UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
OMB Number: 3235-0145
Under the Securities Exchange Act of 1934
WHITTMAN-HART, INC., a Delaware corporation
(Name of the Issuer)
Common Stock
(Title or Class of Securtities)
966834-10-3
(CUSIP Number)
David R. Bradford, Esq. Debra Summers, Esq.
Novell, Inc. with a copy to: Wilson Sonsini Goodrich & Rosati, P.C.
122 East 1700 South 650 Page Mill Road
Provo, Utah 84606 Palo Alto, California 94304-1050
801-861-7000 650-493-9300
(Name, Address and Telephone Number of Person
Authorized To Receive Notices and Commnications)
September 29, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. [ ]
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act.
CUSIP No. 966834-10-3
1. Names of Reporting Persons. I.R.S. Identification Nos. of above
persons (entities only).
Novell, Inc., a Delaware corporation, IRS No. 870393339
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) Not a member of a group
(b)
3. SEC Use Only
4. Source of Funds (See Instructions) WC
5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items
2(d) or 2(e)
Number of 6. Citizenship or Place of Organization Delaware
Shares
Beneficially 7. Sole Voting Power up to 3,694,893 (assuming complete exercise
Owned by of warrant)
Each
Reporting 8. Shared Voting Power N/A
Person
With 9. Sole Dispositive Power N/A
10. Shared Dispositive Power N/A
11. Aggregate Amount Beneficially Owned by Each Reporting Person. up to
3,694,893 (assuming complete exercise of warrant)
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
13. Percent of Class Represented by Amount in Row (11) up to 6.6%
(assuming complete exercise of warrant)
14. Type of Reporting Person (See Instructions) CO
ITEM 1. Security and Issuer
(a) Name and Address of Principal Executive Offices of Issuer:
Whittman-Hart, Inc., a Delaware corporation
311 South Wacher Drive, Suite 3500
Chicago, Illinois 60606-6618
(b) Title of Class of Equity Securities:
Common Stock
ITEM 2. Identity and Background
(a) Name of Person Filing: Novell, Inc.
(b) Address of Principal Business Office:
122 East 1700 South
Provo, Utah 94606
(c) Principal Business:
See Exhibit 2, incorporated herein by this reference.
(d) Criminal Proceedings:
During the last five years the Reporting Person has not been convicted
in any criminal proceeding.
(e) Civil Proceedings:
During the last five years the Reporting Person has not been a party
to any civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person would have
been subject to any judgment, decree or final order enjoining future
violations of or prohibiting or mandating activities subject to
Federal or State securities laws or finding any violation with respect
to such laws.
(f) Place of Organization: Delaware
ITEM 3. Source and amount of Funds or Other Consideration:
Funds for purchase of securities are derived from the Reporting
Person's Working Capital.
ITEM 4. Purpose of Transaction:
The Issuer ("WH") and the Reporting Person ("Novell") have
entered into a Common Stock and Warrant Purchase Agreement dated
September 29, 1999 (the "Agreement", attached hereto as Exhibit 1 and
incorporated by reference herein) whereby WH shall issue to Novell (i)
3,294,893 shares of WH Common Stock and (ii) a warrant (the "Warrant")
to purchase an additional 400,000 shares of WH Common Stock
exercisable at any time during the period commencing on the date of
the Closing (as defined in the Agreement) and ending on June 30, 2005,
for a total cash consideration (if all shares are purchased pursuant
to the Warrant) of $12,140,000. Based on the number of shares of WH
outstanding as of September 21, 1999, and assuming that the Warrant is
not exercised, Novell will hold approximately 5.9% of the Common
Stock. Assuming exercise of the Warrant and no other change in the
number of issued and outstanding voting securities, Novell will hold
approximately 6.6% of the outstanding voting securities of WH.
Among the events required to consummate the transaction is (a)
the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended), and
(b) consummation of certain services, consulting and other business
agreements to be negotiated between WH and Novell.
The purpose of the transaction is to provide working capital
to the Issuer and to enhance the working relationship between the
Issuer and the Reporting Person, as more fully described in their joint
press release attached hereto as Exhibit 2 and incorporated herein by
this reference.
ITEM 5. Interest in Securities of Issuer:
(a) Total number of shares of WH Common
Stock outstanding on September 21, 1999: 55,814,439
Right to Acquire: Up to 3,694,893 shares
of Common Stock
Percent of Class: 6.6% (assuming complete
exercise of the Warrant
and no other change in
the number of issued
and outstanding voting
securities of the
Issuer after September
21, 1999).
(b) Sole Power to Vote, Direct the Vote of
or Dispose of Shares: Up to 3,694,893 shares
(assuming complete
exercise of the
Warrant).
(c) Recent Transactions: N/A
(d) Rights with Respect to
Dividends or Sales Proceeds: N/A
(e) Date of Cessation of Five
Percent Beneficial Ownership: N/A
ITEM 6. Contracts, Arrangements, Understandings or Relationships:
Novell will be subject to certain standstill provisions and
restrictions on transfer and voting of the securities of the Issuer.
See Exhibit C to the Agreement for a further description of these
provisions.
ITEM 7. Material to Be Filed as Exhibits
Exhibit 1. Common Stock and Warrant Purchase Agreement
Exhibit 2. Joint Press Release Dated September 30, 1999
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated as of September 11, 1999
NOVELL, INC.
/s/ David R. Bradford
David R. Bradford
Sr. Vice President, General Counsel and
Corporate Secretary
<PAGE>
EXHIBIT INDEX
No. Document
1 Common Stock and Warrant Purchase Agreement
2. Joint Press Release Dated September 30, 1999
EXHIBIT 1
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(R) (NDS(R)) and NDS-related
technology, and the development and implementation of methodologies, marketing
strategies, public relations 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 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 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 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, 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 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;
(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 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.
(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 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.
(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 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 orany 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 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 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.
(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.
(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.
(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 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 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 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.
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 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 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.]
<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: September 29, 1999 Date Signed: September 29, 1999
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>
List of Exhibits
A Warrant
B-1 Legal Opinion - Company Counsel
B-2 Legal Opinion - Investor Counsel
C Investor Rights Agreement
<PAGE>
EXHIBIT A
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 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.
WARRANT TO PURCHASE COMMON STOCK OF WHITTMAN-HART
Initial Number of Shares 400,000 shares
Date of Grant _____________, 1999
Expiration Date: June 30, 2005
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 and 35/100 Dollars ($30.35)
(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 that 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:
(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
deemed to be the average of the closing bid prices for each trading day in the
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 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 July 1, 2000, 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 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); or
(b) The Company shall enter into NDS Solutions Practice
assignments with at least 20 individual customers,
provided, 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, 2000 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 June 30, 2000, (ii) the Global Alliance
Agreement, dated as of September 29, 1999 (the "Alliance Agreement"), is
terminated in accordance with the terms thereof on or before June 30, 2000 as a
consequence of a breach or default by the Investor under the Alliance Agreement,
or (iii) as of June 30, 2000, 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 that, in the case of this subpart (iii), the Investor shall
not be entitled to exercise its right to purchase the Initial 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, and 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
300 billable consultants in its NDS Solutions
Practice; or
(b) The Company shall enter into NDS Solutions Practice
assignments with at least 80 individual customers,
provided, 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, 2000 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 permitted thereby,
provided that, in the case of this subpart (iii), the Investor shall not be
entitled to exercise its right to purchase the Initial Shares during any such
cure period, or (iv) despite good faith negotiations by the Company, the
Alliance Agreement terminates pursuant to Section 12.c(iii) thereof. 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) or 3(d) of the Alliance Agreement in any
material respect, in which event 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,
in whole or in part at any time or from time to time, on or before the
Expiration Date by:
(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).
A = the Fair Market Value of one share of the Company's
Common Stock.
B = the Per Share Purchase Price in effect under this
Warrant on the date the net issue 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 such date, 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 the 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 their 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 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 from 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 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 of this Warrant 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 (collectively "Reorganization"), 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 hereof 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.
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 of this
Warrant, 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 reserves of 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 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 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 of the entities that the Company, in
its good faith and reasonable business judgment, 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 SEC Rule 144.
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 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.
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 of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of 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 of this Warrant 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]
<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: ________________________ By: _________________________
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
Mark D. Wood
Katten Muchin & Zavis
525 West Monroe St., Suite 1600
Chicago, Illinois 60661
</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 ____________ 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 such Common Stock.
|_| Elects the Net Issue Exercise option pursuant to Section 2.5 of the Warrant
with respect to ________ Warrant Shares, 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 the Company's Common
Stock.
B = the Per Share Purchase Price in effect under this
Warrant on the date the net issue 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 ___________ Warrant Shares, and (i) hereby irrevocably elects to
sell such number of Warrant Shares (the "Additional Shares") as is necessary to
pay the Purchase Price for all of the Warrant Shares 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):
Name:
Address:
Taxpayer Identification Number:
Signature:
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 [the Company] with respect to
the number of shares of the Company Common Stock set forth below, with full
power of substitution in the premises:
<TABLE>
<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: , 2000
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
[TO BE ATTACHED]
<PAGE>
EXHIBIT B-1
LEGAL OPINION - COMPANY COUNSEL
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to do business and is in good standing in each state listed on a schedule
attached to the opinion.
2. The Company has all requisite corporate power and authority to own
or lease its properties and assets and to conduct its business as is currently
conducted.
3. The Company has all requisite corporate power and authority to
execute and deliver the Transaction Documents, to sell and issue the Purchased
Shares and the Warrant to the Investor, and to otherwise carry out and perform
its obligations under the terms of the Transaction Documents.
4. The Transaction Documents have been duly and validly authorized,
executed and delivered by the Company, and each constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
5. Subject to the accuracy of Novell=s representations and warranties
in Sections 4(d), (e), (f), (g) and (h) of the Purchase Agreement and assuming
there is no general solicitation or general advertising by the Company of which
we are unaware, the offer and sale of the Purchased Shares and the Warrant by
the Company and any Company Designee are exempt from the registration provisions
of the Securities Act of 1933, as amended.
6. The Company has duly reserved at least 400,000 shares of Common
Stock for issuance upon exercise of the Warrant.
7. All corporate actions necessary on the part of the Company, its
directors and stockholders for the following actions have been taken for: (a)
the sale and the issuance of the Purchased Shares and the Warrant to the
Investor; (b) the reservation and issuance of shares of Common Stock issuable
upon exercise of the Warrant; and (c) the execution and delivery of each of the
Transaction Documents and the performance of the Company's obligations
thereunder.
8. The Purchased Shares received by the Investor, when issued and paid
for as provided in the Purchase Agreement, will be validly issued, fully paid
and nonassessable.
9. The shares of Common Stock issuable to the Investor upon exercise of
the Warrant, when issued and paid for incompliance with the provisions of the
Warrant, will be validly issued, fully paid and nonassessable.
10. The execution and delivery of each of the Transaction Documents and
the performance by the Company of the covenants set forth in Transaction
Documents do not (a) conflict with or violate the Bylaws or Certificate of
Incorporation of the Company; (b) to our knowledge, violate or contravene any
United States federal or state law, statute, rule or regulation applicable to
the Company which we would typically expect to be applicable to transactions of
this type ("Applicable Law"), (c) to our knowledge, violate or contravene any
order, writ, judgement, decree, determination or award of any United States
federal or any state governmental authority applicable to the Company, or (d) to
our knowledge, violate or result in a breach of or constitute any default under
any agreement of the Company filed as an exhibit to an SEC Report.
11. To our knowledge, there are no actions, proceedings or
investigations pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of any Transaction
Document.
12. Except for the filing of a Form 8-K pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority on the part of the Company under Applicable Law
is required for (i) the execution, delivery or performance by the Company of any
Transaction Documents, (ii) the sale and issuance of the Purchased Shares, or
(iii) the issuance of the Warrant.
<PAGE>
EXHIBIT B-2
LEGAL OPINIONS - INVESTOR COUNSEL
1. The Investor is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and is duly qualified
to do business and is in good standing in each state listed on a schedule
attached to the opinion.
2. The Investor has all requisite corporate power and authority to own
or lease its properties and assets and to conduct its business as is currently
conducted.
3. The Investor has all requisite corporate power and authority to
execute and deliver the Transaction Documents, to receive and execute the
Purchased Shares and the Warrant, and to otherwise carry out and perform its
obligations under the terms of the Transaction Documents.
4. The Transaction Documents have been duly and validly authorized,
executed and delivered by the Investor, and each constitutes a valid and binding
agreement of the Investor, enforceable against the Investor in accordance with
its terms.
5. All corporate actions necessary on the part of the Investor, its
directors and stockholders for the following actions have been taken for: (a)
the purchase and the receipt of the Purchased Shares and the Warrant from the
Company and (b) the execution and delivery of each of the Transaction Documents
and the performance of the Investor's obligations thereunder.
6. The execution and delivery of each of the Transaction Documents and the
performance by the Investor of the covenants set forth in Transaction Documents
do not (a) conflict with or violate the Bylaws or [Certificate] of Incorporation
of the Investor; (b) to our knowledge, violate or contravene any United States
federal or state law, statute, rule or regulation applicable to the Investor
which we would typically expect to be applicable to transactions of this type
("Applicable Law"), (c) to our knowledge, violate or contravene any order, writ,
judgement, decree, determination or award of any United States federal or any
state governmental authority applicable to the Investor, or (d) to our
knowledge, violate or result in a breach of or constitute any default under any
agreement of the Investor filed as an exhibit to an SEC Report where the breach
of such agreement would result in a Material Adverse Effect on the Investor.
7. To our knowledge, there are no actions, proceedings or investigations pending
or overtly threatened against the Investor before any court or administrative
agency that questions the validity of any Transaction Document.
8. Except for the filing of a Form 8-K pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, the filing of a Schedule 13D or G
with the SEC, and a Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, no consent, approval or
authorization of, or designation, declaration or filing with, any governmental
authority on the part of the Investor under Applicable Law is required for (i)
the execution, delivery or performance by the Investor of any Transaction
Documents, (ii) the sale and issuance of the Purchased Shares, or (iii) the
issuance of the Warrant.
<PAGE>
EXHIBIT C
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is made and entered
into to be effective as of ______________, 19__ ("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 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, for 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
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 and State 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 (or its successor form), 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
(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, which 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-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 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 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 this
Section 2.3 or Section 2.2 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 the 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 (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-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 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 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 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 number of shares of Company Common Stock included in the offering
shall be reduced in proportion to their 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 another holder of a registration demand the underwriting; (B) second, to the
Company (provided, however, that a minimum of fifteen percent (15%) of the
number of Registrable Securities that 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.
(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 statement and the Company
shall promptly, and in all events within 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 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 (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 Securities Exchange Act of 1934 (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
a "Violation"):
(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 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.
(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 Violation 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 (A) 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 (B) 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: (X) 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 (Y)
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 a 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, "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
Securities 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 (X) the Company shall not issue a Suspension
Notice more than twice in any 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 12-month period, (Y) the Company shall use its best efforts
to remedy, as promptly as practicable, but in any event within 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 (Z) 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, 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.]
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 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 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-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
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 having Voting Power equal to the greater
of (X) 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 (Y) 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 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-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:
(c) Nothing in this Section shall affect any of the
registration, 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.
6.3 Notice. The Company shall notify the Investor in writing of the
occurrence of any event described in clauses (i) through (iv) of the
immediately preceding Section as soon as practicable following the Company's
becoming aware of any such event and in any case, shall provide the Investor
written notice of any such event within two (2) business days of the Company's
being aware of the occurrence of any such event.
6.4 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 (i) 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; (ii) as a result of any tender
offer, merger, consolidation, or reorganization of the Company; (iii) by way of
stock dividends or other distributions or rights or offerings made available
to holders of shares of Voting Stock generally; (iv) with the consent of a
simple majority of the authorized members of the Company's Board of Directors;
or (v) 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.
6.5 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 (i) 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 (ii) 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 (a) a underwritten
piggy-back offering in accordance with Section 2.4, above, (b) an underwritten
public offering pursuant to Sections 2.2 of 2.3, above, (c) a tender offer,
merger, reorganization, or consolidation of the Company, or (d) 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 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 (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 90-day period, the rights of the Company set forth above in this Section
shall apply to any subsequent sale of the Company 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 (i) 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
(ii) 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.
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.
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]
<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: By:
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
</TABLE>
EXHIBIT 2
FOR IMMEDIATE RELEASE
Sept. 30, 1999
Novell to Invest $100 Million in Whittman-Hart to Accelerate Deployment of
Directory-based Computing Solutions to Growing, Mid-Sized Businesses
Investment is First Step in Novell's Strategic Services Initiative
PROVO, Utah and CHICAGO -- Sept. 30, 1999 -- Novell, Inc. (NASDAQ:NOVL) and
Whittman-Hart, Inc. (NASDAQ:WHIT), a leading provider of integrated business and
technology solutions for growing and middle-market companies, today announced
that Novell will invest $100 million in Whittman-Hart to accelerate the
deployment of Novell(R) Directory Services(R) (NDS(R)) in enterprise and
e-business solutions. This investment and strategic alliance will help meet the
needs of customers in mid-sized businesses for secure, manageable e-business
solutions that span the enterprise and the Internet. The investment is the first
step in a new Novell initiative to expand its partnerships with leading
consulting and systems integrator organizations worldwide.
Under the terms of the investment agreement, Novell will purchase $100 million
worth of Whittman-Hart stock. This investment will represent approximately 6
percent of Whittman-Hart's outstanding capitalization.
In addition, the two companies have formed an alliance to jointly develop
customized NDS solutions for mid-sized businesses. These solutions will
integrate NDS with leading e-business applications such as customer relationship
management, supply chain management, enterprise e-business tools and Enterprise
Resource Planning extended to the Internet. Whittman-Hart will also establish a
Solutions Development Center to train employees on these solutions and
demonstrate them to customers. Whittman-Hart will train over 600 consultants in
NDS and related Novell solutions, including qualification of these consultants
as Novell Certified Directory EngineersSM.
"We invested in Whittman-Hart to drive the growth of directory-based solutions
that are becoming critical to the way information is managed and accessed in a
networked world," said Dr. Eric Schmidt, Novell Chairman and CEO. "This
agreement is an important
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Novell to Invest $100 Million in Whittman-Hart Page 2
-more-
component in an ongoing series of Novell strategic investments and alliances
that are speeding the deployment of directory solutions worldwide. The
combination of Novell's networking expertise, along with Whittman-Hart's
solutions expertise, will meet the needs of customers in mid-sized businesses
for more efficient and secure management of their business networks and the
Internet."
"Whittman-Hart clients are using e-business technologies to extend their
enterprises and better manage relationships with customers, employees, and
suppliers," said Robert Bernard, Whittman-Hart Chairman and CEO. "The solutions
we develop based on NDS represent a huge opportunity for our clients to better
manage their private networks and Internet security."
NDS, Novell's industry-leading full-service directory, provides centralized
network management and security that reduces the cost and complexity of
deploying mission-critical applications on heterogeneous business networks and
the Internet. Novell is pursuing investment opportunities in consulting and
services companies around the world focused on specific application areas
supported by NDS, including customer relationship management, supply chain
management and e-business.
Novell and Whittman-Hart have executed a definitive agreement, and each
company's Board of Directors has voted to approve the investment and alliance.
Novell and Whittman-Hart expect to close the agreement by November 1999,
following government approval under the Hart-Scott-Rodino Act.
About Novell
Novell, Inc. is the world's leading provider of directory-enabled networking
software. Novell solutions give businesses total control of their private
networks and the Internet, simplifying the management of user access and
identity. Novell's worldwide channel, consulting, developer, education and
technical support programs are the most extensive in the network computing
industry. For information on Novell's complete range of products and services,
contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit
Novell's Web site at http://www.novell.com.
About Whittman-Hart
Headquartered in Chicago, Whittman-Hart helps clients improve marketplace
performance through the strategic use of information technology. In 1999,
FORTUNE ranked Whittman-Hart as one of America's Fastest-Growing Companies. In
1998 and 1997, Forbes named Whittman-Hart one of the 200 Best Small Companies in
America. In 1998, Standard & Poor's added the Company to its S&P SmallCap 600
Index.
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Novell to Invest $100 Million in Whittman-Hart Page 3
Whittman-Hart has approximately 3,700 employees in 21 branch offices throughout
the United States and the United Kingdom. Its Web site is www.whittman-hart.com.
###
Novell, NDS and Novell Directory Services are registered trademarks, and Novell
Certified Directory Engineer is a service mark of Novell, Inc. in the United
States and other countries. All third-party trademarks are the property of their
respective owners.
Novell Press Contacts:
Jonathan Cohen
Novell, Inc.
Phone: (408) 967-7268
Internet: [email protected]
Katie Hogan
Cunningham Communications
Phone: (650) 858-3760
Internet: [email protected]
Whittman-Hart Press Contacts:
Dean Dranias
Whittman-Hart, Inc.
Phone: (312) 602-6155
Internet: [email protected]
Marnie Gordon
Edelman Publications
Phone: (312) 240-2633
Internet: [email protected]
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