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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________________ TO __________________
COMMISSION FILE NUMBER 0-28430
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SS&C TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
06-1169696
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION
(STATE OR OTHER JURISDICTION OF NUMBER)
INCORPORATION OR ORGANIZATION)
CORPORATE PLACE
705 BLOOMFIELD AVENUE
BLOOMFIELD, CONNECTICUT 06002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 242-7887
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $.01
par value per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 17, 1997, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $25,193,846 based on the closing sales
price of $6.125 of the Registrant's Common Stock on the Nasdaq National
Market.
As of March 17, 1997, 12,433,712 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF REPORT INTO
DOCUMENT WHICH INCORPORATED
-------- -------------------
<S> <C>
Portions of Proxy Statement for the Annual Items 10, 11, 12 & 13 of Part III
Meeting of Stockholders to be held April 24,
1997
</TABLE>
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SS&C TECHNOLOGIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
FORM 10-K
ITEM PAGE
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<C> <S> <C>
PART I
Item 1. Business...................................................... 2
Item 2. Properties.................................................... 9
Item 3. Legal Proceedings............................................. 9
Item 4. Submission of Matters to a Vote of Security Holders........... 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder 10
Matters......................................................
Item 6. Selected Financial Data....................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition 12
and Results of Operations....................................
Item 8. Financial Statements and Supplementary Data................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting 18
and Financial Disclosure.....................................
PART III
Item 10. Directors and Executive Officers of the Registrant............ 18
Item 11. Executive Compensation........................................ 18
Item 12. Security Ownership of Certain Beneficial Owners and 18
Management....................................................
Item 13. Certain Relationships and Related Transactions................ 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8- 18
K.............................................................
</TABLE>
FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements. For this purpose,
any statements contained herein that are not statements of historical fact may
be deemed to be forward-looking statements. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. The important
factors discussed below under the caption "Certain Factors That May Affect
Future Operating Results," among others, could cause actual results to differ
materially from those indicated by forward-looking statements made herein and
presented elsewhere by management from time to time.
----------------
PTS and Macro Pricing are registered trademarks, SS&C, CAMRA, CAMRA 2000,
FILMS, FILMS for Windows, PTS 2000, FOTOS, Allocator Plus, EPN E-Z Link,
Finesse 2000 and SS&C GO Trading are trademarks, and SS&C Direct is a service
mark of SS&C Technologies, Inc. All other trademarks or trade names referred
to in this Annual Report are the property of their respective owners.
<PAGE>
PART I
ITEM 1. BUSINESS
SS&C Technologies, Inc. (the "Company") was organized as a Connecticut
corporation in March 1986 and reincorporated in Delaware in April 1996. The
Company commenced the initial public offering of its common stock, $.01 par
value per share (the "Common Stock"), on May 31, 1996 pursuant to which the
Company sold 3,026,250 shares of Common Stock and selling stockholders sold an
aggregate of 723,750 shares of Common Stock.
The Company is a leading provider of client/server-based financial software
solutions, and related consulting services, designed to improve the efficiency
and effectiveness of the investment management and actuarial functions within
a broad range of organizations in the financial services industry. The Company
has developed a family of software products that provides a full range of
mission-critical information management and analysis, accounting, reporting
and compliance tools to help high-level investment and actuarial professionals
make informed, real-time decisions and automate many operational functions in
today's increasingly complex and fast-moving financial markets. The Company's
products are focused on improving the effectiveness of decision making through
open, fully integrated access to the quantitative analysis of transactions-
based data, allowing investment and other financial professionals to manage
and analyze large amounts of data both in the aggregate and in detail on a
timely basis. The Company provides products and services to over 300
organizations worldwide and its customers include asset managers, insurance
companies, banks, corporate treasuries and government agencies.
Each of the Company's software products features (i) intuitive graphical
interfaces to minimize learning time and maximize user flexibility; (ii) a
high degree of functionality, integrating trading, accounting, reporting and
analytical functions as part of a complete system for managing securities and
asset portfolios; (iii) advanced quantitative analytical tools tailored to the
requirements of particular industry segments; and (iv) highly scalable and
flexible architecture, allowing the customizing of each product to a specific
client's requirements and priorities, regardless of size, organizational
structure and number of relevant portfolios, types of securities, accounting
bases, regulatory regimes or managers involved. Each of the Company's products
is designed to be interoperable with other Company products, third-party
applications and data sources (including legacy systems) and other desktop
applications. The Company's products feature client/server architecture to
support a distributed model of computing within a Windows (3.1, 3.11, 95),
Windows NT or OS/2 environment consistent with the requirement of the
Company's principal users. The high functionality, interoperability and ease-
of-use of the Company's products are intended to assure the efficient analysis
and management of information on a timely basis, increase productivity, reduce
costs and enable users in a variety of financial service organizations to
devote more time to critical business decisions rather than administrative,
reporting and compliance matters.
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PRODUCTS AND SERVICES
The Company offers a family of application software products designed to
address the requirements of professionals in the financial services industry
for flexible, scalable and secure analysis and reporting tools to support
automation of the investment process. The Company's family of software
products supports trading, accounting, reporting and analysis requirements of
a broad range of users within financial organizations, including senior
executives, portfolio managers, actuaries, analysts, portfolio accountants and
traders.
The following chart summarizes the Company's principal products and typical
users:
<TABLE>
<CAPTION>
PRODUCT DESCRIPTION TYPICAL USERS
------- ----------- -------------
<C> <C> <S>
CAMRA 2000 Complete asset management, reporting Securities and other
and accounting system asset and portfolio
managers and operations
personnel
FILMS for Windows Fully integrated loan management Mortgage portfolio
system managers and servicers
PTS 2000 Spread management/asset-liability Insurance company CEO's,
management/pricing system CFO's, product managers
and actuarial
professionals
FOTOS Front office trade operations system Fixed-income and equity
traders
Allocator Plus Structured finance forward trading Mortgage-backed
and allocation system securities traders and
operations personnel
EPN E-Z Link Electronic pool notification system Mortgage-backed
communications securities traders and
operations personnel
Finesse 2000 Dynamic financial modeling and CEO's, CFO's and risk
analysis program managers of property
and casualty insurance
companies
</TABLE>
The Company's software applications are compatible with Intel x86 platforms
(IBM PC compatible or emulators) and a wide range of popular topologies,
protocols and network operating systems, including Ethernet, Token Ring,
IPX/SPX, TCP/IP, NET BEUI, Novell Netware, Windows, Windows 95, Windows NT,
Pathworks and UNIX. The Company's FILMS for Windows and FOTOS products run on
DOS, Windows (3.1, 3.11, 95) and Windows NT operating systems, and FILMS for
Windows also runs on OS/2. The Company's CAMRA 2000 and PTS 2000 products,
which were introduced to the market during 1996 as 32-bit Windows
applications, currently run on Windows 95 and Windows NT.
The prices of the Company's software products vary depending upon the
product features included and, in the case of the Company's CAMRA 2000 and
FILMS for Windows products, on the assets under management by the client. The
Company's PTS 2000 software is available for purchase by site or as an
individual CPU license.
CAMRA 2000
The Company's complete asset management, reporting and accounting ("CAMRA
2000") software supports the integrated management of asset portfolios by
investment professionals operating across a wide range of institutional
investment entities. CAMRA 2000 is a 32-bit multi-user, integrated solution
tailored to support the entire portfolio management function and includes
features to execute, account for and report on all typical securities
transactions. For example, it allows investment professionals to allocate and
reallocate securities and to update account, portfolio, issuer, custodian and
security-type information through selected entries across the entire database.
CAMRA 2000 is designed to allow integration with several Company-offered
modules which support various functions, including compliance, Bloomberg
Financial Markets ("Bloomberg") data exchange, performance measurement,
TBA/dollar roll processing, net asset value and portfolio rebalancing.
3
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As part of its support of complete portfolio management, CAMRA 2000 provides
the following capabilities:
Portfolio Management and Market Analysis. CAMRA 2000 includes a
comprehensive, integrated securities database supporting on-line daily,
monthly, quarterly and on-demand calculation of a range of information,
including book and market value, yields, duration, convexity, average life and
various user-selected scenarios. During 1996, the Company and Bloomberg
announced the introduction of SS&C GO Trading, a new service providing
investment professionals with an integrated platform for using Bloomberg
trading, securities and portfolio analysis in conjunction with CAMRA 2000.
Comprehensive Accounting and Reporting Capabilities. CAMRA 2000 supports
four distinct yet interrelated accounting bases--GAAP, statutory, management
and tax--and has the flexibility to provide multiple alternative accrual
methods, multiple sales methods, average cost or tax lot accounting and
multiple amortization methods. CAMRA 2000 can generate reports on multiple
reporting levels, exporting data directly to spreadsheets, word processors and
external databases for ease of delivery and presentation.
Support of Trading Transactions. CAMRA 2000 supports a wide variety of
investment and accounting transactions, ranging from buy and sell to short and
cover, swap, put, call, redemption, return of capital, settlement, account
transfer and portfolio transfer. All transactions are recorded on a real-time
basis, permitting immediate enterprise-wide access to the most current
portfolio information by authorized users.
Multi-Currency Processing. CAMRA 2000 automatically calculates transaction
and translation values in accordance with applicable accounting and industry
conventions, supports calculation of market, accounting and foreign exchange
gains and losses, and provides a full foreign exchange trading capability with
forward pricing, while taking into account such critical parameters as global
calendars (with weekends and holidays defined by countries), multiple-based
currencies and required rounding techniques.
Regulatory Compliance. CAMRA 2000 provides performance measurement results
in accordance with AIMR standards and can be run for any time period, entity,
portfolio and security grouping as well as benchmarked against outside
indices. CAMRA 2000 also supports statutory reporting for insurance
organizations as promulgated by the National Association of Insurance
Commissioners (the "NAIC").
Available Interfaces. CAMRA 2000 supports comprehensive importing and
exporting of data, in ASCII format, using a number of automated interfaces,
including interfaces with custodian banks and pricing, other third-party
market data and general ledger services of popular financial/accounting
applications, such as Interactive Data Corporation, HUB Data and the NAIC. In
addition, CAMRA 2000 interfaces with a variety of third-party analytic
systems, including those offered by GAT, CMS and Solomon Brothers, among
others.
FILMS for Windows
The Company's fully integrated loan management system ("FILMS for Windows")
enables mortgage professionals to process, analyze and report on a
comprehensive basis information regarding their mortgage loan portfolios. Like
CAMRA 2000, FILMS for Windows is a multi-user, integrated solution operating
on a client/server platform, which eliminates the need for separate,
independent systems within the mortgage loan area. FILMS for Windows, which
can be integrated with data stored in the Company's CAMRA 2000 and PTS 2000
products, provides the following features:
Applications and Commitment Processing. FILMS for Windows supports the
processing of commercial and residential mortgage loans, providing on-line
access to critical evaluative information, including credit history,
appraisals, LTV ratio, broker information, duration, convexity, average life
and discounted cash flow valuation, permitting loan recommendations to be
generated quickly, consistently and easily.
Accounting and Servicing Support. FILMS for Windows supports accurate and
consistent servicing of loans, including general ledger entries at the sub-
portfolio level, with a direct interface to the corporate general ledger.
FILMS for Windows also maintains appraisals and operating statements at the
proper level to support loan and portfolio management.
4
<PAGE>
Comprehensive Reports. FILMS for Windows generates and supports a wide range
of accounting, servicing and management reports. All reports can be viewed on-
line, downloaded or printed. During 1997, the Company's product development
plans call for the migration of the FILMS for Windows application to a 32-bit
Windows environment, operating under Windows 95 and Windows NT.
PTS 2000
The Company's profit testing system ("PTS 2000") software, introduced during
the second quarter of 1996 as an enhanced version of its original PTS
software, is a 32-bit client/server system designed to provide asset/liability
management and pricing services primarily to insurance companies, as well as
fund managers and other financial institutions. PTS 2000 provides an economic
model of insurance liabilities and assets, generating option-adjusted cash
flows to reflect the complex sets of options and covenants frequently
encountered in insurance contracts or comparable agreements. During 1996, more
than 80% of the Company's installed PTS users licensed the upgraded solution.
PTS 2000 includes the following features:
Large-Scale Corporate Simulation Models. The Company and certain significant
clients have implemented a number of complex models of whole-company financial
performance. Unlike simpler systems, PTS 2000 maintains an internal
architecture patterned after the structure of insurance companies themselves,
making full-scale corporate models practical. Such corporate models are used
to facilitate capital structure decisions, revealing and measuring overall
financial performance and guiding overall risk management practice.
Option Pricing. The PTS 2000 option pricing model provides option-adjusted
valuation of assets and liabilities under a consistent conceptual framework.
The PTS 2000 option pricing model explicitly considers interest-sensitive
embedded options, providing valid interest rate risk analysis using price
behavior curves that graphically depict asset/liability performance over
shifts in the interest rate term structure.
Macro Pricing. The Company's proprietary Macro Pricing algorithm recognizes
the complex relationships within contemporary financial intermediaries and
provides a matrix of possible product and production quota options in
conformity with the profit expectations of the client.
FOTOS
The Company's front office trade operations system ("FOTOS") is designed to
fully automate trade operations for portfolio managers and traders using CAMRA
2000. FOTOS is integrated with the CAMRA 2000 system and other software
products of the Company and provides real-time trading information to enable
traders to cost-effectively order, block, work, execute and allocate trades.
FOTOS allows clients to review, monitor and access trading room activity from
local and remote locations and provides clients with reporting and audit
trails as well as standard industry trading, analytical, accounting and
pricing information associated with each security. FOTOS supports not only
equity securities but also treasuries, options, futures, corporate and
municipal bonds, mortgage-backed securities and a full range of investment
strategies, including hedging and indexes.
Allocator Plus
The Company's Allocator Plus system is designed to support portfolio
managers and custodians in the mortgaged-backed securities markets. Allocator
Plus is a client/server system that facilitates mortgage-backed securities
forward trading by optimizing profit and loss to the allocation of current
inventory relative to market conditions. While assuring that users achieve
optimal financial results, Allocator Plus simultaneously checks incoming
announcements and deliveries for compliance with Public Securities Association
good delivery guidelines, monitors all pool-specific and special instruction
trades and effectively minimizes fail trades and identifies potential fails of
counterparties. Allocator Plus can be integrated with CAMRA 2000 and other
software products of the Company.
5
<PAGE>
EPN E-Z Link
The Company's EPN E-Z Link system is a Windows-based, stand-alone software
solution that provides assistance to portfolio managers and custodians in the
mortgage-backed securities ("MBS") markets. EPN E-Z Link is designed to send
and receive detailed MBS pool allocation information quickly and efficiently
by converting pool allocation lists to the EPN system language, thereby
eliminating time consuming manual data entry. The Company installed the first
EPN E-Z Link system in October 1996.
Finesse 2000
The Company's Finesse 2000 system is a dynamic financial analysis tool
designed and developed in cooperation with Ernst & Young LLP to model
operating results, gauge the effects of reinsurance and validate pricing,
value business transactions such as mergers and acquisitions, measure the
impact of new products, predict cash flows, analyze the impact of investment
decisions and improve strategic planning. Finesse 2000 generates iterative,
computer-simulated scenarios in response to events that may have an impact on
a client's business. The results of this iterative process are stored in
Finesse 2000's "virtual general ledger," which mimics the financial accounting
that would occur if these scenarios were to occur. All simulated results are
recorded and can be easily viewed on Finesse 2000's "graphical palette," an
on-line facility that visually depicts the likely occurrence of one or more
specific events. The Company installed the first Finesse 2000 system in
February 1997, and it is now generally available.
Consulting and Outsourcing Services
Building upon the capability and flexibility of its software products, the
Company offers a range of professional services to assist clients in
implementing the Company's software products and meeting their portfolio
management needs. To facilitate successful product implementation, the
Company's consultants assist clients with initial installation of a system,
conversion of the client's historical data and ongoing training and support.
The Company's team works closely with the client to ensure smooth transition
and operation of the Company's systems. The Company believes that its
commitment of dedicated professionals to facilitate the transition process
strengthens its relationship with the client, provides the Company with
valuable information regarding client requirements and offers the opportunity
for sales of additional Company products and services to the client. The
Company's consultants have a broad range of experience in the financial
services industry and include certified public accountants, chartered
financial analysts, mathematicians and professionals in the real estate,
investment, insurance and banking industries. In addition, the Company also
offers actuarial consulting services to its insurance company and other
financial institution clients. The Company believes that its commitment to
professional services facilitates the adoption of the Company's software
products across its target markets.
For those clients wishing to outsource certain portfolio accounting,
reporting and analysis functions, the Company also provides comprehensive
outsourcing services through its SS&C Direct operating unit. The Company's
consultants initially work with a client to research and evaluate data
sources, implement custodian and pricing interfaces and determine reporting
requirements and timing. The Company provides its clients with accurate,
processed data on a timely basis, enabling investment professionals to utilize
their time analyzing data and making investment decisions rather than
operating and servicing the Company's software products. The features of the
Company's outsourcing services include: (i) customized access rights to
provide on-line access for senior management; (ii) regular holdings reports
and complete regulatory support; (iii) disk mirroring, daily back-up of the
system and uninterruptable power supply to ensure data protection, combined
with a detailed disaster recovery plan; and (iv) data storage and "hot site"
capabilities in the event of a disaster.
PRODUCT SUPPORT
The Company believes that its high level of service and support is critical
to its success, and an important competitive advantage. Furthermore, the
Company believes that a close and active service and support relationship is
both important to client satisfaction and also provides the Company with
important information
6
<PAGE>
regarding evolving client requirements. For example, the Company provides each
of its significant clients with a dedicated client support representative
whose primary responsibility is to resolve questions and concerns and act as a
liaison between the client and the Company. In addition, the Company provides
direct telephone support from 8:30 a.m. to 7:00 p.m. Eastern Time, Mondays
through Thursdays, from 8:30 a.m. to 5:30 p.m. on Fridays and also on weekends
during peak regulatory reporting periods, as well as use of electronic
bulletin boards and other forms of electronic data distribution that provide
clients with the latest information regarding the Company's products. The
Company also provides periodic maintenance releases of licensed software to
its clients, including regulatory updates, generally during the fourth
quarter, to enable them to meet industry reporting obligations and other
processing requirements as they evolve. The Company's service and support
activities are supplemented by a comprehensive training program, including
introductory training courses for new users and dedicated seminars for
investment professionals to familiarize them with the capabilities of the
Company's systems.
CLIENTS
The Company's clients include a wide range of financial institutions and
other organizations that require a full range of information management and
analysis, accounting, actuarial, reporting and compliance software on a timely
and flexible basis, and include asset managers, insurance companies, banks,
mutual funds, corporate treasuries, pension funds and government agencies. The
Company provides products and services to over 300 organizations worldwide.
SALES AND MARKETING
The Company believes that a direct sales organization is essential to the
successful implementation of its business strategy given the complexity and
importance of the operations and information the Company's products are
designed to manage and the extensive regulatory and reporting requirements of
its clients. The Company's dedicated direct sales and support staff, which is
supplemented by extensive ongoing product and sales training, is organized by
product area and situated in the Company's various sales offices.
The Company's marketing personnel are responsible for evaluating and
developing market opportunities and providing sales support. The Company's
marketing activities include generation of client leads, targeted direct mail
campaigns, seminars, advertising, trade shows, conferences and public
relations efforts. The marketing department also supports the sales force with
appropriate documentation or electronic materials for use during the sales
process.
PRODUCT DEVELOPMENT; RESEARCH AND DEVELOPMENT; BACKLOG
The Company believes that it must introduce new products and features into
the market on a regular basis to maintain its competitive advantage. To meet
these goals, the Company uses multidisciplinary teams of highly trained
finance, accounting, mathematical, actuarial, software and investment
personnel, and has invested heavily in developing a comprehensive product
analysis to meet rigorous requirements for product functionality and quality
across its target markets.
The Company's research and development engineers work closely with the
Company's marketing and support personnel to assure that product evolution
reflects developments in the marketplace and trends in client requirements.
Historically, the Company has issued a major functional release of its core
products during the third quarter of each fiscal year, including functional
enhancements, as well as an annual fourth quarter release to reflect evolving
regulatory changes in time to meet year-end reporting requirements of clients.
Although the Company has historically met its scheduled dates for product
releases and enhancements, software development is characterized by
unanticipated delays, and there can be no assurance that the Company will be
able to maintain future scheduled release dates as planned. Furthermore, there
can be no assurance that the Company's new product releases and product
enhancements will adequately address the needs of the
7
<PAGE>
marketplace or will not contain "bugs" which could cause delays in product
introduction or shipments or, if discovered in the future, require
modification of the Company's products.
As of December 31, 1996, the Company's research and development staff
consisted of 59 employees. The Company's total expenses for research and
development, excluding purchased in-process research and development, for the
years ended December 31, 1994, 1995 and 1996 were $1.7 million, $5.3 million
and $6.5 million, respectively.
Backlog is not a significant factor in the Company's business.
COMPETITION
The market for financial services software is competitive, rapidly evolving
and highly sensitive to new product introductions and marketing efforts by
industry participants. The market is also highly fragmented and served by
numerous firms, many of which serve only their respective local markets or
specific customer types, and much of the Company's competition stems from
information systems or timesharing services developed and serviced internally
by the MIS departments of financial services firms. The Company currently
faces direct competition in various segments of the financial services
industry from Princeton Financial Systems (a subsidiary of State Street Bank
and Trust Company), Thomson Financial, SunGard Data Systems, Inc., DST
Systems, Inc. and Advent Software, Inc. The Company believes that none of its
competitors currently competes against it in all of the Company's target
industry segments, although there can be no assurance that one or more may not
compete against the Company in the future in additional industry segments.
Many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources, generate
higher revenues and have greater name recognition than does the Company. There
can be no assurance that the Company's current or potential competitors will
not develop products comparable or superior to those developed by the Company
or adapt more quickly than the Company to new technologies, evolving industry
trends or changing client requirements. It is also possible that alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition may result in price reductions, reduced gross margins
and loss of market share, any of which would materially adversely affect the
Company's business, financial condition and results of operations.
The Company believes that the principal competitive factors in its industry
include product performance and functionality, ease of use, scalability,
ability to integrate external data sources and processing systems, product and
company reputation, client service and support and price. Although the Company
believes that it currently competes effectively with respect to such factors,
there can be no assurance that the Company will be able to maintain its
competitive position against current and potential competitors.
PROPRIETARY RIGHTS
The Company primarily relies on a combination of copyright, trademark and
trade secret laws and license agreements to establish and protect proprietary
rights of its products. The source code for the Company's products is
protected as both a trade secret and an unpublished copyrighted work. In
addition, the Company generally enters into confidentiality and/or license
agreements with its employees, distributors, clients and potential clients and
limits access to, and distribution of, its software, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's products or
technology without authorization or to develop similar technology
independently. In addition, effective copyright and trade protection may be
unavailable or limited in certain foreign countries. In January 1996, the
Company licensed the use of certain of its source code to General American
Life Insurance Company and Conning Asset Management Company, affiliates of
certain principal stockholders of the Company.
Because the software development industry is characterized by rapid
technological change, the Company believes that factors such as technological
and creative skills of its personnel, new product developments, frequent
product enhancements, name recognition and reliable service and support are
more important to establishing and maintaining a leadership position than
legal protections of its technology.
8
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EMPLOYEES
As of December 31, 1996, the Company had 197 full-time employees, consisting
of 59 employees in research and development, 52 employees in consulting and
services, 38 employees in sales and marketing, 24 employees in client support,
17 employees in finance and administration and seven employees in the
Company's international operations. None of these employees is covered by any
collective bargaining agreements. The Company believes that its relationship
with its employees is good. The future success of the Company will depend upon
its ability to attract and retain qualified personnel. Competition for such
personnel is often intense, and there can be no assurance that the Company
will be able to attract and retain adequate numbers of qualified personnel in
the future.
ITEM 2. PROPERTIES
The Company owns its corporate offices in Bloomfield, Connecticut, which
consist of approximately 14,800 square feet of office space. The Company also
leases an additional 18,000 square feet of office space in Bloomfield. In
support of its direct sales and service and support operations, the Company
utilizes facilities and offices in 16 locations in the United States and
Canada and has offices in London, England and Kuala Lumpur, Malaysia.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to certain legal proceedings and
claims which arise in the normal course of its business. In the opinion of
management, the Company is not a party to any litigation which it believes
could have a material adverse effect on the Company or its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
William C. Stone............ 41 President, Chief Executive Officer and
Chairman of the Board of Directors
Shane A. Chalke............. 39 Executive Vice President and Director
Patrick W. Kenny............ 54 Senior Vice President, Services
Senior Vice President, Development and
David A. Varsano............ 35 Client Services
Marc W. Zimmerman........... 41 Senior Vice President, Strategic Products
Steven M. Helmbrecht........ 34 Vice President, International
Vice President, Chief Financial Officer and
John S. Wieczorek........... 36 Treasurer
</TABLE>
William C. Stone founded the Company in 1986 and has served as President,
Chief Executive Officer and Chairman of the Board of Directors since the
Company's inception. Prior to founding the Company, he directed the financial
services consulting practice of KPMG Peat Marwick LLP in Hartford, Connecticut
and was Vice President of Administration and Special Investment Services at
Advest, Inc.
Shane A. Chalke joined the Company in March 1995 as Executive Vice President
and Director upon the Company's acquisition of substantially all of the assets
and operations of Chalke Incorporated. Specializing in the financial analysis
of insurance companies, Mr. Chalke founded Chalke Incorporated in 1983 and
served as its Chairman, Chief Executive Officer and President until March
1995.
Patrick W. Kenny is Senior Vice President, Services of the Company. Mr.
Kenny joined the Company in November 1995 after serving as Chief Financial
Officer of Aetna Life & Casualty from January 1988 to
9
<PAGE>
December 1994. He was formerly a partner and director of insurance
professional practices at KPMG Peat Marwick LLP, both internationally and
domestically.
David A. Varsano is Senior Vice President, Development and Client Services
of the Company. Mr. Varsano joined the Company in September 1995 after serving
as Vice President at Dunn & Bradstreet Software, where he was responsible for
the client/server platform and decision support business from March 1994 to
September 1995. He formerly served as Vice President at Litle & Company, where
he managed product and systems development from March 1990 to March 1994.
Marc W. Zimmerman is Senior Vice President, Strategic Products of the
Company. Mr. Zimmerman joined the Company in August 1995 from his position as
Vice President of Market Investment Solutions, Inc., an investment software
and consulting services provider, which he joined in 1993. From 1989 to 1993
he served as Executive Vice President of Sales and Marketing and co-founder of
Princeton Financial Systems, Inc., a provider of investment software and
consulting services to the financial services industry.
Steven M. Helmbrecht is Vice President, International of the Company. Mr.
Helmbrecht joined the Company in 1993 after serving as Vice President of Prime
Advisors, Inc., an investment advisory firm, where he was responsible for
investment accounting and reporting from 1989 to 1992. He formerly worked at
Arthur Andersen & Co. as a tax accountant from 1985 to 1988.
John S. Wieczorek is Vice President, Chief Financial Officer and Treasurer
of the Company. Mr. Wieczorek joined the Company in October 1994 after serving
in various management positions from 1983 to 1994 and ultimately as Chief
Financial Officer at Vantage Computer Systems, Inc., a provider of computer
software and services (prior to the merger of Vantage with The Continuum
Company, Inc.).
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the directors and executive officers of
the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been trading on the Nasdaq National Market
under the symbol "SSNC" since the Company's initial public offering on May 31,
1996. The following table sets forth for the fiscal periods indicated the high
and low sales prices per share of Common Stock as reported on the Nasdaq
National Market:
FISCAL 1996
<TABLE>
<CAPTION>
PRICE RANGE
-------------
QUARTER HIGH LOW
------- ------ ------
<S> <C> <C>
Second (from May 31, 1996)............................. $23.50 $13.00
Third.................................................. 15.50 6.75
Fourth................................................. 10.38 5.50
</TABLE>
There were 45 stockholders of record of the Company's Common Stock as of
March 17, 1997. The number of stockholders of record may not be representative
of the number of beneficial owners because many shares are held by
depositaries, brokers or other nominees.
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
its growth strategy and does not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account
various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion.
10
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1992 1993 1994 1995(1) 1996
------- ------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses................ $ 651 $2,703 $ 5,146 $10,647 $13,824
Maintenance...................... 932 1,308 2,030 4,055 6,209
Professional services............ 1,073 1,215 2,092 4,100 6,374
------- ------ ------- ------- -------
Total revenues................. 2,656 5,226 9,268 18,802 26,407
------- ------ ------- ------- -------
Cost of revenues:
Software licenses................ 110 96 152 454 589
Maintenance...................... 293 312 898 1,046 2,000
Professional services............ 772 310 1,182 3,800 4,430
------- ------ ------- ------- -------
Total cost of revenues......... 1,175 718 2,232 5,300 7,019
------- ------ ------- ------- -------
Gross profit....................... 1,481 4,508 7,036 13,502 19,388
------- ------ ------- ------- -------
Operating expenses:
Selling and marketing............ 1,005 1,545 2,693 5,242 8,506
Research and development......... 1,071 1,401 1,743 5,253 6,494
General and administrative....... 1,096 693 1,044 2,515 4,611
Write-off of purchased in-process
research and development........ -- -- -- 7,889 --
------- ------ ------- ------- -------
Total operating expenses....... 3,172 3,639 5,480 20,899 19,611
------- ------ ------- ------- -------
Operating income (loss)............ (1,691) 869 1,556 (7,397) (223)
Interest income (expense), net..... (191) (198) (12) 24 972
Other income....................... -- -- -- -- 138
------- ------ ------- ------- -------
Income (loss) before income taxes.. (1,882) 671 1,544 (7,373) 887
Provision (benefit) for income
taxes............................. (468) 120 661 (3,024) 414
------- ------ ------- ------- -------
Net income (loss).................. $(1,414) $ 551 $ 883 $(4,349) $ 473
======= ====== ======= ======= =======
Net income (loss) per common and
common equivalent share........... $ (.18) $ .09 $ .13 $ (.72) $ .04
======= ====== ======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding....................... 7,982 6,059 6,990 6,012 11,820
======= ====== ======= ======= =======
<CAPTION>
DECEMBER 31,
------------------------------------------
1992 1993 1994 1995 1996
------- ------ ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......... $ 2,416 $1,983 $ 3,084 $ 1,585 $36,091
Working capital.................... 2,938 2,316 3,345 3,255 53,571
Total assets....................... 5,484 5,871 10,940 21,807 76,286
Long-term obligations.............. 3,269 2,254 450 1,840 --
Redeemable convertible preferred
stock............................. 750 750 750 750 --
Stockholders' equity (deficit)..... (518) 33 5,121 9,493 64,354
</TABLE>
- --------
(1) On March 31, 1995, the Company purchased substantially all of the assets
and operations of Chalke Incorporated for a purchase price of $12.7
million. Such acquisition was accounted for as a purchase and the Company
incurred a charge to operations of $7.9 million associated with the write-
off of purchased in-process research and development. The write-off of
purchased in-process research and development, after tax, increased 1995
net loss and net loss per common and common equivalent share by $4.8
million and $.80, respectively. See Notes 2 and 10 of Notes to the
Company's Consolidated Financial Statements.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of client/server-based software solutions,
and related consulting services, designed to improve the efficiency and
effectiveness of the investment management function within a broad range of
organizations in the financial services industry. The Company was founded in
1986 to provide consulting services to support the investment management
functions of financial services organizations. In 1989, as a result of a joint
development arrangement with GALIC, the Company introduced its first product,
CAMRA (Complete Asset Management, Reporting and Accounting), a DOS-based
program designed to address the management of asset portfolios by mid- and
large-size financial institutions. In 1993, the Company released its first
Windows-based version of CAMRA and has continued to enhance the level of
CAMRA's functionality each year thereafter. A majority of the Company's
revenues have historically been derived from sales of the CAMRA system. In
1993, SS&C introduced its FILMS (Fully Integrated Loan Management System)
product, enabling mortgage professionals to process, analyze and report on a
comprehensive basis information regarding their loan portfolios. On March 31,
1995, the Company acquired substantially all of the assets and operations of
Chalke Incorporated ("Chalke"), a supplier of asset/liability management and
modeling software and consulting services to the financial services industry.
Chalke's primary software product, PTS (Profit Testing System), provides an
economic model of insurance liabilities and assets to facilitate capital,
financial and risk management.
The Company enters into license, maintenance and professional services
contracts to provide software and services to its clients. License fees for
the Company's CAMRA and FILMS products are based on assets under management,
with underlying maintenance provided on an annually renewable basis for
approximately 20% of the underlying software license fee. License fees for PTS
software are determined on a per-CPU or per-site basis, and maintenance is
provided on an annually renewable basis for approximately 16% of the
underlying software license fee. License revenues are recognized upon the
later of delivery of software to the client or the completion of any
significant vendor obligations remaining after delivery, provided that
collection of the resulting receivable is considered probable. Maintenance
revenues are recognized ratably over the life of the contract. Professional
services revenues are provided on a time and material basis and are recognized
as they are performed.
The Company's results of operations for 1995 reflect the acquisition of
substantially all of the assets and operations of Chalke for a purchase price
of $12.7 million (the "Chalke Acquisition"). In connection with the Chalke
Acquisition, which was accounted for under the purchase method, the Company
incurred a charge to operations of $7.9 million associated with the write-off
of purchased in-process research and development related to Chalke products
that were under development at the time of acquisition but had not yet reached
technological feasibility. The balance of the purchase price was allocated to
operating assets of $2.2 million, goodwill of $1.8 million and purchased
completed software of $795,000. The operating results of Chalke have been
included in the Company's operating results since the date of acquisition.
Deferred revenues of $1.5 million, including approximately $1.0 million of
annual maintenance revenues, for which Chalke had previously invoiced and
collected the cash, were not included in the Company's operating results. As
part of the allocation of the purchase price, the Company accrued the costs to
perform the obligations remaining under these maintenance contracts.
Subsequent to 1995, the Company has recognized revenues and associated
expenses in accordance with normal accounting policies as the Chalke
maintenance contracts are renewed.
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Total revenues increased 103% from $9.3
million in 1994 to $18.8 million in 1995 and increased 40%
12
<PAGE>
to $26.4 million in 1996. The increase in 1996 revenues was due primarily to
sales of PTS 2000, which was released in the second quarter of 1996, as well as
the full-year inclusion of maintenance clients from Chalke Incorporated
("Chalke") and increased demand for the Company's professional services. The
increase from 1994 to 1995 was primarily attributable to the addition of PTS to
the Company's product family as a result of the Chalke Acquisition, the growing
market acceptance of the Company's CAMRA products, as well as an increase in
the size of sales of the Company's products, reflecting their purchase by
larger clients with more assets under management. Inclusion of the operating
results of Chalke since the date of acquisition accounted for approximately
$4.2 million of the Company's total revenues during 1995.
Software Licenses. Software license revenues increased 107% from $5.1 million
in 1994 to $10.6 million in 1995 and increased 30% to $13.8 million in 1996.
The increase from 1994 to 1995 was primarily attributable to the growing market
acceptance of the Company's CAMRA product and the addition of the PTS product
from the acquisition of Chalke. The increase in 1996 was primarily attributable
to sales of PTS 2000, which was added to the Company's product line in the
second quarter of 1996. In addition to PTS license sales, the Company had
continued growth with its asset management products, CAMRA and FILMS.
Maintenance. Maintenance revenues increased 100% from $2.0 million in 1994 to
$4.1 million in 1995 and increased 53% to $6.2 million in 1996. The increases
in maintenance revenues from 1994 to 1995 was attributable to the growing
installed base of clients with maintenance contracts as a result of increased
license sales. The majority of the growth from 1995 to 1996 was due to the
addition of Chalke's maintenance clients. Asset management maintenance
contracts also grew in this same period, due to a continued increase in the
Company's installed base of clients as a result of additional license sales.
Professional Services. Professional services revenues increased 96% from $2.1
million in 1994 to $4.1 million in 1995 and increased 55% to $6.4 million in
1996. Demand for the Company's implementation, conversion and training services
has increased primarily due to the Company's increasing number of license
sales. The Company's strategy of increasing rates charged for consulting time
and improved consulting resource utilization also contributed to the increase.
As a result of the Chalke Acquisition, the Company also includes actuarial
consulting services in its professional services revenues.
Cost of Revenues
The total cost of revenues increased 137% from $2.2 million in 1994 to $5.3
million in 1995 and increased 32% to $7.0 million in 1996. The gross margin
remained relatively stable, from 76% in 1994 to 72% in 1995 to 73% in 1996.
Cost of Software Licenses. Cost of software license revenues relates
primarily to royalties, as well as the costs of product media, packaging,
documentation and labor involved in the distribution of the Company's software.
The cost of software license revenues increased 198% from $.2 million in 1994
to $.5 million in 1995 and increased 30% to $.6 million in 1996. The costs of
software license revenues as a percentage of these revenues remained stable at
3%, 4% and 4% in 1994, 1995 and 1996, respectively.
Cost of Maintenance. Cost of maintenance revenues primarily comprises
technical customer support and development costs associated with product and
regulatory updates. The cost of maintenance revenues increased 16% from $.9
million in 1994 to $1.0 million in 1995 and increased 91% to $2.0 million in
1996, representing 44%, 26% and 32%, respectively, of maintenance revenues in
those years. The increases in cost of maintenance revenues were primarily due
to increased headcount attributable to the development of a dedicated support
infrastructure to service the existing installed asset management client base,
as well as the inclusion of Chalke maintenance clients and corresponding costs.
Cost of Professional Services. Cost of professional services revenues consist
primarily of the cost related to personnel utilized to provide implementation,
conversion and training services to the Company's software licensees, as well
as system integration, custom programming, and actuarial consulting services.
The cost of
13
<PAGE>
professional services revenues increased 222% from $1.2 million in 1994 to
$3.8 million in 1995 and increased 17% to $4.4 million in 1996, representing
56%, 93% and 69%, respectively, of professional services revenues in those
years. The increases in cost of professional services revenues were
attributable to increased headcount in order to meet the increased demand.
Increased utilization, improved efficiencies and increased rates charged for
consulting time contributed to reducing the cost of professional services
revenues as a percentage of such professional services revenues in 1996.
Operating Expenses
Selling and Marketing. Selling and marketing expenses consist primarily of
the cost of personnel associated with the selling and marketing of the
Company's products, including salaries, commissions and travel and
entertainment. Such expenses also include the cost of branch sales offices,
advertising, trade shows, marketing and promotional materials. Selling and
marketing expenses increased 95% from $2.7 million in 1994 to $5.2 million in
1995 and increased 62% to $8.5 million in 1996, representing 29%, 28% and 32%,
respectively, of total revenues in those years. The increases in sales and
marketing expenses were largely attributable to the hiring of additional sales
and marketing personnel, and increased marketing activity to further enhance
the Company's market presence.
Research and Development. Research and development expenses consist
primarily of personnel costs attributable to the development of new software
products and the enhancement of existing products. Research and development
expenses increased 201% from $1.7 million in 1994 to $5.3 million in 1995 and
increased 24% to $6.5 million in 1996, representing 19%, 28% and 25%,
respectively, of total revenues in those years. The Company's research and
development expenses in 1995 do not include the charge to operations of $7.9
million associated with the write-off of purchased in-process research and
development related to Chalke products that were under development at the time
of the Chalke acquisition but had not yet reached technological feasibility.
See "Write-off of Purchased In-Process Research and Development" below. During
1995, the Company significantly increased the dollar value of research and
development expenses, primarily in the development of three new products--
Finesse, COPE and PTS 2000. Research and development expenses increased from
1995 to 1996 primarily due to ongoing development of Finesse, and further
development of the Windows-based versions of CAMRA and FILMS. PTS 2000 was
released in the second quarter of 1996, while the Company discontinued
development of COPE as a stand-alone product during 1996.
General and Administrative. General and administrative expenses primarily
comprise personnel costs related to management, accounting, human resources
and administration and associated overhead costs, as well as fees for
professional services. General and administrative expenses increased 141% from
$1.0 million in 1994 to $2.5 million in 1995 and increased 83% to $4.6 million
in 1996, representing 11%, 13% and 17%, respectively, of total revenues in
those years. During 1995, the Company's general and administrative expenses
included expenses associated with the recruitment of several of the Company's
executive officers as well as the leasing of additional space to accommodate
the Company's expanded operations. During 1996, the Company recorded bad debt
expense of $1.0 million by increasing its allowance for doubtful accounts,
representing a $513,000 increase in bad debt expense, the largest factor in
the increase in general and administrative expenses. Actual write-offs of
accounts receivable were $309,000, $34,000 and $70,000 for 1994, 1995 and
1996, respectively. Other factors related to the increase in general and
administrative expenses included increases in professional fees of $211,000,
primarily related to the Company's status as a public company. The inclusion
of Chalke for the entire year also contributed to the increase in general and
administrative expenses during 1996.
Write-off of Purchased In-Process Research and Development. In the first
quarter of 1995, the Company expensed $7.9 million of purchased in-process
research and development associated with two products acquired in March 1995
as part of the acquisition of Chalke. Because these products had not reached
technological feasibility at the time of the acquisition and, in the Company's
judgment, there was no alternative use for the related research and
development, such in-process research and development was charged to expense.
There were no comparable expenses in 1994 or 1996.
14
<PAGE>
Interest Income (Expense). Net interest income (expense) increased from
$(12,000) in 1994 to $25,000 in 1995 and to $1.0 million in 1996. The
increases were due to the interest earned on investing the proceeds from the
private sale of stock in 1995 and the Company's initial public offering in May
1996.
Provision (Benefit) for Income Taxes. The Company had effective tax rates of
approximately 43%, (41)% and 47% in 1994, 1995 and 1996, respectively.
Primarily as a result of the write-off of in-process research and development
related to the Chalke acquisition, the Company recognized a tax benefit of
$3.0 million in 1995. The increase in the 1996 effective tax rate from 1995 is
primarily related to losses from foreign operations for which there is no
benefit in the United States and an increase in the disallowance of meals and
entertainment expenses, both of which were partially offset by interest income
which was primarily exempt from federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, 1995 and 1996, the Company financed its operations primarily
through cash flows generated from operations and from private and public sales
of securities. Cash provided by operations was $1.1 million in 1994 and cash
used in operations was $1.9 million and $0.6 million in 1995 and 1996,
respectively. The decrease in cash provided by operations from 1994 to 1995
was primarily attributable to the increase in accounts receivable and unbilled
receivables. Accounts receivable increased significantly during 1995 as a
result of an increase in license sales and related professional services as
well as due to the Chalke Acquisition. Unbilled accounts receivable also
increased significantly during 1995 for the foregoing reason as well as due to
the high level of software licensing activity that occurred late in the fourth
quarter of 1995 versus 1994. The decrease in cash used in operations from 1995
to 1996 is primarily attributable to the increase in operating profits and an
increase in accrued expenses and deferred maintenance revenues. Net accounts
receivable increased $3.1 million from 1995 to 1996, while unbilled accounts
receivable increased $.3 million during the same period. Total revenues
increased $7.6 million from 1995 to 1996. The Company has instituted
procedures to enhance collections of accounts receivable, including the
suspension of client support services for lack of maintenance payments,
assigning executive personnel to potentially difficult collection accounts and
negotiating accelerated payment terms in contracts. The Company believes these
procedures will increase the control over the collection of the outstanding
receivables in the next year.
The Company's general and administrative expenses included bad debt expenses
of $.3 million, $.5 million and $1.0 million in 1994, 1995 and 1996,
respectively. The increase in the provision for bad debts was due to the
increase in the allowance for doubtful accounts, which was based on an
evaluation of specific delinquent accounts and a general reserve based on the
aging of receivables. The Company believes its determination of doubtful
accounts is appropriate in light of the large increases in revenues over the
past three years. Actual write-offs of accounts receivable were $309,000,
$34,000 and $70,000 for 1994, 1995 and 1996, respectively. There was one
significant account written off in 1994 of approximately $292,000. Because of
the nature of the Company's market and complexity of its products, the Company
believes that its receivables are typically higher than companies that
generate substantial revenues from shrink-wrap licenses or lower-end
applications software.
Investing activities used cash of $.7 million, $8.3 million and $17.1
million in 1994, 1995 and 1996, respectively. In 1995, the Company used cash
of $7.4 million to finance the acquisition of Chalke. The remaining $.9
million was used to acquire property and equipment. Investing activities in
1996 included $15.6 million for the purchase of investments in marketable
securities and $1.5 million to acquire equipment and capitalized software.
Cash used in investing activities in 1994 was primarily used to acquire
equipment.
Net cash of $8.7 million provided by financing activities in 1995 resulted
from the issuance of Convertible Preferred Stock of $7.3 million and the
issuance of Common Stock upon the exercise of warrants for $1.4 million
related to the financing of Chalke. Net cash of $52.2 million provided by
financing activities in 1996 resulted from proceeds of $52.6 million from the
issuance of Common Stock in the Company's initial public offering and proceeds
of $.8 million from the exercise of stock options, partially offset by the
repayment of $1.3 million of debt. Cash provided by financing activities in
1994 resulted primarily from the issuance of Convertible Preferred Stock of
$6.0 million, less the repayment of the balance of notes payable and the
mortgage on the Company's corporate offices totaling $2.3 million, as well as
the repurchase of stock by the Company in the amount of $2.3 million.
15
<PAGE>
As of December 31, 1996, the Company had $36.1 million in cash and cash
equivalents and $15.6 million in highly liquid marketable securities. In
connection with the Chalke acquisition, the Company issued a promissory note
in the principal amount of $3.0 million, with an imputed interest rate of
7.91% per annum. There is one payment of $1.5 million remaining, which is due
on March 31, 1997.
The Company believes that its current cash balances and net cash provided by
operating activities will be sufficient to meet its working capital and
capital expenditure requirements for the next 12 months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Fluctuations in Quarterly Performance. The Company's revenues and operating
results historically have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a
number of factors, including the timing, size and nature of the Company's
individual license transactions; the timing of the introduction and the market
acceptance of new products or product enhancements by the Company or its
competitors; the relative proportions of revenues derived from license fees,
maintenance, consulting and other recurring revenues and professional
services; changes in the Company's operating expenses; personnel changes and
fluctuations in economic and financial market conditions. The timing, size and
nature of individual license transactions are important factors in the
Company's quarterly operating results. Many such license transactions involve
large dollar amounts, and the sales cycles for these transactions are often
lengthy and unpredictable. There can be no assurance that the Company will be
successful in closing large license transactions on a timely basis or at all.
Dependence on Financial Services Industry. The Company's clients include a
range of organizations in the financial services industry, and the success of
such clients is intrinsically linked to the health of the financial markets.
In addition, because of the capital expenditures required in connection with
an investment in the Company's products, the Company believes that demand for
its products could be disproportionately affected by fluctuations,
disruptions, instability or downturns in the financial markets, which may
cause clients and potential clients to exit the industry or delay, cancel or
reduce any planned expenditures for investment management systems and software
products. Any resulting decline in demand for the Company's products could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Product Concentration. To date, substantially all of the Company's revenues
have been attributable to the licensing of its CAMRA, PTS and FILMS software
and the provision of maintenance and consulting services in connection
therewith. The Company currently expects that the licensing of CAMRA, PTS and
FILMS software, and the provision of related services, will account for a
substantial portion of its revenues for the foreseeable future. As a result,
factors adversely affecting the pricing of or demand for such products and
services, such as competition or technological change, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Management of Growth. The Company's business has grown significantly in size
and complexity over the past three years. The growth in the size and
complexity of the Company's business as well as its client base has placed and
is expected to continue to place a significant strain on the Company's
management and operations. The Company's senior management has had limited
experience in managing publicly traded companies. The Company's ability to
compete effectively and to manage future growth, if any, will depend on its
ability to continue to implement and improve operational, financial and
management information systems on a timely basis and to expand, train,
motivate and manage its work force. There can be no assurance that the
Company's personnel, systems, procedures and controls will be adequate to
support the Company's operations. If the Company's management is unable to
manage growth effectively, the quality of the Company's products and its
business, financial condition and results of operations could be materially
adversely affected.
Competition. The market for financial services software is competitive,
rapidly evolving and highly sensitive to new product introductions and
marketing efforts by industry participants. Although the Company believes that
none of its competitors currently competes against the Company in each of the
industry segments served by the Company, there can be no assurance that such
competitors will not compete against the Company
16
<PAGE>
in the future in additional industry segments. In addition, many of the
Company's current and potential future competitors have significantly greater
financial, technical and marketing resources, generate higher revenues and
have greater name recognition than does the Company.
Rapid Technological Change. The market for the Company's products and
services is characterized by rapidly changing technology, evolving industry
standards and new product introductions. The Company's future success will
depend in part upon its ability to enhance its existing products and services
and to develop and introduce new products and services to meet changing client
requirements. The process of developing software products such as those
offered by the Company is extremely complex and is expected to become
increasingly complex and expensive in the future with the introduction of new
platforms and technologies. There can be no assurance that the Company will
successfully complete the development of new products in a timely fashion or
that the Company's current or future products will satisfy the needs of the
financial markets.
Dependence on Database Supplier. The relational database design in many of
the Company's software products incorporates PFXplus, a "C"-based database
management system licensed to the Company by POWERflex Corporation Proprietary
Limited, an Australian vendor ("Powerflex"). If Powerflex were to increase its
fees under the license agreement, the Company's results of operations could be
materially adversely affected. Moreover, if Powerflex were to terminate the
license agreement, the Company would have to seek an alternative relational
database for its software products. While the Company believes that it could
migrate its products to an alternative database, there can be no assurance
that the Company would be able to license in a timely fashion a database with
similar features and on terms acceptable to the Company.
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company
relies on a combination of trade secret, copyright and trademark law,
nondisclosure agreements and technical measures to protect its proprietary
technology. There can be no assurance that the steps taken by the Company to
limit access to its proprietary technology will be adequate to deter
misappropriation or independent third-party development of such technology.
Product Defects and Product Liability. The Company's software products are
highly complex and sophisticated and could from time to time contain design
defects or software errors that could be difficult to detect and correct.
Errors, bugs or viruses may result in loss of or delay in market acceptance or
loss of client data. Although the Company has not experienced material adverse
effects resulting from any software defects or errors, there can be no
assurance that, despite testing by the Company and its clients, errors will
not be found in new products, which errors could result in a delay in or
inability to achieve market acceptance and thus could have a material adverse
impact upon the Company's business, financial condition and results of
operations.
Risks Associated with International Operations. The Company intends to
expand its international sales activity as part of its business strategy. To
accomplish such expansion, the Company must establish additional foreign
operations and hire additional personnel, requiring significant management
attention and financial resources that could materially adversely affect the
Company's business, financial condition or results of operations. The
Company's international sales are primarily denominated in U.S. dollars. An
increase in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and, therefore, potentially less
competitive in those markets. Currently, the Company does not employ currency
hedging strategies to reduce this risk. In addition, the Company's
international business may be subject to a variety of risks, including
difficulties in obtaining U.S. export licenses, potentially longer payment
cycles, increased costs associated with maintaining international marketing
efforts, the introduction of non-tariff barriers and higher duty rates and
difficulties in enforcement of contractual obligations and intellectual
property rights. There can be no assurance that such factors will not have a
material adverse effect on the Company's business, financial condition or
results of operations.
Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's annual and
quarterly operating results may vary significantly, depending on factors such
as the timing, size and nature of licensing transactions and new product
introductions by the
17
<PAGE>
Company or its competitors. Investors should not use historical trends to
anticipate future results and should be aware that the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarterly variations in operating results and other factors, including those
discussed above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to the Company's Consolidated Financial Statements and the
accompanying financial statements and notes which are filed as part of this
Form 10-K following the signature page and are incorporated herein by this
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item 10 is set forth in the proxy statement to
be provided to stockholders in connection with the Company's 1997 Annual
Meeting of Stockholders (the "Proxy Statement") under the headings "Directors
and Nominees for Director" and "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference. The name,
age and position of each executive officer of the Company is set forth under
the heading "Executive Officers of the Registrant" in Part I of this Annual
Report on Form 10-K, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is set forth in the Proxy Statement
under the headings "Compensation of Executive Officers," "Director
Compensation" and "Compensation Committee Interlocks and Insider
Participation," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item 12 is set forth in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is set forth in the Proxy Statement
under the heading "Certain Transactions," which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Form 10-K:
1. Financial Statements. The Consolidated Financial Statements listed in
the Index to Consolidated Financial Statements are filed as part of this
Annual Report on Form 10-K.
2. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report on Form 10-
K.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed by the Registrant during the
fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SS&C TECHNOLOGIES, INC.
By: /s/ William C. Stone
___________________________________
William C. Stone
President, Chief Executive Officer
and Chairman of the Board of
Directors
Date: March 31, 1997
19
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ William C. Stone President, Chief Executive
____________________________________ Officer and Chairman of the
William C. Stone Board of Directors
(Principal Executive
Officer)
/s/ John S. Wieczorek Vice President, Chief
____________________________________ Financial Officer and
John S. Wieczorek Treasurer (Principal
Financial and Accounting
Officer)
/s/ Peter L. Bloom Director
____________________________________
Peter L. Bloom
Director
____________________________________
Shane A. Chalke
/s/ David W. Clark, Jr. Director March 31, 1997
____________________________________
David W. Clark, Jr.
/s/ John B. Clinton Director
____________________________________
John B. Clinton
/s/ Joseph H. Fisher Director
____________________________________
Joseph H. Fisher
/s/ William E. Ford Director
____________________________________
William E. Ford
/s/ William W. Wyman Director
____________________________________
William W. Wyman
</TABLE>
20
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SS&C TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and 1996............. F-3
Consolidated Statements of Operations for the years ended
December 31, 1994, 1995 and 1996........................................ F-4
Consolidated Statements of Changes in Stockholders' Equity for the
years ended December 31, 1994, 1995 and 1996............................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996........................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
SS&C Technologies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of SS&C
Technologies, Inc. and Subsidiaries (the "Company") as of December 31, 1995
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SS&C Technologies, Inc. and Subsidiaries as of December 31, 1995 and 1996,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 10, 1997
F-2
<PAGE>
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,584,659 $36,091,405
Investments in marketable securities................ -- 15,579,873
Accounts receivable, net of allowance for doubtful
accounts of $486,764 and $1,128,591, respectively.. 5,325,182 8,434,156
Unbilled accounts receivable, net of allowance for
doubtful accounts of $0 and $300,000, respectively. 5,201,390 3,455,369
Prepaid expenses and other current assets........... 604,634 885,157
Refundable income taxes............................. -- 353,529
Deferred income taxes............................... 261,724 703,740
----------- -----------
Total current assets................................ 12,977,589 65,503,229
----------- -----------
Property and equipment:
Land................................................ 105,840 105,840
Building and leasehold improvements................. 1,159,988 1,224,961
Equipment, furniture and fixtures................... 2,700,789 4,070,473
----------- -----------
3,966,617 5,401,274
Less accumulated depreciation....................... (1,398,578) (2,274,784)
----------- -----------
Net property and equipment......................... 2,568,039 3,126,490
----------- -----------
Unbilled accounts receivable-related party (Note 11). -- 630,000
Unbilled accounts receivable......................... -- 1,386,750
Deferred income taxes................................ 3,061,182 3,229,771
Restricted cash equivalents.......................... 505,000 505,000
Goodwill, net of accumulated amortization of $270,588
and $631,370, respectively (Notes 2 and 10)......... 1,533,329 1,172,547
Intangible and other assets, net of accumulated
amortization of $524,455 and $1,018,194,
respectively (Notes 2 and 10)....................... 1,161,410 732,258
----------- -----------
Total assets........................................ $21,806,549 $76,286,045
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt-related party
(Note 3)........................................... $ 1,288,154 $ 1,390,047
Current portion of long-term debt-other (Note 3).... -- 450,000
Accounts payable.................................... 387,082 475,724
Accrued expenses.................................... 2,053,413 2,526,223
Deferred licensing and professional services
revenues........................................... 1,330,563 1,211,739
Deferred maintenance revenues....................... 4,294,942 5,878,538
Accrued income taxes................................ 368,909 --
----------- -----------
Total current liabilities........................... 9,723,063 11,932,271
Long-term debt (Note 3)
Related party....................................... 1,390,047 --
Other............................................... 450,000 --
----------- -----------
Total liabilities................................... 11,563,110 11,932,271
----------- -----------
Series A, redeemable convertible preferred stock,
$0.20 par value (liquidation preference of
$750,000), 24,750 and no shares authorized, issued
and outstanding (Notes 3 and 4)..................... 750,000 --
----------- -----------
Commitments (Notes 6 and 7)
Stockholders' equity: (Note 4)
Preferred stock, $0.01 par value; 1,000,000 shares
authorized, no shares issued or outstanding........ -- --
Series B, convertible preferred stock, $0.20 par
value (liquidation preference of $7,000,000),
152,778 and no shares authorized, issued and
outstanding, respectively.......................... 30,556 --
Series C, convertible preferred stock, $0.20 par
value (liquidation preference of $7,368,770),
155,132 and no shares authorized, issued and
outstanding, respectively.......................... 31,026 --
Common stock, $0.01 par value, 25,000,000 shares
authorized; 7,118,500 and 13,738,142 shares issued,
respectively; 5,767,570 and 12,387,212 shares
outstanding, respectively.......................... 71,185 137,381
Additional paid-in capital.......................... 15,215,544 69,597,948
Accumulated deficit................................. (3,449,800) (2,976,483)
----------- -----------
11,898,511 66,758,846
Less treasury stock, 1,350,930 common shares, at
cost............................................... (2,405,072) (2,405,072)
----------- -----------
Total stockholders' equity.......................... 9,493,439 64,353,774
----------- -----------
Total liabilities and stockholders' equity.......... $21,806,549 $76,286,045
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
SS&C TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996
---------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Software licenses...................... $5,146,215 $10,646,908 $13,824,372
Maintenance............................ 2,030,144 4,054,939 6,209,030
Professional services.................. 2,091,704 4,100,209 6,373,974
---------- ----------- -----------
Total revenues....................... 9,268,063 18,802,056 26,407,376
---------- ----------- -----------
Cost of revenues:
Software licenses...................... 152,566 454,257 589,590
Maintenance............................ 898,487 1,045,499 2,000,097
Professional services.................. 1,181,585 3,799,972 4,429,843
---------- ----------- -----------
Total cost of revenues............... 2,232,638 5,299,728 7,019,530
---------- ----------- -----------
Gross profit............................. 7,035,425 13,502,328 19,387,846
---------- ----------- -----------
Operating expenses:
Selling and marketing.................. 2,692,892 5,242,372 8,505,620
Research and development............... 1,742,956 5,253,748 6,494,052
General and administrative............. 1,044,066 2,514,776 4,611,488
Write-off of purchased in-process re-
search and development................ -- 7,888,886 --
---------- ----------- -----------
Total operating expenses............. 5,479,914 20,899,782 19,611,160
---------- ----------- -----------
Operating income (loss).................. 1,555,511 (7,397,454) (223,314)
---------- ----------- -----------
Interest income (expense), net........... (11,755) 24,546 971,918
Other income (Note 3).................... -- -- 138,476
---------- ----------- -----------
Income (loss) before income taxes........ 1,543,756 (7,372,908) 887,080
Provision (benefit) for income taxes
(Note 5)................................ 660,882 (3,024,210) 413,763
---------- ----------- -----------
Net income (loss)........................ $ 882,874 $(4,348,698) $ 473,317
========== =========== ===========
Net income (loss) per common and common
equivalent share (Note 2)............... $ 0.13 $ (0.72) $ 0.04
========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding
(Note 2)................................ 6,989,535 6,011,950 11,820,007
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
SERIES B CONVERTIBLE SERIES C CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
---------------------- ---------------------- -------------------
NUMBER NUMBER NUMBER ADDITIONAL RETAINED EARNINGS
OF OF OF PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT)
---------- ---------- ---------- ---------- ---------- -------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at
December 31,
1993............. -- $ -- -- $ -- 5,578,500 $ 55,785 $ 805,151 $ 16,024
Purchase of
treasury stock.. -- -- -- -- -- -- -- --
Issuance of
Series B
convertible
preferred stock. 152,778 30,556 -- -- -- -- 6,008,946 --
Purchase of
redeemable
common stock.... -- -- -- -- 500,000 5,000 5,000 --
Exercise of
options......... -- -- -- -- 80,000 800 5,760 --
Purchase of
warrants........ -- -- -- -- -- -- (290,000) --
Net income...... -- -- -- -- -- -- -- 882,874
---------- ---------- ---------- ---------- ---------- -------- ----------- -----------
Balance, at
December 31,
1994............. 152,778 30,556 -- -- 6,158,500 61,585 6,534,857 898,898
Issuance of
Series C
convertible
preferred stock. -- -- 155,132 31,026 -- -- 7,284,687 --
Exercise of
options......... -- -- -- -- 60,000 600 4,000 --
Issuance of
common stock.... -- -- -- -- 900,000 9,000 1,392,000 --
Net loss........ -- -- -- -- -- -- -- (4,348,698)
---------- ---------- ---------- ---------- ---------- -------- ----------- -----------
Balance, at
December 31,
1995............. 152,778 30,556 155,132 31,026 7,118,500 71,185 15,215,544 (3,449,800)
Exercise of
options......... -- -- -- -- 266,792 2,668 834,303 --
Conversion of
Series B and C
preferred stock
to common stock. (152,778) (30,556) (155,132) (31,026) 3,079,100 30,791 30,791 --
Conversion of
Series A
preferred stock
to common stock. -- -- -- -- 247,500 2,475 747,525 --
Issuance of
common stock.... -- -- -- -- 3,026,250 30,262 52,609,028 --
Income tax
benefit related
to exercise of
stock options... -- -- -- -- -- -- 160,757 --
Net income...... -- -- -- -- -- -- -- 473,317
---------- ---------- ---------- ---------- ---------- -------- ----------- -----------
Balance, at
December 31,
1996............. -- $ -- -- $ -- 13,738,142 $137,381 $69,597,948 $(2,976,483)
========== ========== ========== ========== ========== ======== =========== ===========
<CAPTION>
TREASURY STOCK
----------------------
NUMBER TOTAL
OF STOCKHOLDERS'
SHARES COST EQUITY
--------- ------------ -------------
<S> <C> <C> <C>
Balance, at
December 31,
1993............. 788,950 $ (104,128) $ 772,832
Purchase of
treasury stock.. 61,980 (50,944) (50,944)
Issuance of
Series B
convertible
preferred stock. -- -- 6,039,502
Purchase of
redeemable
common stock.... 500,000 (2,250,000) (2,240,000)
Exercise of
options......... -- -- 6,560
Purchase of
warrants........ -- -- (290,000)
Net income...... -- -- 882,874
--------- ------------ -------------
Balance, at
December 31,
1994............. 1,350,930 (2,405,072) 5,120,824
Issuance of
Series C
convertible
preferred stock. -- -- 7,315,713
Exercise of
options......... -- -- 4,600
Issuance of
common stock.... -- -- 1,401,000
Net loss........ -- -- (4,348,698)
--------- ------------ -------------
Balance, at
December 31,
1995............. 1,350,930 (2,405,072) 9,493,439
Exercise of
options......... -- -- 836,971
Conversion of
Series B and C
preferred stock
to common stock. -- -- --
Conversion of
Series A
preferred stock
to common stock. -- -- 750,000
Issuance of
common stock.... -- -- 52,639,290
Income tax
benefit related
to exercise of
stock options... -- -- 160,757
Net income...... -- -- 473,317
--------- ------------ -------------
Balance, at
December 31,
1996............. 1,350,930 $(2,405,072) $64,353,774
========= ============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ 882,874 $(4,348,698) $ 473,317
----------- ----------- ------------
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization........ 372,202 1,229,853 1,780,727
Deferred income taxes................ 172,300 (3,615,006) (610,605)
Income tax benefit related to
exercise of stock options........... -- -- 160,757
Purchased in-process research and
development......................... -- 7,888,886 --
Non-cash license revenue............. (180,000) -- --
Provision for doubtful accounts...... 324,880 497,663 1,010,464
Changes in operating assets and
liabilities, excluding effects from
acquisition:
Accounts receivable................. (1,707,880) (1,307,853) (3,819,438)
Unbilled accounts receivable........ (1,066,483) (3,357,029) (570,729)
Prepaid and other current assets.... (70,616) (372,531) (280,523)
Refundable/accrued income taxes..... 440,638 (12,107) (722,438)
Accounts payable.................... 147,212 (98,154) 88,642
Accrued expenses.................... 156,244 (165,626) 472,810
Deferred licensing and professional
services revenues.................. 881,648 (172,700) (118,824)
Deferred maintenance revenues....... 760,283 1,889,381 1,583,596
----------- ----------- ------------
Total adjustments.................. 230,428 2,404,777 (1,025,561)
----------- ----------- ------------
Net cash provided by (used in)
operating activities................. 1,113,302 (1,943,921) (552,244)
----------- ----------- ------------
Cash flows from investing activities:
Additions to property and equipment... (484,305) (850,919) (1,434,657)
Acquisition of Chalke, net of cash
received (Note 10)................... -- (7,426,126) --
Additions to capitalized software..... -- -- (114,587)
Purchase of intangible assets......... (210,000) -- --
Investments in marketable securities,
net.................................. -- -- (15,579,873)
----------- ----------- ------------
Net cash used in investing activities. (694,305) (8,277,045) (17,129,117)
----------- ----------- ------------
Cash flows from financing activities:
Repayment of debt..................... (2,267,852) -- (1,288,154)
Purchase of treasury stock............ (2,300,944) -- --
Issuance of convertible preferred
stock................................ 6,039,502 7,315,713 --
Issuance of common stock.............. -- 1,401,000 52,639,290
Exercise of options................... 6,560 4,600 836,971
Purchase of warrants.................. (290,000) -- --
Transfer of cash to restricted cash
equivalents.......................... (505,000) -- --
----------- ----------- ------------
Net cash provided by financing
activities........................... 682,266 8,721,313 52,188,107
----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents...................... 1,101,263 (1,499,653) 34,506,746
Cash and cash equivalents, at beginning
of year............................... 1,983,049 3,084,312 1,584,659
----------- ----------- ------------
Cash and cash equivalents, at end of
year.................................. $ 3,084,312 $ 1,584,659 $ 36,091,405
=========== =========== ============
Supplemental disclosure of cash flow
information:
Cash paid for:
Interest............................. $ 176,658 $ -- $ 211,846
Income taxes......................... 82,763 616,128 1,586,047
</TABLE>
<TABLE>
<S> <C>
Supplemental disclosure of non-cash investing activities:
As more fully disclosed in Note 10, effective March 31, 1995, the Company
purchased all of the assets of Chalke Incorporated for $12,702,964.
As more fully described in Note 10, effective in August 1994, the Company
acquired packaged software and other assets in the amount of $840,000.
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
SS&C Technologies, Inc. and Subsidiaries ("SS&C" or the "Company") (formerly
named Securities Software & Consulting, Inc.) is a leading provider of
client/server-based software solutions, and related consulting services,
designed to improve the efficiency and effectiveness of a broad range of
organizations in the financial services industry. The Company has developed a
family of software products that provides a full-range of mission-critical
information management and analysis, accounting, reporting and compliance
tools to help high-level investment professionals make informed real-time
decisions and automate many operational functions in today's increasingly
complex and fast-moving financial markets. The Company's products are focused
on improving the effectiveness of decision making through open, fully
integrated access to the quantitative analysis of transactions-based data,
allowing investment professionals to manage and analyze large amounts of data
in the aggregate and in detail on a timely basis.
The Company operates in one business segment and currently derives
substantially all of its revenue from the licensing of its CAMRA, PTS and
FILMS applications software to the financial services industry and the
provision of related maintenance, consulting and training services in the
areas of investments, investment accounting and software development. The
Company expects that the licensing of these products and the related services
will account for a substantial portion of its revenues in the future. The
Company's clients include a range of organizations that manage investment
portfolios, including asset managers, insurance companies, banks, mutual
funds, public and private pension funds, hedge funds, corporate treasuries and
government agencies. The success of many of the Company's clients is
intrinsically linked to the health of the financial markets. Demand for its
products could be affected by fluctuations or downturns in the financial
markets, which may cause clients and potential clients to exit the industry or
delay, cancel or reduce any planned expenditures for investment management
systems and software products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, SS&C S.A.R.L., SS&C Ventures,
Inc., Securities Software & Consulting, Limited and SS&C Pacific, Inc. All
intercompany activity has been eliminated in preparing the consolidated
financial statements.
Revenue Recognition
The Company recognizes revenues in accordance with the Statement of Position
on software revenue recognition issued by the American Institute of Certified
Public Accountants.
The Company licenses the right to use its software products to customers
under perpetual license agreements. The Company generally recognizes license
revenues on delivery of the software to the customer provided that collection
of the resulting receivable is considered probable, unless the Company has
significant future obligations remaining under the license agreement or there
is significant uncertainty about customer acceptance. If there are significant
future obligations or uncertainty about customer acceptance, revenue is
recognized when such obligations are satisfied and any uncertainty about
acceptance becomes insignificant.
The Company occasionally enters into license agreements requiring
significant customization of the Company's software. These agreements are
accounted for by the Company on a percentage of completion basis. This method
requires estimates to be made for costs to complete the agreement utilizing an
estimate of
F-7
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
development man hours remaining. Due to uncertainties inherent in the
estimation process, it is at least reasonably possible that completion costs
may be revised. Such revisions are recognized in the period in which the
revisions are determined. Provisions for estimated losses on uncompleted
contracts are determined on a contract by contract basis, and are made in the
period in which such losses are first estimated or determined.
The Company's software license agreements include a short-term, generally
90-day, warranty period that the Company does not consider a cancellation
privilege.
The Company records accounts receivable and related deferred revenues upon
the execution of contracts for license and licensed lease agreements and upon
billing for maintenance agreements. Revenues from maintenance agreements are
recognized ratably over the term of the agreement. Unbilled accounts
receivable principally reflect revenues recognized pursuant to license
agreements for which milestone amounts are not contractually billable.
Unbilled accounts receivable, including those related to lease agreements,
which are not contractually billable in one year have been classified as
noncurrent.
Professional services revenues include consulting and training provided to
customers, generally on a time and materials basis. Professional services
revenues are recognized as the services are performed.
The Company records an allowance for doubtful accounts based on individual
customer analyses. Write-offs of accounts receivable were $309,328, $34,432
and $68,637 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Research and Development
Research and development costs associated with computer software are charged
to expense as incurred. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, capitalization of internally developed computer
software costs begins upon the establishment of technological feasibility
based on a working model. Capitalized software costs of $114,587 are included
in the December 31, 1996 balance sheet under "intangible and other assets."
There were no capitalized software costs as of December 31, 1995.
The Company's policy is to amortize these costs upon a product's general
release to the customer. Amortization of capitalized software costs is
calculated by the greater of (a) the ratio that current gross revenues for a
product bear to the total of current and anticipated future gross revenues for
that product or (b) the straight-line method over the remaining estimated
economic life of the product including the period being reported on. It is
reasonably possible that those estimates of anticipated future gross revenues,
the remaining estimated economic life of the product, or both could be reduced
significantly due to competitive pressures.
Cash and Cash Equivalents and Marketable Securities
The Company considers all highly liquid debt instruments with original
maturities of three months or less at date of acquisition to be cash
equivalents. Debt securities with original maturities of more than three
months at date of acquisition are classified as marketable securities. All
marketable securities mature within 12 months and are classified as current
assets. The Company classifies its entire investment portfolio of $50,886,857
at December 31, 1996, consisting of debt securities issued by state and local
governments of the United States, as available for sale securities. With the
cost of the debt securities approximating the fair market value of the
securities, no unrealized gain or loss has been recognized. The Company did
not have any material realized gains or losses during 1995 and 1996.
Restricted Cash Equivalents
The Company has a letter of credit agreement with a U.S. bank for $505,000
in connection with the purchase of the main-frame based investment accounting
line of business of an unrelated entity. The purchase agreement requires the
Company to maintain an irrevocable letter of credit until the debt is paid in
full. In
F-8
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
accordance with the terms of the letter of credit agreement, the Company has a
$505,000 certificate of deposit with the bank which is restricted to serve as
collateral for the letter of credit. The letter of credit was released in
January 1997 upon the settlement of the debt (see Note 3).
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using a combination of straight-line and accelerated
methods over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
DESCRIPTION
-----------
<S> <C>
Building............................. 31.5 years
Equipment............................ 3-5 years
Furniture and fixtures............... 7-10 years
Leasehold improvements............... shorter of lease
term or estimated
useful life
</TABLE>
Maintenance and repairs are expensed as incurred. The costs of sold or
retired assets are removed from the related asset and accumulated depreciation
accounts and any gain or loss is included in operations.
Goodwill and Intangible Assets
Goodwill, which is entirely associated with the Company's Chalke acquisition
described in Note 10, is being amortized on a straight-line basis over its
estimated life of five years. The carrying amount of goodwill is evaluated for
future recoverability on a periodic basis, relying on a number of factors,
including the estimated life of the customer base under the annual maintenance
agreements, the Chalke division's operating results, business plans, budgets
and economic projections and undiscounted cash flows. In addition, the
Company's evaluation considers non-financial data such as market trends,
product development cycles and changes in management's market emphasis.
Amortization expense associated with goodwill was $270,588 and $360,782 for
the years ended December 31, 1995 and 1996, respectively.
Other intangible assets, excluding complete technology, are being amortized
on a straight-line basis over their estimated lives of two to three years.
Complete technology is amortized over approximately six years based on the
ratio that current gross revenues of the product bear to the total of current
and anticipated future gross revenues of the product.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, cash equivalents,
marketable securities and trade receivables. The Company invests its cash in
deposits with commercial banks or in municipal bond and bond funds with a
broker/dealer. Concentrations of credit risk, with respect to trade
receivables, are limited due to the large number of customers comprising the
Company's customer base and their dispersion across many geographies. As of
December 31, 1995 and 1996, the Company had no significant concentrations of
credit risk.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS 109, an asset and liability approach
is used to recognize deferred tax assets and liabilities for the future tax
consequences of items that have already been recognized in its financial
statements and tax returns. A valuation allowance is established against net
deferred tax assets if, based on the weight of available evidence, it is more
likely than not that some or all of the net deferred tax assets will not be
realized.
F-9
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net Income (Loss) per Common and Common Equivalent Share
Net income (loss) per common share is computed based upon the weighted
average number of common shares and common equivalent shares outstanding after
certain adjustments described below. The computation of net income (loss) per
common and common equivalent share is based on net income (loss) divided by
the weighted average number of common and common equivalent shares outstanding
during the period after giving effect to all stock splits. Common equivalent
shares comprise stock options and warrants using the treasury stock method.
Common equivalent shares from stock options and warrants are excluded from the
computation if their effect is antidilutive. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletin No. 83, common and common
equivalent shares, issued at prices below the anticipated public offering
price during the 12 months immediately preceding the initial filing date have
been included in the calculation as if they were outstanding for all periods
presented (using the treasury stock method and the anticipated initial public
offering price). In addition, all preferred stock is considered to be a common
stock equivalent based on its terms and conditions except that in 1995
preferred stock is excluded as the effect of inclusion would be antidilutive.
The supplemental pro forma net income (loss) per common share is computed in
the same manner as historical net income (loss) per common share except that
all outstanding shares of preferred stock, which were converted into common
stock upon the closing of the initial public offering, were treated as having
been converted into common stock at the date of original issuance.
On a supplemental pro forma basis, net income per common share is the same
as historical net income per common share in 1994 and 1996, and net loss per
common share on a supplemental pro forma basis in 1995 was $.49 based on
8,911,248 weighted average common and common equivalent shares outstanding.
Fully diluted net income per share is not presented as it is the same as the
amounts disclosed in historical net income per share for the year ended
December 31, 1994, and was antidilutive for the years ended December 31, 1995
and 1996.
Accounting Standards
SFAS No. 128, "Earnings Per Share", must be adopted in 1997. The standard
requires the replacement of the current primary earnings per share
presentation with a basic earnings per share presentation. Basic earnings per
share includes no dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. The standard also requires companies with complex
capital stock structures to disclose diluted earnings per share and, among
other things, a reconciliation of the numerator and denominator for purposes
of the calculation. Management has not made a determination of the impact the
adoption of SFAS No. 128 would have on the financial statements.
3. DEBT AND REDEEMABLE PREFERRED STOCK, SERIES A:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
7.91% note payable, due to a related party in two
equal annual installments of principal and interest
of $1,500,000 on March 31, 1996 and 1997........... $ 2,678,201 $ 1,390,047
6.81% note payable, due August 31, 1999............. 450,000 450,000
----------- -----------
Total long-term debt................................ 3,128,201 1,840,047
Less current portion-related party.................. (1,288,154) (1,390,047)
Less current portion-other.......................... -- (450,000)
----------- -----------
Long-term debt...................................... $ 1,840,047 $ --
=========== ===========
</TABLE>
The 7.91% note payable to a related party was issued in connection with the
Company's acquisition of the assets and operations of Chalke Incorporated
("Chalke") (see Note 10). The term of the promissory note dated
F-10
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
March 31, 1995 is for repayment in two equal installments of $1,500,000 on
March 31, 1996 and March 31, 1997. The promissory note includes interest
accruing annually from March 31, 1995 at the applicable federal rate. The
applicable rate at March 31, 1995 was 7.91%. The present value of the
$3,000,000 two-year loan at 7.91% is $2,678,201. Interest expense for the
years ended December 31, 1995 and 1996 was $158,884 and $135,179,
respectively. Interest payable as of December 31, 1995 and 1996 was $158,884
and $82,465, respectively.
The 6.81% note payable was issued in connection with the Company's
acquisition of packaged software and related assets (see Note 10). The note
was issued at $505,000 and requires the Company to make periodic payments on
the debt based upon specific percentages of revenues collected by the Company
related to customers utilizing the acquired product. The payments are based
upon 10% of maintenance fees collected through December 31, 1996, 5% of
conversion fees collected through June 30, 1997 and 15% of all license fees
collected. In connection with the outstanding note payable of $450,000 and
invoices and accrued interest of $138,476, a settlement was reached in
December 1996 whereby the Company would pay $450,000 in total for all of the
outstanding obligations. The payment was made in January 1997. The balance of
$138,476 is included in other income on the accompanying statement of
operations.
Notes payable to a related party in the aggregate of $1,000,000 at 9% were
repaid in full on January 31, 1994 and April 29, 1994. In connection with this
borrowing in 1990, the Company issued warrants, with no assigned value, to
purchase 600,000 shares of common stock at $2.00 per share. On March 31, 1995,
the warrantholder exercised all 600,000 warrants at a discounted price of
$1.67 per share. The discounted price was negotiated to induce the related
party to exercise its warrants prior to the September 24, 1997 expiration date
in order for the Company to obtain the proceeds to assist in the financing of
the Chalke acquisition.
An 11% note payable to a related party of $500,000 was repaid in full on
December 14, 1994. In connection with this borrowing in 1990, the Company
issued warrants, with no assigned value, to purchase 400,000 shares of common
stock at $1.60 per share. In September 1994, the warrantholder surrendered the
right to purchase 100,000 shares of common stock for consideration of $2.90
per share. On March 31, 1995, the warrantholder exercised the remaining
300,000 warrants at a discounted price of $1.33 per share. The discounted
price was negotiated to induce the related party to exercise its warrants
prior to the September 24, 1997 expiration date in order for the Company to
obtain the proceeds to assist in the financing of the Chalke acquisition.
In connection with the note agreements referred to above, the 9% noteholders
entered into a stock purchase agreement with the Company under which the
noteholders purchased 500,000 shares of redeemable common stock for $750,000
and 15,000 shares of Series A redeemable convertible preferred stock for
$750,000.
In connection with the issuance of the convertible preferred stock, Series B
in September 1994, the following transactions were completed:
. The number of Series A redeemable convertible preferred stock shares
authorized and owned by the 9% noteholders was changed to 24,750 to
maintain the preferred stockholders' conversion rights and the par value
was changed to $0.20 per share from $1.00 per share;
. The liquidation value per share was changed to maintain the preferred
stockholders' aggregate liquidation value;
. The conversion ratio of the Series A, redeemable convertible preferred
stock was changed to a rate of one share of preferred stock for one
share of common stock; and
. The Company purchased the 500,000 shares of redeemable common stock held
by the 9% noteholders at $4.50 per share.
F-11
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Series A redeemable convertible preferred stock was converted into
Common Stock upon the closing of the Company's initial public offering (see
Note 4).
4. CAPITAL STOCK:
During 1994, the Company authorized the issuance of 152,778 shares of a new
series of preferred stock, Series B convertible preferred stock (the "Series B
stock"). On September 20, 1994, the Company entered into a stock purchase
agreement in which it issued 152,778 shares of Series B stock at $40.00 per
share, before costs of the transaction.
In connection with the issuance of the Series B stock, the Company
repurchased 100,000 warrants to purchase common stock and redeemed 500,000
shares of redeemable common stock (see Note 3). The warrants were repurchased
at $4.50 per warrant less their $1.60 exercise price and the redeemable common
stock was redeemed at $4.50 per share. Additionally, the Company repurchased
8,980 shares of common stock owned by employees at $4.50 per share and
repurchased options to purchase 28,000 shares of common stock from employees
at $4.50 per share. At the time of issuance of the Series B stock, the
authorized shares of common stock were increased from 8,850,000 to 10,224,720.
During 1995, the Company authorized the issuance of 155,132 shares of a new
series of preferred stock, Series C convertible preferred stock (the "Series C
stock"). On March 31, 1995 and April 13, 1995, the Company entered into stock
purchase agreements in which it issued the 155,132 shares of Series C stock at
$47.50 per share, before transaction costs.
In connection with the issuance of the Series C stock, holders of
outstanding warrants exercised their rights to purchase 900,000 shares of
common stock for $1,401,000. At the time of issuance of the Series C stock,
the authorized shares of common stock were increased from 10,224,720 to
11,673,400. At December 31, 1995, 3,326,600 shares of the common stock were
reserved for issuance upon the conversion of the Series A, Series B and Series
C stock. At December 31, 1995 and 1996, 2,860,000 and 2,919,708 shares,
respectively, were reserved for the stock option plans.
On April 25, 1996, the Company reincorporated in the State of Delaware and
exchanged each outstanding share of common stock for ten shares of common
stock, $.01 par value, and exchanged each outstanding share of preferred stock
Series A, Series B, and Series C for one share of preferred stock Series A,
Series B and Series C, respectively. Holders of outstanding options were
entitled, upon exercise, to purchase ten times the number of common stock
shares provided in each option, at an exercise price per share of one-tenth
the price per share provided in the option. The outstanding preferred stock
was converted into ten shares of common stock for each share of preferred
stock. The Company authorized a total of 25,000,000 shares of common stock,
$.01 par value, and a total of 1,000,000 shares of preferred stock, $.01 par
value. The outstanding Series A, Series B and Series C preferred stock was
subsequently converted into common stock on June 5, 1996, the closing date of
the Company's initial public offering. As of December 31, 1996 there was no
preferred stock outstanding.
The Company consummated an initial public offering of 3,750,000 shares of
common stock on June 5, 1996, of which 723,750 shares were sold by selling
stockholders. The Company received proceeds from the offering of approximately
$52,639,000, net of underwriting discounts and commissions and offering
expenses payable by the Company.
All shares, warrants, options and par values have been restated in the
financial statements and footnotes to reflect the effects of the split of the
Company's common stock.
F-12
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES:
The income tax provision (benefit) for the years ended December 31, 1994,
1995 and 1996 consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
-------- ----------- ---------
<S> <C> <C> <C>
Current:
Federal................................... $428,989 $ 434,005 $ 735,224
State..................................... 59,593 156,791 202,347
Deferred:
Federal................................... 135,200 (2,756,736) (427,047)
State..................................... 37,100 (858,270) (96,761)
-------- ----------- ---------
Total................................... $660,882 $(3,024,210) $ 413,763
======== =========== =========
</TABLE>
The effective tax rates were 42.8%, (41.0)%, and 46.6% for the years ended
December 31, 1994, 1995 and 1996, respectively, and are reconciled from the
expected tax expense (benefit) (the expected tax expense (benefit) is computed
by applying the U.S. Federal corporate income tax rate of 34% to income before
income taxes) as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
-------- ----------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)..... $524,877 $(2,506,789) $ 301,607
Increase (decrease) in income taxes resulting
from:
State income taxes (net of Federal income
tax benefit)............................... 63,817 (459,016) 69,687
Tax exempt interest income.................. -- -- (326,927)
Tax effects of foreign operations .......... -- -- 305,763
Meals and entertainment..................... 14,830 38,137 61,289
Other....................................... 57,358 (96,542) 2,344
-------- ----------- ---------
Income tax expense (benefit).................. $660,882 $(3,024,210) $ 413,763
======== =========== =========
</TABLE>
The components of the net deferred tax asset at December 31, 1995 and 1996
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets............................... $4,279,920 $4,706,942
Deferred tax liabilities.......................... (957,014) (773,431)
---------- ----------
Net deferred tax asset.......................... $3,322,906 $3,933,511
========== ==========
</TABLE>
F-13
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income taxes at December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1996
-------------------------- --------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Purchased in-process re-
search and development.. $3,063,260 $ -- $2,922,354 $ --
Accounting method
change--cash to accrual. -- 925,877 -- 609,041
Accounting method
change--advance pay-
ments................... 641,385 -- 587,733 --
Deferred revenues........ 137,744 -- -- --
Acquired technology...... 133,202 31,137 335,529 --
Accrued expenses......... 149,049 -- 352,494 118,631
Accounts receivable...... 106,125 -- 470,984 --
Other.................... 49,155 -- 37,848 45,759
---------- -------- ---------- --------
Total.................. $4,279,920 $957,014 $4,706,942 $773,431
========== ======== ========== ========
</TABLE>
6. LEASES
The Company is obligated under noncancelable operating leases for office
space and office equipment. Total related expense for the years ended December
31, 1994, 1995 and 1996 was $172,130, $464,560 and $767,537, respectively.
Future minimum lease payments under these operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997..................................... $ 700,444
1998..................................... 617,889
1999..................................... 412,279
2000..................................... 362,107
2001..................................... 334,829
----------
$2,427,548
==========
</TABLE>
The Company leases a portion of its building and subleases other office
space to unrelated parties under noncancelable leases. The Company received
rent under these leases of $17,772, $19,440 and $54,396 for the years ended
December 31, 1994, 1995 and 1996, respectively. Minimum future lease receipts
under these leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997....................................... $ 75,576
1998....................................... 74,016
1999....................................... 29,220
--------
$178,812
========
</TABLE>
7. LICENSE AND ROYALTY AGREEMENTS:
During 1994 and 1995, the Company was a party to two license and royalty
agreements as a result of the joint development of software products. One of
these agreements was with a related party. The related party development
partner was paid a 3% royalty based on a percentage of license fee revenues
collected related to the Company's CAMRA and FILMS products. The second
agreement called for royalty payments of 3% on a
F-14
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
certain module until $22,000 had been paid. The total royalty expense included
in the cost of software licensing revenues under these agreements of $105,890
and $186,914 for the years ended December 31, 1994 and 1995, respectively,
includes $98,925 and $165,835, respectively, to a related party. As more fully
described in Note 11, on January 27, 1996, the Company licensed its CAMRA and
FILMS applications software and certain other programs to the related party
pursuant to a software license agreement. Under the terms of this agreement,
all outstanding accounts receivable and accounts payable between the parties
as of January 27, 1996 were forgiven, including amounts payable by the Company
under certain royalty agreements. The agreement also terminated the
requirement for the Company to pay royalties to the related party in the
future. The second agreement was paid in full during 1996. The Company has no
future obligations under royalty agreements related to CAMRA and FILMS
products.
The Company also has non-exclusive rights, acquired by the Company in the
Chalke acquisition, to integrate software into certain Company products. Under
the terms of the agreement, the licensor of the software is paid minimum
monthly royalties and additional royalties based on a percentage of the
related license fee revenues collected. These payments range between 20% and
43% of sales of the related software products. The Company also entered into
an agreement in 1996 which allows the Company to integrate software into a
certain Company product. Under this agreement, the licensor is paid $1,500 for
the first 200 clients that purchase the Company's product containing this
software and a maintenance agreement for that product. The fee is reduced to
$1,000 per client for each client thereafter. The Company is obligated to pay
on a cumulative basis at least $25,000 per quarter. The total royalty expense
under these agreements for the years ended December 31, 1995 and 1996 was
$331,572 and $451,821, respectively.
8. DEFINED CONTRIBUTION PLANS:
On January 1, 1992, the Company established its 401(k) Profit Sharing Plan
and Trust (the "Plan"). The Plan covers substantially all employees. Each
employee may elect to contribute to the Plan, through payroll deductions, up
to 15% of his or her salary, subject to certain limitations. The Plan provides
for a Company match of employees' contributions in an amount equal to 50% of
an employee's contributions up to $1,000, in addition to discretionary
contributions as determined by the Board of Directors.
In connection with the acquisition of Chalke on March 31, 1995, the Company
assumed the pre-existing deferred compensation plan for Chalke employees,
which was established in January 1993. Under the plan, each eligible employee
may elect to contribute to the plan up to 20% of his or her salary, subject to
certain limitations.
During the years ended December 31, 1994, 1995 and 1996, the Company
incurred $26,691, $73,440 and $74,045, respectively, of expense related to
these plans.
9. STOCK OPTION AND PURCHASE PLANS:
During 1993, the Board of Directors approved an employee stock option plan
("1993 Plan") which was in place through December 1994 and reserved 1,000,000
shares of common stock for issuance under this plan. During 1994, the Board of
Directors approved a new plan ("1994 Plan"), effective January 1, 1995, for
which 1,000,000 shares of common stock were reserved. The 1994 Plan was
amended in October 1995 and April 1996 to reserve additional shares of common
stock for issuance under the plan, bringing the total shares of common stock
reserved for issuance to 3,000,000. Options issued under the 1993 Plan remain
under the terms of that plan. There were options to purchase 128,000 shares of
common stock outstanding under the 1993 Plan at December 31, 1996. No new
options will be granted under this plan. Options under the 1993 Plan are fully
vested and expire in 1998. Generally, options outstanding under the 1994 Plan
vest ratably over three, four or five years and expire ten years subsequent to
the grant. There were options to purchase 1,146,208 shares of common stock
outstanding under the 1994 Plan at December 31, 1996 and 1,587,000 shares
available for option grants.
F-15
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The purchase price of the shares subject to each option granted will not be
less than 100% of the fair market value of the Company's common stock at the
date of grant. Options granted prior to the issuance of the Series B preferred
stock are exercisable for five years from the date of grant. Options issued
subsequent to the Series B preferred stock have vesting periods of three to
five years from the date of grant. As of December 31, 1996, options to
purchase 128,000 and 353,916 shares of common stock were then exercisable
under the 1993 Plan and 1994 Plan, respectively. As of December 31, 1995,
options to purchase 186,500 and 77,250 shares of common stock were then
exercisable under the 1993 Plan and 1994 Plan, respectively.
The following table summarizes stock option transactions for the years ended
December 31, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------ --------
<S> <C> <C>
Outstanding at December 31, 1993............................ 410,000 $0.07
Granted................................................... 328,000 3.65
Canceled.................................................. -- --
Exercised................................................. (80,000) 0.08
Redeemed.................................................. (28,000) 0.07
--------- -----
Outstanding at December 31, 1994............................ 630,000 1.93
Granted................................................... 1,074,000 4.34
Canceled.................................................. (167,500) 2.06
Exercised................................................. (60,000) 0.08
--------- -----
Outstanding at December 31, 1995............................ 1,476,500 3.75
Granted................................................... 217,000 8.31
Canceled.................................................. (152,500) 5.13
Exercised................................................. (266,792) 3.14
--------- -----
Outstanding at December 31, 1996............................ 1,274,208 $4.49
========= =====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- --------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICES AT 12/31/96 LIFE PRICE AT 12/31/96 PRICE
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.07-$0.15..... 128,000 1.6 years $ .08 128,000 $ .08
$4.00-$9.00..... 1,146,208 8.4 years $4.96 353,916 $4.29
</TABLE>
The exercise price for each of the above grants was determined by the Board
of Directors of the Company to be equal to the fair market value of the
Company's common stock on the date of grant. In reaching this determination at
the time of such grants prior to the initial public offering (see Note 4), the
Board considered a broad range of factors, including the illiquid nature of an
investment in the Company's common stock, the Company's historical financial
performance, the preferences (including liquidation) of the Company's
outstanding convertible preferred stock and the Company's future prospects.
Exercise prices for grants issued subsequent to the initial public offering
are determined by the closing sale price of the stock on the Nasdaq National
Market on the date of the grant.
F-16
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In April 1996, the Company adopted the 1996 Employee Stock Purchase Plan
which permits employees of the Company to purchase shares of common stock
pursuant to payroll deductions at a price equal to 85% of the fair market
value of the Company's common stock on either the first or last day of the
purchase period, whichever is lower. The initial purchase period is from
October 1, 1996 to March 31, 1997. As of December 31, 1996, employees had
deposited with the Company, through payroll deductions, $83,372 to purchase
shares through the stock purchase plan at March 31, 1997. In April 1996, the
Company also adopted the 1996 Director Stock Option Plan which provides for
non-employee directors to receive options to purchase common stock of the
Company at an exercise price equal to the fair market value of the common
stock at the date of grant. The Company has reserved a total of 350,000 shares
of common stock for issuance under these plans.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for the stock option plans and employee stock purchase
plan. Had compensation cost for the Company's stock option plans and employee
stock purchase plan been determined consistent with SFAS No. 123, the
Company's net income (loss) and earnings per share would have been adjusted to
the pro forma amounts indicated in the table below:
<TABLE>
<CAPTION>
1995 1996
----------- --------
<S> <C> <C>
Net income (loss) as reported........................... $(4,348,698) $473,317
=========== ========
Net loss pro forma...................................... $(4,559,597) $(15,950)
=========== ========
Net income (loss) per common and common equivalent
share.................................................. $ (0.72) $ 0.04
=========== ========
Net loss per common and common equivalent share pro
forma.................................................. $ (0.76) $ 0.00
=========== ========
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996: dividend yield of 0%; expected
volatility of 0% and 80% in 1995 and 1996, respectively; risk-free interest
rate of 6.8% and 6.1% in 1995 and 1996, respectively; and expected lives of
5.5 years. The compensation cost for the stock option plans was $210,899 and
$472,420 for 1995 and 1996, respectively. The weighted-average fair value of
options granted using this option-pricing model in 1995 and 1996 was $1.34 and
$5.87, respectively.
The fair value of each estimated stock grant under the employee stock
purchase plan is based on the price of the stock at the beginning of the
offering period ($9.625 per share) using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in 1996:
dividend yield of 0%; expected volatility of 80%; risk-free interest rate of
5.32%; and expected lives of six months. The compensation cost for the
employee stock purchase plan was $16,847 for 1996.
10. ACQUISITIONS:
On March 31, 1995, the Company purchased substantially all of the assets and
operations of Chalke for $12,702,964. The purchase has been paid in the form
of cash of $7,426,126, net of cash received from Chalke and a line of credit
repayment, a promissory note with a present value of $2,678,201, the
assumption of liabilities of $2,598,637 and the costs of effecting the
transaction.
The Chalke acquisition was accounted for as a purchase and, accordingly, the
net assets and results of operations of Chalke have been included in the
consolidated financial statements from the acquisition date. The purchase
price was first allocated to tangible assets based on their net realizable
value or fair market value on the date of the acquisition. The remaining
portion of the purchase price is allocated to identified intangible assets and
goodwill.
F-17
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following summarizes the allocation of the purchase price.
<TABLE>
<S> <C>
Cash.......................................................... $ 49,188
Accounts receivable........................................... 1,581,151
Property and equipment........................................ 572,137
Complete technology........................................... 794,865
Other assets.................................................. 12,820
Incomplete technology......................................... 7,888,886
Goodwill...................................................... 1,803,917
-----------
Total purchase price........................................ $12,702,964
===========
</TABLE>
The allocation to complete technology is based on future risk-adjusted
discounted cash flows. Complete technology has been capitalized and included
in the caption "intangible and other assets" in the accompanying consolidated
balance sheets. Amortization expense associated with complete technology was
$121,485 and $243,377 for the years ended December 31, 1995 and 1996.
The allocation to incomplete technology is also based on future risk-
adjusted discounted cash flows and has been expensed in 1995, in accordance
with generally accepted accounting principles. The incomplete technology had
not achieved technological feasibility and had no alternative uses.
The values allocated to complete and incomplete technology were determined
after extensive evaluation of the status of the products as they existed at
the time of acquisition, an assessment of their commercial viability and, in
the case of the two products considered to be incomplete technology, an
analysis of the additional costs necessary to reach technological feasibility.
The COPE product consisted of several modules, all of which were necessary
to meet the needs of its target market--large financial institutions. As of
the acquisition date, development of none of the modules had been completed
and the validity of the relevant algorithms had not been validated. PTS 2000
was also incomplete as the product existed only as early stage prototype and
the core development was still in the tool set and the object-oriented design
stage.
Neither product had any alternative future use (in other research and
development projects or otherwise) as they were not commercially viable at the
time of acquisition and could not be utilized with any of the Company's
existing products. The Company discontinued the development of COPE as a
stand-alone product in 1996.
Future discounted cash flows require estimates of future revenues and
expenses, analysis of future market conditions and an estimate of the future
economic life of the product. Estimates were based on management's analysis of
the data available at the time. It is reasonably possible that the estimates
could change significantly in the near term as, in the case of incomplete
technology, the new products are introduced into the market and the existing
complete technology product faces new competitive pressures.
The Company assumed the current liabilities of Chalke as of March 31, 1995,
totaling $3,024,763, which included an outstanding line of credit, trade
accounts payable and various accrued expenses. The line of credit was repaid
by the Company in accordance with the purchase agreement.
The unaudited pro forma condensed consolidated results of operations
presented below for the years ended December 31, 1994 and 1995, assume the
Chalke acquisition occurred at the beginning of each period presented. The
unaudited pro forma condensed statement of operations for the year ended
December 31, 1995, excludes the $7,888,886 write-off of purchased in-process
research and development.
F-18
<PAGE>
SS&C TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994 1995
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA
<S> <C> <C>
Total revenues...................................... $ 17,439 $ 21,164
Operating income.................................... 911 403
Net income.......................................... 406 235
Net income per common and common equivalent share... .06 .02
</TABLE>
These pro forma results are not necessarily indicative of results of
operations that would have actually occurred had the acquisition taken place
at the beginning of each period, or of future operations of the combined
companies.
In August 1994, the Company acquired packaged software and other assets from
an unrelated entity for a purchase price of $840,000. Payment of the purchase
price consisted of cash of $160,000 at the closing; the Company's agreement,
under separately executed licensing and maintenance agreements, to provide the
seller with a CAMRA software license and five years of maintenance valued at
$75,000 and $100,000, respectively; and a note payable for the remaining
$505,000 which was subsequently reduced by $55,000 in a non-cash exchange for
a license agreement. The acquisition has been accounted for as a purchase and,
accordingly, the assets and results of operations are included in the
consolidated financial statements from the acquisition date. The assets
received in the acquisition, principally the packaged software and customer
lists, net of accumulated amortization of $93,333, $373,333 and $653,333 as of
December 31, 1994, 1995 and 1996, respectively, are included in intangible and
other assets. Amortization is being provided over a three-year period. The
results of operations from this acquisition are immaterial.
11. RELATED PARTY TRANSACTIONS:
In 1994 and 1995, the Company entered into licensing and maintenance
contracts with several related parties that have ownership interests in the
Company, as well as representation on the Company's Board of Directors. Total
licensing, maintenance and professional services fee revenues under these
agreements were $451,633 and $263,054 for the years ended December 31, 1994
and 1995, respectively. Amounts collected under these agreements totaled
$457,547 and $294,806 for the years ended December 31, 1994 and 1995,
respectively. At December 31, 1994 and 1995, $99,360 and $228,163,
respectively, remained payable from these parties to the Company.
As described in Note 7, the Company licensed its CAMRA and FILMS
applications software and certain other programs to a related party for a
total purchase price of $2,054,786, including a five-year maintenance program
beginning in February 1996. The purchase price was allocated to license fees
of $1,543,561, maintenance fees over the five-year period of $375,000 and
deferred interest of $136,225 resulting from an extended payment plan. Terms
include $900,000 payable upon execution of the agreement and quarterly
installments of $52,500 for five years. All outstanding receivables and
payables between the parties as of January 27, 1996, including those described
in the previous paragraph, were forgiven, resulting in an additional $104,786
allocated to the purchase price. Interest was imputed at 9% for payments on
the license fee. The amount collected from the related party during the year
ended December 31, 1996 was $1,113,477, including sales tax and other products
not related to this agreement.
The Company also licenses its CAMRA applications software to another related
party from which the Company derived revenues of $60,000, $62,600 and $0 in
1994, 1995 and 1996, respectively. This license was transferred under the
agreement dated January 27, 1996 such that all licenses and maintenance
agreements with these three related parties, which are affiliated with each
other, are governed by one agreement.
F-19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2 Agreement and Plan of Merger, dated April 19, 1996, between the
Registrant and Securities Software & Consulting, Inc., a Connecticut
corporation, is incorporated herein by reference to Exhibit 2 to the
Registrant's Registration Statement on Form S-1, as amended (File No.
333-3094) (the "Form S-1").
3.1 Amended and Restated Certificate of Incorporation of the Registrant is
incorporated herein by reference to Exhibit 3.2 to the Form S-1.
3.2 Amended and Restated By-Laws of the Registrant is incorporated herein
by reference to Exhibit 3.4 to the Form S-1.
4 Specimen Certificate for shares of Common Stock, $.01 par value per
share, of the Registrant is incorporated herein by reference to
Exhibit 4 to the Form S-1.
10.1* 1993 Stock Option Plan is incorporated herein by reference to Exhibit
10.1 to the Form S-1.
10.2* 1994 Stock Option Plan, as amended.
10.3* 1996 Director Stock Option Plan, as amended.
10.4* 1996 Employee Stock Purchase Plan, as amended.
10.5* Employment Agreement between the Registrant and William C. Stone,
dated March 28, 1996, is incorporated herein by reference to Exhibit
10.5 to the Form S-1.
10.6* Employment Agreement between the Registrant and Shane A. Chalke, dated
as of March 31, 1995, as amended, is incorporated herein by reference
to Exhibit 10.6 to the Form S-1.
10.7 Promissory Note dated March 31, 1995 in the principal amount of
$3,000,000 issued by the Registrant to Chalke Incorporated is
incorporated herein by reference to Exhibit 10.8 to the Form S-1.
10.8 Asset Purchase Agreement, dated March 31, 1995, among the Registrant,
Shane A. Chalke and Chalke Incorporated is incorporated herein by
reference to Exhibit 10.9 to the Form S-1.
10.9 Stock and Note Purchase Agreement, dated September 25, 1990, as
amended on September 20, 1994, among the Registrant and certain
stockholders of the Registrant is incorporated herein by reference to
Exhibit 10.10 to the Form S-1.
10.10 Series B Preferred Stock Purchase Agreement, dated September 20, 1994,
among the Registrant and certain stockholders of the Registrant is
incorporated herein by reference to Exhibit 10.11 to the Form S-1.
10.11 Series C Preferred Stock Purchase Agreement, dated March 31, 1995,
among the Registrant and certain stockholders of the Registrant is
incorporated herein by reference to Exhibit 10.12 to the Form S-1.
10.12** Software License Agreement between the Registrant and Conning Asset
Management Company, dated January 27, 1996, is incorporated herein by
reference to Exhibit 10.15 to the Form S-1.
10.13 Reseller Agreement between the Registrant and PFX(USA), Inc., dated
June 22, 1993, is incorporated herein by reference to Exhibit 10.16
to the Form S-1.
11 Computation of income per common share.
21 Subsidiaries of the Registrant is incorporated herein by reference to
Exhibit 21 to the Form S-1.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement filed herewith in
response to Item 14(a)(3) of the Instructions to the Annual Report on Form
10-K.
**Confidential treatment previously granted as to certain portions of such
document.
<PAGE>
EXHIBIT 10.2
SECURITIES SOFTWARE AND CONSULTING, INC.
1994 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Securities Software and Consulting, Inc., a
-------
Connecticut corporation.
(g) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of (i) any leave of
absence
<PAGE>
approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave. For purposes of Incentive Stock Options, no
such leave may exceed 90 days, unless reemployment upon expiration of such leave
is guaranteed by statute or contract, including Company policies. If
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 91st day of such leave any Incentive Stock Option held
by the Optionee shall cease to be treated as an Incentive Stock Option and shall
be treated for tax purposes as a Nonstatutory Stock Option.
(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
-2-
<PAGE>
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
------
(o) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(p) "Optionee" means an Employee or Consultant who receives an
--------
Option.
(q) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1994 Stock Option Plan.
(s) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(t) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
(3) Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,000,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
(4) Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which
----------------------
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
-3-
<PAGE>
(b) Plan Procedure after the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Administration with Respect to Directors and Officers.
-----------------------------------------------------
With respect to grants of Options to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3 promulgated under
the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a committee
designated by the Board to administer the Plan, which committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who
- ---------
are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of state corporate and securities laws, of the Code, and of any applicable
stock exchange (the "Applicable Laws"). Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
-4-
<PAGE>
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the Shares relating
thereto, based in each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the
purchase of unvested Shares, subject to such terms and conditions as the
Administrator may determine; and
(x) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
-5-
<PAGE>
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares underlying Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) in excess of $100,000, such excess shall be
treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option:
-6-
<PAGE>
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
share exercise price shall be determined by the Administrator.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) other Shares which (x) in the case of Shares acquired upon exercise
of an Option have been owned by the Optionee for more than six months on the
date of surrender and (y) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, and (4) any combination of the foregoing methods of payment.
In making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
(9) Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder
-7-
<PAGE>
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. The Company shall issue (or cause to be issued) such stock
certificate promptly upon exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
----------------------------------------------------
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three months following the Optionee's termination. In the case
of an Incentive Stock Option, such period of time for exercise shall not exceed
three months from the date of termination. Notwithstanding the above, in the
event of an Optionee's change in status from Consultant to Employee or Employee
to Consultant, an Option held by the Optionee shall not automatically terminate
solely as a result of such change in status. However, an Incentive Stock Option
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option on the day that is three months and
one day following such change of status. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. If such disability is not a "disability" as
such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall cease to be treated as
an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option on the ninety-first (91st) day following such termination. To the
extent that Optionee is not entitled to exercise the Option at the date of
termination, or if
-8-
<PAGE>
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who has acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
(f) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock
-9-
<PAGE>
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action. In addition,
immediately prior to such dissolution or liquidation, any Company repurchase
option applicable to Shares shall lapse as to all such Shares, provided such
transaction takes place at the time and in the manner contemplated.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each Option may be assumed or an equivalent option substituted
by such successor corporation (including as a "successor" any purchaser of
substantially all of the assets of the Company) or a parent or subsidiary of
such successor corporation. In the event that the successor corporation or a
parent or subsidiary of such successor corporation does not agree to assume the
Option or to substitute an equivalent option, the Administrator may, in its sole
discretion, as soon as practicable prior to the effective date of such
transaction, provide for the Optionee to have the right to exercise the Option
as to all of the Optioned Stock, including Shares that would not otherwise be
exercisable. In such event the Administrator shall notify the Optionee as soon
as practicable prior to the effective date of such transaction that the Option
shall be fully exercisable for a stated period from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger, the Option confers the right to purchase, for each Share of Optioned
Stock subject to the Option immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor
-10-
<PAGE>
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
-11-
<PAGE>
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
-12-
<PAGE>
AMENDMENT NO. 1 TO THE 1994 STOCK OPTION PLAN
OF
SS&C TECHNOLOGIES, INC.
JULY 31, 1996
Section 9 of the 1994 Stock Option Plan (the "Plan") of SS&C Technologies,
Inc. (the "Company") is hereby amended to add the following provision
(capitalized terms used herein and not defined herein shall have the respective
meaning ascribed to such terms in the Plan):
(g) November 23, 1994 Grants. Notwithstanding any other provision of this
------------------------
Section 9 to the contrary, with respect to any Option granted on November 23,
1994 in connection with certain Employment Contracts of even date (the
"Employment Contracts") by and between the Company and certain Optionees, the
following provisions shall apply:
(a) Termination of Relationship. In the event of the termination of an
---------------------------
Optionee's Continuous Status as an Employee or Consultant, the Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise the Option through the expiration date of the term
of such option as set forth in the Notice of Grant (the "Expiration Date"). To
the extent that the Optionee was not entitled to exercise the Option at the
Termination Date, the Option shall terminate; provided, however, that if the
-------- -------
Optionee shall be terminated from employment with the Company without Cause (as
defined in the Employment Contracts) prior to the close of business on November
28, 1997, the Option shall become exercisable in full as of the Termination Date
and shall remain exercisable through the Expiration Date.
(b) Disability of Optionee. In the event of the termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only through the Expiration Date, exercise
the Option to the extent otherwise entitled to exercise it at such Termination
Date. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option, such
Incentive Stock Option shall cease to be treated as an Incentive Stock Option
and will be treated for tax purposes as a Nonstatutory Stock Option on the
ninety-first (91st) day following such termination.
(c) Death of Optionee. In the event of the termination of an Optionee's
-----------------
Continuous Status as an Employee or Consultant as a result of the death of the
Optionee, the Option may be exercised at any time (but in no event later than
the Expiration Date), by the Optionee's estate or by a person
<PAGE>
who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent the Optionee could exercise the Option at the date
of death.
Except as aforesaid, the Plan shall remain in full force and effect.
-2-
<PAGE>
AMENDMENT NO. 2 TO THE 1994 STOCK OPTION PLAN
OF
SS&C TECHNOLOGIES, INC.
October 30, 1996
The 1994 Stock Option Plan (the "Plan") of SS&C Technologies, Inc. is
hereby amended as follows (capitalized terms used herein and not defined herein
shall have the respective meaning ascribed to such terms in the Plan):
1. The title of the Plan shall be:
SS&C TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
2. Section 4(a) of the Plan shall be deleted in its entirety and replaced with
the following:
"(a) Plan Procedures. The Plan shall be administered by the Board or a
---------------
committee appointed by the Board. "
3. Section 4(b) of the Plan shall be deleted in its entirety, and Sections
4(c) and 4(d) shall hereinafter become Sections 4(b) and 4(c), respectively.
4. Section 10 of the Plan shall be deleted in its entirety and replaced with
the following:
"10. Transferability of Options. Except as otherwise provided in
--------------------------
the Option Agreement, no Option granted thereby may be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner either voluntarily or by
operation of law, otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee shall be exercisable only
by the Optionee."
5. Section 13(a) of the Plan shall be amended to delete the words "Rule 16b-3
under the Exchange Act or with" in the second sentence.
Except as aforesaid, the Plan shall remain in full force and effect.
<PAGE>
EXHIBIT 10.3
SS&C TECHNOLOGIES, INC.
1996 DIRECTOR STOCK OPTION PLAN
1. Purpose.
-------
The purpose of this 1996 Director Stock Option Plan (the "Plan") of SS&C
Technologies, Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. Administration.
--------------
The Board of Directors shall supervise and administer the Plan. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
concerning interpretation of the Plan or any options granted under it shall be
resolved by the Board of Directors and such resolution shall be final and
binding upon all persons having an interest in the Plan.
3. Participation in the Plan.
-------------------------
Directors of the Company who are not full-time employees of the Company or
any subsidiary of the Company ("outside directors") shall be eligible to receive
options under the Plan.
4. Stock Subject to the Plan.
-------------------------
(a) The maximum number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), which may be issued under the Plan shall be
150,000 shares, subject to adjustment as provided in Section 7.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
<PAGE>
5. Terms, Conditions and Form of Options.
-------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates. Options shall automatically be granted to all
------------------
eligible outside directors as follows:
(i) each person who first becomes an eligible outside director after
the closing date (the "Closing Date") of the Company's initial public offering
of Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, shall be granted an option to purchase 5,000
shares of Common Stock on the date of his or her initial election to the Board
of Directors, provided that such eligible director is elected on a date other
than the date of an Annual Meeting of Stockholders; and
(ii) each eligible outside director shall be granted an additional
option to purchase 5,000 shares of Common Stock on the date of each Annual
Meeting of Stockholders of the Company commencing with the 1997 Annual Meeting
of Stockholders, provided that he or she continues to serve as a director
immediately following such Annual Meeting.
(b) Option Exercise Price. The option exercise price per share for each
---------------------
option granted under the Plan shall equal (i) the last reported sales price per
share of the Company's Common Stock on the Nasdaq National Market (or, if the
Company is traded on a nationally recognized securities exchange on the date of
grant, the reported closing sales price per share of the Company's Common Stock
by such exchange) on the date of grant (or if no such price is reported on such
date such price as reported on the nearest preceding day) or (ii) if the Common
Stock is not traded on the Nasdaq National Market or an exchange, the fair
market value per share on the date of grant as most recently determined by the
Board of Directors.
(c) Options Non-Transferable. To the extent required to qualify for the
------------------------
exemption provided by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any option granted under the Plan to an optionee
shall not be transferable by the optionee other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder, and shall be exercisable during the optionee's lifetime
only by the optionee or the optionee's guardian or legal representative.
-2-
<PAGE>
(d) Vesting Period.
--------------
(i) General. Each option granted under the Plan shall become
-------
exercisable on the first anniversary of the Option Grant Date; provided,
however, that the optionee continue to serve as a director on such date.
(ii) Acceleration Upon Change in Control. Notwithstanding the
-----------------------------------
foregoing, each outstanding option granted under the Plan shall immediately
become exercisable in full in the event a Change in Control (as defined in
Section 8) of the Company occurs.
(e) Termination. Each option shall terminate, and may no longer be
-----------
exercised, on the earlier of the (i) the date 10 years after the Option Grant
Date or (ii) the date 60 days after the optionee ceases to serve as a director
of the Company; provided that, in the event an optionee ceases to serve as a
director due to his or her death or disability (within the meaning of Section
22(e)(3) of the Code or any successor provision), then the exercisable portion
of the option may be exercised, within the period of 180 days following the date
the optionee ceases to serve as a director (but in no event later than 10 years
after the Option Grant Date), by the optionee or by the person to whom the
option is transferred by will, by the laws of descent and distribution, or by
written notice pursuant to Section 5(h).
(f) Exercise Procedure. An option may be exercised only by written notice
------------------
to the Company at its principal office accompanied by payment in cash of the
full consideration for the shares as to which the option is exercised.
(g) Exercise by Representative Following Death of Director. An optionee,
------------------------------------------------------
by written notice to the Company, may designate one or more persons (and from
time to time change such designation), including his or her legal
representative, who, by reason of the optionee's death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.
6. Limitation of Rights.
--------------------
(a) No Right to Continue as a Director. Neither the Plan, nor the
----------------------------------
granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain the optionee as a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
-----------------------------------
as a stockholder with respect to the shares covered by his or her option until
the date
-3-
<PAGE>
of the issuance to him or her of a stock certificate therefor, and no adjustment
will be made for dividends or other rights (except as provided in Section 7) for
which the record date is prior to the date such certificate is issued.
7. Adjustment Provisions for Mergers, Recapitalizations and Related
----------------------------------------------------------------
Transactions.
------------
If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are exchanged for a different number or kind of securities of the Company or of
another entity, or (ii) additional shares or new or different shares or other
securities of the Company or of another entity are distributed with respect to
such shares of Common Stock, the Board of Directors shall make an appropriate
and proportionate adjustment in (x) the maximum number and kind of shares
reserved for issuance under the Plan, (y) the number and kind of shares or other
securities subject to then outstanding options under the Plan, and/or (z) the
price for each share subject to any then outstanding options under the Plan
(without changing the aggregate purchase price for such options), to the end
that each option shall be exercisable, for the same aggregate exercise price,
for such securities as such optionholder would have held immediately following
such event if he had exercised such option immediately prior to such event. No
fractional shares will be issued under the Plan on account of any such
adjustments.
8. Change in Control.
-----------------
For purposes of the Plan, a "Change in Control" shall be deemed to have
occurred only if any of the following events occurs: (i) any "person", as such
term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities; (ii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; (iii) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or (iv) individuals who, on the date
on which the Plan was
-4-
<PAGE>
adopted by the Board of Directors, constituted the Board of Directors of the
Company, together with any new director whose election by the Board of Directors
or nomination for election by the Company's stockholders was approved by a vote
of at least a majority of the directors then still in office who were directors
on the date on which the Plan was adopted by the Board of Directors or whose
election or nomination was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors.
9. Modification, Extension and Renewal of Options.
----------------------------------------------
The Board of Directors shall have the power to modify or amend outstanding
options; provided, however, that no modification or amendment may (i) have the
effect of altering or impairing any rights or obligations of any option
previously granted without the consent of the optionee, or (ii) modify the
number of shares of Common Stock subject to the option (except as provided in
Section 7).
10. Termination and Amendment of the Plan.
-------------------------------------
The Board of Directors may suspend, terminate or discontinue the Plan or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company, no amendment may (i) increase the number of
shares subject to the Plan (except as provided in Section 7), (ii) materially
modify the requirements as to eligibility to receive options under the Plan, or
(iii) materially increase the benefits accruing to participants in the Plan; and
provided further that the Board of Directors may not amend the provisions of
Sections 3, 5(a), 5(b) or 5(c) more frequently than once every six months, other
than to comply with changes in the Code or the rules thereunder.
11. Notice.
------
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
12. Governing Law.
-------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
13. Stockholder Approval.
--------------------
The Plan is conditional upon stockholder approval of the Plan within one
year from its date of adoption by the Board of Directors. No option under the
Plan may
-5-
<PAGE>
be exercised until such stockholder approval is obtained, and the Plan and all
options granted under the Plan shall be null and void if the Plan is not so
approved by the Company's stockholders.
Adopted by the Board of Directors on April 1, 1996
Approved by the stockholders on April 1, 1996
-6-
<PAGE>
AMENDMENT NO. 1 TO THE 1996 DIRECTOR STOCK OPTION PLAN
OF
SS&C TECHNOLOGIES, INC.
October 30, 1996
The 1996 Director Stock Option Plan (the "Plan") of SS&C Technologies, Inc.
is hereby amended as follows (capitalized terms used herein and not defined
herein shall have the respective meaning ascribed to such terms in the Plan):
1. The reference to Section 5(h) at the end of Section 5(e) of the Plan shall
be amended to refer to Section 5(f).
2. Section 10 of the Plan shall be deleted in its entirety and replaced with
the following:
"10. Termination and Amendment of the Plan. The Board of Directors may
-------------------------------------
suspend, terminate or discontinue the Plan or amend it in any respect
whatsoever."
Except as aforesaid, the Plan shall remain in full force and effect.
<PAGE>
EXHIBIT 10.4
SS&C TECHNOLOGIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this 1996 Employee Stock Purchase Plan (the "Plan") is to
provide eligible employees of SS&C Technologies, Inc., a Delaware corporation
(the "Company"), and certain of its subsidiaries with opportunities to purchase
shares of the Company's Common Stock, $.01 par value (the "Common Stock"). Two
Hundred Thousand (200,000) shares of Common Stock in the aggregate have been
approved for this purpose.
1. Administration. The Plan will be administered by the Company's Board
--------------
of Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
-----------
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined below) to purchase Common Stock under the Plan, provided
that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the
<PAGE>
employee has a contractual right to purchase shall be treated as stock owned by
the employee.
3. Offerings. The Company will make one or more offerings ("Offerings")
---------
to employees to purchase Common Stock under this Plan. The Board or the
Committee shall determine the commencement dates of each of the Offerings (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a
period (a "Plan Period") during which payroll deductions will be made and held
for the purchase of Common Stock at the end of the Plan Period. The Board or
the Committee shall choose a Plan Period of twelve (12) months or less for each
of the Offerings and may, at its discretion, choose a different Plan Period for
each Offering.
4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the Treasurer of the Company at least 14
days prior to the applicable Offering Commencement Date. The form will
authorize a regular payroll deduction from the Compensation received by the
employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.
5. Deductions.
----------
(a) The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction, as set forth below, from the
Compensation he or she receives during the Plan Period or such shorter period
during which deductions from payroll are made. Payroll deductions may be at the
rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of Compensation.
(b) No employee may be granted an Option which permits his rights to
purchase Common Stock under this Plan and any other stock purchase plan of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
-2-
<PAGE>
6. Deduction Changes. An employee may decrease or discontinue his
-----------------
payroll deduction once during any Plan Period by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
7. Interest. Interest will not be paid on any employee payroll deduction
--------
accounts, except to the extent that the Board or its Committee, in its sole
discretion, elects to credit such accounts with interest at such per annum rate
as it may from time to time determine.
8. Withdrawal of Funds. An employee may on any one occasion during a
-------------------
Plan Period and for any reason withdraw all or part of the balance accumulated
in the employee's payroll deduction account. Any such withdrawal must be
effected prior to the close of business on the last day of the Plan Period. If
the employee withdraws all of such balance, the employee shall thereby withdraw
from participation in the Offering and may not begin participation again during
the remainder of the Plan Period. Any employee withdrawing all or part of such
balance may participate in any subsequent Offering in accordance with terms and
conditions established by the Board or the Committee, except that, unless
otherwise permitted under Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules promulgated thereunder, any employee
who is also a director and/or officer of the Company within the meaning of
Section 16 of the Exchange Act may not (a) withdraw less than all of the balance
accumulated in such employee's payroll deduction account or (b) participate
again for a period of at least six months as provided in Rule 16b-3(d)(2)(i) or
any successor provision under the Exchange Act.
9. Purchase of Shares.
------------------
(a) On the Offering Commencement Date of each Plan Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option (an "Option") to purchase on the last business day of such Plan
Period (the "Exercise Date"), at the Option Price hereinafter provided for, such
number of whole shares of Common Stock of the Company reserved for the purposes
of the Plan as does not exceed the number of shares determined by dividing 15%
of such employee's annualized Compensation for the immediately prior six-month
period by the price determined in accordance with the formula set forth in the
following paragraph but using the closing price on the Offering Commencement
Date of such Plan Period.
(b) The Option Price for each share purchased will be 85% of the
closing price of the Common Stock on (i) the first business day of such Plan
Period or
-3-
<PAGE>
(ii) the Exercise Date, whichever closing price shall be less. Such closing
price shall be (A) the closing price of the Common Stock on any national
securities exchange on which the Common Stock is listed, or (B) the closing
price of the Common Stock on the Nasdaq National Market ("Nasdaq") or (C) the
average of the closing bid and asked prices in the over-the-counter market,
whichever is applicable, as published in The Wall Street Journal. If no sales of
-----------------------
Common Stock were made on such a day, the price of the Common Stock for purposes
of clauses (A) and (B) above shall be the reported price for the next preceding
day on which sales were made.
(c) Each employee who continues to be a participant in the Plan on
the Exercise Date shall be deemed to have exercised his Option at the Option
Price on such date and shall be deemed to have purchased from the Company the
number of full shares of Common Stock reserved for the purpose of the Plan that
his accumulated payroll deductions on such date will pay for pursuant to the
formula set forth above (but not in excess of the maximum number determined in
the manner set forth above).
(d) Any balance remaining in an employee's payroll deduction account
at the end of a Plan Period will be automatically refunded to the employee,
except that any balance which is less than the purchase price of one share of
Common Stock will be carried forward into the employee's payroll deduction
account for the following Offering, unless the employee elects not to
participate in the following Offering under the Plan, in which case the balance
in the employee's account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the street
name of a brokerage firm, bank or other nominee holder designated by the
employee.
11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period (whether as a result of the employee's voluntary
or involuntary termination, retirement, death or otherwise), no payroll
deduction shall be taken from any pay due and owing to the employee and the
balance in the employee's payroll deduction account shall be paid to the
employee or, in the event of the employee's death, (a) to a beneficiary
previously designated in a revocable notice signed by the employee (with any
spousal consent required under state law) or (b) in the absence of such a
designated beneficiary, to the executor or administrator of the employee's
estate or (c) if no such executor or administrator has been appointed to the
knowledge of the Company, to such other person(s) as the Company may, in its
discretion, designate. If, prior to the last business day of the Plan Period,
the Designated Subsidiary by which an employee is employed shall
-4-
<PAGE>
cease to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, and the
share limitation set forth in Section 9, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock,
such adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger.
------
(a) If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Board or the Committee shall take such
steps in connection with such merger as the Board or the Committee shall deem
necessary to assure that the provisions of Section 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities
or property as to which such holder of such Option might thereafter be entitled
to receive thereunder.
(b) In the event of a merger or consolidation of the Company with or
into another corporation which does not involve Continuity of Control, or of a
sale of
-5-
<PAGE>
all or substantially all of the assets of the Company while unexercised Options
remain outstanding under the Plan, (i) subject to the provisions of clauses (ii)
and (iii), after the effective date of such transaction, each holder of an
outstanding Option shall be entitled, upon exercise of such Option, to receive
in lieu of shares of Common Stock, shares of such stock or other securities as
the holders of shares of Common Stock received pursuant to the terms of such
transaction; or (ii) all outstanding Options may be cancelled by the Board or
the Committee as of a date prior to the effective date of any such transaction
and all payroll deductions shall be paid out to the participating employees; or
(iii) all outstanding Options may be cancelled by the Board or the Committee as
of the effective date of any such transaction, provided that notice of such
cancellation shall be given to each holder of an Option, and each holder of an
Option shall have the right to exercise such Option in full based on payroll
deductions then credited to his account as of a date determined by the Board or
the Committee, which date shall not be less than ten (10) days preceding the
effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by
-----------------------
the Board. Upon termination of this Plan all amounts in the payroll deduction
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations.
------------------------
(a) The Company's obligation to sell and deliver Common Stock under
this Plan is subject to listing on a national stock exchange or quotation on
Nasdaq and the approval of all governmental authorities required in connection
with the authorization, issuance or sale of such stock.
(b) The Plan shall be governed by the laws of the State of Delaware
except to the extent that such law is preempted by federal law.
-6-
<PAGE>
(c) The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Exchange Act. Any provision inconsistent with such Rule
shall to that extent be inoperative and shall not affect the validity of the
Plan.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by entering
--------------------------------
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
23. Effective Date and Approval of Stockholders. The Plan shall take
-------------------------------------------
effect upon the closing of the Company's initial public offering of Common Stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended, subject to approval by the stockholders of the Company as
required by Rule 16b-3 under the Exchange Act and by Section 423 of the Code,
which approval must occur within twelve months of the adoption of the Plan by
the Board.
Adopted by the Board of Directors on April 1, 1996
Approved by the stockholders on April 1, 1996
-7-
<PAGE>
AMENDMENT NO. 1 TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
OF
SS&C TECHNOLOGIES, INC.
October 30, 1996
The 1996 Employee Stock Purchase Plan (the "Plan") of SS&C Technologies,
Inc. (the "Company") is hereby amended as follows (capitalized terms used herein
and not defined herein shall have the respective meaning ascribed to such terms
in the Plan):
1. Section 8 of the Plan shall be deleted in its entirety and replaced with
the following:
"8. Withdrawal of Funds. An employee may on any one occasion during a
-------------------
Plan Period and for any reason withdraw all or part of the balance
accumulated in the employee's payroll deduction account. Any such
withdrawal must be effected prior to the close of business on the last day
of the Plan Period. If the employee withdraws all of such balance, the
employee shall thereby withdraw from participation in the Offering and may
not begin participation again during the remainder of the Plan Period. Any
employee withdrawing all or part of such balance may participate in any
subsequent Offering in accordance with terms and conditions established by
the Board or the Committee."
2. Section 9(a) of the Plan shall be deleted in its entirety and replaced with
the following:
"(a) On the Offering Commencement Date of each Plan Period, the Company
will grant to each eligible employee who is then a participant in the Plan
an option (an "Option") to purchase on the last business day of such Plan
Period (the "Exercise Date"), at the Option Price hereinafter provided for,
such number of whole shares of Common Stock of the Company reserved for the
purposes of the Plan as does not exceed the number of shares determined by
dividing 15% of such employee's Compensation for the Plan Period (assuming
no change in compensation during the Plan Period) by the price determined
in accordance with the formula set forth in the following paragraph but
using the closing price on the Offering Commencement Date of such Plan
Period."
<PAGE>
3. Section 17 of the Plan shall be deleted in its entirety and replaced with
the following:
"17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of
any such amendment by the stockholders of the Company is required by
Section 423 of the Code such amendment shall not be effected without such
approval, and (b) in no event may any amendment be made which would cause
the Plan to fail to comply with Section 16 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules promulgated
thereunder, as in effect from time to time, or Section 423 of the Code."
Except as aforesaid, the Plan shall remain in full force and effect.
-2-
<PAGE>
Exhibit 11
SS&C Technologies, Inc.
Statement Regarding The Computation of Net income (loss)
per common and common equivalent shares (4)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1994 1995 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Historical - Primary (1):
Weighted average issued common and preferred
stock outstanding (2)................................... 5,886,983 5,527,570 10,979,061
Weighted average cheap stock (3)......................... 484,380 484,380 484,380
Weighted average common stock equivalents................ 1,335,000 - 422,208
Less: assumed purchase of treasury stock................. (716,828) - (65,642)
---------------- ----------------- -----------------
Weighted average number of common and common equivalent
shares outstanding...................................... 6,989,535 6,011,950 11,820,007
================= ================= =================
Net income (loss)................................................ $ 882,874 $ (4,348,698) $ 473,317
================= ================= =================
Net income (loss) per share...................................... $ 0.13 $ (0.72) $ 0.04
================= ================= =================
Supplemental pro forma (5):
Weighted average issued common and preferred
stock outstanding....................................... 5,886,983 8,426,868 10,979,061
Weighted average cheap stock (3)......................... 484,380 484,380 484,380
Weighted average common stock equivalents................ 1,335,000 - 422,208
Less: assumed purchase of treasury stock................. (716,828) - (65,642)
---------------- ---------------- -----------------
Weighted average number of common and common equivalent
shares outstanding...................................... 6,989,535 8,911,248 11,820,007
================= ================= =================
Net income (loss)................................................ $ 882,874 $ (4,348,698) $ 473,317
================= ================= =================
Net income (loss) per share....................................... $ 0.13 $ (0.49) $ 0.04
================= ================= =================
</TABLE>
Notes:
(1) All common and common equivalent share amounts have been restated to
reflect the 10-for-1 stock split on April 25, 1996 as if in effect from the
date of issuance.
(2) All shares of convertible preferred stock are considered common stock
equivalents and are included using the if-converted method, adjusted for
the 10-for-1 stock split, except where their effect would be antidilutive.
(3) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83, issuances of common stock and common stock equivalents,
within one year prior to the initial filing of the registration statement,
at share prices below the assumed initial public offering price are
considered to have been made in anticipation of the contemplated public
offering. Accordingly, these stock issuances are treated as if issued and
outstanding, using the treasury stock method for options, for all periods
prior to the initial filing of the registration statement in April 1996.
(4) Fully diluted net income (loss) per common and common equivalent share
is not presented as it is the same as historical net income (loss) per
common and common equivalent share for the year ended December 31, 1994,
and was antidilutive for the years ended December 31, 1995 and 1996.
(5) The supplemental pro forma net income (loss) per common share is
computed in the same manner as historical net income (loss) per common
share except that all outstanding shares of preferred stock, which were
converted into common stock upon the closing of the initial public
offering, were treated as having been converted into common stock at the
date of original issuance.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the Registration Statements on
Forms S-8 (file numbers 333-07205, 333-07207, 333-07211 and 333-07213) of SS&C
Technologies, Inc. of our report dated February 10, 1997, on our audits of the
consolidated financial statements of SS&C Technologies, Inc. and Subsidiaries as
of December 31, 1995 and 1996, and for the years ended December 31, 1994, 1995
and 1996, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 36,091
<SECURITIES> 15,580
<RECEIVABLES> 13,318
<ALLOWANCES> 1,429
<INVENTORY> 0
<CURRENT-ASSETS> 65,503
<PP&E> 5,401
<DEPRECIATION> 2,275
<TOTAL-ASSETS> 76,286
<CURRENT-LIABILITIES> 11,932
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> 64,216
<TOTAL-LIABILITY-AND-EQUITY> 76,286
<SALES> 26,407
<TOTAL-REVENUES> 26,407
<CGS> 0
<TOTAL-COSTS> 7,020
<OTHER-EXPENSES> 6,494
<LOSS-PROVISION> 1,010
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 887
<INCOME-TAX> 414
<INCOME-CONTINUING> 473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
