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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000
REGISTRATION NO. 333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WHITTMAN-HART, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 36-3797833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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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)
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COPIES TO:
MARK D. WOOD, ESQ.
KATTEN MUCHIN ZAVIS
525 WEST MONROE STREET, SUITE 1600
CHICAGO, ILLINOIS 60661-3693
(312) 902-5200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per
share............................. 3,694,893 shares $42.50 $157,032,953 $41,457
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(1) Pursuant to Rule 416(a) under the Securities Act of 1933, the number of
shares of common stock registered hereby is subject to adjustment to prevent
dilution resulting from stock splits, stock dividends or similar
transactions.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) of Regulation C under the Securities Act of 1933 on the basis
of the average of the high and low prices of our common stock as reported on
the Nasdaq National Market on January 27, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JANUARY 28, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
3,694,893 SHARES
WHITTMAN-HART, INC.
COMMON STOCK
The selling stockholder described in this prospectus may offer and sell from
time to time an aggregate of up to 3,694,893 shares of our common stock. The
selling stockholder may sell the stock on terms to be determined at the time of
sale. We will not receive any proceeds from this offering.
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Our common stock is quoted on the Nasdaq National Market under the symbol
"WHIT." On January 27, 2000, the closing sale price of our common stock on the
Nasdaq National Market was $39.56 per share. Our address is 311 South Wacker
Drive, Suite 3500, Chicago, Illinois 60606, and our telephone number is (312)
922-9200.
On December 12, 1999, we entered into a merger agreement with USWeb/CKS.
Under the agreement, a subsidiary of ours will merge with and into USWeb/CKS,
with USWeb/CKS continuing as the surviving corporation. If we complete the
merger, USWeb/CKS stockholders will receive 0.865 of a share of our common stock
for each share of USWeb/CKS common stock they own. We cannot complete the merger
unless the stockholders of USWeb/CKS approve the merger proposal, our
stockholders approve the issuance of shares in the merger, the increase in the
number of our shares authorized and a number of other conditions are satisfied
or waived.
SEE "RISK FACTORS" ON PAGE 1 TO READ ABOUT CERTAIN FACTORS YOU SHOULD
CONSIDER BEFORE BUYING OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROSPECTUS DATED
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TABLE OF CONTENTS
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PAGE
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RISK FACTORS................................................ 1
UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS........ 8
WHITTMAN-HART............................................... 9
THE USWEB/CKS MERGER........................................ 10
USE OF PROCEEDS............................................. 11
THE SELLING STOCKHOLDER..................................... 11
PLAN OF DISTRIBUTION........................................ 12
ABOUT THIS PROSPECTUS....................................... 13
WHERE YOU CAN FIND MORE INFORMATION......................... 13
LEGAL MATTERS............................................... 14
EXPERTS..................................................... 14
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW,
AND ALL THE OTHER INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK. WE
HAVE SEPARATED THE RISKS INTO TWO GROUPS: RISKS RELATING TO OUR PROPOSED MERGER
WITH USWEB CORPORATION AND RISKS RELATING TO WHITTMAN-HART AND, ASSUMING THAT
THE MERGER IS COMPLETED, THE COMBINED COMPANY WHICH WOULD RESULT FROM THE
MERGER.
RISKS RELATING TO THE MERGER
INTEGRATING WHITTMAN-HART AND USWEB/CKS MAY BE DIFFICULT
After the merger, the combined company will need to efficiently and promptly
integrate the two companies' operations to achieve the anticipated benefits of
the merger. Failure to successfully integrate our businesses could have a
negative effect on the combined company and prevent us from achieving the
anticipated benefits of the merger.
Certain key elements of our businesses need to be integrated, including:
- management and other professional personnel;
- technical and creative service offerings;
- sales and marketing efforts; and
- financial, accounting and other operational controls, procedures,
information systems and policies.
The integration process will be further complicated by the need to integrate
widely dispersed operations, multiple executive offices and different corporate
cultures. This integration may not be accomplished in an efficient or effective
manner, if at all. The integration process will require the dedication of
management and other personnel, which may distract their attention from the
conduct of day-to-day business activities. The integration of Whittman-Hart and
USWeb/CKS will be made more difficult by the large number of other businesses
recently acquired by the two companies and the continuing challenges of
integrating some of these businesses. Finally, neither of us has attempted an
acquisition with the scope or magnitude of the planned merger. Expenses
associated with ongoing integration of the companies are likely to have a
negative effect on operating results of the combined entity at least through
December 31, 2000.
IF THE MERGER IS NOT COMPLETED, OUR STOCK PRICE COULD DECLINE
The obligations of Whittman-Hart and USWeb/CKS to complete the merger are
subject to the satisfaction or waiver of certain conditions, including:
- the continued effectiveness of the registration statement on Form S-4 we
filed with the SEC on January 13, 2000, and any amendment to that
registration statement;
- the approval by USWeb/CKS stockholders of the merger and the merger
agreement;
- the approval by our stockholders of the issuance of shares of our common
stock to USWeb/CKS stockholders in connection with the merger;
- the absence of any injunction or order preventing the completion of the
merger;
- the expiration or termination of any waiting period under U.S. or foreign
antitrust laws; and
- the receipt by each party of an opinion of tax counsel that the merger
will qualify as a tax-free reorganization.
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The obligation of USWeb/CKS to complete the merger is also subject to the
satisfaction by us or the waiver by USWeb/CKS of the following conditions:
- the representations and warranties we made in the merger agreement must be
true and correct in all material respects;
- we must have performed in all material respects all obligations we are
required to perform under the merger agreement at or before the closing of
the merger; and
- there shall not have been any event or development which has resulted or
could reasonably be likely to result in a material adverse effect on us.
Our obligation to complete the merger is also subject to the satisfaction by
USWeb/CKS or the waiver by us of the following conditions:
- the representations and warranties USWeb/CKS made in the merger agreement
must be true and correct in all material respects;
- USWeb/CKS must have performed in all material respects all obligations it
is required to perform under the merger agreement at or before the closing
of the merger; and
- there shall not have been any event or development which has resulted or
could reasonably be likely to result in a material adverse effect on
USWeb/CKS.
These conditions might not be satisfied or waived and the merger might not be
completed. Noncompletion of the merger would likely have a negative effect on
our stock trading price.
WE COULD LOSE CLIENTS AS A RESULT OF UNCERTAINTY REGARDING THE MERGER
Uncertainty regarding the merger and the ability of Whittman-Hart and
USWeb/CKS to effectively integrate their operations without significant
reduction in quality of service could lead some customers to select other
vendors. The loss of business from significant clients could have a negative
effect on the combined company's business.
RISKS RELATING TO WHITTMAN-HART AND THE COMBINED COMPANY
WE MUST RETAIN KEY PERSONNEL AND THEY MUST WORK TOGETHER EFFECTIVELY
The success of the combined company will depend upon the retention of senior
executives and other key employees who are critical to the continued
advancement, development and support of our services, ongoing sales and
marketing efforts. The loss of the services of any key personnel or of any
significant group of employees could negatively affect the combined company's
business and prospects. As often occurs with mergers of technology/services
companies, during the pre-merger and integration phases competitors may
intensify their efforts to recruit key employees. Employee uncertainty regarding
the effects of the merger could also cause increased turnover. The recent
decline in stock prices of both Whittman-Hart and USWeb/CKS may have the effect
of decreasing the incentive value of stock options or other equity held by
employees and thereby increase the risk of employee turnover. The combined
company may not be able to retain key creative, technical, sales or marketing
personnel before or after the merger. The combined company's success largely
depends on the ability of its executive officers and other members of senior
management to operate effectively in their roles in the newly combined company.
If the combined company's management does not succeed in their roles or the
combined company is not able to efficiently allocate management responsibilities
and cause its officers and senior managers to operate effectively as a group,
its business could be negatively affected.
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WE MUST BUILD RECOGNITION AND CUSTOMER ACCEPTANCE OF NEW BRANDS
Whittman-Hart and USWeb/CKS have each invested significant efforts in
building brand recognition and customer acceptance of their brand names.
Whittman-Hart believes that transferring market acceptance for the Whittman-Hart
and USWeb/CKS brands to the combined company brands will be an important aspect
of the combined company's efforts to retain and attract clients. Promoting and
maintaining the combined company brands will depend largely on the success of
the combined company's marketing efforts and the ability of the combined company
to provide high quality, reliable and cost-effective services. These efforts
will require significant expenses, which will affect the combined company's
results of operations. In addition, although Whittman-Hart intends to centralize
the combined company's marketing efforts, a significant part of its client
services will continue to be provided through individual consulting offices.
Client dissatisfaction with the performance of a single office could diminish
the value of the combined company brands.
OUR QUARTERLY RESULTS MAY FLUCTUATE, WHICH MAY LEAD TO REDUCED PRICES FOR OUR
STOCK
Whittman-Hart's operating results have fluctuated in the past and the
combined company's operating results are likely to fluctuate in the future as a
result of a variety of factors, many of which will be outside of the combined
company's control. Some of these factors include:
- timing of the completion, material reduction or cancellation of major
projects or the loss of a major client;
- the amount and timing of the receipt of new business;
- timing of hiring or loss of personnel;
- the cost and timing of the opening or closing of an office;
- the amount and the relative mix of high-margin creative or strategy
consulting projects as compared to lower margin projects;
- capital expenditures and other costs relating to the expansion of
operations;
- the level of demand for Intranet, Extranet and Web site development;
- the productivity of consultants;
- the ability to maintain adequate staffing to service clients effectively;
- the cost of advertising and related media;
- the amount and timing of expenditures by clients for professional
services;
- the introduction of new products or services by competitors;
- pricing changes in the industry;
- the relative mix of lower cost full-time employees versus higher cost
independent contractors;
- technical difficulties with respect to the use of the Internet;
- economic conditions specific to Internet technology usage;
- government regulation and legal developments regarding the use of the
Internet; and
- general economic conditions.
The combined company may also experience seasonality in its business,
resulting in diminished revenues as a consequence of decreased demand for
professional services during summer and year-end vacation and holiday periods.
Due to all of these factors, the combined company's operating results in any
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given quarter may fall below the expectations of securities analysts and
investors. In such event, the trading price of the combined company's common
stock would likely be significantly and negatively affected and litigation may
ensue.
Whittman-Hart's and USWeb/CKS's historical financial data is of limited
value in planning future operating expenses. Accordingly, the combined company's
expense levels will be based in part on its expectations concerning future
revenues and will be fixed to a large extent. The combined company will be
unable to adjust spending in a timely manner to compensate for any unexpected
shortfall in revenues. Accordingly, a significant shortfall in demand for
services could have an immediate and significant negative effect on the combined
company's business and results of operations.
OUR STOCK PRICES ARE VOLATILE AND THE COMBINED COMPANY'S STOCK COULD DECLINE IN
VALUE
The stock market, which has recently been at or near historic highs, has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology companies and
that often have been unrelated to the operating performance of those companies.
In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which would have a negative
effect on the combined company's business, financial condition and results of
operations.
THE MERGER WILL DILUTE YOUR PERCENTAGE OWNERSHIP
The merger will dilute the percentage ownership held by our stockholders in
the combined company when compared to their ownership prior to the merger. Based
upon the estimated capitalization of Whittman-Hart and USWeb/CKS as of
January 25, 2000, approximately 81,482,000 shares of common stock will be issued
in the merger, and the Whittman-Hart stockholders will hold approximately 43% of
the outstanding shares of the combined company's common stock after giving
effect to such issuance. Each of Whittman-Hart and USWeb/CKS have outstanding a
large number of options to purchase common stock of their company, many of which
have exercise prices significantly below the market price of each company's
respective common stock as of the date of this prospectus. When the merger is
completed, the USWeb/CKS options will be converted into options to purchase
shares of common stock in the combined company. To the extent these options are
exercised, there will be further dilution. Pursuant to its prior acquisition
agreements, USWeb/CKS may be required to issue substantial additional "earn out"
stock to the former stockholders of acquired companies as well as stock options
and stock bonuses to the employees of the acquired companies who have remained
employees of USWeb/CKS. These obligations will continue following the merger.
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TO SUCCEED, WE MUST RECRUIT AND RETAIN SKILLED PROFESSIONALS, WHO ARE IN SHORT
SUPPLY
The combined company's business of delivering Internet professional services
is labor intensive. Accordingly, its success depends in large part on its
ability to identify, hire, train and retain consulting professionals who can
provide the Internet strategy, technology, and marketing and creative skills
required by clients. The inability to attract and retain the necessary
technical, marketing and managerial personnel would have a negative effect on
the combined company's business. There is currently a shortage of such
personnel, and this shortage is likely to continue for the foreseeable future.
The combined company will encounter intense competition for qualified personnel
from other companies, and may not be able to identify, hire, train or retain
other highly qualified technical, marketing and managerial personnel in the
future.
OUR SUCCESS DEPENDS ON OUR ABILITY TO MANAGE GROWTH
Whittman-Hart has experienced recent rapid growth and is subject to the
risks inherent in the expansion and growth of a business enterprise. This
significant growth, if sustained, will continue to place a substantial strain on
its operational and administrative resources and to increase the level of
responsibility for its existing and new management personnel. To manage its
growth effectively, Whittman-Hart will need to further develop its operating,
MIS, accounting and financial systems and to expand, train and manage its
employee base. The management skills and systems currently in place may not be
adequate if the combined company continues to grow.
OUR INTERNATIONAL OPERATIONS ARE DIFFICULT TO MANAGE
Upon completion of the merger, the combined company will have 27 offices
outside the United States. If revenues from international consulting offices are
not adequate to offset the expenses of establishing and maintaining
international operations and of localizing the combined company's marketing
programs, the combined company's business and results of operations could be
negatively affected. In addition to the uncertainty as to the combined company's
ability to generate revenues from foreign operations and expand its
international presence, there are certain risks inherent in doing business on an
international level, including any of the following factors which could
negatively affect the combined company's international operations:
- unexpected changes in regulatory requirements, export and import
restrictions, tariffs and other trade barriers;
- difficulties in staffing and managing foreign operations;
- potentially adverse differences in business customs, practices and norms;
- longer payment cycles;
- problems in collecting accounts receivable;
- political instability;
- fluctuations in currency exchange rates;
- software piracy;
- seasonal reductions in business activity; and
- potentially adverse tax consequences.
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THE MARKET IN WHICH WE COMPETE IS HIGHLY COMPETITIVE AND HAS LOW BARRIERS TO
ENTRY
The market for Internet professional services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change. The
combined company expects competition to intensify and increase in the future.
The combined company's competitors can be divided into several groups:
- large information technology consulting service providers such as Andersen
Consulting, Cambridge Technology Partners and Electronic Data Systems
Corporation;
- the consulting divisions of computer hardware vendors such as
International Business Machines Corporation, Compaq Computer Corp. and
Hewlett-Packard Company;
- Internet integrators and Web presence providers such as Agency.com, iXL
Enterprises, Inc., Organic Online, Inc., Proxicom Inc., Sapient
Corporation, Scient Corporation, and Viant Corporation; and
- advertising and media agencies such as Ogilvy & Mather, Young & Rubicam,
and Foote, Cone & Belding.
Many of the combined company's current and potential competitors have longer
operating histories, larger installed customer bases, longer relationships with
clients and significantly greater financial, technical, marketing and public
relations resources than the combined company and could decide at any time to
increase their resource commitments to the combined company's target markets. In
addition, the market for Intranet, Extranet and Web site development is
relatively new and subject to continuing definition, and, as a result, may
better position the combined company's competitors to compete in this market as
it matures. As a strategic response to changes in the competitive environment,
the combined company may from time to time make pricing, service, technology or
marketing decisions or business or technology acquisitions that could have a
negative effect on the combined company's business and results of operations.
In addition, the combined company's ability to maintain its existing client
relationships and generate new clients will depend to a significant degree on
the quality of its services and its reputation among its clients and potential
clients, as compared with its competitors. To the extent the combined company
loses clients to its competitors because of dissatisfaction with the combined
company's services or its reputation is negatively affected for any other
reason, the combined company's business could be negatively affected.
There are relatively low barriers to entry into the combined company's
business. Because professional services firms such as Whittman-Hart rely on the
skill of their personnel and the quality of their client service, we have no
patented technology that would preclude or inhibit competitors from entering
their markets. The combined company is likely to face additional competition
from new entrants into the market in the future. Existing or future competitors
may develop or offer services that provide significant performance, price,
creative or other advantages over those offered by the combined company, which
could have a negative effect on the combined company's business and prospects.
WE RELY ON STRATEGIC RELATIONSHIPS THAT COULD BE TERMINATED EASILY
The combined company will have a number of strategic relationships with
leading hardware and software companies, including 3Com Corporation, J.D.
Edwards & Company, Microsoft Corporation, Novell, Inc., and Siebel Systems, Inc.
The loss of any one of these strategic relationships would deprive the combined
company of the opportunity to gain early access to leading-edge technology,
cooperatively market products with the vendor, cross-sell additional services
and gain enhanced access to vendor training and support. Maintenance of the
combined company's strategic relationships is based primarily on an ongoing
mutual business opportunity and a good overall working relationship. The legal
contracts associated with these relationships would not be sufficient to force
the strategic relationship to continue
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effectively if the strategic partner wanted to terminate the relationship. In
the event that any strategic relationship is terminated, the combined company's
business may be negatively affected.
INTERNET ECONOMY AND THE MARKET FOR E-COMMERCE SOLUTIONS IS STILL DEVELOPING
We expect the combined company to derive a substantial portion of its
revenues from services that depend upon the adoption of Internet solutions and
the continued development of the World Wide Web, the Internet and e-commerce.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and volume of traffic. The Internet
infrastructure may not continue to be able to support the demands placed on it
by this continued growth. In addition, critical issues concerning the use of
Internet and e-commerce solutions, including security, reliability, cost, ease
of deployment and administration and quality of service, remain unresolved and
may affect the acceptance of these technologies to operate a business, expand
product marketing, improve corporate communications and increase business
efficiencies. The adoption of Internet solutions for these purposes can be
capital intensive and generally requires the acceptance of a new way of
conducting business and exchanging information. If critical issues concerning
the ability of Internet solutions to improve business positioning and processes
are not resolved or if the necessary infrastructure is not developed, the
combined company's business and prospects will be negatively affected.
Even if these issues are resolved, businesses may not elect to outsource the
design, development and maintenance of their Web sites to Internet professional
services firms. If independent providers of Internet professional services prove
to be unreliable, ineffective or too expensive, or if software companies develop
tools that are sufficiently user-friendly and cost-effective, enterprises may
choose to design, develop or maintain all or part of their Intranets, Extranets
or Web sites themselves. If the market for such services does not continue to
develop or develops more slowly than expected, or if the combined company's
services do not achieve market acceptance, its business will be negatively
affected.
THE INFRINGEMENT OR MISUSE OF INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR
BUSINESS
Whittman-Hart regards its intellectual property rights, such as copyrights,
trademarks, trade secrets, practices and tools, as important to the success of
the combined company. To protect its intellectual property rights, Whittman-Hart
relies on a combination of trademark and copyright law, trade secret protection
and confidentiality agreements and other contractual arrangements with their
employees, affiliates, clients, strategic partners, acquisition targets and
others. Effective trademark, copyright and trade secret protection may not be
available in every country in which the combined company intends to offer its
services. The steps taken by Whittman-Hart to protect its intellectual property
rights may not be adequate, third parties may infringe or misappropriate the
combined company's intellectual property rights or the combined company may not
be able to detect unauthorized use and take appropriate steps to enforce its
rights. In addition, other parties may assert infringement claims against the
combined company. Such claims, regardless of merit, could result in the
expenditure of significant financial and managerial resources. Further, an
increasing number of patents are being issued to third parties regarding
Internet business processes. Future patents may limit the combined company's
ability to use processes covered by such patents or expose the combined company
to claims of patent infringement or otherwise require the combined company to
seek to obtain related licenses. Such licenses may not be available on
acceptable terms. The failure to obtain such licenses on acceptable terms could
have a negative effect on the combined company's business.
IF WE DO NOT PERFORM TO OUR CLIENTS' EXPECTATIONS, WE FACE POTENTIAL LIABILITY
Many of our consulting engagements involve the development, implementation
and maintenance of applications that are critical to the operations of our
clients' businesses. The combined company's failure or inability to meet a
client's expectations in the performance of its services could injure the
combined company's business reputation or result in a claim for substantial
damages against the combined company,
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regardless of its responsibility for such failure. In addition, we possess
technologies and content that may include confidential or proprietary client
information. Although we have implemented policies to prevent such client
information from being disclosed to unauthorized parties or used
inappropriately, any such unauthorized disclosure or use could result in a claim
for substantial damages. We have attempted to contractually limit our damages
arising from negligent acts, errors, mistakes or omissions in rendering
professional services. However, these contractual protections may not be
enforceable or may not otherwise protect the combined company from liability for
damages. Although we maintain general liability insurance coverage, including
coverage for errors and omissions, such coverage may not continue to be
available on reasonable terms or may not be available in amounts sufficient to
cover one or more large claims, or the insurer may disclaim coverage as to any
future claim. The successful assertion of one or more large claims against the
combined company that are not covered by insurance or result in changes to any
of our insurance policies, including premium increases or deductible or
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.
THE ORGANIZATIONAL DOCUMENTS OF THE COMBINED COMPANY AND CURRENT DELAWARE LAW
MAY DETER POTENTIALLY BENEFICIAL TAKEOVER ATTEMPTS
The combined company's certificate of incorporation and by-laws and the
Delaware General Corporation Law include provisions that may be deemed to have
anti-takeover effects and may delay, deter or prevent a takeover attempt that
stockholders might consider in their best interests. These include by-law
provisions under which only the Chairman of the Board or the President may call
meetings of stockholders and certain advance notice procedures for nominating
candidates for election to the board of directors. The combined company's
directors will be divided into three classes and elected to serve staggered
three-year terms. The combined company's board of directors will be empowered to
issue up to 3,000,000 shares of preferred stock and to determine the price,
rights, preferences and privileges of such shares, without any further
stockholder action. The existence of this "blank-check" preferred stock could
render more difficult or discourage an attempt to obtain control of the combined
company by means of a tender offer, merger, proxy contest or otherwise. In
addition, this "blank-check" preferred stock, and any issuance thereof, may
significantly decrease the market price of the common stock.
UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference "forward-looking
statements" within the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 about Whittman-Hart's business and the expected
impact of the merger. These statements include, among others:
- statements concerning the benefits that Whittman-Hart expects will result
from its business activities;
- statements concerning the potential advantages and strategic opportunities
that Whittman-Hart expects will result from the merger; and
- other statements of Whittman-Hart's expectations, beliefs, future plans
and strategies, anticipated developments and other matters that are not
historical facts.
8
<PAGE>
These statements may be made expressly in this document, or may be
incorporated by reference to other documents Whittman-Hart has filed with the
SEC. You can find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," or similar expressions used
in this prospectus or incorporated by reference in this prospectus.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause actual results to be materially and adversely
different from any future results expressed or implied in those statements. Some
of the key factors that could cause such different results are included in those
risks, uncertainties and risk factors identified, among other places, under
"Risk Factors" beginning on page 1 of this prospectus and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated by reference.
We caution you not to place undue reliance on the statements, which speak
only as of the date of this prospectus or, in the case of documents incorporated
by reference, the date of the document.
The cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that we, or any person acting on our behalf, may issue. We undertake
no obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
WHITTMAN-HART
Whittman-Hart provides enterprise-wide e-business solutions to help clients
improve performance and create competitive advantage. Our solutions give
companies the insight and technology they need to evolve in increasingly
competitive markets. We employ an integrated approach focused on delivering four
client outcomes we call Envision, Engage, Empower, Extend-TM-.
DIGITAL STRATEGY SOLUTIONS: We help clients envision integrated Internet
solutions that transform business plans and strategies into processes, systems
and applications. We educate clients' executive management teams and assist them
in developing a shared vision of the e-business model. Our digital strategy
solutions also include detailed assessment of the client's market position,
existing systems, available resources and strategic requirements and translating
these requirements into Internet and business architectures.
CUSTOMER FACING SOLUTIONS. These solutions help our e-business clients
create online experiences that attract, engage and retain customers. Our
e-business marketing solutions are designed to open market channels and generate
communications that build mind share, market share and brand impact. Our
customer relationship management solutions address marketing, sales and customer
service and include channel management, profiling and personalization,
business-to-business and business-to-consumer e-commerce, back-office
integration, and electronic customer service.
KNOWLEDGE STRATEGY SOLUTIONS: Whittman-Hart's knowledge strategy solutions
empower our clients and their employees with the skills, processes and systems
required to turn passive data into positive decisions. Knowledge strategy
solutions include web-enabled business intelligence and knowledge management
systems, employee development processes and self-service human resources
systems.
9
<PAGE>
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.
Our marketing efforts target growing and middle-market companies from
startup to $1 billion in annual revenues, as well as divisions and departments
of the Fortune 500. We serve clients in a broad range of industries including
communications, consumer products, distribution, financial services, insurance,
manufacturing, pharmaceuticals, professional services, retail and technology.
Our business model focuses on providing local and Internet-hosted services to
our clients and developing close and long-lasting relationships with them, and
many of our clients have worked with us for several years spanning a variety of
projects and services. We believe that our ability to provide innovative
solutions is enhanced by our strategic relationships with leading vendors such
as Broadvision, Exodus, IBM, Microsoft, Novell and Oracle.
Headquartered in Chicago, we have approximately 3,900 employees in 23 branch
offices throughout the United States and the United Kingdom. Our Web site can be
found at www.whittmanhart.com.
THE USWEB/CKS MERGER
On December 12, 1999, we entered into a merger agreement with USWeb/CKS.
Under the agreement, a subsidiary of ours will merge with and into USWeb/CKS,
with USWeb/CKS continuing as the surviving corporation.
If we complete the merger, USWeb/CKS stockholders will receive 0.865 of a
share of our common stock, or the exchange ratio, for each share of USWeb/CKS
common stock they own. All outstanding options and warrants to purchase
USWeb/CKS common stock will be assumed by us and converted into options or
warrants to purchase our common stock based on the exchange ratio. Based upon an
estimate of approximately 94,199,000 shares of USWeb/CKS common stock issued and
outstanding as of January 25, 2000, approximately 81,482,000 shares of our
common stock will be issued to holders of USWeb/CKS common stock in the merger.
The existing holders of USWeb/CKS common stock will hold approximately 57% of
the combined company's common stock issued and outstanding after the merger. The
existing holders of our common stock will hold approximately 43% of the combined
company's common stock issued and outstanding after the merger.
The merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware or at such later time as is
specified in the Certificate of Merger. Assuming all conditions to the merger
are met or waived, we anticipate that the effective time of the merger will be
in late February or early March 2000.
Following the merger, the board of directors of the combined company will
consist of nine directors: Robert Bernard, Chairman and Chief Executive Officer
of Whittman-Hart; Robert Shaw, Chief Executive Officer of USWeb/CKS; four
additional directors named by Whittman-Hart, all of whom are currently directors
of Whittman-Hart: Paul D. Carbery, a general partner of Frontenac Company, W.
Barry Moore, Vice Chairman of Kurt Salmon Associates, David P. Storch, Chief
Executive Officer of AAR Corp., and Edward 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 Officer of Whittman-Hart, will continue in the same
positions with the combined company.
We cannot complete the merger unless the stockholders of USWeb/CKS approve
the merger proposal, our stockholders approve the issuance of shares in the
merger and the increase in the number of our shares
10
<PAGE>
authorized and a number of other conditions are satisfied or waived. See "Risk
Factors--Risks Relating to the Merger--If the merger is not completed, our stock
price could decline."
USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock by the
selling stockholder. If the selling stockholder exercises all or a portion of a
warrant which we granted to the selling stockholder in connection with the
entering into of an alliance with the selling stockholder, we will receive
proceeds from the sale of up to 400,000 shares of common stock to the selling
stockholder. If the selling stockholder exercises the warrant in full, we will
receive $14,350,000, which we will use for working capital and other general
corporate purposes.
THE SELLING STOCKHOLDER
The following table is based upon data furnished to us by the selling
stockholder and sets forth certain information regarding the selling
stockholder, including:
- the name of the selling stockholder;
- the beneficial ownership and percentage ownership of common stock of the
selling stockholder as of January 21, 2000; and
- the maximum number of shares of common stock offered by the selling
stockholder.
The number of shares that may be actually sold by the selling stockholder
will be determined by the selling stockholder. Because the selling stockholder
may sell all, some or none of the shares of common stock that it owns, we cannot
estimate the number of shares of common stock that will be owned by the selling
stockholder upon termination of the offering.
Under Rule 416 of the Securities Act, the selling stockholder may also offer
and sell additional shares of common stock issued to it as a result of stock
splits, stock dividends and anti-dilution provisions.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF SHARES NUMBER OF
BENEFICIALLY OWNED BENEFICIALLY OWNED SHARES BEING
SELLING STOCKHOLDER PRIOR TO THE OFFERING PRIOR TO THE OFFERING OFFERED
- ------------------- --------------------- --------------------- ------------
<S> <C> <C> <C>
Novell, Inc................................. 3,694,893* 5.9%* 3,694,893*
</TABLE>
- ------------------------
* Includes 400,000 shares of common stock which the selling stockholder may
acquire upon exercise of a warrant which we granted to the selling
stockholder in connection with the entering into of an alliance with the
selling stockholder.
RELATIONSHIP WITH WHITTMAN-HART.
We entered into a global alliance agreement with the selling stockholder to
develop a Novell Directory Services-Registered Trademark- consulting
organization that offers a comprehensive set of NDS-Registered Trademark--based
products, services and solutions and to develop, market and implement an
NDS-Registered Trademark- solutions practice. We also entered into a consulting
services agreement with the selling stockholder under which we will provide
consulting, educational, marketing and other services to the selling
stockholder.
In connection with our alliance with the selling stockholder, we issued to
the selling stockholder 3,294,893 shares of common stock for a total purchase
price of $100,000,000 and a warrant to purchase 400,000 shares of common stock
at an exercise price of $35.875 per share which is exercisable only if we fail
to achieve certain milestones related to the alliance.
We granted to the selling stockholder registration rights to register the
shares of common stock that the selling stockholder purchased and the shares of
common stock that the selling stockholder may receive
11
<PAGE>
under the warrant. The shares of common stock to be sold under this prospectus
are the shares of common stock for which the selling stockholder has
registration rights.
PLAN OF DISTRIBUTION
Sales of the shares being sold by the selling stockholder are for the
selling stockholder's own account. We will not receive any proceeds from the
sale of the shares offered hereby.
The selling stockholder has advised us that:
- the shares may be sold by the selling stockholder or its pledgees, donees,
transferees or successors in interest, on the Nasdaq National Market, in
sales occurring in the public market of that market quotation system, in
privately negotiated transactions, through the writing of options on
shares, short sales or in a combination of these transactions;
- each sale may be made either at market prices prevailing at the time of
the sale or at negotiated prices;
- some or all of the shares may be sold through brokers, dealers,
underwriters or agents acting on behalf of the selling stockholder or to
dealers for resale by the dealers; and
- in connection with these sales, brokers, dealers, underwriters or agents
may receive compensation in the form of discounts and commissions from the
selling stockholder and may receive commissions from the purchasers of
shares for whom they act as broker or agent, which discounts and
commissions may be less than or exceed those customary in the types of
transactions involved. Any broker, dealer or agent participating in any
sale may be deemed to be an "underwriter" within the meaning of the
Securities Act and will be required to deliver a copy of this prospectus
to any person who purchases any common stock from or through the broker,
dealer, agent or underwriter.
- the selling stockholder has not made any arrangements with any broker,
dealer, agent or underwriter for the sale of its common stock.
In offering the common stock covered by this prospectus, the selling
stockholder and any broker-dealers who execute sales for the selling stockholder
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with the sales, and any profits realized by the selling stockholder
and the compensation of the broker-dealer may be deemed to be underwriting
discounts and commissions. In addition, any common stock covered by this
prospectus which qualifies for sale pursuant to Rule 144 may be sold under Rule
144 rather than under this prospectus.
In some states, to comply with state securities laws, the selling
stockholder may sell the shares of common stock only (1) through registered or
licensed brokers or dealers or (2) if the shares have been registered or
qualified for sale in the state or an exemption from registration or
qualification is available and is complied with.
Under applicable rules and regulations under Regulation M under the
Securities Exchange Act, any person engaged in the distribution of our common
stock may not simultaneously engage in market making activities, subject to
exceptions, with respect to our common stock for a specified period set forth in
Regulation M prior to the commencement of the distribution and until its
completion. In addition, the selling stockholder will be subject to the
applicable provisions of the Securities Act and the Securities Exchange Act and
the rules and regulations under those acts, including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales of
shares of our common stock by the selling stockholder. These restrictions may
affect the marketability of our common stock.
If necessary, with respect to a particular offer, we will set forth in an
accompanying prospectus supplement, a post-effective amendment to the
registration statement of which this prospectus is a part,
12
<PAGE>
the specific shares of our common stock to be sold, the purchase price and
public offering price, the name of any agent, dealer or underwriter and any
applicable commissions or discounts.
We entered into an agreement with the selling stockholder in connection with
the private placement of shares of our common stock which required us to
register the selling stockholder's shares of our common stock under applicable
federal and state securities laws. The registration rights agreement provides
for cross-indemnification of the selling stockholder and us and our respective
directors, officers and controlling persons against certain liabilities in
connection with the offer and sale of the shares of our common stock, including
liabilities under the Securities Act, and require the selling stockholder and us
to contribute to payments the parties may be required to make in connection with
any of these liabilities.
We will pay substantially all of the expenses incurred by the selling
stockholder, other than underwriting discounts or commissions, and us incident
to the offering and sale of the shares of common stock under this prospectus.
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement that we have filed
with the SEC using a "shelf registration" process. You should read this
prospectus and any supplement together with the additional information described
under "Where You Can Find More Information."
You should rely only on the information provided or incorporated by
reference in this prospectus or any supplement. We have not authorized anyone
else to provide you with additional or different information. Our common stock
is not being offered in any state where the offer is not permitted. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of the prospectus or supplement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information that we file with the SEC at:
- the public reference room of the SEC, Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549; or
- the public reference facilities of the SEC's regional offices at Seven
World Trade Center, 13th Floor, New York, New York 10048 or Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Some of these locations may charge a prescribed or modest fee for copies.
You may obtain information on the operation of the SEC public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. In addition, you may
access any document we file with the SEC on its web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to another document we file separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file with the SEC later will automatically update and
supersede this information. The following documents filed by us and any future
filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act, until the selling stockholder sells all of the common
stock offered hereby, are incorporated by reference in this prospectus:
- Our Annual Report on Form 10-K for the year ended December 31, 1998;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
13
<PAGE>
- Our Current Reports on Form 8-K filed on May 10, 1999, October 15, 1999,
December 15, 1999, January 26, 2000 and January 28, 2000; and
- Our Registration Statement on Form S-4 (No. 333-94565).
You may request a copy of these filings, at no cost, by writing or
telephoning us at Whittman-Hart, Inc., 311 South Wacker Drive, Suite 3500,
Chicago, Illinois 60606; telephone number (312) 922-9200; Attention: Investor
Relations.
LEGAL MATTERS
Katten Muchin Zavis, Chicago, Illinois will pass upon the validity of the
shares of common stock offered under this prospectus for us.
EXPERTS
The consolidated financial statements and consolidated financial statement
schedule of valuation and qualifying accounts of Whittman-Hart as of
December 31, 1998 and 1997, and for each of the years in the three-year period
ended December 31, 1998, have been incorporated by reference in this prospectus
and in the registration statement in reliance upon the reports of KPMG LLP,
independent certified public accountants, and upon the authority of that firm as
experts in accounting and auditing.
The audited historical financial statements of USWeb Corporation included in
the Current Report on Form 8-K dated January 28, 2000 have been incorporated in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the estimated expenses (other than the SEC registration
fee and the Nasdaq Listing Fees and Expenses) of the issuance and distribution
of the securities being registered, all of which will be paid by the Company.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee........................................ $47,188
Fees and expenses of counsel................................ $10,000
Fees and expenses of accountants............................ $10,000
Nasdaq Listing Fees and Expenses............................ $17,500
Miscellaneous............................................... $ 5,312
-------
Total..................................................... $90,000
=======
</TABLE>
We have agreed to pay all expenses (other than underwriting discounts and
selling commissions, brokerage fees and transfer taxes, if any, and the fees and
expenses of counsel and other advisors to the selling stockholder) in connection
with the registration and sale of the shares being offered by the selling
stockholder under this prospectus.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Ten of the Company's Amended and Restated Certificate of
Incorporation, filed as Exhibit 3.1, and Article Eight of the Company's by-laws,
filed as Exhibit 3.2, provide that the Company shall indemnify its directors and
officers to the full extent permitted by the Delaware General Corporation Law.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities arising under the
Securities Act of 1933. In addition, Article Eight of the Company's Amended and
Restated Certificate of Incorporation provides that a director of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of his or her fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derives an improper personal benefit.
Reference is made to Section 145 of the General Corporation Law of the State
of Delaware which provides for indemnification of directors and officers in
certain circumstances.
The Company has obtained an insurance policy which will entitle the Company
to be reimbursed for certain indemnity payments it is required or permitted to
make to its directors and officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 12, 1999
by and among Whittman-Hart, Inc., Uniwhale, Inc, a wholly
owned subsidiary of Whittman-Hart and USWeb/CKS,
incorporated herein by reference to the Company's
Registration Statement on Form S-4 (No. 333-94565).
4.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.2 Second Amended and Restated By-Laws of the Company,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.3 Specimen stock certificate representing Common Stock,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.4 Common Stock and Warrant Purchase Agreement dated as of
September 29, 1999 by and between Novell, Inc. and
Whittman-Hart, Inc.
4.5 Investor Rights Agreement dated as of November 12, 1999 by
and between Whittman-Hart, Inc. and Novell, Inc.
4.6 Warrant to Purchase Common Stock of Whittman-Hart, Inc.
dated November 12, 1999.
5.1 Opinion of Katten Muchin Zavis as to the validity of the
securities being registered.
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
ITEM 17. UNDERTAKINGS
(1) The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(d) For purposes of determining any liability under the Securities Act, each
filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, offices and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such
II-2
<PAGE>
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on the 26th day of
January, 2000.
<TABLE>
<S> <C> <C>
WHITMAN-HART, INC.
By: /s/ BERT B. YOUNG
-----------------------------------------
Bert B. Young
CHIEF FINANCIAL OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert F. Bernard and Bert B. Young and each of them his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and post-
effective amendments to this Registration Statement on Form S-3 and to file the
same, with all exhibits thereto and any other documents in connection therewith,
with the SEC under the Securities Act, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as each might or could do in person, hereby ratifying
and confirming each act that said attorneys-in-fact and agents may lawfully do
or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of January, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROBERT F. BERNARD Chief Executive Officer and Chairman of the
------------------------------------------- Board of Directors (principal executive
Robert F. Bernard officer)
/s/ BERT B. YOUNG
------------------------------------------- Chief Financial Officer (principal financial
Bert B. Young and accounting officer)
/s/ EDWARD V. SZOFER
------------------------------------------- Director, President and Secretary
Edward V. Szofer
/s/ PAUL D. CARBERY
------------------------------------------- Director
Paul D. Carbery
/s/ W. BARRY MOORE
------------------------------------------- Director
W. Barry Moore
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LARRY P. ROCHES
------------------------------------------- Director
Larry P. Roches
/s/ ROBERT F. STEEL
------------------------------------------- Director
Robert F. Steel
/s/ DAVID P. STORCH
------------------------------------------- Director
David P. Storch
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of December 12, 1999
by and among Whittman-Hart, Inc., Uniwhale, Inc, a wholly
owned subsidiary of Whittman-Hart and USWeb/CKS,
incorporated herein by reference to the Company's
Registration Statement on Form S-4 (No. 333-94565).
4.1 Amended and Restated Certificate of Incorporation of the
Company, incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.2 Second Amended and Restated By-Laws of the Company,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.3 Specimen stock certificate representing Common Stock,
incorporated herein by reference to the Company's
Registration Statement on Form S-1 (No. 333-1778).
4.4 Common Stock and Warrant Purchase Agreement dated as of
September 29, 1999 by and between Novell, Inc. and
Whittman-Hart, Inc.
4.5 Investor Rights Agreement dated as of November 12, 1999 by
and between Whittman-Hart, Inc. and Novell, Inc.
4.6 Warrant to Purchase Common Stock of Whittman-Hart, Inc.
dated November 12, 1999.
5.1 Opinion of Katten Muchin Zavis as to the validity of the
securities being registered.
23.1 Consent of KPMG LLP, independent accountants.
23.2 Consent of PricewaterhouseCoopers LLP, independent
accountants.
23.3 Consent of Katten Muchin Zavis (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
<PAGE>
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Common Stock and Warrant Purchase Agreement (this "AGREEMENT") is
made and entered into to be effective as of September 29, 1999 ("EFFECTIVE
DATE"), by and between Novell, Inc., a Delaware corporation (the "INVESTOR"),
and Whittman-Hart, Inc., a Delaware corporation (the "COMPANY").
RECITALS
WHEREAS, the Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, shares of common stock, par value $0.001
per share, of the Company (the "COMMON STOCK") and a Warrant to purchase
additional shares of the Company's Common Stock on the terms and conditions set
forth in this Agreement; and
WHEREAS, the Company and the Investor have entered into a Global
Alliance Agreement dated as of September 29, 1999 relating to certain business
transactions between the Company and the Investor (the "ALLIANCE AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) AUTHORIZATION. The Company's Board of Directors will,
prior to the Closing (as defined below), authorize the issuance, pursuant to the
terms and conditions of this Agreement, of 3,294,893 shares of Common Stock.
(b) AGREEMENT TO PURCHASE AND SELL SECURITIES. At the Closing,
the Company shall issue and sell to the Investor, and the Investor shall
purchase from the Company, 3,294,893 shares of Common Stock (the "PURCHASED
SHARES"). The aggregate purchase price to be paid by the Investor for all
Purchased Shares shall be One Hundred Million Dollars ($100,000,000) (the
"PURCHASE PRICE").
(c) AGREEMENT TO PURCHASE AND SELL WARRANT. At the Closing,
the Company shall issue to the Investor a warrant (the "WARRANT") to purchase
all or any portion of 400,000 shares of Common Stock (the "Warrant Shares") in
the form of attached hereto as EXHIBIT A.
(d) USE OF PROCEEDS. The Company intends to apply the net
proceeds received from the sale of the Purchased Shares to fund the
development, promotion and implementation of an NDS Solutions Practice (as
defined in the Alliance Agreement), which shall include, but not be limited
to, the hiring and/or redeployment, training and certification of the
Company's consulting personnel in Novell Directory Services-Registered
Trademark- (NDS-Registered Trademark-) and NDS-related technology, and the
development and implementation of methodologies, marketing strategies, public
relations
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programs and facilities, all as more specifically set forth in the Alliance
Agreement and the Services Agreement and other agreements anticipated by the
Alliance Agreement (collectively, the "BUSINESS AGREEMENTS").
(e) HSR COMPLIANCE.
(i) Promptly after the execution hereof, the Company
and Investor shall each complete and file their respective premerger
notification report forms under the Hart-Scott-Rodino Antitrust Improvements
Acts of 1976, as amended (the "HSR ACT"). After the filing thereof, the Company
and the Investor shall use all reasonable efforts to comply with any applicable
requirements of the HSR Act (herein the "HSR REQUIREMENTS"); provided, however,
that neither the Company nor the Investor shall be under any obligations to
comply with any request or requirement imposed by the Federal Trade Commission
(the "FTC"), the Department of Justice (the "DOJ") or any other governmental
authority in connection with the compliance with any HSR Requirement, if the
Company or the Investor, determines in its sound, good faith, reasonable
business judgment that compliance with the requirement would have an adverse
impact on its business, contracts, financial position, or prospects. Without
limiting the generality of the foregoing, neither the Company nor the Investor
shall be obligated to comply with any request by, or any requirement of the FTC,
the DOJ or any other governmental authority to; (i) disclose information the
Company or the Investor, as the case may be, in its sound, good faith,
reasonable business judgment believes must be kept confidential to avoid injury
to its respective business; (ii) dispose of any assets or operations; or (iii)
comply with any restriction on the manner in which it conducts its operations.
(ii) In the event an exercise or holding of the
Warrant would require a filing by the Investor under the HSR Act, the Investor
and its respective affiliates (including any "ultimate parent entity," as
defined in the HSR Act), and the Company and its respective affiliates
(including any "ultimate parent entity," as defined in the HSR Act), shall
promptly prepare and make their respective filings, and thereafter shall make
all required or requested submissions under the HSR Act or any analogous
applicable law, if required. In taking such actions or making any such filings,
the parties hereto shall furnish information required in connection therewith
and seek timely to obtain any applicable actions, consents, approvals or waivers
of governmental authorities; PROVIDED, HOWEVER, that the parties hereto shall
cooperate with each other in connection with the making of all such filings to
the extent permitted by applicable law. Without limiting the generality of the
foregoing, to the extent permitted by applicable law and so long as the
following will not involve the disclosure of confidential or proprietary
information of one party hereto to another, each party shall cooperate with the
other by (a) providing copies of all documents to be filed to the non-filing
party and its advisors prior to filing and, if requested, accepting reasonable
additions, deletions or changes suggested in connection therewith and (b)
providing to each other party copies of all correspondence from and to any
governmental authority in connection with any such filing.
2. CLOSING. The purchase and sale of the Purchased Shares shall take
place at the offices of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, 650 Page Mill Road, Palo Alto, California, at 10:00 a.m. California
time, within three (3) business days after the
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conditions set forth in Sections 5 and 6 have been satisfied, or at such
other time and place as the Company and the Investor mutually agree upon
(which time and place are referred to in this Agreement as the "CLOSING"). At
the Closing, the Company will deliver to the Investor the Warrant and
certificate representing the Purchased Shares against delivery to the Company
by the Investor of the Purchase Price in cash, paid by wire transfer of funds
to the Company. Closing documents may be delivered by facsimile with original
signature pages sent by overnight courier. The date of the Closing is
referred to herein as the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that, except as set forth in the
Disclosure Letter, delivered by the Company to Investor concurrently herewith,
or the SEC Documents (as defined below):
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to (a) carry on its business as presently conducted and (b) execute and enter
into this Agreement, the Warrant, the Investor Rights Agreement, the Alliance
Agreement, the Services Agreement, the Confidentiality Agreement, the other
Business Agreements, and the other agreements, instruments and documents
contemplated hereby and thereby (the "TRANSACTION DOCUMENTS"), and to consummate
the transactions contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which the failure to so
qualify, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means (i) a material adverse effect on the execution, delivery, validity or
consummation of the Transaction Documents, (ii) a material adverse effect on the
performance of the Transaction Documents, or (ii) a material adverse effect on,
or a material adverse change in, or a group of such effects on or changes in,
the business, operations, financial condition, results of operations, assets or
liabilities of the applicable party and its subsidiaries, taken as a whole;
provided, however, that changes in the information technology consulting
services industry generally changes in economic conditions generally, or changes
in the securities market generally shall not in and of themselves be deemed a
Material Adverse Effect.
(b) CAPITALIZATION. The authorized stock and other securities
of the Company, without giving effect to the transactions contemplated by this
Agreement, consists only of the following.
(i) COMMON STOCK. The authorized Common Stock
consists only of 75,000,000 shares of Common Stock, of which 55,814,439 shares
were issued and outstanding as of September 21, 1999. All such shares of Common
Stock have been duly authorized, and all such issued and outstanding shares of
Common Stock have been validly issued, are fully paid and nonassessable. No such
outstanding shares of Common Stock were issued in violation of any pre-emptive
rights.
(ii) RESERVED SHARES. As of the date hereof, the
Company has also reserved: 24,000,000 shares of Common Stock for issuance upon
exercise of options granted to
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employees, consultants and directors of the Company under the Company's 1995
Incentive Stock Plan. As of the date hereof, 24,000,000 shares of Common Stock
reserved for issuance under the above plans, approximately 17,800,000 shares
remained subject to outstanding options or warrants and have a weighted average
exercise price of approximately $19.11, and approximately 6,200,000 shares were
reserved for future grant. In addition, the Company has reserved approximately
1,100,000 shares of Common Stock for issuance to employees of the Company under
the Company's Employee Stock Purchase Plan. All shares of Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no other equity
securities, options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound, obligating
the Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of the Company or obligating the Company to grant, extend or enter into
any such equity security, option, warrant, call, right, commitment or agreement.
(c) SUBSIDIARIES. The Company does not have any subsidiaries,
nor does the Company own any capital stock, assets comprising the business of,
obligations of, or any other interest (including any equity, limited liability
company, joint venture or partnership interest) in, or any outstanding loan or
advance to or from, any person or entity, except as described in Section 3(c) of
the Disclosure Letter. Each such identified subsidiary is duly organized,
validly existing and in good standing under the laws of the state indicated for
such subsidiary in the Disclosure Letter and has all corporate power and
authority required to carry on its business as presently conducted. Each such
identified subsidiary is qualified to do business and is in good standing in
each jurisdiction in which the failure to so qualify has had or is reasonably
likely to have, individually or collectively, a Material Adverse Effect.
(d) DUE AUTHORIZATION. All corporate actions on the part of
the Company necessary for the authorization, execution, delivery of, and the
performance of all obligations of the Company under, the Transaction Documents,
and the authorization, issuance, reservation for issuance, and delivery of all
of the Purchased Shares being sold under this Agreement and all of the Warrant
Shares issuable upon exercise of the Warrant have been taken. The Transaction
Documents, when executed, will constitute, legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
except (a) as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (ii) the effect of rules of
law governing the availability of equitable remedies, and (b) as rights to
indemnity or contribution may be limited under federal or state securities laws
or by principles of public policy thereunder.
(e) VALID ISSUANCE OF STOCK.
(i) VALID ISSUANCE. The Purchased Shares and the
Warrant Shares have been duly and validly reserved for issuance and, upon
payment of the Purchase Price therefor by the Investor in accordance with this
Agreement or the Warrant, will be duly
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authorized, validly issued, fully paid and non-assessable and free of any lien,
claim, encumbrance or transfer restriction, except as expressly provided in the
Warrant and/or the Investor Rights Agreement. The Warrant Shares have been duly
and validly reserved for issuance and, upon issuance, sale and delivery in
accordance with the terms of the Warrant, for the consideration provided for
therein, will be duly and validly issued, fully paid and nonassessable.
(ii) COMPLIANCE WITH SECURITIES LAWS. Assuming the
correctness of the representations made by the Investor in Section 4, the
Purchased Shares, the Warrant and (assuming no change in applicable law and no
unlawful distribution of Purchased Shares or the Warrant by the Investor or
other parties) the Warrant Shares will be issued to the Investor in compliance
with applicable exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and (ii) the registration and qualification requirements of all applicable
securities laws of the states of the United States.
(f) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority on
the part of the Company is required in connection with the issuance of the
Purchased Shares, the Warrant or the Warrant Shares to the Investor, or the
consummation of the other transactions contemplated by the Transaction
Documents, except for (i) compliance with the HSR Requirements, (ii) any filing
that may be required pursuant to Regulation D promulgated under the Securities
Act and (iii) such other consents, approvals, orders, authorizations,
qualifications, registrations, designations, declarations or filings as are not
material. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing and will, in the case of filings, be
made within the time prescribed by law.
(g) NON-CONTRAVENTION. The execution, delivery and performance
of the Transaction Documents by the Company, and the consummation by the Company
of the transactions contemplated hereby and by the Warrant (including issuance
of the Purchased Shares and the Warrant, and the issuance of the Warrant Shares
upon exercise of the Warrant), do not and will not (i) contravene or conflict
with the Certificate of Incorporation or Bylaws of the Company or its
subsidiaries; (ii) constitute a material violation of any provision of any
federal, state, local or foreign law binding upon or applicable to the Company
or its subsidiaries; or (iii) constitute a default or require any consent under,
give rise to any right of termination, cancellation or acceleration of, or to a
loss of any material benefit to which the Company or its subsidiaries is
entitled under, or result in the creation or imposition of any lien, claim or
encumbrance on any assets of the Company or its subsidiaries under, any contract
to which the Company or its subsidiaries is a party or any material permit,
license or similar right relating to the Company or its subsidiaries or by which
the Company or its subsidiaries may be bound or affected, except, in each of the
foregoing cases, as has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(h) LITIGATION. There is no action, suit, proceeding, claim,
arbitration or investigation ("ACTION") pending or, to the Company's knowledge,
threatened nor is there any basis for any action: (a) against the Company or its
subsidiaries, with respect to their activities,
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properties or assets, or against any officer, director or employee of the
Company or its subsidiaries in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of, the Company or its
subsidiaries, (b) that seeks to prevent, enjoin, alter or delay the transactions
contemplated by the Transaction Documents (including issuance of the Purchased
Shares, the Warrant and the Warrant Shares), or which is reasonably likely to
have a material adverse effect on the execution, delivery, validity or
consummation of the Transaction Documents or the performance of the Transaction
Documents by the Company, or (c) relating to the current or prior employment of
a current or former employee or consultant of the Company or its subsidiaries,
their use of any information in connection with the business, technology,
techniques, or other assets allegedly proprietary to any person other than the
Company or its wholly owned subsidiaries of the Company to which the Company is,
or, to the Company's knowledge, would likely be, a party. Neither the Company
nor its subsidiaries is a party to or is subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. No Action by the Company or any of its subsidiaries is pending.
(i) COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. Neither the
Company nor any of its subsidiaries is in violation or default of any provisions
of its Certificate of Incorporation or Bylaws, both as amended. The Company and
its subsidiaries have complied in all respects and are in compliance with all
applicable statutes, laws, rules, regulations and orders of the United States of
America and all states thereof, foreign countries and other governmental bodies
and agencies having jurisdiction over their business or properties, except for
any instance of non-compliance that has not had, and would not reasonably be
expected to have, individually or collectively, a Material Adverse Effect.
(j) SEC DOCUMENTS.
(i) REPORTS. The Company has furnished to the
Investor prior to the date hereof (or the Investor can obtain from the internet)
copies of its Annual Report on Form 10-K for the fiscal year ended December 31,
1998 (the "FORM 10-K"), and all other registration statements, reports and proxy
statements, including the exhibits thereto, filed by the Company with the
Securities and Exchange Commission ("SEC") on or after said date (the Form 10-K
and such registration statements, reports and proxy statements, including the
exhibits thereto, are collectively referred to herein as the "SEC DOCUMENTS").
Since the Balance Sheet Date (as defined below), the Company has duly filed with
the SEC all registration statements, reports and proxy statements required to be
filed by it under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"). Each of the SEC Documents, as of the respective date thereof (or if
amended or superseded by a filing prior to the Closing Date, then on the date of
such filing), did not, and each of the registration statements, reports and
proxy statements filed by the Company with the SEC after the date hereof and
prior to the Closing will not, as of the date thereof (or if amended or
superseded by a filing after the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. Neither the
Company nor any of its subsidiaries is a party
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to any material contract, agreement or other arrangement that was required to
have been filed as an exhibit to the SEC Documents that was not so filed.
(ii) FINANCIAL STATEMENTS. The Form 10-K includes the
Company's audited balance sheet ("DECEMBER 31 BALANCE SHEET") and its other
financial statements (collectively, the "AUDITED FINANCIAL STATEMENTS") for the
fiscal year ended December 31, 1998. The SEC Documents also include the
Company's unaudited balance sheet (the "JUNE 30 BALANCE SHEET") as of June 30,
1999 (the "BALANCE SHEET DATE"), and its other unaudited financial statements
(collectively, the "UNAUDITED 1999 QUARTERLY FINANCIAL STATEMENTS") for the
quarters ending March 31, 1999 and June 30, 1999. The Audited Financial
Statements, the June 30 Balance Sheet, and the Unaudited 1999 Quarterly
Financial Statements of the Company included in the SEC Documents filed prior to
the date hereof fairly presented, as of their issuance, in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
the financial position of the Company as at the dates thereof and the results of
its operations and cash flows for the periods covered thereby.
(k) ABSENCE OF CERTAIN CHANGES SINCE BALANCE SHEET DATE. Since
the Balance Sheet Date, the business and operations of the Company and its
subsidiaries have been conducted in the ordinary course consistent with past
practice, and there has not been:
(i) any declaration, setting aside or payment of any dividend
or other distribution of the assets of the Company or its subsidiaries
with respect to any shares of capital stock of the Company or any
repurchase, redemption or other acquisition by the Company or its
subsidiaries of any outstanding shares of the Company's capital stock;
(ii) any damage, destruction or loss, whether or not covered
by insurance, which has had or is reasonably likely to have,
individually or collectively, a Material Adverse Effect;
(iii) any waiver by the Company or any of its subsidiaries of
a valuable right or of a material debt owed to any of them, except for
such waivers, that have not had nor are reasonably likely to have,
individually or collectively, a Material Adverse Effect;
(iv) any change or amendment to, or any waiver of any right
under a contract or arrangement by which the Company or any of its
assets or properties is bound or subject which has had or is reasonably
likely to have, individually or collectively, a Material Adverse
Effect;
(v) any change by the Company in its accounting principles,
methods or practices or in the manner it keeps its accounting books and
records, except any such change required by a change in GAAP which has
not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect;
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(vi) any other circumstance, condition or event of any
character which constitutes, either individually or collectively, a
Material Adverse Effect.
(l) INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Each
employee and consultant or independent contractor of the Company or its
subsidiaries whose duties include the development of products or Intellectual
Property (as defined below), and each former employee and consultant or
independent contractor whose duties included the development of products or
Intellectual Property, has entered into and executed an invention assignment and
confidentiality agreement in the form provided to the Investor prior to the
Effective Date, or an employment or consulting agreement containing
substantially similar terms, except where the absence of such assignment and/or
agreement has not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect.
(m) INTELLECTUAL PROPERTY
(i) COMPANY RIGHTS TO INTELLECTUAL PROPERTY. The
Company or its wholly owned subsidiaries have sole title to and own, or are
licensed or otherwise possess valid, subsisting, and legally enforceable rights
to use, all (i) patents, and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof ("PATENTS"); (ii) inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing ("TRADE SECRETS"); (iii) copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world ("COPYRIGHTED WORKS"); (iv) domain names, uniform
resource locators and other names and locators associated with the Internet; (v)
industrial designs and any registrations and applications therefor; (vi) trade
names, logos, common law trademarks and service marks, trademark and service
mark registrations and applications therefor ("TRADEMARKS"); (vii) all databases
and data collections and all rights therein; (viii) all moral and economic
rights of authors and inventors, however denominated; (ix) mask work rights and
other rights in semiconductor designs; and (x) any similar or equivalent rights
to any of the foregoing (collectively "INTELLECTUAL PROPERTY") necessary to
enable the Company and its subsidiaries to carry on their business as currently
conducted in all material respects ("COMPANY INTELLECTUAL PROPERTY"). All
licenses, sublicenses, agreements, and permissions relating to such Company
Intellectual Property are in full force and effect and there exists no breach or
default on the part of the Company or, to the Company's knowledge, any other
party thereunder, except for such circumstances of unenforceability, invalidity,
or breach that, have not had and are not reasonably likely to have, individually
or collectively, a Material Adverse Effect. The Company Intellectual Property is
free and clear of any lien, license, lease, claim or encumbrance (other than
non-exclusive out-licenses granted by the Company in the ordinary course of
business which do not materially reduce the value or utility to the Company or
its subsidiaries of such Company Intellectual Property), except as had not had,
and is not reasonably likely to have, a Material Adverse Effect.
(ii) MAINTENANCE OF RIGHTS. After the Closing, the
Company and its subsidiaries will use all reasonable business efforts to obtain
and maintain protection for all
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Patents, Trade Secrets, Copyrighted Works, Trademarks, and other Company
Intellectual Property.
(iii) OTHER CLAIMS. No person, other than the Company
and its subsidiaries, holds any license, agreement or other right of any kind in
or to the Company Intellectual Property, to manufacture, modify, or create
derivative works of any of the Company Intellectual Property, or to receive any
copy of any source code or any software included within the Company Intellectual
Property, except for such licenses, agreements and rights that, have not had and
are not reasonably likely to have, individually or collectively, a Material
Adverse Effect.
(iv) NO INFRINGEMENT. Neither the Company nor any of
its subsidiaries has violated or infringed in any respect, and is not currently
violating or infringing in any respect the Intellectual Property of any third
party in any manner that, has had and is reasonably likely to have, individually
or collectively, a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received any written communications and has no other basis to
believe that any person is (a) alleging that the Company (or any of its
employees or consultants) has violated or infringed, any Intellectual Property
of any other person or entity in any material respect, (b) seeking to restrict
in any manner the use, transfer, or licensing of any Company Intellectual
Property, (c) which may reasonably be expected to effect the validity or
enforceability of any Company Intellectual Property, (d) restricting the
provision of any material product or service of the Company or its subsidiaries,
or (e) otherwise relating to the Company Intellectual Property, except where
such violations, infringements, restrictions or other effects, have not had and
are not reasonably likely to have, individually or collectively, a Material
Adverse Effect. The Company knows of no information, material facts, or
circumstances that would render any of the Company Intellectual Property invalid
or unenforceable and the Company has not made any material misrepresentation or
concealment in any application for registration of any Company Intellectual
Property.
(v) JOINT DEVELOPMENT. To the extent that any Company
Intellectual Property has been developed or created independently or jointly by
a third party for the Company or any of its subsidiaries, or is incorporated
into any of the products or services of the Company or any of its subsidiaries,
the Company has a written agreement with such third party with respect thereto
and the Company thereby either: (a) has obtained ownership of, and is the
exclusive owner of, or (b) has obtained a perpetual, non-terminable license
(sufficient for the conduct of the business of the Company and its subsidiaries
as currently conducted and as required to be conducted under the Transaction
Documents) to all of such third party's right title and interest in said
Intellectual Property by operation of law or by valid assignment, to the fullest
extent legally possible, except where the absence of such ownership or
agreement, has not had and is not reasonably likely to have, individually or
collectively, a Material Adverse Effect
(vi) OUT-LICENSES. Neither the Company nor any of its
subsidiaries has transferred ownership of, or granted any exclusive license with
respect to, any Company Intellectual Property to any third party (herein "OUT
LICENSE"), except where such transfer or license has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect.
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(vii) NO CONFLICT. The consummation of the transactions
contemplated by the Transaction Documents will not violate nor result in the
breach, modification, cancellation, termination or suspension of any Out
License or of any material license, contract or other agreement to which the
Company or any of its subsidiaries is a party pursuant to which a third party
has licensed or transferred Intellectual Property to the Company or any of its
subsidiaries ("IN LICENSE"), except where the violation, breach, modification,
cancellation, termination, or suspension has not had and is not reasonably
likely to have, individually or collectively, a Material Adverse Effect.
(viii) MISAPPROPRIATION. To the Company's knowledge, no
third party is infringing or misappropriating the Company's Intellectual
Property in any manner that, has had or is reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(ix) TRADE SECRETS, EMPLOYEES AND CONSULTANTS. The
Company and its subsidiaries have taken reasonable and practicable steps
designed to safeguard and maintain the secrecy and confidentiality of, and
their proprietary rights in, all trade secrets or other confidential
information constituting Intellectual Property, except where the absence of
such measures, has not had and is not reasonably likely to have, individually
or collectively, a Material Adverse Effect. To the Company's knowledge, no
employee of or consultant to the Company or its subsidiaries is in default
under any term of any employment contract, agreement or arrangement relating to
Intellectual Property of the Company or its subsidiaries or any non-competition
arrangement, other contract or restrictive covenant relating to Intellectual
Property, except where such default, has not had and is not reasonably likely
to have, individually or collectively, a Material Adverse Effect.
(x) INDEPENDENT DEVELOPMENT. The Company Intellectual
Property (other than any Company Intellectual Property duly acquired or
licensed from third parties) was developed entirely by the employees of or
consultants to the Company and its subsidiaries during the time they were
employed or retained by the Company or its subsidiaries, except under
circumstances that, have not had and are not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(xi) YEAR 2000 ISSUES. Except where a failure has not
had and is not reasonably likely to have, individually or collectively, a
Material Adverse Effect, (a) all of the products of the Company and its
subsidiaries (including products currently under development) will record,
store, process, calculate and present calendar dates falling on and after
January 1, 2000, and will calculate any information dependent on or relating to
such dates in the same manner and with the same functionality, data integrity
and performance as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on or relating to such dates (collectively "YEAR 2000 COMPLIANT"),
and (b) none of the products of the Company and its subsidiaries will lose
functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000.
(n) REGISTRATION RIGHTS. Except as provided in the Investor
Rights Agreement, neither the Company nor any of its subsidiaries is subject to
any agreement providing any person
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or entity any rights (including piggyback registration rights) to have any
securities of the Company or its subsidiaries registered with the SEC or
registered or qualified with any other governmental authority.
(o) TITLE TO PROPERTY AND ASSETS. The properties and assets
of the Company and its subsidiaries reasonably necessary for the Company to
conduct its business as currently conducted are owned or leased by the Company
free and clear of all mortgages, deeds of trust, liens, charges, encumbrances
and security interests, except for statutory liens for the payment of current
taxes that are not yet delinquent and liens, encumbrances and security
interests that arise in the ordinary course of business and are not reasonably
likely to have, individually or collectively, a Material Adverse Effect. With
respect to the property and assets it leases, the Company is in compliance with
such leases and such leases are in full force and effect, except where such
non-compliance or invalidity has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(p) TAX MATTERS. Except as has not had and is not reasonably
likely to have, individually or collectively, a Material Adverse Effect, the
Company and its subsidiaries have filed all tax returns required to be filed,
which returns are true and correct in all material respects, and the Company
and its subsidiaries have paid in full all federal, state, local an other net
income, gross income, gross receipts, sales, use, ad valorem, value added,
intangible unitary, capital gains, transfer, franchise, profits, license,
permit, lease, service, service use, withholding, backup withholding, payroll
employment, estimated, excise, severance stamp, occupation, premium, property,
prohibited transaction, windfall, or excess profits, customs, duties, or other
taxes, fees, assessment or charges of any kind whatsoever, together with any
penalties and interest, assessments, fees and other charges, addition to tax or
additional amount with respect thereto due and owing to any governmental or
quasi-governmental authority and has discharged any obligations for payment of
the foregoing under any tax sharing, tax indemnity or other arrangement binding
upon the Company or its subsidiaries, other than those being contested in good
faith and for which adequate reserves have been provided for in the June 30
Balance Sheet. Neither the Company nor any of its subsidiaries has received
notice that the Internal Revenue Service (IRS) or any other taxing authority
has asserted against the Company or its subsidiaries any deficiency or claim
for additional taxes, and no issues have been raised (and are currently
pending) by any taxing authority in connection with any tax return filed by the
Company or any of its subsidiaries which have had or are reasonably likely to
have, individually or collectively, a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has received notice that it is or may be
subject to tax in a jurisdiction in which it has not filed or does not
currently file tax returns.
(q) FINDER'S FEE. The Company neither is, nor will be,
obligated for any finder's or broker's fee or commission in connection with
this transaction, other than the fee payable to Donaldson, Lufkin & Jenrette
Securities Corporation in the amount disclosed to Investor in the Disclosure
Letter.
(r) ERISA.
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(i) As used in this Section 3(r), the following terms
have the following meanings: (1) "BENEFIT ARRANGEMENT" means any material
benefit arrangement that is not an Employee Benefit Plan, including (i) each
material employment or consulting agreement, (ii) each material arrangement
providing for insurance coverage or workers' compensation benefits, (iii) each
material bonus or deferred bonus arrangement, (iv) each material arrangement
providing any termination allowance, severance or similar benefits, (v) each
equity compensation plan, (vi) each deferred compensation plan and (vii) each
material compensation policy and practice maintained by the Company or ERISA
Affiliate covering the employees, former employees, officers, former officers,
directors and former directors of the Company, any ERISA Affiliate, and the
beneficiaries of any of them; (2) "BENEFIT PLAN" means an Employee Benefit Plan
or Benefit Arrangement; (3) "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, as set forth in Section 4980B of the
Internal Revenue Code (the "Code") and Part 6 of Title I of ERISA; (4)
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined in Section
3(3) of ERISA, that is sponsored or contributed to by the Company, any ERISA
Affiliate, or any ERISA Affiliate covering employees or former employees of the
Company; (5) "EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA that is regulated under Title IV or
ERISA, other than a Multiemployer Plan; (6) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended; (7) "ERISA AFFILIATE" of
the Company means any other person or entity that, together with the Company as
of the relevant measuring date under ERISA, was or is required to be treated as
a single employer under Section 414 of the Code; (8) "GROUP HEALTH PLAN" means
any group health plan, as defined in Section 5000(b)(1) of the Code; (9)
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section 3(37)
and 4001(a)(3) of ERISA; and (10) "PROHIBITED TRANSACTION means a transaction
that is prohibited under Section 4975 of the Code or Section 406 of ERISA and
not exempt under Section 4975 of the Code or Section 408 of ERISA, respectively.
(ii) No Employee Benefit Plan has participated in,
engaged in or been a party to any Prohibited Transaction which has had or is
reasonably likely to have a Material Adverse Effect, and neither the Company
nor any of its ERISA Affiliates has had asserted against it any claim for any
material tax or material penalty imposed under ERISA or the Code with respect
to any Employee Benefit Plan nor, to the Company's knowledge, is there a basis
for any such claim. To the Company's knowledge, no officer, director or
employee of the Company has committed a breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA with respect to any
Employee Benefit Plan, with respect to which breach the Company is directly or
indirectly liable which has had or is reasonably likely to have, individually
or collectively, a Material Adverse Effect.
(iii) No violation of any reporting or disclosure
requirement imposed by ERISA or the Code and which has had or is reasonably
likely to have, individually or collectively, a Material Adverse Effect exists
with respect to any Employee Benefit Plan.
(iv) Except for non-compliance which has not had and
is not reasonably likely to have, individually or collectively, a Material
Adverse Effect, each Benefit Plan has been maintained in all material respects,
by its terms and in operation, in accordance
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with ERISA (if applicable), the Code and all other applicable federal, state,
local and foreign laws. The Company and its ERISA Affiliates have made full and
timely payment of all amounts required to be (i) contributed under the terms of
each Benefit Plan and such laws, or (ii) required to be paid as expenses under
such Benefit Plan except for non-compliance which has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect. Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code either has received a favorable determination letter
with respect to such qualified status from the IRS or has filed a request for
such a determination letter with the IRS within the remedial amendment period
such that such determination of qualified status will apply from and after the
effective date of any such Employee Benefit Plan, except where the failure to
qualify such plan has not had and is not reasonably likely to have,
individually or collectively, a Material Adverse Effect.
(v) With respect to any Group Health Plans maintained
by the Company or its ERISA Affiliates, whether or not for the benefit of the
Company's employees, the Company and its ERISA Affiliates have complied with
the provisions of COBRA, except for non-compliance which has not had and is not
reasonably likely to have, individually or collectively, a Material Adverse
Effect.
(s) LABOR MATTERS.
(i) No collective bargaining agreement exists that is
binding on the Company or any of its subsidiaries, and no petition has been
filed or proceedings instituted against the Company or any of its subsidiaries
by an employee or group of employees with any labor relations board seeking
recognition of a bargaining representative. To the Company's knowledge, no
organizational effort is currently being made or threatened by or on behalf of
any labor union to organize any employees of the Company.
(ii) There is no labor strike, dispute, slow down or
stoppage pending or threatened against or directly affecting the Company or any
of its subsidiaries. No grievance or arbitration proceedings arising out of or
under any collective bargaining agreement is pending, and no claims therefor
exist. Neither the Company nor any of its subsidiaries has received any notice,
and they have no knowledge of any threatened labor or civil rights dispute,
controversy or grievance or any other unfair labor practice proceeding, or
breach of contract claims or action with respect to claims of, or obligations
to, any employee or group of employees of the Company or its subsidiaries,
which in any such case is reasonably likely to have, individually or
collectively, a Material Adverse Effect.
(iii) All individuals who are performing or have
performed services for the Company or any of its subsidiaries, and who are or
were classified by the Company as "independent contractors," qualify for such
classification under Section 530 of the Revenue Act of 1978 or Section 1706 of
the Tax Reform Act of 1986, as applicable, except for such instances which are
not, reasonably likely to have, individually or collectively, a Material
Adverse Effect.
(t) FULL DISCLOSURE. The representations made in this
Section 3 and in the Company Disclosure Letter with respect to the matters
therein addressed, are true and complete in all material respects and do not
omit to state any material fact or facts necessary in order to
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make the statements therein, in light of the circumstances under which they
were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the Company, and
agrees that, except as disclosed in the Disclosure Letter delivered by the
Investor to the Company concurrently herewith:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Investor is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate power and
authority required to enter into the Transaction Documents and to consummate
the transactions contemplated hereby and thereby.
(b) AUTHORIZATION. The execution, delivery and performance
of the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Investor. This Agreement and the Alliance
Agreement constitutes, and the Warrant, Investor Rights Agreement and other
Transaction Documents to which the Investor will be a party, when executed,
will constitute the Investor's legal, valid and binding obligations,
enforceable in accordance with their terms, except (i) as may be limited by (A)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (B) the effect of rules of law governing the availability of
equitable remedies and (ii) as rights to indemnity or contribution may be
limited under federal or state securities laws or by principles of public
policy thereunder. The Investor has full corporate power and authority to enter
into the Transaction Documents.
(c) LITIGATION. There is no Action pending, or to the
Investor's knowledge, threatened, that seeks to prevent, enjoin, alter or delay
the transactions contemplated by the Transaction Documents or which is
reasonably likely to have a Material Adverse Effect on the execution, delivery,
validity, consummation or performance of the Transaction Documents by the
Company.
(d) PURCHASE FOR OWN ACCOUNT. The Purchased Shares and the
Warrant are being acquired for investment for the Investor's own account, not
as a nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act, and the Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Investor also represents that it has not been formed
for the specific purpose of acquiring the Purchased Shares and the Warrant.
(e) INVESTMENT EXPERIENCE. The Investor understands that the
purchase of the Purchased Shares and the Warrant involves substantial risk. The
Investor has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment in the Purchased Shares and the Warrant and has such knowledge
and experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the Purchased Shares and
the Warrant and protecting its own interests in connection with this
investment. The foregoing, however, does not in any way limit or modify the
representations or warranties of the Company in Section 3 or any rights of the
Investor under
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the Transaction Documents entered into or benefiting Investor in connection
with the transactions contemplated by the Transaction Documents.
(f) ACCREDITED INVESTOR STATUS. The Investor is an
"accredited investor" within the meaning of Regulation D promulgated under the
Securities Act.
(g) RESTRICTED SECURITIES. The Investor understands that the
Purchased Shares and the Warrant to be purchased by the Investor hereunder, and
any Warrant Shares to be purchased by the Investor upon exercise of the
Warrant, are characterized as "restricted securities" under the Securities Act,
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the Securities Act and applicable
regulations thereunder, such securities may be resold without registration
under the Securities Act only in certain limited circumstances. The Investor is
familiar with Rule 144 of the SEC, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act. The Company
understands that, except as required by the Investors Rights Agreement executed
concurrently herewith, the Company is under no obligation to register any of
the securities sold hereunder.
(h) LEGENDS. The Investor agrees that the certificates for
the Purchased Shares, the Warrant and the Warrant Shares shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR WITH
ANY STATE SECURITIES COMMISSION, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE ABSENCE OF
A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE LAWS AND
RULES, OR, UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR
TRANSFER, SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION
OF THE SECURITIES ACT OF 1933 AND OTHER APPLICABLE STATE
LAWS AND RULES.
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS SPECIFIED IN A CERTAIN INVESTOR
RIGHTS AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL
HOLDER OF THESE SECURITIES, A COPY OF WHICH IS AVAILABLE
FOR EXAMINATION AT THE ISSUER'S PRINCIPAL OFFICE."
The appropriate portion of the legend will be removed promptly upon delivery to
the Company of an opinion of counsel reasonably satisfactory to the Company or
such other satisfactory evidence as reasonably may be required by the Company,
that such legend is not required to ensure compliance with the Securities Act
or that the security is hereby freely transferable in a public sale under the
Securities Act.
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(i) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority
on the part of the Investor is required for the performance by the Investor of
its obligations under the Transaction Documents, except for (i) compliance with
HSR Requirements, (ii) any filing that may be required pursuant to Regulation D
promulgated under the Securities Act and (iii) such other consents, approvals,
orders, authorizations, qualifications, registrations, designations,
declarations, or filings as are not material. All such qualifications and
filings will, in the case of qualifications, be effective on the Closing and
will, in the case of filings, be made within the time prescribed by law.
(j) NON-CONTRAVENTION. The execution, delivery and
performance of the Transaction Documents by the Investor, and the consummation
by the Investor of the transactions contemplated thereby do not and will not
(i) contravene or conflict with the Certificate of Incorporation or Bylaws of
the Investor, (ii) constitute a material violation of any provision of federal,
state, local or foreign law binding upon or applicable to the Investor, or
(iii) constitute a default or require any consent under, give rise to any right
of termination, cancellation or acceleration of, or to a loss of any material
benefit to which the Investor is entitled under any contract to which the
Investor is a party in a manner which is reasonably likely to have,
individually or collectively, an adverse impact on the Investor's ability to
perform its obligations under said Transaction Documents.
(k) FULL DISCLOSURE. The representation made in this Section
4 and in the Investor Disclosure Letter with respect to the matters therein
addressed, are true and complete in all material respects and do not omit to
state any material fact or facts necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor under Sections l and 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct on and as of the date of the Disclosure Letter and on and as
of the date of the Closing, with the same effect as though such representations
and warranties had been made as of the Closing.
(b) PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing in all material respects and shall have obtained all approvals,
consents and qualifications necessary to complete the purchase and sale
described herein.
(c) COMPLIANCE CERTIFICATE. The Company will have delivered
to the Investor at the Closing a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer certifying that the conditions
specified in Sections 5(a) and 5(b) hereof have been fulfilled.
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(d) SECURITIES EXEMPTIONS. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this Agreement
and/or the Warrant shall be exempt from the registration requirements of the
Securities Act, and the registration and/or qualification requirements of all
applicable state securities laws, except to the extent such failure to be
exempted results from the inaccuracy of any of the representations made by the
Investor pursuant to Section 4.
(e) HSR COMPLIANCE. The HSR Requirements applicable to the
transactions contemplated hereby shall have been fulfilled.
(f) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor, and the Investor shall have received all such
counterpart originals, and certified or other copies of such documents, as it
may reasonably request. Such documents shall include but not be limited to the
following:
(i) CERTIFIED CHARTER DOCUMENT. A copy of (i) the
Restated Certificate of Incorporation of the Company, as amended, certified as
of a recent date by the secretary of state for Delaware as a complete and
correct copy thereof and (ii) the Bylaws of the Company (as amended through the
date of the Closing), certified by the Secretary of the Company as a true and
correct copy thereof as of the Closing.
(ii) BOARD RESOLUTIONS. A copy, certified by the
Secretary of the Company, of the resolutions of the Board of Directors of the
Company providing for the approval of the Transaction Documents and the
issuance of the Purchased Shares and the Warrant and the other matters
contemplated hereby and thereby.
(g) OPINION OF COMPANY COUNSEL. The Investor will have
received an opinion on behalf of the Company, dated as of the date of the
Closing, from Katten Muchin & Zavis, counsel to the Company, as to the matters
attached in EXHIBIT B-1, with such customary assumptions and qualifications as
is appropriate to such matters.
(h) NO MATERIAL ADVERSE EFFECT. Between the date hereof and
the Closing, there shall not have occurred any Material Adverse Effect to the
Company.
(i) NASDAQ REQUIREMENTS. All requirement of the Nasdaq
National Market in connection with the transactions contemplated by this
Agreement and the Warrant shall have been complied with by the Company.
(j) BUSINESS AGREEMENTS. The Company shall have entered into
the Business Agreements and shall have timely performed the obligations on its
part to be performed under the Alliance Agreement prior to the Closing in all
material respects.
(k) WARRANT. The Company will have issued the Warrant
substantially in the form attached hereto as EXHIBIT A.
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(l) INVESTOR RIGHTS AGREEMENT. The Company will have executed
and delivered the Investor Rights Agreement substantially in the form attached
hereto as EXHIBIT C (the "INVESTOR RIGHTS AGREEMENT").
(m) OTHER ACTIONS. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Investor in
connection with the transactions contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Investor contained in Section 4 shall be true and correct
in all respects on and as of the date hereof and on and as of the date of the
Closing with the same effect as though such representations and warranties had
been made as of the Closing.
(b) PERFORMANCE. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing in all material respects and shall have obtained any approvals,
consents and qualifications necessary to perform its obligations to purchase the
Purchased Shares and Warrant at the Closing.
(c) COMPLIANCE CERTIFICATE. The Investor will have delivered
to the Company at the Closing a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer, certifying that the conditions
specified in Sections 6(a) and 6(b) hereof have been fulfilled.
(d) HSR COMPLIANCE. The HSR Requirements applicable to the
transactions contemplated hereby shall have been fulfilled.
(e) PAYMENT OF PURCHASE PRICE. The Investor shall have
delivered to the Company (if directed to do so by the Company) the Purchase
Price as specified in Section 1.
(f) BUSINESS AGREEMENTS. The Investor shall have entered into
the Business Agreements and shall have timely performed the obligations on its
part to be performed under the Alliance Agreement prior to the Closing in all
material respects.
(g) OPINION OF COUNSEL. The Company shall have received an
opinion on behalf of the Company, dated as of the date of the Closing, from
Wilson Sonsini Goodrich & Rosati, counsel to the Investor, as to matters
attached in Exhibit B-2, with such customary assumptions and qualifications as
is appropriate to such matters.
(h) OTHER ACTIONS. The Investor shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary
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or reasonably requested by the Company in connection with the transactions
contemplated hereby.
7. INDEMNIFICATION.
(a) AGREEMENT TO INDEMNIFY.
(i) COMPANY INDEMNITY. The Investor, its Affiliates and
Associates, any successor in interest to the Purchased Shares, Warrant and
Warrant Shares, and each of the officers, directors, shareholders, employees,
representatives and agents of any of the foregoing (collectively, the "INVESTOR
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section by the Company with respect to any and all Damages (as
defined below) incurred by any Investor Indemnitee as a proximate result of (i)
any inaccuracy or misrepresentation in, or breach of, any representation,
warranty, covenant or agreement made by the Company in the Transaction
Documents.
(ii) INVESTOR INDEMNITY. The Company, its respective
Affiliates and Associates, and each officer, director, shareholder, employer,
representative and agent of any of the foregoing (collectively, the "COMPANY
INDEMNITEES") shall each be indemnified and held harmless to the extent set
forth in this Section, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any inaccuracy or
misrepresentation in, or breach of, any representation warranty, covenant or
agreement made by the Investor in the Transaction Documents.
(iii) EQUITABLE RELIEF. Nothing set forth in this
Section shall be deemed to prohibit or limit any Investor Indemnitee's or
Company Indemnitee's right at any time before, on or after the Closing, to seek
injunctive or other equitable relief for the failure of a party required to
provide indemnity pursuant to subparts (i) and (ii) above (a "INDEMNIFYING
PARTY") to perform or comply with any covenant or agreement contained herein.
(b) SURVIVAL. All representations and warranties of the
Investor and the Company contained herein or in the Warrant and all claims of
any Investor Indemnitee or Company Indemnitee (each an "Indemnitee") in respect
of any inaccuracy or misrepresentation in or breach hereof, shall survive the
Closing until the third anniversary of the Closing, regardless of whether the
applicable statute of limitations, including extensions thereof, may expire. All
covenants and agreements of the Investor and the Company contained in this
Agreement or the Warrant shall survive the Closing in perpetuity (except to the
extent any such covenant or agreement shall expire by its terms). All claims of
any Indemnitee in respect of any breach of such covenants or agreements shall
survive the Closing until the expiration of three (3) years following the
non-breaching party's obtaining actual knowledge of such breach.
(c) CLAIMS FOR INDEMNIFICATION. If any Indemnitee shall
believe that such Indemnitee is entitled to indemnification pursuant to this
Section in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Party (which for purposes hereof, in the case of an Investor
Indemnitee, means the Company, and in the case of a Company Indemnitee, means
the Investor) prompt written notice thereof. Any such notice shall set forth in
reasonable
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detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim
for indemnification promptly shall not adversely affect such Indemnitee's
right to indemnity hereunder except to the extent that such failure adversely
affects the right of the Indemnifying Party to assert any reasonable defense
to such claim. Each such claim for indemnity shall expressly state that the
Indemnifying Party shall have only the twenty (20) business day period
referred to in the next sentence to dispute or deny such claim. The
Indemnifying Party shall have twenty (20) business days following its receipt
of such notice either (a) to acquiesce in such claim by giving such
Indemnitee written notice of such acquiescence or (b) to object to the claim
by giving such Indemnitee written notice of the objection. If the
Indemnifying Party does not object thereto within such twenty (20) business
day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by such Indemnitee in respect of
such claim. If the Indemnifying Party objects to such claim in a timely
manner, the senior management of the Company and the Investor shall meet to
attempt to resolve such dispute. If the dispute cannot be resolved by the
senior management, either party may make a written demand for formal dispute
resolution and specify therein the scope of the dispute. Within thirty (30)
days after such written notification, the parties agree to meet for one (1)
day with an impartial mediator and consider dispute resolution alternatives
other than litigation. If an alternative method of dispute resolution is not
agreed upon within thirty (30) days after the one (1) day mediation, either
party may begin litigation proceedings. Nothing in this Section shall be
deemed to require arbitration.
(d) DEFENSE OF CLAIMS. In connection with any claim that may
give rise to indemnity under this Section resulting from or arising out of any
claim or Proceeding against an Indemnitee by a person or entity that is not a
party hereto, the Indemnifying Party may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim), but shall not be obligated to, upon
written notice to the relevant Indemnitee, assume the defense of any such claim
or Proceeding if the Indemnifying Party provides assurances, reasonably
satisfactory to such Indemnitee, that the Indemnifying Party will be financially
able to satisfy such claim to the extent provided herein if such claim or
Proceeding is decided adversely; PROVIDED, HOWEVER, that nothing set forth
herein shall be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have against the
Indemnitee for damages. The Indemnitee shall be entitled to retain separate
counsel, reasonably acceptable to the Indemnifying Party, if the Indemnitee
shall determine, upon the written advice of counsel, that an actual or potential
conflict of interest exists between the Indemnifying Party and the Indemnitee in
connection with such Proceeding. The Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such separate counsel to the extent the
Indemnitee is entitled to indemnification by the Indemnifying Party with respect
to such claim or Proceeding under this subpart (d). If the Indemnifying Party
assumes the defense of any such claim or Proceeding, the Indemnifying Party
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times diligently and promptly
pursue the resolution thereof. If the Indemnifying Party shall have assumed the
defense of any claim or Proceeding in accordance with this subpart (d), the
Indemnifying Party shall be authorized to consent to a settlement of, or the
entry of any judgment arising from, any such claim or Proceeding, with the prior
written consent of such Indemnitee, not to be unreasonably withheld; PROVIDED,
HOWEVER, that the
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Indemnifying Party shall pay or cause to be paid all amounts arising out of
such settlement or judgment concurrently with the effectiveness thereof;
PROVIDED, FURTHER, that the Indemnifying party shall not be authorized to
encumber any of the assets of any Indemnitee or to agree to any restriction
that would apply to any Indemnitee or to its conduct of business; and
PROVIDED, FURTHER, that a condition to any such settlement shall be a
complete release of such Indemnitee and its Affiliates, directors, officers,
employees and agents with respect to such claim, including any reasonably
foreseeable collateral consequences thereof. Such Indemnitee shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. Each Indemnitee shall, and shall
cause each of its Affiliates, directors, officers, employees and agents to,
cooperate fully with the Indemnifying Party in the defense of any claim or
Proceeding being defended by the Indemnifying Party pursuant to this subpart
(d). If the Indemnifying Party does not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this subpart
(d), such Indemnitee may defend against such claim or Proceeding in such
manner as it may deem appropriate, including settling such claim or
Proceeding after giving notice of the same to the Indemnifying Party, on such
terms as such Indemnitee may deem appropriate. If any Indemnifying Party
seeks to question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, such
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that such Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
(e) CERTAIN DEFINITIONS. As used in this Section, (i)
"AFFILIATE" means, with respect to any person or entity, any person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other person or entity; (ii) "ASSOCIATE" means, when
used to indicate a relationship with any person or entity, (A) any other person
or entity of which such first person or entity is an officer, director or
partner or is, directly or indirectly, beneficial owner of ten percent (10%) or
more of any class of equity securities, membership interests or other comparable
ownership interests issued by such other person or entity, (B) any trust or
other estate in which such first person or entity has a ten percent (10%) or
more beneficial interest or as to which such first person or entity serves as
trustee or in a similar fiduciary capacity, and (C) any relative or spouse of
such first person or entity who has the same home as such first person or entity
or who is a director or officer of such first person or entity; (iii) "DAMAGES"
means all demands, claims, actions or causes of action, assessments, losses,
damages, costs, expenses, liabilities, judgments, awards, fines, response costs,
sanctions, taxes, penalties, charges and amounts paid in settlement, including
(A) interest on cash disbursements in respect of any of the foregoing at the
prime rate of the Bank of America, as in effect from time to time, compounded
quarterly, from the date each such cash disbursement is made until the date the
party incurring such cash disbursement shall have been indemnified in respect
thereof, and (B) reasonable out-of-pocket costs, fees and expenses (including
reasonable costs, fees and expenses of attorneys, accountants and other agents
of, or other parties retained by, such party), and (iv) "PROCEEDING" means any
action, suit, hearing, arbitration, audit, proceeding (public or private) or
investigation that is brought or initiated by or against any federal, state,
local or foreign governmental authority or any other person or entity.
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<PAGE>
8. TERMINATION. Prior to the Closing, this Agreement may be terminated
and the purchase and sale of the Common Stock and the issuance of the Warrant as
contemplated by this Agreement may be abandoned only in accordance with the
following provisions:
(a) by mutual written consent of the Investor and the Company;
(b) by the Investor or the Company if any court of competent
jurisdiction in the United States or other United States federal or state
governmental authority shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the purchase and sale of the Common Stock, and such order, decree, ruling or
other action is or shall have become nonappealable;
(c) by the Investor or the Company, upon five (5) days written
notice to the other party, if the Closing shall not have occurred by December
14, 1999 (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that neither the Investor nor
the Company may terminate this Agreement pursuant to this clause (c) if such
party's failure to fulfill any of its obligations under this Agreement shall
have been a principal reason that the Closing shall not have occurred on or
before said date;
In the event of the termination of this Agreement, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or stockholders;
PROVIDED, HOWEVER, nothing contained herein shall relieve any party from
liability for any breach of this Agreement prior to such termination.
9. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.
(b) GOVERNING LAW. This Agreement will be governed by, and
construed under, the internal laws of the State of Delaware, without reference
to principles of conflict of laws or choice of laws.
(c) COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(d) HEADINGS. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
(e) NOTICES. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and shall
in any event be deemed received and
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<PAGE>
effectively given upon personal delivery to the party to be notified or three
(3) business days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid, or one (1) business day after
deposit with a nationally recognized courier service (such as Federal Express)
for next business day delivery under circumstances in which such service
guarantees next business day delivery at the address for notices set forth at
the end of this Agreement, or at such other address as the Investor or the
Company may designate by giving at least ten (10) days advance written notice
pursuant to this Section.
(f) NO FINDER'S FEES. The parties acknowledge that they have
dealt with no finder, broker or investment banker in this transaction, other
than Donaldson, Lufkin & Jenrette Securities Corporation, on behalf of the
Company, and Morgan Stanley Dean Witter, on behalf of the Investor. The Investor
will be solely responsible for any compensation owing to Morgan Stanley Dean
Witter and shall indemnify and hold harmless the Company from any liability for
any commission or compensation in the nature of a finders' or broker's fee
asserted by any finder, broker or investment banker (other than Donaldson,
Lufkin & Jenrette Securities Corporation) with whom Investor or any of its
officers, partners, employees, consultants, or representatives has dealt in
connection with this transaction. The Company will be solely responsible for any
compensation owing to Donaldson, Lufkin & Jenrette Securities Corporation and
shall indemnify and hold harmless the Investor from any liability for any
commission or compensation in the nature of a finder's or broker's fee asserted
by any broker, finder, or investment banker (other than Morgan Stanley Dean
Witter) with whom the Company or any of its officers, employees, consultants or
representatives has dealt in connection with this transaction.
(g) AMENDMENTS AND WAIVERS. This Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and, prior to the Closing, the Investor, and
after the Closing, the holders of Purchased Shares and Warrant Shares
representing at least a majority of the total aggregate number of Purchased
Shares and Warrant Shares then outstanding (excluding any of such shares that
have been sold in a transaction in which registration rights are not assigned in
accordance with the Investor Rights Agreement or sold to the public pursuant to
SEC Rule 144 or otherwise). Any amendment or waiver effected in accordance with
this Section 10(g) will be binding upon the Investor, the Company and their
respective successors and assigns. Notwithstanding the foregoing, the provisions
of Section 8 may not be amended without the written consent of the Company and
the Investor, which may be withheld in either of their sole and absolute
discretion.
(h) SEVERABILITY. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision was so excluded and will be enforceable in accordance with its terms.
(i) ENTIRE AGREEMENT. This Agreement, together with the other
Transaction Documents and all exhibits and schedules hereto and thereto
constitute the entire agreement and understanding of the parties with respect to
the subject matter hereof and supersedes any and all
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<PAGE>
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
(j) FURTHER ASSURANCES. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and the
Investor will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(k) MEANING OF INCLUDE AND INCLUDING. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(l) FEES, COSTS AND EXPENSES. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby (including the costs associated with any filings with, or compliance
with any of the requirements of, any governmental authorities), shall be the
sole and exclusive responsibility of such party.
(m) COMPETITION. Nothing set forth herein shall be deemed to
preclude, limit or restrict the Company's or the Investor's ability to compete
with the other.
(n) STOCK SPLITS, DIVIDENDS AND OTHER SIMILAR EVENTS. The
provisions of this Agreement (including the number of shares of Common Stock and
other securities described herein) shall be appropriately adjusted to reflect
any stock split, stock dividend, reorganization, or other similar event that may
occur with respect to the Company after the date hereof.
(o) JOINT PRESS RELEASE. Prior to the execution of this
Agreement, the parties will agree on the content of a joint press release
announcing the existence of this Agreement, which press release will be issued
as mutually agreed by the parties. Thereafter, the Company and the Investor
shall cooperate and consult, to the extent feasible, concerning any additional
press release, conference, advertising, announcements, professional or trade
publication, mass marketing materials, with respect to Transaction Documents and
the transactions contemplated thereby.
(p) ATTORNEYS' FEES. If Investor or the Company institutes any
action, suit or other Proceeding to enforce or interpret any Transaction
Document, then the prevailing party in such action, suit or Proceeding shall be
entitled to recover its attorneys' fees, experts' fees and court costs as
awarded by the court in the proceeding or a separate proceeding.
[The balance of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
<TABLE>
<S> <C>
NOVELL, INC. WHITTMAN-HART, INC.
By: /s/ Dennis Raney By: /s/ Robert F. Bernard
------------------------------------ ----------------------------------
Name: Dennis Raney Name: Robert F. Bernard
Title: Senior Vice President and Title: Chairman of the Board and
Chief Financial Officer Chief Executive Officer
Novell, Inc. Whittman-Hart, Inc.
Date Signed: October 1, 1999 Date Signed:
-------------------------------- -----------------------------
Address: 122 East 1700 South Address: 311 South Wacker Dr.,
Provo, Utah 84606 Suite 3500
Chicago, Illinois 60606-6618
Telephone No: 801-861-7000 Telephone No: 312-922-9200
with copies to: with copies to:
Wilson Sonsini Goodrich & Rosati Mark D. Wood, Esq.
650 Page Mill Rd. Katten Muchin & Zavis
Palo Alto, California 94304 525 West Monroe St., Suite 1600
Attn: Debra S. Summers, Esq. Chicago, Illinois 60661
David Shelow, Esq.
Whittman-Hart, Inc.
311 South Wacker Dr.,
Suite 3500
Chicago, Illinois 60606-6618
</TABLE>
<PAGE>
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "AGREEMENT") is made and
entered into to be effective as of November 12, 1999 ("EFFECTIVE DATE"), by
and between Whittman-Hart, Inc., a Delaware corporation (the "COMPANY"), and
Novell, Inc., a Delaware corporation (the "INVESTOR"). Unless otherwise
provided herein, all capitalized terms shall have the meanings set forth in
that certain Common Stock and Warrant Purchase Agreement, dated as of
September 29, 1999, between the Company and Investor (the "PURCHASE
AGREEMENT").
RECITALS
A. The Investor desires to purchase 3,294,893 shares (the "PURCHASED
SHARES") of the common stock, par value $0.001 per share, of the Company (the
"COMPANY COMMON STOCK") and a Warrant (the "WARRANT") to purchase additional
shares (the "WARRANT SHARES") of the Company Common Stock on the terms and
conditions set forth in the Purchase Agreement, provided it receives the
additional information rights, registration rights and other rights as more
fully set forth in this Agreement.
B. The Company desires to sell the Purchased Shares to the Investor
on the terms and conditions set forth in the Purchase Agreement and is
willing to provide the additional rights requested by the Investor, subject
to the additional limitations set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual promises hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. INFORMATION RIGHTS.
The Company covenants and agrees that, commencing on the date of
this Agreement and continuing for so long as the Investor holds at least
500,000 shares, in the aggregate, of the Purchased Shares and Warrant Shares
(including those shares issued or issuable pursuant to exercise of the
Warrant), then:
1.1 ANNUAL REPORTS. If the following information is not
available on the Internet, the Company, upon demand by the Investor, shall
furnish to the Investor promptly following the filing of such report with the
Securities and Exchange Commission ("SEC"), a copy of the Company's Annual
Report on Form 10-K for each fiscal year, which shall include a consolidated
balance sheet as of the end of such fiscal year, a consolidated statement of
income and a consolidated statement of cash flows of the Company and its
subsidiaries for such year, setting forth in each case in comparative form
the figures from the Company's previous fiscal year, all prepared in
accordance with generally accepted accounting principles and practices and
audited by nationally recognized independent certified public accountants. In
the event the Company shall no longer be required to file or does not file
Annual Reports on Form 10-K with the SEC, then within ninety (90) days
following the end of each respective fiscal year, the
<PAGE>
Company shall deliver to the Investor a consolidated balance sheet as of the
end of such fiscal year, a consolidated statement of income and a
consolidated statement of cash flows of the Company and its subsidiaries for
such year, setting forth in each case in comparative form the figures from
the Company's previous fiscal year, all prepared in accordance with generally
accepted accounting principles and practices and audited by nationally
recognized independent certified public accountants.
1.2 QUARTERLY REPORTS. If the following information is not
available on the Internet, the Company, upon demand by the Investor, shall
furnish to the Investor promptly following the filing of such report with the
SEC, a copy of each of the Company's Quarterly Reports on Form 10-Q, which
shall include a consolidated balance sheet as of the end of the respective
fiscal quarter, consolidated statements of income and consolidated statements
of cash flows of the Company and its subsidiaries for the respective fiscal
quarter and for the year-to-date period, setting forth in each case in
comparative form the figures from the comparable periods in the Company's
immediately preceding fiscal year, all prepared in accordance with generally
accepted accounting principles and practices (except, in the case of any Form
10-Q, as may otherwise be permitted by Form 10-Q), but all of which may be
unaudited. In the event the Company shall no longer be required to file or
does not file Quarterly Reports on Form 10-Q with the SEC, then within
forty-five (45) days following the end of each of the first three (3) fiscal
quarters of each fiscal year, the Company shall deliver to the Investor a
consolidated balance sheet, consolidated statement of income, and
consolidated statement of cash flows, of the Company and its subsidiaries for
the respective fiscal quarter and for the year-to-date period, setting forth
in each case in comparative form the figures from the comparable periods in
the Company's immediately preceding fiscal year, all prepared in accordance
with generally accepted accounting principles and practices and consistent
with the requirements of Form 10-Q, but all of which may be unaudited.
1.3 SEC FILINGS. QUARTERLY REPORTS. If the following
information is not available on the Internet, the Company shall deliver to
the Investor copies of each other document filed with the SEC on a
non-confidential basis promptly following the filing of such document with
the SEC.
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(a) REGISTRATION. The terms "REGISTER,"
"REGISTERED," and "REGISTRATION" refer to a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the
declaration or ordering of effectiveness of such registration statement
(b) REGISTRABLE SECURITIES. The term "INVESTOR
SECURITIES" means: (x) the Purchased Shares and the Warrant Shares; and (y)
any shares of Company Common Stock or other securities of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as a dividend or other distribution with
respect to, or in exchange for, or in replacement of, any of the securities
described in the
2
<PAGE>
immediately preceding clause (x). The term "REGISTRABLE SECURITIES" means the
Investor Securities other than the Investor Securities sold by a person in a
transaction in which rights under this Section 2 are not assigned in
accordance with this Agreement or any Investor Securities sold in a public
offering, whether sold pursuant to Rule 144 promulgated under the Securities
Act, or in a registered offering, or otherwise.
(c) INVESTOR SECURITIES THEN OUTSTANDING. The
number of shares of "INVESTOR SECURITIES THEN OUTSTANDING" shall mean the
number of shares of Investor Securities which are then issued and outstanding
or are issuable pursuant to exercise of the Warrant.
(d) HOLDER. For purposes of this Section 2, the
term "HOLDER" means any holder owning of record Investor Securities that have
not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of such Investor
Securities to whom rights under this Section 2 have been duly assigned in
accordance with Section 4 of this Agreement.
(e) FORM S-3. The term "FORM S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC
that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
2.2 FORM S-3 REGISTRATION. The Company shall cause to be
filed with the SEC a registration statement on Form S-3 (and, to the extent
applicable and reasonably requested by the Holder, for sale or transfer of
the Registrable Securities, any related qualification or compliance under
"blue sky" law with respect to all or any portion of the Registrable
Securities) as soon as practicable after the date hereof, but not later than
December 31, 1999, and shall use its reasonable best efforts to effect such
registration and all such qualifications and compliances as are reasonably
required to permit or facilitate the sale and distribution of all the
Registrable Securities not later than March 31, 2000. Notwithstanding the
foregoing, the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section:
(i) on Form S-3, if Form S-3 is not
available for such offering by the Holders of the
Registrable Securities to be included in the offering
(but in such event the Company shall cause to be
filed and become effective a Form S-1 registration
statement in accordance with Section 2.3); or
(ii) under any "blue sky" law in any
particular jurisdiction (other than Delaware and
Illinois) where it is not otherwise required to
qualify to do business, if such registration,
qualification or compliance in said jurisdiction
would require the Company to qualify to do business
in such jurisdiction; or
3
<PAGE>
(iii) under any "blue sky" law in any
particular jurisdiction, if such registration,
qualification or compliance in said jurisdiction
would require the Company to execute a general
consent to service of process that it would not
otherwise be required to execute.
(b) EXPENSES. The Company shall pay all expenses
incurred in connection with each registration requested pursuant to this
Section, excluding underwriters' or brokers' discounts and commissions
relating to shares sold by the Holders and any fees and disbursements of
counsel to the Holders, but including federal and "blue sky" registration,
filing and qualification fees, printers' and accounting fees, and fees and
disbursements of counsel to the Company.
(c) DEFERRAL. Notwithstanding the foregoing, if
the Company shall furnish to Holders a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith judgment of
the Board, it would be materially detrimental to the Company and its
stockholders for such registration statement to be filed within the time
allowed by this Section, then the Company shall have the right to defer such
filing for a period of not more than an additional ninety (90) days (until
March 31, 2000 for the filing and until June 30, 2000 for the effectiveness
of the registration) to permit sale of the Registrable Securities; provided,
however, that in such event the period of time that the Company is obligated
to maintain the effectiveness of any registration statement under this
Section shall be similarly extended by the amount of such additional time
allowed for the filing and effectiveness of the registration of the
Registrable Securities.
(d) NOT DEMAND REGISTRATION. The Form S-3
registration required by this Section shall not be deemed to be a demand
registration for the purposes of Section 2.3.
(e) MAINTENANCE. The Company shall maintain the
effectiveness of any Form S-3 registration statement filed under this Section
until the earlier of: (i) the date on which no Investor Securities continue
to be "Registrable Securities" (as defined in Section 2.1(b)), (ii) all
Registrable Securities then outstanding can be sold in a single three (3)
month period pursuant to Rule 144, or (iii) the second anniversary of the
Effective Date of this Agreement. Upon demand by a Holder in connection with
a proposed sale of Registrable Securities, the Company shall provide to the
Holder a legal opinion that the Form S-3 is effective and that no further
registrations of the Registrable Securities are required in connection with a
sale of the Registrable Securities.
2.3 DEMAND REGISTRATION.
(a) REQUEST BY HOLDERS. If the Company receives a
written request from the Holders of twenty-five percent (25%) of the
Registrable Securities then outstanding (the "INITIATING HOLDERS") that the
Company file a registration statement under the Securities Act on Form S-1,
then the Company shall, within ten (10) business days of the receipt of such
written request, give written notice of such request ("REQUEST NOTICE") to
all Holders that a registration statement on Form S-1 (or such other form,
including Form S-3, as shall be determined by the Company in its good faith,
reasonable business judgment, which shall allow sales of the
4
<PAGE>
Registrable Securities by the Holders) (the "Requested Form") is being
initiated and, thereafter, shall use its reasonable best efforts to effect,
as soon as practicable, the registration on the Requested Form under the
Securities Act of all Registrable Securities that Holders request to be
registered and included in such registration. The Company shall maintain the
effectiveness of any such registration statement for a period of at least (a)
forty-five (45) days or (b) with respect to an underwritten offering, for
such time as the underwriters may take to complete the distribution of
Registrable Securities in the offering. To be included in the registration,
any Holder (other than the Initiating Holders) must provide, within twenty
(20) days after receipt of the Request Notice, written notice to the Company
of the number of shares of Company Common Stock such Holder has elected to
include in the registration. Notwithstanding the foregoing, the Company shall
not be obligated to effect any such Form S-1 or other form of registration as
required by this subpart:
(i) if the Company demonstrates to the
reasonable satisfaction of the Initiating Holders
that the Form S-3 filed pursuant to Section 2.2 is
effective and available to permit sale and transfer
of the Registrable Securities by the Initiating
Holders to the public in the manner proposed by the
Initiating Holders and certifies to the Investor that
the prospectus relating to such Form S-3 does not
include any untrue statement of a material fact and
does not omit to state a material fact required to be
stated therein or otherwise necessary to make the
statements therein not misleading in light of the
circumstances then existing; or
(ii) if the Company has, within the six
(6) month period preceding the date of such request,
already effected a registration under the Securities
Act pursuant to Section 2.3 or Section 2.2 herein
that continues in full force and effect (other than a
registration from which the Registrable Securities of
Holders requesting participation in the registration
pursuant to this Section have been previously
excluded with respect to any or all of the
Registrable Securities that the Holders are
requesting be included in a registration pursuant to
this Section).
(b) NUMBER OF DEMAND REGISTRATIONS. The Company
shall be obligated to effect only three (3) registrations upon the request of
the Holders under this Section 2.3.
(c) DEFERRAL. Notwithstanding the foregoing, if
the Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith and
reasonable judgment of the Board, it would be materially detrimental to the
Company and its stockholders for such registration statement to be filed,
then the Company shall have the right to defer such filing for the period of
such detriment, but not more than ninety (90) days after receipt of the
request of the Initiating Holders; PROVIDED, HOWEVER, that the Company may
not utilize this right (i) more than twice in any twelve (12) month period
for an aggregate period of ninety
5
<PAGE>
(90) days for both such suspensions, nor (ii) during any period when the
Company's executive officers and directors are not restrained from disposing
of shares of Company Common Stock.
(d) EXPENSES. All expenses incurred in connection
with any registration pursuant to this Section, including all federal and
"blue sky" registration, filing and qualification fees, printer's and
accounting fees, and fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of counsel to the Holders (but
excluding underwriters' discounts and commissions relating to shares of
Company Common Stock sold by the Holders and, if the registration occurs at
any time after the second anniversary of the Effective Date of this
Agreement, any fees and disbursements of counsel to the Holders), shall be
borne by the Company. Each Holder participating in a registration pursuant to
this Section shall bear such Holder's proportionate share (based on the total
number of shares of Company Common Stock sold in such registration) of all
discounts, commissions or other amounts payable to underwriters or brokers in
connection with such offering by the Holders. Notwithstanding the foregoing,
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to this Section if the registration request is
subsequently withdrawn at the request of the Initiating Holders who hold a
majority of the Registrable Securities to be registered, unless the
Initiating Holders of a majority of the Registrable Securities agree that
such registration constitutes the use by the Holders of one (1) demand
registration pursuant to this Section (in which case such registration shall
also constitute the use by all Holders of Registrable Securities of one (l)
such demand registration); PROVIDED FURTHER, HOWEVER, that if at the time of
such withdrawal, the Holders have learned of a material adverse change
relating to the business or operations of the Company not known to the
Holders at the time of their request for such registration and have withdrawn
their request for registration after learning of such material adverse
change, then the Holders shall not be required to pay (and the Company shall
pay) any of such expenses and such registration shall not constitute the use
of a demand registration pursuant to this Section.
(e) TIME LIMITATION. The rights of the Holders
under this Section 2.3 shall terminate, and the Company shall have no
obligation to effect a registration statement on a Form S-1 or other form of
registration hereunder on or after the earlier of: (a) the date on which no
Investor Securities continue to be "Registrable Securities" (as defined in
Section 2.1(b)), or (b) all Registrable Securities then outstanding can be
sold in a single three (3) month period pursuant to Rule 144.
2.4 PIGGYBACK REGISTRATIONS.
(a) NOTIFICATION AND RIGHTS. The Company shall
notify all Holders of Registrable Securities in writing at least twenty (20)
days prior to filing any registration statement under the Securities Act for
purposes of effecting a public offering of securities of the Company
(including registration statements relating to secondary offerings of
securities of the Company, but EXCLUDING registration statements relating to
any employee benefit plan, any merger, other corporate reorganization or
other business combination) and will afford each such Holder an opportunity
to include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any
such registration
6
<PAGE>
statement all or any part of the Registrable Securities held by such Holder
shall, within twenty (20) days after receipt of the above-described notice
from the Company, so notify the Company in writing, and in such notice shall
inform the Company of the number of Registrable Securities such Holder wishes
to include in such registration statement. If a Holder decides not to include
all of its Registrable Securities in any registration statement thereafter
filed by the Company, such Holder shall nevertheless continue to have (a) the
right to include any Registrable Securities in any subsequent registration
statement and (b) its rights hereunder to demand a registration of
Registrable Securities and to include their Registrable Securities in such
registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth
herein. Notwithstanding the foregoing, the piggy-back rights granted herein
shall not apply (a) to issuances, sales and exchanges by and for employee
benefit plans, in connection with any merger, consolidation, corporate
reorganization, or business combination affecting the Company, or of the
Company Common Stock held by a third party stockholder (I.E., any holder
other than the Company or its subsidiaries), or (b) when that amount of
Registrable Shares that would be included in the piggy-back offering may also
be sold under any Form S-1, Form S-3 or other form of registration statement
applicable to the Registrable Shares.
(b) EXPENSES. All expenses incurred in connection
with a registration pursuant to this Section (excluding underwriters' and
brokers' discounts and commissions relating to securities sold by the Holders
and any fees and disbursements to counsel to the Holders), including all
federal and "blue sky" registration, filing and qualification fees, printers'
and accounting fees, and fees and disbursements to counsel for the Company,
shall be borne by the Company.
(c) NOT DEMAND REGISTRATION. Registration pursuant
to this Section shall not be deemed to be a demand registration as described
in Section 2.3 above. Except as otherwise provided herein, there shall be no
limit on the number of times the Holders may request registration of
Registrable Securities under this Section 2.4.
2.5 UNDERWRITING. If the Initiating Holders elect an
underwritten offering pursuant to the Form S-3 registration under Section 2.2
or pursuant to a Form S-1 or other registration under Section 2.3 or if the
Company has elected an underwriting for a piggy-back registration pursuant to
Section 2.4, the parties shall reasonably cooperate to fulfill the
requirements for such underwriting. In this regard, if the Company gives
notice under Section 2.3 or 2.4 of the registration to Holders, then the
Company shall also advise the Holders whether the offering is to be
underwritten and, if so, the right of any such Holder's Registrable
Securities to be included in such a registration shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their Registrable Securities
through such underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters selected for
such underwriting (including, as appropriate, a market stand-off agreement of
up to ninety (90) days, if required by such underwriters and if, during the
stand-off period, all directors and officers of the Company are similarly
subject to the market stand-off provisions); PROVIDED, HOWEVER, that it shall
not be considered customary to require any of the Holders to provide
representations and warranties
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regarding the Company or indemnification of the underwriters for material
misstatements or omissions in the registration statement or prospectus for
such offering made by anyone other than the Holders giving the indemnity.
Notwithstanding any other provision of this Agreement, if the indemnity is
being made in or the managing underwriter determine(s) in good faith that
marketing factors require a limitation of the number of shares of Company
Common Stock to be underwritten, then the managing underwriter(s) may exclude
shares of Company Common Stock from the registration and the underwriting;
PROVIDED; HOWEVER, that if the offering is a demand offering pursuant to
Section 2.3, then the limitation on the number of shares of Company Common
Stock included in the offering shall be reduced in proportion to the
respective holdings, and FURTHER PROVIDED, that in the case of a piggy-back
offering, the securities to be included in the registration and the
underwriting shall be allocated, (A) FIRST to any other holder of a
registration demand which is participating in the offering; (B) SECOND, to
the Company, PROVIDED, HOWEVER, that a minimum of fifteen percent (15%) of
the number of Registrable Securities of each Holder (where any Registrable
Securities that are not shares of Company Common Stock but are exercisable or
exchangeable for, or convertible into, shares of Company Common Stock, shall
be deemed to have been so exercised, exchanged or converted for such purpose)
must also in any event be included, (C) THIRD, to the extent the managing
underwriter determines additional securities can be included after compliance
with clauses (A) and (B), to each of the Holders (to the extent not included
pursuant to clause (B)) requesting inclusion of their Registrable Securities
in such registration statement on a pro rata basis, based on the total number
of Registrable Securities and other securities entitled to registration then
held by each such Holder, and (D) FOURTH, to the extent the managing
underwriter determines additional securities can be included after compliance
with clauses (A), (B) and (C), any other shares of Company Common Stock or
other securities of the Company. Any Registrable Securities excluded or
withdrawn from an underwriting shall be excluded and withdrawn from the
registration. For any Holder that is a partnership or limited liability
company, the Holder and the partner/member and each retired partner/member of
such Holder, or the estates and family members of any such partner/member and
retired partner/member and any trusts for the benefit of any of the foregoing
persons, shall be deemed to be a single Holder, and any pro rata reduction
with respect to a Holder shall be based upon the aggregate amount of shares
of Company Common Stock carrying registration rights owned by all entities
and individuals included in such Holder, as defined in this sentence,
notwithstanding any provision of law or other contract binding upon such
partners/members to the contrary.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect
the registration of any Registrable Securities under this Agreement, the
Company shall, as expeditiously as reasonably possible:
(a) REGISTRATION STATEMENT. Promptly and
diligently prepare and file with the SEC a registration statement on the
appropriate form with respect to such Registrable Securities and use
commercially reasonable efforts to cause such registration statement to
become effective.
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(b) AMENDMENTS AND SUPPLEMENTS. Prepare and file
with the SEC such amendments and supplements to such registration statement
and the prospectus used in connection with such registration statement as may
be necessary to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement.
(c) PROSPECTUSES. Furnish to the Holders such
number of copies of a prospectus (including a preliminary prospectus) in
conformity with the requirements of the Securities Act and such other
documents as they may reasonably request, in order to facilitate the
disposition of the Registrable Securities owned by them that are included in
such registration.
(d) BLUE SKY. To the extent applicable, register
and qualify the securities covered by such registration statement under such
other securities or "blue sky" laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions in which the Company is not otherwise required to
qualify or provide such consent to service in order to carry on its business.
(e) UNDERWRITING. In the event of any underwritten
public offering, enter into and perform its obligations under an underwriting
agreement in usual and customary form (including customary indemnification of
the underwriters by the Company) with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement as otherwise
required by this Agreement.
(f) NOTIFICATION. Notify each Holder of
Registrable Securities covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing. Upon
receipt of any such notice, the Holders will suspend their use of the
registration statement and the Company shall promptly, and in all events
within thirty (30) days, amend the statement to meet the aforesaid standard
of care.
(g) OPINION AND COMFORT LETTER. Furnish, at the
request of any Holder requesting registration of Registrable Securities, on
the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i)
an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, and (ii) a "comfort" letter (or if the offering is not
underwritten, an "agreed upon procedures" letter), dated as of such
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date, from the independent certified public accountants of the Company, in
the form and with the substance as is customarily given by independent
certified public accountants in a comparable public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, in both cases addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
2.7 FURNISH INFORMATION. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to Sections 2.2
through 2.6 that the selling Holders shall furnish to the Company such
information regarding themselves, the Registrable Securities held by them,
and the intended method of disposition of such securities as shall be
required to timely effect the registration of their Registrable Securities.
2.8 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under Sections 2.2
through 2.6, then:
(a) BY THE COMPANY. To the extent permitted by
law, the Company will indemnify and hold harmless the Holder, the partners,
officers, stockholders, employees, representatives and directors of each
Holder, any underwriter (as determined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (herein each a "COMPANY INDEMNIFIED PARTY"),
against any losses, claims, damages, or Liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act, or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (collectively
"VIOLATIONS"):
(i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus
contained therein or in any amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any federal
or state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or
state securities law in connection with the offering covered
by such registration statement;
and the Company will reimburse each such Company Indemnified Party for any
legal or other expenses reasonably incurred by it, as incurred, in connection
with investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in this
subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action, if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in
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any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished expressly
for use in connection with such registration by such Company Indemnified
Party.
(b) BY SELLING HOLDERS. To the extent permitted by
law, each selling Holder ("INDEMNIFYING HOLDER") will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities under such registration statement, any of such
other Holder's partners, officers, stockholders, employees, representatives
and directors, and any person who controls such other Holder within the
meaning of the Securities Act or the Exchange Act (herein each a "HOLDER
INDEMNIFIED PARTY"), against any losses, claims, damages or liabilities
(joint or several) to which the Holder Indemnified Party may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Indemnifying
Holder expressly for use in connection with such registration; and each such
Indemnifying Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any other Holder Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability or
action. Notwithstanding the foregoing, (1) the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Indemnifying Holder, which consent shall not be
unreasonably withheld, and (2) the total amounts payable in indemnity by an
Indemnifying Holder under this subsection or otherwise in respect of any and
all Violations shall not exceed in the aggregate the net proceeds received by
such Indemnifying Holder in the registered offering out of which such
Violations arise.
(c) NOTICE. Promptly after receipt by a Company
Indemnified Party or a Holder Indemnified Party (each an "INDEMNIFIED PARTY")
of notice of the commencement of any action (including any governmental
action subject to indemnification hereunder), such Indemnified Party will, if
a claim in respect thereof is to be made against any indemnifying party under
this section, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; PROVIDED, HOWEVER,
that an Indemnified Party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the Indemnifying Party, to the
extent that representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential
conflict of interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of
liability under this Section 2.8, except to the extent the indemnifying party
is prejudiced as a result thereof.
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(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The
foregoing indemnity agreements of the Company and Indemnifying Holders are
subject to the condition that, insofar as they relate to any Violations made
in a prospectus but eliminated or remedied in the amended prospectus on file
with the SEC at the time the registration statement in question becomes
effective or in any amended prospectus filed with the SEC pursuant to SEC
Rule 424(b) (a "FINAL PROSPECTUS"), such indemnity agreement shall not inure
to the benefit of any Indemnified Party, if a copy of the Final Prospectus
was timely furnished to such Indemnified Party and was not furnished by the
Indemnified Party to a person asserting the loss, liability, claim or damage
at or prior to the time such action is required by the Securities Act.
(e) CONTRIBUTION. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any
case in which either (i) any Holder exercising rights under this Agreement,
or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this section, but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of
appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this section provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on
the part of any such selling Holder or any such controlling person in
circumstances for which indemnification is provided under this Section; then,
and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and
other selling Holders are responsible for the remaining portion; PROVIDED,
HOWEVER, that, in any such case: (A) no such Holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Securities offered and sold by such Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not also
guilty of fraudulent misrepresentation.
(f) SURVIVAL. The obligations of the Company and
Holders under this Section 2.8 shall survive until the third anniversary of
the completion of any offering of Registrable Securities in a registration
statement, regardless of the expiration of any statutes of limitation or
extensions of such statutes.
2.9 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company
shall have no obligations pursuant to this Section 2 to register any
Registrable Securities or to maintain the effectiveness of any Form S-3
registration beyond JUNE 30, 2005.
2.10 NO REGISTRATION RIGHTS TO THIRD PARTIES. Without the
prior written consent of the Holders of a majority in interest of the
Registrable Securities then outstanding, the Company covenants and agrees
that it shall not grant, or cause or permit to be created, for the benefit of
any person or entity any registration rights of any kind (whether similar to
the demand,
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"piggyback" or Form S-3 registration rights described in this Section 2, or
otherwise) relating to shares of the Company Common Stock or any other
securities of the Company that would conflict with or take precedence over
the rights granted to the Holders hereunder.
2.11 SUSPENSION PROVISIONS. Notwithstanding the foregoing
subsections of this Section 2, the Company shall not be required to take any
action with respect to the registration or the declaration of effectiveness
of the registration statement following written notice to the Holders from
the Company (a "SUSPENSION NOTICE") of the existence of any state of facts or
the happening of any event (including pending negotiations relating to, or
the consummation of, a transaction, or the occurrence of any event that the
Company believes, in good faith, requires additional disclosure of material,
non-public information by the Company in the registration statement) with
regard to which the Company believes it has a bona fide business purpose for
preserving confidentiality or that renders the Company unable to comply with
the published rules and regulations of the SEC promulgated under the
Securities Act or the Exchange Act, as in effect at any relevant time (the
"RULES AND REGULATIONS") the failure to disclose of which would result in (i)
the registration statement, any amendment or post-effective amendment
thereto, or any document incorporated therein by reference containing an
untrue statement of a material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) the prospectus issued under the registration statement,
any prospectus supplement, or any document incorporated therein by reference
including an untrue statement of material fact or omitting to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, PROVIDED
that (A) the Company shall not issue a Suspension Notice more than twice in
any twelve (12) month period and, any such suspensions shall not continue for
more than an aggregate of ninety (90) days for all such suspensions in any
twelve (12) month period, (B) the Company shall use its best efforts to
remedy, as promptly as practicable, but in any event within ninety (90) days
of the date on which the Suspension Notice was delivered, the circumstances
that gave rise to the Suspension Notice and, thereupon, shall deliver to the
Holders notification that the Suspension Notice is no longer in effect and
(C) the Company shall not issue a Suspension Notice for any period during
which the Company's executive officers and directors are not similarly
restrained from disposing of shares of the Company Common Stock. Upon receipt
of a Suspension Notice from the Company, all time limits applicable to the
Holders under this Section 2 shall automatically be extended by an amount of
time equal to the amount of time the Suspension Notice is in effect, and the
Holders will forthwith discontinue disposition of all such shares of Company
Common Stock pursuant to the registration statement until the Company
notifies the Holders that the Suspension Notice is no longer in effect (which
the Company shall promptly deliver) and until receipt from the Company of
copies of any prospectus supplements or amendments prepared by or on behalf
of the Company (which the Company shall promptly prepare). If so directed by
the Company in such Suspension Notice, the Holders will deliver to the
Company all copies in their possession of the prospectus covering such shares
of Company Common Stock current at the time of receipt of any Suspension
Notice.
3. [INTENTIONALLY DELETED.]
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4. ASSIGNMENT AND AMENDMENT.
4.1 INFORMATION RIGHTS. Notwithstanding anything herein to
the contrary, the rights of the Investor under Section 1 of this Agreement
are transferable, subject to all the terms and conditions of this Agreement
(including without limitation the provisions of this Section) to any person
who will acquire from the Investor that number of Investor Securities equal
to least one percent (1%) of the Company Common Stock stated to be
outstanding in the Company's most recently published Form 10-Q or 10-K
(appropriately adjusted for all stock splits, dividends, combination, and
recapitalization where all Holders of the Company Common Stock participate on
a pro rata basis since the date of such publication); PROVIDED that such
assignment of information rights hereunder shall not be effective until the
Investor gives written notice to the Company of the assignment of such
rights, stating the name and address of the assignee and identifying the
Investor Securities as to which of the rights in question are being assigned.
4.2 REGISTRATION RIGHTS. Notwithstanding anything herein to
the contrary, the registration rights of the Investor under Section 2 hereof
may be assigned to any Holder; PROVIDED, HOWEVER, that such assignment of
registration rights shall not be effective, unless and until the Company is
given written notice by the assigning party, stating the name and address of
the assignee and identifying the securities of the Company as to which the
rights in question are being assigned; and PROVIDED FURTHER that any such
assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4.
5. AMENDMENT OF RIGHTS.
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and Investor (or, in the case of an amendment or waiver of any
provision of Section 2 hereof, only with the written consent of the Company
and the Holders of a majority of the Investor Securities then outstanding and
entitled to the registration rights set forth in Section 2 hereof). Any
amendment or waiver effected in accordance with this Section shall be binding
upon the Investor, each Holder, each permitted successor or assignee of such
Investor or Holder and the Company.
6. LIMITATION ON INVESTOR'S RIGHT TO BUY AND SELL.
6.1 SALES LIMITATION. During the three (3) year period
commencing on the Effective Date, in no event may more than the "Maximum
Quarterly Sale Amount" (as defined below) of the Company Common Stock
included in the Investor Securities be sold by all Holders to any person or
entity. However, the aforesaid sales limitation shall not apply to a sale of
the Company Common Stock (i) in a transaction which a majority of the Company
Common Stock (other than the Company Common Stock held by all Holders) held
by other stockholders or a majority of Company Common Stock held by
affiliates of the Company (as defined in Rule 144 of the Securities Act) is
being sold, (ii) in a piggy-back offering by the Company of its own Company
Common Stock in accordance with Section 2.4 above, (iii) in a tender offer,
merger, consolidation, reorganization, or other business combination of the
Company or (iv) to a
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company controlled by, under common control with, or which controls the
Investor, provided in such case that the terms, conditions, and limitations
on sale of Company Common Stock set forth in this Agreement continue to apply
to such transferred Company Common Stock. As used herein the term "MAXIMUM
QUARTERLY SALE AMOUNT" for any calendar quarter is equal to that number of
shares of the Company Common Stock equal to the greater of (A) seven-tenths
of one percent (0.7%) of the total number of the then outstanding shares of
the Company Common Stock (the "THEN OUTSTANDING SHARES") or (B) two and
one-tenth percent (2.1%) of the Then Outstanding Shares minus the number of
shares of the Company Common Stock sold by all Holders pursuant to this
provision in the two (2) calendar quarters preceding the quarter in which the
sale occurs; provided that the Investor shall be deemed for the purpose of
this calculation to have sold that number of shares of Company Common Stock
equal to seven-tenths of one percent (0.7%) of the Then Outstanding Shares in
each of the two calendar quarters prior to the date of this Warrant. Any sale
of Company Common Stock by the Investor during the three (3) year period
commencing on the Effective Date shall be executed through Donaldson, Lufkin
& Jenrette Securities Corporation, if it provides competitive market terms
for such transaction.
6.2 STANDSTILL.
(a) DEFINITIONS. As used in this Section, the
following terms shall have the following meanings: "VOTING STOCK" shall mean
the Company Common Stock or other securities issued by the Company having the
ordinary power to vote in the election of directors of the Company (other
than securities having such power only upon the happening of a contingency
that has not occurred as of the relevant time); "VOTING POWER" of any Voting
Stock shall mean the number of votes such Voting Stock is entitled to cast
for directors of the Company at any meeting of the stockholders of the
Company; and "TOTAL VOTING POWER" means the total number of votes which may
be cast in the election of directors of the Company at any meeting of the
stockholders of the Company, if all Voting Stock was represented and voted to
the fullest extent possible at such meeting, other than the votes that may be
cast only upon the happening of a contingency that has not occurred as of the
relevant time.
(b) The Investor hereby agrees that the Investor
and its Majority Owned Subsidiaries shall neither acquire, nor enter into
discussions, negotiations, arrangements or understandings with any third
party to acquire, beneficial ownership (as defined in Rule 13d-3 promulgated
under the Exchange Act) of any Voting Stock, any securities convertible into
or exchangeable for Voting Stock, or any other right to acquire Voting Stock
(except, in any case, by way of dividends or other distributions or offerings
of Company securities made available to holders of any class of Voting Stock
generally) without the written consent of the Company, if the effect of such
acquisition would be to increase the Voting Power (as defined below) of all
Voting Stock then beneficially owned (as defined above) by the Investor and
its Majority Owned Subsidiaries at the time of such Voting Stock acquisition
(the "STANDSTILL PERCENTAGE"). Notwithstanding the foregoing, nothing in this
Section shall affect any of the registration rights, piggy-back rights,
rights with respect to corporate events and other rights granted to the
Investor and its assignees under this Agreement or the Warrant.
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6.3 EXCEPTIONS. The Investor will not be obligated to
dispose of any Voting Stock to the extent that the aggregate percentage of
the Total Voting Power of the Company represented by Voting Stock
beneficially owned by the Investor or which the Investor has a right to
acquire is increased beyond the Standstill Percentage (a) as a result of a
recapitalization of the Company or a repurchase or exchange of securities by
the Company or any other action taken by the Company or its affiliates; (b)
as a result of any tender offer, merger, consolidation, or reorganization of
the Company; (c) by way of stock dividends or other distributions or rights
or offerings made available to holders of shares of Voting Stock generally;
(d) with the consent of a simple majority of the authorized members of the
Company's Board of Directors; or (e) as part of a transaction on behalf of
any defined benefit pension plan, profit sharing Plan, 401(k) savings plan,
sheltered employee retirement plan, or any other retirement plan of the
Investor or its Majority Owned Subsidiaries (collectively, the "RETIREMENT
PLANS"), where the Company securities in such Retirement Plans are voted by a
trustee, the Investor or its Majority Owned Subsidiary for the benefit of
employees or, for those Retirement Plans where Investor or this Majority
Owned Subsidiary agrees not to vote any Company Voting Stock that would
otherwise cause the Standstill Percentage to be exceeded.
6.4 TERMINATION OF STANDSTILL. The provisions of Section
6.2 shall terminate upon the third anniversary of the Effective Date of this
Agreement.
7. COMPANY RIGHT OF FIRST REFUSAL.
7.1 RIGHT OF FIRST REFUSAL UPON TRANSFER OF FIVE PERCENT
STAKE. If the Investor (a) intends to sell Investor Securities (including the
Investor Securities underlying any portion of the Warrants proposed to be
sold) with Voting Power constituting five percent (5%) or more of the Total
Voting Power of the Company, or (b) intends to sell Investor Securities,
(including the Investor Securities underlying any such portion of the
Warrant) with Voting Power constituting less than five percent (5%) of the
Total Voting Power of the Company to any person that beneficially owns five
percent (5%) or more of the Total Voting Power of the Company, as indicated
on a Schedule 13D or 13G filed with the SEC, in either case in a transaction
other than in (i) an underwritten piggy-back offering in accordance with
Section 2.4, above, (ii) an underwritten public offering pursuant to Sections
2.2 or 2.3 above, (iii) a tender offer, merger, reorganization, or
consolidation of the Company, or (iv) a sale of the Company Common Stock in a
transaction where a majority of the Company Common Stock held by stockholders
other than the Holders or a majority of Company Common Stock held by
affiliates of the Company as defined in Rule 144 of the Securities Act is
being sold, then Investor shall provide written notice thereof to the Company
(the "INVESTOR NOTICE") providing the Company with the first right to acquire
the Company Common Stock the Holder intends to sell. The Investor Notice
shall specify the number of Investor Securities involved, the name and
address of the proposed purchaser, and the proposed price per share. For a
period of seven (7) business days after delivery of the Investor Notice, the
Company shall be entitled to elect to purchase all, but not less than all, of
the Investor Securities described in the Investor Notice, at the price per
share described in such notice. The Company may exercise such right by
delivery of a written notice (a "COMPANY PURCHASE ELECTION") to the Investor,
irrevocably electing to purchase such Investor Securities that the Holder
intends to sell and shall have thirty (30) days to consummate
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said purchase from the Investor. In the event that the Company has not
delivered a Company Purchase Election prior to the expiration of such seven
(7) day period or has failed to purchase and pay for such Investor Securities
within said thirty (30) day period, the Company's right to purchase such
Investor Securities shall expire, and the Investor or its Majority Owned
Subsidiary shall be entitled to sell the Investor Securities described in the
Investor Notice for a period of one hundred twenty (120) days following the
date of the Investor Notice, but only to the proposed purchaser set forth in
the Investor Notice (or any Majority Owned Subsidiary thereof) and only for a
purchase price of at least ninety-five percent (95%) of the purchase price
set forth in the Investor Notice. In the event the Investor or Majority Owned
Subsidiary has not sold such Investor Securities by the end of such ninety
(90) day period, the rights of the Company set forth above in this Section
shall apply to any subsequent sale of the Company Common Stock in excess of
the threshold amount by the Investor or its Majority Owned Subsidiary.
Notwithstanding the foregoing, the provisions of this Section shall not apply
to any sales or other transfers by the Investor to any of its Majority Owned
Subsidiaries.
7.2 TERMINATION OF RIGHT OF FIRST REFUSAL. The provisions
of this Section shall terminate upon the third anniversary of the Effective
Date of this Agreement.
8. SECURITIES ACT & EXCHANGE ACT REPORTS. The Company agrees to:
8.1 FILINGS. Use commercially reasonable efforts to file
with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act.
8.2 COMPLIANCE CERTIFICATE. Furnish to each Holder
forthwith upon request a written statement by the Company that it has
complied with the reporting requirements of the Securities Act and the
Exchange Act, or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3.
8.3 PUBLIC INFORMATION. Make and keep public information
available as those terms are understood and defined in Rule 144 under the
Securities Act.
8.4 RULE 144. So long as Investor owns the Investor
Securities, or any portion thereof, furnish to the Investor upon request (a)
a written statement by the Company as to its compliance with the company
information requirements of Rule 144, and of the Securities Act and the
Exchange Act, and (b) such other reports and documents so filed with the SEC
as an Investor may reasonably request in availing itself of any rule or
regulation of the SEC allowing an Investor to sell any such securities
without registration.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. The terms and conditions of
this Agreement will inure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties.
17
<PAGE>
9.2 GOVERNING LAW. This Agreement will be governed by and
construed under the internal laws of the State of Delaware, without reference
to principles of conflict of laws or choice of laws.
9.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute the same instrument.
9.4 HEADINGS. The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement
to sections, paragraphs, exhibits and schedules will, unless otherwise
provided, refer to sections and paragraphs hereof and exhibits and schedules
attached hereto, all of which exhibits and schedules are incorporated herein
by this reference.
9.5 NOTICES. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when received, and
shall in any event be deemed received and effectively given upon personal
delivery to the party to be notified or three (3) business days after deposit
with the United States Post Office, by registered or certified mail, postage
prepaid, or one (1) business day after deposit with a nationally recognized
courier service such as Federal Express for next business day delivery under
circumstances in which such service guarantees next business day delivery, in
any case, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof or at such
other address as the Investor or the Company may designate by giving at least
ten (10) days advance written notice pursuant to this Section.
9.6 [Intentionally deleted.]
9.7 SEVERABILITY. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision will be
excluded from this Agreement and the balance of the Agreement will be
interpreted as if such provision was so excluded and will be enforceable in
accordance with its terms.
9.8 ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and all exhibits and schedules hereto and thereto
constitutes the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
9.9 FURTHER ASSURANCES. From and after the date of this
Agreement upon the request of the Company or the Investor, the Company and
the Investor will execute and deliver such instruments, documents or other
writings, and take such other actions, as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
18
<PAGE>
9.10 MEANING OF INCLUDE AND INCLUDING. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to
mean "include, without limitation" or "including, without limitation," as the
case may be, and the language following "include" or "including" shall not be
deemed to set forth an exhaustive list.
9.11 FEES, COSTS AND EXPENSES. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party hereto in
connection with the preparation, negotiation and execution of this Agreement
and the Purchase Agreement and the consummation of the transactions
contemplated hereby and thereby (including the costs associated with any
filings with, or compliance with any of the requirements of, any governmental
authorities) shall be the sole and exclusive responsibility of such party.
9.12 COMPETITION. Nothing set forth herein shall be deemed
to preclude, limit or restrict the Company's or the Investor's ability to
compete with the other.
9.13 STOCK SPLITS, DIVIDENDS, AND OTHER SIMILAR EVENTS. The
provisions of this Agreement (including the number of shares of Company
Common Stock and other securities described herein) shall be appropriately
adjusted to reflect any stock split, stock dividend, reorganization, or other
similar event that may occur with respect to the Company after the date
hereof.
9.14 ATTORNEYS' FEES. If any action, suit or proceeding is
brought by the Investor or the Company to interpret or enforce this
Agreement, then the prevailing party in such action shall be entitled to
recover its attorneys' fees, experts' fees, and court costs as awarded by the
court in the action or a separate action.
[Signatures On Next Page]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
NOVELL, INC. WHITTMAN-HART, INC.
By: /s/ Dennis Raney By: /s/ Bert Young
--------------------------------- ------------------------------
Name: Dennis Raney Name: Bert Young
Title: Senior Vice President and Title: Chief Financial Officer
Chief Financial Officer Whittman-Hart, Inc.
Novell, Inc.
Date Signed:________________________ Date Signed:_____________________
Address: 122 East 1700 South Address: 311 South Wacker Dr.,
Provo, UT 84606 Suite 3500
Chicago, Illinois 60606-6618
Telephone No.: 801-861-7000 Telephone No.: 312-922-9200
With copies to: With copies to:
Wilson Sonsini Goodrich & Rosati Mark D. Wood, Esq.
650 Page Mill Road Katten Muchin & Zavis
Palo Alto, California 94304 525 West Monroe St., Suite 1600
Attn: Debra S. Summers, Esq. Chicago, IL 60661
David Shelow, Esq.
Whittman-Hart, Inc.
311 South Wacker Dr.,
Suite 3500
Chicago, Illinois 60606-6618
<PAGE>
WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER
OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT TO PURCHASE COMMON STOCK OF WHITTMAN-HART, INC.
<TABLE>
<S> <C>
INITIAL NUMBER OF SHARES 400,000 SHARES
DATE OF GRANT November 12, 1999
EXPIRATION DATE: JUNE 30, 2005
</TABLE>
THIS CERTIFIES THAT, for value received pursuant to that certain
Common Stock and Warrant Purchase Agreement, dated as of September 29, 1999
(the "PURCHASE AGREEMENT"), Novell, Inc., a Delaware corporation, or any
person to whom this interest in this Warrant is lawfully transferred in
accordance with the terms hereof (the original holder hereof and such
transferees herein collectively referred to as "HOLDER") is entitled, subject
to the terms and conditions of this Warrant, at any time or from time to time
on and after July 1, 2000 (the "EFFECTIVE DATE"), and before 5:00 p.m.
Pacific Time on June 30, 2005 (the "EXPIRATION DATE"), to purchase from
Whittman-Hart, Inc., a Delaware corporation (the "COMPANY"), Four Hundred
Thousand (400,000) shares of Common Stock of the Company at a price per share
of Thirty-five and 875/1000 Dollars ($35.875) (the "PER SHARE PURCHASE Price").
Both the number of shares of Common Stock purchasable upon exercise of this
Warrant and the Per Share Purchase Price are subject to adjustment and change
as provided herein. This Warrant is issued pursuant to the Purchase
Agreement. Unless otherwise provided for herein, all capitalized terms in
this Warrant shall have the meanings set forth in the Purchase Agreement.
1. CERTAIN DEFINITIONS. As used in this Warrant, the following terms
shall have the following respective meanings:
1.1 "FAIR MARKET VALUE" of a share of Common Stock as of a
particular date shall mean:
<PAGE>
(a) If the Common Stock is traded on a securities
exchange or the Nasdaq National or SmallCap Market, the Fair Market Value
shall be deemed to be the average of the closing prices of the Common Stock
of the Company on such exchange or market over the 3 trading days of such
exchange ending on the trading day immediately preceding the applicable date
of valuation;
(b) If subpart (a) above does not apply and if the
Common Stock is actively traded over-the-counter, the Fair Market Value shall
be the average of the closing bid prices for each trading day in the thirty
(30)-day period ending immediately prior to the applicable date of valuation;
and
(c) If there is no active public market for the
Common Stock, the Fair Market Value shall be the value thereof, as agreed
upon by the Company and the Holder; PROVIDED, HOWEVER, that if the Company
and the Holder cannot agree on such value within fifteen (15) days following
either party's written demand for an agreement, then, upon demand by either
party, such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly selected in
good faith by the Company and the Holder. The determination of the valuation
firm shall be final and binding on the Company and the Holder, and the fees
and expenses of the valuation firm shall be paid for by the Company.
1.2 "HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.3 "REGISTERED HOLDER" shall mean any Holder in whose name
this Warrant is registered upon the books and records maintained by the
Company.
1.4 "WARRANT" as used herein, shall include this Warrant
and any warrant delivered in substitution or exchange therefor as provided
herein.
1.5 "COMMON STOCK" shall mean the Common Stock of the
Company and any other securities at any time receivable or issuable upon
exercise of this Warrant.
2. EXERCISE OF WARRANT
2.1 INITIAL WARRANT SHARES. The Holder shall have the right
to exercise its rights under this Warrant and to purchase Two Hundred
Thousand (200,000) shares of Common Stock (the "INITIAL WARRANT SHARES") at
any time on and after the effective date, and on or prior to the Expiration
Date, if, but only if, the Company does not meet any one of the following
milestones on or before June 30, 2000, to wit:
(a) The Company shall employ on a full-time basis at
least one hundred twenty-five (125) billable
consultants in its NDS Solutions Practice (as said
term is defined in the Global Alliance Agreement,
dated as of September 29, 1999, between the Company
and the Investor (the "Alliance Agreement")); or
(b) The Company shall enter into NDS Solutions
Practice assignments with at least twenty (20)
individual customers, PROVIDED,
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<PAGE>
HOWEVER, for this purpose, that affiliated companies
shall be deemed one customer; or
(c) The Company's revenue from its NDS Solutions
Practice for the period commencing on September 29,
1999 and ending on the effective date shall be equal
to at least $3,000,000.
The Holder's right to exercise the Warrant and purchase the Initial Warrant
Shares shall expire and be of no force and effect, if: (i) the Company meets
all the above milestones on or before the effective date, (ii) the Alliance
Agreement is terminated in accordance with the terms thereof on or before the
effective date as a consequence of a breach or default by the Investor under
the Alliance Agreement, or (iii) as of the effective date, the Investor is in
breach of, or default under, the Alliance Agreement, Investor fails to cure
such breach or default within any time allowed for cure by the Alliance
Agreement, and, as a consequence of such breach or default, the Company
terminates the Alliance Agreement as permitted thereby; PROVIDED, HOWEVER,
that, in the case of this subpart (iv), the Investor shall not be entitled to
exercise its right to purchase the Initial Warrant Shares during any such
cure period. Further, the Investor shall have no right to exercise its rights
to purchase the Initial Shares at any time when (A) the Company is performing
its obligations under the Alliance Agreement in all material respects and (B)
Novell is failing to perform its obligations under Section 3(a) of the
Alliance Agreement in any material respect, in which case, the time period
permitted for the Company to achieve the above milestones shall be extended
by a period equal to the length of any period of such failure to perform in
accordance with the claim of delay procedures attached hereto as Exhibit A.
2.2 REMAINING WARRANT SHARES: The Holder shall have the right
to exercise its rights under this Warrant and to purchase Two Hundred Thousand
(200,000) shares of Common Stock (the "REMAINING WARRANT SHARES") at any time
after June 30, 2001, and on or prior to the Expiration Date, if, but only if,
the Company does not meet any one of the following milestones on or before June
30, 2001, to wit:
(a) The Company shall employ on a full time basis at
least three hundred (300) billable consultants in its
NDS Solutions Practice; or
(b) The Company shall enter into NDS Solutions
Practice assignments with at least eighty (80)
individual customers, PROVIDED, HOWEVER, for this
purpose, that affiliated companies shall be deemed
one customer; or
(c) The Company's revenue from its NDS Solutions
Practice for the period commencing on September 29,
1999 and ending on June 30, 2001 shall be equal to at
least $35,000,000.
The Holder's right to exercise and purchase the Remaining Warrant Shares
shall expire and be of no force and effect, if: (i) the Company meets all the
above milestones on or before June 30, 2001, (ii) the Alliance Agreement is
terminated in accordance with the terms thereof on or before June 30, 2001 as
a consequence of an event of default by the Investor under the Alliance
Agreement, (iii) as of June 30, 2001, the Investor is in breach of, or
default under, the Alliance Agreement, Investor fails to cure such breach or
default within any time allowed for cure by the Alliance Agreement, and, as a
consequence of such breach or default, the Company terminates the Alliance
Agreement as
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<PAGE>
permitted thereby, PROVIDED, HOWEVER, that, in the case of this
subpart (iii), the Investor shall not be entitled to exercise its right to
purchase the Remaining Warrant Shares during any such cure period, or (iv)
despite good faith negotiations by the Company, the Alliance Agreement
terminates pursuant to Section 12.c(ii) thereof. Further, the Investor shall
have no right to exercise its rights to purchase the Remaining Warrant Shares
at any time when (A) the Company is performing its obligations under the
Alliance Agreement in all material respects and (B) Novell is failing to
perform its obligations under Section 3(a) or 3(d) of the Alliance Agreement
in any material respect, in which case the time period permitted for the
Company to achieve the above milestones shall be extended by a period equal
to the length of any period of such failure to perform in accordance with the
claim of delay procedures attached hereto as Exhibit A.
2.3 ADDITIONAL LIMITATION. The rights to purchase the
Initial Warrant Shares and the Remaining Warrant Shares pursuant to this
Warrant shall expire on the Expiration Date.
2.4 PAYMENT. Subject to compliance with the terms and
conditions of this Warrant and applicable securities laws, this Warrant may
be exercised on or before the Expiration Date:
(a) the delivery (including, without limitation,
delivery by facsimile) of the form of Notice of Exercise attached hereto as
EXHIBIT 1 (the "NOTICE OF EXERCISE"), duly executed by the Holder, at the
principal office of the Company, and as soon as practicable after such date,
surrendering this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire
transfer, (ii) by cancellation by the Holder of indebtedness of the Company
to the Holder; or (iii) by a combination of (i) and (ii), of an amount (the
"PURCHASE PRICE") equal to the product obtained by multiplying the number of
shares of Common Stock being purchased upon such exercise by the Per Share
Purchase Price, except that if Holder is subject to the HSR Requirements (as
defined in Section 2.5 below), the Exercise Amount shall be paid to the
Company within five (5) business days of the termination of all HSR
Requirements.
2.5 NET ISSUE EXERCISE. In lieu of the payment methods set
forth in Section 2.4 above, the Holder may elect to exchange all or some of
the Warrant for a number of shares (rounded down to the nearest whole share)
of Common Stock equal to the value of the amount of the Warrant being
exchanged on the date of exchange. If Holder elects to exchange this Warrant
as provided in this Section, Holder shall tender to the Company the Warrant
for the amount being exchanged, along with written notice of Holder's
election to exchange some or all of the Warrant, and the Company shall issue
to Holder the number of shares (rounded down to the nearest whole share) of
the Common Stock computed using the following formula:
X= Y (A-B)
-----------
A
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the
date of such calculation).
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<PAGE>
A = the Fair Market Value of one share of Common Stock.
B = the Per Share Purchase Price in effect under this
Warrant on the date the net issue exercise election is
made pursuant to this Section.
All references herein to an "exercise" of the Warrant shall include an
exchange pursuant to this Section.
2.6 "EASY SALE" EXERCISE. In lieu of the payment methods
set forth in Section 2.4 above, when permitted by law and applicable
regulations (including Nasdaq and NASD rules), the Holder may pay the Per
Share Purchase Price through a "same day sale" commitment from the Holder
(and if applicable a broker-dealer that is a member of the National
Association of Securities Dealers (a "NASD DEALER")), whereby the Holder
irrevocably elects to exercise this Warrant and to sell a portion of the
Common Stock so purchased to pay for the Purchase Price and the Holder (or,
if applicable, the NASD Dealer) commits upon sale (or, in the case of the
NASD Dealer, upon receipt) of such Common Stock to forward the Purchase Price
directly to the Company.
2.7 STOCK CERTIFICATES; FRACTIONAL SHARES. As soon as
practicable on or after the date this Warrant is exercised, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Common Stock
issuable upon such exercise, rounded down to the nearest whole share. No
fractional shares or scrip representing fractional shares shall be issued
upon an exercise of this Warrant.
2.8 HSR ACT.
(a) The Company hereby acknowledges that exercise
of this Warrant by Holder may subject the Company and/or the Holder to the
filing requirements of the HSR Act and that Holder may be prevented from
exercising this Warrant until the expiration or early termination of all
waiting periods imposed by the HSR Act ("HSR REQUIREMENTS"). If on or before
the Expiration Date, Holder has sent a Notice of Exercise to Company and
Holder has not been able to complete the exercise of this Warrant prior to
the Expiration Date because of the non-fulfillment of HSR Requirements, the
Holder shall be entitled to complete the process of exercising this Warrant,
for a period of ten (10) business days following fulfillment or irrevocable
termination of the HSR Requirements, in accordance with the procedures
contained herein, notwithstanding the fact that completion of the exercise of
this Warrant would take place after the Expiration Date.
(b) Promptly after any exercise of the Holder's
rights under this Warrant, the Company and the Holder shall each complete and
file any premerger notification report forms under the HSR Act applicable to
the issuance of the Warrant Shares and shall use all reasonable efforts to
comply with any applicable HSR Requirements; PROVIDED, HOWEVER, that neither
the Company nor the Holder shall be under any obligation to comply with any
request or requirement imposed by the Federal Trade Commission (the "FTC"),
the Department of Justice ("DOJ") or any other governmental authority in
connection with its compliance with such HSR Requirements, if the Company or
the Holder reasonably determines in its sound, good faith and reasonable
business judgment, that such compliance would have an adverse impact on its
business, contracts, financial position or prospects. Without limiting the
generality of the foregoing, neither the Company nor the Holder shall be
obligated to comply with any request by, or any requirement of the FTC, the
DOJ or any other governmental authority (i) to disclose information the
Company or the Holder, as the case may be, in its sound, good faith and
reasonable business judgment believes must be kept confidential
-5-
<PAGE>
to avoid injury to its business; (ii) to dispose of any assets or operations;
or (iii) to comply with any restriction on the manner in which it conducts
its operations. In the event that the Company shall elect not to comply with
any of the HSR Requirements pursuant to the immediately preceding sentence,
it shall be obligated to pay to the Holder in cash (by check or wire
transfer), within ninety (90) days following written election by the Holder,
an amount equal to the number of shares that were to be issued pursuant to
the Holder's Notice of Exercise times that value equal to the difference
between: (1) the closing price of the Company Common Stock on the date of
delivery of Holder's Notice of Exercise of its rights hereunder, and (2) the
Per Share Purchase Price.
2.9 PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE. In case
of any partial exercise of this Warrant, the Company shall cancel this
Warrant upon surrender hereof and shall execute and deliver a new Warrant of
like tenor and date for the balance of the shares of Common Stock purchasable
hereunder. This Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of its surrender for exercise as
provided above. However, if Holder is subject to HSR Requirements, this
Warrant shall be deemed to have been exercised on the date immediately
following the date of the expiration or termination of all HSR Requirements.
The person entitled to receive the shares of Common Stock issuable upon
exercise of this Warrant shall be treated for all purposes as the holder of
record of such shares as of the close of business on the date the Holder is
deemed to have exercised this Warrant.
3. VALID ISSUANCE; TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and
non-assessable, and the Company shall pay all transfer or stamp taxes and
other similar governmental charges that may be imposed in respect of the
issue or delivery thereof. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the
issuance of any certificate for shares of Common Stock in any name other than
that of the Registered Holder of this Warrant, and in such case the Company
shall not be required to issue or deliver any stock certificate or security
until such tax or other charge has been paid, or it has been established to
the Company's reasonable satisfaction that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of
shares of Common Stock issuable upon exercise of this Warrant (or any shares
of stock or other securities or property receivable or issuable upon exercise
of this Warrant), the Per Share Purchase Price and the Purchase Price are
subject to adjustment upon occurrence of the following events:
4.1 ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR
COMBINATIONS OF SHARES. The Per Share Purchase Price of this Warrant shall be
proportionally decreased, and the number of shares of Common Stock issuable
upon exercise of this Warrant (or any shares of stock or other securities at
the time issuable upon exercise of this Warrant) shall be proportionally
increased, to reflect any forward stock split or subdivision of the Company's
Common Stock. The Per Share Purchase Price of this Warrant shall be
proportionally increased, and the number of shares of Common Stock issuable
upon exercise of this Warrant (or any shares of stock or other securities at
the time issuable upon exercise of this Warrant) shall be proportionally
decreased, to reflect any reverse stock split or combination of the Company's
Common Stock.
4.2 ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR
OTHER SECURITIES OR PROPERTY. In case the Company shall make or issue, or
shall fix a record date for the determination
-6-
<PAGE>
of eligible holders entitled to receive, a dividend or other distribution
with respect to the Common Stock (or any shares of stock or other securities
at the time issuable upon exercise of the Warrant) payable in (a) securities
of the Company or (b) assets (excluding cash dividends paid or payable solely
out of retained earnings), then, in each such case, the Holder on exercise
hereof, at any time after the consummation, effective date or record date of
such dividend or other distribution, shall receive, in addition to the shares
of Common Stock (or such other stock or securities) issuable on such exercise
prior to such date, and without the payment of additional consideration
therefor, the securities or such other assets of the Company to which such
Holder would have been entitled upon such date, if such Holder had exercised
this Warrant on the date hereof and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and/or all other additional stock available by it as aforesaid during
such period, giving effect to all adjustments called for by this Section 4.2.
4.3 RECLASSIFICATION. If the Company, by reclassification
of securities or otherwise, shall change any of the securities as to which
purchase rights under this Warrant exist into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would
have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change, and the Per Share
Purchase Price therefore shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 4. No adjustment shall be made
pursuant to this Section 4.3 upon any conversion or redemption of the Common
Stock which is the subject of Section 4.5.
4.4 ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR
CONSOLIDATION. In case of any capital reorganization of the capital stock of
the Company (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), or any merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all the assets of the Company, then, and in each such
case, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Purchase Price, the
number of shares of stock or other securities or property of the successor
corporation resulting from such reorganization, merger, consolidation, sale
or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer, as if this Warrant had been
exercised immediately before such reorganization, merger, consolidation, sale
or transfer, all subject to further adjustment as provided in this Section 4.
The foregoing provisions of this Section 4.4 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and
to the stock or securities of any other corporation that are at the time
receivable upon the exercise of this Warrant. If the per-share consideration
payable to the Holder for shares in connection with any such transaction is
in a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith
by the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in
relation to any shares or other property deliverable after that event upon
exercise of this Warrant.
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<PAGE>
4.5 CONVERSION OF COMMON STOCK. In case all or any portion
of the authorized and outstanding shares of Common Stock of the Company are
redeemed or converted or reclassified into other securities or property
pursuant to the Company's Certificate of Incorporation or otherwise, or the
Common Stock otherwise ceases to exist, then, in such case, the Holder, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "TERMINATION
DATE"), shall receive, in lieu of the number of shares of Common Stock that
would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been received if
this Warrant had been so exercised and the Common Stock received thereupon
had been simultaneously converted immediately prior to the Termination Date,
all subject to further adjustment as provided in this Warrant. Additionally,
the Per Share Purchase Price shall be immediately adjusted to equal the
quotient obtained by dividing (x) the aggregate Purchase Price of the maximum
number of shares of Common Stock for which this Warrant was exercisable
immediately prior to the Termination Date by (y) the number of shares of
Common Stock of the Company for which this Warrant is exercisable immediately
after the Termination Date, all subject to further adjustment as provided
herein.
4.6 CERTAIN EVENTS. If (i) any event occurs of a type that
would have an effect on the rights granted under this Warrant similar to the
effect of any event described by the other provisions of this Section 4 and
(ii) such event is not expressly provided for by such other provisions, then
an appropriate adjustment in the Per Share Purchase Price and the number of
shares of Common Stock obtainable upon exercise of this Warrant, so as to
protect the rights of the Holder, shall be made.
4.7 CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment in the Per Share Purchase Price, or number or type of shares
issuable upon exercise of this Warrant, the Chief Financial Officer of the
Company shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and showing
in reasonable detail the facts upon which such adjustment is based, including
a statement of the adjusted Per Share Purchase Price, which shall be
conclusive absent fraud, negligence or manifest error. The Company shall
promptly send (by facsimile and by either first class mail, postage prepaid
or overnight delivery) a copy of each such certificate to the Holder.
5. LOSS OR MUTILATION. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of, and the loss, theft,
destruction or mutilation of, this Warrant, and of an indemnity reasonably
satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor as the lost, stolen, destroyed or
mutilated Warrant.
6. RESERVATION OF COMMON STOCK. The Company hereby covenants that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company as are from time to time issuable upon exercise of this
Warrant and, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient authorized shares of
Common Stock issuable upon exercise of this Warrant. All such shares shall be
duly authorized, and when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security
interests, charges, encumbrances or limitations on sale, and free and clear
of all preemptive rights, except non-monetary encumbrances and limitations on
sale arising under federal or state securities laws. Issuance of this Warrant
shall constitute full authority to the Company's officers who are
-8-
<PAGE>
charged with the duty of executing stock certificates to execute and issue
the necessary certificates for shares of Common Stock upon the exercise of
this Warrant.
7. TRANSFER AND EXCHANGE.
7.1 RIGHT TO TRANSFER. Subject to the terms and conditions
of this Warrant and compliance with all applicable securities laws, this
Warrant and all rights hereunder (and any shares of Common Stock acquired on
exercise of the Warrant) may be transferred, in whole or in part, only (a) to
a Majority Owned Subsidiary (as defined below) of the Registered Holder, (b)
to an Institutional Investor (as defined below) or (c) in a sale effectuated
pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended
(the "1933 ACT"), or (d) in an offering registered under Section 5 of the
1933 Act. Any such transfer shall be made on the books of the Company
maintained for such purpose at the principal office of the Company referred
to above, by the Registered Holder hereof in person, or by duly authorized
attorney, upon surrender of this Warrant properly endorsed and upon payment
of any necessary transfer tax or other governmental charge imposed upon such
transfer. Upon any permitted partial transfer of the Warrant, the Company
will issue and deliver to the Registered Holder a new Warrant or Warrants
with respect to the shares of Common Stock not so transferred. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees
that when this Warrant shall have been so endorsed, the person in possession
of this Warrant may be treated by the Company, and all other persons dealing
with this Warrant, as the absolute owner hereof for any purpose and as the
person entitled to exercise the rights represented hereby, any notice to the
contrary notwithstanding; PROVIDED, HOWEVER, that, until a transfer of this
Warrant is duly registered on the books of the Company, the Company may treat
the Registered Holder hereof as the owner for all purposes. Upon any full or
partial transfer of the Warrant or the shares of Common Stock acquired on
exercise of the Warrant pursuant to clauses (b) through (d), inclusive, of
the first sentence of this Section 7.1, all restrictions applicable to the
transfer of the Warrant or such Common Stock, or portion thereof, so
transferred shall cease, including without limitation, the restrictions on
transfer contained the Investor Rights Agreement of even date herewith,
executed by the Company and the Investor.
7.2 MAJORITY OWNED SUBSIDIARY. A "MAJORITY OWNED
SUBSIDIARY" shall mean a subsidiary of which the Registered Holder
beneficially owns, either directly or indirectly, at least fifty percent
(50%) of the voting securities.
7.3 INSTITUTIONAL INVESTOR. An "INSTITUTIONAL INVESTOR"
shall mean any person considered to be an "accredited investor" under Rule
501(a)(i) of Regulation D under the 1933 Act; PROVIDED, HOWEVER, that
"Institutional Investor" shall not include (i) any entity that the Company,
in its good faith and reasonable business judgment, determines is a
significant competitor of the Company or (ii) any Majority Owned Subsidiary.
8. SECURITIES LAW REQUIREMENTS ON TRANSFER. The Holder, by
acceptance hereof, agrees that such Holder will not sell, transfer, pledge or
hypothecate any or all such Warrants or Common Stock issued pursuant to such
Warrant, as the case may be, unless either (i) this Warrant and/or said
Common Stock is registered for sale in accordance with applicable federal and
state securities laws or (ii) the Company has received an opinion of counsel,
in form and substance reasonably satisfactory to the Company, to the effect
that such registration is not required in connection with such disposition or
(iii) the sale of such securities is made pursuant to Rule 144 under the 1933
Act.
-9-
<PAGE>
9. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,
the Holder hereby represents, warrants and covenants that any shares of
Common Stock purchased upon exercise of this Warrant or acquired upon
conversion thereof shall be acquired for investment only and not with a view
to, or for sale in connection with, any distribution thereof; that the Holder
has had such opportunity as such Holder has deemed adequate to obtain from
representatives of the Company such information as is necessary to permit the
Holder to evaluate the merits and risks of its investment in the company;
that the Holder is able to bear the economic risk of holding such shares as
may be acquired pursuant to the exercise of this Warrant for an indefinite
period; that the Holder understands that the shares of Common Stock acquired
pursuant to the exercise of this Warrant will not be registered under the
1933 Act (unless otherwise required pursuant to exercise by the Holder of the
registration rights, if any, previously granted to the Registered Holder) and
will be "restricted securities" within the meaning of Rule 144 under the 1933
Act and that the exemption from registration under Rule 144 will not be
available for at least one (1) year from the date of exercise of this
Warrant, subject to any special treatment by the SEC for exercise of this
Warrant pursuant to Section 2.2, and even then will not be available unless a
public market then exists for the Common Stock, adequate information
concerning the Company is then available to the public and other terms and
conditions of Rule 144 are complied with; and that all stock certificates
representing shares of Common Stock issued to the Holder upon exercise of
this Warrant may have affixed thereto a legend substantially in the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
10. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of
the Company. In the absence of affirmative action by such Holder to purchase
Common Stock by exercise of this Warrant, no provisions of this Warrant, and
no enumeration herein of the rights or privileges of the Holder hereof, shall
cause such Holder hereof to be a stockholder of the Company for any purpose.
11. REGISTRATION RIGHTS. All shares of Common Stock issuable upon
exercise of this Warrant shall be "Registrable Securities" or such other
definition of securities entitled to registration rights pursuant to the
Investor Rights Agreement, dated as of the date hereof, between the Company
and the Holder, and are entitled, subject to the terms and conditions of that
agreement, to all registration rights granted to holders of Registrable
Securities thereunder.
-10-
<PAGE>
12. NOTICES. Unless otherwise provided in this Warrant, any notice
required or permitted under this Warrant shall be given in writing, shall be
effective when received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be notified or three
(3) business days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid, or one (1) business day after
deposit with a nationally recognized courier service such as Federal Express,
at the address indicated for such party on the signature page hereof or at
such other address as the Investor or the Company may designate by giving at
least ten (10) days advance written notice pursuant to this Section.
13. HEADINGS. The headings in this Warrant are for purposes of
convenience in reference only and shall not be deemed to constitute a part
hereof.
14. LAW GOVERNING. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of Delaware.
15. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of
assets or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Registered Holder of this Warrant against impairment. Without
limiting the generality of the foregoing, the Company (a) will not increase
the par value of any shares of stock issuable upon the exercise of this
Warrant above the amount payable therefor upon such exercise, and (b) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares of
Common Stock upon exercise of this Warrant.
16. NOTICES OF RECORD DATE. In case:
16.1 the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time
receivable upon the exercise of this Warrant), for the purpose
of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities or to
receive any other right; or
16.2 of any consolidation or merger of the Company with or
into another corporation, any capital reorganization of the
Company, any reclassification of the Capital Stock of the
Company, or any conveyance of all or substantially all of the
assets of the Company to another corporation in which holders
of the Company's stock are to receive stock, securities or
property of another corporation; or
16.3 of any voluntary dissolution, liquidation or winding-up
of the Company; or
16.4 of any redemption or conversion of all outstanding Common
Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the date on which
a record is to be taken for the purpose of
-11-
<PAGE>
such dividend, distribution or right or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation, winding-up, redemption or conversion is to take
place, and the time, if any is to be fixed, as of which the holders of record
of Common Stock (or such stock or securities as at the time are receivable
upon the exercise of this Warrant) shall be entitled to exchange their shares
of Common Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up.
Such notice shall be delivered at least twenty (20) days prior to the date
therein specified.
17. SEVERABILITY. If any term, provision, covenant or restriction of
this Warrant is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
requirements of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
18. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto, and each
such executed counterpart shall be, and shall be deemed to be, an original
instrument.
19. NO INCONSISTENT AGREEMENTS. The Company will not, on or after
the date of this Warrant, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holder or
otherwise conflicts with the provisions hereof. The rights granted to the
Holder hereunder do not in any way conflict with and are not inconsistent
with the rights granted to holders of the Company's securities under any
other agreements, except rights that have been waived.
20. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on
a Saturday, Sunday or legal holiday, the Expiration Date shall automatically
be extended until 5:00 p.m. the next business day.
21. SUCCESSORS AND ASSIGNS. The terms and conditions of this Warrant
are binding upon and will insure to the benefit of the Company, the Holders
and their respective successors and assigns.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
<TABLE>
<CAPTION>
NOVELL, INC. WHITTMAN-HART, INC.
<S> <C>
By: /s/ Dennis Raney By: /s/ Robert F. Bernard
------------------------------------ --------------------------------
Name: Dennis Raney Name: Robert F. Bernard
Title: Senior Vice President and Title: Chairman of the Board and
Chief Financial Officer Chief Executive Officer
Novell, Inc. Whittman-Hart, Inc.
Date Signed:___________________________ Date Signed:_______________________
Address: 122 East 1700 South Address: 311 South Wacker Dr.,
Provo, Utah 84606 Suite 3500
Chicago, Illinois 60606-6618
Telephone No: 801-861-7000 Telephone No. 312-922-9200
with copies to: Wilson Sonsini Goodrich & Rosati with copies to: David P. Shelow, Esq.
650 Page Mill Rd. Whittman-Hart, Inc.
Palo Alto, California 94304 311 South Wacker Dr.,
ATTN: AARON A. HEN, ESQ. Suite 3500
Chicago, Illinois 60606-6618
Katten Muchin & Zavis
525 West Monroe St., Suite 1600
Chicago, Illinois 60661
ATTN: MARK D. WOOD, ESQ.
</TABLE>
<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
[COMPANY]
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the Common Stock of Whittman-Hart, Inc. as provided for therein, and (check the
applicable box):
|_| Tenders herewith payment of the exercise price in full in the form of cash
or a certified or official bank check in same-day funds in the amount of
$____________ for _________ shares of Common Stock.
|_| Elects the net issue exercise option pursuant to Section 2.5 of the Warrant
with respect to ________ shares of Common Stock, and accordingly requests
delivery of a net of ______________ shares of such Common Stock, according to
the following calculation:
X = Y (A-B) ( ) = (____) [(_____) - (_____)]
------- ---------------------------
A (_____)
Where X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under the
amount of the Warrant being exchanged (as adjusted to the date
of such calculation).
A = the Fair Market Value of one share of Common Stock.
B = the Per Share Purchase Price in effect under this Warrant on
the date the net issue exercise election is made pursuant to
Section 2.5.
|_| Elects the easy sale exercise option pursuant to Section 2.6 of the Warrant
with respect to ___________ shares of Common Stock, and (i) hereby irrevocably
elects to sell such number of shares of Common Stock (the "Additional Shares")
as is necessary to pay the Purchase Price for all of the shares of Common Stock
to be issued pursuant to this exercise, (ii) hereby irrevocably commits that the
Purchase Price shall be forwarded directly to the Company from the proceeds of
such sale and (iii) if applicable, a NASD Dealer concurrently herewith makes the
commitment required by Section 2.6 of the Warrant.
Please issue a certificate or certificates for Common Stock in the name of, and
pay any cash for any fractional share to (please print name, address and
taxpayer identification number):
<TABLE>
<CAPTION>
<S> <C>
Name: Taxpayer Identification Number:
---------------------------- -------------------
Address:
-------------------------
-------------------------
-------------------------
Signature:
-----------------------
</TABLE>
Note: The above signature should correspond exactly with the name on the
first page of this Warrant Certificate or with the name of the assignee
appearing in the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
<PAGE>
EXHIBIT 2
ASSIGNMENT
(TO BE EXECUTED ONLY UPON ASSIGNMENT OF WARRANT CERTIFICATE)
For value received, the undersigned hereby sells, assigns and
transfers unto ________________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby authorize
[WARRANT AGENT], to transfer said Warrant Certificate on the books of
Whittman-Hart, Inc. with respect to the number of shares of the Company
Common Stock set forth below, with full power of substitution in the premises:
<TABLE>
<CAPTION>
- --------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Name(s) of Assignee(s) Address # of Shares
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
- --------------------------------- ------------------------------------- -------------------------------------
</TABLE>
If said number of shares of Common Stock shall not be all the shares
represented by the Warrant Certificate, a new Warrant Certificate is to be
issued in the name of said undersigned for the balance remaining of the
shares of Common Stock covered by said Warrant Certificate.
Dated: , 200
------------------------------------
Signature:
------------------------------------
NOTICE: The signature to the foregoing Assignment must correspond to
the name as written upon the face of this security in every particular,
without alteration or any change whatsoever; signature(s) must be guaranteed
by an eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission
Rule 17Ad-15.
<PAGE>
EXHIBIT A
CLAIM OF DELAY PROCEDURES
CLAIM OF DELAY PROCEDURES
`
If Novell is defaulting in its obligations pursuant to Section 3 (a)
of the Alliance Agreement and as a consequence thereof the Company is delayed
in achievement of the milestones described in Section 2.1 of the Warrant or
if Novell is defaulting in its obligation pursuant to Section 3(a) or (d) of
the Alliance Agreement and as a consequence thereof the Company is delayed in
achievement of its obligations under Section 2.2 of the Warrant, then the
time period for achievement of such milestones shall be extended for such
time as Novell's default shall have reasonably delayed the Company in
achieving the milestones in accordance with the following procedure:
1. NOTICE OF DEFAULT AND DELAY. If Novell is defaulting in its
obligations under the Alliance Agreement as described above and
as a consequence thereof, the Company is delayed in achievement
of any milestone set forth in the Warrant, then the Company shall
notify Novell of the nature of the default, the milestone delayed
by such default, the date the delay in achievement of the
milestone commenced (which date shall not be earlier than ten
(10) days prior to the date of the notice, the reason for such
delay, the expected duration of the delay and the steps that can
be taken by Novell to alleviate the delay within ten (10) days
following the date the Company should have become reasonably
aware of the default and the associated delay (the "Delay
Notice"). If Novell objects to any such notice, it shall notify
the Company of such fact and of the nature of the dispute, within
ten (10) days following receipt of the Delay Notice by Novell and
any such objection shall be resolved in accordance with Section
4.
2. NOTICE OF TERMINATION. If, following receipt of a delay notice
Novell's default is cured or such default no longer results in a
delay in the achievement of a milestone, then Novell shall notify
the Company of such fact and the date the delay in achievement in
the milestone ceased (a "Delay Termination Notice"). If the
Company objects to any such notice, it shall notify the Company
of such fact and of the nature of the dispute, within ten (10)
days following receipt of the Delay Termination Notice by the
Company and any such objection shall be resolved in accordance
with Section 4.
3. EXTENSION OF DATE(S) FOR ACHIEVEMENT OF MILESTONES. If the
Company delivers a valid Delay Notice, then the date (s) for
achievement of the milestones delayed by Novell's default shall
be extended by the number of days commencing on the date for
onset of the delay specified by the Company in its Delay Notice
and ending on the date the delay ended, as specified by Novell in
a valid Delay Termination Notice.
4. DISPUTES. A Delay Notice or a Delay Termination Notice delivered
by a party in accordance with the foregoing for which no valid
objection is delivered in accordance with Section 1 or 2, as the
case may be, shall be deemed a valid notice for the purpose of
Section 3. If an objection to any such notice is timely delivered
then the parties shall meet and confer for a period of at least
fifteen business days following the notice of the dispute in
order to reach agreement on the disputed matter. If the parties
are unable to agree, then at any time after the end of said
fifteen day period, either party may submit the disputed matter
to arbitration in accordance with the rules established by the
American Arbitration Association in Chicago, Illinois. The
finding of the arbitrator in such action as to the number of days
of delay in achievement of a milestone as a consequence of an
associated default by Novell shall be binding on the parties and
shall by appealable solely for fraud and undue influence.
<PAGE>
Exhibit 5.1
January 28, 2000
Whittman-Hart, Inc.
311 South Wacker Drive
Suite 3500
Chicago, Illinois 60606
Ladies and Gentlemen:
We have acted as counsel for Whittman-Hart, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to (i) 3,294,893
shares (the "Purchased Shares") of the Company's Common Stock, par value
$.001 per share ("Common Stock"), issued and sold to Novell, Inc. ("Novell")
pursuant to that certain Common Stock and Warrant Purchase Agreement, dated
as of September 29, 1999, by and between Novell and the Company (the
"Purchase Agreement"); and (ii) 400,000 shares (the "Warrant Shares") of
Common Stock which may in the future be issued upon the exercise of a warrant
(the "Warrant") issued to Novell pursuant to the Purchase Agreement.
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and
upon affidavits, certificates and written statements of directors, officers
and employees of, and the transfer agent for, the Company. We have also
examined originals or copies, certified or otherwise identified to our
satisfaction, of such instruments, documents and records as we have deemed
relevant and necessary to examine for the purpose of this opinion, including
(a) the Registration Statement, (b) the Amended and Restated Certificate of
Incorporation of the Company, (c) the Second Amended and Restated By-Laws of
the Company, (d) resolutions adopted by the Board of Directors of the
Company, (e) the Purchase Agreement and (f) the Warrant.
In connection with this opinion, we have assumed the legal capacity of
all natural persons, the accuracy and completeness of all documents and
records that we have reviewed, the genuineness of all signatures, the
authenticity of the documents submitted to us as originals and the conformity
to authentic original documents of all documents submitted to us as
certified, conformed or reproduced copies.
<PAGE>
Whittman-Hart, Inc.
January 28, 2000
Page 2
Based upon and subject to the foregoing, it is our opinion that:
1. The Purchased Shares are validly issued, fully paid and
nonassessable.
2. The Warrant Shares, when issued and paid for in compliance with
the provisions of the Warrant, will be validly issued, fully paid and
nonassessable.
Our opinions expressed above are limited to the General Corporation Law
of the State of Delaware, the applicable provisions of the Delaware
constitution and the reported judicial decisions interpreting such laws and
we do not express any opinion concerning any other laws. This opinion is
given as of the date hereof and we assume no obligation to advise you of
changes that may hereafter be brought to our attention.
We hereby consent to the use of our name under the heading "Legal
Matters" in the prospectus forming a part of the Registration Statement and
to use of this opinion for filing as Exhibit 5.1 to the Registration
Statement. In giving this consent, we do not thereby admit that we are
included in the category of persons whose consent is required under Section 7
of the Act or the related rules and regulations thereunder.
Very truly yours,
/s/ KATTEN MUCHIN ZAVIS
<PAGE>
CONSENT OF KPMG LLP
The Board of Directors
Whittman-Hart, Inc.:
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Whittman-Hart, Inc. of our reports dated January 14,
1999, relating to the consolidated balance sheets of Whittman-Hart, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of earnings, stockholders' equity and comprehensive income, and
cash flows for each of the years in the three-year period ended December 31,
1998, and the related consolidated financial statement schedule of valuation
and qualifying accounts, which reports appear in the December 31, 1998 annual
report on Form 10-K of Whittman-Hart, Inc. We also consent to the reference
to our firm under the heading "Experts" in such Registration Statement.
/s/ KPMG LLP
Chicago, Illinois
January 26, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
FOR USWEB CORPORATION
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of Whittman-Hart, Inc. of our report dated
January 25, 1999 relating to the financial statements of USWeb Corporation,
which appears in the current Report on Form 8-K of Whittman-Hart, Inc. dated
January 28, 2000.
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 28, 2000
