<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 9, 1998
---------------
SS&C Technologies, Inc.
-----------------------
(Exact Name of Registrant as Specified in Charter)
Delaware
------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-28430 06-1169696
- ------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
Corporate Place
705 Bloomfield Avenue
Bloomfield, Connecticut 06002
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(860) 242-7887
----------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
----------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
On April 9, 1998 (the "Effective Date"), SS&C Technologies, Inc. (the
"Company") acquired all of the outstanding capital stock of Savid International
Inc., a New Jersey corporation ("SI"), and The Savid Group, Inc., a New York
corporation ("SGI"), pursuant to a Stock Purchase Agreement (the "Purchase
Agreement"), dated as of April 9, 1998, by and among the Company, SI, SGI and
Diane Cossin (the "Stockholder").
Pursuant to the Purchase Agreement, the Company paid an aggregate of
$821,500 (the "Initial Payment") in exchange for all of the outstanding capital
stock of SI and SGI. In addition, the Purchase Agreement provides for a further
cash payment of $750,000 to be made by the Company to the Stockholder as part of
the consideration for the outstanding capital stock of SI and SGI, provided that
the aggregate revenues derived from SI and SGI for the three-year period ending
April 14, 2001 equal or exceed $3 million. Also, the Purchase Agreement
provides for certain royalty payments to be paid by the Company to the
Stockholder during the five-year period ending April 14, 2003 as part of the
consideration for the outstanding capital stock of SI and SGI. The transaction
will be accounted for as a purchase. The purchase price for the shares held by
the Stockholder was determined in an "arm's length" negotiation and the
transaction was unanimously approved by the Boards of Directors of each of the
Company, SI and SGI. Prior to the Effective Date, neither the Company nor any
of its affiliates, nor any director or officer of the Company or any associate
of any such director or officer, had any material relationship with SI, SGI or
the Stockholder. The Company used a portion of the net proceeds from its
initial public offering to pay the Initial Payment.
SI and SGI, based in New York, together are a leading supplier of PC/LAN-
based financial software specifically designed to help organizations manage
their debt and derivative portfolios. The Savid System product is a modularized
application designed to process and analyze all activities related to debt and
derivative portfolios: Swaps, Caps, Floors, Collars, FRAs, FX, Futures and
Options, as well as the issuance of Short-, Medium-, and Long-Term Debt. Key
markets include banks, corporate treasury, government agencies and financial
institutions.
The foregoing description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of such
agreement which is filed as Exhibit 2.1 to this Current Report on Form 8-K and
incorporated herein by reference.
-2-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial statements of business acquired are not required as per
Rule 3-05(b) of Regulation S-X.
(b) Pro Forma Financial Information.
Pro forma financial information is not required as per Rule 11-01(c)
of Regulation S-X.
(c) Exhibits.
--------
2 Stock Purchase Agreement by and among the Registrant, Savid
International Inc., The Savid Group, Inc. and Diane Cossin, dated
April 9, 1998
99 Press Release
-3-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: April 22, 1998 SS&C TECHNOLOGIES, INC.
-----------------------------
(Registrant)
By: /s/ John S. Wieczorek
-------------------------------
John S. Wieczorek
Vice President, Chief Financial
Officer and Treasurer
-4-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2 Stock Purchase Agreement by and among the Registrant, Savid
International Inc., The Savid Group, Inc. and Diane Cossin, dated
April 9, 1998
99 Press Release
<PAGE>
EXHIBIT 2
STOCK PURCHASE AGREEMENT
------------------------
This Stock Purchase Agreement (this "Agreement") is entered into as of the
---------
9th day of April, 1998 by and among SS&C Technologies, Inc., a Delaware
corporation with its principal office at 705 Bloomfield Avenue, Bloomfield,
Connecticut 06002 (the "Buyer"), Savid International, Inc., a New Jersey
-----
corporation with its principal office at 928 Haverstraw Road, Suffern, NY 10901
("SI"), The Savid Group, Inc., a New York corporation with its principal office
--
at 928 Haverstraw Road, Suffern, NY 10901 ("SGI"), and Diane Cossin ("Cossin" or
--- ------
the "Stockholder").
-----------
Preliminary Statement
---------------------
1. The Stockholder owns 100 issued and outstanding shares (the "SI
--
Shares") of Common Stock, no par value per share (the "SI Common Stock"), of SI,
---------------
which shares represent all of the issued and outstanding shares of capital stock
of SI.
2. The Stockholder owns 30 issued and outstanding shares (the "SGI
---
Shares") of Common Stock, no par value per share (the "SGI Common Stock"), of
----------------
SGI, which shares represent all of the issued and outstanding shares of capital
stock of SGI. The SI Shares and the SGI Shares are herein collectively referred
to as the "Shares."
------
3. The Buyer desires to purchase, and the Stockholder desires to sell,
the Shares at the Closing (as defined below), for the consideration set forth
below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Purchase and Sale of the Shares
-------------------------------
1.1 Purchase of the Shares from the Stockholder. Subject to and upon
-------------------------------------------
the terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), the Stockholder shall sell,
-------
transfer, convey, assign and deliver to the Buyer, and the Buyer shall purchase,
acquire and accept from the Stockholder, all the Shares owned by the
Stockholder. At the Closing the Stockholder shall deliver to the Buyer
certificates evidencing the Shares owned by the Stockholder duly endorsed in
blank or with stock powers duly executed by the Stockholder.
1.2 Further Assurances. At any time and from time to time after the
------------------
Closing, at the Buyer's reasonable request and without further consideration,
the Stockholder shall promptly execute and deliver such instruments of sale,
transfer,
<PAGE>
conveyance, assignment and confirmation, and take all such other action or
actions as the Buyer may reasonably request, more effectively to transfer,
convey and assign to the Buyer, and to confirm the Buyer's title to, all of the
Shares owned by the Stockholder, to put the Buyer in actual possession and
operating control of the assets, properties and business of SI and SGI, and to
carry out the purpose and intent of this Agreement.
1.3 Consideration for the Shares
----------------------------
(a) The aggregate purchase price to be paid and delivered by the
Buyer on the date of the Closing (the "Closing Date") to the Stockholder for the
------------
Shares shall consist of a total of Eight Hundred Twenty-One Thousand Five
Hundred Dollars ($821,500), in cash, payable by wire transfer (the "Purchase
--------
Price"), subject to adjustment as set forth in Subsection 1.4 below.
- -----
(b) A further cash payment of Seven Hundred Fifty Thousand
Dollars ($750,000) (the "Further Cash Payment") shall be paid as additional
--------------------
consideration to the Stockholder provided that the aggregate Revenues (as
defined below) for the period from and including April 15, 1998 through and
including April 14, 2001 are greater than or equal to $3,000,000. For the
purposes of this paragraph (b), within 45 days after the end of each fiscal
quarter of the Buyer, the Buyer shall submit a statement (each, a "Statement")
---------
to the Stockholder reflecting the Revenues in such fiscal quarter, provided that
for the fiscal quarter ending June 30, 1998, the Statement shall reflect only
the Revenues for the period from and including April 15, 1998 through and
including June 30, 1998, and that for the fiscal quarter ending June 30, 2001,
the Statement shall reflect only the Revenues for the period from and including
April 1, 2001 through and including April 14, 2001. For the purposes of this
paragraph (b), "Revenues" are to be established in accordance with United States
--------
generally accepted accounting principles ("GAAP") and are defined as the total
----
revenues derived from sales, service, training, consulting, customization,
upgrading and/or maintenance activities of SI and SGI worldwide, provided that,
for purposes of establishing Revenues with respect to sales and/or licensing of
the Savid System (as defined in Section 1.5(d) below), such Revenues shall be
determined in accordance with the provisions of Schedule A hereto, which
----------
provisions may be amended from time to time upon the consent of the Buyer and
the Stockholder. The Further Cash Payment shall be paid and delivered by the
Buyer to the Stockholder on the date of delivery of the Statement which reflects
aggregate Revenues greater than or equal to $3,000,000 for the period from and
including April 15, 1998 through and including the end of the relevant fiscal
quarter.
1.4 Net Worth Adjustment. The Purchase Price set forth in Subsection
--------------------
1.3(a) hereof shall be subject to adjustment after the Closing Date as follows:
(a) As promptly as possible following the Closing Date, the
Buyer shall cause Coopers & Lybrand L.L.P., the Buyer's independent public
accountants (the "Closing Auditors"), to conduct an audit of the books and
----------------
records of SI and SGI as of the
-2-
<PAGE>
Closing Date. Not later than 45 days after the Closing Date, the Buyer shall
cause the Closing Auditors to deliver a balance sheet of each of SI and SGI as
of the Closing Date (collectively, as corrected pursuant to this Subsection 1.4,
the "Closing Balance Sheet") to the Buyer and the Stockholder. The Closing
---------------------
Balance Sheet shall be prepared in accordance with GAAP, applied consistently
with SI's and SGI's past practices and methods (to the extent applicable under
GAAP), without any adjustments applicable solely as a result of the acquisition
of the Shares by the Buyer on the Closing Date, and shall be certified without
qualification by the Closing Auditors.
(b) The Stockholder and one firm of independent certified
accountants acting on behalf of the Stockholder (the "Stockholder's Advisors")
----------------------
shall have the right to review the work papers of the Closing Auditors utilized
in preparing the Closing Balance Sheet, and shall have full access to the books,
records, properties and personnel of SI and SGI (and Buyer's personnel
participating in the audit) for purposes of verifying the accuracy and fairness
of the presentation of the Closing Balance Sheet. The Stockholder shall work in
good faith and cooperate with the Buyer and the Closing Auditors in the
preparation of the Closing Balance Sheet and the resolution of any dispute in
connection therewith pursuant to paragraph (c) below.
(c) The values or amounts for each item reflected on the Closing
Balance Sheet shall be binding upon the Stockholder, unless the Stockholder
gives written notice within 15 calendar days after her receipt of the Closing
Balance Sheet, of disagreement with any of the values or amounts shown on the
Closing Balance Sheet, specifying, as to each such item in reasonable detail,
the nature and extent of such disagreement (the "Dispute Notice"). If the Buyer
--------------
and the Stockholder are unable to resolve any such disagreement within 15 days
after the date of the Dispute Notice, the disagreement shall be submitted to
arbitration in accordance with the provisions of Subsection 7.3 hereof. If as a
result of the resolution of any disputes by agreement pursuant to this
Subsection 1.4 or by arbitration pursuant to Subsection 7.3, any amount shown on
the Closing Balance Sheet is determined to be erroneous, such erroneous amount
shall be deleted from the Closing Balance Sheet and the correct amount shall be
inserted in lieu thereof. The Closing Balance Sheet, as so corrected, shall
constitute the Closing Balance Sheet for purposes of this Agreement.
(d) The Buyer shall pay the fees and disbursements of the
Closing Auditors. The fees and disbursements of the Stockholder's Advisors
incurred in the review of the Closing Balance Sheet shall be paid by the
Stockholder. The Buyer shall under no circumstances be liable for any fees or
disbursements of the Stockholder's Advisors nor shall the Stockholder be
responsible for the fees or disbursements of the Closing Auditors.
(e) Immediately upon the expiration of the 15 calendar-day
period following the Stockholder's receipt of the Closing Balance Sheet, if no
Dispute Notice is given by the end of such period, or immediately upon the
resolution of
-3-
<PAGE>
disputes, if any, pursuant to this Subsection 1.4, the Purchase Price shall be
adjusted as follows, based upon the Closing Balance Sheet (as so adjusted, the
"Adjusted Purchase Price"):
-----------------------
If the aggregate net worth (defined as depreciated book value of
all assets, including patents, trademarks and other similar intangible items
less total liabilities) of SI and SGI as shown on the Closing Balance Sheet is
less than Zero Dollars ($0), the deficiency shall be promptly paid in cash by
the Stockholder to the Buyer.
If the aggregate net worth (as defined in the preceding
paragraph) of SI and SGI as shown on the Closing Balance Sheet is greater than
Zero Dollars ($0), the excess shall be promptly paid in cash by the Buyer to the
Stockholder.
1.5 Royalties
---------
(a) As additional consideration for the Shares, the Buyer shall
pay to the Stockholder or her assignee royalty payments (the "Royalty Payments")
----------------
as follows:
The Buyer shall pay to the Stockholder an aggregate of ten
percent (10%) of the License Fees (as defined below) with respect to sales
and/or licensing of the Savid System during the period commencing on April 15,
1998 and ending on April 14, 2003 (the "Royalty Period").
--------------
(b) Within 45 days after the end of each fiscal quarter of the
Buyer, the Buyer shall submit a written report (each, a "Report") to the
------
Stockholder showing the total License Fees received by the Buyer in the relevant
fiscal quarter, provided that for the fiscal quarter ending June 30, 1998, the
Report shall reflect only the License Fees received by the Buyer from and
including April 15, 1998 through and including June 30, 1998, and that for the
fiscal quarter ending June 30, 2003, the Report shall reflect only the License
Fees received by the Buyer from and including April 1, 2003 through and
including April 14, 2003. Each Report shall be accompanied by payment of the
Royalty Payment due pursuant to this Subsection 1.5 for the License Fees
includable in such Report. The Buyer shall keep true and accurate records and
books of account containing sufficient data for the computation of the amounts
to be paid pursuant to this Subsection 1.5. Upon 30 days' prior written request
by the Stockholder, the Buyer shall, during normal business hours, permit the
Stockholder or her representatives to inspect such records (provided that the
Stockholder shall be obligated to maintain the confidentiality of such
information).
(c) For purposes of this Subsection 1.5, "License Fees" shall be
------------
determined in accordance with the provisions of Schedule B hereto, which
----------
provisions may be amended from time to time upon the consent of the Buyer and
the Stockholder.
-4-
<PAGE>
(d) For purposes of this Agreement, "Savid System" shall mean
------------
the software presently being marketed by SI and/or SGI, or any software derived
in whole or in part from the source code of such software.
(e) If the Buyer assigns or licenses to another party the right
to sell the Savid System, the Buyer shall guarantee the payment to the
Stockholder of the Royalty Payments provided for in this Subsection 1.5, unless
otherwise agreed to in writing by the Stockholder.
1.6 Closing. The Closing shall take place at the offices of the
-------
Buyer, 705 Bloomfield Avenue, Bloomfield, Connecticut 06002 at 2:00 a.m.,
Eastern Time, on the date of this Agreement or at such other place, time or date
as may be mutually agreed upon in writing by the parties. The transfer of the
Shares by the Stockholder to the Buyer shall be deemed to occur at the close of
business on the Closing Date.
2. Representations of the Stockholder
----------------------------------
The Stockholder represents and warrants to the Buyer as follows:
(a) The Stockholder has good and marketable title to the Shares which
are to be transferred to the Buyer by the Stockholder pursuant hereto, free and
clear of any and all covenants, conditions, restrictions, voting trust
arrangements, liens, charges, encumbrances, options, voting trusts, voting
agreements, and adverse claims or rights whatsoever ("Stock Claims").
------------
(b) The Stockholder has all requisite right, power and authority to
execute and deliver this Agreement, to perform her obligations hereunder and to
transfer, convey and sell to the Buyer at the Closing the Shares to be sold by
the Stockholder hereunder and, upon consummation of the purchase contemplated
hereby, the Buyer will acquire from the Stockholder good and marketable title to
such Shares, free and clear of all Stock Claims.
(c) The execution, delivery and performance of this Agreement by the
Stockholder and the transfer, conveyance and sale of the Shares to be sold by
the Stockholder to the Buyer pursuant to the terms hereof shall not conflict
with, result in a breach of or constitute a default under any agreement to which
the Stockholder is a party or by which it is bound or any judgment, order, writ,
injunction or decree of any court or other governmental body.
(d) No broker or finder has acted for the Stockholder in connection
with this Agreement or the transactions contemplated hereby, and no broker or
finder is entitled to any brokerage or finder's fee or other commissions in
respect of such transactions based upon agreements, arrangements or
understandings made by or on behalf of the Stockholder.
-5-
<PAGE>
3. Representations of the Stockholder, SI and SGI Regarding SI and SGI
-------------------------------------------------------------------
SI, SGI and the Stockholder jointly and severally represent and
warrant to the Buyer that the statements contained in this Section 3 are true
and correct, except as set forth in the disclosure schedule provided to the
Buyer on the date hereof and forming a part hereof (the "Disclosure Schedule").
-------------------
3.1 Organization, Qualification and Corporate Power. SI is a
-----------------------------------------------
corporation duly organized, validly existing and in corporate and franchise tax
good standing under the laws of the State of New Jersey. SGI is a corporation
duly organized, validly existing and in corporate and franchise tax good
standing under the laws of the State of New York. SI and SGI are each duly
qualified to conduct business and are each in corporate and franchise tax good
standing under the laws of each jurisdiction in which the nature of its business
or the ownership or leasing of its properties requires such qualification,
except to the extent such failure would not have a material adverse effect on
its business, financial condition, results of operations or prospects or on its
or the Stockholder's ability to consummate the transactions contemplated hereby
(a "Material Adverse Effect"). Each of SI and SGI has all requisite corporate
-----------------------
power and authority to carry on the business in which it is engaged and to own
and use the properties owned and used by it. Each of SI and SGI has delivered
to the Buyer true and complete copies of its charter and by-laws, each as
amended and/or restated to date and as in effect on the date hereof. Neither SI
nor SGI is in default under or in violation of any provision of its charter or
by-laws.
3.2 Capitalization. The authorized capital stock of SI consists of
--------------
1,000 shares of SI Common Stock, of which 100 shares are issued and outstanding
on the date hereof and held of record and beneficially by the Stockholder. The
authorized capital stock of SGI consists of 200 shares of SGI Common Stock, of
which 30 shares are issued and outstanding on the date hereof and held of record
and beneficially by the Stockholder. All of the issued and outstanding Shares
are duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which SI or SGI is a party or which are
binding upon SI or SGI providing for the issuance, disposition or acquisition of
any capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to SI or SGI. There are no
agreements, voting trusts, or proxies or understandings with respect to the
voting, or registration under the Securities Act of 1933, as amended, of any
Shares. All of the issued and outstanding Shares were offered and issued in
compliance with applicable federal and state securities laws.
3.3 Authority. Each of SI and SGI has all requisite right, power and
---------
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement and the
consummation by SI and SGI of the transactions contemplated hereby have been
duly
-6-
<PAGE>
and validly authorized by all necessary corporate action on the part of SI and
SGI, respectively. This Agreement has been duly and validly executed and
delivered by each of SI, SGI and the Stockholder and constitutes a valid and
binding obligation of each of SI, SGI and the Stockholder, enforceable against
each of SI, SGI and the Stockholder in accordance with its terms.
3.4 Noncontravention. Neither the execution and delivery of this
----------------
Agreement or the other agreements contemplated hereby by SI, SGI and the
Stockholder, nor the consummation by SI, SGI and the Stockholder of the
transactions contemplated hereby and thereby, will (a) conflict with or violate
any provision of the charter or by-laws of either SI or SGI; (b) require on the
part of SI or SGI any filing with, or any permit, authorization, consent or
approval of, any court, arbitrational tribunal, administrative agency or
commission or other governmental or regulatory authority or agency (a
"Governmental Entity"); (c) conflict with, result in a breach of, constitute
-------------------
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, Security Interest (as
defined below) or other arrangement to which SI or SGI is a party or by which SI
or SGI is bound or to which any of the assets of SI or SGI or the Shares are
subject; (d) result in the imposition of any Security Interest upon any assets
of SI or SGI or (e) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to SI or SGI or any of the properties or assets of SI
or SGI or the Shares. For purposes of this Agreement, "Security Interest" means
-----------------
any mortgage, pledge, security interest, encumbrance, charge, or other lien
(whether arising by contract or by operation of law), other than (i) mechanic's,
materialmen's and similar liens; (ii) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings; (iii) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation; (iv) liens on
goods in transit incurred pursuant to documentary letters of credit; (v)
purchase money liens and liens securing rental payments under capital lease
arrangements and (vi) other liens arising in the ordinary course of business
consistent with past custom and practice (including with respect to frequency
and amount) of SI and SGI ("Ordinary Course of Business") and not material to SI
---------------------------
and SGI.
3.5 Subsidiaries. SI does not own or control, directly or
------------
indirectly, any shares of capital stock of any corporation or have any equity
interest in any partnership, joint venture, trust, association or other non-
corporate business enterprise. SGI does not own or control, directly or
indirectly, any shares of capital stock of any corporation or have any equity
interest in any partnership, joint venture, trust, association or other non-
corporate business enterprise.
-7-
<PAGE>
3.6 Financial Statements. Each of SI and SGI has provided to the
--------------------
Buyer its respective compiled, unaudited statements of assets, liabilities and
equity-cash basis and the related statements of revenues, expenses and retained
earnings-cash basis as of and for each of the fiscal years ended December 31,
1996 and 1997 (collectively, the "Financial Statements"). The Financial
--------------------
Statements have been prepared in accordance with good business practice applied
on a consistent basis throughout the periods covered thereby, fairly present, in
all material respects, the financial condition and results of operations of SI
and SGI as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of SI and SGI. The
Financial Statements have not been prepared in accordance with GAAP.
3.7 Absence of Certain Changes. Since December 31, 1997, (a) there
--------------------------
has not been any Material Adverse Effect, nor has there occurred any event or
development which could reasonably be foreseen to result in a Material Adverse
Effect in the future, and (b) neither SI nor SGI has taken any of the actions
set forth below:
(a) issued, sold, delivered or agreed or committed to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) or authorized the
issuance, sale or delivery of, or redeemed or repurchased, any stock of any
class or any other securities or any rights, warrants or options to acquire any
such stock or other securities;
(b) split, combined or reclassified any shares of its capital
stock; or declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock;
(c) created, incurred or assumed any debt not currently
outstanding (including obligations in respect of capital leases); assumed,
guaranteed, endorsed or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person; or
made any loans, advances or capital contributions to, or investments in, any
other person or entity;
(d) entered into, adopted or amended any employee benefit plan
or any employment or severance agreement or arrangement of the type described in
Section 3.20 or (except for normal increases in the Ordinary Course of Business)
increased in any manner the compensation or fringe benefits of, or materially
modified the employment terms of, its directors, officers or employees,
generally or individually, or paid any benefit not required by the terms in
effect on the date hereof of any existing employee benefit plan;
(e) acquired, sold, leased, encumbered or disposed of any
assets, other than purchases of assets and sales of products in the Ordinary
Course of Business;
(f) amended its charter or by-laws;
-8-
<PAGE>
(g) changed in any material respect its accounting methods,
principles or practices, except insofar as may be required by GAAP;
(h) discharged or satisfied any Security Interest or paid any
obligation or liability other than in the Ordinary Course of Business;
(i) mortgaged or pledged any of its property or assets or
subjected any such assets to any Security Interest;
(j) sold, assigned, transferred or licensed any Intellectual
Property (as defined below), other than in the Ordinary Course of Business;
(k) entered into, amended, terminated, took or intentionally
omitted to take any action that would constitute a violation of or default
under, or waived any rights under, any contract or agreement other than in the
Ordinary Course of Business;
(l) made or committed to make any capital expenditure in excess
of $5,000 per item or $25,000 in the aggregate other than in the Ordinary Course
of Business;
(m) took any action or failed to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in any of the representations and warranties of SI or SGI set forth
in this Agreement becoming untrue; or
(n) agreed in writing or otherwise to take any of the foregoing
actions.
3.8 Undisclosed Liabilities. Neither SI nor SGI has any liability
-----------------------
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated and whether due or to become due), except for (a) liabilities shown
on its respective statement of assets, liabilities and equities-cash basis dated
December 31, 1997 (collectively, the "Most Recent Balance Sheet"), (b)
-------------------------
liabilities which have arisen since the date of the Most Recent Balance Sheet in
the Ordinary Course of Business and which are not in the aggregate material and
(c) contractual liabilities incurred in the Ordinary Course of Business which
are not required by GAAP to be reflected on the Most Recent Balance Sheet and
which are not in the aggregate material.
3.9 Tax Matters.
-----------
(a) For all periods since its election under Subchapter S of the
Internal Revenue Code of 1986, as amended (the "Code"), effective on May 25,
----
1990, SI has been qualified as an S Corporation pursuant to an election validly
made under
-9-
<PAGE>
Subchapter S of the Code (which election has not been revoked or terminated for
any such period), and SI has not been subject to federal corporate income taxes
for such periods. For all periods since its election under Subchapter S of the
Code, effective on January 1, 1987, SGI has been qualified as an S Corporation
pursuant to an election validly made under Subchapter S of the Code (which
election has not been revoked or terminated for any such period), and SGI has
not been subject to federal corporate income taxes for such periods.
(b) Each of SI and SGI has filed all Tax Returns (as defined
below) that it was required to file and all such Tax Returns were correct and
complete. Each of SI and SGI has paid all Taxes (as defined below) imposed on
it, or for which it is liable, whether to Governmental Entities (as, for
example, under law) or to other persons or entities (as, for example, under a
tax allocation agreement), due on or before the date hereof except for such
Taxes that SI or SGI is contesting in good faith or which would not have a
Material Adverse Effect. The unpaid Taxes of SI or SGI for Tax periods through
the date of the Most Recent Balance Sheet do not exceed the accruals and
reserves for Taxes set forth on the Most Recent Balance Sheet or to be set forth
on the Closing Balance Sheet. Neither SI nor SGI has any actual or potential
liability for any Tax obligation of any taxpayer other than SI or SGI,
respectively. All Taxes that either SI or SGI is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity or will be reserved
on the Closing Balance Sheet. For purposes of this Agreement, "Taxes" means all
-----
taxes, charges, fees, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem, premium, value-
added, excise, real property, personal property, sales, use, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means
-----------
all reports, returns, declarations, statements or other information required to
be supplied to a taxing authority in connection with Taxes.
(c) SI and SGI have delivered to the Buyer correct and complete
copies of all Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by SI or SGI since January 1, 1994. None of the
Tax Returns of SI or SGI has ever been audited by any taxing authority or other
Governmental Entity. No examination or audit of any Tax Returns of SI or SGI by
any Governmental Entity is currently in progress or, to the knowledge of SI or
SGI, threatened or contemplated.
(d) Neither SI nor SGI has waived any statute of limitations
with respect to Taxes or agreed to an extension of time with respect to a Tax
assessment or deficiency.
-10-
<PAGE>
(e) Neither SI nor SGI is a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of the assets of SI or SGI is
subject to an election under Section 341(f) of the Code. Neither SI nor SGI has
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code. Neither SI nor SGI is a party to any Tax
allocation or sharing agreement.
(f) Neither SI nor SGI is or has ever been a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code).
(g) None of the assets of SI or SGI is "tax exempt use property"
within the meaning of Section 168(h) of the Code. Neither SI nor SGI has agreed
to make, nor is required to make, any adjustments under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
(h) The Stockholder is eligible to make an election under
Section 338(h)(10) of the Code (and any comparable available election under
state, local or foreign tax law) with respect to each of SI and SGI.
3.10 Tangible Assets. Each of SI and SGI owns or leases all tangible
---------------
assets necessary for the conduct of its business as presently conducted. Each
such tangible asset is free from material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear) and is suitable for the purposes for
which it presently is used. No asset of SI or SGI (tangible or intangible) is
subject to any Security Interest.
3.11 Owned Real Property. Neither SI nor SGI owns any real property.
-------------------
3.12 Intellectual Property.
---------------------
(a) Each of SI and SGI owns or has the right to use all
Intellectual Property (as defined below) used in the operation of its business
or necessary for the operation of its business as presently proposed to be
conducted. Each item of Intellectual Property owned by, or used in the operation
of, the business of SI or SGI will be owned or available for use by SI or SGI on
identical terms and conditions immediately following the Closing. Each of SI and
SGI has taken all reasonable measures to protect the proprietary nature of each
item of Intellectual Property, and to maintain in confidence all trade secrets
and confidential information that it owns or uses. No other person or entity has
any rights to any of the Intellectual Property owned or used by SI or SGI, and,
to the knowledge of SI, SGI or the Stockholder, no other person or entity is
infringing, violating or misappropriating any of the Intellectual Property that
SI or SGI owns or uses. For purposes of this Agreement, "Intellectual Property"
---------------------
means all (i) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility,
model, certificate of
-11-
<PAGE>
invention and design patents, patent applications, registrations and
applications for registrations; (ii) trademarks, service marks, trade dress,
logos, trade names and corporate names and registrations and applications for
registration thereof; (iii) copyrights and registrations and applications for
registration thereof; (iv) computer software, data and documentation; (v) trade
secrets, whether patentable or unpatentable and whether or not reduced to
practice, know-how, research and development information and copyrightable
works; (vi) financial, marketing and business data and information, pricing and
cost information, business and marketing plans and customer and supplier lists
and information (collectively, "Confidential Business Information"); (vii) other
----------------------------------
proprietary rights relating to any of the foregoing and (viii) copies and
tangible embodiments thereof.
(b) None of the activities or business presently conducted by SI
or SGI, or conducted by SI or SGI at any time within the six years prior to the
date of this Agreement, infringes or violates, or constitutes a misappropriation
of, any Intellectual Property rights of any other person or entity. Neither SI
nor SGI has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation.
(c) Section 3.12(c) of the Disclosure Schedule identifies each
item of Intellectual Property owned by SI or SGI, identifies each pending
application for registration of Intellectual Property which SI or SGI has made,
and identifies each license or other agreement pursuant to which SI or SGI has
granted any rights to any third party with respect to any of its Intellectual
Property, excluding the grant of licenses to customers in the Ordinary Course of
Business. SI and SGI have delivered to the Buyer a correct and complete list of
all such Intellectual Property, registrations, applications, licenses and
agreements (each as amended to date) and have made available to the Buyer
correct and complete copies of all other written documentation evidencing
ownership of, and any claims or disputes relating to, each such item. Except for
grants of licenses to customers in the Ordinary Course of Business, with respect
to each item of Intellectual Property that SI or SGI owns:
(i) SI or SGI possesses all right, title and interest in
and to such item;
(ii) such item is not subject to any outstanding judgment,
order, decree, stipulation or injunction; and
(iii) neither SI nor SGI has agreed to indemnify any
person or entity for or against any infringement, misappropriation or other
conflict with respect to such item.
(d) Except for commercially available software subject to
standard "shrinkwrap" licenses and software in the "public domain," Section
3.12(d) of the
-12-
<PAGE>
Disclosure Schedule identifies each item of Intellectual Property used in the
operation of the business of SI or SGI that is owned by a party other than SI or
SGI. SI and SGI have supplied the Buyer with correct and complete copies of all
licenses, sublicenses or other agreements (as amended to date) pursuant to which
SI or SGI uses such Intellectual Property. With respect to each such item of
Intellectual Property:
(i) the license, sublicense or other agreement covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) such license, sublicense or other agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
following the Closing in accordance with the terms thereof as in effect prior to
the Closing;
(iii) none of SI, SGI or, to the knowledge of SI, SGI or the
Stockholder, any other party to such license, sublicense or other agreement is
in breach or default, and no event has occurred which with notice or lapse of
time or both would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iv) the underlying item of Intellectual Property is not
subject to any outstanding judgment, order, decree, stipulation or injunction;
and
(v) neither SI nor SGI has agreed to indemnify any person
or entity for or against any interference, infringement, misappropriation or
other conflict with respect to such item.
(e) Except for commercially available software subject to
standard "shrinkwrap" licenses and software in the "public domain," Section
3.12(e) of the Disclosure Schedule lists each item of Intellectual Property in
which SI or SGI has any interest and which is not listed elsewhere in Section
3.12 of the Disclosure Schedule, including but not limited to all software
programs and related documentation, unregistered trademarks, trade names,
service marks, logos and trade dress.
(f) SI's software products are able to perform correctly with
respect to date-related functions during and after the Year 2000. SGI's software
products are able to perform correctly with respect to date-related functions
during and after the Year 2000.
3.13 Real Property Leases. Section 3.13 of the Disclosure Schedule
--------------------
lists and describes briefly all real property leased or subleased to SI or SGI
and lists the term of such lease, any extension and expansion options, and the
rent payable thereunder. SI and SGI have delivered to the Buyer correct and
complete copies of the leases and subleases (as amended to date) listed in
Section 3.13 of the Disclosure Schedule. With respect to each lease and
sublease listed in Section 3.13 of the Disclosure Schedule:
-13-
<PAGE>
(a) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect;
(b) the lease or sublease will be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) none of SI, SGI or, to the knowledge of SI or SGI, the other
party to the lease or sublease is in breach or default thereof, and no event has
occurred which, with notice or lapse of time, would constitute a breach or
default by SI or SGI or permit termination, modification or acceleration by the
other party thereunder;
(d) there are no disputes, oral agreements or forbearance
programs between SI or SGI and the other party to such lease or sublease in
effect as to the lease or sublease;
(e) neither SI nor SGI has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold; and
(f) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said facilities
as presently conducted.
3.14 Contracts. Section 3.14 of the Disclosure Schedule lists the
---------
following agreements (whether written or oral) to which either SI or SGI is a
party:
(a) any original equipment manufacturer (OEM), value-added
reseller (VAR), distributor or site license agreements;
(b) any contract that requires SI or SGI to perform custom
development work during the 12-month period following the Closing Date;
(c) any agreement (or group of related written agreements) for
the lease of personal property from or to third parties providing for lease
payments in excess of $10,000 per annum;
(d) any agreement (or group of related agreements for the
purchase or sale of supplies, products or other personal property or for the
furnishing or receipt of services (i) which calls for performance over a period
of more than one year, (ii) which involves more than the sum of $10,000 or (iii)
in which SI or SGI has granted manufacturing rights, "most favored nation"
pricing provisions or marketing or distribution rights relating to any products
or territory or has agreed to purchase a
-14-
<PAGE>
minimum quantity of goods or services or has agreed to purchase goods or
services exclusively from a certain party;
(e) any agreement (or group of related agreements) under which
SI or SGI has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations) or
under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(f) any agreement concerning confidentiality or noncompetition;
(g) any agreement involving the Stockholder or her affiliates
("Affiliates"), as defined in Rule 12b-2 under the Securities Exchange Act of
- ------------
1934, as amended (the "Exchange Act,"), that is not both terminated prior to the
------------
Closing and without any force or effect after the Closing;
(h) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Material Adverse Effect; and
(i) any other agreement (or group of related agreements) either
involving more than $20,000 or not entered into in the Ordinary Course of
Business.
SI and SGI have made available to the Buyer a correct and complete
copy of each agreement (as amended to date) listed in Section 3.14 of the
Disclosure Schedule. With respect to each agreement so listed: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) the agreement will be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing; and (iii) none of SI, SGI or, to the
knowledge of SI or SGI, any other party is in breach or default thereof, and no
event has occurred which with notice or lapse of time would constitute a breach
or default by SI or SGI or permit termination, modification or acceleration by
the other party, under the agreement.
3.15 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of either SI or SGI.
3.16 Insurance. Section 3.16 of the Disclosure Schedule sets forth a
---------
list of each insurance policy (including fire, theft, casualty, general
liability, workers compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety arrangements) to
which SI of SGI has been a party, a named insured, or otherwise the beneficiary
of coverage at any time within the past five years. Copies of all such policies
have been delivered to the Buyer. SI, SGI and the Stockholder further represent
that: (i) each such insurance policy is enforceable and in full force and
effect; (ii) such policy will continue to be enforceable and in full force and
effect immediately following the Closing in accordance with the terms thereof
-15-
<PAGE>
as in effect prior to the Closing; (iii) neither SI nor SGI is in breach or
default (including with respect to the payment of premiums or the giving of
notices) under such policy, and no event has occurred which, with notice or the
lapse of time or both, would constitute such a breach or default or permit
termination, modification or acceleration, under such policy and (iv) neither SI
nor SGI has received any notice from the insurer disclaiming coverage or
reserving rights with respect to a particular claim or such policy in general.
3.17 Litigation. Section 3.17 of the Disclosure Schedule identifies,
----------
and contains a brief description of, (a) any unsatisfied judgment, order,
decree, stipulation or injunction and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or before
any arbitrator to which SI or SGI is a party or, to the knowledge of SI, SGI or
the Stockholder, is threatened to be made a party. None of the complaints,
actions, suits, proceedings, hearings and investigations set forth in Section
3.17 of the Disclosure Schedule, if resolved adversely to SI or SGI, would be
reasonably expected to have a Material Adverse Effect.
3.18 Product Warranty. Neither SI nor SGI has agreed with any
----------------
customer with respect to any product manufactured, sold, leased, licensed or
delivered by SI or SGI to any guaranty, warranty, right of return or other
indemnity beyond the applicable written terms and conditions of such sale,
lease, license or delivery.
3.19 Employees. Section 3.19 of the Disclosure Schedule contains a
---------
list of all employees of each of SI and SGI, along with the position and the
annual rate of compensation of each such person. To the knowledge of SI, SGI or
the Stockholder, no key employee or group of employees has any plans to
terminate employment with SI or SGI. Neither SI nor SGI is a party to or bound
by any collective bargaining agreement, or has experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Neither SI nor SGI has knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of SI or SGI.
3.20 Employee Benefit Plans
----------------------
(a) Section 3.20 of the Disclosure Schedule sets forth an
accurate schedule of all employee benefit or welfare benefit plans or
arrangements of SI or SGI, including without limitation any pension, profit
sharing, bonus, stock option, incentive, deferred compensation, hospitalization,
medical, insurance or other plan or arrangement, any employment agreement
containing "golden parachute" provisions, and a description of such plans and
arrangements, together with copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby. All employee
benefit plans listed in Section 3.20 of the Disclosure Schedule are in
compliance with any applicable provisions of the Employee Retirement Income
Security Act of 1974, as
-16-
<PAGE>
amended ("ERISA"), and the regulations issued thereunder, as well as with all
-----
other applicable federal, state and local statutes, ordinances and regulations.
(b) All plans listed in Section 3.20 of the Disclosure Schedule
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
---------------
Code have been determined by the Internal Revenue Service to be so qualified, or
will be submitted to the Internal Revenue Service within the relevant amendment
period of Section 401(b) of the Code, and copies of such determination letters
are included as part of Section 3.20 of the Disclosure Schedule. All reports and
other documents required to be filed with any Governmental Entity or distributed
to plan participants or beneficiaries (including, but not limited to, actuarial
reports, audits and Tax Returns) have been timely filed or distributed, and true
copies thereof have been delivered to the Buyer. None of the Stockholder, any
such plan listed in Section 3.20 of the Disclosure Schedule, SI or SGI has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such plan listed in Section 3.20 of the
Disclosure Schedule has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(1) of ERISA. Neither SI nor SGI
has incurred any liability for excise tax or penalty due to the Internal Revenue
Service or any liability due to the Pension Benefit Guaranty Corporation.
Neither SI nor SGI has ever maintained a plan that is subject to Title IV of
ERISA or Section 412 of the Code. Neither SI nor SGI has ever been required to
contribute to a multiemployer plan as defined in Section 4001 of ERISA.
3.21 Environmental Matters. Neither SI nor SGI has disposed of, or
---------------------
contracted for the disposal of, hazardous wastes, hazardous substances,
infectious or medical waste, as those terms are defined by the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive
----
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or any comparable state laws, rules or regulations. There has been
------
no storage or treatment of solid wastes or hazardous wastes (as defined in RCRA)
by SI or SGI at any site or other facility owned or operated by SI or SGI in
violation of any applicable law, rule, regulation, order, judgment or permit or
that would require any remedial action under any applicable law. Except as
disclosed in Section 3.21 of the Disclosure Schedule, (a) neither SI nor SGI has
received any notice of any violation with respect to asbestos or other toxic or
dangerous materials at any of its sites, and (b) there has been no spill,
discharge, leak, emission, injection, escape, dumping or release of any kind by
SI or SGI onto any property leased by SI or SGI, or into the environment
surrounding any such property of any toxic or hazardous substances as defined
under any local, state or federal regulations or laws. Except as disclosed in
Section 3.21 of the Disclosure Schedule, no employee of SI or SGI has, in the
course and scope of his or her employment, been exposed by SI of SGI in
violation of any law or regulation to hazardous, infectious or toxic wastes or
substances. In addition, none of SI, SGI or the Stockholder has knowledge of
any assertion by any Governmental Entity of any enforcement action.
-17-
<PAGE>
Section 3.21 of the Disclosure Schedule sets forth a complete list of all
disposal sites utilized in the past five years by SI or SGI.
3.22 Legal Compliance. Each of SI and SGI, and its conduct and
----------------
operations of its business, is in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government, or
any Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to either SI or SGI or its
business.
3.23 Permits. Section 3.23 of the Disclosure Schedule sets forth a
-------
list of all permits, licenses, registrations, certificates, orders or approvals
from any Governmental Entity (including without limitation those issued or
required under environmental laws and those relating to the occupancy or use of
owned or leased real property) ("Permits") issued to or held by SI or SGI. Such
-------
listed Permits are the only Permits that are required for SI or SGI to conduct
its business as presently conducted or as proposed to be conducted. Each such
Permit is in full force and effect and, to the knowledge of SI, SGI or the
Stockholder, no suspension or cancellation of such Permit is threatened and
there is no basis for believing that such Permit will not be renewable upon
expiration. Each such Permit will be in full force and effect immediately
following the Closing.
3.24 Certain Business Relationships With Affiliates. No Affiliate of
----------------------------------------------
SI (a) owns any property or right, tangible or intangible, which is used in the
business of SI, (b) has any claim or cause of action against SI, or (c) owes any
money to SI. No Affiliate of SGI (a) owns any property or right, tangible or
intangible, which is used in the business of SGI, (b) has any claim or cause of
action against SGI, or (c) owes any money to SGI.
3.25 Brokers' Fees. Neither SI nor SGI has any liability or
-------------
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
3.26 Books and Records. The minute books and other similar records of
-----------------
SI contain true and complete records in all material respects of all actions
taken at any meetings of SI's stockholders, Board of Directors or any committee
thereof and of all written consents executed in lieu of the holding of any such
meeting. The books and records of SI accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of SI and have been maintained in all material respects in accordance
with good business and bookkeeping practices. The minute books and other
similar records of SGI contain true and complete records in all material
respects of all actions taken at any meetings of SGI's stockholders, Board of
Directors or any committee thereof and of all written consents executed in lieu
of the holding of any such meeting. The books and records of SGI accurately
reflect in all material respects the assets, liabilities, business, financial
condition and results of
-18-
<PAGE>
operations of SGI and have been maintained in all material respects in
accordance with good business and bookkeeping practices.
3.27 Customers and Suppliers. Except as disclosed in Section 3.27 of
-----------------------
the Disclosure Schedule, no material supplier of SI or SGI has indicated in
writing within the past year that it will stop, or decrease the rate of,
supplying materials, products or services to them and no material customer of SI
or SGI has indicated in writing within the past year that it will stop, or
decrease the rate of, buying, leasing or licensing materials, products or
services from them. Section 3.27 of the Disclosure Schedule sets forth a list
of (a) each customer that accounted for more than 1% of the revenues of either
SI or SGI during the last full fiscal year and the amount of revenues accounted
for by such customer during such period and (b) each supplier that is the sole
supplier of any significant product or component to either SI or SGI.
3.28 Disclosure. No representation or warranty by SI, SGI and the
----------
Stockholder contained in this Agreement, and no statement contained in the
Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of SI, SGI and the Stockholder
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
4. Representations of the Buyer
----------------------------
The Buyer represents and warrants to SI, SGI and the Stockholder as
follows:
4.1 Organization. The Buyer is a corporation duly organized, validly
------------
existing and in corporate and franchise tax good standing under the laws of the
State of Delaware, and has all requisite power and authority (corporate and
other) to own its properties and to carry on its business as now being
conducted. Certified copies of the charter and the by-laws of the Buyer, each
as amended and/or restated to date, have been previously made available to the
Stockholder, are complete and correct, and no amendments have been made thereto
or have been authorized since the date thereof. The Buyer is not in default
under any provision of its charter or by-laws.
4.2 Authorization of Transaction. The execution and delivery of this
----------------------------
Agreement by the Buyer and the performance of this Agreement and other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby by the Buyer have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement has been duly and validly executed and delivered by the Buyer and
constitutes a valid and binding obligation of the Buyer, enforceable against it
in accordance with its terms.
-19-
<PAGE>
4.3 Noncontravention. Neither the execution and delivery of this
----------------
Agreement and the other agreements contemplated hereby by the Buyer, nor the
consummation by the Buyer of the transactions contemplated hereby or thereby,
will (a) conflict or violate any provision of the charter or by-laws of the
Buyer; (b) require on the part of the Buyer any filing with, or permit,
authorization, consent or approval of, any Governmental Entity; (c) conflict
with, result in a breach of, constitute (with or without due notice or lapse of
time or both) a default under, result in the acceleration of, create in any
party any right to accelerate, terminate, modify or cancel, or require any
notice, consent or waiver under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other arrangement to
which the Buyer is a party or by which it is bound or to which any of its assets
are subject or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Buyer or any of its properties or assets.
4.4 Broker's Fees. The Buyer has no liability or obligation to pay
-------------
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
4.5 Disclosure. No representation or warranty by the Buyer contained
----------
in this Agreement, and no statement contained in any other document, certificate
or other instrument delivered by or on behalf of the Buyer pursuant to this
Agreement, contains any untrue statement of a material fact or omits to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
5. Indemnification
---------------
5.1 By the Stockholder.
------------------
(a) Subject to the provisions and limitations in this Section 5,
including, without limitation, those in Subsection 5.6, the Stockholder hereby
indemnifies and agrees to hold harmless the Buyer, SI and SGI from and against
any and all debts, obligations and other liabilities (whether absolute, accrued,
contingent, fixed or otherwise, or whether known or unknown, or due or to become
due or otherwise), monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
amounts paid in settlement; interest; court costs; costs of investigators;
reasonable fees and expenses of attorneys, accountants, financial advisors and
other experts; and other expenses of litigation) incurred or suffered by the
party seeking indemnification ("Damages"):
-------
(i) resulting from or relating to any breach of or failure to
perform any representation, warranty, covenant or agreement of SI, SGI or the
Stockholder contained in this Agreement;
-20-
<PAGE>
(ii) resulting from any claim by a stockholder or former
stockholder of SI or SGI, or any other person, firm, corporation or entity,
seeking to assert, or based upon: (A) ownership or rights to ownership of any
shares of stock of SI or SGI; (B) any rights of a stockholder, including any
option, dissenter's or preemptive rights or rights to notice or to vote; (C) any
rights under the charter or by-laws of SI or SGI; or (D) any claim that his, her
or its shares were wrongfully repurchased by SI or SGI; and
(iii) resulting from any claim by a stockholder or former
stockholder of SI or SGI, or any other person, firm, corporation or entity,
arising from, or based upon: (A) that certain Royalty Agreement, dated on or
about May 20, 1988, by and between SGI and David Husnian, as amended; or (B)
that certain Agreement for Stock Redemption, dated as of April 30, 1990, by and
among SGI, Saul Kravecas and Marie Adler, as amended.
(b) The Stockholder hereby indemnifies and agrees to hold harmless
the Buyer, SI and SGI from and against all Damages resulting from any breach of
the representations and warranties made by the Stockholder in Section 2 of this
Agreement.
5.2 Claims for Indemnification. Whenever any claim shall arise for
--------------------------
indemnification under Section 5 or Section 6A (other than Section 6A.7(b)), the
Buyer, SI, SGI or the Stockholder, as the case may be, seeking indemnification
(the "Indemnified Party"), shall promptly notify the party from whom
-----------------
indemnification is sought (the "Indemnifying Party") of the claim and, when
------------------
known, the facts constituting the basis for such claim; provided, however, that
any delay in providing notice shall not relieve the Indemnifying Party of its
responsibility hereunder unless (and then only to the extent) such delay
materially impairs the Indemnifying Party's ability to defend the claim. In the
event of any such claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party, the notice
shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent, which shall not be
unreasonably withheld or delayed, of the Indemnifying Party; provided, however,
that if suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Subsection 5.3 of this Agreement, the Indemnified Party
shall have the right to settle or compromise such claim upon giving 30 days'
prior written notice to the Indemnifying Party as provided in Subsection 5.3.
Notwithstanding the foregoing, if a third party asserts that an Indemnified
Person is liable to such third party for a monetary or other obligation which
may constitute or result in Damages for which such Indemnified Person may be
entitled to indemnification pursuant to this Section 5, and such Indemnified
Person reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Person shall be entitled to satisfy
-21-
<PAGE>
such obligation, without consent from the Indemnifying Party, (ii) such
Indemnified Person may and shall make a claim for indemnification pursuant to
this Section 5 and (iii) such Indemnified Person shall be reimbursed for any
such Damages for which it is ultimately determined to be entitled to
indemnification pursuant to this Section 5 (it being understood that nothing in
this Section 5 shall operate or be construed to affect the right of the
Indemnifying Party to contest the amount or appropriateness of such
reimbursement or the settlement or satisfaction by the Indemnified Party).
5.3 Defense by the Indemnifying Party. In connection with any claim
---------------------------------
which may give rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party, the
Indemnifying Party, at its sole cost and expense, may, upon written notice to
the Indemnified Party, assume the defense of any such claim or legal proceeding
(provided that the Indemnifying Party acknowledges to the Indemnified Party in
writing the obligation of the Indemnifying Party to indemnify the Indemnified
Party with respect to all elements of such claim, subject to the limitations in
this Section 5). If the Indemnifying Party assumes the defense of any such
claim or legal proceeding, it shall select counsel reasonably acceptable to the
Indemnified Party to conduct the defense of such claims or legal proceedings and
at the sole cost and expense of the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof. The Indemnifying Party shall
not consent to a settlement of, or the entry of any judgment arising from, any
such claim or legal proceeding, without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld), unless
such settlement or judgment contains a provision releasing the Indemnified Party
from all liability for such claim. The Indemnified Party shall cooperate with
and shall be entitled to participate in (but not control) the defense of any
such action, with its own counsel and at its own expense. If the Indemnifying
Party does not assume the defense of any such claim or litigation resulting
therefrom within 30 days after receipt of notice of such claim from the
Indemnified Party: (a) the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including, but not limited
to, settling such claim or litigation, after giving at least 15 days' prior
written notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
her counsel and at her own expense; in such event, the Indemnifying Party may
not thereafter seek to question the manner in which the Indemnified Party
defended such third-party claim or the amount or nature of any such settlement.
5.4 No Contribution. If the Stockholder is required to make any
---------------
indemnification payment pursuant to this Section 5, she shall not have any
rights to contribution from either SI or SGI.
5.5 Survival. The representations, warranties, covenants and
--------
agreements of SI, SGI and the Stockholder set forth in this Agreement shall
survive the Closing and
-22-
<PAGE>
the consummation of the transactions contemplated hereby and continue until
three years after the Closing Date. Notwithstanding the foregoing, the
representations and warranties contained in Sections 3.9, 3.12 and 3.21 shall
each survive the Closing and the consummation of the transactions contemplated
thereby and continue until the expiration date of the applicable statute of
limitations, and the representations and warranties contained in Sections 2 and
3.2 shall each survive the Closing and the consummation of the transactions
contemplated thereby and continue in full force and effect ad infinitum.
5.6 Limitations. Notwithstanding anything to the contrary herein,
-----------
(a) the aggregate liability of the Stockholder for Damages under Section 5 and
Section 6A (other than Section 6A.7(b)) shall not exceed $821,500 and (b) the
Indemnifying Party shall not be liable under Section 5 and Section 6A (other
than Section 6A.7(b)) unless and until the aggregate Damages exceed $10,000 (at
which point the Indemnifying Party shall become liable for the aggregate
Damages, and not just amounts in excess of $10,000). Except with respect to
claims based on fraud, the rights of the Indemnified Persons under this Section
5 shall be the exclusive remedy of the Indemnified Persons with respect to any
claims resulting from or relating to this Agreement.
5.7 Adjustment to Purchase Price. All indemnification payments
----------------------------
pursuant to this Section 5 shall be deemed adjustments to the Purchase Price.
6. Ancillary Agreements
--------------------
6.1 Proprietary Information.
-----------------------
(a) The Stockholder shall hold in confidence all knowledge and
information of a secret or confidential nature with respect to the business of
SI or SGI and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that disclosure is required by law or
legal process or such information shall have become public knowledge other than
by breach of this Agreement by the Stockholder.
(b) The Stockholder agrees that the remedy at law for any breach
of this Subsection 6.1 would be inadequate and that the Buyer shall be entitled
to injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Subsection 6.1.
6.2 Employment Agreements.
---------------------
(a) On the Closing Date, Cossin shall enter into an employment
agreement with the Buyer substantially in the form attached hereto as Exhibit A.
---------
-23-
<PAGE>
(b) On the Closing Date, Seth Singer shall enter into an
employment agreement with the Buyer substantially in the form attached hereto as
Exhibit B.
- ---------
6.3 Communications. No public communications concerning this
--------------
Agreement shall be made without the mutual consent and cooperation of the Buyer,
SI, SGI and the Stockholder, except as otherwise required by law.
6A. Tax Matters
-----------
6A.1 Tax Indemnification by the Stockholder.
--------------------------------------
(a) The Stockholder shall indemnify and hold the Buyer, SI and
SGI harmless from and against any and all Taxes for any taxable period ending
(or deemed, pursuant to Section 6A.4, to end) on or before the Closing Date).
(b) Amounts payable pursuant to this Section 6A.1 shall be paid
in accordance with Section 5 of this Agreement. The parties agree that to the
maximum extent allowable under applicable Tax laws, amounts payable to the Buyer
pursuant to this Section 6A.1 shall be treated (and reported on all applicable
Tax Returns) as adjustments to the Purchase Price.
6A.2 Tax Indemnification by the Buyer.
--------------------------------
(a) The Buyer shall indemnify and hold the Stockholder harmless
from and against any and all Taxes with respect to SI or SGI for any taxable
period beginning (or deemed, pursuant to Section 6A.4, to begin) after the
Closing Date.
(b) Amounts payable pursuant to this Section 6A.2 shall be paid
in accordance with Section 5 of this Agreement. The parties agree that to the
maximum extent allowable under applicable Tax laws, amounts payable to the
Stockholder pursuant to this Section 6A.2 shall be treated (and reported on all
applicable Tax Returns) as adjustments to the Purchase Price.
6A.3 Filing Responsibility.
---------------------
(a) The Stockholder shall prepare and file the following
Tax Returns with respect to each of SI and SGI:
(i) All income Tax Returns for any taxable period
actually ending on or before the Closing Date;
(ii) All other Tax Returns required to be filed (taking into
account extensions) prior to the Closing Date.
-24-
<PAGE>
If any Tax Returns for which the Stockholder shall have filing
responsibility under this Section 6A.3(a) are filed after the Closing Date, the
Buyer shall where required cause the relevant officers of SI or SGI, as the case
may be, to sign such Tax Returns unless it is advised in writing by counsel
acceptable to the Stockholder that the execution of the Tax Returns would
subject the officers, the Buyer, SI, SGI or any affiliate to any penalty, fine
or other sanctions.
(b) The Buyer, SI or SGI shall, subject to the provisions of
Section 6A.3(c), file all other Tax Returns with respect to SI and SGI.
(c) With respect to any Tax Return for a taxable period
beginning before the Closing Date and ending after the Closing Date, the Buyer
shall consult with the Stockholder concerning each such Tax Return and report
all items with respect to the period ending on or prior to the Closing Date in
accordance with the instructions of the Stockholder (which shall be consistent
with past practice), unless otherwise agreed by the Stockholder and the Buyer;
provided, however, that if the Buyer is advised in writing by counsel acceptable
to the Stockholder that the filing of any Tax Return and the reporting on such
Tax Return of any item in accordance with the instructions of the Stockholder
may subject the Buyer, SI, SGI or any Affiliate to any penalties or fines, the
Buyer may file such Tax Return without regard to the Stockholder's instructions
relating to such item. The Buyer shall cause SI or SGI, as the case may be, to
provide the Stockholder with a copy of each proposed Tax Return (other than
withholding, payroll or employment Tax Returns, copies of which will be
furnished to the Stockholder after filing) at least 30 days prior to the filing
of such Tax Return, and the Stockholder may provide comments thereon, which
comments shall be delivered within 15 days of receiving such copies.
6A.4 Payment of Taxes and Allocation of Certain Taxes.
------------------------------------------------
(a) The Stockholder shall pay or cause to be paid when due all
Taxes due with respect to the Tax Returns for which it has filing responsibility
under Section 6A.3(a).
(b) The Buyer, SI or SGI shall pay when due all Taxes with
respect to the Tax Returns for which they have filing responsibility under
Section 6A.3(b) of this Agreement, and the Stockholder shall promptly pay or
reimburse the Buyer, SI or SGI, as the case may be, to the extent required by
Section 6A.1(a) above.
(c) The Buyer and the Stockholder agree to treat the Closing
Date as the last day of the taxable period of SI and SGI in all Taxing
jurisdictions where such treatment is required or permitted. The Buyer and the
Stockholder agree to treat the S Short Year, as defined in Section 1362(e) of
the Code, as a taxable period for purposes of this Agreement. If the Closing
Date is the last day of a taxable period, the Buyer and the Stockholder agree
(i) to determine the taxable income of the taxable period then
-25-
<PAGE>
ended by including in it (x) all taxable income and loss from actual operations
and transactions through 11:59 p.m. on the Closing Date and (y) gain from the
deemed sale of assets pursuant to any elections made under Section 338(h)(10) of
the Code (and any comparable election under state, local or foreign tax law)
with respect to the purchase of the Shares by the Buyer from the Stockholder
(the "Section 338(h)(10) Elections") and (ii) to determine the taxable income of
the next taxable period by including in it all taxable income and loss from
actual operations and transactions after 11:59 p.m. on the Closing Date through
the end of the taxable period.
(d) Any Taxes for a taxable period beginning before the Closing
Date and ending after the Closing Date with respect to SI or SGI for which it is
not required or permitted to treat the Closing Date as the last day of the
taxable period shall be apportioned for purposes of this Section 6A.4 and
Sections 6A.1, 6A.2, and 6A.5 between the Stockholder and the Buyer for the
period though the Closing Date and the period after the Closing Date in the same
manner as if the Closing Date were required or permitted to be the last day of a
taxable period as set forth in Section 6A.4(c).
6A.5 Refunds and Carrybacks.
----------------------
(a) The Stockholder shall be entitled to an amount equal to any
refunds or credits of Taxes attributable to taxable periods (or portions
thereof, determined in accordance with Section 6A.4) ending on or before the
Closing Date except to the extent that such refunds or credits are due directly
from any taxing authority or other Governmental Entity and are reflected as
assets in the Most Recent Balance Sheet.
(b) The Buyer, SI and SGI, as the case may be, shall be entitled
to any refunds or credits of Taxes attributable to taxable periods (or portions
thereof determined in accordance with Section 6A.4) beginning after the Closing
Date.
(c) The Buyer shall or shall cause SI or SGI, as the case may
be, promptly to forward to the Stockholder or reimburse the Stockholder for any
refunds or credits, including interest received thereon, due the Stockholder
(pursuant to the terms of this Agreement) after receipt thereof, and the
Stockholder shall promptly forward to the Buyer (pursuant to the terms of this
Agreement) or reimburse the Buyer for any refunds or credits including interest
received thereon, due the Buyer after receipt thereof.
6A.6 Cooperation and Exchange of Information.
---------------------------------------
(a) The Buyer shall provide the Stockholder with such
cooperation and shall deliver to the Stockholder such information and data
concerning the pre-Closing operations of SI and SGI and make available such
knowledgeable employees of such entities as the Stockholder may reasonably
request, in order to enable
-26-
<PAGE>
the Stockholder to complete and file all Tax Returns which it may be required to
file with respect to the operations and business of SI and SGI through the
Closing Date or to respond to audits by any taxing authority or other
Governmental Entity with respect to such operations and to otherwise enable the
Stockholder to satisfy its internal accounting, tax and other legitimate
requirements.
(b) For a period of three (3) years after the Closing Date or
such longer period as may be required by law, the Buyer shall, and shall cause
SI and SGI to, retain and not destroy or dispose of all Tax Returns (including
supporting materials), books and records (including computer files) of, or with
respect to the activities or Taxes of, SI and SGI for all taxable periods ending
on or prior to, or which include, the Closing Date to the extent the Buyer, SI
or SGI received or had possession of such records on the Closing Date.
(c) For a period of three (3) years after the Closing Date or
such longer period as may be required by law, the Stockholder shall retain and
not destroy or dispose of all Tax Returns (including supporting materials),
books and records (including computer files) of, or with respect to the
activities or Taxes of, SI and SGI for all taxable periods ending on or prior
to, or which include, the Closing Date to the extent the Stockholder did not
deliver such records to the Buyer, SI or SGI. Thereafter, the Stockholder shall
not destroy or dispose of any such Tax Returns, books or records unless it first
offers such Tax Returns, books and records to the Buyer in writing and the Buyer
fails to accept such offer within sixty (60) days of its being made.
(d) The Buyer and the Stockholder shall cooperate in the
preparation of all Tax Returns for any Tax periods for which one party could
reasonably require the assistance of the other party in obtaining any necessary
information. Such cooperation shall include, but not be limited to, furnishing
prior years' Tax Returns or return preparation packages illustrating previous
reporting practices or containing historical information relevant to the
preparation of such Tax Returns, and furnishing such other information within
such party's possession requested by the party filing such Tax Returns as is
relevant to their preparation. Such cooperation and information also shall
include without limitation provision of powers of attorney for the purpose of
signing Tax Returns and defending audits and promptly forwarding copies of
appropriate notices and forms or other communications received from or sent to
any taxing authority or other Governmental Entity which relate to SI or SGI, and
providing copies of all relevant Tax Returns, together with accompanying
schedules and related workpapers, documents relating to rulings or other
determinations by any taxing authority or other Governmental Entity and records
concerning the ownership and tax basis of property, which the requested party
may possess. The Buyer, SI and SGI or the Stockholder shall make their
respective employees and facilities available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder.
-27-
<PAGE>
(e) The Stockholder shall have the right, at her own expense, to
control any audit or examination by a taxing authority or other Governmental
Entity ("Tax Audit"), initiate any claim for refund, contest, resolve and defend
against any assessment, notice of deficiency, or other adjustment or proposed
adjustment relating to any and all Taxes for any taxable period ending on or
before the Closing Date with respect to SI or SGI. The Buyer, SI or SGI shall
promptly notify the Stockholder of the initiation of any such Tax Audit, shall
supply the Stockholder with all written communications received with respect to
such Tax Audit and shall periodically report to the Stockholder any other
developments of which any of them become aware during the course of the Tax
Audit. The Buyer shall have the right, at her own expense, to control any other
Tax Audit, initiate any other claim for refund, and contest, resolve and defend
against any other assessment, notice of deficiency, or other adjustment or
proposed adjustment relating to Taxes with respect to SI or SGI; provided that,
with respect to (i) any state, local or foreign Taxes for, or determined by
reference to, any taxable period beginning before the Closing Date and ending
after the Closing Date and (ii) any item the adjustment of which may cause the
Stockholder to become obligated to make an indemnity payment pursuant to Section
6A.1 hereof, (w) the Buyer shall provide the Stockholder with the same
information it would receive if it had the right to control the resolution of
Tax Audit, (x) the Stockholder shall have the right to have a representative
present throughout the Tax Audit and any subsequent proceeding, (y) the
Stockholder shall have the right to control the resolution of all questions
having to do with the effect of the Section 338(h)(10) Elections which could
have an adverse effect on the Stockholder unless it also has an adverse effect
on the Buyer, SI or SGI, in which event, the Stockholder shall not settle such
an issue without the consent of the Buyer, which consent shall not be
unreasonably withheld, and (z) the Buyer shall consult with the Stockholder with
respect to the resolution of any other issue that would affect the Stockholder,
and not settle any such issue, or file any amended return relating to such
issue, without the consent of the Stockholder, which consent shall not
unreasonably be withheld.
(f) If the Buyer, SI or SGI (as the case may be) on the one
hand, or the Stockholder on the other, fails to provide any information
requested by the other party in the time specified herein, or if no time is
specified pursuant to this Section 6A.6, within a reasonable period, or
otherwise fails to do any act required of it under this Section 6A.6, then the
party failing to so provide the information or do such act shall be obligated,
notwithstanding any other provision of this Agreement, to indemnify the party
requesting the information or act and shall so indemnify the requesting party
and hold such party harmless from and against any and all costs, claims or
damages, including, without limitation, all Taxes or deficiencies thereof,
payable as a result of such failure. Notwithstanding the foregoing, the party
that failed to deliver the information or do the act requested, shall in no
event be obligated to make any payments pursuant to this Section 6A.6(f) or
otherwise be liable, if such party used all reasonable commercial efforts to
provide the requested information or perform the requested act on a timely
basis.
-28-
<PAGE>
6A.7 Certain Tax Elections and Other Covenants.
-----------------------------------------
(a) The Stockholder will join with the Buyer in making Section
338(h)(10) Elections with respect to each of SI and SGI, it being understood
that the making of any Section 338(h)(10) Election shall be at the sole
discretion of the Buyer. The Buyer and the Stockholder shall cooperate fully
with each other in the making of such Section 338(h)(10) Elections. In
particular, and not by way of limitation, in order to effect such Section
338(h)(10) Elections, the Buyer and the Stockholder shall, with respect to each
of SI and SGI, jointly execute Internal Revenue Service Form 8023 and all
attachments required to be filed therewith pursuant to applicable Treasury
Regulations (the "Attachments"). No later than 75 days before the last day
prescribed for filing the Section 338(h)(10) Elections, the Stockholder shall
prepare and submit to the Buyer the Forms 8023 and the Attachments to Form 8023
for the Buyer's approval. The Buyer and Stockholder shall use their best good
faith efforts to agree on the Forms 8023 and the Attachments.
(b) The Buyer shall indemnify and hold the Stockholder harmless
from and against any and all Taxes, costs and expenses payable by the
Stockholder and directly attributable to the Section 338(h)(10) Elections,
provided that such Taxes, costs and expenses would not otherwise have become
payable by the Stockholder in the absence of such 338(h)(10) Elections. Amounts
payable pursuant to this Section 6A.7(b) shall be paid in immediately available
funds within 30 days of the Stockholder providing written notice of a claim for
indemnification, subject to the provisions of Section 7 of this Agreement.
(c) The Buyer and the Stockholder agree to report the
transaction for tax purposes in a manner consistent with the making of the
338(h)(10) Elections and with the Forms 8023 and the Attachments in each of
their respective income Tax Returns. If the Buyer elects, the Stockholder agrees
to join, in accordance with the foregoing procedures, in any similar election
under the law of any state in which SI or SGI now files an income Tax Return or
is included in a consolidated, combined or unitary state income Tax Return.
(d) No new elections with respect to Taxes, or any changes in
current elections with respect to Taxes, affecting SI or SGI and which will bind
them after the Section 338(h)(10) Elections, shall be made after the date of
this Agreement without the prior written consent of the Buyer.
(e) The Stockholder shall furnish the Buyer an affidavit,
stating, under penalty of perjury, the transferor's United States taxpayer
identification number and that the transferor is not a foreign person pursuant
to Section 1445(b)(2) of the Code.
6A.8 Payments. All payments to be made under this Section 6A
--------
shall be made in immediately available funds.
-29-
<PAGE>
7. Dispute Resolution
------------------
7.1 General. In the event that any dispute should arise between the
-------
parties hereto with respect to any matter covered by this Agreement, including,
without limitation, the calculation of the Adjusted Purchase Price or claims
under Section 5 or Section 6A, the parties hereto shall resolve such dispute in
accordance with the procedures set forth in this Section 7.
7.2 Consent of the Parties. In the event of any dispute between the
----------------------
parties with respect to any matter covered by this Agreement, the parties shall
first use their best efforts to resolve such dispute among themselves. If the
parties are unable to resolve the dispute within 30 calendar days after the
commencement of efforts to resolve the dispute, the dispute will be submitted to
arbitration in accordance with Subsection 7.3 hereof.
7.3 Arbitration
-----------
(a) Either the Buyer or the Stockholder may submit any matter
referred to in Subsection 7.2 hereof to arbitration by notifying the other party
hereto, in writing, of such dispute. Within 15 days after receipt of such
notice, the Buyer and the Stockholder shall designate in writing one arbitrator
to resolve the dispute; provided, that if the parties hereto cannot agree on an
arbitrator within such 15-day period, the arbitrator shall be selected by the
American Arbitration Association from candidates not selected by the Buyer or
the Stockholder. The arbitrator so designated shall not be an employee,
consultant, officer, director or stockholder of any party hereto or any
Affiliate of any party to this Agreement.
(b) Within 30 days after the designation of the arbitrator, the
arbitrator, the Buyer and the Stockholder shall meet, at which time the Buyer
and the Stockholder shall be required to set forth in writing all disputed
issues and a proposed ruling on each such issue.
(c) The arbitrator shall set a date for a hearing, which shall
be no later than 30 days after the submission of written proposals pursuant to
paragraph (b) above, to discuss each of the issues identified by the Buyer and
the Stockholder. Each such party shall have the right to be represented by
counsel. The arbitration shall be governed by the rules of the American
Arbitration Association; provided, that the arbitrator shall have sole
discretion with regard to the admissibility of evidence.
(d) The arbitrator shall use his or her best efforts to rule on
each disputed issue within 30 days after the completion of the hearings
described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto.
-30-
<PAGE>
(e) The prevailing party in any arbitration shall be entitled to
an award of reasonable attorneys' fees incurred in connection with the
arbitration. The non-prevailing party shall pay such fees, together with the
fees of the arbitrator and the costs and expenses of the arbitration. For
purposes hereof, a party seeking payment of any amount in arbitration shall be
deemed to be the prevailing party if it is determined that it is entitled to
receive at least 85% of the payment initially claimed by it to be due to such
party in such arbitration, and the party from which such payment is sought shall
be deemed to be the "prevailing party" if the other party is not so deemed to be
the prevailing party.
(f) Any arbitration pursuant to this Subsection 7.3 shall be
conducted in Hartford, Connecticut. Any arbitration award may be entered in and
enforced by any court having jurisdiction thereover and the parties hereby
consent and commit themselves to the jurisdiction of the courts of the State of
Connecticut and the United States District Court for the District of Connecticut
for purposes of the enforcement of any arbitration award.
8. Notices
-------
Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing and delivered personally or sent by
telex, telecopy, Federal Express or other overnight courier, registered or
certified mail, postage prepaid, addressed as follows or to such other address
of which the parties may have given notice:
To the Buyer: SS&C Technologies, Inc.
705 Bloomfield Avenue
Bloomfield, Connecticut 06002
Attn: Chief Executive Officer
With a copy to: John A. Burgess, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
To the Stockholder: Diane Cossin
928 Haverstraw Road
Suffern, NY 10901
With a copy to: Donald S. Waskover, Esq.
690 Kinderkamack Road
Suite 300
Oradell, NJ 07649
-31-
<PAGE>
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by telex
or telecopy, (b) the next business day, if delivered by Federal Express or other
overnight courier, charges prepaid, or (c) three business days after being sent,
if sent by registered or certified mail, first class postage prepaid.
9. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Stockholder, SI and SGI, on the other hand, may
not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that the Buyer may assign this
Agreement, and its rights and obligations hereunder, to a wholly owned
subsidiary of the Buyer. In the event that the Buyer assigns this Agreement,
and its rights and obligations hereunder, to a wholly owned subsidiary of the
Buyer, the Buyer shall guarantee the performance of all of the Buyer's
obligations hereunder. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer, the Stockholder, SI or SGI from
any obligation or liability under this Agreement. In addition, the Stockholder
may not assign any rights to receive payments under this Agreement without the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld.
10. Entire Agreement; Amendments; Attachments
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer, by the consent of its Board of Directors or
officers authorized by such Board, and the Stockholder may amend or modify this
Agreement, in such manner as may be agreed upon, by a written instrument
executed by the Buyer and the Stockholder.
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall prevail. The Schedules and Exhibits attached hereto are hereby
incorporated as integral parts of this Agreement.
11. Severability
------------
Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining
-32-
<PAGE>
provisions hereof in such jurisdiction or rendering that or any other provision
of this Agreement invalid, illegal or unenforceable in any other jurisdiction.
12. Investigation of the Parties
----------------------------
All representations and warranties contained herein which are made to
the best knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.
13. Expenses
--------
Except as otherwise expressly provided herein, the Buyer shall pay all
fees and expenses (including, without limitation, legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated
hereby, and the Stockholder shall pay all fees and expenses (including, without
limitation, legal and accounting fees and expenses) incurred by the Stockholder,
SI or SDI in connection with the transactions contemplated hereby. The
Stockholder shall be responsible for payment of all sales or transfer taxes
arising out of the conveyance of the Shares owned by the Stockholder.
14. Legal Fees
----------
In the event that legal proceedings are commenced by the Buyer against
the Stockholder, or by the Stockholder against the Buyer, in connection with
this Agreement or the transactions contemplated hereby, the party or parties
which do not prevail in such proceedings shall pay the reasonable attorneys'
fees and other costs and expenses, including investigation costs, incurred by
the prevailing party in such proceedings.
15. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to conflict of laws rules.
16. Section Headings
----------------
The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit or restrict the contractual obligations of the
parties.
17. Counterparts
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
-33-
<PAGE>
18. Construction.
------------
The language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context requires
otherwise.
* * * * *
-34-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
SS&C TECHNOLOGIES, INC.
/s/ William C. Stone
--------------------------
By: William C. Stone
Title: Chairman and CEO
SAVID INTERNATIONAL, INC.
/s/ Diane Cossin
-------------------------
By: Diane Cossin
Title: President
THE SAVID GROUP, INC.
/s/ Diane Cossin
-------------------------
By: Diane Cossin
Title: President
STOCKHOLDER:
/s/ Diane Cossin
-------------------------
Diane Cossin
-35-
<PAGE>
SS&C Technologies, Inc. agrees to furnish supplementally to the Securities
and Exchange Commission copies of any of the following schedules upon request of
the Commission.
Schedule A Determination of Revenues With Respect to Sales and/or
Licensing of the Savid System, on a Per Savid System
Licensee Basis
Schedule B Determination of License Fees With Respect to Sales and/or
Licensing of the Savid System, on a Per Savid System
Licensee Basis
Schedule 3.2 Capitalization
Schedule 3.4 Noncontravention
Schedule 3.7 Absence of Certain Changes
Schedule 3.8 Undisclosed Liabilities
Schedule 3.12c Intellectual Property owned by the Company
Schedule 3.12d Intellectual Property not owned by the Company
Schedule 3.12e Intellectual Property not listed elsewhere
Schedule 3.13 Leases
Schedule 3.14 Contracts
Schedule 3.16 Insurance Policies
Schedule 3.17 Litigation
Schedule 3.19 Employees
Schedule 3.20 Employee Benefit Plans
Schedule 3.21 Environmental Matters
Schedule 3.23 Permits
Schedule 3.27 Customers and Suppliers
Exhibit A Employment Agreement between the Buyer and Diane Cossin
Exhibit B Employment Agreement between the Buyer and Seth Singer
-36-
<PAGE>
EXHIBIT 99
SS&C Completes Acquisition of Savid International Inc. and The Savid
Group, Inc. Adds Windows-Based Derivative Product
BLOOMFIELD, Conn.--(BUSINESS WIRE)--April 13, 1998--SS&C Technologies, Inc.
(Nasdaq: SSNC - news) announced today it has completed the acquisition of all of
the shares of capital stock of two New York-based corporations, Savid
International Inc. and The Savid Group, Inc. (Savid). The aggregate purchase
price consisted of $821,500 in cash. The transaction will be accounted for as a
purchase. The purchase agreement also provides for a future payment to be made
to the former Savid shareholder contingent on the generation of certain
revenues.
"This acquisition continues our strategy of acquiring brand-name investment
management and accounting solutions to meet the needs of sophisticated
international investment firms,'' commented SS&C's Chief Executive Officer, Bill
Stone. "Combining with Savid is expected to deliver value by further enhancing
CAMRA 2000, particularly in derivative Straight Through Processing. Savid should
also increase SS&C's presence in the corporate treasury and banking markets.''
"SS&C is an industry leader, and combining with them will allow us to leverage
our existing staff and products with SS&C's broad experience and resources,''
said Diane Cossin, Savid's President. "Our clients and prospects can be
confident this move will strengthen our ability to support their needs, and
offer them additional breadth of products and expertise.''
Under the terms of the agreement, Savid President Diane Cossin will become
Director, Derivative Systems Development of SS&C, and Seth Singer, Savid's Vice
President of Sales, will initially become Director, Product Marketing,
Derivative Systems of SS&C, based on multi-year employment agreements.
Savid is a leading supplier of PC/LAN-based financial software specifically
designed to help organizations manage their debt and derivative portfolios. The
Savid System is a modularized application designed to process and analyze all
activities related to debt and derivative portfolios: Swaps, Caps, Floors,
Collars, FRAs, FX, Futures and Options, as well as the issuance of Short-,
Medium-, and Long-Term Debt. Key markets include banks, corporate treasury,
government agencies, and financial institutions.
With offices in the U.S., Canada, Europe, and Asia, SS&C is a leading provider
of financial software solutions, services, and expertise to asset managers
worldwide. SS&C primarily targets its products and services to large-scale,
sophisticated investment enterprises who use the trading, accounting, reporting,
and analysis solutions to manage, in aggregate, more than $1.5 trillion in
assets. Full company information is located on the World Wide Web at
http://www.ssctech.com.
Contact:
SS&C Technologies, Inc.
Peg Berry, 860-286-2251
Cindy Lawrence, 212-303-7611
