businesses and prospects of Whittman-Hart and USWeb/CKS, including the ability
to integrate the businesses of Whittman-Hart and USWeb/ CKS.
Credit Suisse First Boston also considered financial and stock market data
of Whittman-Hart and USWeb/CKS and compared those data with similar data for
other publicly held companies in businesses it
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<PAGE>
deemed similar to those of Whittman-Hart and USWeb/CKS and considered, to the
extent publicly available, the financial terms of other business combinations
and other transactions which have recently been effected. Credit Suisse First
Boston also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume any
responsibility for independent verification of any of the information that was
provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to financial
information forecasts, Credit Suisse First Boston was advised, and assumed, that
this information represents reasonable estimates and judgments as to the future
financial performance of Whittman-Hart and USWeb/CKS. The board of directors of
Whittman-Hart informed Credit Suisse First Boston and Credit Suisse First Boston
assumed that the merger will be treated as a tax-free reorganization for federal
income tax purposes.
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of Whittman-Hart or USWeb/CKS, and was not furnished with any
evaluations or appraisals. Credit Suisse First Boston's opinion was necessarily
based on information available to, and financial, economic, market and other
conditions as they existed and could be evaluated by, Credit Suisse First Boston
on the date of its opinion. Credit Suisse First Boston did not express any
opinion as to the actual value of the Whittman-Hart common stock when issued in
the merger or the prices at which the Whittman-Hart common stock will trade
after the merger. No other limitations were imposed on Credit Suisse First
Boston with respect to the investigations made or procedures followed in
rendering its opinion.
In preparing its opinion to the Whittman-Hart board of directors, Credit
Suisse First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to partial analysis or summary
description. In arriving at its opinion, Credit Suisse First Boston made
qualitative judgments as to the significance and relevance of each analysis and
factor that it considered. Accordingly, Credit Suisse First Boston believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in tabular format,
without considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry performance,
regulatory, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Whittman-Hart and
USWeb/CKS. No company, transaction or business used in Credit Suisse First
Boston's analyses as a comparison is identical to Whittman-Hart or USWeb/CKS or
the proposed merger, and an evaluation of the results of those analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions being analyzed. The estimates
contained in Credit Suisse First Boston's analyses and the ranges of valuations
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by the analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, Credit Suisse First Boston's analyses and estimates
are inherently subject to substantial uncertainty.
47
<PAGE>
Credit Suisse First Boston's opinion and financial analyses were not the
only factors considered by the Whittman-Hart board of directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of the Whittman-Hart board of directors or management with respect to
the merger or the exchange ratio.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion and
reviewed with the Whittman-Hart board of directors at a meeting of the board of
directors held on December 11, 1999. The financial analyses summarized below
include information presented in tabular format. In order to fully understand
Credit Suisse First Boston's financial analyses, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the data set forth
in the tables below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the
analyses, could create a misleading or incomplete view of Credit Suisse First
Boston's financial analyses.
SELECTED COMPANIES ANALYSIS. Credit Suisse First Boston compared financial,
operating and stock market data of USWeb/CKS to corresponding data of the
following publicly traded companies in the information technology services
industry:
- Scient Corporation
- Sapient Corporation
- Razorfish, Inc.
- Rare Medium Group, Inc.
- iXL Enterprises, Inc.
- Viant Corporation
- Proxicom, Inc.
- AppNet, Inc.
- Tanning Technology Corporation
- U.S. Interactive, Inc.
- Luminant Worldwide Corporation
- Modem Media.Poppe Tyson, Inc.
Credit Suisse First Boston reviewed, among other things, estimated calendar
year 2000 price-to-earnings and enterprise values, calculated as equity value,
plus debt, less cash, as a multiple of estimated calendar year 2000 revenues.
All multiples were based on closing stock prices on December 10, 1999. Estimated
financial data for the selected companies was based on publicly available
research analysts' estimates. This analysis indicated an implied exchange ratio
reference range of approximately 0.694x to 0.946x.
None of the selected companies is identical to USWeb/CKS. Accordingly, an
analysis of the results of this selected companies analysis involves complex
considerations of the selected companies and other factors that could affect the
public trading value of USWeb/CKS and the selected companies.
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<PAGE>
SELECTED TRANSACTIONS ANALYSIS. Credit Suisse First Boston analyzed the
purchase prices and implied transaction multiples paid in the following recent
selected transactions in the high-end information technology services industry,
as well as those involving USWeb/CKS:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C> <C>
- - Razorfish, Inc. International Integration Incorporated
- - USWeb Corporation CKS Group, Inc.
- - Complete Business Solutions, Inc. Claremont Technology Group, Inc.
- - The Registry, Inc. Renaissance Solutions, Inc.
- - USWeb/CKS Mitchell Madison Group
- - AnswerThink ThinkNew Ideas
- - Getronics NV Wang Laboratories
- - Metamor Worldwide SPR
</TABLE>
Credit Suisse First Boston compared enterprise values in the selected
transactions as multiples of, among other things, latest twelve months revenues
and earnings before interest and taxes, commonly known as "EBIT," and equity
values in the selected transactions as a multiple of latest twelve months cash
net income. All multiples were based on financial information available at the
time of the relevant transaction. Credit Suisse First Boston then applied a
range of selected multiples for the selected transactions of latest twelve
months revenues, EBIT and cash net income, to corresponding financial data of
USWeb/CKS. This analysis indicated an implied exchange ratio reference range of
approximately 0.631x to 0.883x.
No company or transaction used in the selected transactions analysis is
identical to Whittman-Hart, USWeb/CKS or the proposed merger. Accordingly, an
analysis of the results of this analysis involves complex considerations of the
companies involved and the transactions and other factors that could affect the
acquisition value of the companies and USWeb/CKS.
TERMINAL VALUE ANALYSIS. Credit Suisse First Boston estimated the present
value of USWeb/CKS's future stock price based upon estimated 2001 earnings per
share, commonly referred to as "EPS," for USWeb/CKS, which was derived by
applying the I/B/E/S long-term EPS growth rate for USWeb/CKS of 50% to estimated
2000 EPS for USWeb/CKS based upon publicly available research analysts'
estimates. Applying a range of multiples of 60.0x to 80.0x and discount rates
ranging from 14% to 18%, this analysis indicated an implied exchange ratio range
of approximately 0.765x to 1.056x.
RELATIVE CONTRIBUTION ANALYSIS. Credit Suisse First Boston performed a
contribution analysis comparing the relative contributions of Whittman-Hart and
USWeb/CKS to estimated calendar year 2000 revenues, gross profit, operating
income and net income of the combined company. This analysis yielded, after
adjustment to reflect net debt balances, among other things, an implied exchange
ratio reference range of approximately 0.938x to 1.346x, as indicated in the
following table:
<TABLE>
<CAPTION>
WHITTMAN-HART USWEB/CKS IMPLIED
PERCENTAGE PERCENTAGE EXCHANGE
CONTRIBUTION CONTRIBUTION RATIO
------------- ------------ --------
<S> <C> <C> <C>
Revenues.................................. 40.1% 59.9% 0.966x
Gross Profit.............................. 40.9% 59.1% 0.938x
Operating Income.......................... 32.6% 67.4% 1.320x
Net Income................................ 33.3% 66.7% 1.346x
</TABLE>
HISTORICAL STOCK PRICE ANALYSIS. Credit Suisse First Boston performed an
exchange ratio analysis comparing the average exchange ratios implied by the
daily closing stock prices for Whittman-Hart and USWeb/CKS on December 10, 1999
and during the 5-day, 10-day, 20-day, 30-day, 40-day, 50-day, 60-day,
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<PAGE>
90-day and 180-day periods preceding December 10, 1999 and for calendar year
1999 through December 10, 1999 and the premiums over those periods implied by
the exchange ratio in the merger. This comparison yielded an implied exchange
ratio reference range of approximately 0.642x to 0.998x, as indicated in the
following table:
<TABLE>
<CAPTION>
IMPLIED
PERIOD EXCHANGE RATIO
- ------ --------------
<S> <C>
December 10, 1999........................................... 0.642x
5-day....................................................... 0.667x
10-day...................................................... 0.678x
20-day...................................................... 0.723x
30-day...................................................... 0.783x
40-day...................................................... 0.814x
50-day...................................................... 0.822x
60-day...................................................... 0.838x
90-day...................................................... 0.834x
180-day..................................................... 0.932x
January 4, 1999 to December 10, 1999........................ 0.998x
</TABLE>
PRO FORMA EARNINGS IMPACT ANALYSIS. Credit Suisse First Boston analyzed the
potential pro forma effect of the merger on Whittman-Hart's estimated cash EPS
for calendar year 2000. Based on the exchange ratio in the merger of 0.865x,
this analysis indicated that the proposed merger would be accretive to
Whittman-Hart's estimated cash EPS in calendar year 2000, excluding goodwill
amortization and other non-cash charges currently excluded from USWeb/CKS's
earnings. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
OTHER FACTORS. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:
- Whittman-Hart's historical and projected financial information;
- the common stock price performance of Whittman-Hart and USWeb/CKS relative
to selected information technology services companies and Nasdaq; and
- publicly available research analyst coverage of USWeb/CKS.
MISCELLANEOUS. Whittman-Hart has agreed to pay Credit Suisse First Boston
for its financial advisory services a customary fee. Whittman-Hart also has
agreed to reimburse Credit Suisse First Boston for its out-of-pocket expenses,
including fees and expenses of legal counsel and any other advisor retained by
Credit Suisse First Boston, and to indemnify Credit Suisse First Boston and
related parties against liabilities, including liabilities under the federal
securities laws, arising out of its engagement. In the ordinary course of
business, Credit Suisse First Boston and its affiliates may actively trade the
securities of both Whittman-Hart and USWeb/CKS for their own accounts and for
the accounts of customers and, accordingly, may at any time hold long or short
positions in such securities.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When considering the recommendation of USWeb/CKS's board of directors, you
should be aware that some USWeb/CKS directors and officers have interests in the
merger that are different from, or are in addition to, yours.
In particular, Robert Shaw's employment agreement, dated as of November 1,
1998, and amended as of December 12, 1999, entitles him to acceleration of a
number of his unexercisable options to purchase shares of common stock of
USWeb/CKS upon the closing of the merger, based on his duration of service with
USWeb/CKS. Mr. Shaw's employment agreement also entitles him to receive payments
of up to $5 million to pay excise taxes imposed upon such accelerated options by
the Internal Revenue Code. Assuming the merger were to close March 1, 2000, the
number of shares of USWeb/CKS common stock subject to unvested options held by
Mr. Shaw that would vest upon completion of the merger is 375,000. Further, so
long as Mr. Shaw continues to serve as an employee, officer or director of the
combined company, he will continue to vest in his unexercisable options.
Additionally, the USWeb/CKS board of directors determined to accelerate all
of Carolyn Aver's unvested stock options upon the closing of the merger.
Assuming the merger were to close March 1, 2000, the number of shares of
USWeb/CKS common stock subject to unvested options held by Ms. Aver that would
vest upon completion of the merger is 201,875.
Some other officers of USWeb/CKS have provisions in their employment
agreements or arrangements that could accelerate their unvested options upon a
change of control of USWeb/CKS and in some cases, in combination with a
termination of, or a major change in, their employment with the combined
company. In some cases, it is not clear whether the merger constitutes a change
of control under the terms of their employment agreements or arrangements. The
overwhelming majority of other employees of USWeb/CKS are not entitled to
acceleration of unvested options upon the consummation of the merger, and
accordingly, upon termination of their employment, could lose the right to any
unvested options held by them. Options held by continuing employees will be
assumed by the combined company.
As of the USWeb/CKS record date, directors and executive officers of
USWeb/CKS and their affiliates beneficially owned approximately 3% of the
outstanding shares of USWeb/CKS common stock.
MMG LLC, a Cayman Islands limited liability company, owns approximately 7.6%
of the outstanding shares of USWeb/CKS. Each of the three members of the board
of directors of MMG are employees of USWeb/CKS.
According to the terms of the merger agreement, Robert Shaw and three other
members of the board of directors of USWeb/CKS will join the combined company's
board of directors following the merger. Mr. Shaw will be Chairman of the board
of directors of the combined company. Robert Clarkson, the Chief Operating
Officer of USWeb/CKS, will be the Chief Operating Officer of the combined
company. In addition, these and other executive officers of USWeb/CKS are in the
process of negotiating the terms of their employment with the combined company
subject to completion of the merger. These terms are expected to be consistent
with usual and customary business practice.
Whittman-Hart will indemnify present and former directors and officers of
USWeb/CKS against all claims arising out of actions and omissions occurring on
or prior to the effective time of the merger to the fullest extent permitted by
law, subject to certain limitations. Whittman-Hart has also agreed to maintain
for six years, subject to certain cost limitations, a policy of directors' and
officers' liability insurance with respect to matters occurring on or before the
effective time of the merger for the benefit of USWeb/CKS's directors and
officers.
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the merger will be allocated to the
tangible and identifiable intangible assets acquired
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and liabilities assumed of USWeb/CKS on the basis of their estimated fair values
on the acquisition date. The excess of purchase price over tangible and
identifiable intangible assets acquired and liabilities assumed will be recorded
as goodwill.
REGULATORY MATTERS
ANTITRUST--Whittman-Hart and USWeb/CKS have filed the required pre-merger
Notification and Report Forms pursuant to U.S. antitrust laws. In connection
with the merger, the Federal Trade Commission or the Antitrust Division of the
U.S. Department of Justice could take such action under the antitrust laws as
either deems necessary or desirable in the public interest, including seeking to
enjoin consummation of the merger or seeking to cause divestiture of significant
assets of Whittman-Hart or USWeb/CKS or their subsidiaries. It is possible that
a challenge to the merger on antitrust grounds will be made, and we cannot
accurately predict the result of such challenge. Consummation of the merger is
conditioned upon, among other things, the expiration or termination of the
waiting period applicable to the consummation of the merger under U.S. or
foreign antitrust laws and the absence of any temporary restraining order,
preliminary or permanent injunction, or other order issued by any federal or
state court in the United States that prevents the consummation of the merger.
SECURITIES LAWS--USWeb/CKS and Whittman-Hart must comply with the federal
securities laws and applicable securities laws of various states.
RIGHTS OF DISSENTING USWEB/CKS AND WHITTMAN-HART STOCKHOLDERS
Neither USWeb/CKS nor stockholders are entitled to exercise dissenters' or
appraisal rights as a result of the merger or to demand payment for their shares
under Delaware law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the merger that are generally applicable to holders of USWeb/CKS
common stock. This discussion is based on current existing provisions of the
Internal Revenue Code, existing and proposed U.S. Treasury Regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Any such change, which may or may not be retroactive,
could alter the tax consequences to Whittman-Hart, USWeb/CKS or the USWeb/CKS
stockholders.
USWeb/CKS stockholders should be aware that this discussion does not deal
with all U.S. federal income tax considerations that may be relevant to
particular USWeb/CKS stockholders in light of their particular circumstances,
such as stockholders who are dealers in securities, banks, insurance companies
or tax-exempt organizations, who are subject to the alternative minimum tax
provisions of the Internal Revenue Code, who are non-United States persons, who
acquired their shares in connection with stock option or stock purchase plans or
in other compensatory transactions or who hold their shares as a hedge or as a
part of a hedging, straddle, conversion or other risk reduction transaction. In
addition, the following discussion does not address the tax consequences of the
merger under foreign, state or local tax laws or the tax consequences of
transactions effectuated prior to or after the merger (whether or not such
transactions are in connection with the merger).
USWEB/CKS STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE MERGER TO THEM IN THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES.
Neither Whittman-Hart nor USWeb/CKS has requested or will request a ruling
from the Internal Revenue Service regarding any of the U.S. federal income tax
consequences of the merger. As a condition to consummation of the merger, Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel to USWeb/CKS, and
Katten Muchin Zavis, counsel to Whittman-Hart, will each render a tax opinion to
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USWeb/CKS and Whittman-Hart, respectively, that the merger will constitute a
reorganization under Section 368(a) of the Internal Revenue Code provided,
however, that if either firm does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to such party if counsel to
the other party renders such opinion to such party. If either USWeb/CKS or
Whittman-Hart waives receipt of a tax opinion, the USWeb/CKS stockholders and
the Whittman-Hart stockholders will be notified and resolicited. Such tax
opinions are, and will be, based on certain assumptions and representations, and
will be subject to certain limitations. Moreover, such opinions will not be
binding on the IRS nor preclude the IRS or a court from adopting a contrary
position. The discussion below assumes that the merger will qualify as a
reorganization.
Subject to the limitations and qualifications referred to herein, and as a
result of the merger qualifying as a reorganization, the following U.S. federal
income tax consequences will result:
- no gain or loss will be recognized by the holders of USWeb/CKS common
stock upon the receipt of Whittman-Hart common stock in exchange for
USWeb/CKS common stock in the merger (except to the extent, if any, of
cash received in lieu of fractional shares);
- the aggregate tax basis of the Whittman-Hart common stock received by the
USWeb/CKS public stockholders in the merger (including any fractional
share of Whittman-Hart common stock not actually received) will be the
same as the aggregate tax basis of USWeb/CKS common stock surrendered in
exchange therefor;
- the holding period of Whittman-Hart common stock received by each
USWeb/CKS public stockholder in the merger will include the period for
which the USWeb/CKS common stock exchanged therefor was considered to be
held, provided that the USWeb/CKS common stock surrendered was held as a
capital asset at the effective time of the merger; and
- cash payments received by the USWeb/CKS public stockholders in lieu of a
fractional share will be treated as if a fractional share of Whittman-Hart
common stock was issued in the merger and then redeemed by Whittman-Hart.
A USWeb/CKS public stockholder receiving such cash will recognize gain or
loss upon such payment, measured by the difference (if any) between the
amount of cash received and the basis of such fractional share. The gain
or loss should be capital gain or loss provided that the USWeb/CKS common
stock was held as a capital asset at the effective time of the merger.
The tax opinions will be subject to certain assumptions and qualifications
and will be based on the accuracy of certain representations of Whittman-Hart,
the merger subsidiary and USWeb/CKS, including representations in certain
certificates delivered to counsel by the respective managements of Whittman-
Hart, the merger subsidiary and USWeb/CKS.
A successful IRS challenge to the reorganization status of the merger could
result in significant adverse tax consequences to the USWeb/CKS stockholders. A
USWeb/CKS stockholder would recognize gain or loss on each share of USWeb/CKS
common stock surrendered equal to the difference between the basis of such share
and the fair market value, as of the effective time of the merger, of the
Whittman-Hart common stock received in exchange therefor. In such event, a
stockholder's aggregate basis in the Whittman-Hart common stock received would
equal its fair market value, and the stockholder's holding period for such stock
would begin the day after the effective time of the merger.
Certain noncorporate USWeb/CKS stockholders may be subject to backup
withholding at a rate of 31% on cash payments received in lieu of a fractional
share of Whittman-Hart common stock. Backup withholding will not apply, however,
to a stockholder who furnishes a correct taxpayer identification number and
certifies that he, she or it is not subject to backup withholding on the
substitute Form W-9 included in the transmittal letter from the exchange agent,
who provides a certificate of foreign status on Form W-8, or who is otherwise
exempt from backup withholding. A stockholder who fails to provide the correct
taxpayer identification number on Form W-9 may be subject to a $50 penalty
imposed by the IRS.
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Each USWeb/CKS stockholder will be required to retain records and file with
such stockholder's U.S. federal income tax return a statement setting forth
certain facts relating to the merger.
USWEB/CKS VOTING AGREEMENTS
Pursuant to the USWeb/CKS voting agreements, three stockholders of USWeb/CKS
who beneficially owned an aggregate of approximately 2% of the outstanding
shares of USWeb/CKS common stock as of December 31, 1999, have agreed that they
will vote their shares of USWeb/CKS common stock: (i) for approval of the merger
agreement and the merger, and (ii) against any action which is intended to
impede or interfere with the transactions contemplated by the merger agreement.
In addition, these stockholders have generally agreed not to transfer any
securities of USWeb/CKS owned by them except as contemplated by the merger
agreement. The form of the USWeb/CKS voting agreement is attached to this joint
proxy statement/prospectus as Annex D. The following USWeb/CKS stockholders have
signed USWeb/CKS voting agreements, in substantially the form of Annex D: Robert
Shaw, Chief Executive Officer of USWeb/CKS, Mark D. Kvamme, Chairman of the
Board of USWeb/CKS, and Robert Hoff, Director of USWeb/CKS.
WHITTMAN-HART VOTING AGREEMENT
Pursuant to the Whittman-Hart voting agreement, Robert Bernard, Chairman of
the Board and Chief Executive Officer of Whittman-Hart, who beneficially owned
an aggregate of approximately 21% of the outstanding shares of Whittman-Hart
common stock as of December 31, 1999, has agreed that he will vote his shares of
Whittman-Hart common stock: (i) for approval of the merger agreement and the
merger, including the amendment to Whittman-Hart's charter; and (ii) against any
action which is intended to impede or interfere with the transactions
contemplated by the merger agreement. In addition, Mr. Bernard has agreed not to
transfer any securities of Whittman-Hart owned by him except as contemplated by
the merger agreement. The Whittman-Hart voting agreement is attached to this
joint proxy statement/ prospectus as Annex E.
USWEB/CKS AFFILIATE LETTERS; RESTRICTIONS ON SALES BY USWEB/CKS AFFILIATES
USWeb/CKS has identified each of its affiliates, as that term is defined
under SEC rules. USWeb/CKS has agreed to use its reasonable efforts to obtain
written agreements from each USWeb/CKS affiliate stating that he or she will not
sell, pledge, transfer or otherwise dispose of shares of Whittman-Hart common
stock received in the merger, except in compliance with Rule 145 under the
Securities Act.
The shares of Whittman-Hart common stock to be issued in connection with the
merger will be registered under the Securities Act of 1933 and will be freely
transferable under the Securities Act, except for shares of Whittman-Hart common
stock issued to any person who is deemed to be an affiliate of either party at
the time of the special meeting. Persons who may be deemed to be affiliates
include individuals or entities that control, are controlled by, or are under
common control of, either of the companies and may include some officers and
directors, as well as principal stockholders. Affiliates may not sell their
shares of Whittman-Hart common stock acquired in connection with the merger
except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
The registration statement in which this joint proxy statement/prospectus is
included does not cover the resale of shares of Whittman-Hart common stock to be
received by affiliates in the merger.
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THE MERGER AGREEMENT
The following summary of the merger agreement is qualified by reference to
the complete text of the merger agreement, which is incorporated by reference
and attached as Annex A.
STRUCTURE OF THE MERGER
Under the merger agreement, a subsidiary of Whittman-Hart will merge with
and into USWeb/CKS, with USWeb/CKS continuing as the surviving corporation.
TIMING OF CLOSING
The closing will occur on the second business day after the conditions set
forth in the merger agreement have been satisfied or waived. We expect that, as
promptly as practicable after the closing, we will file a certificate of merger
with the Secretary of State of the State of Delaware, at which time or at such
time thereafter as provided in the certificate of merger, the merger will become
effective.
CONSIDERATION TO BE RECEIVED IN THE MERGER
The merger agreement provides that each share of USWeb/CKS common stock
outstanding immediately prior to the effective time of the merger will, at the
effective time of the merger, be converted into the right to receive 0.865 of a
share of Whittman-Hart common stock (other than shares held by Whittman-Hart or
its subsidiaries or by USWeb/CKS). The number of shares of Whittman-Hart common
stock to be received per share of USWeb/CKS common stock is referred to in this
joint proxy statement/prospectus as the "exchange ratio." Any shares of
USWeb/CKS common stock held by USWeb/CKS as treasury stock or owned by
Whittman-Hart or its subsidiaries will be canceled without any payment for those
shares and each issued and outstanding share of common stock of Whittman-Hart's
merger subsidiary will be converted automatically into for one share of common
stock of the surviving corporation.
CONVERSION OF USWEB/CKS OPTIONS AND WARRANTS
The merger agreement provides that each outstanding and unexercised option
and warrant to purchase shares of USWeb/CKS common stock will be assumed by
Whittman-Hart and converted into an option or warrant to purchase shares of
Whittman-Hart common stock. The number of shares of Whittman-Hart common stock
to be subject to such new options and warrants will be determined by multiplying
the number of shares of USWeb/CKS common stock subject to the original option or
warrant by the exchange ratio and rounding down to the nearest full share, and
the exercise price with respect thereto will equal the exercise price under the
original option or warrant divided by the exchange ratio and rounded up to the
nearest tenth of a cent.
NO FRACTIONAL SHARES
No fractional shares of Whittman-Hart common stock will be issued in
connection with the merger. In lieu of such fractional shares, any holder of
USWeb/CKS common stock will, upon surrender of such holder's stock
certificate(s) representing USWeb/CKS common stock to an exchange agent mutually
agreed upon by the parties, be paid in cash the dollar amount, without interest,
determined by multiplying such fraction by the closing price of a share of
Whittman-Hart common stock on the Nasdaq National Market on the trading day
immediately prior to the effective time of the merger.
CONVERSION OF USWEB/CKS COMMON STOCK; PROCEDURES FOR EXCHANGE OF CERTIFICATES
Promptly after the effective time, the exchange agent will mail to the
registered holders of USWeb/CKS common stock (i) a letter of transmittal and
(ii) instructions for use in effecting the surrender of the USWeb/CKS stock
certificates in exchange for certificates representing shares of Whittman-Hart
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common stock. Upon surrender of a USWeb/CKS stock certificate to the exchange
agent, together with a duly executed letter of transmittal and any other
required documents, the holder of such USWeb/CKS stock certificate will be
entitled to receive for each USWeb/CKS share, a certificate representing the
whole number of shares of Whittman-Hart common stock that such holder has the
right to receive. No fractional shares of Whittman-Hart common stock will be
issued in connection with the merger, and no certificates for any such
fractional shares will be issued.
USWEB/CKS STOCKHOLDERS SHOULD NOT SURRENDER THEIR USWEB/CKS STOCK
CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE
EXCHANGE AGENT.
CERTAIN CONDITIONS
CONDITIONS OF EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The obligation
of each party to the merger agreement to consummate the merger is subject to the
following: (a) the merger agreement and the merger shall have received the
approval of the stockholders of USWeb/CKS, (b) the issuance of Whittman-Hart
common stock to the USWeb/CKS stockholders in connection with the merger shall
have received the approval of the stockholders of Whittman-Hart, (c) the
registration statement that includes this joint proxy statement/prospectus shall
not be the subject of any stop order suspending its effectiveness, (d) no
judgment, order, decree, statute, law, ordinance, rule or regulation, or other
legal restraint or prohibition preventing consummation of the merger shall be in
effect or pending, (e) any waiting period applicable to the merger under U.S. or
foreign antitrust laws and all applicable material foreign merger laws shall
have expired or been terminated, and (f) Whittman-Hart and USWeb/CKS shall have
received opinions as to certain tax matters related to the merger. The
conditions to a party's obligations to effect the merger may be waived by the
party entitled to assert the condition.
CONDITIONS TO THE OBLIGATIONS OF USWEB/CKS. The obligation of USWeb/CKS to
complete the merger is also subject to the following: (a) subject to certain
limitations set forth in the merger agreement, the representations and
warranties of Whittman-Hart shall be true and correct, except to the extent that
such inaccuracies do not constitute and are not reasonably expected to result in
a material adverse effect on Whittman-Hart, (b) Whittman-Hart shall have
performed in all material respects all obligations required to be performed by
it under the merger agreement at or before the closing of the merger, (c) there
shall not have been any event or development which has resulted in a material
adverse effect upon the business of Whittman-Hart, nor shall there have occurred
any event or development which could reasonably be likely to result in a
material adverse effect on Whittman-Hart, and (d) the shares of Whittman-Hart
common stock to be issued to the stockholders of USWeb/CKS shall have been
approved for listing on Nasdaq.
CONDITIONS TO THE OBLIGATIONS OF WHITTMAN-HART. The obligation of
Whittman-Hart to complete the merger is also subject to the following:
(a) subject to certain limitations set forth in the merger agreement, the
representations and warranties of USWeb/CKS shall be true and correct, except to
the extent that such inaccuracies do not constitute and are not reasonably
expected to result in a material adverse effect on USWeb/CKS, (b) USWeb/CKS
shall have performed in all material respects all obligations required to be
performed by it under the merger agreement at or before the closing of the
merger, and (c) there shall not have been any event or development which has
resulted in a material adverse effect on USWeb/CKS, nor shall there have
occurred any event or development which could reasonably be likely to result in
a material adverse effect on USWeb/CKS.
CERTAIN REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties of Whittman-Hart and USWeb/CKS customary for a transaction similar to
the merger. None of the representations and warranties made in the merger
agreement survive the closing of the merger.
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CERTAIN COVENANTS
Each of Whittman-Hart and USWeb/CKS has undertaken certain covenants in the
merger agreement. The following summarizes the more significant of these
covenants.
NO SOLICITATION. USWeb/CKS and Whittman-Hart have agreed that they and
their subsidiaries and their directors, officers, affiliates and advisers will
not take action to solicit or encourage an offer for an alternative acquisition
transaction involving USWeb/CKS or Whittman-Hart of a nature defined in the
merger agreement.
Restricted actions include engaging in any discussions with or furnishing
any information to a potential bidder, or knowingly taking any other action
designed to facilitate an alternative transaction. Whittman-Hart or USWeb/CKS,
as the case may be, is permitted to take these actions in response to an
unsolicited offer, however, if the board of Whittman-Hart or USWeb/CKS, as the
case may be, determines in good faith that such action is required by its
fiduciary duties and that the unsolicited offer is likely to result in a more
favorable transaction for its stockholders. In such event, the Whittman-Hart or
USWeb/CKS board, as the case may be, must inform the non-acting party of the
material terms of the unsolicited offer no less than 24 hours prior to
participation in any such discussions. Each of USWeb/CKS and Whittman-Hart must
keep the other reasonably informed of the status and any material change to the
terms of the unsolicited offer.
USWEB/CKS BOARD'S COVENANT TO RECOMMEND. The USWeb/CKS board has agreed to
recommend to USWeb/CKS's stockholders the approval and adoption of the merger
agreement and the merger. However, the USWeb/CKS board may withhold or modify
its recommendation if the USWeb/CKS Board determines in good faith, in
consultation with outside counsel, that such withdrawal or modification is
required by its fiduciary duties.
WHITTMAN-HART BOARD'S COVENANT TO RECOMMEND. The Whittman-Hart board has
agreed to recommend the approval of the merger agreement and the issuance of
shares of Whittman-Hart common stock in the merger to Whittman-Hart's
stockholders. However, the Whittman-Hart board may withhold or modify its
recommendation the issuance of shares to USWeb/CKS stockholders in the merger if
the Whittman-Hart board determines in good faith, in consultation with outside
counsel, that such withdrawal or modification is required by its fiduciary
duties.
COVENANT TO HOLD STOCKHOLDER MEETINGS. Whittman-Hart and USWeb/CKS have
agreed to submit the merger agreement and any related transactions to their
stockholders at the meetings even if their boards of directors no longer
recommend approval and adoption of the merger agreement and any related
transactions.
CONDUCT OF BUSINESS OF WHITTMAN-HART AND USWEB/CKS. Whittman-Hart and
USWeb/CKS are required to conduct their business in the ordinary course
consistent with past practice until the effective time of the merger and,
subject to certain exceptions, may not engage in certain material transactions
during this period.
COOPERATION COVENANT. Whittman-Hart and USWeb/CKS have agreed to cooperate
with each other to use their reasonable efforts to take all actions and do all
things necessary, proper or appropriate to complete the merger and the other
transactions contemplated by the merger agreement as soon as practicable.
INDEMNIFICATION AND INSURANCE OF WHITTMAN-HART AND USWEB/CKS DIRECTORS AND
OFFICERS. The merger agreement provides that after the effective time of the
merger:
- Whittman-Hart will indemnify present and former directors and officers of
USWeb/CKS against all claims arising out of actions or omissions occurring
on or prior to the effective time to the fullest extent permitted by law,
however, such indemnification shall be limited to the indemnification
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provided in the charter and by-laws of USWeb/CKS or the indemnification
actually provided by USWeb/CKS as of the date of the merger agreement; and
- Whittman-Hart will maintain in effect for at least six years the current
policies of directors' and officers' liability insurance and fiduciary
liability insurance maintained by USWeb/CKS, Whittman-Hart and their
subsidiaries respectively (except that Whittman-Hart may substitute
policies which are, in the aggregate, no less advantageous to the insured
in any material respect) with respect to any claims arising from facts or
events which occurred on or before the effective time of the merger,
subject to certain cost limitations.
FILING OF REGISTRATION STATEMENT ON FORM S-8. Promptly following the
closing date, Whittman-Hart will file a Registration Statement on Form S-8 under
the Securities Act covering the shares of Whittman-Hart common stock issuable
with respect to options to purchase USWeb/CKS common stock assumed by
Whittman-Hart.
CERTAIN OTHER COVENANTS. The merger agreement contains other mutual
covenants of the parties that are typical for a transaction similar to the
merger.
TERMINATION
Until the effective time, the merger agreement may be terminated by
USWeb/CKS and Whittman-Hart by mutual consent, or by either USWeb/CKS or
Whittman-Hart if:
- the merger has not been consummated on or before May 31, 2000;
- any judgment, order, decree, statute, law, ordinance, rule or regulation
or other legal restraint shall be in effect and shall have become final or
non-appealable;
- the approval of either party's stockholders shall not have been obtained
(however, a party may not use this provision to terminate if such failure
was caused by a breach of certain covenants of such party); or
- the other party has breached or failed to comply in any material respect
with any of its obligations under the merger agreement or any
representation or warranty made by the other party in the merger agreement
is incorrect in any material respect, and such breaches, failures, or
misrepresentations are not cured within 20 business days of notice.
The merger agreement may also be terminated by USWeb/CKS or Whittman-Hart if the
other party's board of directors withdraws or adversely modifies its approval or
recommendation of the merger or the merger agreement, or approves or recommends
any other acquisition proposal, or a tender offer or exchange offer for such
party's outstanding common stock is commenced and such party's board of
directors fails to oppose such offer or such party enters into discussions in
violation of the no solicitation covenant.
TERMINATION FEE
The merger agreement obligates payment of a termination fee of $150 million
as follows:
- if an acquisition proposal or the intention to make an acquisition
proposal to either USWeb/CKS or Whittman-Hart shall have been made
directly to the stockholders of such company, generally or otherwise
publicly announced by such company or the person making the acquisition
proposal, AND the acquisition proposal or intention is not irrevocably and
publicly withdrawn prior to the vote of such company's stockholders at the
duly held stockholders' meeting, and thereafter the merger agreement is
terminated by either party due to (i) such company's stockholders not
approving the merger or (ii) the stockholders' meeting not occurring prior
to May 31, 2000 as a result of such acquisition proposal; PROVIDED,
HOWEVER, that no termination fee will be payable to the company which was
not subject to the acquisition proposal unless and until within twelve
(12) months of such
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termination the company which was subject to the acquisition proposal or
any of its subsidiaries enters into any acquisition agreement with respect
to, or consummates any acquisition proposal, in which event the
termination fee will be payable upon the first to occur of such events.
Also, if either Whittman-Hart or USWeb/CKS consummates an acquisition
proposal during the twelve (12) month period subsequent to such
termination contemplated by this paragraph with the same person or an
affiliate of the person that made and withdrew an acquisition proposal
prior to such termination, such company will pay the termination fee; or
- if USWeb/CKS or Whittman-Hart terminates the merger agreement because the
other party's board of directors has withdrawn or adversely modified its
recommendation of the merger or the merger agreement.
EXPENSES
Each of Whittman-Hart and USWeb/CKS will bear its own costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated thereby, except that (a) the combined company shall pay any
property or transfer taxes imposed on the combined company as a result of the
merger and (b) the printing of the registration statement that includes this
joint proxy statement/ prospectus will be shared equally by USWeb/CKS and
Whittman-Hart, and (c) the filing fees of the pre-merger notification and report
forms relating to the merger under U.S. or foreign antitrust laws will be shared
equally.
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AMENDMENT TO THE WHITTMAN-HART
CERTIFICATE OF INCORPORATION
The board of directors of Whittman-Hart has declared the advisability of and
approved, and is submitting for stockholder adoption, an amendment to
Whittman-Hart's Amended and Restated Certificate of Incorporation that increases
the authorized shares of common stock from 75,000,000 shares to
500,000,000 shares. The proposed amendment is as follows:
"AUTHORIZED SHARES. The total number of shares of all classes of
stock which the Corporation shall have authority to issue is five
hundred three million (503,000,000) shares, consisting of five
hundred million (500,000,000) shares of common stock, par value
$.001 per share (the "Common Stock"), and three million (3,000,000)
shares of Preferred Stock, par value $.001 per share (the "Preferred
Stock")."
Under Whittman-Hart's current Amended and Restated Certificate of
Incorporation, Whittman-Hart has the authority to issue 75,000,000 shares of
common stock and 3,000,000 shares of preferred stock. At the record date,
62,146,544 shares of common stock were issued and outstanding and no shares
of preferred stock were outstanding. Accordingly, as of such date, after taking
into account the shares reserved for issuance under Whittman-Hart's 1995
Incentive Stock Plan and upon the exercise of outstanding options issued by
Whittman-Hart, no shares of common stock remained available for issuance. As of
the record date, the issuance of Whittman-Hart common stock to USWeb/CKS
stockholders in the merger would require approximately 81,482,000 shares of
common stock, and significant additional shares will be issued by Whittman-Hart
in the future to satisfy option, warrant, bonus and earn-out obligations of
USWeb/CKS that will be assumed by Whittman-Hart in the merger.
Although Whittman-Hart has no specific plans to use the additional
authorized shares of common stock other than as described above or pursuant to
the plan, the board of directors believes that an increase in the number of
authorized shares to the proposed level is advisable because, in addition to
allowing Whittman-Hart to issue shares of its common stock in and in connection
with the merger, it will provide Whittman-Hart with a reserve of shares and
needed flexibility in connection with possible future financing transactions,
acquisitions of other companies or business properties, stock splits, employee
benefit plans and other corporate purposes. Having such additional authorized
shares available for issuance in the future would allow the Whittman-Hart board
of directors to issue shares of Whittman-Hart common stock without the delay and
expense associated with seeking stockholder approval. Elimination of such delays
and expense occasioned by the necessity of obtaining stockholder approval will
better enable Whittman-Hart (or, after the merger, the combined company), among
other things, to engage in financing transactions and acquisitions as well as to
take advantage of changing market and financial conditions on a more competitive
basis as determined by Whittman-Hart's board (or, after the merger, the combined
company's board).
The increase in authorized Whittman-Hart common stock will not have any
immediate effect on the rights of existing stockholders. To the extent that the
additional authorized shares are issued in the future, they will decrease the
existing stockholders' percentage equity ownership and, depending on the price
at which they are issued, could be dilutive to the existing stockholders.
The increase in the authorized number of shares of Whittman-Hart common
stock could have an anti-takeover effect. Shares of authorized and unissued
Whittman-Hart common stock could (within the limits imposed by applicable law)
be issued in one or more transactions that would make a takeover of
Whittman-Hart more difficult, and therefore less likely. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of outstanding shares of Whittman-Hart common stock, and
such additional shares could be used to dilute the stock ownership or voting
rights of persons seeking to obtain control of Whittman-Hart. See "Risk
Factors--Risks Relating to the
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Combined Company--The organizational documents of the combined company and
current Delaware law may deter potentially beneficial takeover attempts."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION INCREASING THE NUMBER OF
SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE FROM 75,000,000 TO 500,000,000.
AMENDMENT TO THE WHITTMAN-HART 1995 INCENTIVE STOCK PLAN
The Whittman-Hart 1995 Incentive Stock Plan, as approved and adopted by
stockholders, currently provides that 24,000,000 shares of Whittman-Hart common
stock are authorized for award thereunder. As of December 31, 1999,
Whittman-Hart had granted options to purchase 16,662,916 shares of Whittman-
Hart common stock under the plan. After taking cancellations and forfeitures
into account at December 31, 1999, 7,337,084 shares of Whittman-Hart common
stock remained available for future option grants. On completion of the merger,
the combined company will have approximately 8,000 employees. As a result of the
merger, the combined company will more directly compete within an employment
base for which stock options have historically represented a significant portion
of compensation. Because of these factors, the board believes that it is
necessary to increase the number of shares of Whittman-Hart common stock
authorized for issuance under the plan. Therefore, in December 1999, in
connection with its approval of the merger, Whittman-Hart's board of directors
approved an amendment to the plan that increased the number of shares of common
stock available for issuance under the plan from 24,000,000 shares to 48,000,000
shares. The Whittman-Hart board is seeking stockholder approval of the proposed
amendment to the plan to meet the requirements of the Nasdaq National Market and
the Internal Revenue Code.
Whittman-Hart has historically utilized stock options as a part of its
overall compensation program for key employees, officers and directors. The
board of directors believes that it is in the best interests of Whittman-Hart to
have stock-based awards available for these individuals. The board of directors
believes that the proposed amendment, if approved by stockholders, will assist
Whittman-Hart in attracting, retaining, and motivating highly qualified
personnel.
The following is a brief summary of certain provisions of the plan.
SUMMARY OF THE PLAN
The purpose of the plan is to enable Whittman-Hart to provide officers and
employees of Whittman-Hart and its subsidiaries with performance-based equity
and monetary incentives, thereby attracting, retaining and rewarding such
persons and strengthening the mutuality of interest between such persons and
Whittman-Hart's stockholders.
The maximum number of shares which currently may be awarded to any
participant in any year during the term of the plan is 100,000 shares. If there
is a lapse, cancellation, expiration or termination of any option prior to the
issuance of shares, or if shares are issued and thereafter are reacquired by
Whittman-Hart pursuant to rights reserved upon issuance thereof, those shares
may again be used for new awards under the plan.
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The plan is administered by the compensation committee of the board of
directors. Among the committee's powers are the authority to interpret the plan,
establish rules and regulations for its operation, select officers and other
employees of Whittman-Hart and its subsidiaries to receive awards, and determine
the form, amount and other terms and conditions of awards.
Officers and employees of Whittman-Hart or any of its subsidiaries are
eligible to participate in the plan. The selection of participants is within the
discretion of the compensation committee. Approximately 3,900 employees and
non-employee directors were eligible to participate in the plan on December 31,
1999.
The plan provides for the grant of any or all of the following types of
awards:
- stock options, including incentive stock options and nonqualified stock
options;
- stock appreciation rights;
- stock awards;
- performance shares; and
- performance units.
Awards may be granted singly, in combination, or in tandem as determined by the
compensation committee.
Under the plan, the compensation committee may grant awards in the form of
incentive stock options or nonqualified stock options to purchase shares of
Whittman-Hart common stock. The compensation committee, with regard to each
stock option, determines the number of shares subject to the option, the manner
and time of the option's exercise and vesting, and the exercise price per share
of stock subject to the option; provided, however, that no stock options shall
be exercisable later than fifteen years after the date they are granted. The
aggregate fair market value at the time of grant of shares of common stock with
respect to which incentive stock options are exercisable for the first time by a
participant during any calendar year cannot be more than $100,000. The exercise
price of an incentive stock option will not be less than 100% of the fair market
value of the common stock on the date the option is granted. The exercise price
of a nonqualified stock option will not be less than 85% of the fair market
value of the common stock on the date the option is granted. The option price
may be paid by a participant in cash or, in the discretion of the compensation
committee, in shares of Whittman-Hart common stock then owned by the
participant, or a combination thereof. At the committee's discretion, it may
also permit broker assisted cashless exercise.
The plan authorizes the compensation committee to grant a stock appreciation
right either in tandem with a stock option or independent of a stock option. A
stock appreciation right is a right to receive a payment equal to the
appreciation in market value of a stated number of shares of Whittman-Hart
common stock from the exercise price. If issued in tandem with a stock option
such appreciation is measured from not less than the option price and in the
case of a stock appreciation right issued independently of any stock option,
such appreciation is measured from not less than 85% of the fair market value of
the Whittman-Hart common stock on the date the right is granted. No stock
appreciation right may be exercisable earlier than six months after the date of
grant and shall expire at the earlier of the date the related stock option
expires or 15 years after the stock appreciation right was granted.
The plan authorizes the compensation committee to grant awards in the form
of restricted or unrestricted shares of Whittman-Hart common stock. Such awards
are subject to such terms, conditions, restrictions, and/or limitations, if any,
as the compensation committee deems appropriate including, but not by way of
limitation, restrictions on transferability and continued employment.
The plan authorizes the compensation committee to grant awards in the form
of performance shares and performance units which consist of the right to
receive common stock or cash of equivalent value at
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the end of a specified period. The compensation committee determines the terms
and conditions of the performance units.
The plan provides that awards shall not be transferable otherwise than by
law or by will or the laws of descent and distribution. Notwithstanding the
foregoing, the compensation committee may issue an award that permits the
transferability of the award to members of the participant's immediate family or
trusts or family partnerships for the benefit of such family members.
The board of directors reserves the right to amend, suspend or terminate the
plan at any time, subject to the rights of participants with respect to any
outstanding awards. Notwithstanding the foregoing, no amendment to the plan
shall, without approval of stockholders of Whittman-Hart, result in the plan
losing its status as a protected plan under SEC Rule 16b-3.
The plan contains provisions for equitable adjustment of awards in the event
of a merger, consolidation or reorganization, or issuance of shares by
Whittman-Hart without new consideration or a change of control.
FEDERAL TAX TREATMENT
Under current law, the following are U.S. federal income tax consequences
generally arising with respect to awards under the plan.
A participant who is granted an incentive stock option does not recognize
any taxable income at the time of the grant or at the time of exercise.
Similarly, Whittman-Hart is not entitled to any deduction at the time of grant
or at the time of exercise. If the participant makes no disposition of the
shares acquired pursuant to an incentive stock option before the later of two
years from the date of grant and one year from the date of exercise, any gain or
loss realized on a subsequent disposition of the shares will be treated as a
long-term capital gain or loss. Under such circumstances, Whittman-Hart will not
be entitled to any deduction for federal income tax purposes.
However, if the participant disposes of shares acquired upon exercise of an
incentive stock option within two years after the date of grant or one year
after the date of exercise of the option (a "disqualifying disposition"), the
participant will recognize taxable income in the amount of the excess of the
fair market value of the shares on the date of exercise over the option exercise
price (or, in certain circumstances, the gain on the sale, if less). Any excess
of the amount realized on the disqualifying disposition over the fair market
value of the shares on the date of exercise of the option will generally be
treated as capital gain. In the event of a disqualifying disposition,
Whittman-Hart will be entitled to a deduction equal to the amount of ordinary
compensation income recognized by the participant.
A participant who is granted a nonqualified stock option will not have
taxable income at the time of grant, but will have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. Whittman-Hart is
entitled to a tax deduction for the same amount.
The grant of a stock appreciation right will generally produce no U.S.
federal tax consequences for the participant or Whittman-Hart. The exercise of a
stock appreciation right generally results in taxable income to the participant,
equal to the difference between the exercise price of the shares and the market
price of the shares on the date of exercise, and a corresponding tax deduction
to Whittman-Hart.
A participant who has been granted an award of restricted shares of
Whittman-Hart common stock will not realize taxable income at the time of the
grant, and Whittman-Hart will not be entitled to a tax deduction at the time of
the grant, unless the participant makes an election to be taxed at the time of
the award. When the restrictions lapse, the participant will recognize taxable
income in an amount equal to the excess of the fair market value of the shares
at such time over the amount, if any, paid for such shares. Whittman-Hart will
be entitled to a corresponding tax deduction.
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The grant of an unrestricted stock award will produce immediate tax
consequences for both the participant and Whittman-Hart. The participant will be
treated as having received taxable income in an amount equal to the then fair
market value of the Whittman-Hart common stock awarded. Whittman-Hart will
receive a corresponding tax deduction.
A participant who has been granted an award of performance shares or
performance units will not realize taxable income at the time of grant and
Whittman-Hart will not be entitled to a deduction at that time. The participant
will realize taxable income when the shares or cash, as the case may be, are
delivered upon achievement of the performance objectives in an amount equal to
the fair market value of the shares on the date of delivery or payment of cash.
Whittman-Hart will be entitled to a corresponding tax deduction.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
WHITTMAN-HART 1995 INCENTIVE STOCK PLAN INCREASING THE NUMBER OF SHARES OF
COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE PLAN FROM 24,000,000 SHARES TO
48,000,000 SHARES.
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POST-MERGER DIRECTORS AND OFFICERS OF WHITTMAN-HART
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 V. Szofer, President of
Whittman-Hart; and three additional directors to be named by USWeb/CKS.
Mr. Bernard will serve as the Chief Executive Officer and President of the
combined company and Mr. Shaw will serve as 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.
Information concerning the respective background and experience of the
post-merger directors and officers is as follows:
ROBERT F. BERNARD, the founder of Whittman-Hart, has served as Chairman of
the Board and Chief Executive Officer of Whittman-Hart since its inception in
1984. From 1984 to August 1997, Mr. Bernard also served as Whittman-Hart's
President. He was selected as the KPMG Illinois High Tech Entrepreneur of the
Year in 1992 and the Ernst and Young Illinois and Northwest Indiana Service
Entrepeneur of the Year in 1998.
ROBERT SHAW joined USWeb in November 1998 as Chief Executive Officer and a
director. Prior to joining USWeb, Mr. Shaw served as Executive Vice President of
Worldwide Consulting Services and Vertical Markets of Oracle Corporation since
February 1997, and Senior Vice President of Worldwide Applications and Services
of Oracle Corporation from August 1995 to January 1997. From June 1992 to July
1995, Mr. Shaw served as Senior Vice President of Global Services of Oracle
Corporation. Prior to joining Oracle Corporation, Mr. Shaw served as a Vice
President of the West Coast Information Systems Group of Booz-Allen & Hamilton
from June 1989 to June 1992.
PAUL D. CARBERY has served as a director of Whittman-Hart since August 1995.
Mr. Carbery has been a general partner of Frontenac Company, a private equity
investment management partnership, since June 1993 and was an associate of that
firm from September 1989 to June 1993. He also serves as a director of
Mastering, Inc. as well as several privately held companies.
ROBERT CLARKSON has served as the Chief Operating Officer of USWeb/CKS since
November 1999. Mr. Clarkson became the executive partner of the pan-European
Region of USWeb/CKS upon consummation of the USWeb-CKS merger in December 1998
and later served as the executive partner of the Northwest Region. From
February 1997 to December 1998, Mr. Clarkson served as Executive Vice President
of CKS Group. Prior to joining CKS Group, Mr. Clarkson was a partner with the
law firm of Wilson Sonsini Goodrich & Rosati.
W. BARRY MOORE has served as a director of Whittman-Hart since July 1999.
Mr. Moore has been Vice Chairman of Kurt Salmon Associates, a leading global
management-consulting firm serving the retail, consumer products and health care
industries, since 1999 and has served as President for the North American and
Asian practices of that firm since 1990. Prior to joining Kurt Salmon
Associates, he was a partner with Touche Ross Management Consulting and
responsible for the Southeast and Middle Atlantic regions.
DAVID P. STORCH has served as a director of Whittman-Hart since July 1999.
Mr. Storch has been Chief Executive Officer of AAR Corp., a New York Stock
Exchange listed aviation aftermarket support company, since October 1996 and has
served as its President and Chief Operating Officer since 1989. Mr. Storch has
also served as a director of AAR Corp. since 1989.
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EDWARD V. SZOFER has served as a director of Whittman-Hart since August 1995
and has been its President since August 1997 and its Secretary since May 1996.
From December 1993 through July 1997, Mr. Szofer served as Vice President of
Whittman-Hart. From 1984 to December 1993, Mr. Szofer held various management
positions with Whittman-Hart in operations. Mr. Szofer was employed as a
consultant of Arthur Andersen LLP prior to joining Whittman-Hart.
BERT B. YOUNG has served as the Chief Financial Officer and Treasurer of
Whittman-Hart since August 1999. Mr. Young joined Whittman-Hart in 1997 as the
Chief Information Officer before becoming the Chief Financial Officer and
Treasurer. Mr. Young was previously the Vice President of Information Systems
and Chief Information Officer at Waste Management, Inc. where he was responsible
for a 300 person systems organization with a $70 million annual budget. He
developed and implemented an international systems strategy while at that firm.
Prior to joining Waste Management, Inc., Mr. Young was the Chief Financial
Officer of a start-up regional airline.
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INFORMATION REGARDING THE COMPANIES
USWEB/CKS'S BUSINESS
USWeb/CKS is a professional services firm with expertise in business
strategy, marketing communications, and Internet technology solutions.
USWeb/CKS's clients are typically medium-sized and large companies. USWeb/CKS
provides a comprehensive range of business strategy consulting services;
Intranet, Extranet and Web site solutions and services; and creative consulting
services, including marketing communications programs that use advanced
technology and new media. By combining our expertise with industry-specific
knowledge, we provide an integrated service offering to help clients build their
businesses in innovative ways.
To capitalize on the opportunity presented by the rapid growth in demand for
Internet solutions, we have built a professional services firm with offices
across the United States and important markets worldwide. We are an integrated
international firm, with local offices that can develop close client
relationships and gain an in-depth understanding of client needs while
benefitting from the resources of our overall organization.
We offer a comprehensive range of services to deliver marketing
communications and Internet solutions designed to help clients build their
business in innovative ways.
STRATEGY CONSULTING. We work closely with the client to conduct a
thorough study of its strategic market position, business requirements and
existing systems and capabilities to determine the ways in which Internet
solutions can most improve the client's business processes or help them
transform their business, and the marketing communications programs needed
for such transformations.
INTERNET SOLUTION DEVELOPMENT AND DEPLOYMENT. We translate the client's
strategic requirements into a system or process design architecture. Our
objective is to design, build and deploy a solution that is logically
planned, scales well over time, is sufficiently secure, and is easy to use,
administer and manage. We design, code, integrate and test all necessary
programs and components using a broad range of expertise, including
object-based and relational database systems; electronic commerce systems;
integration with back-office legacy systems; implementation of third-party
applications and security technologies; and integration of hardware,
software and Internet access products. We maintain third-party vendor
relationships that offer our clients secure, state-of-the-art,
high-availability Intranet, Extranet and Web site hosting and integrated
services.
MARKETING COMMUNICATIONS SERVICES. Our marketing communications
services include both on-line and off-line programs. In providing strategic
corporate and product positioning, corporate identity, and product branding
services, we work with the client to analyze the client's products or
services and the market for those services, and to develop a unique selling
proposition for either a company or product that differentiates it from the
competition. We design advertising and related solutions for both
traditional and new media to help clients deliver a consistent and effective
marketing message through digital channels. We can also develop and
implement the design and content of collateral literature systems; provide
creative design, development, and production of product packaging; and
provide creative design, development and management of virtual and physical
environments.
To address the Application Service Provider (ASP) market, USWeb/CKS has
established a "Managed Services" division to offer outsourced application
solutions designed to maximize a company's return of information technology
investments. We are leveraging our relationship with leading technology
companies to offer our clients a variety of Internet application modules, which
we will customize to the ends of each client. We are assembling a portfolio of
offerings in four categories: e-commerce, communications and knowledge
management, customer relationship management, and back office functions.
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USWeb/CKS is headquartered in San Francisco, California and has offices in
13 countries around the world. As of December 31, 1999, the Company had
approximately 4,100 employees worldwide.
WHITTMAN-HART'S BUSINESS
Whittman-Hart provides enterprise-wide e-business solutions to help clients
improve performance and create competitive advantage. Whittman-Hart's 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.
Whittman-Hart's 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, Whittman-Hart has 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.
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COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of Whittman-Hart stockholders are governed by Delaware law,
including the Delaware General Corporation Law, and Whittman-Hart's current
Amended and Restated Certificate of Incorporation and Second Amended and
Restated By-laws. The rights of USWeb/CKS stockholders are also governed by
Delaware law, including the Delaware General Corporation Law, and USWeb/CKS's
Amended and Restated Certificate of Incorporation and Amended and Restated
By-laws.
Upon consummation of the merger, holders of shares of USWeb/CKS common stock
will become holders of shares of Whittman-Hart common stock. Consequently,
following the merger, Delaware law and Whittman-Hart's Certificate of
Incorporation, as amended in connection with the merger, and its By-laws, will
govern the rights of former holders of USWeb/CKS common stock. Copies of
Whittman-Hart's current Certificate of Incorporation and By-laws have been filed
with the SEC and will be sent to any stockholder of Whittman-Hart or USWeb/CKS
upon request.
A tabular comparison of rights of holders of common stock of Whittman-Hart,
USWeb/CKS and the combined company is included below. This table is not intended
to be a complete statement of all differences or a complete description of the
specific provisions referred to in this summary, and the identification of
specific differences is not intended to indicate that other significant
differences do not exist. However, the table includes a description of the
differences that we believe to be material.
<TABLE>
WHITTMAN-HART BEFORE USWEB/CKS BEFORE COMBINED COMPANY
STOCKHOLDER RIGHTS THE MERGER THE MERGER STOCKHOLDER RIGHTS
<S> <C> <C> <C>
AUTHORIZED CAPITAL The authorized capital stock The authorized capital stock If the merger is completed,
STOCK: of Whittman-Hart consists of of USWeb/CKS consists of the authorized capital stock
75,000,000 shares of common 200,000,000 shares of common of the combined company will
stock and 3,000,000 shares stock and 1,000,000 shares consist of 500,000,000
of preferred stock. of preferred stock. shares of common stock and
3,000,000 shares of
preferred stock.
NUMBER OF DIRECTORS: The Whittman-Hart board The USWeb/CKS board After the merger the board
currently consists of seven currently consists of eight of directors of the combined
directors. directors. company will consist of nine
directors.
REMOVAL OF DIRECTORS: Whittman-Hart directors may USWeb/CKS directors may be See Whittman-Hart before the
be removed from office only removed from office with or merger.
with cause and then only by without cause by the
a majority of the affirmative vote of holders
stockholder voting power of at least a majority of
entitled to vote in the shares then entitled to
elections of directors. vote at an election of
directors of USWeb/CKS.
STOCKHOLDER ACTION BY Whittman-Hart stockholders USWeb/CKS stockholders may See Whittman-Hart before the
WRITTEN CONSENT: may act by written consent not act by written consent merger.
in lieu of a meeting of in lieu of a meeting of
stockholders. stockholders.
</TABLE>
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<TABLE>
WHITTMAN-HART BEFORE USWEB/CKS BEFORE COMBINED COMPANY
STOCKHOLDER RIGHTS THE MERGER THE MERGER STOCKHOLDER RIGHTS
<S> <C> <C> <C>
CALLING OF SPECIAL The Whittman-Hart by-laws The USWeb/CKS by-laws See Whittman-Hart before the
MEETINGS OF provide that the Chairman of provide that the USWeb/CKS merger.
STOCKHOLDERS: the Board and the President Board, the Chairman of the
may each call a special Board, the President or one
meeting of the Whittman-Hart or more stockholders holding
stockholders. Timely notice shares entitled to cast at
of a special meeting least 10% of the votes at
stating, among other things, that special meeting may
the purpose or purposes of call a special meeting of
the meeting must be given to USWeb/CKS stockholders. If a
each stockholder entitled to special meeting is called by
vote at such meeting. any person or persons other
than the board or the
president or the chairman of
the board of directors, the
stockholder or stockholders
calling the meeting must
send a request to the
chairman, the president, any
vice president or the
secretary of USWeb/CKS. This
request must include, among
other things, the general
nature of the business
proposed to be addressed at
the special meeting.
STOCKHOLDER PROPOSALS For nominations or other For nominations or other See Whittman-Hart before the
AT ANNUAL MEETING business to be properly business to be properly merger.
brought before an annual brought before an annual
meeting by a stockholder, meeting by a stockholder,
the stockholder must have the stockholder must have
given timely notice thereof given timely notice thereof
in writing to the secretary in writing to the secretary
of the corporation and such of the corporation and such
business must be a proper business must be a proper
matter for stockholder matter for stockholder
action under the Delaware action under the Delaware
General Corporation Law. General Corporation Law.
Specific instructions for
the qualification of a
notice as "timely" are
provided in the by-laws.
Such stockholder's notice
shall set forth, among other
things, a brief description
of the business the
stockholder wishes to bring
before the meeting, the
reasons for conducting such
business at the meeting and
any material interest in
such business of such
stockholder and the
beneficial owner, if any, on
whose behalf the proposal is
made.
</TABLE>
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<TABLE>
WHITTMAN-HART BEFORE USWEB/CKS BEFORE COMBINED COMPANY
STOCKHOLDER RIGHTS THE MERGER THE MERGER STOCKHOLDER RIGHTS
<S> <C> <C> <C>
AMENDMENT OF CHARTER - The Whittman-Hart charter - The USWeb/CKS charter may See Whittman-Hart before the
AND BY-LAWS: may be amended by the be amended by the merger.
affirmative vote of affirmative vote of
stockholders holding a stockholders holding a
majority of the majority of the
outstanding shares of outstanding shares of
Whittman-Hart. USWeb/CKS.
- The Whittman-Hart by-laws - The USWeb/CKS by-laws may
may be amended by the be amended by the
affirmative vote of a affirmative vote of a
majority of the majority of the
stockholders of stockholders of USWeb/CKS
Whittman-Hart voting in voting in person or by
person or by proxy or a proxy or a majority of the
majority of the directors directors of USWeb/CKS.
of Whittman-Hart.
STOCKHOLDER RIGHTS Whittman-Hart does not have USWeb/CKS does not have a See Whittman-Hart before the
PLANS: a stockholder rights plan. stockholder rights plan. merger.
While Whittman-Hart has no While USWeb/CKS has no
present intention to adopt a present intention to adopt a
stockholder rights plan stockholder rights plan
either before or after the either before or after the
merger, the Whittman-Hart merger, the USWeb/ CKS
board, pursuant to its Board, pursuant to its
authority to issue preferred authority to issue preferred
stock, could do so without stock, could do so without
stockholder approval at any stockholder approval at any
future time. future time.
</TABLE>
STOCKHOLDER PROPOSALS
The deadline for receipt of a proposal to be considered for inclusion in
Whittman-Hart's proxy statement for the 2000 annual meeting was December 31,
1999. Notice of a proposal for which a stockholder will conduct his or her own
solicitation must be provided to Whittman-Hart not earlier than February 20,
2000 and not later than March 21, 2000. If the date of the annual meeting occurs
prior to April 20, 2000 or after July 19, 2000, such notice must be delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Any such notice of a proposal should be directed to
the attention of the Secretary, Whittman-Hart, Inc., 311 South Wacker Drive,
Suite 3500, Chicago, Illinois 60606-6618.
USWeb/CKS will hold an annual meeting in the year 2000 only if the merger
has not already been completed. If such meeting is held, the deadline for
receipt of a proposal to be considered for inclusion in USWeb/CKS's proxy
statement for the 2000 annual meeting was January 5, 2000. The deadline for
notice of a proposal for which a stockholder will conduct his or her own
solicitation is March 21, 2000. Any such notice of a proposal should be directed
to the attention of the Secretary, USWeb Corporation, 410 Townsend Street, San
Francisco, California 94107.
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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 in this joint proxy statement/
prospectus by reference in reliance on the reports pertaining to the
consolidated financial statements and consolidated financial statement schedule
of valuation and qualifying accounts, dated January 14, 1999, of KPMG LLP,
independent certified public accountants, incorporated in this joint proxy
statement/prospectus by reference, and on the authority of that firm as experts
in accounting and auditing.
The consolidated financial statements of USWeb Corporation at December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998, have been incorporated in this joint proxy statement/prospectus by
reference in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
LEGAL MATTERS
Legal matters with respect to the validity of the securities issuable in
connection with the merger and certain federal income tax matters for
Whittman-Hart will be passed upon for Whittman-Hart by Katten Muchin Zavis,
Chicago, Illinois. Legal matters relating to certain federal income tax matters
will be passed upon for USWeb/CKS by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
WHERE YOU CAN FIND MORE INFORMATION
We each 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 we file at the SEC's public reference rooms at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, as well as at the SEC's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. You may obtain
information on the SEC's public reference rooms by calling the SEC at
1-800-SEC-0330. Copies of these materials may also be obtained from the SEC at
prescribed rates by writing to the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. Our filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at www.sec.gov.
Whittman-Hart has filed a registration statement on Form S-4 with the SEC to
register with the SEC the shares of Whittman-Hart common stock to be issued to
USWeb/CKS stockholders (other than shares owned by Whittman-Hart and its
subsidiaries or by USWeb/CKS). This joint proxy statement/prospectus is a part
of that registration statement and constitutes a prospectus of Whittman-Hart in
addition to being a proxy statement of Whittman-Hart and USWeb/CKS for their
respective meetings. As allowed by SEC Rules, this joint proxy
statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/ prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement/prospectus, except for any information superseded by
information in, or incorporated by reference in, this joint proxy
statement/prospectus. This joint proxy statement/prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about our companies and their
finances.
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The following documents previously filed with the SEC by USWeb/CKS (SEC File
Number 000-23151) are incorporated by reference into this joint proxy
statement/prospectus:
<TABLE>
<CAPTION>
USWEB/CKS SEC FILINGS PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended September 30, 1999, June 30,
1999 and March 31, 1999
Current Reports on Form 8-K Filed on January 26, 2000, December 22, 1999
and September 17, 1999 (as amended
November 12, 1999)
</TABLE>
The following documents previously filed with the SEC by Whittman-Hart (SEC
File Number 00-28166) are incorporated by reference into this joint proxy
statement/prospectus:
<TABLE>
<CAPTION>
WHITTMAN-HART SEC FILINGS PERIOD
- --------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended September 30, 1999, June 30,
1999 and March 31, 1999
Current Reports on Form 8-K Filed on January 26, 2000, December 15, 1999,
October 15, 1999 and May 10, 1999
The description of Whittman-Hart common stock Filed on April 30, 1996
set forth in the Registration Statement on
Form 8-A.
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this joint proxy statement/prospectus and the
dates of the meetings of our stockholders.
If you are a Whittman-Hart stockholder or a USWeb/CKS stockholder, we may
have sent you some of the documents incorporated by reference, but you can
obtain any of them through us or the SEC. Documents incorporated by reference
are available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this joint proxy
statement/prospectus. You may obtain documents incorporated by reference by
requesting them in writing or by telephone from the appropriate party at the
following address:
<TABLE>
<S> <C>
USWeb Corporation Whittman-Hart, Inc.
410 Townsend Street 311 South Wacker Drive
San Francisco, California 94107 Suite 3500
Attention: Investor Relations Chicago, Illinois 60606-6618
(415) 284-7070 Attention: Investor Relations
(312) 922-9200
</TABLE>
If you would like to request documents from us, please do so by
February 21, 2000 to receive them before the meetings.
You should rely only on the information contained or incorporated by
reference in this joint proxy statement/prospectus to vote on the Whittman-Hart
proposals and the USWeb/CKS proposal, as the case may be. We have not authorized
anyone to provide you with information that is different from what is contained
in this joint proxy statement/prospectus. This joint proxy statement/prospectus
is dated January 26, 2000. You should not assume that the information contained
in the joint proxy statement/ prospectus is accurate as of any date other than
such date, and neither the mailing of this joint proxy
73
<PAGE>
statement/prospectus to you nor the issuance of Whittman-Hart common stock in
the merger shall create any implication to the contrary.
This joint proxy statement/prospectus is being furnished:
(1) to USWeb/CKS's stockholders in connection with the solicitation of
proxies by the USWeb/CKS board of directors for use at the USWeb/CKS
special meeting. Each copy of this joint proxy statement/prospectus
mailed to the USWeb/CKS stockholders is accompanied by a form of proxy
for use at the USWeb/CKS special meeting. This joint proxy
statement/prospectus is also being furnished by Whittman-Hart to holders
of USWeb/CKS common stock as a prospectus in connection with the shares
of Whittman-Hart common stock to be issued after consummation of the
merger; and
(2) to Whittman-Hart's stockholders in connection with the solicitation of
proxies by the Whittman-Hart board of directors for use at the
Whittman-Hart special meeting. Each copy of this joint proxy
statement/prospectus mailed to the Whittman-Hart stockholders is
accompanied by a form of proxy for use at the Whittman-Hart special
meeting.
Whittman-Hart has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to Whittman-Hart,
and USWeb/CKS has supplied all such information relating to USWeb/CKS.
74
<PAGE>
PART II
INFORMATION NOT REQUIRED IN JOINT PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ten of Whittman-Hart's Certificate of Incorporation, filed as
Exhibit 3.1, and Article Eight of the by-laws, filed as Exhibit 3.2, provide
that Whittman-Hart 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 Whittman-Hart's
Certificate of Incorporation provides that a director of Whittman-Hart shall not
be personally liable to Whittman-Hart 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 Whittman-Hart 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 145 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
Whittman-Hart has obtained an insurance policy which will entitle
Whittman-Hart to be reimbursed for certain indemnity payments it is required or
permitted to make to its directors and officers.
Pursuant to the merger agreement, Whittman-Hart will become obligated to
indemnify present and former USWeb/CKS directors and officers to the full extent
of the law; provided however that the indemnification shall not exceed the
greater of the indemnification provided by USWeb/CKS's Certificate of
Incorporation and by-laws as in effect on December 12, 1999 or the
indemnification actually provided by USWeb/CKS on December 12, 1999. In
addition, for six years Whittman-Hart will maintain in effect the current
USWeb/CKS policies of directors' and officers' liability insurance with respect
to claims arising from facts or events that occur on or before the effective
date of the Merger. Whittman-Hart is not, however, required to expend more than
200% of the current USWeb/CKS annual premium for such insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among
Whittman-Hart, Inc., Uniwhale, Inc., and USWeb/CKS
Corporation dated as of December 12, 1999 (included as
Annex A to the joint proxy statement/prospectus contained in
this Registration Statement).
*2.2 Form of letter from USWeb/CKS to Whittman-Hart regarding
selection of directors pursuant to Section 6.17 of the
Agreement and Plan of Merger.
4.1 Amended and Restated Certificate of Incorporation of
Whittman-Hart, incorporated herein by reference to
Whittman-Hart's Registration Statement on Form S-1
(No. 333-1778).
4.2 Second Amended and Restated By-Laws of Whittman-Hart,
incorporated herein by reference to Whittman-Hart'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).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
--------------------- -----------
<C> <S>
*5.1 Opinion of Katten Muchin Zavis as to the validity of the
securities being registered.
8.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to certain federal income tax matters.
8.2 Opinion of Katten Muchin Zavis as to certain federal income
tax matters.
9.1 Stockholder Agreement dated December 12, 1999, by and
between USWeb Corporation and Robert F. Bernard (included as
Annex D to the joint proxy statement/prospectus contained in
this registration statement).
9.2 Form of Stockholder Agreement dated December 12, 1999, by
and between Whittman-Hart, Inc. and each of Robert Shaw,
Mark D. Kvamme, and Robert Hoff (included as Annex E to the
joint proxy statement/prospectus contained in this
registration statement).
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 8.1).
*23.4 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
23.5 Consent of Katten Muchin Zavis (included in Exhibit 8.2).
*24.1 Power of Attorney.
99.1 USWeb/CKS Form of Proxy Card.
99.2 Whittman-Hart Form of Proxy Card.
*99.3 Consent of Morgan Stanley & Co. Incorporated.
*99.4 Consent of Credit Suisse First Boston Corporation.
99.5 Consent of Robert Shaw.
</TABLE>
- ------------------------
* Previously filed.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(2) To respond to requests for information that is incorporated by
reference into this joint proxy statement/prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the
date of responding to the request.
(3) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement when
it became effective.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be
II-2
<PAGE>
an underwriter within the meaning of Rule 145(c), the issuer undertakes that
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415 (Section230.415 of this chapter), will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the 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, as amended, the
Registrant has duly caused this amendment to the 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 of January, 2000.
<TABLE>
<S> <C> <C>
WHITTMAN-HART, INC.
By: /s/ ROBERT F. BERNARD
-----------------------------------------
Robert F. Bernard
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities indicated on January 26, 2000.
<TABLE>
<C> <S>
/s/ ROBERT F. BERNARD CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE
------------------------------------------- BOARD OF DIRECTORS (PRINCIPAL
Robert F. Bernard EXECUTIVE OFFICER)
/s/ BERT B. YOUNG
------------------------------------------- CHIEF FINANCIAL OFFICER AND TREASURER
Bert B. Young (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
*
------------------------------------------- DIRECTOR, PRESIDENT AND SECRETARY
Edward V. Szofer
*
------------------------------------------- DIRECTOR
Paul D. Carbery
*
------------------------------------------- DIRECTOR
Lawrence P. Roches
*
------------------------------------------- DIRECTOR
Robert F. Steel
*
------------------------------------------- DIRECTOR
W. Barry Moore
*
------------------------------------------- DIRECTOR
David P. Storch
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ ROBERT F. BERNARD
--------------------------------------
Robert F. Bernard
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
--------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger by and among
Whittman-Hart, Inc., Uniwhale, Inc., and USWeb/CKS
Corporation dated as of December 12, 1999 (included as Annex
A to the joint proxy statement/prospectus contained in this
Registration Statement).
*2.2 Form of Letter from USWeb/CKS to Whittman-Hart regarding
selection of directors pursuant to Section 6.17 of the
Agreement and Plan of Merger.
4.1 Amended and Restated Certificate of Incorporation of the
Company incorporated herein by reference to Whittman-Hart'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 Whittman-Hart's
Registration Statement on Form S-1 (No. 333-1778).
4.3 Specimen stock certificate representing Common Stock,
incorporated herein by reference to Whittman-Hart'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.
8.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as to certain federal income tax matters.
8.2 Opinion of Katten Muchin Zavis as to certain federal income
tax matters.
9.1 Stockholder Agreement dated December 12, 1999, by and
between USWeb Corporation and Robert F. Bernard (included as
Annex D to the joint proxy statement/prospectus contained in
this registration statement).
9.2 Form of Stockholder Agreement dated December 12, 1999, by
and between Whittman-Hart, Inc. and each of Robert Shaw,
Mark D. Kvamme, and Robert Hoff (included as Annex E to the
joint proxy statement/prospectus contained in this
registration statement).
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 8.1).
*23.4 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
23.5 Consent of Katten Muchin Zavis (included in Exhibit 8.2).
*24.1 Power of Attorney.
99.1 USWeb/CKS Form of Proxy Card.
99.2 Whittman-Hart Form of Proxy Card.
*99.3 Consent of Morgan Stanley & Co. Incorporated.
*99.4 Consent of Credit Suisse First Boston Corporation.
99.5 Consent of Robert Shaw.
</TABLE>
- ------------------------
* Previously filed.
II-5
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WHITTMAN-HART, INC.
UNIWHALE, INC.,
AND
USWEB CORPORATION
DATED AS OF DECEMBER 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I The Merger; Effective Time; Closing......................... A-1
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-1
1.3 Closing..................................................... A-1
1.4 Effect of the Merger........................................ A-2
ARTICLE II Certificate of Incorporation and By-Laws of the Surviving
Corporation............................................... A-2
2.1 Certificate of Incorporation; Name.......................... A-2
2.2 By-Laws..................................................... A-2
ARTICLE III Directors and Officers of the Surviving Corporation......... A-2
3.1 Directors................................................... A-2
3.2 Officers.................................................... A-2
ARTICLE IV Merger Consideration; Conversion or Cancellation of Shares
in the Merger............................................. A-2
4.1 Share Consideration for the Merger; Conversion or
Cancellation of Shares in the Merger...................... A-2
4.2 Payment for Shares in the Merger............................ A-3
4.3 Cash For Fractional Parent Shares........................... A-4
4.4 Transfer of Shares after the Effective Time................. A-4
ARTICLE V Representations and Warranties.............................. A-4
5.1 Representations and Warranties of Parent and Merger Sub..... A-4
5.2 Representations and Warranties of the Company............... A-17
ARTICLE VI Additional Covenants and Agreements......................... A-30
6.1 Conduct of Business......................................... A-30
6.2 No Solicitation by the Company.............................. A-33
6.3 No Solicitation by Parent................................... A-34
6.4 Meeting of Stockholders..................................... A-36
6.5 Registration Statement...................................... A-36
6.6 Reasonable Efforts.......................................... A-37
6.7 Access to Information....................................... A-37
6.8 Publicity................................................... A-37
6.9 Indemnification of Directors and Officers................... A-37
6.10 Affiliates of the Company and Parent........................ A-38
6.11 Maintenance of Insurance.................................... A-38
6.12 Representations and Warranties.............................. A-38
6.13 Filings; Other Action....................................... A-38
6.14 Tax-Free Reorganization Treatment........................... A-38
6.15 Company Options; Company ESPPs.............................. A-39
6.16 Stockholders Agreements..................................... A-39
6.17 Board Composition........................................... A-39
6.18 Officers of Combined Company................................ A-40
6.19 Change of Name.............................................. A-40
6.20 Contemplated Termination of 401(k) Plan(s).................. A-40
6.21 Crediting Service and Providing Other Benefits.............. A-40
6.22 Earn-Out Shares............................................. A-40
6.23 Exemption from Liability Under Section 16(b)................ A-41
</TABLE>
A-i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE VII Conditions.................................................. A-41
7.1 Conditions to Each Party's Obligations...................... A-41
7.2 Conditions to the Obligations of the Company................ A-42
7.3 Conditions to the Obligations of Parent..................... A-42
ARTICLE VIII Termination................................................. A-43
8.1 Termination by Mutual Consent............................... A-43
8.2 Termination by either the Company or Parent................. A-43
8.3 Termination by the Company.................................. A-44
8.4 Termination by Parent....................................... A-44
8.5 Effect of Termination; Termination Fee...................... A-45
ARTICLE IX Miscellaneous and General................................... A-46
9.1 Payment of Expenses......................................... A-46
9.2 Non-Survival of Representations and Warranties.............. A-46
9.3 Modification or Amendment................................... A-47
9.4 Waiver of Conditions........................................ A-47
9.5 Counterparts................................................ A-47
9.6 Governing Law............................................... A-47
9.7 Notices..................................................... A-47
9.8 Entire Agreement; Assignment................................ A-48
9.9 Parties in Interest......................................... A-48
9.10 Certain Definitions......................................... A-48
9.11 Obligation of the Company................................... A-49
9.12 Severability................................................ A-49
9.13 Specific Performance........................................ A-49
9.14 Recovery of Attorney's Fees................................. A-49
9.15 Captions.................................................... A-49
</TABLE>
A-ii
<PAGE>
DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
Agreement Introduction
Authorized Representatives.................................. Section 6.6
Certificate of Merger....................................... Section 1.2
Certificates................................................ Section 4.2(b)
Closing..................................................... Section 1.3
Closing Date................................................ Section 1.3
COBRA....................................................... Section 5.1(m)(iii)(6)
Code........................................................ Recitals
Codification of Financing Reporting Policies................ Section 6.9
Company..................................................... Introduction
Company Acquisition Agreement............................... Section 6.2(b)
Company Acquisition Proposal................................ Section 6.2(a)
Company Affiliate........................................... Section 6.10
Company Affiliate Letter.................................... Section 6.10
Company Contract............................................ Section 5.2(o)
Company Directors........................................... Section 6.18
Company Disclosure Schedule................................. Section 5.2
Company ESPPs............................................... Section 6.16(b)
Company Financial Statements................................ Section 5.2(h)(ii)
Company Insiders............................................ Section 6.23(c)
Company Intellectual Property Rights........................ Section 5.2(n)(i)
Company International Employee Plans........................ Section 5.2(m)(iii)(13)
Company Key Employees....................................... Section 5.2(o)(ii)
Company Option.............................................. Section 4.1(c)
Company Option Plans........................................ Section 4.1(c)
Company SEC Reports......................................... Section 5.2(h)(i)
Company Scheduled Plans..................................... Section 5.2(m)(i)
Company Shares.............................................. Section 4.1(a)
Confidentiality Agreement................................... Section 6.6
DGCL........................................................ Section 1.1
Effective Time.............................................. Section 1.2
Environmental Costs and Liabilities......................... Section 5.1(s)
Environmental Laws.......................................... Section 5.1(s)
ERISA....................................................... Section 9.10(a)
Exchange Act................................................ Section 5.1(f)
Exchange Agent.............................................. Section 4.2(a)
Exchange Ratio.............................................. Section 4.1(a)
Fractional Securities Fund.................................. Section 4.3
Governmental Entity......................................... Section 9.10(b)
Hazardous Material.......................................... Section 5.1(s)
HSR Act..................................................... Section 5.1(f)
Indemnified Parties......................................... Section 6.8(a)
Joint Proxy Statement....................................... Section 6.4
Knowledge................................................... Section 9.10(c)
KPMG........................................................ Section 5.1(p)
Malfunction................................................. Section 9.10(d)
</TABLE>
A-iii
<PAGE>
DEFINED TERMS
(CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Material Adverse Effect..................................... Section 9.10(e)
Material Adverse Effect Exception........................... Section 9.10(f)
Merger...................................................... Recitals
Merger Sub.................................................. Introduction
NNM......................................................... Section 4.3
Parent...................................................... Introduction
Parent Acquisition Proposal................................. Section 6.3(a)
Parent Contract............................................. Section 5.1(o)
Parent Superior Proposal.................................... Section 6.3(a)
Parent Directors............................................ Section 6.18
Parent Disclosure Schedule.................................. Section 5.1
Parent Financial Statements................................. Section 5.1(h)(ii)
Parent Intellectual Property Rights......................... Section 5.1(n)(i)
Parent International Employee Plans......................... Section 5.1(m)(iii)(13)
Parent Key Employees........................................ Section 5.1(o)(iv)
Parent SEC Reports.......................................... Section 5.1(h)(i)
Parent Scheduled Plans...................................... Section 5.1(m)(i)
Parent Shares............................................... Section 4.1(a)
Parties..................................................... Introduction
PBGC........................................................ Section 5.1(m)(iii)(7)
Person...................................................... Section 9.10(g)
Plan Affiliate.............................................. Section 5.1(m)(v)
Requisite Stockholder Approval.............................. Section 6.3
Restraints.................................................. Section 7.1(c)
Returns..................................................... Section 5.1(l)(i)
S-4 Registration Statement.................................. Section 6.4
SEC......................................................... Section 5.1(h)(i)
Section 16 Information...................................... Section 6.23(b)
Securities Act.............................................. Section 5.1(f)
Share Consideration......................................... Section 4.2(a)
Significant Tax Agreement................................... Section 9.10(h)
Software.................................................... Section 9.10(i)
Stock Merger Exchange Fund.................................. Section 4.2(a)
Stockholder Meetings........................................ Section 6.4
Stockholders Agreement...................................... Recitals
Subsidiary.................................................. Section 9.10(j)
Substitute Option........................................... Section 4.1(c)
Subsidiary Shares........................................... Section 6.22
Surviving Corporation....................................... Section 1.1
Tax......................................................... Section 9.10(k)
Taxes....................................................... Section 9.10(k)
Termination Fee............................................. Section 8.5(b)
United States Real Property Holdings Corporation............ Section 5.1(l)(ix)
Voting Stockholder.......................................... Recitals
Voting Stockholders......................................... Recitals
</TABLE>
A-iv
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Stockholders Agreement (Company)............................ Exhibit A-1
Stockholders Agreement (Parent)............................. Exhibit A-2
Certificate of Merger....................................... Exhibit B
Company Affiliate Letter.................................... Exhibit C
</TABLE>
A-v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December 12,
1999, by and among WHITTMAN-HART, INC., a Delaware corporation ("Parent"),
UNIWHALE, INC., a Delaware corporation and a direct wholly-owned subsidiary of
Parent ("Merger Sub"); and USWEB CORPORATION, a Delaware corporation (the
"Company"). Parent, Merger Sub and the Company are referred to collectively
herein as the "Parties".
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub and the
Company have determined that it is in the best interests of each corporation and
their respective stockholders that the Company and Parent enter into a strategic
"merger of equals" business combination by means of the merger of Merger Sub
with and into the Company (the "Merger") and, in furtherance thereof, have
approved the Merger and declared the Merger advisable;
WHEREAS, pursuant to the Merger, the outstanding shares of common stock of
the Company shall be converted into shares of common stock of Parent at the rate
determined herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, it is intended
that the Merger shall be treated for accounting purposes as a purchase;
WHEREAS, concurrently with the execution hereof, certain holders (each a
"Voting Stockholder" and collectively the "Voting Stockholders") of Company
Shares and of Parent Shares are entering into a stockholder voting agreement, in
each case in the forms attached as EXHIBIT A-1 and A-2 hereto (each, a
"Stockholders Agreement").
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall thereupon cease
and the Company shall be the successor or surviving corporation. The Company, as
the surviving corporation after the consummation of the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
Parties shall cause the Merger to be consummated by filing the certificate of
merger of Merger Sub and the Company (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in such form as required by, and
executed in accordance with, the relevant provisions of the DGCL as soon as
practicable on or before the Closing Date. The Merger shall become effective
upon such filing or at such time thereafter as is provided in the Certificate of
Merger (the "Effective Time"). The Certificate of Merger is attached hereto as
EXHIBIT B.
1.3 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
local time, at the offices of counsel for Parent, on the second business day
after all of the conditions to the obligations of the Parties to consummate the
Merger as set forth in Article VII have been satisfied or waived, or such other
date, time or place as is agreed to in writing by the Parties (the "Closing
Date").
A-1
<PAGE>
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION; NAME. At the Effective Time, the
Certificate of Incorporation of the Company immediately prior to the Effective
Time shall remain the Certificate of Incorporation of the Surviving Corporation,
and the name of the Surviving Corporation shall be the Company's name.
2.2 BY-LAWS. At the Effective Time, the by-laws of the Company in effect
immediately prior to the Effective Time shall remain the by-laws of the
Surviving Corporation.
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Merger Sub shall be the initial directors
of the Surviving Corporation, until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Articles of Incorporation
and By-Laws.
3.2 OFFICERS. The officers of Merger Sub shall be the initial officers of
the Surviving Corporation, until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and By-
Laws.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
4.1 SHARE CONSIDERATION FOR THE MERGER; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER. At the Effective Time, the manner of converting or
canceling shares of the Company and Parent shall be as follows:
(a) CONVERSION OF COMPANY STOCK. Each share of common stock, $0.001
par value ("Company Shares"), of the Company issued and outstanding
immediately prior to the Effective Time (excluding any Company Shares
described in Section 4.1(d)), shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted automatically into
the right to receive 0.865 shares of common stock, $0.001 par value, of
Parent (collectively, "Parent Shares"). All Company Shares to be converted
into Parent Shares pursuant to this Section 4.1(a) shall, by virtue of the
Merger and without any action on the part of the holders thereof, cease to
be outstanding, be canceled and cease to exist, and each holder of a
certificate representing any such Company Shares shall thereafter cease to
have any rights with respect to such Company Shares, except the right to
receive for each of the Company Shares, upon the surrender of such
certificate in accordance with Section 4.2, the number of Parent Shares
specified above and cash in lieu of fractional shares. The ratio of Company
Shares per share of Parent Shares is sometimes hereinafter referred to as
the "Exchange Ratio."
(b) STOCK OF MERGER SUB. Each share of common stock, $0.01 par value,
of Merger Sub issued and outstanding immediately prior to the Effective
Time, shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted automatically into and exchanged for one
(1) validly issued, fully paid and nonassessable share of common stock,
$0.001 par value, of the
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Surviving Corporation. Each stock certificate representing any shares of
Merger Sub shall continue to represent ownership of such shares of capital
stock of the Surviving Corporation.
(c) OUTSTANDING OPTIONS AND WARRANTS. Each outstanding option or
warrant to purchase Company Shares (each, a "Company Option") shall be
assumed by Parent (in accordance with the further provisions contained in
Section 6.17) and each such assumed option shall be converted into and
represent an option to purchase the number of Parent Shares (a "Substitute
Option") (rounded down to the nearest full share) determined by multiplying
(i) the number of Company Shares subject to such Company Option immediately
prior to the Effective Time by (ii) the Exchange Ratio, at an exercise price
per share of Parent Shares (rounded up to the nearest tenth of a cent) equal
to the exercise price per share of Company Shares immediately prior to the
Effective Time divided by the Exchange Ratio. It is the intent of the
parties that the Company Options assumed by Parent shall qualify following
the Effective Time as "incentive stock options" as defined in Section 422 of
the Code to the extent such Company Options qualified as incentive stock
options immediately prior to the Effective Time and the provisions of this
Section 4.1(c) shall be applied consistent with such intent. Parent will
reserve a sufficient number of Parent Shares for issuance under this Section
4.1(c).
(d) CANCELLATION OF PARENT OWNED AND TREASURY STOCK. All of the
Company Shares that are owned by Parent, any direct or indirect wholly-owned
subsidiary of Parent or by the Company as treasury stock shall automatically
cease to be outstanding, shall be canceled and shall cease to exist and no
Parent Shares shall be delivered in exchange therefor.
4.2 PAYMENT FOR SHARES IN THE MERGER. The manner of making payment for
Shares in the Merger shall be as follows:
(a) EXCHANGE AGENT. On or prior to the Closing Date, Parent shall make
available to EquiServe, or other entity mutually agreed upon by the Parties
(the "Exchange Agent"), for the benefit of the holders of Company Shares, a
sufficient number of certificates representing the Parent Shares required to
effect the delivery of the aggregate consideration in Parent Shares and cash
for the Fractional Securities Fund required to be issued pursuant to Section
4.1 (collectively, the "Share Consideration" and the certificates
representing the Parent Shares comprising such aggregate Share Consideration
being referred to hereinafter as the "Stock Merger Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the
Share Consideration out of the Stock Merger Exchange Fund and the Fractional
Securities Fund. The Stock Merger Exchange Fund and the Fractional
Securities Fund shall not be used for any other purpose than as set forth
herein.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Company Shares (the "Certificates") (i) a form of letter of
transmittal, in a form reasonably satisfactory to the Parties (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the Company Shares
represented by such Certificates the Share Consideration, without interest,
allocable to such Certificates and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, such Certificates shall
represent solely the right to receive the Share Consideration allocable to
such Certificates.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions that are declared after the Effective Time on Parent
Shares and payable to the holders of record thereof after the Effective Time
will be paid to Persons entitled by reason of the Merger to receive Parent
Shares until such Persons surrender their Certificates as provided above.
Upon such surrender, there shall be paid to the Person in whose name the
Parent Shares are issued any dividends or other
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distributions having a record date after the Effective Time and payable with
respect to such Parent Shares between the Effective Time and the time of
such surrender. After such surrender there shall be paid to the Person in
whose name the Parent Shares are issued any dividends or other distributions
on such Parent Shares which shall have a record date after the Effective
Time. In no event shall the Persons entitled to receive such dividends or
other distributions be entitled to receive interest on such dividends or
other distributions.
(d) TRANSFERS OF OWNERSHIP. If any certificate representing Parent
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the Person requesting
such exchange shall pay to the Exchange Agent any transfer or other taxes
required by reason of the issuance of certificates for such Parent Shares in
a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable.
(e) NO LIABILITY. Neither the Exchange Agent nor any of the Parties
shall be liable to a holder of Company Shares for any Parent Shares or
dividends thereon, or, in accordance with Section 4.3, cash in lieu of
fractional Parent Shares, delivered to a public official pursuant to
applicable escheat law. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Parent Shares held by
it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect to such
Parent Shares for the account of the Persons entitled thereto.
(f) TERMINATION OF FUNDS. Subject to applicable law, any portion of
the Stock Merger Exchange Fund and the Fractional Securities Fund which
remains unclaimed by the former stockholders of the Company for one
(1) year after the Effective Time shall be delivered to Parent, upon demand
of Parent, and any former stockholder of the Company shall thereafter look
only to Parent for payment of their applicable claim for the Share
Consideration for their Company Shares.
4.3 CASH FOR FRACTIONAL PARENT SHARES. No fractional Parent Shares shall
be issued in the Merger. Each holder of Parent Shares shall be entitled to
receive in lieu of any fractional Parent Shares to which such holder otherwise
would have been entitled pursuant to Section 4.2 (after taking into account all
Parent Shares then held of record by such holder) a cash payment in an amount
equal to the product of (i) the fractional interest of a Parent Share to which
such holder otherwise would have been entitled and (ii) the closing price of a
Parent Share on the NASDAQ National Market ("NNM") on the trading day
immediately prior to the Effective Time (the cash comprising such aggregate
payments in lieu of fractional Parent Shares being hereinafter referred to as
the "Fractional Securities Fund").
4.4 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers of Company
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. Parent and
Merger Sub hereby represent and warrant to the Company that the statements
contained in this Section 5.1 are true and correct, except to the extent
specifically set forth on the disclosure schedule previously delivered by Parent
to the Company (the "Parent Disclosure Schedule"). The Parent Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
letter and numbered paragraphs contained in this Section 5.1, and the disclosure
in any paragraph shall qualify only the corresponding paragraph in this Section
5.1 or other paragraphs or sections to which it is clearly apparent (from a
plain reading of the disclosure) that such disclosure relates.
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(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation and is
qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted,
by it require such qualification, except where failure to so qualify or be
in good standing as a foreign corporation would not have a Material Adverse
Effect on Parent. Each of Parent and its subsidiaries has all requisite
power and authority (corporate or otherwise) to own its properties and to
carry on its business as it is now being conducted. All of the subsidiaries
of Parent are set forth in Section 5.1(a) of the Parent Disclosure Schedule.
Parent has heretofore made available to the Company complete and correct
copies of its Certificate of Incorporation and Bylaws and the charter
documents of its subsidiaries, each as amended. Merger Sub is a direct,
wholly-owned subsidiary of Parent, was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(b) CAPITALIZATION. The authorized capital stock of Parent consists of
(i) 75,000,000 shares of common stock, $0.001 par value per share, of which
61,784,097 shares were issued and outstanding on December 9, 1999 and (ii)
3,000,000 shares of preferred stock, $0.001 par value per share, none of
which are issued or outstanding. All of the outstanding shares of capital
stock of Parent and its subsidiaries have been duly authorized and validly
issued and are fully paid and nonassessable. Parent has no outstanding stock
appreciation rights, phantom stock or similar rights. No Parent Shares are
owned by any subsidiary of Parent. All outstanding shares of capital stock
or other equity interests of the subsidiaries of Parent are owned by Parent
or a direct or indirect wholly-owned subsidiary of Parent, free and clear of
all liens, pledges, charges, encumbrances, claims and options of any nature.
Except for options to purchase 16,831,629 Parent Shares as of December 9,
1999 under the 1995 Incentive Stock Plan (the "Parent Option Plans") and
rights under Parent Employee Stock Purchase Plan, there are no outstanding
or authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character which Parent
or any of its subsidiaries is a party to, or may be bound by, requiring it
to issue, transfer, grant, sell, purchase, redeem or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock
of Parent or any of its subsidiaries. There are not as of the date hereof
and there will not be at the Effective Time any stockholder agreements,
voting trusts or other agreements or understandings to which Parent is a
party or to which it is bound relating to the voting of any shares of the
capital stock of Parent.
(c) FAIRNESS OPINION. The Board of Directors of Parent has received an
opinion in writing from Credit Suisse First Boston Corporation to the effect
that as of the date hereof and based upon and subject to the matters stated
therein, the Exchange Ratio is fair to Parent from a financial point of
view. As of the date hereof, such opinion has not been withdrawn, revoked or
modified.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The Board of Directors of
Merger Sub has declared the Merger advisable and Merger Sub has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The Board of Directors of Parent has declared the issuance of Parent
Shares advisable and Parent has the requisite corporate power and authority
to approve, authorize, execute and deliver this Agreement and, subject to
the approval by the stockholders of Parent of the amendment to Parent's
Certificate of Incorporation to increase Parent's authorized capital stock
in order to allow for the issuance of Parent Shares by virtue of the Merger
and the approval of the issuance of Parent Shares by the stockholders of
Parent in accordance with the NNM listing requirements, to consummate the
transactions contemplated hereby. This Agreement and the consummation by
Parent of the transactions contemplated hereby have been duly and validly
authorized by the Boards of Directors of Parent and Merger Sub and no other
corporate proceedings on the part of Parent or Merger Sub (including, in the
case of Merger Sub, all stockholder action by Parent as its sole
stockholder) are necessary to
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authorize this Agreement or to consummate the transactions contemplated
hereby (other than the approval by the stockholders of Parent of the
amendment to Parent's Certificate of Incorporation to increase Parent's
authorized capital stock in order to allow for the issuance of Parent Shares
by virtue of the Merger and the approval of the issuance of Parent Shares by
the stockholders of Parent in accordance with the NNM listing requirements).
This Agreement has been duly and validly executed and delivered by Parent
and Merger Sub and, assuming this Agreement constitutes the valid and
binding agreement of the Company, constitutes the valid and binding
agreement of Parent and Merger Sub, enforceable against Parent and Merger
Sub in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
(e) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS. Neither Parent nor
any of its subsidiaries is: (i) in violation of its Certificate of
Incorporation or Bylaws or similar documents; (ii) in default in the
performance of any obligation, agreement or condition of any debt instrument
which (with or without the passage of time or the giving of notice, or both)
affords to any Person the right to accelerate any indebtedness or terminate
any right; (iii) in default under or breach of (with or without the passage
of time or the giving of notice) any other contract to which it is a party
or by which it or its assets are bound; or (iv) in violation of any law,
regulation, administrative order or judicial order, decree or judgment
(domestic or foreign) applicable to it or its business or assets, except
where any violation, default or breach under items (ii), (iii), or
(iv) would not, individually or in the aggregate, have a Material Adverse
Effect on Parent.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement nor the consummation by Parent of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation (or
other similar documents) or Bylaws (or other similar documents) of Parent or
any of its subsidiaries; (ii) require any consent, approval, authorization
or permit of, or registration or filing with or notification to, any
governmental or regulatory authority, except (A) in connection with the
applicable requirements, if any, of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B) pursuant to the
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder, and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder, (C) the filing of the
Certificate of Merger pursuant to the DGCL and appropriate documents with
the relevant authorities of other states in which Parent is authorized to do
business, (D) as may be required by any applicable state securities laws,
(E) the consents, approvals, orders, authorizations, registrations,
declarations and filings required under the antitrust laws of foreign
countries, as set forth in Section 5.1(f) of the Parent Disclosure Schedule,
or (F) where the failure to obtain such consent, approval, authorization or
permit, or to make such filing or notification, would not in the aggregate
have a Material Adverse Effect on Parent or adversely affect the ability of
Parent to consummate the transactions contemplated hereby; (iii) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any right of termination,
cancellation or acceleration or lien or other charge or encumbrance) under
any of the terms, conditions or provisions of any indenture, note, license,
lease, agreement or other instrument or obligation to which Parent or any of
its subsidiaries is a party or by which any of their assets may be bound,
except for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or lien or other charge or encumbrance) as to
which requisite waivers or consents have been obtained or which, in the
aggregate, would not have a Material Adverse Effect on Parent or adversely
affect the ability of Parent to consummate the transactions contemplated
hereby; (iv) cause the suspension or revocation of any authorizations,
consents, approvals or licenses currently in effect which would have a
Material Adverse Effect on Parent; or (v) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in this
Section 5.1(f) are duly and timely obtained or made and the approval by the
stockholders of Parent of the amendment to Parent's
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Certificate of Incorporation to increase parent's authorized capital stock
in order to allow for the issuance of Parent Shares by virtue of the Merger
and approval of the issuance of the Parent Shares by the stockholders of
Parent in accordance with the NNM listing requirements have been obtained,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or any of its subsidiaries or to any of their
respective assets, except for violations which would not in the aggregate
have a Material Adverse Effect on Parent or adversely affect the ability of
Parent to consummate the transactions contemplated hereby.
(g) LITIGATION. There are no actions, suits, claims, investigations or
proceedings pending or, to the knowledge of Parent, threatened against
Parent or any of its subsidiaries that, alone or in the aggregate would be
reasonably likely to result in obligations or liabilities of Parent or any
of its subsidiaries that, alone or in the aggregate, would have a Material
Adverse Effect on Parent or a material adverse effect on the parties'
ability to consummate the transactions contemplated by this Agreement.
Neither Parent nor any of its subsidiaries is subject to any outstanding
order, writ, injunction or decree which (i) has or may have the effect of
prohibiting or impairing any business practice of Parent or any of its
subsidiaries, any acquisition of property (tangible or intangible) by Parent
or any of its subsidiaries, the conduct of the business by Parent or any of
its subsidiaries, or Parent's ability to perform its obligations under this
Agreement or (ii) insofar as can be reasonably foreseen, individually or in
the aggregate, would have a Material Adverse Effect on Parent.
(h) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since January 1, 1997, Parent has filed all forms, reports and
documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder
(collectively, the "Parent SEC Reports"). None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules
included therein, at the time filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of Parent's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(ii) The consolidated balance sheets and the related consolidated
statements of income, stockholders' equity (deficit) and cash flows
(including the related notes thereto) of Parent included in the Parent
SEC Reports (collectively, "Parent Financial Statements") comply as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent throughout the periods involved (except as
otherwise noted therein or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act), and present fairly the consolidated financial position of
Parent and its consolidated subsidiaries as of their respective dates,
and the consolidated results of their operations and their cash flows for
the periods presented therein (subject, in the case of the unaudited
interim financial statements, to normal and recurring year-end
adjustments). Since January 1, 1999, there has not been any material
change, by Parent or any of its subsidiaries, in accounting principles,
methods or policies for financial accounting purposes except as required
by concurrent changes in generally accepted accounting principles.
(i) NO LIABILITIES; ABSENCE OF CERTAIN CHANGES OR EVENTS. Neither
Parent nor any of its subsidiaries has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
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contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to knowledge of Parent, there is no reasonable basis for
the assertion of any material claim or liability of any nature against
Parent or any of its subsidiaries, except for liabilities (i) which are
fully reflected in, reserved against or otherwise described in the Parent
Financial Statements for the period ending September 30, 1999, (ii) which
have been incurred after September 30, 1999 in the ordinary course of
business, consistent with past practice, or (iii) which are obligations to
perform under executory contracts in the ordinary course of business (none
of which is a liability resulting from a breach of contract or warranty,
tort, infringement or legal action). Since September 30, 1999, the business
of Parent and its subsidiaries has been carried on only in the ordinary and
usual course, and there has not been any Material Adverse Effect on Parent
and no event has occurred and no fact or set of circumstances has arisen
which has resulted in or could reasonably be expected to result in a
Material Adverse Effect on Parent. Since September 30, 1999, to the
knowledge of Parent, no material customer or supplier of Parent or its
subsidiaries has threatened, in writing, to alter materially its
relationship with Parent or its subsidiaries. Since September 30, 1999,
neither Parent nor any of its subsidiaries has agreed to a waiver or release
of any material right or claim (including without limitation to any write
off or other compromise of any material account receivable) outside of the
ordinary course of business consistent with past practice.
(j) BROKERS AND FINDERS. Except for the fees and expenses payable to
Credit Suisse First Boston or Launchpad Consulting, LLC, which fees and
expenses are reflected in their agreements with Parent, a true and complete
copy of which (including all amendments) has been furnished to the Company,
neither Parent nor any of its subsidiaries has employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
(k) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None of
the information supplied or to be supplied by Parent for inclusion or
incorporation by reference in the S-4 Registration Statement or the Joint
Proxy Statement will (i) in the case of the S-4 Registration Statement, at
the time it becomes effective or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, or (ii) in the case of the Joint Proxy Statement, at the time of
the mailing of the Joint Proxy Statement and at the time of the Stockholder
Meetings, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any
event with respect to Parent, Merger Sub or any of their respective
affiliates, officers and directors or any of its subsidiaries should occur
which is required to be described in an amendment of, or a supplement to,
the Joint Proxy Statement or the S-4 Registration Statement, Parent should
promptly inform the Company, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of Parent and the Company.
The S-4 Registration Statement will (with respect to Parent and Merger Sub)
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations promulgated thereunder. The
Joint Proxy Statement will (with respect to Parent and Merger Sub) comply as
to form in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder.
(l) TAXES.
(i) Parent and each of its subsidiaries has timely filed all federal,
state, local and foreign returns, information statements and reports
relating to Taxes ("Returns") required by applicable Tax law to be filed
by Parent and each of its subsidiaries, except for any such failures to
file that could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse
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Effect on Parent. All Taxes owed by Parent or any of its subsidiaries
to a taxing authority, or for which Parent or any of its subsidiaries
is liable, whether to a taxing authority or to other Persons or
entities under a Significant Tax Agreement, as of the date hereof,
have been paid and, as of the Effective Time, will have been paid,
except for any such failure to pay that could not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Parent has made accruals for Taxes on the
Parent Financial Statements which are adequate to cover any Tax
liability of Parent and each of its subsidiaries determined in
accordance with generally accepted accounting principles through the
date of the Parent Financial Statements, except where failures to
make such accruals or provisions could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on
Parent.
(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent, Parent and each of its subsidiaries
have withheld with respect to its employees all federal and state income
taxes, FICA, FUTA and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against Parent or any of its subsidiaries, except any such deficiency
that, if paid, could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Parent. Neither Parent nor
any of its subsidiaries executed or requested any waiver of any statute
of limitations on or extending the period for the assessment or
collection of any federal or material state Tax that is still in effect.
(iv) No federal or state Tax audit or other examination of Parent or
any of its subsidiaries is presently in progress, nor has Parent or any
of its subsidiaries been notified in writing of any request for such
federal or material state Tax audit or other examination, except in all
cases for Tax audits and other examinations which could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent.
(v) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by Parent.
(vi) Neither Parent nor any of its subsidiaries is a party to (A) any
agreement with a party other than Parent or any of its subsidiaries
providing for the allocation or payment of Tax liabilities or payment for
Tax benefits with respect to a consolidated, combined or unitary Return
which Return includes or included Parent or any subsidiary or (B) any
Significant Tax Agreement other than any Significant Tax Agreement
described in (A).
(vii) Except for the group of which Parent and its subsidiaries are
now presently members, neither Parent nor any of its subsidiaries has
ever been a member of an affiliated group of corporations within the
meaning of Section 1504 of the Code.
(viii) Neither Parent nor any of its subsidiaries has agreed to make
nor is it required to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise which have
not yet been taken into account.
(ix) Parent is not, and has not at any time been, a "United States
Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
(m) EMPLOYEE BENEFITS.
(i) Section 5.2(m)(i) of the Parent Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA), "employee welfare benefit plan" (as such term is
defined in Section 3(1) of ERISA), material personnel or payroll policy
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(including vacation time, holiday pay, service awards, moving expense
reimbursement programs and sick leave) or material fringe benefit,
severance agreement or plan or any medical, hospital, dental, life or
disability plan, excess benefit plan, bonus, stock option, stock
purchase, or other incentive plan (including any equity or equity-based
plan), tuition reimbursement, automobile use, club membership, parental
or family leave, top hat plan or deferred compensation plan, salary
reduction agreement, change-of-control agreement, employment agreement,
consulting agreement, collective bargaining agreement, indemnification
agreement, or retainer agreement, or any other material benefit plan,
policy, program, arrangement, agreement or contract, whether or not
written or terminated, with respect to any employee, former employee,
director, independent contractor, or any beneficiary or dependent thereof
maintained, sponsored, adopted or administered by Parent or any current
or former Plan Affiliate or to which Parent or any current or former Plan
Affiliate has made contributions to, obligated itself or had any
liability with respect to (all such plans, policies, programs,
arrangements, agreements and contracts, whether or not set forth in
Section 5.1(m) of the Parent Disclosure Schedule or on the Parent
Financial Statements are referred to in this Agreement as "Parent
Scheduled Plans").
(ii) Parent has delivered or made available to the Company a complete
and accurate copy of each written Parent Scheduled Plan, together with,
if applicable, a copy of audited financial statements, actuarial reports
and Form 5500 Annual Reports (including required schedules), if any, for
the three (3) most recent plan years, the most recent IRS determination
letter or IRS recognition of exemption; each other material letter,
ruling or notice issued by a governmental body with respect to each such
plan, a copy of each trust agreement, insurance contract or other funding
vehicle, if any, with respect to each such plan, the most recent PBGC
Form 1 with respect to each such plan, if any, the current summary plan
description and summary of material modifications thereto with respect to
each such plan, Form 5310 and any related filings with the PBGC and with
respect to the last six (6) Plan years, for each Plan subject to
Title IV of ERISA, general notification to employees of their rights
under Code Section 4980B and form of letter(s) distributed upon the
occurrence of a qualifying event described in Code Section 4980B, in the
case of a Parent Scheduled Plan that is a "group health plan" as defined
in Code Section 162(i), and a copy or description of each other general
explanation or written or oral communication which describes a material
term of each Parent Scheduled Plan that has not previously been disclosed
to the Company pursuant to this Section. Section 5.1(m) of the Parent
Disclosure Schedule contains a description of the material terms of any
unwritten Parent Scheduled Plan as comprehended to the Closing Date.
Except as set forth in Section 5.1(m) of the Parent Disclosure Schedule,
there are no negotiations, demands or proposals which are pending or
threatened which concern matters now covered, or that would be covered,
by the foregoing types of unwritten Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to a Material Adverse Effect to Parent or Merger
Sub:
(1) Each Parent Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all
applicable requirements of ERISA and the Code, and any other legal
requirements; (B) has been and is operated and administered in
material compliance with its terms (except as otherwise required by
law); (C) has been and is operated in compliance with applicable
legal requirements in such a manner as to qualify, where appropriate,
for both Federal and state purposes, for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the
allowance of deductions and credits with respect to contributions
thereto; and (D) where appropriate, has received a favorable
determination letter or recognition of exemption from the Internal
Revenue Service.
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(2) With respect to each Parent Scheduled Plan, there are no
claims or other proceedings pending or, to the knowledge of Parent,
threatened with respect to the assets thereof (other than routine
claims for benefits), and there are no facts which could reasonably
give rise to any material liability, claim or other proceeding
against any Parent Scheduled Plan, any fiduciary or plan
administrator or other Person dealing with any Parent Scheduled Plan
or the assets of any such Parent Scheduled Plan.
(3) With respect to each Parent Scheduled Plan, to the knowledge
of Parent, no Person: (A) has entered into any "prohibited
transaction," as such term is defined in ERISA or the Code and the
regulations, administrative rulings and case law thereunder that is
not otherwise exempt under Code Section 4975 or ERISA Section 408 (or
any administrative class exemption issued thereunder); (B) has
materially breached a fiduciary obligation or violated Sections 402,
403, 405, 503, 510 or 511 of ERISA; (C) has any material liability
for any failure to act or comply in connection with the
administration or investment of the assets of such plans; or
(D) engaged in any transaction or otherwise acted with respect to
such plans in such a manner which could subject the Company, or any
fiduciary or plan administrator or any other Person dealing with any
such plan, to material liability under Section 409 or 502 of ERISA or
Sections 4972 or 4976 through 4980B of the Code.
(4) Each Parent Scheduled Plan (other than any stock option plan)
may be amended, terminated, modified or otherwise revised by Parent,
on and after the Closing, without further material liability to
Parent (other than ordinary administrative expenses or routine claims
for benefit plans), including, but not limited to, any withdrawal
liability under ERISA for any multi-employer plan or any liability
under any Parent Scheduled Plan subject to Title IV of ERISA.
(5) None of Parent or any current or former Parent Plan Affiliate
has at any time participated in, made contributions to or had any
other liability with respect to any Parent Scheduled Plan which is a
"multi-employer plan" as defined in Section 4001 of ERISA, a
"multi-employer plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of Section 413(c) of the
Code, a "multiple employer welfare arrangement" within the meaning of
Section 3(40) of ERISA or a plan that is subject to Title IV of
ERISA.
(6) No Parent Scheduled Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason,
except as may be required by COBRA or other applicable statute, and
neither Parent nor any Plan Affiliate has ever represented, promised
or contracted (whether in oral or written form) to any current or
former employee, consultant or director (either individually or as a
group) or any other person that such current or former employee(s) or
other person would be provided with retiree health, except to the
extent required by applicable continuation coverage statute.
(7) No Parent Scheduled Plan has incurred an "accumulated funding
deficiency" as such term is defined in Section 302 of ERISA or
Section 412 of the Code, whether or not waived, or has posted or is
required to provide security under Code Section 401(a)(29) or
Section 307 of ERISA; no event has occurred which has or could result
in the imposition of a lien under Code Section 412 or Section 302 of
ERISA, nor has any liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (except for payment of premiums) been
incurred or reportable event within the meaning of Section 4043 of
ERISA occurred with respect to any such plan; and the PBGC has not
threatened or taken steps to institute the termination of any such
plan;
(8) The requirements of COBRA and the Health Insurance
Portability and Accountability Act, the requirements of the Family
Medical Leave Act of 1993, as amended, the
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requirements of the Women's Health and Cancer Rights Act, the
requirements of the Newborns' and Mothers' Health Protection Act of
1996, or any amendment to each such act, or any similar provisions of
state law applicable to its employees, have, in all material
respects, been satisfied with respect to each Parent Scheduled Plan.
(9) All contributions, payments, premiums, expenses,
reimbursements or accruals for all periods ending prior to or as of
the Closing for each Parent Scheduled Plan (including periods from
the first day of the then current plan year to the Closing) shall
have been made or accrued on Parent financial statements (in
accordance with generally applied accounting principles, including
FAS 87, 88, 106 and 112) and each such plan otherwise does not have
nor could have any unfunded liability (including benefit liabilities
as defined in Section 4001(a)(16) of ERISA) which is not reflected on
Parent financial statements. Any contribution made or accrued with
respect to any Parent Scheduled Plan has been or, to the knowledge of
Parent, will be intended to be, fully deductible by Parent.
(10) Neither Parent nor a Plan Affiliate has any material
liability (A) for the termination of any single employer plan under
Section 4062 of ERISA or any multiple employer plan under
Section 4063 of ERISA, (B) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (C) for any
interest payments required under Section 302(e) of ERISA or
Section 412(m) of the Code, (D) for any excise tax imposed by Code
Sections 4971, 4972, 4977, or 4979, or (E) for any minimum funding
contributions under Section 302(c)(11) of ERISA or Code
Section 412(c)(11).
(11) All Parent Scheduled Plans to the extent applicable, are in
compliance with Section 1862(b)(1)(A)(i) of the Social Security Act
and neither Parent nor any Plan Affiliate has any liability for any
excise tax imposed by Code Section 5000.
(12) With respect to any Parent Scheduled Plan which is a welfare
plan as defined in Section 3(1) of ERISA; (A) each such welfare plan
which is intended to meet the requirements for tax-favored treatment
under Subchapter B of Chapter 1 of the Code materially meets such
requirements; and (B) there is no disqualified benefit (as such term
is defined in Code Section 4976(b)) which would subject Parent or any
Plan Affiliate to a tax under Code Section 4976(a).
(13) Each Parent Scheduled Plan that has been adopted or
maintained by Parent or any Plan Affiliate, whether informally or
formally, or with respect to which Parent or any Plan Affiliate will
or may have any liability, for the benefit of Parent Employees who
perform services outside the United States (the "Parent International
Employee Plans") has been established, maintained and administered in
material compliance with its terms and conditions and with the
requirements prescribed by any and all statutory or regulatory laws
that are applicable to such Parent International Employee Plan.
Furthermore, no Parent International Employee Plan has unfunded
liabilities, that, as of the Effective Time, will not be offset by
insurance or fully accrued. Except as required by law, no condition
exists that would prevent Parent or any Plan Affiliate from
terminating or amending any Parent International Employee Plan at any
time for any reason without material liability to Parent or any Plan
Affiliate (other than ordinary administration expenses or routine
claims for benefits). To the extent any such Parent International
Employee Plan has not been disclosed or provided prior to the date of
this Agreement, Parent agrees to use its best efforts to disclose and
provide such plan prior to the Effective Time.
(iv) Other than by reason of actions taken by Parent following the
Closing, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any current or former employee of Parent
to severance pay, unemployment compensation or any other payment,
(B) accelerate the time of payment or vesting of any payment (other than
for a terminated or
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frozen tax-qualified plan, pursuant to a requirement herein to freeze or
terminate such plan), cause the forgiveness of any indebtedness, or
increase the amount of any compensation due to any such employee or
former employee, (C) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption
is not available, or (D) give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the
Code.
(v) As used in this Agreement, with respect to any Person the term
"Plan Affiliate" shall mean each other Person with whom such Person
constitutes or has constituted all or part of a controlled group, or
which would be treated or has been treated with such Person as under
common control or whose employees would be treated or have been treated
as employed by such Person, under Section 414 of the Code and any
regulations, administrative rulings and case law interpreting the
foregoing.
(n) PARENT INTANGIBLE PROPERTY.
(i) Parent and its subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights and mask works, all applications for and
registrations of such patents, trademarks, trade names, service marks,
copyrights and mask works, and all processes, formulae, methods,
schematics, technology, know-how, computer software programs or
applications and tangible or intangible proprietary information or
material that are necessary to conduct the business of Parent and its
subsidiaries as currently conducted or planned to be conducted (the
"Parent Intellectual Property Rights"). Section 5.1(n) of the Parent
Disclosure Schedule sets forth a list of the material software licenses
to which Parent or its subsidiaries is a party.
(ii) Neither Parent nor any of its subsidiaries is or will be as a
result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in breach in any material
respect of any material license, sublicense or other agreement relating
to the Parent Intellectual Property Rights or any license, sublicense or
other agreement pursuant to which Parent or any of its subsidiaries is
authorized to use any third party patents, trademarks or copyrights,
including software, which are used in the manufacture of, incorporated
in, or form a part of any product of Parent or any of its subsidiaries.
(iii) To Parent's knowledge, all patents, registered trademarks,
service marks and copyrights held by Parent or any of its subsidiaries
which are material to its business are valid and enforceable. Neither
Parent nor any of its subsidiaries has been sued in any suit, action or
proceeding which involves a claim of infringement of any patent,
trademark, service mark or copyright or the violation of any trade secret
or other proprietary rights of any third party, which infringement would
be reasonably likely to have a Material Adverse Effect on Parent.
(iv) Parent and its subsidiaries have taken reasonable security
measures to safeguard and maintain their property rights in all Parent
Intellectual Property Rights owned by Parent or its subsidiaries. Parent
and its subsidiaries maintain and in all material respects abide by a
policy that officers, employees and consultants of Parent or any of its
subsidiaries, except for clerical and other lower level support personnel
(e.g. mail room, messengers, etc.), execute an agreement, in a form or
forms previously provided to the Company, regarding (i) the protection of
proprietary information, (ii) the assignment to Parent (or an applicable
subsidiary) of all Parent Intellectual Property Rights arising from
services performed for Parent or any of its subsidiaries by such Persons,
(iii) the ownership by Parent or one of its subsidiaries of all Parent
Intellectual Property Rights arising from the services performed for
Parent or one of its subsidiaries by such Persons and (iv) limitations on
the individual's ability to solicit or hire Parent's or its subsidiaries'
employees or consultants.
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(o) AGREEMENTS, CONTRACTS AND COMMITMENTS; MATERIAL CONTRACTS. Except
as set forth in the Section 5.1(o) of the Parent Disclosure Schedule, as of
the date hereof, neither Parent nor any of its subsidiaries is a party to or
is bound by:
(i) any contract relating to the borrowing of money, the guaranty of
another Person's borrowing of money, or the creation of an encumbrance or
lien on the assets of the Parent or any of its subsidiaries and with
outstanding obligations in excess of $1,000,000;
(ii) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of Parent's Board
of Directors or any other employee who is one of the fifty (50) most
highly compensated employees, including base salary and bonuses, (the
"Parent Key Employees"), other than those that are terminable by Parent
or any of its subsidiaries on no more than thirty (30) days notice
without liability or financial obligation or benefits generally available
to employees of Parent, except to the extent general principles of
wrongful termination law may limit Parent's or any of its subsidiaries'
ability to terminate employees at will;
(iii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(iv) any agreement of indemnification or guaranty by Parent or any of
its subsidiaries not entered into in the ordinary course of business
other than indemnification agreements between Parent or any of its
subsidiaries and any of its officers or directors in standard forms as
filed by Parent with the SEC;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of Parent or any of its subsidiaries to engage in
any line of business or conduct business in any geographical area,
compete with any person or granting any exclusive distribution rights;
(vi) any joint venture, partnership, and other contract (however
named) involving a sharing of profits or losses by the Parent or any
subsidiary with any other Person;
(vii) any contract for capital expenditures in excess of $1,000,000;
(viii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business;
(ix) any agreement, contract or commitment for the purchase of any
ownership interest in any corporation, partnership, joint venture or
other business enterprise for consideration in excess of $2,500,000, in
any case which includes all escrow and earn-out agreements with
outstanding obligations; or
(x) any material joint marketing, distribution or development
agreement or any other material contract of the Parent or any of its
subsidiaries not previously filed with the SEC and not otherwise listed
in any other section of the Parent Disclosure Schedule.
A true and complete copy (including all amendments) of each Parent Contract
(or if standard forms are used, copies of the applicable forms with an
indication of any material differences from the actual listed Parent Contract),
or a summary of each oral contract, has been made available to the Company,
excluding those Parent Contracts referenced in clause (vii). Each contract set
forth in Section 5.1(o)(i)-(x) of the Parent Disclosure Schedule (a "Parent
Contract") and each Parent Material Contract (as defined below) is in full force
and effect, and is a legal, valid and binding obligation of Parent or a
subsidiary of Parent and, to the knowledge of Parent, each of the other parties
thereto, enforceable in accordance with
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its terms, except (a) that the enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (b) as would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect on
Parent. No condition exists or event has occurred which (whether with or without
notice or lapse of time or both, or the happening or occurrence of any other
event) would constitute a default by Parent or a subsidiary of Parent or, to the
knowledge of Parent, any other party thereto under, or result in a right in
termination of, any Parent Contract or Parent Material Contract, except as would
not, individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect on Parent. The term "Parent Material Contract" shall
mean any contract that is material to Parent and its subsidiaries, taken as a
whole. Except as provided for herein, at the Effective Time, no Person will have
the right, by contract or otherwise, to become, nor does any entity have the
right to designate or cause Parent to appoint a Person as, a director of Parent
or any subsidiary of Parent.
(p) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the knowledge of Parent,
neither Parent, any subsidiary of Parent nor any of their respective
directors, officers, employees or agents has, with respect to the businesses
of Parent or its subsidiaries, (i) used any funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any Person or
entity.
(q) LISTINGS. Parent's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, other than the
NNM.
(r) ENVIRONMENTAL MATTERS. Except as disclosed in Parent's SEC Reports
filed prior to the date hereof, (i) Parent and its subsidiaries and the
operations, assets and properties thereof are in material compliance with
all Environmental Laws; (ii) there are no judicial or administrative
actions, suits, proceedings or investigations pending or, to the knowledge
of Parent, threatened against Parent or any subsidiary of Parent alleging
the violation of any Environmental Law and neither Parent nor any subsidiary
of Parent has received notice from any governmental body or Person alleging
any violation of or liability under any Environmental Laws, in either case
which could reasonably be expected to result in material Environmental Costs
and Liabilities; (iii) to the knowledge of Parent, there are no facts,
circumstances or conditions relating to, arising from, associated with or
attributable to Parent or its subsidiaries or any real property currently or
previously owned, operated or leased by Parent or its subsidiaries that
could reasonably be expected to result in material Environmental Costs and
Liabilities; and (iv) to the knowledge of Parent, neither Parent nor any of
its subsidiaries has ever generated, transported, treated, stored, handled
or disposed of any Hazardous Material (as hereinafter defined) at any site,
location or facility in a manner that could create any material
Environmental Costs and Liabilities under any Environmental Law, and no such
Hazardous Material has been or is currently present on, in, at or under any
real property owned or used by Parent or any of its subsidiaries in a manner
that could create any Environmental Costs and Liabilities (including without
limitation, containment by means of any underground or aboveground storage
tank). For the purpose of Sections 5.1(s) and 5.2(s), the following terms
have the following definitions: (X) "Environmental Costs and Liabilities"
means any losses, liabilities, obligations, damages, fines, penalties,
judgments, actions, claims, costs and expenses (including, without
limitation, fees, disbursements and expenses of legal counsel, experts,
engineers and consultants and the costs of investigation and feasibility
studies, remedial or removal actions and cleanup activities) arising from or
under any Environmental Law; (Y) "Environmental Laws" means any applicable
federal, state, local, or foreign law (including common law), statute, code,
ordinance, rule, regulation or other requirement relating to the
environment, natural resources, or public or employee health and safety; and
(Z) "Hazardous Material"
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means any substance, material or waste regulated by federal, state or local
government, including, without limitation, any substance, material or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "toxic waste" or "toxic substance" under any provision of
Environmental Law and including but not limited to petroleum and petroleum
products.
(s) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(i) Parent and its subsidiaries have good and marketable title to, or
a valid leasehold interest in, the real and personal property, located on
their premises or shown on their most recent balance sheet or acquired
after the date thereof. None of the property owned or used by Parent or
any of its subsidiaries is subject to any mortgage, pledge, deed of
trust, lien (other than for taxes not yet due and payable), conditional
sale agreement, security title, encumbrance, or other adverse claim or
interest of any kind. Since September 30, 1999, there has not been any
sale, lease, or any other disposition or distribution by Parent or any of
its subsidiaries of any of its assets or properties, material to Parent
and its subsidiaries, taken as a whole, except transactions in the
ordinary and regular course of business.
(ii) Parent has delivered to the Company a schedule of all material
leases, subleases, rental agreements, contracts of sale, tenancies or
licenses related to any of the real property used by Parent or any of its
subsidiaries in their respective businesses. All such leases are valid,
binding and enforceable in accordance with their terms against the
parties thereto, and each such lease is subsisting and no default exists
under any thereof. Neither Parent nor any of its subsidiaries has
received notice that any party to any such lease intends to cancel,
terminate or refuse to renew the same or to exercise or decline to
exercise any option or any right thereunder.
(t) LABOR AND EMPLOYEE RELATIONS.
(i) Neither Parent nor any of its subsidiaries is party to any
employment, consulting, non-competition, severance, golden parachute,
indemnification agreement or any other material employment or consulting
agreement providing for payments or benefits or the acceleration of
payments or benefits upon the change of control of Parent (including,
without limitation, any contract to which Parent is a party involving
employees of Parent).
(ii) Except as required by applicable law in non-U.S. jurisdictions,
(A) none of the employees of Parent or any of its subsidiaries is
represented in his or her capacity as an employee of such company by any
labor organization; (B) neither Parent nor any of its subsidiaries has
recognized any labor organization nor has any labor organization been
elected as the collective bargaining agent of any of their employees, nor
has Parent or any of its subsidiaries signed any collective bargaining
agreement or union contract recognizing any labor organization as the
bargaining agent of any of their employees; and (C) to the knowledge of
Parent there is no active or current union organization activity
involving the employees of Parent or any of its subsidiaries, nor has
there ever been union representation involving employees of Parent or any
of its subsidiaries.
(iii) Except for complaints which, in the aggregate, do not represent
claims which could reasonably involve liabilities in excess of
$2,000,000, there are no complaints against Parent or any of its
subsidiaries pending or, to the knowledge of Parent, overtly threatened
before the National Labor Relations Board or any similar foreign, state
or local labor agencies, or before the Equal Employment Opportunity
Commission or any similar foreign, state or local agency, or before any
other governmental agency or entity by or on behalf of any employee or
former employee of Parent or any of its subsidiaries.
(iv) Parent has provided to the Company a description of all written
employment policies under which Parent and each subsidiary is operating.
(v) Parent and each of its subsidiaries is in compliance with all
Federal, foreign (as applicable), and state laws regarding employment
practices, including laws relating to workers' safety, sexual harassment
or discrimination, except where the failure to so be in compliance,
individually or in the aggregate, would not have a Material Adverse
Effect on Parent.
(vi) To the knowledge of Parent, as of the date hereof, no executive,
key employee or group of employees has any plans to terminate his or her
employment with Parent or any of its subsidiaries.
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(u) PERMITS. Parent and each of its subsidiaries hold all licenses,
permits, registrations, orders, authorizations, approvals and franchises
which are required to permit it to conduct its businesses as presently
conducted, except where the failure to hold such licenses, permits,
registrations, orders, authorizations, approvals or franchises would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
All such material licenses, permits, registrations, orders, authorizations,
approvals and franchises are now, and will be after the Closing, valid and
in full force and effect, and Parent shall have full benefit of the same,
except where the failure to be valid and in full force and effect or to have
the benefit of any such license, permit, registration, order, authorization,
approval or franchise would not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Neither Parent nor any of its
subsidiaries has received any notification of any asserted present failure
(or past and unremedied failure) by it to have obtained any such license,
permit, registration, order, authorization, approval or franchise except
where such failures would not, in the aggregate, have a Material Adverse
Effect on Parent.
(v) WARRANTY OR OTHER CLAIMS. Parent has provided to the Company a
copy of its standard form agreement for services. It is Parent's practice
and policy to adhere to the form terms, except to the extent not
commercially practicable.
(w) TRANSACTIONS WITH AFFILIATES. Except as set forth in the Parent
SEC Reports filed prior to the date of this Agreement, since the date of
Parent's last proxy statement to its stockholders, no event has occurred
that would be required to be reported by Parent as a Certain Relationship or
Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by
the SEC.
(x) COMPUTER SOFTWARE. The occurrence in or use by any material
Software used by Parent and its subsidiaries of dates on or after
January 1, 2000 will not result in any Malfunction.
(y) STATE TAKEOVER LAWS. The Board of Directors of Parent has taken
all necessary action so that the restrictions contained in Section 203 of
the DGCL applicable to a "business combination" (as defined in Section 203)
will not apply to the execution, delivery or performance of this Agreement
or the Stockholder Agreements or the consummation of the Merger or the other
transactions contemplated by this Agreement or the Stockholder Agreements.
No other state takeover statute or similar statute or regulation is
applicable to this Agreement or the Stockholder Agreements.
5.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Parent and Merger Sub that the statements contained
in this Section 5.2 are true and correct, except to the extent specifically set
forth on the disclosure schedule previously delivered by the Company to Parent
and Merger Sub (the "Company Disclosure Schedule"). The Company Disclosure
Schedule shall be arranged in sections and paragraphs corresponding to the
letter and numbered paragraphs contained in this Section 5.2, and the disclosure
in any paragraph shall qualify only the corresponding paragraph in this Section
5.2 or other paragraphs or sections to which it is clearly apparent (from a
plain reading of the disclosure) that such disclosure relates.
(a) CORPORATE ORGANIZATION AND QUALIFICATION. Each of the Company and
its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of incorporation and is
qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted,
by it require such qualification, except where failure to so qualify or be
in good standing as a foreign corporation would not have a Material Adverse
Effect on the Company. Each of the Company and its subsidiaries has all
requisite power and authority (corporate or otherwise) to own its properties
and to carry on its business as it is now being conducted. All of the
subsidiaries of the Company are set forth in Section 5.2(a) of the Company
Disclosure Schedule. The Company has heretofore made available to Parent
complete and correct copies of its Certificate of Incorporation and Bylaws
and the charter documents of its subsidiaries, each as amended.
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(b) CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 200,000,000 shares of common stock, $0.001 par value per
share, of which 90,645,130 shares were issued and outstanding on
November 30, 1999, and (ii) 1,000,000 shares of preferred stock, $0.001 par
value per share, none of which is issued or outstanding. All of the
outstanding shares of capital stock of the Company and its subsidiaries have
been duly authorized and validly issued and are fully paid and
nonassessable. The Company has no outstanding stock appreciation rights,
phantom stock or similar rights. All outstanding shares of capital stock or
other equity interests of the subsidiaries of the Company are owned by the
Company or a direct or indirect wholly-owned subsidiary of the Company, free
and clear of all liens, pledges, charges, encumbrances, claims and options
of any nature. Except for options to purchase 35,484,796 Company Shares
(i) issued pursuant to the 1996 Stock Option Plan, 1996 Equity Compensation
Plan, the 1997 Acquisition Stock Option Plan and the 1999 Non-Qualified
Stock Option Plan of the Company (the "Company Stock Option Plans"),
(ii) existing as a result of the Company's assumption of then outstanding
stock options of CKS Group, Inc. in connection with the merger with CKS
Group, Inc. consummated on December 17, 1998, and (iii) under the Stock
Option Agreement with Robert Shaw and the Company's Bonus Plan (the plans
and agreements referred to in clauses (i), (ii) and (iii), collectively, the
"Company Option Plans") and rights under the Company ESPPs, as of
November 30, 1999, there are no outstanding or authorized options, warrants,
calls, rights (including preemptive rights), commitments or any other
agreements of any character which the Company or any of its subsidiaries is
a party to, or may be bound by, requiring it to issue, transfer, grant,
sell, purchase, redeem or acquire any shares of capital stock or any of its
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for, any shares of capital stock of the Company or any of
its subsidiaries. There are not as of the date hereof and there will not be
at the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to which it
is bound relating to the voting of any shares of the capital stock of the
Company. No existing rights with respect to the registration of Company
Shares under the Securities Act, including, but not limited to, demand
rights or piggy-back registration rights, shall apply with respect to any
Parent Shares issuable in connection with the Merger. The Company has
provided to Parent a list, as of November 30, 1999, of the outstanding
options to acquire shares of the Company's capital stock, the name of the
holder of such option, the exercise price of such option, the number of
shares as to which such option will have vested at such date and whether the
exercisability of such option will be accelerated in any way by the
transactions contemplated by this Agreement, and indicates the extent of
acceleration, if any. Since November 30, 1999 through the date hereof no
options have been issued or accelerated or had their terms modified.
(c) FAIRNESS OPINION. The Board of Directors of the Company has
received an oral opinion from Morgan Stanley Dean Witter to be confirmed in
writing and addressed to its Board of Directors, to the effect that, as of
the date hereof and based upon and subject to the matters stated therein,
the consideration to be received by the holders of Common Shares in the
Merger is fair to such holders from a financial point of view. As of the
date hereof, such opinion has not been withdrawn, revoked or modified.
(d) AUTHORITY RELATIVE TO THIS AGREEMENT. The Board of Directors of
the Company has declared the Merger advisable and the Company has the
requisite corporate power and authority to approve, authorize, execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than the approval of
the Merger by the stockholders of the Company in accordance with the DGCL).
This Agreement has been duly and validly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding
agreement of Parent and Merger Sub, constitutes the valid and binding
agreement of the
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Company, enforceable against the Company in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(e) PRESENT COMPLIANCE WITH OBLIGATIONS AND LAWS. Neither the Company
nor any of its subsidiaries is: (i) in violation of its Certificate of
Incorporation or Bylaws or similar documents; (ii) in default in the
performance of any obligation, agreement or condition of any debt instrument
which (with or without the passage of time or the giving of notice, or both)
affords to any Person the right to accelerate any indebtedness or terminate
any right; (iii) in default under or breach of (with or without the passage
of time or the giving of notice) any other contract to which it is a party
or by which it or its assets are bound; or (iv) in violation of any law,
regulation, administrative order or judicial order, decree or judgment
(domestic or foreign) applicable to it or its business or assets, except
where any violation, default or breach under items (ii), (iii), or
(iv) would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the
Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of its Certificate of Incorporation or
Bylaws; (ii) require any consent, approval, authorization or permit of, or
registration or filing with or notification to, any governmental or
regulatory authority, except (A) in connection with the applicable
requirements, if any, of the HSR Act, (B) pursuant to the applicable
requirements of the Securities Act and the Exchange Act, (C) the filing of
the Certificate of Merger pursuant to the DGCL and appropriate documents
with the relevant authorities of other states in which the Company is
authorized to do business, (D) as may be required by any applicable state
securities laws, (E) such filings, consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under the antitrust laws of any foreign country or, (F) where the failure to
obtain such consent, approval, authorization or permit, or to make such
filing or notification, would not in the aggregate have a Material Adverse
Effect on the Company or adversely affect the ability of the Company to
consummate the transactions contemplated hereby; (iii) result in a violation
or breach of, or constitute (with or without notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any indenture, note, license, lease, agreement
or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of their assets may be bound, except
for such violations, breaches and defaults (or rights of termination,
cancellation, or acceleration or lien or other charge or encumbrance) as to
which requisite waivers or consents have been obtained or which, in the
aggregate, would not have a Material Adverse Effect on the Company or
adversely affect the ability of the Company to consummate the transactions
contemplated hereby; (iv) cause the suspension or revocation of any
authorizations, consents, approvals or licenses currently in effect which
would have a Material Adverse Effect on the Company; or (v) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 5.2(f) are duly and timely obtained or made,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries or to any of their
respective assets, except for violations which would not in the aggregate
have a Material Adverse Effect on the Company or adversely affect the
ability of the Company to consummate the transactions contemplated hereby.
(g) LITIGATION. Except as disclosed in Company SEC Reports filed prior
to the date hereof, there are no actions, suits, claims, investigations or
proceedings pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries that, alone or in the aggregate,
would be reasonably likely to result in obligations or liabilities of the
Company or any of its subsidiaries that would have a Material Adverse Effect
on the Company or a material adverse effect on the parties' ability to
consummate the transactions contemplated by this Agreement. Neither the
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<PAGE>
Company nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree which (i) has or may have the effect of
prohibiting or impairing any business practice of the Company or any of its
subsidiaries, any acquisition of property (tangible or intangible) by the
Company or any of its subsidiaries, the conduct of the business by the
Company or any of its subsidiaries, or Company's ability to perform its
obligations under this Agreement or (ii), insofar as can be reasonably
foreseen, individually or in the aggregate, would have a Material Adverse
Effect on the Company.
(h) SEC REPORTS; FINANCIAL STATEMENTS.
(i) Since January 1, 1997, the Company has filed all forms, reports
and documents with the SEC required to be filed by it pursuant to the
federal securities laws and the SEC rules and regulations thereunder, all
of which complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act (the "Company SEC
Reports"). None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included therein, at
the time filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing) contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(ii) The consolidated balance sheets and the related statements of
income, stockholders' equity and cash flow (including the related notes
thereto) of the Company included in the Company SEC Reports
(collectively, the "Company Financial Statements") comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with generally accepted accounting principles
applied on a basis consistent throughout the periods involved (except as
otherwise noted therein or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act), and present fairly the consolidated financial position of
the Company and its consolidated subsidiaries as of their respective
dates, and the results of its operations and its cash flow for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments).
Since January 1, 1999, there has not been any material change, by the
Company or any of its subsidiaries in accounting principles, methods or
policies for financial accounting purposes except as required by
concurrent changes in generally accepted accounting principles.
(i) NO LIABILITIES; ABSENCE OF CERTAIN CHANGES OR EVENTS. Neither the
Company nor any of its subsidiaries has any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to the knowledge of the Company, there is no reasonable
basis for the assertion of any material claim or liability of any nature
against the Company or any of its subsidiaries, except for liabilities
(i) which are fully reflected in, reserved against or otherwise described in
the Company Financial Statements for the period ending September 30, 1999,
(ii) which have been incurred after September 30, 1999 in the ordinary
course of business, consistent with past practice, or (iii) which are
obligations to perform under executory contracts in the ordinary course of
business (none of which is a liability resulting from a breach of contract
or warranty, tort, infringement or legal action). Since September 30, 1999,
the business of the Company and its subsidiaries has been carried on only in
the ordinary and usual course, and there has not been any Material Adverse
Effect on the Company and no event has occurred and no fact or set of
circumstances has arisen which has resulted in or could reasonably be
expected to result in a Material Adverse Effect on the Company. Since
September 30, 1999, to the knowledge of the Company, no material customer or
supplier of the Company or its subsidiaries has threatened, in writing, to
alter materially its relationship with the Company or its subsidiaries.
Since
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September 30, 1999, neither the Company nor any of its subsidiaries has
agreed to a waiver or release of any material right or claim (including
without limitation to any write off or other compromise of any material
account receivable) outside of the ordinary course of business consistent
with past practice.
(j) BROKERS AND FINDERS. Except for the fees and expenses payable to
Morgan Stanley Dean Witter, which fees and expenses are reflected in its
agreement with the Company, a true and complete copy of which (including all
amendments) has been furnished to the Company, neither the Company nor any
of its subsidiaries has employed any investment banker, broker, finder,
consultant or intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to any investment banking,
brokerage, finder's or similar fee or commission in connection with this
Agreement or the transactions contemplated hereby.
(k) S-4 REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS. None of
the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the S-4 Registration Statement or the Joint
Proxy Statement will (i) in the case of the S-4 Registration Statement, at
the time it becomes effective or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, or (ii) in the case of the Joint Proxy Statement, at the time of
the mailing of the Joint Proxy Statement and at the time of the Stockholder
Meetings, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or any of its
subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Joint Proxy Statement or the S-4 Registration
Statement, the Company shall promptly inform Parent such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of the Company
and Parent. The S-4 Registration Statement will (with respect to the
Company) comply as to form in all material respects with the requirements of
the Securities Act and the rules and regulations promulgated thereunder. The
Joint Proxy Statement will (with respect to the Company) comply as to form
in all material respects with the requirements of the Exchange Act and the
rules and regulations promulgated thereunder.
(l) TAXES.
(i) The Company and each of its subsidiaries has timely filed all
Returns required by applicable Tax law to be filed by the Company and
each of its subsidiaries, except for any such failures to file that could
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. All Taxes owed by the Company or
any of its subsidiaries to a taxing authority, or for which the Company
or any of its subsidiaries is liable, whether to a taxing authority or to
other Persons or entities under a Significant Tax Agreement, as of the
date hereof, have been paid and, as of the Effective Time, will have been
paid, except for any such failure to pay that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company. The Company has made accruals for Taxes on the
Company Financial Statements which are adequate to cover any Tax
liability of the Company and each of its subsidiaries determined in
accordance with generally accepted accounting principles through the date
of the Company Financial Statements, except where failures to make such
accruals or provisions could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company.
(ii) Except to the extent that any such failure to withhold could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company, the
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<PAGE>
Company and each of its subsidiaries have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or assessed
against the Company or any of its subsidiaries, except any such
deficiency that, if paid, could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the
Company. Neither the Company nor any of its subsidiaries executed or
requested any waiver of any statute of limitations on or extending the
period for the assessment or collection of any federal or material state
Tax that is still in effect.
(iv) No federal or state Tax audit or other examination of the Company
or any of its subsidiaries is presently in progress, nor has the Company
or any of its subsidiaries been notified in writing of any request for
such federal or material state Tax audit or other examination, except in
all cases for Tax audits and other examinations which could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(v) Neither the Company nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company.
(vi) Neither the Company nor any of its subsidiaries is a party to
(A) any agreement with a party other than the Company or any of its
subsidiaries providing for the allocation or payment of Tax liabilities
or payment for Tax benefits with respect to a consolidated, combined or
unitary Return which Return includes or included the Company or any
subsidiary or (B) any Significant Tax Agreement other than any
Significant Tax Agreement described in (A).
(vii) Except for the group of which the Company and its subsidiaries
are now presently members, neither the Company nor any of its
subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code.
(viii) Neither the Company nor any of its subsidiaries has agreed to
make nor is it required to make any adjustment under Section 481(a) of
the Code by reason of a change in accounting method or otherwise which
have not yet been taken into account.
(ix) The Company is not, and has not at any time been, a United
States Real Property Holding Corporation.
(m) EMPLOYEE BENEFITS.
(i) Section 5.2(m)(i) of the Company Disclosure Schedule lists each
"employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA), "employee welfare benefit plan" (as such term is
defined in Section 3(1) of ERISA), material personnel or payroll policy
(including vacation time, holiday pay, service awards, moving expense
reimbursement programs and sick leave) or material fringe benefit,
severance agreement or plan or any medical, hospital, dental, life or
disability plan, excess benefit plan, bonus, stock option, stock purchase
or other incentive plan (including any equity or equity-based plan),
tuition reimbursement, automobile use, club membership, parental or
family leave, top hat plan or deferred compensation plan, salary
reduction agreement, change-of-control agreement, employment agreement,
consulting agreement, or collective bargaining agreement, indemnification
agreement, retainer agreement, or any other material benefit plan,
policy, program, arrangement, agreement or contract, whether or not
written or terminated, with respect to any employee, former employee,
director, independent contractor, or any beneficiary or dependent thereof
maintained, sponsored, adopted or administered by the Company or any
current or former Plan Affiliate or to which the Company or any current
or former Plan Affiliate has made contributions to, obligated itself or
had any
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<PAGE>
liability with respect to (all such plans, policies, programs,
arrangements, agreements and contracts, are referred to in this Agreement
as "Company Scheduled Plans").
(ii) The Company has delivered or made available to Parent a complete
and accurate copy, as of the Closing, of each written Company Scheduled
Plan, together with, if applicable, a copy of audited financial
statements, actuarial reports and Form 5500 Annual Reports (including
required schedules), if any, for the three (3) most recent plan years,
the most recent IRS determination letter or IRS recognition of exemption;
each other material letter, ruling or notice issued by a governmental
body with respect to each such plan, a copy of each trust agreement,
insurance contract or other funding vehicle, if any, with respect to each
such plan, the most recent PBGC Form 1 with respect to each such plan, if
any, the current summary plan description and summary of material
modifications thereto with respect to each such plan, Form 5310 and any
related filings with the PBGC and with respect to the last six (6) Plan
years, for each Plan subject to Title IV of ERISA, general notification
to employees of their rights under Code Section 4980B and form of
letter(s) distributed upon the occurrence of a qualifying event described
in Code Section 4980B, in the case of a Company Scheduled Plan that is a
"group health plan" as defined in Code Section 162(i), and a copy or
description of each other general explanation or written or oral
communication which describes a material term of each Company Scheduled
Plan that has not previously been disclosed to Parent pursuant to this
Section. Section 5.2(m) of the Company Disclosure Schedule contains a
description of the material terms of any unwritten Company Scheduled Plan
as comprehended to the Closing Date. Except as set forth in
Section 5.2(m) of the Company Disclosure Schedule, there are no
negotiations, demands or proposals which are pending or threatened which
concern matters now covered, or that would be covered, by the foregoing
types of unwritten Plans.
(iii) Except as could not reasonably give rise, whether individually
or in the aggregate, to a Material Adverse Effect to the Company, Parent,
or Merger Sub:
(1) Each Company Scheduled Plan (A) has been and currently
complies in form and in operation in all material respects with all
applicable requirements of ERISA and the Code, and any other legal
requirements; (B) has been and is operated and administered in
material compliance with its terms (except as otherwise required by
law); (C) has been and is operated in compliance with applicable
legal requirements in such a manner as to qualify, where appropriate,
for both Federal and state purposes, for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the
allowance of deductions and credits with respect to contributions
thereto; and (D) where appropriate, has received a favorable
determination letter or recognition of exemption from the Internal
Revenue Service.
(2) With respect to each Company Scheduled Plan, there are no
claims or other proceedings pending or, to the knowledge of the
Company, threatened with respect to the assets thereof (other than
routine claims for benefits), and there are no facts which could
reasonably give rise to any material liability, claim or other
proceeding against any Company Scheduled Plan, any fiduciary or plan
administrator or other Person dealing with any Company Scheduled Plan
or the assets of any such Company Scheduled Plan.
(3) With respect to each Company Scheduled Plan, to the knowledge
of the Company, no Person: (A) has entered into any "prohibited
transaction," as such term is defined in ERISA or the Code and the
regulations, administrative rulings and case law thereunder that is
not otherwise exempt under Code Section 4975 or ERISA Section 408 (or
any administrative class exemption issued thereunder); (B) has
materially breached a fiduciary obligation or violated Sections 402,
403, 405, 503, 510 or 511 of ERISA; (C) has any material liability
for any failure to act or comply in connection with the
administration or investment of the assets
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<PAGE>
of such plans; or (D) engaged in any transaction or otherwise acted
with respect to such plans in such a manner which could subject
Parent, or any fiduciary or plan administrator or any other Person
dealing with any such plan, to material liability under Section 409
or 502 of ERISA or Sections 4972 or 4976 through 4980B of the Code.
(4) Each Company Scheduled Plan (other than any stock option
plan) may be amended, terminated, modified or otherwise revised by
the Company or Parent, on and after the Closing, without further
material liability to the Company or Parent (other than ordinary
administrative expenses or routine claims for benefit plans),
including, but not limited to, any withdrawal liability under ERISA
for any multi-employer plan or any liability under any Company
Scheduled Plan subject to Title IV of ERISA.
(5) None of the Company or any current or former Company Plan
Affiliate has at any time participated in, made contributions to or
had any other liability with respect to any Company Scheduled Plan
which is a "multi-employer plan" as defined in Section 4001 of ERISA,
a "multi-employer plan" within the meaning of Section 3(37) of ERISA,
a "multiple employer plan" within the meaning of Section 413(c) of
the Code, a "multiple employer welfare arrangement" within the
meaning of Section 3(40) of ERISA or a plan that is subject to Title
IV of ERISA.
(6) No Company Scheduled Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason,
except as may be required by COBRA or other applicable statute, and
neither the Company nor any Plan Affiliate has ever represented,
promised or contracted (whether in oral or written form) to any
current or former employee, consultant or director (either
individually or as a group) or any other person that such current or
former employee(s) or other person would be provided with retiree
health, except to the extent required by applicable continuation
coverage statute.
(7) No Company Scheduled Plan has incurred an "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA
or Section 412 of the Code, whether or not waived, or has posted or
is required to provide security under Code Section 401(a)(29) or
Section 307 of ERISA; no event has occurred which has or could result
in the imposition of a lien under Code Section 412 or Section 302 of
ERISA, nor has any liability to the PBGC (except for payment of
premiums) been incurred or reportable event within the meaning of
Section 4043 of ERISA occurred with respect to any such plan; and the
PBGC has not threatened or taken steps to institute the termination
of any such plan;
(8) The requirements of COBRA and the Health Insurance
Portability and Accountability Act, the requirements of the Family
Medical Leave Act of 1993, as amended, the requirements of the
Women's Health and Cancer Rights Act, the requirements of the
Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law
applicable to its employees, have, in all material respects, been
satisfied with respect to each Company Scheduled Plan.
(9) All contributions, payments, premiums, expenses,
reimbursements or accruals for all periods ending prior to or as of
the Closing for each Company Scheduled Plan (including periods from
the first day of the then current plan year to the Closing) shall
have been made or accrued on the Company financial statements (in
accordance with generally applied accounting principles, including
FAS 87, 88, 106 and 112) and each such plan otherwise does not have
nor could have any unfunded liability (including benefit liabilities
as defined in Section 4001(a)(16) of ERISA) which is not reflected on
the Company financial statements. Any contribution made or accrued
with respect to any Company Scheduled Plan has been or, to the
knowledge of the Company, will be intended to be, fully deductible by
the Company.
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<PAGE>
(10) Neither the Company nor a Plan Affiliate has any material
liability (A) for the termination of any single employer plan under
Section 4062 of ERISA or any multiple employer plan under
Section 4063 of ERISA, (B) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (C) for any
interest payments required under Section 302(e) of ERISA or
Section 412(m) of the Code, (D) for any excise tax imposed by Code
Sections 4971, 4972, 4977, or 4979, or (E) for any minimum funding
contributions under Section 302(c)(11) of ERISA or Code
Section 412(c)(11).
(11) All the Company Scheduled Plans to the extent applicable,
are in compliance with Section 1862(b)(1)(A)(i) of the Social
Security Act and neither the Company nor any Plan Affiliate has any
liability for any excise tax imposed by Code Section 5000.
(12) With respect to any Company Scheduled Plan which is a
welfare plan as defined in Section 3(1) of ERISA; (A) each such
welfare plan which is intended to meet the requirements for
tax-favored treatment under Subchapter B of Chapter 1 of the Code
materially meets such requirements; and (B) there is no disqualified
benefit (as such term is defined in Code Section 4976(b)) which would
subject the Company or any Plan Affiliate to a tax under Code
Section 4976(a).
(13) Each Company Scheduled Plan that has been adopted or
maintained by the Company or any Plan Affiliate, whether informally
or formally, or with respect to which the Company or any Plan
Affiliate will or may have any liability, for the benefit of the
Company Employees who perform services outside the United States (the
"Company International Employee Plans") has been established,
maintained and administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such Company
International Employee Plan. Furthermore, no Company International
Employee Plan has unfunded liabilities, that, as of the Effective
Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company
or any Plan Affiliate from terminating or amending any Company
International Employee Plan at any time for any reason without
material liability to the Company or any Plan Affiliate (other than
ordinary administration expenses or routine claims for benefits). To
the extent any such Company International Employee Plan has not been
disclosed or provided prior to the date of this Agreement, the
Company agrees to use its best efforts to disclose and provide such
plan prior to the Effective Time.
(iv) Other than by reason of actions taken by Parent following the
Closing, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any current or former employee of the
Company to severance pay, unemployment compensation or any other payment,
(B) accelerate the time of payment or vesting of any payment (other than
for a terminated or frozen tax-qualified plan, pursuant to a requirement
herein to freeze or terminate such plan), cause the forgiveness of any
indebtedness, or increase the amount of any compensation due to any such
employee or former employee, (C) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which
an exemption is not available, or (D) give rise to the payment of any
amount that would not be deductible pursuant to the terms of
Section 280G of the Code.
(n) COMPANY INTANGIBLE PROPERTY.
(i) The Company and its subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights and mask works, all
applications for and registrations of such patents, trademarks, trade
names, service marks, copyrights and mask works, and all processes,
formulae, methods, schematics, technology, know-how, computer software
programs or applications and tangible or intangible
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proprietary information or material that are necessary to conduct the
business of the Company and its subsidiaries as currently conducted or
planned to be conducted (the "Company Intellectual Property Rights").
Section 5.2(n) of the Company Disclosure Schedule sets forth a list of
the material software licenses to which the Company or its subsidiaries
is a party.
(ii) Neither the Company nor any of its subsidiaries is or will be as
a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach in any
material respect of any material license, sublicense or other agreement
relating to the Company Intellectual Property Rights or any license,
sublicense or other agreement pursuant to which the Company or any of its
subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are used in the manufacture of,
incorporated in, or form a part of any product of the Company or any of
its subsidiaries.
(iii) To the Company's knowledge, all patents, registered trademarks,
service marks and copyrights held by the Company or any of its
subsidiaries which are material to its business are valid and
enforceable. Neither the Company nor any of its subsidiaries has been
sued in any suit, action or proceeding which involves a claim of
infringement of any patent, trademark, service mark or copyright or the
violation of any trade secret or other proprietary rights of any third
party, which infringement would be reasonably likely to have a Material
Adverse Effect on the Company.
(iv) The Company and its subsidiaries have taken reasonable security
measures to safeguard and maintain their property rights in all the
Company Intellectual Property Rights owned by the Company or its
subsidiaries. The Company and its subsidiaries maintain and in all
material respects abide by a policy that officers, employees and
consultants of the Company or any of its subsidiaries, except for
clerical and other lower level support personnel (e.g. mail room,
messengers, etc.), execute an agreement, in a form previously provided to
Parent, regarding (i) the protection of proprietary information,
(ii) the assignment to the Company (or an applicable subsidiary) of all
the Company Intellectual Property Rights arising from services performed
for the Company or any of its subsidiaries by such Persons, (iii) the
ownership by the Company or one of its subsidiaries of all the Company
Intellectual Property Rights arising from the services performed for the
Company or one of its subsidiaries by such Persons and (iv) limitations
on the individual's ability to solicit or hire Parent's or its
subsidiaries' employees or consultants.
(o) AGREEMENTS, CONTRACTS AND COMMITMENTS; MATERIAL CONTRACTS. Except
as set forth in the Section 5.2(o) of the Company Disclosure Schedule, as of
the date hereof, neither the Company nor any of its subsidiaries is a party
to or is bound by:
(i) any contract relating to the borrowing of money, the guaranty of
another Person's borrowing of money, or the creation of an encumbrance or
lien on the assets of the Company or any of its subsidiaries and with
outstanding obligations in excess of $1,000,000;
(ii) any employment or consulting agreement, contract or commitment
with any officer or director level employee or member of the Company's
Board of Directors or any other employee who is one of the fifty (50)
most highly compensated employees, including base salary and bonuses (the
"Company Key Employees"), other than those that are terminable by the
Company or any of its subsidiaries on no more than thirty (30) days
notice without liability or financial obligation or benefits generally
available to employees of the Company, except to the extent general
principles of wrongful termination law may limit the Company's or any of
its subsidiaries' ability to terminate employees at will;
(iii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
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contemplated by this Agreement or the value of any of the benefits of
which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(iv) any agreement of indemnification or guaranty by the Company or
any of its subsidiaries not entered into in the ordinary course of
business other than indemnification agreements between the Company or any
of its subsidiaries and any of its officers or directors in standard
forms as filed by the Company with the SEC;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company or any of its subsidiaries to engage
in any line of business or conduct business in any geographical area,
compete with any person or granting any exclusive distribution rights;
(vi) any joint venture, partnership, and other Contract (however
named) involving a sharing of profits or losses by the Company or any
subsidiary with any other Person;
(vii) any contract for capital expenditures in excess of $1,000,000;
(viii) any agreement, contract or commitment currently in force
relating to the disposition or acquisition of assets not in the ordinary
course of business;
(ix) any agreement, contract or commitment for the purchase of any
ownership interest in any corporation, partnership, joint venture or
other business enterprise for consideration in excess of $2,500,000, in
any case, which includes all escrow and earn-out agreements with
outstanding obligations; or
(x) any material joint marketing, distribution or development
agreement or other material contract of the Company or any of its
subsidiaries not previously filed with the SEC and not otherwise listed
in any other section of the Company Disclosure Schedule.
(xi) A true and complete copy (including all amendments) of each
Company Contract (or if standard forms are used, copies of the applicable
forms with an indication of any material differences from the actual
listed Company Contract), or a summary of each oral contract, has been
made available to Parent, excluding those Company Contracts referenced in
clauses (vii). Each contract set forth in Section 5.2(o)(i)-(x) of the
Company Disclosure Schedule (a "Company Contract") and each Company
Material Contract (as defined below) is in full force and effect, and is
a legal, valid and binding obligation of the Company or a subsidiary of
the Company and, to the knowledge of the Company, each of the other
parties thereto, enforceable in accordance with its terms, except
(a) that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law) and (b) as would not,
individually or in the aggregate, be reasonably expected to result in a
Material Adverse Effect with respect to the Company on the Company. No
condition exists or event has occurred which (whether with or without
notice or lapse of time or both, or the happening or occurrence of any
other event) would constitute a default by the Company or a subsidiary of
the Company or, to the knowledge of the Company, any other party thereto
under, or result in a right in termination of, any Company Contract or
Company Material Contract, except as would not, individually or in the
aggregate, be reasonably expected to result in a Material Adverse Effect
on the Company. The term "Company Material Contract" shall mean any
contract that is material to the Company and its subsidiaries, taken as a
whole.
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(p) UNLAWFUL PAYMENTS AND CONTRIBUTIONS. To the knowledge of the
Company, neither the Company, any subsidiary of the Company nor any of their
respective directors, officers, employees or agents has, with respect to the
businesses of the Company or its subsidiaries, (i) used any funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee;
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any Person or
entity.
(q) LISTINGS. The Company's securities are not listed, or quoted, for
trading on any U.S. domestic or foreign securities exchange, other than the
NNM.
(r) ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Reports filed prior to the date hereof, (i) the Company and its subsidiaries
and the operations, assets and properties thereof are in material compliance
with all Environmental Laws; (ii) there are no judicial or administrative
actions, suits, proceedings or investigations pending or, to the knowledge
of the Company, threatened against the Company or any subsidiary of the
Company alleging the violation of any Environmental Law and neither the
Company nor any subsidiary of the Company has received notice from any
governmental body or Person alleging any violation of or liability under any
Environmental Laws, in either case which could reasonably be expected to
result in material Environmental Costs and Liabilities; (iii) to the
knowledge of the Company, there are no facts, circumstances or conditions
relating to, arising from, associated with or attributable to the Company or
its subsidiaries or any real property currently or previously owned,
operated or leased by the Company or its subsidiaries that could reasonably
be expected to result in material Environmental Costs and Liabilities; and
(iv) to the knowledge of the Company, neither the Company nor any of its
subsidiaries has ever generated, transported, treated, stored, handled or
disposed of any Hazardous Material at any site, location or facility in a
manner that could create any material Environmental Costs and Liabilities
under any Environmental Law, and no such Hazardous Material has been or is
currently present on, in, at or under any real property owned or used by the
Company or any of its subsidiaries in a manner that could create any
Environmental Costs and Liabilities (including without limitation,
containment by means of any underground or aboveground storage tank).
(s) TITLE TO PROPERTIES; LIENS; CONDITION OF PROPERTIES.
(i) The Company and its subsidiaries have good and marketable title
to, or a valid leasehold interest in, the real and personal property,
located on their premises or shown on their most recent balance sheet or
acquired after the date thereof. None of the property owned or used by
the Company or any of its subsidiaries is subject to any mortgage,
pledge, deed of trust, lien (other than for taxes not yet due and
payable), conditional sale agreement, security title, encumbrance, or
other adverse claim or interest of any kind. Since September 30, 1999,
there has not been any sale, lease, or any other disposition or
distribution by the Company or any of its subsidiaries of any of its
assets or properties material to the Company and its subsidiaries, taken
as a whole, except transactions in the ordinary and regular course of
business.
(ii) The Company has delivered to Parent a schedule of all material
leases, subleases, rental agreements, contracts of sale, tenancies or
licenses related to any of the real property used by the Company or any
of its subsidiaries in their respective businesses. All such leases are
valid, binding and enforceable in accordance with their terms against the
parties thereto, and each such lease is subsisting and no default exists
under any thereof. Neither the Company nor any of its subsidiaries has
received notice that any party to any such lease intends to cancel,
terminate or refuse to renew the same or to exercise or decline to
exercise any option or any right thereunder.
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(t) LABOR AND EMPLOYEE RELATIONS.
(i) Neither the Company nor any of its subsidiaries is a party to any
employment, consulting, non-competition, severance, golden parachute,
indemnification agreement or any other material employment or consulting
agreement providing for payments or benefits or the acceleration of
payments or benefits upon the change of control of the Company
(including, without limitation, any contract to which the Company is a
party involving employees of the Company).
(ii) Except as required by applicable law in non-U.S. jurisdictions,
(A) none of the employees of the Company or any of its subsidiaries is
represented in his or her capacity as an employee of such company by any
labor organization; (B) neither the Company nor any of its subsidiaries
has recognized any labor organization nor has any labor organization been
elected as the collective bargaining agent of any of their employees, nor
has the Company or any of its subsidiaries signed any collective
bargaining agreement or union contract recognizing any labor organization
as the bargaining agent of any of their employees; and (C) to the
knowledge of the Company, there is no active or current union
organization activity involving the employees of the Company or any of
its subsidiaries, nor has there ever been union representation involving
employees of the Company or any of its subsidiaries.
(iii) Except for complaints which, in the aggregate, do not represent
claims which could reasonably involve liabilities in excess of
$2,000,000, there are no complaints against the Company or any of its
subsidiaries pending or, to the knowledge of the Company, overtly
threatened before the National Labor Relations Board or any similar
foreign, state or local labor agencies, or before the Equal Employment
Opportunity Commission or any similar foreign, state or local agency, or
before any other governmental agency or entity by or on behalf of any
employee or former employee of the Company or any of its subsidiaries.
(iv) The Company has provided to Parent a description of all written
employment policies under which the Company and each subsidiary is
operating.
(v) The Company and each of its subsidiaries is in compliance with
all Federal, foreign (as applicable), and state laws regarding employment
practices, including laws relating to workers' safety, sexual harassment
or discrimination, except where the failure to so be in compliance,
individually or in the aggregate, would not have a Material Adverse
Effect on the Company.
(vi) To the knowledge of the Company, as of the date hereof, no
executive, key employee or group of employees has any plans to terminate
his or her employment with the Company or any of its subsidiaries.
(vii) Section 5.2(t) of the Company Disclosure Schedule lists the
following information with respect to the Company Key Employees.
(1) position; and
(2) any non-compete or non solicitation agreement they are bound
by.
(u) PERMITS. The Company and each of its subsidiaries hold all
licenses, permits, registrations, orders, authorizations, approvals and
franchises which are required to permit it to conduct its businesses as
presently conducted, except where the failure to hold such licenses,
permits, registrations, orders, authorizations, approvals or franchises
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. All such material licenses, permits, registrations, orders,
authorizations, approvals and franchises are now, and will be after the
Closing, valid and in full force and effect, and Parent shall have full
benefit of the same, except where the failure to be valid and in full force
and effect or to have the benefit of any such license, permit, registration,
order, authorization, approval or franchise would not, individually or in
the aggregate, have a Material Adverse Effect
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on the Company. Neither the Company nor any of its subsidiaries has received
any notification of any asserted present failure (or past and unremedied
failure) by it to have obtained any such license, permit, registration,
order, authorization, approval or franchise, except where such failures
would not, in the aggregate, have a Material Adverse Effect on the Company.
(v) WARRANTY OR OTHER CLAIMS. The Company has provided to the Company
a copy of its standard form agreement for services. It is the Company's
practice and policy to adhere to the form terms, except to the extent not
commercially practicable.
(w) TRANSACTIONS WITH AFFILIATES. Except as set forth in the Company
SEC Reports filed prior to the date of this Agreement, since the date of
Company's last proxy statement to its stockholders, no event has occurred
that would be required to be reported by Company as a Certain Relationship
or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated
by the SEC.
(x) COMPUTER SOFTWARE. The occurrence in or use by any material
Software used by the Company and its subsidiaries of dates on or after
January 1, 2000 will not result in any Malfunction.
(y) STATE TAKEOVER LAWS. The Board of Directors of the Company has
taken all necessary action so that the restrictions contained in Section 203
of the DGCL applicable to a "business combination" (as defined in Section
203) will not apply to the execution, delivery or performance of this
Agreement or the Stockholder Agreements or the consummation of the Merger or
the other transactions contemplated by this Agreement or the Stockholder
Agreements. No other state takeover statute or similar statute or regulation
is applicable to this Agreement or the Stockholder Agreements.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS
(a) Parent and the Company each covenant and agree that, during the
period from the date of this Agreement to the Effective Time (unless the
Parties shall otherwise agree in writing and except as otherwise
contemplated by this Agreement), Parent and the Company each will, and will
cause each of their subsidiaries to, conduct their operations according to
their ordinary and usual course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact their current business organizations, use their reasonable efforts to
keep available the service of its current officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that goodwill and ongoing businesses
shall be unimpaired at the Effective Time.
(b) Without limiting the generality of the foregoing, and except as
otherwise permitted in this Agreement, prior to the Effective Time, Parent
and the Company shall not, and each shall cause each of their subsidiaries
not to, without the prior written consent of the other Parties:
(i) except as set forth in Section 6.1(b) of the Company Disclosure
Schedule, accelerate, amend or change the period of exercisability of any
outstanding options or restricted stock, reprice options granted under
the Company Option Plans or Parent Option Plans or authorize cash
payments in exchange for any options granted under any of such plans, as
the case may be, or authorize cash payments in exchange for any options
granted under any of such plans, except to the extent required under any
Company Option Plan or Parent Option Plan, as the case may be, or any
individual agreement as in effect on the date hereof (or, if entered into
after the date hereof in compliance with this Section 6.1(b), such
agreement which shall be in the standard form thereof as in effect on the
date hereof);
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(ii) except (v) for issuances of shares of common stock of Merger Sub
to Parent, (w) as set forth in Section 6.1(b) of the Parent Disclosure
Schedule or the Company Disclosure Schedule, as the case may be, (x) for
shares to be issued upon exercise of outstanding options or warrants or
options and warrants granted in compliance with clauses (w) or
(y) hereof, and (y) for grants of stock options in the ordinary course
consistent with past practice pursuant to the Parent Option Plans or
Company Option Plans, as the case may be, in connection with new hires or
in accordance with regularly scheduled periodic grants, not to exceed
4,000,000 shares, in all cases, for each of Parent and the Company,
respectively, issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or
pledge or other encumbrance of (A) any additional shares of capital stock
of any class, or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for any shares of capital
stock, or any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares of capital
stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock, or
(B) any other securities in respect of, in lieu of, or in substitution
for, shares outstanding on the date hereof;
(iii) redeem, purchase or otherwise acquire, or offer to redeem,
purchase or otherwise acquire, any of its outstanding securities
(including the Parent Shares or the Company Shares, as the case may be),
other than the repurchase of securities from service providers upon their
termination from service with Parent or the Company, as the case may be,
at the original purchase price;
(iv) split, combine, subdivide or reclassify any shares of its
capital stock or declare, set aside for payment or pay any dividend, or
make any other actual, constructive or deemed distribution in respect of
any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such;
(v) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger as provided for herein);
(vi) adopt any amendments to its Certificate or Articles of
Incorporation, as the case may be, or By-Laws or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any of its subsidiaries, except to
increase the authorized capital stock or reduce the par value of the
capital stock of Merger Sub;
(vii) other than as set forth in Section 6.1(b) of the Parent
Disclosure Schedule or the Company Disclosure Schedule, as applicable,
make any acquisition, by means of merger, consolidation or otherwise, or
dispositions, of assets or securities (except for acquisitions or
dispositions in the ordinary course of business none of which are
acquisitions of businesses);
(viii) other than in the ordinary course of business consistent with
past practice, except as set forth in Section 6.1(b) of the Parent
Disclosure Schedule or the Company Disclosure Schedule, incur any
indebtedness for borrowed money or guarantee any such indebtedness or
make any loans, advances or capital contributions to, or investments in,
any other Person;
(ix) make or revoke any material Tax election, settle or compromise
any material federal, state, local or foreign Tax liability or change (or
make a request to any taxing authority to change) any material aspect of
its method of accounting for Tax purposes (except for Tax elections which
are consistent with prior such elections (in past years);
(x) incur any material liability for Taxes other than in the ordinary
course of business;
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(xi) incur or commit to incur any capital expenditures in excess of
current budgets for capital expenditures which were provided by the
Company or Parent to the other party prior to the date hereof;
(xii) enter into any contract material to Parent or the Company as the
case may be, and its subsidiaries, taken as a whole;
(xiii) enter into any strategic alliance or joint marketing arrangement
or agreement other than routine alliances, arrangements or agreements;
(xiv) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) or litigation (whether or not commenced prior to
the date of this Agreement), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent
with past practice or in accordance with its terms, of any liability
recognized or disclosed in the most recent Parent Financial Statements
(September 30, 1999) or Company Financial Statements (September 30, 1999)
(or the notes thereto), as applicable, or incurred since the date of such
financial statements, or (B) voluntarily waive the benefits of, or agree
to modify in any manner, terminate or release any Person from any
non-competition, confidentiality, standstill or similar agreement to
which Parent or any of its subsidiaries or the Company or any of its
subsidiaries, as applicable, is a party or of which any of them is a
beneficiary;
(xv) except as required by this Agreement or as required to be held in
accordance with a valid stockholder request, call or hold any meeting of
stockholders of the Company or Parent other than an annual meeting of
shareholders which considers routine matters in the ordinary course of
business consistent with past practices;
(xvi) transfer or license to any Person or entity or otherwise extend,
amend or modify any material rights to the Parent Intellectual Property
Rights or the Company Intellectual Property Rights, as applicable, other
than in the ordinary course of business consistent with past practices or
on a non-exclusive basis not materially different from past practices;
(xvii) make any change to accounting policies or procedures, except as
may be required by generally accepted accounting principles or applicable
law; or
(xviii) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
(c) Between the date hereof and the Effective Time, except as
contemplated herein, Parent, the Company and their subsidiaries shall not
(without the prior written consent of the Parties hereto) (A) except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not materially increase benefits or
compensation expenses of Parent and its subsidiaries, or the Company and its
subsidiaries, or as contemplated by the terms of any contract the existence
of which does not constitute a violation of this Agreement, increase the
compensation, bonus or other benefits of any director, officer or other
employee; (B) pay or agree to pay any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing
benefit, severance, pension or employment plans, agreements or arrangements
as in effect on the date hereof to any such director, officer or employee,
whether past or present; (C) enter into any new or amend any existing
employment or severance agreement with any such director, officer or
employee; (D) except as may be required to comply with applicable law,
become obligated under any new pension plan, welfare plan, multi-employer
plan, employee benefit plan, severance plan, benefit arrangement, or similar
plan or arrangement, which was not in existence on the date hereof, or
amend, terminate or change any funding policies or assumptions for any such
plan or arrangement in existence on the date hereof if such amendment,
termination or change would have the effect of enhancing any benefits
thereunder or increasing the cost thereof to Parent or the Company or
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(E) increase the total head count of Parent and its subsidiaries, or the
Company and its subsidiaries, in an amount greater than an increase in the
ordinary course of business consistent with past practice.
6.2 NO SOLICITATION BY THE COMPANY.
(a) From and after the date of this Agreement until the Effective Time
or the earlier termination of this Agreement in accordance with its terms,
the Company and its subsidiaries will not, and will not permit their
respective directors, officers, investment bankers, affiliates,
representatives and agents to, (i) solicit, initiate, or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or proposals that constitute, or could reasonably
be expected to lead to, any Company Acquisition Proposal (as defined below),
or (ii) engage in, or enter into, any negotiations or discussions concerning
any Company Acquisition Proposal. Notwithstanding the foregoing, in the
event that, notwithstanding compliance with the preceding sentence, the
Company receives a Company Superior Proposal (as defined below) the Company
may, to the extent that the Board of Directors of the Company determines in
good faith (in consultation with outside counsel) that such action would, in
the absence of the foregoing proscriptions, be required by its fiduciary
duties, participate in discussions regarding any Company Superior Proposal
in order to be informed with respect thereto in order to make any
determination permitted pursuant to Section 6.2(b)(i). In such event, the
Company shall, (i) no less than twenty four (24) hours prior to
participating in any such discussions, inform Parent of the material terms
and conditions of such Company Superior Proposal, including the identity of
the Person making such Company Superior Proposal and (ii) promptly keep
Parent informed of the status including any material change to the terms of
any such Company Superior Proposal. As used herein, the term "Company
Acquisition Proposal" shall mean any bona fide inquiry, proposal or offer
relating to any (i) merger, consolidation, business combination, or similar
transaction involving the Company or any subsidiary of the Company,
(ii) sale, lease or other disposition, directly or indirectly, by merger,
consolidation, share exchange or otherwise, of any assets of the Company or
any subsidiary of the Company in one or more transactions, (iii) issuance,
sale, or other disposition of (including by way of merger, consolidation,
share exchange or any similar transaction) securities (or options, rights or
warrants to purchase such securities, or securities convertible into such
securities) of the Company or any subsidiary of the Company,
(iv) liquidation, dissolution, recapitalization or other similar type of
transaction with respect to the Company or any subsidiary of the Company,
(v) tender offer or exchange offer for Company securities; in the case of
(i), (ii), (iii), (iv) or (v) above, which transaction would result in a
third party (or its shareholders) acquiring more than thirty-five percent
(35%) of the voting power of the Company or the assets representing more
than thirty-five percent (35%) of the net income, net revenue or assets of
the Company on a consolidated basis, (vi) transaction which is similar in
form, substance or purpose to any of the foregoing transactions or
(vii) public announcement of an agreement, proposal, plan or intention to do
any of the foregoing, PROVIDED, HOWEVER, that the term "Company Acquisition
Proposal" shall not include the Merger and the transactions contemplated
thereby. For purposes of this Agreement, "Company Superior Proposal" means
any offer not solicited by the Company, or by other persons in violation of
the first sentence of this Section 6.2(a), and made by a third party to
consummate a tender offer, exchange offer, merger, consolidation or similar
transaction which would result in such third party (or its shareholders)
owning, directly or indirectly, more than fifty percent (50%) of the Company
Shares then outstanding (or of the surviving entity in a merger) or all or
substantially all of the assets of Company and its subsidiaries, taken
together, and otherwise on terms which the Board of Directors of the Company
determines in good faith (based on its consultation with a financial advisor
of nationally recognized reputation and other such matters that it deems
relevant) would, if consummated, result in a transaction more favorable to
the Company's stockholders from a financial point of view than the Merger
and, in the reasonable good faith judgment of the Board of Directors of the
Company after consultation with its financial advisor the persons or entity
making such Company Superior Proposal has the financial means to conclude
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such transaction. The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) except as required by their fiduciary duties as determined
in good faith in consultation with outside counsel, withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Merger Sub,
the approval or recommendation by the Board of Directors of the Company or
such committee of this Agreement or the Merger, (ii) approve, recommend, or
otherwise support or endorse any Company Acquisition Proposal, or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or similar agreement (each a "Company
Acquisition Agreement") with respect to any Company Acquisition Proposal.
Nothing contained in this Section 6.2 shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 or
14e-2 promulgated under the Exchange Act or from making any disclosure to
the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, in consultation with outside counsel, such
disclosure is necessary for the Board of Directors to comply with its
fiduciary duties under applicable law; PROVIDED, HOWEVER, that, subject to
Section 6.2(b)(i), neither the Company nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw
or modify, its position with respect to this Agreement or the Merger or
approve or recommend or propose publicly to approve or recommend, a Company
Acquisition Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.2, the Company will promptly (and
in any event within twenty-four (24) hours) advise Parent, orally and in
writing, if any Company Acquisition Proposal is made or proposed to be made
or any information or access to properties, books or records of the Company
is requested in connection with a Company Acquisition Proposal, the
principal terms and conditions of any such Company Acquisition Proposal or
potential Company Acquisition Proposal or inquiry (and will disclose any
written materials received by the Company in connection with such Company
Acquisition Proposal, potential Company Acquisition Proposal or inquiry) and
the identity of the party making such Company Acquisition Proposal,
potential Company Acquisition Proposal or inquiry. The Company will keep
Parent advised of the status and details (including amendments and proposed
amendments) of any such request or Company Acquisition Proposal.
6.3 NO SOLICITATION BY PARENT.
(a) From and after the date of this Agreement until the Effective Time
or the earlier termination of this Agreement in accordance with its terms,
Parent and its subsidiaries will not, and will not permit their respective
directors, officers, investment bankers, affiliates, representatives and
agents to, (i) solicit, initiate, or encourage (including by way of
furnishing information), or take any other action to facilitate, any
inquiries or proposals that constitute, or could reasonably be expected to
lead to, any Parent Acquisition Proposal (as defined below), or (ii) engage
in, or enter into, any negotiations or discussions concerning any Parent
Acquisition Proposal. Notwithstanding the foregoing, in the event that,
notwithstanding compliance with the preceding sentence, Parent receives a
Parent Superior Proposal (as defined below) Parent may, to the extent that
the Board of Directors of Parent determines in good faith (in consultation
with outside counsel) that such action would, in the absence of the
foregoing proscriptions, be required by its fiduciary duties, participate in
discussions regarding any Parent Superior Proposal in order to be informed
with respect thereto in order to make any determination permitted pursuant
to Section 6.3(b)(i). In such event, Parent shall, (i) no less than twenty
four (24) hours prior to participating in any such discussions, inform the
Company of the material terms and conditions of such Parent Superior
Proposal, including the identity of the Person making such Parent Superior
Proposal and (ii) promptly keep the Company informed of the status including
any material change to the terms of any such Parent Superior Proposal. As
used herein, the term "Parent Acquisition Proposal" shall mean any bona fide
inquiry, proposal or offer relating to any
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(i) merger, consolidation, business combination, or similar transaction
involving Parent or any subsidiary of Parent, (ii) sale, lease or other
disposition, directly or indirectly, by merger, consolidation, share
exchange or otherwise, of any assets of Parent or any subsidiary of Parent
in one or more transactions, (iii) issuance, sale, or other disposition of
(including by way of merger, consolidation, share exchange or any similar
transaction) securities (or options, rights or warrants to purchase such
securities, or securities convertible into such securities) of Parent or any
subsidiary of Parent, (iv) liquidation, dissolution, recapitalization or
other similar type of transaction with respect to Parent or any subsidiary
of Parent, (v) tender offer or exchange offer for Parent securities; in the
case of (i), (ii), (iii), (iv) or (v) above, which transaction would result
in a third party (or its shareholders) acquiring more than thirty-five
percent (35%) of the voting power of Parent or the assets representing more
than thirty-five percent (35%) of the net income, net revenue or assets of
Parent on a consolidated basis, (vi) transaction which is similar in form,
substance or purpose to any of the foregoing transactions or (vii) public
announcement of an agreement, proposal, plan or intention to do any of the
foregoing, PROVIDED, HOWEVER, that the term "Parent Acquisition Proposal"
shall not include the Merger and the transactions contemplated thereby. For
purposes of this Agreement, "Parent Superior Proposal" means any offer not
solicited by Parent, or by other persons in violation of the first sentence
of this Section 6.3(a), and made by a third party to consummate a tender
offer, exchange offer, merger, consolidation or similar transaction which
would result in such third party (or its shareholders) owning, directly or
indirectly, more than fifty percent (50%) of Parent Shares then outstanding
(or of the surviving entity in a merger) or all or substantially all of the
assets of Parent and its subsidiaries, taken together, and otherwise on
terms which the Board of Directors of Parent determines in good faith (based
on its consultation with a financial advisor of nationally recognized
reputation and other such matters that it deems relevant) would, if
consummated, result in a transaction more favorable to Parent's stockholders
from a financial point of view than the Merger and, in the reasonable good
faith judgment of the Board of Directors of Parent after consultation with
its financial advisor the persons or entity making such Parent Superior
Proposal has the financial means to conclude such transaction. Parent will
immediately cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing.
(b) Neither the Board of Directors of Parent nor any committee thereof
shall (i) except as required by their fiduciary duties as determined in good
faith in consultation with outside counsel, withdraw or modify, or propose
to withdraw or modify, in a manner adverse to the Company, the approval or
recommendation by the Board of Directors of Parent or such committee of the
amendment to Parent's Certificate of Incorporation and the approval of the
issuance of Parent Shares, (ii) approve, recommend, or otherwise support or
endorse any Parent Acquisition Proposal, or (iii) cause Parent to enter into
any letter of intent, agreement in principle, acquisition agreement or
similar agreement (each a "Parent Acquisition Agreement") with respect to
any Parent Acquisition Proposal. Nothing contained in this Section 6.3 shall
prohibit Parent from taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or 14e-2 promulgated under the Exchange Act or
from making any disclosure to Parent's stockholders if, in the good faith
judgment of the Board of Directors of Parent, in consultation with outside
counsel, such disclosure is necessary for the Board of Directors to comply
with its fiduciary duties under applicable law; PROVIDED, HOWEVER, that,
subject to Section 6.3(b)(i), neither Parent nor its Board of Directors nor
any committee thereof shall withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement or the
Merger or approve or recommend or propose publicly to approve or recommend,
a Parent Acquisition Proposal.
(c) In addition to the obligations of Parent set forth in paragraphs
(a) and (b) of this Section 6.3, Parent will promptly (and in any event
within twenty-four (24) hours) advise the Company, orally and in writing, if
any Parent Acquisition Proposal is made or proposed to be made or any
information or access to properties, books or records of Parent is requested
in connection with a Parent Acquisition Proposal, the principal terms and
conditions of any such Parent Acquisition Proposal or potential
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Parent Acquisition Proposal or inquiry (and will disclose any written
materials received by Parent in connection with such Parent Acquisition
Proposal, potential Parent Acquisition Proposal or inquiry) and the identity
of the party making such Parent Acquisition Proposal, potential Parent
Acquisition Proposal or inquiry. Parent will keep the Company advised of the
status and details (including amendments and proposed amendments) of any
such request or Parent Acquisition Proposal.
6.4 MEETING OF STOCKHOLDERS. Parent, on the one hand, and the Company on
the other, shall each take all action necessary in accordance with applicable
law and its Certificate of Incorporation and By-Laws to convene a meeting of its
stockholders (the "Stockholder Meetings") as promptly as practicable to consider
and vote upon the approval of the Merger and the issuance of the Parent Shares,
as the case may be. Subject to the fiduciary duties of each Party's Board of
Directors under applicable law in consultation with independent legal counsel
(who may be the Party's regularly engaged independent legal counsel), the Board
of Directors of Parent, on the one hand, and the Company, on the other, shall
recommend and each shall declare advisable such approval (the requisite approval
by stockholders of the Company as well as by stockholders of Parent is
hereinafter referred to collectively as the "Requisite Stockholder Approval");
provided, however, that the Board of Directors of Parent and the Board of
Directors of the Company shall submit this Agreement to the stockholders of
Parent and the Company, as the case may be, whether or not the Board of
Directors of Parent or the Board of Directors of the Company, as the case may
be, at any time subsequent to the date hereof determines that this Agreement is
no longer advisable or recommends that the stockholders of Parent or the
Company, as the case may be, reject it. Unless the Board of Directors of Parent
or the Board of Directors of the Company, as the case may be, has withdrawn its
recommendation of this Agreement in compliance herewith, each of Parent and the
Company shall use reasonable efforts to solicit from its stockholders proxies in
favor of the approval and adoption of this Agreement and the Merger and to
secure the vote or consent of stockholders required by the DGCL and its
respective Certificate of Incorporation and Bylaws to approve and adopt this
Agreement and the Merger and the issuance of Parent Shares, as the case may be.
6.5 REGISTRATION STATEMENT. Parent will, as promptly as practicable,
prepare and file with the SEC a registration statement on Form S-4 (the "S-4
Registration Statement"), containing a proxy statement/ prospectus and a form of
proxy, in connection with the registration under the Securities Act of the
Parent Shares issuable upon conversion of the Shares and the other transactions
contemplated hereby. The Company and Parent will, as promptly as practicable,
prepare and file with the SEC a proxy statement that will be the same proxy
statement/prospectus contained in the S-4 Registration Statement and a form of
proxy, in connection with the vote of the Company's and Parent's stockholders
with respect to the Merger and the issuance of the Parent Shares (such proxy
statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Company's and Parent's
stockholders, is herein called the "Joint Proxy Statement"). The Company and
Parent will, and will cause their accountants and lawyers to, use their
reasonable efforts to have or cause the S-4 Registration Statement declared
effective as promptly as practicable, including, without limitation, causing
their accountants to deliver necessary or required instruments such as opinions,
consents and certificates, and will take any other action required or necessary
to be taken under federal or state securities laws or otherwise in connection
with the registration process, it being understood and agreed that Katten
Muchin & Zavis, counsel to Parent, and Wilson Sonsini Goodrich & Rosati, P.C.,
counsel to the Company, will each render the tax opinions referred to in Section
7.1(g) and 7.1(h), respectively, on (i) the date the preliminary Joint Proxy
Statement is filed with the SEC and (ii) the date the S-4 Registration Statement
is filed with the SEC. The Company and Parent will each use their reasonable
efforts to cause the Joint Proxy Statement to be mailed to their respective
stockholders at the earliest practicable date and will coordinate and cooperate
with one another with respect to the timing of the Stockholder Meetings and the
Company and Parent shall each use their commercially reasonable efforts to hold
such Stockholder Meetings as soon as practicable after the date hereof. Parent
shall also take any action required to be taken under state blue sky or other
securities laws in connection with the issuance of Parent Shares in the Merger.
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6.6 REASONABLE EFFORTS. The Parties shall: (i) promptly make their
respective filings and thereafter make any other required submissions under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby; and (ii) use their reasonable efforts to promptly take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.7 ACCESS TO INFORMATION. Upon reasonable notice, Parent, on the one
hand, and the Company, on the other, shall (and shall cause each of their
subsidiaries to) afford to officers, employees, counsel, accountants and other
authorized representatives of the other such party (the "Authorized
Representatives") reasonable access, during normal business hours throughout the
period prior to the Effective Time, to their properties, assets, books and
records and, during such period, shall (and shall cause each of their
subsidiaries to) furnish promptly to such Authorized Representatives all
information concerning their business, properties, assets and personnel as may
reasonably be requested for purposes of appropriate and necessary due diligence,
provided that no investigation pursuant to this Section 6.7 shall affect or be
deemed to modify any of the representations or warranties made by the Parties.
The Parties each agree to treat (and cause their Authorized Representatives to
treat) any and all information provided pursuant to this Section 6.7 in strict
compliance with the terms of that certain Confidentiality Agreement, entered by
and between the Company and Parent, dated November 18, 1999 (the
"Confidentiality Agreement").
6.8 PUBLICITY. The Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining to the
Merger in order to agree upon the text of any such press release or the making
of such public announcement, which agreement shall not be unreasonably withheld,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with an national securities exchange or national automated
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use reasonable efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcement. Notwithstanding the foregoing, in the event the Board
of Directors of Parent or the Company withdraws its recommendation of this
Agreement in compliance herewith, neither party will be required to consult with
or obtain the agreement of the other in connection with any press release or
public announcement.
6.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) From and after the Effective Time, Parent shall, and in addition
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless the present and former officers and directors of the Company and
any of their subsidiaries against all losses, expenses, claims, damages or
liabilities arising out of actions or omissions occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated
by this Agreement) to the full extent (not otherwise covered by insurance)
permitted or required under applicable law (and shall also advance expenses
as incurred to the fullest extent permitted under applicable law, PROVIDED
that the Person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Person is not
entitled to indemnification); PROVIDED, HOWEVER, the indemnification
provided hereunder by Parent shall not be greater than the greater of (x)
the indemnification actually provided pursuant to the Company's Certificate
of Incorporation and By-Laws, as in effect as of the date hereof or (y) the
indemnification actually provided by the Company as of the date hereof.
Parent agrees that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the present or former directors, officers, employees,
fiduciaries and agents of the Company, Parent or any of their subsidiaries
(collectively, the "Indemnified Parties") as provided in, as the case may
be, the Company's Certificate of Incorporation or By-Laws or pursuant to
other agreements, or articles or certificates of incorporation or by-laws or
similar documents of any of the Company's or Parent's subsidiaries, as in
effect as of the date hereof, with respect to matters occurring through the
Effective Time, shall survive the Merger.
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(b) Parent shall cause to be maintained in effect for not less than six
(6) years the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by the Company,
Parent and their subsidiaries with respect to matters occurring prior to the
Effective Time to the extent required to cover the types of actions and
omissions currently covered by such policies; PROVIDED, HOWEVER, that
(i) Parent may substitute therefor policies of substantially the same
coverage containing terms and conditions which are not less advantageous, in
any material respect, to the Indemnified Parties and (ii) Parent shall not
be required to pay an annual premium for such insurance in excess of two
hundred percent (200%) of current aggregate policies but in such case shall
purchase as much coverage as possible for such amount.
(c) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated by this Agreement is
commenced, whether before or after the Closing, the parties hereto agree to
cooperate and use their respective commercially reasonable efforts to
vigorously defend against and respond thereto.
(d) This Section 6.9 is intended to benefit the Indemnified Parties and
shall be binding on all successors and assigns of the Parties.
6.10 AFFILIATES OF THE COMPANY AND PARENT. The Company has identified to
Parent each "affiliate" of the Company for purposes of Rule 145 promulgated
under the Securities Act (each, a "Company Affiliate") and the Company will use
its reasonable efforts to obtain as promptly as practicable from each Company
Affiliate written agreements in the form attached hereto as EXHIBIT C (the
"Company Affiliate Letter") that such Company Affiliate will not sell, pledge,
transfer or otherwise dispose of any Parent Shares issued to such Company
Affiliate pursuant to the Merger, except in compliance with Rule 145 promulgated
under the Securities Act or an exemption from the registration requirements of
the Securities Act.
6.11 MAINTENANCE OF INSURANCE. Between the date hereof and through the
Effective Time each of the Company and Parent will maintain in full force and
effect all of their and their subsidiaries presently existing policies of
insurance or insurance comparable to the coverage afforded by such policies.
6.12 REPRESENTATIONS AND WARRANTIES. Each of the Company and Parent shall
give prompt notice to the other of any circumstances that would cause any of
their respective representations and warranties set forth in Section 5.1 or 5.2,
as the case may be, not to be true and correct in all material respects at and
as of the Effective Time.
6.13 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Parties shall: (a) promptly make their respective filings and
thereafter make any other required submissions under the HSR Act, the Securities
Act and the Exchange Act with respect to the Merger; (b) cooperate in the
preparation of such filings or submissions under the HSR Act; and (c) use
reasonable efforts promptly to take, or cause to be taken, all other actions and
do, or cause to be done, all other things necessary, proper or appropriate under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.14 TAX-FREE REORGANIZATION TREATMENT. Prior to the Effective Time, the
Parties shall use their best efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368 of the Code and to obtain the
opinion of their respective counsels contemplated by Section 7.1 and shall not
knowingly take or fail to take any action which action or failure to act would
jeopardize the qualification of the Merger as a reorganization within Section
368 of the Code.
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6.15 COMPANY OPTIONS; COMPANY ESPPS.
(a) After the Effective Time, except as provided above, each Substitute
Option shall be subject to the same terms and conditions as were applicable
under the related Company Option immediately prior to the Effective Time.
The Company agrees that it will not grant any stock appreciation rights or
limited stock appreciation rights and will not permit cash payments to
holders of Company Options in lieu of the substitution therefor of
Substitute Options, as described herein. As soon as practicable after the
Effective Time, Parent shall deliver to each holder of a Company Option an
appropriate notice setting forth such holder's right to acquire Parent
Shares and Company Option agreements of such holder shall be deemed to be
appropriately amended so that such Company Options shall represent rights to
acquire Parent Shares on substantially the same terms and conditions as
contained in the outstanding Company Options.
(b) From and after the date hereof, the Company (i) shall not commence
any "offering periods" or "purchase periods" under its 1997 Employee Stock
Purchase Plan or the CKS Group, Inc. Employee Stock Purchase Plan
(collectively, the "Company ESPPs") and shall apply all amounts deducted and
withheld thereunder to purchase shares of the Company in accordance with the
provisions thereof, (ii) shall not grant any bonuses under its Acquisition
Stock Bonus Plan, and (iii) shall terminate the Company ESPPs or the
Acquisition Stock Purchase Plan and the Acquisition Stock Purchase Plan as
of the Effective Time. Parent shall have no obligation or duty in respect of
the Company ESPPs or the Acquisition Stock Purchase Plan or the rights
granted thereunder.
(c) Parent shall file and use commercially reasonable efforts to cause
there to be effective within one week of the Effective Time a registration
statement on Form S-8 (or any successor form) or other appropriate forms,
with respect to Parent Shares subject to such Company Options and shall use
commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
such Company Options remain outstanding.
6.16 STOCKHOLDERS AGREEMENTS. Concurrently with the execution and delivery
of this Agreement, each of the Voting Stockholders has executed and delivered
each Stockholders Agreement, as applicable.
6.17 BOARD COMPOSITION. The Board of Directors of Parent will take all
actions within its power to cause the Board of Directors of Parent, effective
upon the Effective Time, to consist of nine (9) Persons, four (4) of whom shall
have served on the Board of Directors of Parent ("Parent Directors") immediately
prior to the Effective Time (including the Chief Executive Officer of Parent as
of the date of this Agreement), and four (4) of whom shall have served on the
Board of Directors of the Company ("Company Directors") immediately prior to the
Effective Time (including the Chief Executive Officer of the Company as of the
date of this Agreement), and the "New Director." The "New Director" shall be a
person who is not a current director or employee of Parent or the Company, and
shall be selected by the Chief Executive Officer of Parent, with the consent of
the Chief Executive Officer of the Company, which consent cannot be unreasonably
withheld or delayed. The first class of directors, with a term expiring at
Parent's 2000 annual meeting of stockholders, (and such persons shall be
nominated for election at such meeting for a term expiring at Parent's 2003
annual meeting) shall include one (1) Parent Director and one (1) Company
Director. The second class of directors, with a term expiring at Parent's 2001
annual meeting of stockholders, shall include two (2) Parent Directors and two
(2) Company Directors, one of whom shall be Robert Shaw. The third class of
directors, with a term expiring at Parent's 2002 annual meeting of stockholders,
shall include one (1) Parent Director, one (1) Company Director and the New
Director. If, prior to the Effective Time, any of the Parent or the Company
designees shall decline or be unable to serve as a director of Parent, the
Company (if such Person was designated by the Company) or Parent (if such Person
was designated by Parent) shall designate another Person to serve in such
Person's stead, which Person shall be reasonably acceptable to the other party.
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6.18 OFFICERS OF COMBINED COMPANY. Robert Shaw shall be elected
non-executive Chairman of Parent effective as of the Effective Time, and Robert
F. Bernard shall remain the Chief Executive Officer, with the additional title
of President, of Parent (reporting directly to the Board of Directors as a
whole). At the Effective Time, the Chief Operating Officer Robert Clarkson, the
Chief Creative Officer Thomas Suiter, the Chief Strategist & Information Officer
Ian Small, and the Chief People Officer Richard Evans, of the Company, as of the
date of this Agreement will be offered positions as the Chief Operating Officer,
the Chief Creative Officer, the Chief Strategist Officer and the Chief People
Officer of Parent, respectively. The Chief Executive Officer, Chief Financial
Officer and Executive Vice President of Corporate Development of Parent shall
remain in such positions after the Effective Time.
6.19 CHANGE OF NAME. Subject to the terms hereof, at Parent's
Stockholders' Meeting, Parent shall propose and recommend that its Certificate
of Incorporation be amended at the Effective Time to change its name to a new
name to be agreed upon by Parent and the Company.
6.20 CONTEMPLATED TERMINATION OF 401(K) PLAN(S). Parent and its Plan
Affiliates and Company and its Plan Affiliates each agree to evaluate whether
the termination of any of their 401(k) plans is reasonable in light of the
Merger contemplated herein. To the extent that Parent and Company agree to
terminate one (1) or more 401(k) plans prior to the Effective Time, the sponsor
of such plan will take any and all actions required under the circumstances to
effectuate such termination prior to the Effective Time including, without
limitation, resolutions of that entity's Board of Directors (the form and
substance of which resolutions shall be subject to review and approval by the
other entity).
6.21 CREDITING SERVICE AND PROVIDING OTHER BENEFITS. Parent shall either
(i) adopt and maintain any or all employee welfare benefit plan, as defined in
Section 3(1) of ERISA and as specified in Section 5.2(m) of the Company
Disclosure Schedule (the "Scheduled Welfare Plans"), and, accordingly, shall
thereby continue in full force and effect each Scheduled Welfare Plan subject to
the terms and conditions thereof, to the extent such Scheduled Welfare Plan is
offered as of the Effective Time to each eligible employee of the Company and
its participating Affiliates, his or her dependents and each Qualified
Beneficiary (as such term is defined in COBRA); or (ii) provide all eligible
employees of the Company and their dependents and all Qualified Beneficiaries
(as such term is defined in COBRA) with coverage under one or more of Parent's
employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
corresponds to a Scheduled Welfare Plan which meets all of the following
requirements as of the Effective Time (the "Successor Welfare Plan"): (A) the
coverage is as favorable as that provided to Parent employees in similar
circumstances, (B) service with the Company or its Affiliates prior to the
Effective Time shall be credited against all service and waiting period
requirements under the Successor Welfare Plan(s), (C) Parent shall make its
commercially reasonable best efforts to have the Successor Welfare Plan(s) not
provide any pre-existing condition exclusion(s) to persons who were not excluded
under the Company Scheduled Plans, and (D) the deductibles and co-payments in
effect under the Successor Welfare Plan(s) shall be reduced by any deductibles
and/or co-payments, respectively, paid by such individuals under the
corresponding Scheduled Welfare Plan for the plan year in which the Effective
Time occurs. In addition, service with the Company shall be recognized for all
purposes under Parent's compensation and benefit plans, programs, policies and
arrangements, except where crediting such service would result in a duplication
of benefits or is not legally permissible. Without limiting the generality of
the foregoing, Parent shall honor all vacation, personal and sick days accrued
by Continuing Employees under the Company's plans, policies, programs and
arrangements immediately prior to the Effective Time to the same extent required
to be honored under the Company's plan, programs, policies and arrangements in
effect on the date hereof.
6.22 EARN-OUT SHARES. The Company shall use its reasonable efforts to
amend all acquisition agreements to which it or one of its subsidiaries is a
party and that provide for the future issuance of Company Shares or shares of
capital stock of a subsidiary ("Subsidiary Shares") as deferred consideration,
purchase price adjustment or otherwise, to allow for the issuance of Parent
Shares in lieu of Company Shares or Subsidiary Shares in an amount equal to, (i)
with respect to the Company Shares, the number of Company Shares otherwise
issuable, multiplied by the Exchange Ratio, and (ii) with respect to the
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Subsidiary Shares, the number of Subsidiary Shares otherwise issuable,
multiplied by a factor that appropriately reflects the exchange ratio or other
valuation factor used in the acquisition of the respective subsidiary by the
Company.
6.23 EXEMPTION FROM LIABILITY UNDER SECTION 16(B).
(a) Provided that the Company delivers to Parent the Section 16
Information with respect to the Company prior to the Effective Time, the
Board of Directors of Parent, or a committee of Non-Employee Directors
thereof (as such term is defined for purposes of Rule 16b-3(d) under the
Exchange Act), shall adopt a resolution in advance of the Effective Time
providing that the receipt by the Company Insiders of Parent Shares in
exchange for Company Shares, and of options to purchase Parent Shares in
exchange for shares of Company Shares, and of options to purchase Parent
Shares upon assumption and conversion by Parent of options to purchase
Company Shares, in each case pursuant to the transactions contemplated
hereby and to the extent such securities are listed in the Section 16
Information, are intended to be exempt from liability pursuant to
Rule 16b-3 under the Exchange Act.
(b) "Section 16 Information" shall mean information accurate in all
respects regarding the Company Insiders, the number of Company Shares or
other Company equity securities deemed to be beneficially owned by each
Company Insider and expected to be exchanged for Parent Shares in connection
with the Merger.
(c) "Company Insiders" shall mean those officers and directors of
Company who are subject to the reporting requirements of Section 16(a) of
the Exchange Act who are listed in Section 16 Information.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations of
each Party to consummate the Merger are subject to the satisfaction or waiver by
each of the Parties of the following conditions:
(a) this Agreement and the Merger shall have received the Requisite
Stockholder Approvals;
(b) the S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect;
(c) no judgment, order, decree, statute, law, ordinance, rule or
regulation, entered, enacted, promulgated, enforced or issued by any court
or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or making
the Merger illegal (collectively, "Restraints") shall be in effect, and
there shall not be pending any suit, action or proceeding by any
Governmental Entity preventing the consummation of the Merger; PROVIDED,
HOWEVER, that each of the parties shall have used reasonable efforts to
prevent the entry of such Restraints and to appeal as promptly as possible
any such Restraints that may be entered;
(d) the waiting period(s) under the HSR Act and all applicable material
foreign merger laws, if any, shall have expired; and each of Parent and the
Company shall have received a written opinion from its respective tax
counsel (Katten Muchin & Zavis and Wilson Sonsini Goodrich & Rosati,
Professional Corporation, respectively), in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
tax-free reorganization within the meaning of Section 368(a) of the Code and
such opinions shall not have been withdrawn; PROVIDED, HOWEVER, that if the
counsel to either Parent or the Company does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to such
party if counsel to the other party renders such opinion to
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such party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are subject to the fulfillment at or prior to
the Effective Time of the following conditions, any or all of which may be
waived in whole or in part by the Company to the extent permitted by applicable
law:
(a) the representations and warranties of Parent set forth in Section
5.1 that are qualified as to materiality or Material Adverse Effect, or in
Sections 5.1(a), (b) or (d) shall be true and correct (provided, however,
that with respect to the representations and warranties contained in Section
5.1(b), an understatement in Section 5.1(b) of the number of Parent Shares
outstanding or of the number of Parent Shares issuable under outstanding
options, warrants or other commitments shall not render such representations
and warranties untrue or incorrect unless the difference between (x) the
actual number of Parent Shares outstanding or the actual number of Parent
Shares issuable under outstanding options, warrants or other commitments,
and (y) the number of Parent Shares outstanding or the number of Parent
Shares issuable under outstanding options, warrants or other commitments set
forth in Section 5.1(b) is equal to or greater than one-half percent (0.5%)
of the number set forth in Section 5.1(b)), and those that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement, and as of the Effective Time with the same
force and effect as if made on and as of the Effective Time (except to the
extent expressly made as of an earlier date, in which case as of such date),
in each case except as permitted or contemplated by this Agreement (it being
understood that for purposes of determining the accuracy of such
representations and warranties (i) any update or modification to the
Parent's Disclosure Schedule made or purported to have been made without the
Company's written consent thereto shall be disregarded, (ii) any inaccuracy
that results from a Material Adverse Effect Exception shall be disregarded,
and (iii) with respect to representations and warranties as if made as of
the Effective Time, (x) all qualifications as to materiality or Material
Adverse Effect shall be disregarded, and (y) any inaccuracies in such
representations and warranties (as so modified) shall be disregarded, if the
inaccuracies (considered collectively) do not constitute and are not
reasonably expected to result in a Material Adverse Effect on Parent).
(b) Parent and its subsidiaries shall have performed or complied in all
material respects with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(c) Parent shall have delivered to the Company a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in Section 7.1 (as it relates to Parent) and
clauses (a), (b) and (d) of this Section 7.2 is satisfied in all respects;
(d) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which has resulted in a Material
Adverse Effect (other then any Material Adverse Effect Exception) on Parent
nor shall there have occurred any event or development which could
reasonably be likely to result in the future in a Material Adverse Effect on
Parent (other than any Material Adverse Effect Exception);
(e) the Parent Shares to be issued in the Merger to the stockholders of
the Company shall have been approved for listing on the NNM.
7.3 CONDITIONS TO THE OBLIGATIONS OF PARENT. The obligation of Parent to
consummate the Merger is subject to the fulfillment at or prior to the Effective
Time of the following conditions, any or all of which may be waived in whole or
in part by Parent to the extent permitted by applicable law:
(a) the representations and warranties of the Company set forth in
Section 5.2 that are qualified as to materiality or Material Adverse Effect,
or in Sections 5.2(a), (b) or (d) shall be true and correct
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(provided, however, that with respect to the representations and warranties
contained in Section 5.2(b) an understatement in Section 5.2(b) of the
number of Company Shares outstanding or of the number of Company Shares
issuable under outstanding options, warrants or commitments shall not render
such representations and warranties untrue or incorrect unless the
difference between (x) the actual number of Company Shares outstanding or
the actual number of Company Shares issuable under outstanding options,
warrants or other commitments, and (y) the number of Company Shares
outstanding or the number of Company Shares issuable under outstanding
options, warrants or other commitments set forth in Section 5.2(b) is equal
to or greater than one-half percent (0.5%) of the number set forth in
Section 5.2(b)), and those that are no so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement, and as of the Effective Time with the same force and effect as if
made on and as of the Effective Time (except to the extent expressly made as
of an earlier date, in which case as of such date), in each case except as
permitted or contemplated by this Agreement (it being understood that for
purposes of determining the accuracy of such representations or warranties
(i) any update or modifications to the Company's Disclosure Schedule made or
purported to have been made without Parent's written consent thereto shall
be disregarded, (ii) any inaccuracy that results from a Material Adverse
Effect Exception shall be disregarded and (iii) with respect to
representations and warranties as if made as of the Effective Time, (x) all
qualifications as to materiality or Material Adverse Effect shall be
disregarded, and (y) any inaccuracies in such representations and warranties
(as so modified) shall be disregarded, if the inaccuracies (considered
collectively) do not constitute and are not reasonably expected to result in
a Material Adverse Effect on the Company).
(b) the Company and its subsidiaries shall have performed or complied
with in all material respects its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the
Effective Time;
(c) the Company shall have delivered to Parent a certificate of its
Chief Executive Officer and Chief Financial Officer to the effect that each
of the conditions specified in Section 7.1 and clauses (a), (b) and (d) of
this Section 7.3 is satisfied in all respects; and
(d) from the date of this Agreement to the Effective Time, there shall
not have been any event or development which results in a Material Adverse
Effect (other than any Material Adverse Effect Exception) on the Company.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after gaining Requisite Stockholder Approval, by the mutual written consent of
the Company and Parent.
8.2 TERMINATION BY EITHER THE COMPANY OR PARENT. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either the Company or Parent if:
(a) the Merger shall not have been consummated by May 31, 2000 (the
"Outside Date"); PROVIDED, HOWEVER, that the right to terminate this
Agreement under this Section 8.2(a) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a material
breach of this Agreement;
(b) if any Restraint shall be in effect and shall have become final and
nonappealable; or
(c) (i) at the Company's duly held Stockholders' Meeting (including any
adjournments thereof), the Requisite Stockholder Approval of the
Company's stockholders shall not have been obtained;
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provided, however, that the right to terminate this Agreement under this
Section 8.2(c)(i) shall not be available to any party which has not
complied with its obligations under Sections 6.2 or 6.3, as applicable,
and 6.4, or
(ii) at Parent's duly held Stockholders' Meeting (including any
adjournments thereof), the Requisite Stockholder Approval of Parent's
stockholders shall not have been obtained; provided, however, that the
right to terminate this Agreement under this Section 8.2(c)(ii) shall not
be available to any party which has not complied with its obligations
under Sections 6.2 or 6.3, as applicable, and 6.4.
8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated upon
written notice to Parent and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of the Company
Shares, by action of the Board of Directors of the Company, if:
(a) Parent shall have breached or failed to perform any of the
representations, warranties, covenants or other agreements contained in this
Agreement, or if any representation or warranty shall have become untrue, in
either case such that (i) the condition set forth in Section 7.2(a) or (b),
would not be satisfied as of the time of such breach or as of such time as
such representation or warranty shall have become untrue and (ii) such
breach or failure to be true has not been or is incapable of being cured
within twenty (20) business days following receipt by Parent of notice of
such failure to comply; or
(b) (i) the Board of Directors of Parent or any committee thereof shall
have withdrawn or modified in a manner adverse to the Company its
recommendation of approval of the Agreement and the issuance of Parent
Shares pursuant to the Merger, (ii) Parent shall have failed to include in
the Proxy Statement the recommendation of the Board of Directors of Parent
in favor of approval of the Agreement and the issuance of Parent Shares
pursuant to the Merger, (iii) in connection with a Rule 14d-9 disclosure,
the Board of Directors of Parent shall have taken any action other than a
rejection of the Rule 14d-9 proposal, (iv) the Board of Directors of Parent
or any committee thereof shall have recommended any Parent Acquisition
Proposal, (v) Parent or any of its officers or directors shall have entered
into discussions or negotiations in violation of Section 6.3, (vi) the Board
of Directors of Parent or any committee thereof shall have resolved to do
any of the foregoing or (vii) any Parent Acquisition Proposal is
consummated.
8.4 TERMINATION BY PARENT. This Agreement may be terminated upon written
notice to the Company and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval by holders of Parent Shares, by
action of the Board of Directors of Parent, if:
(a) the Company shall have breached or failed to perform any of the
representations, warranties, covenants or other agreements contained in this
Agreement, or if any representation or warranty shall have become untrue, in
either case such that (i) the condition set forth in Section 7.3(a) or (b),
would not be satisfied as of the time of such breach or as of such time as
such representation or warranty shall have become untrue and (ii) such
breach or failure to be true has not been or is incapable of being cured
within twenty (20) business days following receipt by the breaching party of
notice of such failure to comply; or
(b) (i) the Board of Directors of the Company or any committee thereof,
shall have withdrawn or modified in a manner adverse to Parent its approval
or recommendation of the Merger or this Agreement, (ii) the Company shall
have failed to include in the Proxy Statement the recommendation of the
Board of Directors of the Company in favor of approval to the Merger and
this Agreement, (iii) in connection with a Rule 14d-9 disclosure, the Board
of Directors of the Company shall have taken any action other than a
rejection of a Rule 14d-9 proposal, (iv) the Board of Directors of the
Company or any committee thereof shall have recommended any Company
Acquisition Proposal, (v) the Company or any of its officers or directors
shall have entered into discussions or negotiations
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in violation of Section 6.2, (vi) the Board of Directors of the Company or
any committee thereof shall have resolved to do any of the foregoing or
(vii) any Company Acquisition Proposal is consummated.
8.5 EFFECT OF TERMINATION; TERMINATION FEE.
(a) Except as set forth in this Section 8.5, in the event of termination
of this Agreement by either Parent or the Company as provided in this
Article VIII, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of the Parties or their respective
affiliates, officers, directors or stockholders except (x) with respect to
the treatment of confidential information pursuant to Section 6.6, the
payment of expenses pursuant to Section 9.1, and Article IX generally, (y)
to the extent that such termination results from the willful breach of a
Party of any of its representations or warranties, or any of its covenants
or agreements or (z) intentional or knowing misrepresentation in connection
with this Agreement or the transactions contemplated hereby.
(b) In the event that (i) a Company Acquisition Proposal or the
intention to make a Company Acquisition Proposal shall have been made
directly to the stockholders of the Company generally or otherwise publicly
announced by the Company or the Person making such Company Acquisition
Proposal, AND such Company Acquisition Proposal or intention is not
irrevocably and publicly withdrawn prior to the vote of the Company
stockholders at the Company's duly held Stockholders' Meeting, AND
thereafter this Agreement is terminated by either the Company or Parent
pursuant to Section 8.2(a) [Drop dead date] due to the Company's
Stockholders' Meeting not occurring as a result of such Company Acquisition
Proposal or (c)(i) [Company stockholder disapproval], or (ii) this Agreement
is terminated by Parent pursuant to Section 8.4(b) [Company Board withdraws
recommendation], then the Company shall promptly, but in no event later than
the date of such termination, pay Parent a fee equal to $150 million (the
"Termination Fee"), payable by wire transfer of same day funds; PROVIDED,
HOWEVER, that no Termination Fee shall be payable to Parent pursuant to
clause (i) of this paragraph (b) unless and until within twelve (12) months
of such termination the Company or any of its subsidiaries enters into any
Company Acquisition Agreement with respect to, or consummates, any Company
Acquisition Proposal (for the purposes of the foregoing proviso the term
"Company Acquisition Proposal" shall have the meaning assigned to such term
in Section 6.2 except that references to 35% in the definition of "Company
Acquisition Proposal" in Section 6.2 as they relate to net revenues, net
income, voting power or assets of Company shall be deemed to be references
to "50%"), in which event the Termination Fee shall be payable upon the
first to occur of such events; PROVIDED FURTHER, if the Company consummates
a Company Acquisition Proposal during the twelve (12) month period
subsequent to such termination contemplated by clause (i) of this paragraph
(b) with the same person or an affiliate of the person that made and
withdrew a Company Acquisition Proposal prior to such termination, the
Company shall pay Parent the Termination Fee at the time contemplated by the
preceding proviso. The Company acknowledges that the agreements contained in
this Section 8.5(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter
into this Agreement, and accordingly, if the Company fails promptly to pay
the amount due pursuant to this Section 8.5(b), and, in order to obtain such
payment, Parent commences a suit which results in a judgment against the
Company for the fee set forth in this Section 8.5(b), the Company shall pay
to Parent its costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amount
of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made.
(c) In the event that (i) a Parent Acquisition Proposal or the intention
to make a Parent Acquisition Proposal shall have been made directly to the
stockholders of Parent generally or otherwise publicly announced by Parent
or the Person making such Parent Acquisition Proposal, AND such Parent
Acquisition Proposal or intention is not irrevocably and publicly withdrawn
prior to the vote of Parent stockholders at the duly held Stockholders'
Meeting, AND thereafter this Agreement is
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terminated by either Parent or the Company pursuant to Section 8.2(a) due to
the Parent's Stockholders' Meeting not occurring as a result of such Parent
Acquisition Proposal or (c)(ii) [Parent stockholder disapproval], or
(ii) this Agreement is terminated by the Company pursuant to Section
8.3(b) [Parent Directors withdraw recommendation], then Parent shall
promptly, but in no event later than the date of such termination, pay the
Company the Termination Fee, payable by wire transfer of same day funds;
PROVIDED, HOWEVER, that no Termination Fee shall be payable to the Company
pursuant to clause (i) of this paragraph (c) unless and until within twelve
(12) months of such termination Parent or any of its subsidiaries enters
into any Parent Acquisition Agreement with respect to, or consummates, any
Parent Acquisition Proposal (for the purposes of the foregoing proviso the
term "Parent Acquisition Proposal" shall have the meaning assigned to such
term in Section 6.3 except that references to 35% in the definition of
"Parent Acquisition Proposal" in Section 6.3 as they relate to net revenues,
net income, voting power or assets of Parent, shall be deemed to be
references to "50%"), in which event the Termination Fee shall be payable
upon the first to occur of such events; PROVIDED FURTHER, that if the Parent
consummates a Parent Acquisition Proposal during the twelve (12) month
period subsequent to such termination contemplated by clause (i) of this
paragraph (c) with the same person or an affiliate of such person that made
and withdrew a Parent Acquisition Proposal prior to such termination, Parent
shall pay the Company the Termination Fee at the time contemplated by the
preceding proviso. Parent acknowledges that the agreements contained in this
Section 8.5(c) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Company would not enter
into this Agreement; accordingly, if Parent fails promptly to pay the amount
due pursuant to this Section 8.5(c), and, in order to obtain such payment,
the Company commences a suit which results in a judgment against Parent for
the fee set forth in this Section 8.5(c), Parent shall pay to the Company
its costs and expenses (including reasonable attorneys' fees and expenses)
in connection with such suit, together with interest on the amount of the
fee at the prime rate of Citibank, N.A. in effect on the date such payment
was required to be made.
(d) If this Agreement is terminated under circumstances in which a party
is entitled to receive the Termination Fee, the payment of such Termination
Fee shall be the sole and exclusive remedy available to such party, except
in the event of (x) a willful breach by the other party of any provision of
this Agreement in any material respect, or (y) the intentional or knowing
misrepresentation in connection with this Agreement or the transactions
contemplated hereby, in which event the non-breaching Party shall have all
rights, powers and remedies against the breaching Party which may be
available at law or in equity. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any such
right, power or remedy by any Party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such Party.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Whether or not the Merger shall be consummated,
each Party shall pay its own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby, provided that the Surviving Corporation shall pay any and
all property or transfer taxes imposed on the Surviving Corporation. The filing
fee and the cost of printing the S-4 Registration Statement and the Joint Proxy
Statement and the filing fee for the required filing under the HSR Act shall be
borne equally by the Company and Parent.
9.2 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties made herein shall not survive beyond the Effective Time or a
termination of this Agreement, except to the extent a willful breach of such
representation or intentional or knowing misrepresentation formed the basis for
such termination. This Section 9.2 shall not limit any covenant or agreement of
the Parties which by its terms contemplates performance after the Effective
Time.
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9.3 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto, by resolution
of their respective Board of Directors, may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties; provided, however, that after approval of the Merger by the
Requisite Stockholder Approval is obtained, no amendment which requires further
stockholder approval shall be made without such approval of stockholders.
9.4 WAIVER OF CONDITIONS. The conditions to each of the Parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
9.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
9.7 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other Parties shall be deemed delivered upon
actual receipt and shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, reputable overnight courier, or
by facsimile transmission (with a confirming copy sent by reputable overnight
courier), as follows:
(a) if to Parent or Merger Sub, to:
Whittman-Hart, Inc.
311 South Wacker Drive
Suite 3500
Chicago, Illinois 60606-6618
Attention: Chief Executive Officer
Facsimile: (312) 913-3020
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Matthew S. Brown, Esq.
Facsimile: (312) 902-1061
(b) if to the Company, to:
USWeb Corporation
410 Townsend Street
San Francisco, CA 94107
Attention: Chief Executive Officer
Facsimile: (415) 369-6713
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attention: Mark E. Bonham, Esq.
Steve L. Camahort, Esq.
Facsimile: (650) 493-6811
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or to such other Persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including the Disclosure
Schedule and Confidentiality Agreement, (i) constitutes the entire agreement
among the Parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, among the
Parties or any of them with respect to the subject matter hereof, and
(ii) shall not be assigned by operation of law or otherwise.
9.9 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article IV hereof,
is intended to or shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that (a) the provisions of Section 6.9 shall inure to the
benefit of and be enforceable by the Indemnified Parties; and (b) the provisions
of Section 6.19 and 6.20 shall inure to the benefit of and be enforceable by the
officers and directors of the Company and Parent referenced herein.
9.10 CERTAIN DEFINITIONS. As used herein:
(a) "ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
(b) "Governmental Entity" means the United States or any state, local or
foreign government, or instrumentality, division, subdivision, agency,
department or authority of any thereof.
(c) "knowledge" with respect to a party hereto shall mean the actual
knowledge of any of the executive officers of such party.
(d) "Malfunction" means the failure to: (i) accurately recognize dates
falling before, on or after the year 2000; (ii) accurately record, store,
retrieve and process data input and date information; (iii) function in a
manner which does not create any ambiguity as to century; and
(iv) accurately manage and manipulate single century and multi-century
formulae, including leap year calculations.
(e) "Material Adverse Effect" shall mean any adverse change in the
business, operations, liabilities (contingent or otherwise), results of
operations or financial performance, or condition of Parent or any of its
subsidiaries or the Company or any of its subsidiaries, as the case may be,
which is material to Parent and its subsidiaries, taken as a whole, or the
Company and its subsidiaries, taken as a whole, as the case may be.
(f) "Material Adverse Effect Exception" means (i) a change in the market
price or trading volume of either the Parent Shares or the Company Shares
between the date hereof and the Effective Time, in and of itself, and not
otherwise attributable to or resulting from any other effects, changes,
events, circumstances or conditions which by itself would constitute a
Material Adverse Effect (ii) effects, changes, events, circumstances and
conditions generally affecting the industry in which either Parent and its
subsidiaries or the Company and its subsidiaries operate or from changes in
general business or economic conditions in the region, nation or world, or
(iii) any effects, changes, events, circumstances or conditions resulting
from (A) compliance by Parent or the Company with the terms of, or the
taking of any action expressly required by, this Agreement, or (B) the
pendency or announcement of this Agreement, or the transactions contemplated
hereby, including changes or effects resulting from employee attrition or a
delay of, reduction in or a cancellation or change in the terms of customer
engagements or relationships with alliance partners or other third parties,
each to the extent attributable to the pendency or announcement of this
Agreement or the transactions contemplated hereby.
(g) "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated association, corporation, entity or
Governmental Entity.
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(h) "Significant Tax Agreement" is any agreement to which any Party or
any subsidiary of any Party is a party under which such Party or such
subsidiary could reasonably be expected to be liable to another party under
such agreement in an amount in excess of $25,000 in respect of Taxes payable
by such other party to any taxing authority.
(i) "Software" means all computer software and subsequent versions
thereof, including but not limited to, source code, object code, objects,
comments, screens, user interfaces, report formats, templates, menus,
buttons and icons, and all files, data, materials manuals, design notes and
other items and documentation related thereto or associated therewith.
(j) "Subsidiary" shall mean, when used with reference to any entity, any
entity fifty percent (50%) or more of the outstanding voting securities or
interests of which are owned directly or indirectly by such former entity.
(k) "Tax" or "Taxes" refers to any and all federal, state, local and
foreign, taxes, assessments and other governmental charges, duties,
impositions and liabilities relating to taxes, including taxes based upon or
measured by gross receipts, income, profits, sales, use and occupation, and
value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and
including any liability for taxes of a predecessor entity.
9.11 OBLIGATION OF THE COMPANY. Whenever this Agreement requires the
Surviving Corporation or Merger Sub to take any action, such requirement shall
be deemed to include an undertaking on the part of Parent to cause such party to
take such action.
9.12 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party.
9.13 SPECIFIC PERFORMANCE. The parties hereto acknowledge that irreparable
damage would result if this Agreement were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance issued by a court
of competent jurisdiction. Such remedy shall, however, not be exclusive and
shall be in addition to any other remedies which any party may have under this
Agreement or otherwise.
9.14 RECOVERY OF ATTORNEY'S FEES. In the event of any litigation between
the parties relating to this Agreement, the prevailing party shall be entitled
to recover its reasonable attorney's fees and costs (including court costs) from
the non-prevailing party, provided that if both parties prevail in part, the
reasonable attorney's fees and costs shall be awarded by the court in such
manner as it deems equitable to reflect the relative amounts and merits of the
parties' claims.
9.15 CAPTIONS. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Parties hereto and shall be effective as of
the date first hereinabove written.
<TABLE>
<S> <C> <C>
WHITTMAN-HART, INC.
By: /s/ ROBERT F. BERNARD
-----------------------------------------
Robert F. Bernard
CHAIRMAN & CEO
UNIWHALE, INC.
By: /s/ ROBERT F. BERNARD
-----------------------------------------
Robert F. Bernard
PRESIDENT
USWEB CORPORATION
By: /s/ CAROLYN AVER
-----------------------------------------
Carolyn Aver
CHIEF FINANCIAL OFFICER
</TABLE>
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ANNEX B
[LOGO]
December 12, 1999
Board of Directors
USWeb Corporation
410 Townsend Street
San Francisco, California 94107
Members of the Board:
We understand that USWeb Corporation ("USWeb"), Whittman-Hart, Inc.
("Whittman-Hart"), and Merger Sub ("Merger Sub"), a wholly-owned subsidiary of
Whittman-Hart, propose to enter into an Agreement and Plan of Merger,
substantially in the form of the draft dated December 12, 1999 (the "Merger
Agreement") which provides, among other things, for the merger (the "Merger") of
Merger Sub with and into USWeb. Pursuant to the Merger, USWeb will become a
wholly-owned subsidiary of Whittman-Hart and each outstanding share of common
stock, par value $0.001 per share (the "USWeb Common Stock"), of USWeb, other
than shares held in treasury or held by Whittman-Hart or any affiliate of
Whittman-Hart or USWeb or as to which dissenters' rights have been perfected,
will be converted into the right to receive 0.865 shares (the "Exchange Ratio")
of common stock, par value $0.001 per share, of Whittman-Hart (the
"Whittman-Hart Common Stock"). The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio pursuant to the
Merger Agreement is fair from a financial point of view to the holders of common
stock of USWeb.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Whittman-Hart and USWeb;
(ii) reviewed certain internal financial statements and other financial and
operating data concerning Whittman-Hart and USWeb prepared by the
managements of Whittman-Hart and USWeb, respectively;
(iii) discussed the past and current operations and financial condition and
the prospects of Whittman-Hart, including information relating to
certain strategic, financial and operational benefits anticipated from
the Merger, with senior executives of Whittman-Hart;
(iv) discussed the past and current operations and financial condition and
the prospects of USWeb, including information relating to certain
strategic, financial and operational benefits anticipated from the
Merger, with senior executives of USWeb;
(v) reviewed the pro forma impact of the Merger on the earnings per share of
Whittman-Hart;
(vi) reviewed the reported prices and trading activity for the Whittman-Hart
Common Stock and USWeb Common Stock;
(vii) compared the financial performance of Whittman-Hart and USWeb and the
prices and trading activity of the Whittman-Hart Common Stock and USWeb
Common Stock with that of certain other publicly-traded companies and
their securities;
(viii) analyzed the contribution of revenues and earnings from USWeb and
Whittman-Hart to the combined company;
(ix) reviewed and discussed with the senior managements of Whittman-Hart and
USWeb their strategic rationales for the Merger;
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Board of Directors
December 12, 1999
Page 2
(x) participated in discussions and negotiations among representatives of
Whittman-Hart and USWeb and their financial and legal advisors;
(xi) reviewed the draft Merger Agreement and certain related agreements; and
(xii) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the internal financial statements and other financial
and operating data, and discussions relating to the strategic, financial and
operational benefits anticipated from the Merger provided by Whittman-Hart and
USWeb, we have assumed that they have, in each case, been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
prospects of Whittman-Hart and USWeb. We have relied upon the assessment by the
managements of Whittman-Hart and USWeb of their ability to retain key employees
of Whittman-Hart and USWeb. We have also relied upon, without independent
verification, the assessment by the managements of Whittman-Hart and USWeb of:
(i) the strategic and other benefits expected to result from the Merger;
(ii) the timing and risks associated with the integration of Whittman-Hart and
USWeb; and (iii) the validity of, and risks associated with, Whittman-Hart's and
USWeb's existing and future technologies, services or business models. We have
not made any independent valuation or appraisal of the assets or liabilities or
technology of Whittman-Hart and USWeb, nor have we been furnished with any such
appraisals. In addition, we have assumed that the Merger will be consummated in
accordance with the terms set forth in the Merger Agreement including that the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986 (as amended). Our opinion is necessarily based
on financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of USWeb in
connection with this transaction and will receive a fee for our services. In the
ordinary course of our business we may actively trade the securities of USWeb
and Whittman-Hart for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of USWeb, except that this opinion may be included in its entirety in
any filing made by USWeb with the Securities and Exchange Commission in respect
of the transaction. In addition, this opinion does not in any manner address the
prices at which the USWeb Common Stock and the Whittman-Hart Common Stock will
actually trade at any time and we express no recommendation or opinion as to how
the holders of USWeb Common Stock should vote at the stockholders' meeting held
in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Exchange Ratio pursuant to the Merger Agreement is fair from a
financial point of view to the holders of common stock of USWeb.
Very truly yours,
<TABLE>
<S> <C> <C>
MORGAN STANLEY & CO. INCORPORATED
By: /s/ MARK S. MENELL
-----------------------------------------
Mark S. Menell
PRINCIPAL
</TABLE>
B-2
<PAGE>
ANNEX C
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
December 12, 1999
Board of Directors
Whittman-Hart, Inc.
311 S. Wacker Drive
Suite 3500
Chicago, Illinois 60606-6618
Members of the Board:
You have asked us to advise you with respect to the fairness to
Whittman-Hart, Inc. ("Whittman-Hart") from a financial point of view of the
Exchange Ratio (as defined below) set forth in the Agreement and Plan of Merger,
dated as of December 12, 1999 (the "Merger Agreement"), by and among Whittman-
Hart, Whittman-Hart Sub, Inc., a wholly owned subsidiary of Whittman-Hart
("Merger Sub"), and USWeb Corporation ("USWeb"). The Merger Agreement provides
for, among other things, the merger (the "Merger") of Merger Sub with and into
USWeb pursuant to which each outstanding share of the common stock, par value
$0.001 per share, of USWeb will be converted into the right to receive 0.865
(the "Exchange Ratio") of a share of the common stock, par value $0.001 per
share ("Whittman-Hart Common Stock"), of Whittman-Hart.
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to Whittman-Hart
and USWeb. We have also reviewed certain other information relating to
Whittman-Hart and USWeb, including financial forecasts, provided to or discussed
with us by Whittman-Hart and USWeb, and have met with the managements of
Whittman-Hart and USWeb to discuss the businesses and prospects of Whittman-Hart
and USWeb, including the ability to integrate the businesses of Whittman-Hart
and USWeb. We have also considered certain financial and stock market data of
Whittman-Hart and USWeb, and we have compared those data with similar data for
other publicly held companies in businesses similar to those of Whittman-Hart
and USWeb, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial information relating to Whittman-Hart and USWeb, we
have been advised, and have assumed, that such information represents reasonable
estimates and judgments as to the future financial performance of Whittman-Hart
and USWeb. You also have informed us, and we have assumed, that the Merger will
be treated as a tax-free reorganization for federal income tax purposes. In
addition, we have not been requested to make, and have not made an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Whittman-Hart or USWeb, nor have we been furnished with any such evaluations
or appraisals. Our opinion is necessarily based upon information available to
us, and financial, economic, market and other conditions as they exist and can
be evaluated on the date hereof. We are not expressing any opinion as to the
actual value of the Whittman-Hart Common Stock when issued pursuant to the
Merger or the price at which the Whittman-Hart Common Stock will trade
subsequent to the Merger.
C-1
<PAGE>
<TABLE>
<S> <C>
[LOGO] [LOGO]
</TABLE>
Board of Directors
Whittman-Hart, Inc.
December 12, 1999
Page 2
We have acted as financial advisor to Whittman-Hart in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. We will also receive a fee
upon delivery of this opinion. Credit Suisse First Boston and its affiliates
have in the past provided financial services to Whittman-Hart and USWeb
unrelated to the Merger, for which we have received compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the equity securities of both Whittman-Hart and USWeb for their
own accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Whittman-Hart in connection with its evaluation of the Merger, does
not constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to any matter relating to the Merger, and is not to be
quoted or referred to, in whole or in part, in any registration statement,
prospectus or proxy statement, or in any other document used in connection with
the offering or sale of securities, nor shall this letter be used for any other
purposes, without our prior written consent, except that this letter may be
attached in its entirety as an exhibit to any registration statement, prospectus
or proxy statement relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to Whittman-Hart from a financial point of
view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-2
<PAGE>
ANNEX D
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (the "Stockholder Agreement"), dated
December 12, 1999, is by and between Whittman-Hart, Inc., a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of USWeb
Corporation, a Delaware corporation (the "Company").
RECITALS
A. WHEREAS, concurrent with the execution of this Stockholder Agreement,
Parent, the Company and Merger Sub, a Delaware corporation and a wholly owned
subsidiary of Parent, have entered into an Agreement and Plan of Merger, dated
of even date herewith (as amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company, with the
Company continuing as the surviving corporation and as a direct wholly owned
subsidiary of Parent (the "Merger").
B. WHEREAS, the Stockholder owns shares, par value $0.001 per share, of
common stock of the Company (the "Shares") in the amounts set forth opposite the
Stockholder's name and signature on the signature page hereof.
C. WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent desires that the Stockholder agree, and the Stockholder is
willing to agree, to enter into this Stockholder Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere herein,
capitalized terms used and not defined herein have the respective meanings
ascribed to them in the Merger Agreement. For purposes of this Stockholder
Agreement:
(a) "Affiliate" means, as to any specified Person, (i) any stockholder,
equity holder, officer, or director of such Person and their family members or
(ii) any other Person which, directly or indirectly, controls, is controlled by,
employed by or is under common control with, any of the foregoing. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meanings of
Section 13(d)(3) of the Exchange Act.
(c) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
2. DISCLOSURE. The Stockholder hereby agrees to permit the Company and
Parent to publish and disclose in the S-4 Registration Statement and the Proxy
Statement/Prospectus (including all documents and schedules filed with the SEC),
and any press release or other disclosure document which Parent reasonably
determines to be necessary or desirable in connection with the Merger and any
transactions
D-1
<PAGE>
related thereto, the Stockholder's identity and ownership of the Shares and the
nature of the Stockholder's commitments, arrangements and understandings under
this Stockholder Agreement.
3. VOTING OF THE COMPANY STOCK. The Stockholder hereby agrees that, during
the period commencing on the date hereof and continuing until the first to occur
of (a) the Effective Time or (b) the termination of the Merger Agreement in
accordance with its terms (the "Termination Date"), at any meeting of the
holders of the Shares, however called, or in connection with any written consent
of the holders of the Shares, he shall vote (or cause to be voted) the Shares
held of record or Beneficially Owned by the Stockholder, whether heretofore
owned or hereafter acquired: (i) in favor of approval of the Merger Agreement
and any actions required in furtherance thereof and hereof, (ii) against any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty, or any other obligation or agreement, of
the Company under the Merger Agreement or the Stockholder under this Stockholder
Agreement (after giving effect to any materiality or similar qualifications
contained therein) and (iii) except as otherwise agreed to in writing in advance
by Parent, against the following actions (other than the Merger and the
transactions contemplated by this Stockholder Agreement and the Merger
Agreement): (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company, (B) a sale,
lease or transfer of a material amount of assets of the Company, or a
reorganization, recapitalization, dissolution or liquidation of the Company;
(C)(1) any change in a majority of the individuals who constitute the Company's
Board of Directors; (2) any change in the present capitalization of the Company
or any amendment of the Company's Certificate of Incorporation or By-Laws;
(3) any material change in the Company's corporation structure or business; or
(4) any other action which, in the case of each of the matters referred to in
clauses (C)(1), (2) or (3), is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially and adversely affect the
Merger and the transactions contemplated by this Stockholder Agreement and the
Merger Agreement. The Stockholder agrees that he will not enter into any
agreement or understanding with any Person the effect of which would be
inconsistent with or violative of any provision contained in this Section 3.
Notwithstanding the foregoing, nothing in this Section 3 shall require the
Stockholder to exercise any options with respect to Company Shares.
4. GRANT OF PROXY; APPOINTMENT OF PROXY. (a) The Stockholder hereby
irrevocably grants to, and appoints, the Board of Directors of Parent, the
Stockholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place and stead of the Stockholder, to vote the Stockholder's
Shares, or grant a consent or approval in respect of such Shares as set forth in
Section 3 hereof. The Stockholder shall have no claim against such proxy and
attorney-in-fact, for any action taken, decision made or instruction given by
such proxy and attorney-in-fact in accordance with this Stockholder Agreement.
(b) The Stockholder understands and acknowledges that Parent is entering
into the Merger Agreement in reliance upon such irrevocable proxy. The
Stockholder hereby affirms that the irrevocable proxy set forth in this
Section 4 is given to secure the performance of the duties of the Stockholder
under this Stockholder Agreement. The Stockholder hereby affirms that the
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. The Stockholder hereby ratifies and confirms that such irrevocable
proxy may lawfully do or cause to be done by virtue hereof.
5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The
Stockholder hereby represents and warrants to, and agrees with, Parent as
follows:
(a) OWNERSHIP OF SHARES. The Stockholder is the sole record and Beneficial
Owner of the number of Shares opposite the Stockholder's name on the signature
page hereof. On the date hereof, the Shares set forth opposite the Stockholder's
name on the signature page hereof constitute all of the Shares owned of record
or Beneficially Owned by the Stockholder or to which the Stockholder has voting
power by proxy, voting agreement, voting trust or other similar instrument. The
Stockholder has sole voting power and sole power to issue instructions with
respect to the matters set forth in Section 3 hereof, sole power of disposition,
sole power of conversion, sole power to demand appraisal rights and sole power
to agree to all
D-2
<PAGE>
of the matters set forth in this Stockholder Agreement, in each case with
respect to all of the Shares set forth opposite the Stockholder's name on the
signature page hereof, with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws, and the terms of this
Stockholder Agreement.
(b) AUTHORIZATION. The Stockholder has the legal capacity, power and
authority to enter into and perform all of the Stockholder's obligations under
this Stockholder Agreement. The execution, delivery and performance of this
Stockholder Agreement by the Stockholder will not violate any other agreement to
which the Stockholder is a party including, without limitation, any voting
agreement, stockholders agreement, voting trust, trust or similar agreement.
This Stockholder Agreement has been duly and validly executed and delivered by
the Stockholder and constitutes a valid and binding agreement enforceable
against the Stockholder in accordance with its terms. There is no beneficiary or
holder of a voting trust certificate or other interest of any trust of which the
Stockholder is a trustee whose consent is required for the execution and
delivery of this Stockholder Agreement or the consummation by the Stockholder of
the transactions contemplated hereby. If the Stockholder is married and the
Stockholder's Shares constitute community property, this Stockholder Agreement
has been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, the Stockholder's spouse, enforceable against such person
is accordance with its terms.
(c) NO CONFLICTS. No filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Stockholder Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Stockholder Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof shall
(A) conflict with or result in any breach of the organizational documents of the
Stockholder (if applicable), (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the Stockholder or any of
its properties or assets may be bound, or (C) violate any order, writ
injunction, decree, judgment, order, statute, rule or regulation applicable to
the Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as applicable in connection with the
transactions contemplated by Section 3 and 4 hereof, the Stockholder's Shares at
all times during the term hereof will be Beneficially Owned by the Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever.
(e) NO SOLICITATION. The Stockholder agrees not to take any action
inconsistent with or in violation of Section 6.2 of the Merger Agreement.
(f) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. The Stockholder
shall not, directly or indirectly (i) except as [with respect to 400,000 Shares
owned by the Stockholder or]* contemplated by the Merger Agreement, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Stockholder's
Shares or any interest therein, (ii) except as contemplated by this Stockholder
Agreement, grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to the Shares, or
(iii) take any action that would make any representation or warranty of the
Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling the Stockholder from performing the Stockholder's
obligations under this Stockholder Agreement.
- ------------------------
* Bracketed language appears only in the Stockholder Agreement of Mark D.
Kvamme.
D-3
<PAGE>
(g) RELIANCE BY PARENT. The Stockholder understands and acknowledges that
Parent is entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Stockholder Agreement.
6. STOP TRANSFER LEGEND.
(a) The Stockholder agrees and covenants to Parent that the Stockholder
shall not request that the Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of the
Stockholder's Shares, unless such transfer is made in compliance with this
Stockholder Agreement.
(b) Without limiting the covenants set forth in paragraph (a) above, in the
event of a stock dividend or distribution, or any change in Shares by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, other than pursuant to the Merger, the term "Shares" shall be
deemed to refer to and include the Shares into which or for which any or all of
the Shares may be changed or exchanged and appropriate adjustments shall be made
to the terms and provisions of this Stockholder Agreement.
7. FURTHER ASSURANCES. From time to time, at Parent's request and without
further consideration, the Stockholder shall execute and deliver such additional
documents and take all such further lawful action as may be necessary or
desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Stockholder Agreement.
8. STOCKHOLDER CAPACITY. If the Stockholder is or becomes during the term
hereof a director or an officer of the Company, the Stockholder makes no
agreement or understanding herein in his capacity as such director or officer.
The Stockholder signs solely in his capacity as the record and Beneficial Owner
of the Stockholder's Shares.
9. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) the Termination Date or (b) the Effective Time.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Stockholder Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Subject to Section 6(f) hereof, the Stockholder agrees
that this Stockholder Agreement and the obligations hereunder shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
Beneficial Ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation, the Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any such transfer of Shares, the
transferor shall remain liable for the performance of all obligations under this
Stockholder Agreement; [provided, however, that the 400,000 shares that are
freely transferable by Stockholder pursuant to Section 5(f) hereof shall, if
transferred by Stockholder, be transferred and held by transferee free and clear
of any obligations under this Stockholder Agreement.]
(c) ASSIGNMENT. This Stockholder Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party hereto, provided that Parent may assign, in its sole discretion, its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Parent of its
obligations hereunder if such assignee does not perform such obligations.
- ------------------------
* Bracketed language appears only in the Stockholder Agreement of Mark D.
Kvamme.
D-4
<PAGE>
(d) AMENDMENT AND MODIFICATION. This Stockholder Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and delivered (i) personally, (ii) via
telecopy, (iii) via overnight courier (providing proof of delivery) or (iv) via
registered or certified mail (return receipt requested). Such notice shall be
deemed to be given, dated and received (i) when so delivered personally, via
telecopy upon confirmation, or via overnight courier upon actual delivery or
(ii) five days after the date of mailing, if mailed by registered or certified
mail. Any notice pursuant to this section shall be delivered as follows:
If to the Stockholder to the address set forth for the Stockholder on the
signature page to this Stockholder Agreement.
If to Parent:
Whittman-Hart, Inc.
311 South Wacker Drive, Suite 3500
Chicago, Illinois 60606
Attn: Chief Executive Officer
with a copy to:
Katten Muchin Zavis
525 West Monroe Street
Chicago, Illinois 60661
Attn: Matthew S. Brown, Esq.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Stockholder Agreement will be interpreted in such a manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Stockholder Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision of this Stockholder Agreement in
such jurisdiction, and this Stockholder Agreement will be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. The parties hereto agree recognize and
acknowledge that a breach by it of any covenants or agreements contained in this
Stockholder Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Stockholder Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any such
rights, powers or remedies by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Stockholder Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
D-5
<PAGE>
(j) NO THIRD PARTY BENEFICIARIES. This Stockholder Agreement is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(k) GOVERNING LAW. This Stockholder Agreement will be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof.
(l) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN CONNECTION
WITH THIS STOCKHOLDER AGREEMENT.
(m) DESCRIPTION HEADINGS. The description headings used herein are for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Stockholder Agreement.
(n) COUNTERPARTS. This Stockholder Agreement may be executed in
counterparts, each of which will be considered one and the same Stockholder
Agreement and will become effective when such counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
(o) RECOVERY OF ATTORNEY'S FEES. In the event of any litigation between
the parties relating to this Stockholder Agreement, the prevailing party shall
be entitled to recover its reasonable attorney's fees and costs (including court
costs) from the non-prevailing party, provided that if both parties prevail in
part, the reasonable attorney's fees and costs shall be awarded by the court in
such a manner as it deems equitable to reflect the relative amounts and merits
of the parties' claims.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, Parent and the Stockholder have caused this Stockholder
Agreement to be duly executed as of the day and year first above written.
<TABLE>
<S> <C> <C>
PARENT:
By:
--------------------------------------
Name:
--------------------------------------------
Title:
---------------------------------------------
STOCKHOLDER:
By:
--------------------------------------
Name:
--------------------------------------------
Number of Existing Shares:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
</TABLE>
D-7
<PAGE>
ANNEX E
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (the "Stockholder Agreement"), dated
December 12, 1999, is by and between USWeb Corporation, a Delaware corporation
(the "Company"), and the undersigned stockholder ("Stockholder") of
Whittman-Hart, Inc., a Delaware corporation ("Parent").
RECITALS
A. WHEREAS, concurrent with the execution of this Stockholder Agreement,
Parent, the Company and Merger Sub, a Delaware corporation and a wholly owned
subsidiary of Parent, have entered into an Agreement and Plan of Merger, dated
of even date herewith (as amended from time to time, the "Merger Agreement"),
pursuant to which Merger Sub will be merged with and into the Company, with the
Company continuing as the surviving corporation and as a direct wholly owned
subsidiary of Parent (the "Merger").
B. WHEREAS, the Stockholder owns shares, par value $0.001 per share, of
common stock of Parent (the "Shares") in the amounts set forth opposite the
Stockholder's name and signature on the signature page hereof.
C. WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, the Company desires that the Stockholder agree, and the Stockholder
is willing to agree, to enter into this Stockholder Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. CERTAIN DEFINITIONS. In addition to the terms defined elsewhere herein,
capitalized terms used and not defined herein have the respective meanings
ascribed to them in the Merger Agreement. For purposes of this Stockholder
Agreement:
(a) "Affiliate" means, as to any specified Person, (i) any stockholder,
equity holder, officer, or director of such Person and their family members or
(ii) any other Person which, directly or indirectly, controls, is controlled by,
employed by or is under common control with, any of the foregoing. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as within the meanings of
Section 13(d)(3) of the Exchange Act.
(c) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.
2. DISCLOSURE. The Stockholder hereby agrees to permit the Company and
Parent to publish and disclose in the S-4 Registration Statement and the Proxy
Statement/Prospectus (including all documents and schedules filed with the SEC),
and any press release or other disclosure document which Parent
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reasonably determines to be necessary or desirable in connection with the Merger
and any transactions related thereto, the Stockholder's identity and ownership
of the Shares and the nature of the Stockholder's commitments, arrangements and
understandings under this Stockholder Agreement.
3. VOTING OF PARENT STOCK. The Stockholder hereby agrees that, during the
period commencing on the date hereof and continuing until the first to occur of
(a) the Effective Time or (b) the termination of the Merger Agreement in
accordance with its terms (the "Termination Date"), at any meeting of the
holders of the Shares, however called, or in connection with any written consent
of the holders of the Shares, he shall vote (or cause to be voted) the Shares
held of record or Beneficially Owned by the Stockholder, whether heretofore
owned or hereafter acquired: (i) in favor of approval of the Merger Agreement
and any actions required in furtherance thereof and hereof, including the
amendment of Parent's Certificate of Incorporation to increase the number of
authorized shares to allow for issuance of Shares by virtue of the Merger,
(ii) against any action or agreement that would result in a breach in any
respect of any covenant, representation or warranty, or any other obligation or
agreement, of Parent under the Merger Agreement or the Stockholder under this
Stockholder Agreement (after giving effect to any materiality or similar
qualifications contained therein) and (iii) except as otherwise agreed to in
writing in advance by the Company, against the following actions (other than the
Merger and the transactions contemplated by this Stockholder Agreement and the
Merger Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving Parent, (B) a
sale, lease or transfer of a material amount of assets of Parent, or a
reorganization, recapitalization, dissolution or liquidation of Parent;
(C)(1) any change in a majority of the individuals who constitute Parent's Board
of Directors; (2) any change in the present capitalization of Parent or any
amendment of Parent's Certificate of Incorporation or By-Laws; (3) any material
change in Parent's corporation structure or business; or (4) any other action
which, in the case of each of the matters referred to in clauses (C)(1), (2) or
(3), is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially and adversely affect the Merger and the
transactions contemplated by this Stockholder Agreement and the Merger
Agreement. The Stockholder agrees that he will not enter into any agreement or
understanding with any Person the effect of which would be inconsistent with or
violative of any provision contained in this Section 3. Notwithstanding the
foregoing, nothing in this Section 3 shall require the Stockholder to exercise
any options with respect to Parent Shares.
4. GRANT OF PROXY; APPOINTMENT OF PROXY. (a) The Stockholder hereby
irrevocably grants to, and appoints, the Board of Directors of the Company, the
Stockholder's proxy and attorney-in-fact (with full power of substitution), for
and in the name, place and stead of the Stockholder, to vote the Stockholder's
Shares, or grant a consent or approval in respect of such Shares as set forth in
Section 3 hereof. The Stockholder shall have no claim against such proxy and
attorney-in-fact, for any action taken, decision made or instruction given by
such proxy and attorney-in-fact in accordance with this Stockholder Agreement.
(b) The Stockholder understands and acknowledges that the Company is
entering into the Merger Agreement in reliance upon such irrevocable proxy. The
Stockholder hereby affirms that the irrevocable proxy set forth in this
Section 4 is given to secure the performance of the duties of the Stockholder
under this Stockholder Agreement. The Stockholder hereby affirms that the
irrevocable proxy is coupled with an interest and may under no circumstances be
revoked. The Stockholder hereby ratifies and confirms that such irrevocable
proxy may lawfully do or cause to be done by virtue hereof.
5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. The
Stockholder hereby represents and warrants to, and agrees with, the Company as
follows:
(a) OWNERSHIP OF SHARES. The Stockholder is the sole record and Beneficial
Owner of the number of Shares opposite the Stockholder's name on the signature
page hereof. On the date hereof, the Shares set forth opposite the Stockholder's
name on the signature page hereof constitute all of the Shares owned of record
or Beneficially Owned by the Stockholder or to which the Stockholder has voting
power by proxy,
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voting agreement, voting trust or other similar instrument. The Stockholder has
sole voting power and sole power to issue instructions with respect to the
matters set forth in Section 3 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to agree to all
of the matters set forth in this Stockholder Agreement, in each case with
respect to all of the Shares set forth opposite the Stockholder's name on the
signature page hereof, with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws, and the terms of this
Stockholder Agreement.
(b) AUTHORIZATION. The Stockholder has the legal capacity, power and
authority to enter into and perform all of the Stockholder's obligations under
this Stockholder Agreement. The execution, delivery and performance of this
Stockholder Agreement by the Stockholder will not violate any other agreement to
which the Stockholder is a party including, without limitation, any voting
agreement, stockholders agreement, voting trust, trust or similar agreement.
This Stockholder Agreement has been duly and validly executed and delivered by
the Stockholder and constitutes a valid and binding agreement enforceable
against the Stockholder in accordance with its terms. There is no beneficiary or
holder of a voting trust certificate or other interest of any trust of which the
Stockholder is a trustee whose consent is required for the execution and
delivery of this Stockholder Agreement or the consummation by the Stockholder of
the transactions contemplated hereby. If the Stockholder is married and the
Stockholder's Shares constitute community property, this Stockholder Agreement
has been duly authorized, executed and delivered by, and constitutes a valid and
binding agreement of, the Stockholder's spouse, enforceable against such person
is accordance with its terms.
(c) NO CONFLICTS. No filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Stockholder Agreement by the Stockholder and the consummation
by the Stockholder of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Stockholder Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof shall
(A) conflict with or result in any breach of the organizational documents of the
Stockholder (if applicable), (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the Stockholder or any of
its properties or assets may be bound, or (C) violate any order, writ
injunction, decree, judgment, order, statute, rule or regulation applicable to
the Stockholder or any of its properties or assets.
(d) NO ENCUMBRANCES. Except as applicable in connection with the
transactions contemplated by Section 3 and 4 hereof, the Stockholder's Shares at
all times during the term hereof will be Beneficially Owned by the Stockholder,
free and clear of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other encumbrances
whatsoever.
(e) NO SOLICITATION. The Stockholder agrees not to take any action
inconsistent with or in violation of Section 6.2 of the Merger Agreement.
(f) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE. The Stockholder
shall not, directly or indirectly (i) except as contemplated by the Merger
Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
the Stockholder's Shares or any interest therein, (ii) except as contemplated by
this Stockholder Agreement, grant any proxies or powers of attorney, deposit any
Shares into a voting trust or enter into a voting agreement with respect to the
Shares, or (iii) take any action that would make any representation or warranty
of the Stockholder contained herein untrue or
E-3
<PAGE>
incorrect or have the effect of preventing or disabling the Stockholder from
performing the Stockholder's obligations under this Stockholder Agreement.
(g) RELIANCE BY THE COMPANY. The Stockholder understands and acknowledges
that the Company is entering into the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Stockholder Agreement.
6. STOP TRANSFER LEGEND.
(a) The Stockholder agrees and covenants to the Company that the Stockholder
shall not request that Parent register the transfer (book-entry or otherwise) of
any certificate or uncertificated interest representing any of the Stockholder's
Shares, unless such transfer is made in compliance with this Stockholder
Agreement.
(b) Without limiting the covenants set forth in paragraph (a) above, in the
event of a stock dividend or distribution, or any change in Shares by reason of
any stock dividend, split-up, recapitalization, combination, exchange of shares
or the like, other than pursuant to the Merger, the term "Shares" shall be
deemed to refer to and include the Shares into which or for which any or all of
the Shares may be changed or exchanged and appropriate adjustments shall be made
to the terms and provisions of this Stockholder Agreement.
7. FURTHER ASSURANCES. From time to time, at the Company's request and
without further consideration, the Stockholder shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Stockholder Agreement.
8. STOCKHOLDER CAPACITY. If the Stockholder is or becomes during the term
hereof a director or an officer of Parent, the Stockholder makes no agreement or
understanding herein in his capacity as such director or officer. The
Stockholder signs solely in his capacity as the record and Beneficial Owner of
the Stockholder's Shares.
9. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) the Termination Date or (b) the Effective Time.
10. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Stockholder Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Subject to Section 5(f) hereof, the Stockholder agrees
that this Stockholder Agreement and the obligations hereunder shall attach to
the Stockholder's Shares and shall be binding upon any Person to which legal or
Beneficial Ownership of such Shares shall pass, whether by operation of law or
otherwise, including without limitation, the Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any such transfer of Shares, the
transferor shall remain liable for the performance of all obligations under this
Stockholder Agreement.
(c) ASSIGNMENT. This Stockholder Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party hereto, provided that the Company may assign, in its sole discretion, its
rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of the Company, but no such assignment shall relieve the Company of
its obligations hereunder if such assignee does not perform such obligations.
(d) AMENDMENT AND MODIFICATION. This Stockholder Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
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<PAGE>
(e) NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and delivered (i) personally, (ii) via
telecopy, (iii) via overnight courier (providing proof of delivery) or (iv) via
registered or certified mail (return receipt requested). Such notice shall be
deemed to be given, dated and received (i) when so delivered personally, via
telecopy upon confirmation, or via overnight courier upon actual delivery or
(ii) [five] days after the date of mailing, if mailed by registered or certified
mail. Any notice pursuant to this section shall be delivered as follows:
If to the Stockholder to the address set forth for the Stockholder on the
signature page to this Stockholder Agreement.
If to the Company:
USWeb Corporation
410 Townsend Street
San Francisco, CA 94107
Attn: Chief Executive Officer
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: Mark E. Bonham, Esq.
Steve L. Camahort, Esq.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Stockholder Agreement will be interpreted in such a manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Stockholder Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision of this Stockholder Agreement in
such jurisdiction, and this Stockholder Agreement will be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained herein.
(g) SPECIFIC PERFORMANCE. The parties hereto agree recognize and
acknowledge that a breach by it of any covenants or agreements contained in this
Stockholder Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach the aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements and injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Stockholder Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any such
rights, powers or remedies by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Stockholder Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Merger Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
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(k) GOVERNING LAW. This Stockholder Agreement will be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof.
(l) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT OR PROCEEDING IN CONNECTION
WITH THIS STOCKHOLDER AGREEMENT.
(m) DESCRIPTION HEADINGS. The description headings used herein are for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Stockholder Agreement.
(n) COUNTERPARTS. This Merger Agreement may be executed in counterparts,
each of which will be considered one and the same Stockholder Agreement and will
become effective when such counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
(o) RECOVERY OF ATTORNEY'S FEES. In the event of any litigation between
the parties relating to this Stockholder Agreement, the prevailing party shall
be entitled to recover its reasonable attorney's fees and costs (including court
costs) from the non-prevailing party, provided that if both parties prevail in
part, the reasonable attorney's fees and costs shall be awarded by the court in
such a manner as it deems equitable to reflect the relative amounts and merits
of the parties' claims.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholder have caused this
Stockholder Agreement to be duly executed as of the day and year first above
written.
<TABLE>
<S> <C> <C>
COMPANY:
By: /s/ CAROLYN AVER
-----------------------------------------
Name: Carolyn Aver
Title: Chief Financial Officer
STOCKHOLDER:
By: /s/ ROBERT F. BERNARD
-----------------------------------------
Name: Robert F. Bernard
Number of Existing Shares: 12,647,222
Address: 311 South Wacker Drive #3500
Chicago, Illinois 60606
</TABLE>
E-7
<PAGE>
ANNEX F
WHITTMAN-HART CORPORATION
1995 INCENTIVE STOCK PLAN
1. PURPOSE. The WHITTMAN-HART CORPORATION 1995 Incentive Stock Plan (the
"Plan") is intended to provide incentives which will attract and retain highly
competent persons as officers and employees of WHITTMAN-HART CORPORATION and its
subsidiaries (the "Company"), by providing them opportunities to acquire shares
of Common Stock of the Company ("Common Shares") or to receive monetary payments
based on the value of such shares pursuant to the Awards described herein.
2. ADMINISTRATION. The Plan will be administered by the Stock Option
Committee (the "Committe") appointed by the Board of Directors of the Company
from among its members PROVIDED, HOWEVER, that as long as Common Shares are
registered under the Securities Exchange Act of 1934, members of the Committee
must qualify as disinterested persons within the meaning of Securities and
Exchange Commission Regulation Section240.16b-3. The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Awards granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member of
the Board, no member of the Committee and no employee of the Company shall be
liable for any act or failure to act hereunder, by any other member or employee
or by any agent to whom duties in connection with the administration of this
Plan have been delegated or, except in circumstances involving his bad faith,
gross negligence or fraud, for any act or failure to act by the member or
employee.
3. PARTICIPANTS. Participants will consist of such officers and employees
of the company, as the Committee in its sole discretion determines to be
significantly responsible for the success and future growth and profitability of
the Company and whom the Committee may designate from time to time to receive
Awards under the Plan. Designation of a participant in any year shall not
require the Committee to designate such person to receive an Award in any other
year or, once designated, to receive the same type or amount of Awards as
granted to the participant in any year. The Committee shall consider such
factors as it deems pertinent in selecting participants and in determining the
type and amount of their respective Awards. The maximum number of Common Shares
which may be awarded to any participant in any year during the term of the Plan
is 100,000 shares.
4. TYPES OF AWARDS. Awards under the Plan may be granted in any one or a
combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Shares, and (e) Performance Units, all as described
below (collectively "Awards").
5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance
under the Plan an aggregate of twenty four million (24,000,000) Common Shares,
which may be authorized but unissued shares. Any shares subject to any form of
Award hereunder may thereafter be subject to new Awards under this Plan if there
is a lapse, expiration or termination of any such Awards prior to issuance of
the shares or the payment of the equivalent or if shares are issued under such
Stock Options or Stock Appreciation Rights or as Stock Awards, and thereafter
are reacquired by the Company pursuant to rights reserved by the Company upon
issuance thereof.
6. STOCK OPTIONS. Stock Options will consist of awards from the Company,
in the form of agreements, which will enable the holder to purchase a specific
number of Common Shares, at set terms and at a fixed purchase price. Stock
Options may be "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code ("Incentive Stock Options") or Stock Options which do
not constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be
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subject to such terms and conditions consistent with the Plan as the Committee
may impose from time to time, subject to the following limitations:
(a) EXERCISE PRICE. Each Stock Option granted hereunder shall have
such per-share exercise price as the Committee may determine at the date of
grant provided, however, that the per-share exercise price for Incentive
Stock Options shall not be less than 100% of the Fair Market Value of the
Common Shares on the date the option is granted and provided further that
the per-share exercise price for Nonqualified Stock Options shall not be
less than 85% of the Fair Market Value of the Common Shares on the date the
option is granted.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid
by check or, in the discretion of the Committee, by the delivery (or
certification of ownership) of Common Shares of the Company then owned by
the participant; provided, however, that option agreements may provide that
payment of the exercise price by delivery of Common Shares of the Company
then owned by the participant may be made only if such payment does not
result in a charge to earnings for financial accounting purposes as
determined by the Committee. In the discretion of the Committee, if Common
Shares are readily tradeable on a national securities exchange or other
market system at the time of option exercise, payment may also be made by
delivering a properly executed exercise notice to the Company together with
a copy of irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay the exercise price. To
facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.
(c) EXERCISE PERIOD. Stock Options granted under the Plan shall be
exercisable at such times and subject to such terms and conditions as shall
be determined by the Committee. In addition, Nonqualified Stock Options
shall not be exercisable later than fifteen (15) years after the date they
are granted and Incentive Stock Options shall not be exercisable later than
ten (10) years after the date they are granted. All Stock Options shall
terminate at such earlier times and upon such conditions or circumstances as
the Committee shall in its discretion set forth in such option at the date
of grant.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options
may be granted only to participants who are employees of the Company or one
of its subsidiaries (within the meaning of Section 424(f) of the Internal
Revenue Code) at the date of grant. The aggregate Fair Market Value
(determined as of the time of the option is granted) of the Common Shares
with respect to which Incentive Stock Options are exercisable for the first
time by a participant during any calendar year (under all option plans of
the Company) shall not exceed $100,000. Incentive Stock Options may not be
granted to any participant who, at the time of grant, owns stock possessing
(after the application of the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting power of all classes of
stock of the Company, unless the option price is fixed at not less than 110%
of the Fair Market Value of the Common Shares on the date of grant and the
exercise of such option is prohibited by its terms after the expiration of
five (5) years from the date of grant of such option.
(e) REDESIGNATION AS NONQUALIFIED STOCK OPTIONS. Options designated as
"incentive stock options" that fail to continue to meet the requirements of
Section 422 of the Internal Revenue Code shall be redesignated as
nonqualified options for Federal income tax purposes automatically without
further action by the Committee on the date of such failure to continue to
meet the requirements of Section 422 of the Code.
(f) LIMITATION OF RIGHTS IN SHARES. The recipient of a Stock Option
shall not be deemed for any purpose to be a shareholder of the Company with
respect to any of the shares subject thereto except to the extent that the
Stock Option shall have been exercised and, in addition, a certificate shall
have been issued and delivered to the participant.
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(g) INDIVIDUAL LIMITATION ON NUMBER OF SHARES. The number of shares
subject to Stock Options which may be granted during any calendar year to
any one participant shall not exceed One Hundred Thousand (100,000) shares.
7. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
Stock Appreciation Rights to the holders of any Stock Options granted hereunder.
In addition, Stock Appreciation Rights may be granted independently of and
without relation to options. The number of shares subject to Stock Appreciation
Rights which may be granted during any calendar year to any one participant
shall not exceed Twenty One Thousand (21,000) shares. Each Stock Appreciation
Right shall be subject to such terms and conditions consistent with the Plan as
the Committee shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to a Nonqualified Stock Option
may be made part of such option at the time of its grant or at any time
thereafter up to six months prior to its expiration, and a Stock
Appreciation Right relating to an Incentive Stock Option may be made part of
such option only at the time of its grant.
(b) Each Stock Appreciation Right will entitle the holder to elect to
receive the appreciation in the Fair Market Value of the shares subject
thereto up to the date the right is exercised. In the case of a right issued
in relation to a Stock Option, such appreciation shall be measured from not
less than the option price and in the case of a right issued independently
of any Stock Option, such appreciation shall be measured from not less than
85% of the Fair Market Value of the Common Shares on the date the right is
granted. Payment of such appreciation shall be made in cash or in Common
Shares, or a combination thereof, as set forth in the award, but no Stock
Appreciation Right shall entitle the holder to receive, upon exercise
thereof, more than the number of Common Shares (or cash of equal value) with
respect to which the right is granted.
(c) Each Stock Appreciation Right will be exercisable at the times and
to the extent set forth therein, but no Stock Appreciation Right may be
exercisable earlier than six months after the date it was granted or later
than the earlier of (i) the term of the related option, if any, or
(ii) fifteen years after it was granted. Exercise of a Stock Appreciation
Right shall reduce the number of shares issuable under the Plan (and the
related option, if any) by the number of shares with respect to which the
right is exercised.
8. STOCK AWARDS. Stock Awards will consist of Common Shares transferred to
participants for a consideration equal to the Fair Market Value per share, at a
discount from Fair Market Value, or without other payment therefor as additional
compensation for services rendered to the Company. Stock Awards shall be subject
to such terms and conditions as the Committee determines appropriate, including,
without limitation, restrictions on the sale or other disposition of such shares
and rights of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Shares covered by any Stock Award. The
Committee may also require that the stock certificates evidencing such shares be
held in custody until the restrictions thereon shall have lapsed. Subject to the
restrictions set forth in any such Stock Award, the participant shall have, with
respect to the Common Shares subject to a Stock Award, all of the rights of a
holder of Common Shares of the Company, including the right to receive dividends
and to vote the shares.
9. PERFORMANCE SHARES
(a) Performance Shares may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to
receive Common Shares or cash of an equivalent value at the end of a
specified Performance Period. The Committee shall determine the participants
to whom and the time or times at which Performance Shares shall be awarded,
the number of Performance Shares to be awarded to any person, the duration
of the period (the "Performance
F-3
<PAGE>
Period") during which, and the conditions under which, receipt of the Common
Shares will be deferred, and the other terms and conditions of the Award in
addition to those set forth in this Section 9. The Committee may condition
the grant of Performance Shares upon the attainment of specified performance
goals or such other factors or criteria as the Committee shall determine.
(b) Performance Shares awarded pursuant to this Section 9 shall be
subject to the following terms and conditions:
(i) Unless otherwise determined by the Committee at the time of the
grant a Performance Share Award, with respect to the Common Shares
subject to a Performance Share Award, the participant shall not have any
of the rights of a holder of Common Shares of the Company, including the
right to receive dividends or to vote the shares.
(ii) Subject to the provisions of the Performance Share Award and
this Plan, at the expiration of the Performance Period, share
certificates and/or cash of an equivalent value (as the Committee may
determine) shall be delivered to the participant, or his or her legal
representative, in a number equal to the vested shares covered by the
Performance Share Award.
(iii) Subject to the applicable provisions of the Performance Share
Award and this Plan, upon termination of a participant's employment with
the Company for any reason during the specified Performance Period, the
participant's Performance Shares will vest or be forfeited in accordance
with the terms and conditions established by the Committee.
10. PERFORMANCE UNITS.
(a) Performance Units may be awarded either alone or in addition to
other Awards granted under this Plan and shall consist of the right to
receive a fixed dollar amount, payable in cash or Common Shares or a
combination of both. The Committee shall determine the participants to whom
and the time or times at which Performance Units shall be awarded, the
number of Performance Units to be awarded to any person, the duration of the
period (the "Performance Cycle") during which, and the conditions under
which, a participant's right to Performance Units will be vested, the
ability of participants to defer the receipt of payment of such Performance
Units, and the other terms and conditions of the Award in addition to those
set forth in Section 10. The Committee may condition the vesting of
Performance Units upon the attainment of specified performance goals or such
other factors or criteria as the Committee shall determine.
(b) The Performance Units awarded pursuant to this Section 10 shall be
subject to the following terms and conditions:
(i) At the expiration of the Performance Cycle, the Committee shall
determine the extent to which the performance goals have been achieved,
and the percentage of the Performance Units of each participant that have
vested.
(ii) Subject to the applicable provisions of the Performance Unit
Award and this Plan, at the expiration of the Performance Cycle, cash
and/or share certificates of an equivalent value (as the Committee may
determine) shall be delivered to the participant, or his or her legal
representative, in payment of the vested Performance Units covered by the
Performance Unit Award.
(iii) Subject to the applicable provisions of the Performance Unit
Award and this Plan, upon termination of a participant's employment with
the Company for any reason during the Performance Cycle for a given
Performance Unit Award, the Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established by the
Committee.
F-4
<PAGE>
11. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued Common
Shares without new consideration to the Company (such as by stock dividend,
stock split, recapitalization, reorganization, exchange or shares,
liquidation, combination or other change in corporate structure affecting
the Common Shares) or make a distribution of cash or property which has a
substantial impact on the value of issued Common Shares, the total number of
shares available for Awards under this Plan shall be appropriately adjusted
and the number of shares covered by each outstanding Award and the reference
price or Fair Market Value for each outstanding Award shall be adjusted so
that the net value of such Award shall not be changed.
(b) In the case of any sale of assets, merger, consolidation,
combination or other corporate reorganization or restructuring of the
Company with or into another corporation which results in the outstanding
Common Shares being converted into or exchanged for different securities,
cash or other property, or any combination thereof (an "Acquisition"),
subject to the provisions of this Plan and any limitation applicable to the
Award:
(i) any participant to whom a Stock Option has been granted shall
have the right thereafter and during the term of the Stock Option, to
receive upon exercise thereof the Acquisition Consideration (as defined
below) receivable upon the Acquisition by a holder of the number of
Common Shares which might have been obtained upon exercise of the Stock
Option or portion thereof, as the case may be, immediately prior to the
Acquisition;
(ii) any participant to whom a Stock Appreciation Right has been
granted shall have the right thereafter and during the term of such right
to receive upon exercise therof the difference on the exercise date
between the aggregate Fair Market Value of the Acquisition Consideration
receivable upon such acquisition by a holder of the number of Common
Shares which are covered by such right and the aggregate reference price
of such right; and
(iii) any participant to whom Performance Shares or Performance Units
have been awarded shall have the right thereafter and during the term of
the Award, upon fulfillment of the terms of the Award, to receive on the
date or dates set forth in the Award, the Acquisition Consideration
receivable upon the Acquisition by a holder of the number of Common Share
which are covered by the Award.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one Common Share upon consummation of an Acquisition.
(c) Notwithstanding any other provision of this Plan, the Committee may
authorize the issuance, continuation or assumption of Awards or provide for
other equitable adjustments after changes in the Common Shares resulting
from any other merger, consolidation, sale of assets, acquisition of
property or stock, recapitalization, reorganization or similar occurrence
upon such terms and conditions as it may deem equitable and appropriate.
(d) In the event that another corporation or business entity is being
acquired by the Company, and the Company assumes outstanding employee stock
options and/or stock appreciation rights and/ or the obligation to make
future grants of options or rights to employees of the acquired entity, the
aggregate number of Common Shares available for Awards under this Plan shall
be increased accordingly.
12. NONTRANSFERABILITY.
(a) Each Award granted under the Plan to a participant shall not be
transferable by him otherwise than by law or by will or the laws of descent
and distribution, and shall be exercisable, during his lifetime, only by
him. In the event of the death of a participant while the participant is
F-5
<PAGE>
rendering services to the Company, each Stock Option or Stock Appreciation
Right theretofore granted to him shall be exercisable during such period
after his death as the Committee shall in its discretion set forth in such
option or right at the date of grant (but not beyond the stated duration of
the option or right) and then only:
(i) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's
rights under the Stock Option or Stock Appreciation Right shall pass by
will or the laws of descent and distribution; and
(ii) To the extent that the deceased participant was entitled to do
so at the date of his death.
(b) Notwithstanding Section 12(a), in the discretion of the Committee,
Awards granted hereunder may be transferred to members of the participant's
immediate family (which for purposes of this Plan shall be limited to the
participant's children, grandchildren and spouse), or to one or more trusts
for the benefit of such family members or partnerships in which such family
members and/or trusts are the only partners, but only if the Award expressly
so provides.
13. OTHER PROVISIONS. Awards under the Plan may also be subject to such
other provisions (whether or not applicable to any other Awards under the Plan)
as the Committee determines appropriate, including without limitation,
provisions for the installment purchase of Common Shares under Stock Options,
provisions for the installment exercise of Stock Appreciation Rights, provisions
to assist the participant in financing the acquisition of Common Shares,
provisions for the forfeiture of, or restrictions on resale or other disposition
of Shares acquired under any form of Award, provisions for the acceleration of
exercisability or vesting of Awards in the event of a change of control of the
Company, provisions for the payment of the value of Awards to participants in
the event of a change of control of the Company, provisions for the forfeiture
of, or provisions to comply with Federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
14. FAIR MARKET VALUE. For purposes of this Plan and any Awards hereunder,
the Fair Market Value of Common Shares shall be the mean between the highest and
lowest sale prices for the Company's Common Shares as reported on the NASDAQ
National Market System (or such other consolidated transaction reporting system
on which such Common Shares are primarily traded) on the date of calculation (or
on the next preceding trading date if Common Shares were not traded on the date
of calculation), provided, however, that if the Company's Common Shares are not
at any time readily tradeable on a national securities exchange or other market
system, Fair Market Value shall mean the amount determined in good faith by the
Committee as the fair market value of the Common Shares of the Company.
15. WITHHOLDING. All payments or distributions made pursuant to the Plan
shall be net of any amounts required to be withheld pursuant to applicable
federal, state and local income and/or employment tax withholding requirements.
If the Company proposes or is required to distribute Common Shares pursuant to
the Plan, it may require the recipient to remit to it an amount sufficient to
satisfy such tax withholding requirements prior to the delivery of any
certificates for such Common Shares. The Committee may, in its discretion and
subject to such rules as it may adopt, permit an optionee or award or right
holder to pay all or a portion of the federal, state and local withholding taxes
arising in connection with (a) the exercise of a Nonqualified Stock Option or a
Stock Appreciation Right, (b) the receipt or vesting of Stock Awards, or
(c) the receipt of Common Shares upon the expiration of the Performance Period
or the Performance Cycle, respectively, with respect to any performance Shares
or Performance Units, by electing to have the Company withhold Common Shares
having a Fair Market Value equal to the amount of taxes required to be withheld.
16. TENURE. A participant's right, if any, to continue to serve the
Company as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his designation as a participant under the Plan,
F-6
<PAGE>
nor shall this Plan in any way interfere with the right of the Company, subject
to the terms of any separate employment agreement to the contrary, at any time
to terminate such employment or to increase or decrease the compensation of the
participant from the rate in existence at the time of the grant of an Award.
17. DURATION, AMENDMENT AND TERMINATION. No Award shall be granted after
July 1, 2005; provided, however, that the terms and conditions applicable to any
Award granted prior to such date may thereafter be amended or modified by mutual
agreement between the Company and the participant or such other persons as may
then have an interest therein. Also, by mutual agreement between the Company and
a participant, under this Plan or under any other present or future plan of the
Company, Awards may be granted to such participant in substitution and exchange
for, an in cancellation of, any Awards previously granted such participant under
this Plan, or any other present or future plan of the Company. The Board of
Directors may amend the Plan from time to time or terminate the Plan at any
time. However, no action authorized by this Section 17 shall reduce the amount
of any existing Award or change the terms and conditions thereof without the
participant's consent. No amendment of the Plan shall, without approval of the
shareholders of the Company, (i) result in any member of the Committee losing
his or her status as a disinterested person under Securities and Exchange
Commission Regulation Section240.16b-3; or (ii) result in the Plan losing its
status as a protected plan under the Securities and Exchange Commission
Rule 16b-3.
18. GOVERNING LAW. This Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the State of
Illinois (regardless of the law that might otherwise govern under applicable
Illinois principles of conflict of laws).
19. APPROVAL. The Plan was adopted by the Board of Directors and the
shareholders of the Company on December 29, 1995.
F-7
<PAGE>
January 25, 2000
USWeb/CKS Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, CA 95054
Ladies and Gentlemen:
We have acted as counsel to USWeb/CKS Corporation, a Delaware
corporation (the "Company") in connection with the proposed merger (the
"Merger") among Whittman-Hart, Inc., a Delaware corporation ("Parent"),
Uniwhale, a Delaware corporation and wholly-owned transitory merger
subsidiary of Parent ("Merger Sub"), and the Company pursuant to an Agreement
and Plan of Merger dated as of December 12, 1999, (the "Merger Agreement").
The Merger and certain proposed transactions incident thereto are described
in the Registration Statement on Form S-4 (the "Registration Statement") of
Parent which includes the Proxy Statement/Prospectus of the Company (the
"Proxy Statement/Prospectus"). This opinion is being rendered pursuant to the
requirements of Item 21(a) of Form S-4 under the Securities Act of 1933, as
amended. Unless otherwise indicated, any capitalized terms used herein and
not otherwise defined have the meaning ascribed to them in the Proxy
Statement/Prospectus.
In connection with this opinion, we have examined and are familiar with
the Merger Agreement, the Registration Statement, and such other presently
existing documents, records and matters of law as we have deemed necessary or
appropriate for purposes of our opinion. In addition, we have assumed (i)
that the Merger will be consummated in the manner contemplated by the Proxy
Statement/Prospectus and in accordance with the provisions of the Merger
Agreement, (ii) the truth and accuracy of the representations and warranties
made by Parent, Merger Sub and the Company in the Merger Agreement, and (iii)
the truth and accuracy of the certificates of representations provided to us
by Parent, Merger Sub and the Company.
Based upon and subject to the foregoing, in our opinion, the discussion
contained in the Registration Statement under the caption "Approval of the
Merger -- Certain Federal Income Tax Consequences," subject to the limitations
and qualifications described therein, sets forth the material United States
Federal income tax considerations generally applicable to the Merger.
Because this opinion is being delivered prior to the Effective Time of the
Merger, it must be considered prospective and dependent on future events.
There can be no assurance that changes in the law will not take place which
could affect the United States Federal income tax consequences of the Merger
or that contrary positions may not be taken by the Internal Revenue Service.
<PAGE>
USWeb/CKS Corporation
January 25, 2000
Page 2
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as
Exhibit 8.1 to the Registration Statement. We also consent to the reference
to our firm name wherever appearing in the Registration Statement with
respect to the discussion of the material federal income tax consequences of
the Merger, including the Proxy Statement/Prospectus constituting a part
thereof, and any amendment thereto. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder,
nor do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/S/ WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
Exhibit 8.2
January 26, 2000
WHITTMAN-HART, INC.
311 S. Wacker Drive, Suite 3500
Chicago, Illinois 60606-6618
Attention: Board of Directors
Ladies and Gentlemen:
We have been requested to render this opinion concerning certain material
federal income tax consequences in connection with the proposed merger of
UNIWHALE, INC., a newly formed corporation, organized and existing under the
laws of the State of Delaware ("Merger Sub") which is wholly owned by
WHITTMAN-HART, INC., a corporation organized and existing under the laws of
the Delaware ("Parent"), with and into USWEB/CKS CORPORATION, a corporation
organized and existing under the laws of the State of Delaware (the
"Company"), with the Company surviving the merger and becoming a wholly owned
subsidiary of Parent, pursuant to the applicable corporate law of the State
of Delaware (the "Merger"), and in accordance with that certain Agreement and
Plan of Merger dated as of December 12, 1999, among the Company, Parent and
Merger Sub (the "Agreement") and related documents and agreements referenced
in the Agreement (together with the Agreement, the "Merger Agreement"). Our
opinion is being delivered to you pursuant to Section 7.1(d) of the Agreement.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended
(the "Code").
We have acted as legal counsel to the Parent in connection with the Merger.
As such, and for the purpose of rendering this opinion, we have examined (or
will examine on or prior to the Effective Time of the Merger) and are relying
(or will rely) upon (without any independent investigation or review thereof)
the truth and accuracy, at all relevant times, of the statements, covenants,
representations and warranties contained in the following documents
(including all schedules and exhibits thereto):
1. The Merger Agreement.
2. Representations made to us by Parent and Merger Sub, including
those representations contained in the Parent Tax Certificate
dated January 11, 2000.
3. Representations made to us by the Company, including those
representations contained in the Company Tax Certificate dated
January 25, 2000.
<PAGE>
WHITTMAN-HART, INC.
January 26, 2000
Page 2
4. Parent's Registration Statement on Form S-4, filed January 26,
2000.
5. Such other instruments and documents related to the formation,
organization and operation of the Company, Parent and Merger Sub
or the consummation of the Merger and the transactions
contemplated by the Merger Agreement as we have deemed necessary
or appropriate.
OPINION
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent
investigation or review thereof) including that:
1. Original documents (including signatures) are authentic; documents
submitted to us as copies conform to the original documents, and
there has been (or will be by the Effective Time of the Merger)
due execution and delivery of all documents where due execution
and delivery are prerequisites to the effectiveness thereof.
2. Any representation or statement referred to above made "to the
knowledge of" or otherwise similarly qualified is correct without
such qualification.
3. The Merger will be consummated pursuant to the Merger Agreement
and will be effective under the applicable state law.
4. After the Merger, the Company will hold "substantially all" of its
and Merger Sub's properties within the meaning of Section
368(a)(2)(E)(i) of the Code and the regulations promulgated
thereunder.
5. Following the Merger, the Company will continue its historic
business or use a significant portion of its historic business
assets in a business.
6. No outstanding indebtedness of the Company, Parent or Merger Sub
has represented or will represent equity for tax purposes
(including, without limitation, any loans from Parent to the
Company); no outstanding equity of the Company, Parent or Merger
Sub has represented or will represent indebtedness for tax
purposes; no outstanding security (other than the Company Option
Plans), instrument, agreement or arrangement that provides for,
contains, or represents either a right to acquire the Company
stock or to share in the appreciation thereof constitutes or will
constitute "stock" for purposes of Section 368(c) of the Code.
<PAGE>
WHITTMAN-HART, INC.
January 26, 2000
Page 3
7. Each of Company, Parent and Merger Sub has paid and will pay only
its respective expenses, if any, incurred in connection with the
Merger, and neither Parent, Merger Sub nor Company has agreed to
assume, nor will it directly or indirectly assume, any expense or
other liability, whether fixed or contingent, of any holder of
Company Common Stock.
8. Neither Parent, the Company nor Merger Sub is, or will be at the
time of the Merger: (a) an "investment company" within the meaning
of Section 368(a)(2)(F) of the Code; or (b) under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, it
is our opinion, as legal counsel for Parent, that for federal income tax
purposes:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company,
Merger Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Company, Parent, or
Merger Sub as a result of the Merger;
(iii) no gain or loss will be recognized by the stockholders of
the Company upon the exchange of their Company Common Stock
solely for shares of Parent Common Stock pursuant to the
Merger, except with respect to cash, if any, received in
lieu of fractional shares of Parent Common Stock;
(iv) the aggregate tax basis of the shares of Parent Common Stock
received solely in exchange for Company Common Stock
pursuant to the Merger (including fractional shares of
Parent Common Stock for which cash is received) will be the
same as the aggregate tax basis of the Company Common Stock
exchanged therefor;
(v) the holding period for shares of Parent Common Stock
received solely in exchange for Company Common Stock
pursuant to the Merger will include the holding period of
the Company Common Stock exchanged therefor, provided such
Company Common Stock was held as a capital asset by the
stockholder at the Effective Time; and
<PAGE>
WHITTMAN-HART, INC.
January 26, 2000
Page 4
(vi) a stockholder of the Company who receives cash in lieu of a
fractional share of Parent Common Stock will recognize gain
or loss equal to the difference, if any, between such
stockholder's tax basis in such fractional share (as
described in clause (iv) above) and the amount of cash
received.
QUALIFICATIONS
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under
the Code, existing judicial decisions, administrative regulations
and published rulings and procedures. Our opinion is not binding
upon the Internal Revenue Service or the courts, and the Internal
Revenue Service is not precluded from asserting a contrary
position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the
accuracy of the opinion expressed herein. Nevertheless, we
undertake no responsibility to advise you of any new developments
in the application or interpretation of the federal income tax
laws.
2. Our opinion concerning certain of the federal tax consequences of
the Merger is limited to the specific federal tax consequences
presented above. No opinion is expressed as to any transaction
other than the Merger, including any transaction undertaken in
connection with the Merger. In addition, this opinion does not
address any other federal, estate, gift, state, local or foreign
tax consequences that may result from the Merger. In particular,
we express no opinion regarding:
(a) whether and the extent to which any Company stockholder who
has provided or will provide services to the Company, Parent
or Merger Sub will have compensation income under any
provision of the Code;
(b) the effects of such compensation income, including, but not
limited to, the effect upon the basis and the holding period
of the Parent Stock received by any such stockholder in the
Merger;
(c) the potential application of the "disqualifying disposition"
rules of Section 421 of the Code to dispositions of the
Company Common Stock;
<PAGE>
WHITTMAN-HART, INC.
January 26, 2000
Page 5
(d) the tax consequences of Parent's assumption of outstanding
options to acquire the Company Common Stock on the holders
of such options under any Company employee stock option or
stock purchase plan;
(e) the effects of the Merger on any pension or other employee
benefit plan maintained by Parent or the Company;
(f) the potential application of the "golden parachute"
provisions of Sections 280G, 3121(v)(2) and 4999 of the
Code, the alternative minimum tax provisions of Sections 55,
56 and 57 of the Code or Sections 108, 305, 306, 357 and 424
of the Code, or the regulations promulgated thereunder;
(g) the survival and/or availability, after the Merger, of any
of the federal income tax attributes or elections of the
Company or Parent (including, without limitation, foreign
tax credits or net operating loss carryforwards, if any, of
the Company or Parent), after application of any provision
of the Code, as well as the regulations promulgated
thereunder and judicial interpretations thereof;
(h) the basis of any equity interest in the Company acquired by
Parent in the Merger;
(i) the tax consequences of any transaction in which Company
Common Stock or a right to acquire Company Common Stock was
received; and
(j) the tax consequences of the Merger (including the opinion
set forth above) as applied to holders of options or
warrants to purchase Company Common Stock or that may be
relevant to particular classes of the Company stockholders
and/or holders of options or warrants for the Company Common
Stock, including, without limitation, dealers in securities,
corporate shareholders subject to the alternative minimum
tax, foreign persons, and holders of shares acquired upon
exercise of stock options or in other compensatory
transactions.
3. No opinion is expressed if all the transactions described in the
Merger Agreement are not consummated in accordance with the terms
of such Merger Agreement and without waiver or breach of any
material provision thereof or if all of the representations,
warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one
of the statements, representations, warranties or assumptions upon
which we have relied to issue this
<PAGE>
WHITTMAN-HART, INC.
January 26, 2000
Page 6
opinion is incorrect, our opinion might be adversely affected and
may not be relied upon.
4. No ruling has been or will be requested from the Internal Revenue
Service concerning the federal income tax consequences of the
Merger. In reviewing this opinion, you should be aware that the
opinion set forth above represents our conclusions regarding the
application of existing federal income tax law to the instant
transaction. If the facts vary from those relied upon (including
if any representation, covenant, warranty or assumption upon which
we have relied is inaccurate, incomplete, breached or
ineffective), our opinion contained herein could be inapplicable.
You should be aware that an opinion of counsel represents only
counsel's best legal judgment, and has no binding effect or
official status of any kind, and that no assurance can be given
that contrary positions will not be taken by the Internal Revenue
Service or that a court considering the issues would not hold
otherwise.
5. This opinion is being delivered solely for the purpose of
satisfying the condition set forth in Section 7.1(d) of the Merger
Agreement. This opinion may not be relied upon or utilized for any
other purpose or by any other person or entity, including the
Company and its stockholders, and may not be made available to any
other person or entity, without our prior written consent. We do,
however, consent to the use of our name in the Registration
Statement wherever it appears.
Very truly yours,
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-4 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.
/s/KPMG LLP
-------------------
KPMG LLP
Chicago, Illinois
January 26, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS OF USWEB CORPORATION
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Whittman-Hart, Inc. of our report dated January 25,
1999 relating to the consolidated financial statements, which appears in
USWeb Corporation's Annual Report on Form 10-K for the year ended December
31, 1998. We also consent to the reference to us under the heading "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 25, 2000
<PAGE>
PROXY
[LOGO]
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FEBRUARY 28, 2000
The undersigned stockholder of Whittman-Hart, Inc., a Delaware corporation,
hereby acknowledges receipt of the Notice of Special Meeting of Stockholders
and Joint Proxy Statement/Prospectus, each dated January 26, 2000, and hereby
appoints Robert F. Bernard and Bert B. Young, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Special
Meeting of Stockholders of Whittman-Hart, Inc., to be held on February 28,
2000, at 11:00 a.m., Central Standard Time, at The Whittman-Hart Institute
for Strategic Education, 320 North Elizabeth Street, Chicago, Illinois 60606,
and at any continuation(s) or adjournment(s) thereof, and to vote all shares
of Common Stock that the undersigned would be entitled to vote if then and
there personally present on the matters set forth on the reverse side and, in
their discretion, upon such other matter or matters that may properly come
before the meeting
February 28, 2000, 11:00 a.m.
The Whittman-Hart Institute for Strategic Education
320 North Elizabeth Street
Chicago, Illinois 60606
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSALS SET FORTH BELOW AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
<PAGE>
/x/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE USING DARK INK ONLY. 0949
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" EACH OF THE FOLLOWING PROPOSALS.
1. A proposal to approve the issuance of shares of common stock to the
stockholders of USWeb Corporation ("USWeb/CKS") pursuant to the
Agreement and Plan of Merger, dated as of December 12, 1999, among
Whittman-Hart, Inc. ("Whittman-Hart"), Uniwhale, Inc., a wholly owned
subsidiary of Whittman-Hart, and USWeb/CKS, providing for the merger of
USWeb/CKS and Uniwhale, after which USWeb/CKS will become a wholly owned
subsidiary of Whittman-Hart;
FOR / / AGAINST / / ABSTAIN / /
2. A proposal to amend the Whittman-Hart charter to increase the number of
authorized common shares from 75,000,000 shares to 500,000,000 shares;
FOR / / AGAINST / / ABSTAIN / /
3. A proposal to increase the number of authorized shares of common stock
available for issuance under the Whittman-Hart 1995 Incentive Stock
Plan from 24,000,000 shares to 48,000,000 shares; and
FOR / / AGAINST / / ABSTAIN / /
4. To transact any other business that may properly come before the special
meeting, including any adjournment or postponement thereof.
FOR / / AGAINST / / ABSTAIN / /
I PLAN TO ATTEND THE MEETING YES / / NO / /
SIGNATURE(S) DATE:
------------------------------- -------------------
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign).
<PAGE>
Exhibit 99.2
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
USWEB CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
FEBRUARY 28, 2000
The undersigned stockholder of USWeb Corporation, a Delaware corporation
(the "Company"), hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and Joint Proxy Statement/Prospectus, each dated January 26,
2000, and hereby appoints Robert Shaw and Carolyn Aver, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at
the Special Meeting of Stockholders of USWeb Corporation, to be held on
February 28, 2000, at 9:00 a.m., Pacific Standard Time, at the Company's
offices at 2880 Lakeside Drive, Santa Clara, California 95054 and at any
continuation(s) adjournment(s) thereof, and to vote all shares of Common
Stock that the undersigned would be entitled to vote if then and there
personally present on the matters set forth on the reverse side and, in their
discretion, upon such other matter or matters that may properly come before
the meeting and any adjournment(s) thereof.
February 28, 2000, 9:00 a.m.
USWeb Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, California 95054
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AGREEMENT, DATED AS OF DECEMBER 12, 1999 BY AND AMONG WHITTMAN-HART, INC.,
UNIWHALE, INC., A WHOLLY-OWNED SUBSIDIARY OF WHITTMAN-HART, AND THE COMPANY,
AND THE MERGER CONTEMPLATED THEREBY AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
FOLD AND DETACH HERE
USWeb/CKS
SPECIAL MEETING OF STOCKHOLDERS
February 28, 2000
9:00 a.m.
USWeb Corporation
2880 Lakeside Drive, Suite 300
Santa Clara, California 95054
<PAGE>
Please mark your votes as indicated in this example /X/
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" EACH OF FOLLOWING PROPOSALS.
1. Proposal to approve the Agreement and Plan of Merger, dated as of
December 12, 1999, by and among Whittman-Hart, Inc., Uniwhale, Inc. and
USWeb Corporation and the merger contemplated thereby;
FOR / / AGAINST / / ABSTAIN / /
2. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
FOR / / AGAINST / / ABSTAIN / /
I PLAN TO ATTEND THE MEETING YES / / NO / /
Signature(s) Date , 2000
-------------------------------------- ---------------
(This Proxy should be marked, dated, signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign).
FOLD AND DETACH HERE
<PAGE>
CONSENT OF ROBERT SHAW
January 13, 2000
Whittman-Hart, Inc.
311 South Wacker Drive, Suite 3500
Chicago, IL 60606
Ladies and Gentlemen:
I hereby consent to the use of my name as a nominee director in the
Registration Statement on Form S-4 of Whittman-Hart, Inc. (File No.
333-94565).
Very truly yours,
/s/Robert Shaw
--------------------------
ROBERT SHAW
