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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): December 31, 1997
----------------------
SS&C Technologies, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-28430 06-1169696
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(Commission File Number) (I.R.S. Employer Identification No.)
Corporate Place
705 Bloomfield Avenue
Bloomfield, Connecticut 06002
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(Address of Principal Executive Offices) (Zip Code)
(860) 242-7887
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
On December 31, 1997 (the "Effective Date"), SS&C Technologies, Inc. (the
"Company") completed its acquisition of Shepro Braun Systems, Inc. ("SBS")
pursuant to an Agreement and Plan of Merger, dated as of December 31, 1997 (the
"Merger Agreement"), among the Company, SBS, Securities Software Acquisition
Corp., a wholly owned subsidiary of the Company (the "Merger Subsidiary"), and
Robert C. Shepro, Linda A. Shepro, Richard J. Moore, Mark L. Seaman and Brian R.
Shearer (collectively, the "Stockholders").
Pursuant to the Merger Agreement, the Merger Subsidiary was merged with and
into SBS (the "Merger") on the Effective Date, whereupon SBS became a wholly
owned subsidiary of the Company. At that time, the outstanding shares of
capital stock of SBS were converted into an aggregate of 1,000,000 shares of
Common Stock of the Company (the "Common Stock"). The Company used authorized
but previously unissued shares of Common Stock in connection with the Merger.
The Company, SBS and representatives of the Stockholders have entered into
an Escrow Agreement providing, among other things, that 10% of the Common Stock
of the Company received by the Stockholders in the Merger will be held in escrow
to reimburse the Company in connection with the breaches of representations,
warranties or covenants made by SBS and the Stockholders in the Merger
Agreement.
Prior to the Merger, SBS engaged in software development and consulting,
providing information systems and technology integration to the investment
management and financial services marketplace. The Company currently intends to
continue SBS's business substantially in the manner conducted by SBS immediately
prior to the Merger.
The Merger Agreement and the Merger were approved by the Board of Directors
of the Company and the Board of Directors and stockholders of SBS. The terms of
the Merger Agreement and the Merger were determined on the basis of arm's-length
negotiations. Prior to the execution of the Merger Agreement, 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 SBS.
The foregoing description of the Merger Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of the
Merger Agreement which is filed as Exhibit 2 to this Current Report on Form 8-K
and incorporated herein by reference.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
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Not applicable.
(b) Pro Forma Financial Information.
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Not applicable.
(c) Exhibits.
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See Exhibit Index attached hereto.
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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: January 8, 1998 SS&C TECHNOLOGIES, INC.
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(Registrant)
By: /s/ John S. Wieczorek
------------------------------------
John S. Wieczorek
Vice President, Chief Financial
Officer and Treasurer
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2 Agreement and Plan of Merger, dated as of December 31, 1997, by and
among SS&C Technologies, Inc., Shepro Braun Systems, Inc., Securities
Software Acquisition Corp. and Robert C. Shepro, Linda A. Shepro,
Richard J. Moore, Mark L. Seaman and Brian R. Shearer.
99 Press Release dated December 31, 1997.
<PAGE>
Exhibit 2
---------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SS&C TECHNOLOGIES, INC.,
SECURITIES SOFTWARE ACQUISITION CORP.,
SHEPRO BRAUN SYSTEMS, INC.,
ROBERT C. SHEPRO,
LINDA A. SHEPRO,
RICHARD J. MOORE,
MARK L. SEAMAN
AND
BRIAN R. SHEARER
December 31, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER............................................................... 1
1.1 The Merger......................................................... 1
1.2 The Closing........................................................ 1
1.3 Actions at the Closing............................................. 2
1.4 Additional Action.................................................. 2
1.5 Conversion of Shares............................................... 2
1.6 Exchange of Shares................................................. 3
1.7 Dividends.......................................................... 4
1.8 Fractional Shares.................................................. 4
1.9 Escrow............................................................. 5
1.10 Articles of Incorporation.......................................... 5
1.11 By-laws............................................................ 5
1.12 Directors and Officers............................................. 5
1.13 No Further Rights.................................................. 5
1.14 Closing of Transfer Books.......................................... 5
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS............................ 6
2.1 Organization, Qualification and Corporate Power.................... 6
2.2 Capitalization..................................................... 6
2.3 Authorization of Transaction....................................... 7
2.4 Noncontravention................................................... 7
2.5 Subsidiaries....................................................... 7
2.6 Financial Statements............................................... 8
2.7 Absence of Certain Changes......................................... 8
2.8 Undisclosed Liabilities............................................ 8
2.9 Tax Matters........................................................ 8
2.10 Assets............................................................ 10
2.11 Real Property..................................................... 10
2.12 Intellectual Property............................................. 10
2.13 Inventory......................................................... 13
2.14 Real Property Leases.............................................. 13
2.15 Contracts......................................................... 13
2.16 Accounts Receivable............................................... 15
2.17 Insurance......................................................... 15
2.18 Litigation........................................................ 15
2.19 Product Warranty.................................................. 15
2.20 Employees......................................................... 16
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2.21 Employee Benefit Plans............................................ 16
2.22 Environmental Matters............................................. 17
2.23 Legal Compliance.................................................. 17
2.24 Permits........................................................... 17
2.25 Certain Business Relationships With Affiliates.................... 18
2.26 Brokers' Fees..................................................... 18
2.27 Books and Records................................................. 18
2.28 Customers and Suppliers........................................... 18
2.29 Pooling........................................................... 18
2.30 Disclosure........................................................ 18
2.31 Additional Representations and Warranties of the Stockholders..... 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY........................................... 20
3.1 Organization...................................................... 20
3.2 Capitalization.................................................... 20
3.3 Authorization of Transaction...................................... 21
3.4 Noncontravention.................................................. 21
3.5 Reports and Financial Statements.................................. 21
3.6 Absence of Material Adverse Changes............................... 22
3.7 Brokers' Fees..................................................... 22
3.8 Legal Compliance.................................................. 22
3.9 Disclosure........................................................ 22
3.10 Negotiations...................................................... 23
ARTICLE IV
COVENANTS............................................................... 23
4.1 Best Efforts...................................................... 23
4.2 Notices and Consents.............................................. 23
4.3 Operation of Business............................................. 23
4.4 Full Access....................................................... 25
4.5 Notice of Breaches................................................ 25
4.6 Agreements from Certain Affiliates of the Company................. 25
4.7 Listing of Merger Shares.......................................... 26
4.8 Bonus Pool........................................................ 26
4.9 Option Pool....................................................... 26
4.10 Repayment of Loans; Deferred Compensation......................... 26
4.11 Tax-Free Reorganization........................................... 26
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ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER.................................... 28
5.1 Conditions to Each Party's Obligations............................ 28
5.2 Conditions to Obligations of the Buyer and the Transitory
Subsidiary........................................................ 29
5.3 Conditions to Obligations of the Company.......................... 30
ARTICLE VI
INDEMNIFICATION......................................................... 32
6.1 Indemnification................................................... 32
6.2 Method of Asserting Claims........................................ 33
6.3 Survival.......................................................... 34
6.4 Limitations....................................................... 34
ARTICLE VII
TERMINATION............................................................. 35
7.1 Termination of Agreement.......................................... 35
7.2 Effect of Termination............................................. 36
ARTICLE VIII
REGISTRATION RIGHTS..................................................... 36
8.1 Registration of Shares............................................ 36
8.2 Limitations on Registration Rights................................ 37
8.3 Registration Procedures........................................... 37
8.4 Requirements of Principal Stockholders............................ 38
8.5 Indemnification................................................... 39
8.6 Assignment of Rights.............................................. 39
ARTICLE IX
DEFINITIONS............................................................. 39
ARTICLE X
MISCELLANEOUS........................................................... 41
10.1 Press Releases and Announcements.................................. 41
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10.2 No Third-Party Beneficiaries...................................... 41
10.3 Entire Agreement.................................................. 41
10.4 Succession and Assignment......................................... 42
10.5 Counterparts...................................................... 42
10.6 Headings.......................................................... 42
10.7 Notices........................................................... 42
10.8 Governing Law..................................................... 43
10.9 Amendments and Waivers............................................ 43
10.10 Severability...................................................... 43
10.11 Expenses.......................................................... 44
10.12 Specific Performance.............................................. 44
10.13 Construction...................................................... 44
10.14 Incorporation of Exhibits and Schedules........................... 44
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Exhibits
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Exhibit A - Form of Escrow Agreement
Exhibit B - Form of Affiliate Agreement
Exhibit C - Form of Opinion of Mayer, Brown & Platt
Exhibit D - Form of Robert C. Shepro Employment Agreement
Exhibit E - Form of Linda A. Shepro Employment Agreement
Exhibit F - Form of Opinion of Hale and Dorr LLP
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into as of
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December 31, 1997 by and among SS&C Technologies, Inc., a Delaware corporation
(the "Buyer"), Securities Software Acquisition Corp., a Delaware corporation and
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a wholly owned subsidiary of the Buyer (the "Transitory Subsidiary"), Shepro
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Braun Systems, Inc., an Illinois corporation (the "Company"), and Robert C.
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Shepro, Linda A. Shepro, Richard J. Moore, Mark L. Seaman and Brian R. Shearer
(individually, a "Stockholder" and collectively, the "Stockholders"). The
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Buyer, the Transitory Subsidiary, the Company and the Stockholders are referred
to collectively herein as the "Parties."
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This Agreement contemplates a merger of the Transitory Subsidiary into the
Company in a transaction that will qualify as a reorganization under Section 368
of the Code (as defined below) and which will be accounted for as a "pooling of
interests" for financial accounting purposes. In such merger, the Stockholders
will receive capital stock of the Buyer in exchange for their capital stock of
the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
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Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
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defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
---------
Corporation"). The "Effective Time" shall be the time at which the Company and
- ------------ --------------
the Transitory Subsidiary file the Certificate of Merger prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law (the "Certificate of Merger") with the Secretary of State of the State of
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Delaware, and file the Articles of Merger prepared and executed in accordance
with the relevant provisions of The Business Corporation Act of the State of
Illinois (the "Articles of Merger") with the Secretary of State of the State of
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Illinois (the Certificate of Merger and Articles of Merger are collectively
referred to herein as the "Merger Documents"). The Merger shall have the
----------------
effects set forth in Section 259 of the Delaware General Corporation Law and
Section 11.50 of The Business Corporation Act of the State of Illinois.
1.2 The Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Hale and Dorr LLP,
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60
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State Street, Boston, Massachusetts 02109 commencing at 10:00 a.m., local
time, on the date hereof (the "Closing Date").
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1.3 Actions at the Closing. At the Closing, (a) the Company shall deliver
----------------------
to the Buyer and the Transitory Subsidiary the various certificates, instruments
and documents referred to in Section 5.2, (b) the Buyer and the Transitory
Subsidiary shall deliver to the Company the various certificates, instruments
and documents referred to in Section 5.3, (c) the Company and the Transitory
Subsidiary shall file the appropriate Merger Documents with the Secretaries of
State of the States of Delaware and Illinois, (d) the Buyer shall deliver
certificates for the Initial Shares (as defined below) to the Stockholders in
accordance with Section 1.6 and (e) the Buyer, the Indemnification
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Representatives (as defined therein) and the Escrow Agent (as defined therein)
- --------------- ------------
shall execute and deliver the Escrow Agreement attached hereto as Exhibit A (the
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"Escrow Agreement") and the Buyer shall deliver to the Escrow Agent a
----------------
certificate for the Escrow Shares (as defined below) being placed in escrow on
the Closing Date pursuant to Section 1.9.
1.4 Additional Action. The Surviving Corporation may, at any time after
-----------------
the Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
--------------------
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each share of common stock, no par value per share, of the Company
(the "Company Shares") issued and outstanding immediately prior to the Effective
--------------
Time (other than Company Shares owned beneficially by the Buyer or the
Transitory Subsidiary and Company Shares held in the Company's treasury) shall
be converted into and represent the right to receive (subject to the provisions
of Section 1.9) such number of shares of common stock, $.01 par value per share,
of the Buyer (the "Buyer Common Stock") as is equal to the Conversion Ratio.
------------------
The "Conversion Ratio" shall be equal to a fraction, (x) the numerator of which
----------------
shall be 1,000,000 and (y) the denominator of which shall be the number of
Company Shares issued and outstanding immediately prior to the Effective Time
(other than Company Shares held in the Company's treasury). The Conversion
Ratio shall be subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split or similar event affecting the Buyer Common
Stock between the date of this Agreement and the Effective Time. The
Stockholders, who represent all of the stockholders of record of the Company,
shall be entitled to receive immediately 90% of the shares of Buyer Common Stock
into which their Company Shares were converted pursuant to this Section 1.5(a)
(the "Initial Shares"); the remaining 10% of the shares of Buyer Common Stock
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into which Company Shares were converted
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pursuant to this Section 1.5(a) (the "Escrow Shares") shall be deposited in
--------------
escrow pursuant to Section 1.9 and shall be held and disposed of in accordance
with the terms of the Escrow Agreement. The Initial Shares and the Escrow Shares
shall together be referred to herein as the "Merger Shares."
-------------
(b) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned beneficially by the
Buyer or the Transitory Subsidiary shall be cancelled and retired without
payment of any consideration therefor.
(c) Each share of common stock, $.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
no par value per share, of the Surviving Corporation.
1.6 Exchange of Shares; Restrictions on Transfer
--------------------------------------------
(a) From and after the Effective Time, each holder of an outstanding
certificate or certificates which represented, immediately prior to the
Effective Time, Company Shares converted into Merger Shares pursuant to Section
1.5 ("Certificates") shall have the right to surrender each Certificate to the
------------
Buyer, and receive in exchange therefor a certificate representing the whole
number of Initial Shares issuable pursuant to Section 1.5(a). Until
surrendered, each outstanding Certificate which prior to the Effective Time
represented Company Shares shall be deemed for all purposes to evidence the
right to receive the whole number of Initial Shares into which the Company
Shares have been converted. From and after the Effective Time, the holders of
Company Shares shall cease to have any rights in respect of such Company Shares
and their rights shall be solely in respect of the Buyer Common Stock into which
such Company Shares have been converted. From and after the Effective Time,
there shall be no further registration of transfers on the records of the
Company of Company Shares outstanding immediately prior to the Effective Time.
(b) Unless otherwise agreed to in writing, Initial Shares will not be
issued in the name of a person other than the person in whose name the
Certificate(s) surrendered in exchange therefor is registered.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Buyer shall issue in
exchange for such lost, stolen or destroyed Certificate the Initial Shares
issuable in exchange therefor pursuant to Section 1.5(a). The Board of
Directors of the Buyer may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to submit to the Buyer an affidavit and to give to the
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Buyer an indemnity against any claim that may be made against the Buyer with
respect to the Certificate alleged to have been lost, stolen or destroyed.
(d) The Stockholders acknowledge that the Merger Shares will not have
been registered under the Securities Act of 1933, as amended (the "Securities
----------
Act"), or applicable state securities laws as of the Closing Date, and that any
- ---
resale inconsistent with the Securities Act may create liability on their part
and/or the part of the Buyer, and agree not to assign, sell, pledge, transfer or
otherwise dispose of or transfer any Merger Shares unless registered under the
Securities Act and applicable state securities laws, or an opinion is given by
counsel satisfactory to the Buyer that such registration is not required.
(e) The Stockholders acknowledge that certificates representing the
Merger Shares will bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
1.7 Dividends. No dividends or other distributions that are payable to
---------
the holders of record of Buyer Common Stock as of a date on or after the Closing
Date shall be paid to former Stockholders entitled by reason of the Merger to
receive Initial Shares until such holders surrender their Certificates in
accordance with Section 1.6. Upon such surrender, the Buyer shall pay or deliver
to the persons in whose name the certificates representing such Initial Shares
are issued any dividends or other distributions that are payable to the holders
of record of Buyer Common Stock as of a date on or after the Closing Date and
which were paid or delivered between the Effective Time and the time of such
surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
1.8 Fractional Shares. No certificates or scrip representing fractional
-----------------
Initial Shares shall be issued to former Stockholders upon the surrender for
exchange of Certificates, and such former Stockholders shall not be entitled to
any voting rights, rights to receive any dividends or distributions or other
rights as a stockholder of the Buyer with respect to any fractional Initial
Shares that would otherwise be issued to such former Stockholders. In lieu of
any fractional Initial Shares that would otherwise be issued, each former
Stockholder that would have been entitled to receive a fractional Initial Share
shall, upon proper surrender of such person's Certificates, receive a cash
payment equal to the closing price per share of the Buyer Common Stock on the
Nasdaq National Market, as reported by the Nasdaq Stock
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<PAGE>
Market on the business day immediately preceding the Closing Date, multiplied by
the fraction of a share that such Stockholder would otherwise be entitled to
receive.
1.9 Escrow.
------
(a) On the Closing Date, the Buyer shall deliver to the Escrow Agent
a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares, as described in Section 1.5(a), for the purpose
of securing the indemnification obligations of the Stockholders set forth in
this Agreement. The Escrow Shares shall be held by the Escrow Agent under the
Escrow Agreement pursuant to the terms thereof. The Escrow Shares shall be held
as a trust fund and shall not be subject to any lien, attachment, trustee
process or any other judicial process of any creditor of any party, and shall be
held and disbursed solely for the purposes and in accordance with the terms of
the Escrow Agreement.
(b) The execution of this Agreement by the Stockholders and the
approval of the Merger by the Stockholders shall constitute approval of the
Escrow Agreement and of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares in escrow and the appointment of
the Indemnification Representatives.
1.10 Articles of Incorporation. The Articles of Incorporation of the
-------------------------
Surviving Corporation shall be the same as the Articles of Incorporation of the
Company immediately prior to the Effective Time.
1.11 By-laws. The By-laws of the Surviving Corporation shall be the same
-------
as the By-laws of the Company immediately prior to the Effective Time.
1.12 Directors and Officers. The directors of the Transitory Subsidiary
----------------------
shall become the directors of the Surviving Corporation as of the Effective
Time. The officers of the Company shall remain as officers of the Surviving
Corporation after the Effective Time, retaining their respective positions,
except as specified by the Buyer pursuant to Section 5.2(g). The directors and
officers shall each hold office in accordance with the Articles of Incorporation
and By-laws of the Surviving Corporation.
1.13 No Further Rights. From and after the Effective Time, no Company
-----------------
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.14 Closing of Transfer Books. At the Effective Time, the stock transfer
-------------------------
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the
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<PAGE>
Surviving Corporation, they shall be cancelled and exchanged for Initial Shares
in accordance with Section 1.5(a), subject to Section 1.9.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS
Robert C. Shepro and Linda A. Shepro (individually, a "Principal
---------
Stockholder" and collectively, the "Principal Stockholders") and, prior to the
- ----------- ----------------------
Effective Time, the Company, jointly and severally, represent and warrant to the
Buyer and, following the Effective Time, the Surviving Corporation that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule attached hereto (the "Disclosure Schedule").
-------------------
The Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article II, and the
disclosures in any paragraph of the Disclosure Schedule shall qualify other
paragraphs in the Disclosure Schedule to the extent relevant.
2.1 Organization, Qualification and Corporate Power. The Company is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Illinois. The Company is duly qualified to conduct business and
is in corporate and 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 where the failure to so qualify would not
have a material adverse effect on the business of the Company. The Company 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. The Company
has furnished to the Buyer true and complete copies of its Article of
Incorporation and By-laws, each as amended and as in effect on the date hereof.
The Company is not in default under, or in violation of any provision of, its
Articles of Incorporation or By-laws.
2.2 Capitalization. The authorized capital stock of the Company consists
--------------
of 100,000 Company Shares, of which 10,400 shares are issued and outstanding and
no shares are held in the treasury of the Company. Section 2.2 of the
Disclosure Schedule sets forth a complete and accurate list of all stockholders
of the Company, indicating the number of Company Shares held by each
stockholder. All of the issued and outstanding Company 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 the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock. There are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company.
There are no agreements, voting trusts, proxies or understandings with respect
to the voting, or registration under the Securities Act, of any Company Shares.
All of the issued and outstanding Company Shares were issued in compliance with
applicable federal and state securities laws.
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2.3 Authorization of Transaction. The Company has all requisite power and
----------------------------
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. All of the Stockholders
have voted to approve this Agreement in accordance with The Business Corporation
Act of the State of Illinois, and no Stockholder may assert dissenters' rights
in accordance with Section 11.70 of such Business Corporation Act. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
2.4 Noncontravention. Except for the filing of the Certificate of Merger
----------------
as required by the Delaware General Corporation Law and the filing of the
Articles of Merger as required by The Business Corporation Act of the State of
Illinois, neither the execution and delivery of this Agreement by the Company,
nor the consummation by the Company of the transactions contemplated hereby,
will (a) conflict with or violate any provision of the Articles of Incorporation
or By-laws of the Company; (b) require on the part of the Company 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 the Company is a party or by which the Company is bound or
to which any of its assets is subject; (d) result in the imposition of any
Security Interest upon any assets of the Company or (e) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its properties or assets. 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 arising under worker's
compensation, unemployment insurance, social security, retirement and similar
legislation and (iii) liens on goods in transit incurred pursuant to documentary
letters of credit, in each case arising in the ordinary course of business
consistent with past custom and practice (including with respect to frequency
and amount) ("Ordinary Course of Business") of the Company and not material to
---------------------------
the Company.
2.5 Subsidiaries. The Company does not own or control, directly or
------------
indirectly, any shares of capital stock of any corporation or have any equity
interest
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in any partnership, joint venture, trust, association or other non-corporate
business enterprise.
2.6 Financial Statements. The Company has provided the Buyer with the
--------------------
Company's unaudited balance sheets and unaudited statements of income and cash
flows for and as of each of the fiscal years ended December 31, 1995 and 1996
and for and as of the eleven months ended November 30, 1997 (the "Most Recent
-----------
Period End"). Such financial statements (collectively, the "Financial
- ---------- ---------
Statements") have been prepared in accordance with good business practice
- ----------
applied on a consistent basis throughout the periods covered thereby (with
recording of work in progress, assets and revenues as described in Section 2.6
of the Disclosure Schedule), fairly present the financial condition, results of
operations and cash flows of the Company as of the respective dates thereof and
for the periods referred to therein and are consistent with the books and
records of the Company. The Financial Statements have not been prepared in
accordance with United States generally accepted accounting principles ("GAAP").
----
2.7 Absence of Certain Changes. Since the Most Recent Period End, (a)
--------------------------
there has not been any material adverse change in the business, properties,
operations, financial condition, assets or liabilities of the Company, nor has
there occurred any event or development which could reasonably be foreseen to
result in such a material adverse change in the future, and (b) the Company has
not taken any of the actions set forth in paragraphs (a) through (o) of Section
4.3.
2.8 Undisclosed Liabilities. The Company has no 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 the
Company's balance sheet as of November 30, 1997 (the "Most Recent Balance
-------------------
Sheet"), (b) liabilities which have arisen since the Most Recent Period End in
- -----
the Ordinary Course of Business and which are similar in nature and amount to
the liabilities which arose during the comparable period of time in the
immediately preceding fiscal period and (c) contractual liabilities incurred in
the Ordinary Course of Business which are not required by good business practice
(not necessarily GAAP) to be reflected on a balance sheet.
2.9 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 January 1,
----
1995, the Company 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 the Company has not been subject to
federal corporate income taxes for such periods.
-8-
<PAGE>
(b) The Company has filed all Tax Returns (as defined below) required
to be filed by it and all such Tax Returns were correct and complete in all
material respects. The Company 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 the Company is contesting in good faith or which would not have a
material adverse effect on the Company. The unpaid Taxes of the Company 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. The
Company has no actual or potential liability for any Tax obligation of any
taxpayer (including without limitation any affiliated group of corporations or
other entities that included the Company during a prior period) other than the
Company. All Taxes that the Company 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, except as would not have a material
adverse effect on the Company. 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, severance, stamp, occupation, windfall profits, customs, duties,
real property, personal property, sales, use, transfer, withholding, employment,
unemployment insurance, social security, business license, business
organization, environmental, 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) The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since January 1, 1995.
No examination or audit of any Tax Returns of the Company by any Governmental
Entity is currently in progress or, to the knowledge of the Company and the
Principal Stockholders, threatened or contemplated. Except as set forth in
Section 2.9(c) of the Disclosure Schedule, the Company has not waived any
statute of limitations with respect to taxes or agreed to an extension of time
with respect to a tax assessment or deficiency.
(d) The Company is not a "consenting corporation" within the meaning
of Section 341(f) of the Code, and none of the assets of the Company is subject
to an election under Section 341(f) of the Code. The Company has not 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
-9-
<PAGE>
Section 897(c)(l)(A)(ii) of the Code. The Company is not a party to any Tax
allocation or sharing agreement.
(e) The Company is not and has never been a member of an "affiliated
group" of corporations (within the meaning of Section 1504 of the Code). The
Company has not made an election under Treasury Reg. Section 1.1502-20(g). The
Company is not, nor has it ever been, required to make a basis reduction
pursuant to Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section
1.337(d)-2(b).
(f) None of the assets of the Company is "tax exempt use property"
within the meaning of Section 168(h) of the Code. The Company has not 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.
2.10 Assets. The Company 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 the Company (tangible or intangible) is subject to any Security
Interest. The assets set forth on Section 2.10 of the Disclosure Schedule,
which assets have an aggregate value of less than $50,000, are leased from a
general partnership of which Robert C. Shepro and Steven Braun are the sole
general partners.
2.11 Real Property. The Company does not own any real property.
-------------
2.12 Intellectual Property.
---------------------
(a) The Company 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 the Company at any time during the period covered by the Financial
Statements will be owned or available for use by the Surviving Corporation on
identical terms and conditions immediately following the Closing. The Company
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, except to the extent that it has
elected to disclose Confidential Business Information (as defined below)
pursuant to the agreements disclosed pursuant to Section 2.15(e) below. No other
person or entity has any rights to any of the Intellectual Property owned or
used by the Company (except pursuant to agreements or licenses specified in
Sections 2.12(c) or 2.12(d) of the Disclosure Schedule), and, except as
disclosed in Section 2.12(b) of the Disclosure Schedule, to the knowledge of the
Company and the Principal Stockholders, no other person or entity is infringing,
-10-
<PAGE>
violating or misappropriating any of the Intellectual Property that the Company
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 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) To the knowledge of the Company and the Principal Stockholders,
except as set forth in Section 2.12(b) of the Disclosure Schedule,
none of the activities or business presently conducted by the Company,
or conducted by the Company 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. The Company has not received any complaint, claim or
notice alleging any such infringement, violation or misappropriation.
(c) Section 2.12(c) of the Disclosure Schedule identifies each item of
Intellectual Property owned by the Company, identifies each pending
application for registration of Intellectual Property which the
Company has made, and identifies each license or other agreement
pursuant to which the Company 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. The
Company has delivered to the Buyer a correct and complete list of all
such Intellectual Property, registrations, applications, licenses and
agreements (as amended to date) and has 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 as set forth in Section 2.12(c) of the Disclosure
Schedule, and for grants of licenses to customers in the Ordinary
Course of Business, with respect to each item of Intellectual Property
that the Company owns:
(i) the Company 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
-11-
<PAGE>
(iii) the Company has not 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 2.12(d) of
the Disclosure Schedule identifies each item of Intellectual Property used in
the operation of the business of the Company that is owned by a party other than
the Company. The Company has supplied the Buyer with correct and complete copies
of all licenses, sublicenses or other agreements (as amended to date) pursuant
to which the Company uses such Intellectual Property. Except as set forth in
Section 2.12(d) of the Disclosure Schedule, 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) Neither the Company nor, to the knowledge of the
Company or either Principal 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) the Company has not 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 2.12(e) of
the Disclosure Schedule lists each item of Intellectual Property in which the
Company has any interest and which is not listed elsewhere in Section 2.12 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) The Company's software products are presently not able to perform
correctly with respect to date-related functions during and after the Year 2000.
The Company is currently evaluating the programming and testing effort
-12-
<PAGE>
necessary to correct for such deficiencies. Date-related functions programmed
into the Company's software are based on serialized date math and sorting
operations. The Company believes that correction and testing efforts for Year
2000 compliance to require less than 1,500 hours of programmer/analyst time,
which is scheduled by the Company to be completed prior to December 31, 1998.
2.13 Inventory. The Company's only inventory is work in process, the
---------
amount of which is not excessive in the present circumstances of the Company.
2.14 Real Property Leases. Section 2.14 of the Disclosure Schedule lists
--------------------
all real property leased or subleased to the Company. The Company has delivered
to the Buyer correct and complete copies of the leases and subleases (as amended
to date) listed in Section 2.14 of the Disclosure Schedule. With respect to
each lease and sublease listed in Section 2.14 of the Disclosure Schedule, and
except as provided in such Section 2.14 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(b) the lease or sublease will continue to 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) to the knowledge of the Company and the Principal Stockholders,
no party to the lease or sublease 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;
(d) there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease; and
(e) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or subleasehold.
2.15 Contracts. Section 2.15 of the Disclosure Schedule lists the
---------
following written arrangements (including without limitation written agreements)
to which the Company is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $25,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities, supplies,
-13-
<PAGE>
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 $25,000, or (iii) in which the Company has granted
"most favored nation" pricing provisions or marketing or distribution rights
relating to any products or territory or has agreed to purchase a minimum
quantity of goods or services or has agreed to purchase goods or services
exclusively from a certain party;
(c) any written arrangement establishing a partnership or joint
venture;
(d) any written arrangement (or group of related written
arrangements) under which it 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;
(e) any written arrangement concerning confidentiality or
noncompetition;
(f) any written arrangement involving any of the Stockholders or
their affiliates ("Affiliates"), as defined in Rule 12b-2 under the Securities
----------
Exchange Act of 1934, as amended (the "Exchange Act");
------------
(g) any written arrangement not otherwise disclosed under which the
consequences of a default or termination could have a material adverse effect on
the business, properties, operations, financial condition, assets or liabilities
of the Company; and
(h) any other written arrangement (or group of related written
arrangements) either involving more than $25,000 or not entered into in the
Ordinary Course of Business.
The Company has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Section 2.15 of the
Disclosure Schedule. With respect to each written arrangement so listed: (i)
the written arrangement is legal, valid, binding and enforceable and in full
force and effect; (ii) the written arrangement will continue to 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) to the knowledge of the Company and the Principal Stockholders, no
party 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, under the written arrangement. The
Company is not a party to any oral contract, agreement or other arrangement
-14-
<PAGE>
which, if reduced to written form, would be required to be listed in Section
2.15 of the Disclosure Schedule under the terms of this Section 2.15.
2.16 Accounts Receivable. All accounts receivable of the Company
-------------------
reflected on the Most Recent Balance Sheet are valid receivables subject to no
setoffs or counterclaims and are current and collectible (within 90 days after
the date on which it first became due and payable), net of the applicable
reserve for bad debts on the Most Recent Balance Sheet. All accounts receivable
reflected in the financial or accounting records of the Company that have arisen
since the Most Recent Period End are valid receivables subject to no setoffs or
counterclaims and are collectible, net of a reserve for bad debts in an amount
proportionate to the reserve shown on the Most Recent Balance Sheet.
2.17 Insurance. Section 2.17 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 the
Company 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. The Company and the Principal Stockholders
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 as in effect prior to the Closing; (iii) to the knowledge of the
Company and the Principal Stockholders, the Company is not 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) the Company has not
received any notice from the insurer disclaiming coverage or reserving rights
with respect to a particular claim or such policy in general.
2.18 Litigation. Section 2.18 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 the Company is a party or, to the knowledge of the
Company and the Principal Stockholders, is threatened to be made a party. None
of the complaints, actions, suits, proceedings, hearings and investigations set
forth in Section 2.18 of the Disclosure Schedule could have a material adverse
effect on the business, properties, operations, financial condition, assets or
liabilities of the Company.
2.19 Product Warranty. The Company has not agreed with any customer with
----------------
respect to any product manufactured, sold, leased, licensed or delivered by the
-15-
<PAGE>
Company to any guaranty, warranty, right of return or other indemnity beyond the
applicable written terms and conditions of such sale, lease, license or
delivery.
2.20 Employees. Section 2.20 of the Disclosure Schedule contains a list
---------
of all employees of the Company, along with the position and the annual rate of
compensation of each such person and all agreements between the Company and its
employees. Except as set forth in Section 2.20 of the Disclosure Schedule, each
such employee has entered into a confidentiality agreement with the Company, a
copy of which has previously been delivered to the Buyer. To the knowledge of
the Company and the Principal Stockholders, no key employee or group of
employees has any plans to terminate employment with the Company. The Company
is not a party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. The Company and the Principal Stockholders have
no knowledge of any organizational effort made or threatened, either currently
or within the past three years, by or on behalf of any labor union with respect
to employees of the Company.
2.21 Employee Benefit Plans.
----------------------
(a) Section 2.21 of the Disclosure Schedule sets forth an accurate
schedule of all employee benefit or welfare benefit plans or arrangements of the
Company, including without limitation any pension, profit sharing, bonus, stock
option, incentive, deferred compensation, hospitalization, medical, insurance or
other plan or arrangement and any employment agreement containing "golden
parachute" provisions. All employee benefit plans listed in Section 2.21 of the
Disclosure Schedule are in compliance with any applicable provisions of the Code
and the Employee Retirement Income Security Act of 1974, as 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 2.21 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, and
copies of such determination letters are included as part of Section 2.21 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. Neither the Stockholders, any such plan listed in Section 2.21 of
the Disclosure Schedule nor the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. The Company has not incurred any liability for excise tax or penalty due
to the Internal Revenue Service nor any liability to the Pension Benefit
Guaranty Corporation. The Company has never maintained a plan that is subject
to Title IV of ERISA or Section 412 of the Code. The Company
-16-
<PAGE>
has never been required to contribute to a multiemployer plan as defined in
Section 4001 of ERISA.
2.22 Environmental Matters. The Company has not 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 the Company at any site or other facility owned or operated by the Company 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 2.22 of the Disclosure Schedule, (a) the Company has not
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
the Company onto any property leased by the Company, 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 2.22 of the Disclosure Schedule, no employee of the Company has, in the
course and scope of his employment, been exposed by the Company in violation of
any law or regulation to hazardous, infectious or toxic wastes or substances.
In addition, neither the Company nor the Principal Stockholders have knowledge
of any assertion by any Governmental Entity of any enforcement action. Section
2.22 of the Disclosure Schedule sets forth a complete list of all disposal sites
utilized in the past five years by the Company.
2.23 Legal Compliance. The Company, and the 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 the Company or its
business, except for any violation of or default under a law referred to in
clause (b) which reasonably may be expected not to have a material adverse
effect on the business, properties, operations, financial condition, assets or
liabilities of the Company.
2.24 Permits. Section 2.24 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 the Company. Such listed
-------
Permits are the only Permits that are required for the Company to conduct its
business as presently conducted or as proposed to be conducted, except for those
the absence of which would not have any material adverse effect on the business,
properties,
-17-
<PAGE>
operations, financial condition, assets or liabilities of the Company. Each such
Permit is in full force and effect and, to the knowledge of the Company and the
Principal Stockholders, 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 continue in full force and
effect immediately following the Closing.
2.25 Certain Business Relationships With Affiliates. Except as described
----------------------------------------------
in Section 2.25 of the Disclosure Schedule, no Affiliate of the Company: (a)
owns any property or right, tangible or intangible, which is used in the
business of the Company; (b) has any claim or cause of action against the
Company or (c) owes any money to the Company.
2.26 Brokers' Fees. The Company 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.
2.27 Books and Records. The minute books and other similar records of the
-----------------
Company contain true and complete records of all actions taken at any meetings
of the Company'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 the Company accurately reflect in all material respects
the business, properties, operations, financial condition, assets and
liabilities of the Company and have been maintained in accordance with good
business and bookkeeping practices.
2.28 Customers and Suppliers. Except as disclosed in Section 2.28 of the
-----------------------
Disclosure Schedule, no material supplier of the Company 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
the Company 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 2.28 of the Disclosure Schedule sets forth a list
of (a) each customer that accounted for more than 1% of the revenues of the
Company during the last full fiscal year or the eleven months ended November 30,
1997 and the amount of revenues accounted for by such customer during each such
period and (b) each supplier that is the sole supplier of any significant
product or component to the Company.
2.29 Pooling. To the best knowledge of the Company and the Principal
-------
Stockholders, neither the Company nor any of its Affiliates has through the date
of this Agreement taken or agreed to take any action that would prevent the
Company and the Buyer from accounting for the business combination to be
effected by the Merger as a "pooling of interests" in conformity with GAAP.
2.30 Disclosure. No representation or warranty by the Company or the
----------
Principal Stockholders contained in this Agreement, and no statement contained
in
-18-
<PAGE>
the Disclosure Schedule or any other document, certificate or other instrument
delivered to or to be delivered by or on behalf of the Company pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
2.31 Additional Representations and Warranties of the Stockholders. Each
-------------------------------------------------------------
of the Stockholders severally represents and warrants to the Company as follows:
(a) such Stockholder is acquiring the shares of Buyer Common Stock for
his or her own account for investment and not with a view to, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling the same; and, except as contemplated by this Agreement,
such Stockholder has no present or contemplated agreement, undertaking,
arrangement, obligation, indebtedness or commitment providing for the
disposition thereof;
(b) such Stockholder has had such opportunity as he has deemed
adequate to obtain from representatives of the Buyer such information as is
necessary to permit the Stockholder to evaluate the merits and risks of my
investment in the Buyer. The Stockholder has sufficient experience in business,
financial and investment matters to be able to evaluate the risks involved in
the acquisition of the Merger Shares and to make an informed investment decision
with respect to such acquisition. The Stockholder understands that: (i) the
Merger Shares have not been registered under the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities Act,
and (ii) the Merger Shares cannot be sold, transferred or otherwise disposed of
unless they are subsequently registered under the Securities Act or an exemption
from registration is then available;
(c) such Stockholder has full power and authority to enter into and to
perform this Agreement in accordance with its terms;
(d) such Stockholder has good, valid and marketable title to the
Company Shares held by him or her, free and clear of all liens, claims, pledges,
options, adverse claims, charges, encumbrances, assessments or restrictions or
any other charges of any nature whatsoever; and
(e) subject to the filing of the Certificate of Merger as required by
the Delaware General Corporation Law and the Articles of Merger as required by
The Business Corporation Act of the State of Illinois, neither the execution and
delivery of this Agreement by such Stockholder, nor the consummation by such
Stockholder of the transactions contemplated hereby, will (a) require on the
part of such Stockholder any filing with, or permit, authorization, consent or
approval of, any Governmental Entity; (b) conflict with, result in breach of,
constitute (with or without due notice or
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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 such Stockholder is a party or by which such Stockholder is bound or to
which any of his or her assets are subject or (c) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to such Stockholder
or any of his or her properties or assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company and the Principal Stockholders as follows:
3.1 Organization. Each of the Buyer and the Transitory Subsidiary is a
------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of the Buyer and the Transitory Subsidiary is
duly qualified to conduct business and is in corporate and 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 when
the failure to so qualify would not have a material adverse effect on the
businesses of the Buyer and the Transitory Subsidiary taken as a whole. Each of
the Buyer and the Transitory Subsidiary 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.
3.2 Capitalization. The authorized capital stock of the Buyer consists of
--------------
(a) 25,000,000 shares of Buyer Common Stock, of which 12,744,743 shares are
issued and outstanding and 1,350,930 shares are held in the treasury of the
Buyer, and (b) 1,000,000 shares of Preferred Stock, $.01 par value per share,
of which no shares are issued or outstanding. All of the issued and outstanding
shares of Buyer Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the Merger Shares will
be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. The
authorized capital stock of the Transitory Subsidiary consists of 3,000 shares
of common stock, $.01 par value, of which 100 shares are issued and outstanding
and no shares are held in the treasury of the Transitory Subsidiary. All of the
issued and outstanding shares of capital stock of the Transitory Subsidiary are
duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights. All shares of the Transitory Subsidiary are held of record
and beneficially by the Buyer and are held or owned free and clear of any
restrictions on
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transfer (other than restrictions under the Securities Act and state securities
laws), claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
----------------------------
Subsidiary has all requisite power and authority to execute and deliver this
Agreement and (in the case of the Buyer) the Escrow Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and (in the case of the Buyer) the Escrow Agreement by the Buyer and
the Transitory Subsidiary and the performance of this Agreement and (in the case
of the Buyer) the Escrow Agreement, and the consummation of the transactions
contemplated hereby and thereby, by the Buyer and the Transitory Subsidiary have
been duly and validly authorized by all necessary corporate action on the part
of the Buyer and Transitory Subsidiary. This Agreement and (in the case of the
Buyer) the Escrow Agreement have been duly and validly executed and delivered by
the Buyer and the Transitory Subsidiary and constitute valid and binding
obligations of the Buyer and the Transitory Subsidiary, enforceable against them
in accordance with their respective terms.
3.4 Noncontravention. Except for the filing of the Certificate of Merger
----------------
as required by the Delaware General Corporation Law and the Articles of Merger
as required by The Business Corporation Act of the State of Illinois, neither
the execution and delivery of this Agreement or (in the case of the Buyer) the
Escrow Agreement by the Buyer or the Transitory Subsidiary, nor the consummation
by the Buyer or the Transitory Subsidiary of the transactions contemplated
hereby or thereby, will (a) conflict or violate any provision of the Certificate
of Incorporation or By-laws of the Buyer or the Transitory Subsidiary; (b)
require on the part of the Buyer or the Transitory Subsidiary any filing with,
or permit, authorization, consent or approval of, any Governmental Entity; (c)
conflict with, result in 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 or Transitory Subsidiary is a party or by which either is bound
or to which any of their assets are subject or (d) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Buyer or the
Transitory Subsidiary or any of their properties or assets. The exercise by the
Principal Stockholders of the registration rights set forth in Section 8.1 of
this Agreement will not trigger any incidental or "piggyback" registration
rights currently held by stockholders of the Buyer.
3.5 Reports and Financial Statements. The Buyer has previously furnished
--------------------------------
to the Company complete and accurate copies, as amended or supplemented, of its
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(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as
filed with the Securities and Exchange Commission (the "SEC") and (b) all other
---
reports filed by the Buyer under Section 13 of the Exchange Act with the SEC
since December 31, 1996 (such reports are collectively referred to herein as the
"Buyer Reports"). The Buyer Reports constitute all of the documents required to
-------------
be filed by the Buyer under Section 13 of the Exchange Act with the SEC since
December 31, 1996. As of their respective dates, the Buyer Reports did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of the
Buyer included in the Buyer Reports: (i) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto, and
in the case of quarterly financial statements, as permitted by Form 10-Q under
the Exchange Act), (iii) fairly present the consolidated financial condition,
results of operations and cash flows of the Buyer as of the respective dates
thereof and for the periods referred to therein and (iv) are consistent with the
books and records of the Buyer.
3.6 Absence of Material Adverse Changes. Since September 30, 1997, there
-----------------------------------
has not been any material adverse change in the business, properties,
operations, financial condition, assets or liabilities of the Buyer, nor has
there occurred any event or development which could reasonably be foreseen to
result in such a material adverse change in the future.
3.7 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary 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.
3.8 Legal Compliance. The Buyer, and the 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 the Buyer or its
business, except for any violation of or default under a law referred to in
clause (b) which reasonably may be expected not to have a material adverse
effect on the business, properties, operations, financial condition, assets or
liabilities of the Buyer.
3.9 Disclosure. No representation or warranty by the Buyer contained in
----------
this Agreement, and no statement contained in the any document, certificate or
other instrument delivered to or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or
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<PAGE>
omit or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
3.10 Negotiations. The Buyer is not currently involved in any negotiations
------------
or discussions concerning any change in control, merger or acquisition
transaction with a party of equal size to, or larger than, the Buyer, in terms
of such party's annual gross revenue.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each of the Parties shall use its best efforts to take
------------
all actions and to do all things necessary, proper or advisable to consummate
the transactions contemplated by this Agreement.
4.2 Notices and Consents. Each of the Parties shall use its best efforts
--------------------
to obtain, at its expense, all such waivers, permits, consents, approvals or
other authorizations from third parties and Governmental Entities, and to effect
all such registrations, filings and notices with or to third parties and
Governmental Entities, as may be required by or with respect to such Party in
connection with the transactions contemplated by this Agreement (including
without limitation those listed in Section 2.4 or Section 2.24 of the Disclosure
Schedule).
4.3 Operation of Business. Except as contemplated by this Agreement
---------------------
(including without limitation Section 4.10), during the period from the date of
this Agreement to the Effective Time, the Company shall conduct its operations
in the Ordinary Course of Business and in compliance with all applicable laws
and regulations and, to the extent consistent therewith, use all reasonable
efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without
limiting the generality of the foregoing, from the date hereof through the
Effective Time, the Company shall not, without the written consent of the Buyer:
(a) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) or authorize the issuance, sale
or delivery of, or redeem or repurchase, any stock of any class or any other
securities or any rights, warrants or options to acquire any such stock or other
securities;
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(b) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity;
(d) enter into, adopt or amend any plan referred to in Section 2.21
(collectively, "Employee Benefit Plans") or any employment or severance
----------------------
agreement or arrangement or (except for normal increases in the Ordinary Course
of Business) increase in any manner the compensation or fringe benefits of, or
materially modify the employment terms of, its directors, officers or employees,
generally or individually, or pay any benefit not required by the terms in
effect on the date hereof of any existing Employee Benefit Plan;
(e) acquire, sell, lease, encumber or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in
the Ordinary Course of Business;
(f) amend its Articles of Incorporation or By-laws;
(g) change in any material respect its accounting methods, principles
or practices, except insofar as may be required by a generally applicable change
in GAAP;
(h) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(i) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
(j) sell, assign, transfer or license any Intellectual Property, other
than in the Ordinary Course of Business;
(k) enter into, amend, terminate, take or omit to take any action that
would constitute a violation of or default under, or waive any rights under, any
material contract or agreement;
(l) make or commit to make any capital expenditure in excess of
$15,000 per item;
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<PAGE>
(m) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in: (i) any of the representations and warranties of the Company set
forth in this Agreement becoming untrue or (ii) any of the conditions to the
Merger set forth in Article V not being satisfied;
(n) take any action that would jeopardize the treatment of the Merger
as a "pooling of interests" for accounting purposes; or
(o) agree in writing or otherwise to take any of the foregoing
actions.
4.4 Full Access. The Company shall permit representatives of the Buyer to
-----------
have full access (at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Company) to all premises,
properties, financial and accounting records, contracts, other records and
documents, and personnel, of or pertaining to the Company.
4.5 Notice of Breaches. The Company shall promptly deliver to the Buyer
------------------
written notice of any event or development that would: (a) render any
statement, representation or warranty of the Company in this Agreement
(including the Disclosure Schedule) inaccurate or incomplete in any material
respect, or (b) constitute or result in a breach by the Company of, or a failure
by the Company to comply with, any agreement or covenant in this Agreement
applicable to such party. The Buyer or the Transitory Subsidiary shall promptly
deliver to the Company written notice of any event or development that would:
(i) render any statement, representation or warranty of the Buyer or the
Transitory Subsidiary in this Agreement inaccurate or incomplete in any material
respect or (ii) constitute or result in a breach by the Buyer or the Transitory
Subsidiary of, or a failure by the Buyer or the Transitory Subsidiary to comply
with, any agreement or covenant in this Agreement applicable to such party. No
such disclosure shall be deemed to avoid or cure any such misrepresentation or
breach.
4.6 Agreements from Certain Affiliates of the Company. Concurrently with
-------------------------------------------------
the execution of this Agreement, the Company shall deliver to the Buyer a list
of all persons or entities who are at such time Affiliates of the Company (the
"Company Affiliates"). To help ensure that the Merger will be accounted for as
------------------
a "pooling of interests," and that the issuance of Merger Shares will comply
with the Securities Act, the Company shall cause each Company Affiliate to
execute and deliver to the Buyer, prior to Closing, a written agreement
substantially in the form attached hereto as Exhibit B (the "Affiliate
--------- ---------
Agreement"). If any Company Affiliate fails to execute and deliver an Affiliate
- ---------
Agreement, the Buyer shall be entitled to place appropriate legends on the
certificates evidencing the Merger Shares to be issued to such person or entity,
and to issue appropriate stock transfer instructions to the transfer agent for
the Buyer Common Stock, to the effect that such shares may only be sold,
transferred
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<PAGE>
or otherwise disposed of, and the holder thereof may only reduce his or its
interest in or risk relating to such shares, after financial results covering at
least 30 days of combined operations of the Company and the Buyer after the
Effective Time shall have been publicly released.
4.7 Listing of Merger Shares. The Buyer shall use its best efforts to
------------------------
list the Merger Shares on the Nasdaq National Market.
4.8 Bonus Pool. By the 30th day following the Closing Date, the Buyer
----------
agrees to award annual bonuses in the aggregate amount of $350,000 to employees
of the Surviving Corporation other than the Principal Stockholders for services
rendered in 1997.
4.9 Option Pool. On the Closing Date, the Buyer agrees to grant options
-----------
(the "Employee Options") that qualify (to the extent allowable by law) as
----------------
incentive stock options within the meaning of Section 422 of the Code to
purchase an aggregate of 150,000 shares of Buyer Common Stock to the employees
of the Company listed on Section 4.9 of the Disclosure Schedule. The Employee
Options shall be granted at an exercise price equal to the closing sale price of
the Buyer Common Stock on the Nasdaq National Market on the Closing Date. The
Employee Options shall be cumulatively exercisable (i) with respect to 25% of
the shares underlying each such Employee Option, on the first anniversary of the
Closing Date, and (ii) with respect to the remaining 75% of the shares
underlying each such Employee Option, in 36 equal monthly installments on the
same day of the month as the Closing Date commencing on the 13th month following
the Closing Date. By the 30th day following the Closing Date, the Buyer agrees
to deliver to the respective employees executed agreements evidencing the
Employee Options and containing the Buyer's standard terms and conditions.
4.10 Repayment of Loans; Deferred Compensation. Within 30 days following
-----------------------------------------
the Closing, the Buyer agrees to cause the Company to repay up to an aggregate
of $300,000 of loans, plus accrued interest, made by the Principal Stockholders
to the Company and reflected on the Company's balance sheet as of the Closing
Date (the "Closing Balance Sheet"). Deferred Compensation of $158,333 reflected
---------------------
on the Closing Balance Sheet shall be paid by the Company to its employees prior
to Closing.
4.11 Tax-Free Reorganization. The Buyer, the Transitory Subsidiary, the
-----------------------
Company and the Principal Stockholders shall each use its best efforts to cause
the Merger to be treated as a reorganization within the meaning of sections
368(a)(1)(A) and 368(a)(2)(E) of the Code and to obtain an opinion of its
respective counsel to such effect. The Buyer shall not, nor shall the Buyer
permit any of its affiliates to, take any action which would cause the Merger to
fail to qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Code. The Stockholders have not, and shall not, take
any action which would cause the Merger
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to fail to qualify as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code.
4.12 Tax Returns.
-----------
(a) The Principal Stockholders shall cause Dallmann & Associates Ltd.
(the "Company Accountants") to prepare the federal and state S Corporation
-------------------
income tax returns required to be filed by the Company for the taxable year
beginning January 1, 1997 and ending on the day before the Closing Date
(individually, an "S Corporation Return" and collectively, the "S Corporation
-------------------- -------------
Returns"). Each S Corporation Return shall be prepared using accounting methods
- -------
and other practices that are consistent with those used by the Company in its
prior returns and items to be taken into account in the S Corporation Returns
for the period ending on the date before the Closing Date shall be determined
under "closing-the-books" method as described in Section 1362(e)(3) of the Code,
and the regulations thereunder, and the parties agree to make an election, if
necessary, under Section 1362(e)(3) of the Code. All fees and expenses of the
Company Accountants in preparing the S Corporation Returns shall be paid by the
Stockholders. The Buyer agrees to make available to the Company Accountants all
books and records of the Company needed for the preparation of the returns. The
Principal Stockholders shall cause the Company Accountants to deliver a draft of
each S Corporation Return to the Buyer not less than thirty days before the due
date for filing such Return, and the Buyer shall provide to the Company
Accountants its comments on, and proposed changes to, the draft of each S
Corporation Return not later than twenty days before such due date. If any
aspect of any S Corporation Return remains in dispute within ten days before the
due date for filing such Return, the matters in dispute shall be submitted to a
mutually acceptable "Big Six" accounting firm (the "Accounting Firm") for
---------------
resolution. The decision of the Accounting Firm concerning any disputed item
shall be final and binding on the parties and the fees and expenses of the
Accounting Firm shall be paid one-half by the Stockholders and one-half by the
Buyer. After each S Corporation Return has been prepared, reviewed and approved
(and any disputes concerning any items on such Return have been resolved by the
Accounting Firm, if necessary), the Buyer will cause the appropriate officers of
the Company to sign and file the applicable S Corporation Return with the
applicable taxing authority.
(b) Amended Tax Filings. The Buyer and the Company shall consult with
-------------------
the Principal Stockholders with respect to the filing of any amended federal or
state income tax filing where such filings would impact the tax liability of the
Stockholders and not file such amended return without the consent of the
Principal Stockholders. If the filing of an amended return remains in dispute
for a period of thirty days following delivery of the proposed amended return to
the Principal Stockholders, it shall be submitted to the Accounting Firm for
resolution. The decision of the Accounting Firm concerning filing of the
amended return shall be final and binding on the parties, and the fees and
expenses of the Accounting Firm
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relating to the resolution of the dispute shall be paid one-half by the
Stockholders and one-half by the Buyer.
(c) [Intentionally omitted].
---------------------
(d) Agreement of Cooperation. After the Closing, the Buyer shall make
------------------------
available to the Stockholders such records as the Stockholders may reasonably
require for the preparation of any Tax Returns or other similar governmental
reports or forms required to be filed by the Stockholders and such records as
the Stockholders may require for the defense of any audit, examination,
administrative appeal or litigation of any such Tax Return or other similar
governmental reports or forms (including allowing the Stockholders reasonable
access to the relevant computer records and personnel of the Buyer). After the
Closing, the Stockholders shall make available to the Buyer such records as the
Buyer may reasonably require for the preparation of any Tax Returns or other
similar governmental reports or forms required to be filed by the Buyer and such
records as the Buyer may require for the defense of any audit, examination,
administrative appeal or litigation of any such Tax Return or other similar
governmental report or form (including allowing the Buyer reasonable access to
the relevant computer records of the Stockholders).
(e) Tax Accounting Methods. The Buyer and the Company will not file
----------------------
any requests for change in accounting method that would impact the timing for
reporting of income and deductions for any taxable year for which an S
Corporation Return was filed.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations of
--------------------------------------
each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) the stockholders of the Company will have duly approved this
Agreement and the Merger in accordance with The Business Corporation Act of the
State of Illinois and the Articles of Incorporation and By-laws of the Company;
and
(b) no action, suit or proceeding shall be pending or threatened by or
before any Governmental Entity wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
affect adversely the right of the Buyer to own, operate or control any of the
assets and operations of the
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<PAGE>
Surviving Corporation following the Merger, and no such judgment, order, decree,
stipulation or injunction shall be in effect.
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary.
--------------------------------------------------------------------
The obligation of each of the Buyer and the Transitory Subsidiary to consummate
the Merger is subject to the satisfaction of the following additional
conditions:
(a) the Company shall have obtained all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2;
(b) the representations and warranties of the Company and the
Stockholders set forth in Article II shall be true and correct when made on the
date hereof and shall be true and correct as of the Effective Time as if made as
of the Effective Time, except for representations and warranties made as of a
specific date, which shall be true and correct as of such date;
(c) the Company shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Effective Time;
(d) the Company shall have delivered to the Buyer and the Transitory
Subsidiary a certificate (without qualification as to knowledge or materiality
or otherwise) to the effect that each of the conditions specified in Section 5.1
and clauses (a) through (c) of this Section 5.2 is satisfied in all respects;
(e) the Buyer and the Transitory Subsidiary shall have received from
Mayer, Brown & Platt, counsel to the Company, an opinion in the form attached
hereto as Exhibit C, addressed to the Buyer and the Transitory Subsidiary and
---------
dated as of the Closing Date;
(f) the Company shall have delivered to the Buyer a certificate of
the Secretary of the Company attesting to the incumbency of the Company's
officers, the authenticity of the resolutions authorizing the transactions
contemplated by this Agreement, and the authenticity and continuing validity of
the Company's Articles of Incorporation and By-laws;
(g) the Buyer and the Transitory Subsidiary shall have received the
resignations, effective as of the Effective Time, of each director and officer
of the Company specified by the Buyer in writing prior to the Closing;
(h) the Buyer shall have received an opinion from Hale and Dorr LLP,
in a form reasonably satisfactory to the Buyer, dated the Closing Date, based
upon certain factual representations of the Company, the Stockholders and the
Buyer
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reasonably requested by such counsel, to the effect that the Merger will
constitute a reorganization for federal income tax purposes within the meaning
of Section 368(a) of the Code and no gain or loss will be recognized by the
Company, the Buyer or the Transitory Subsidiary as a result of the Merger;
(i) Robert C. Shepro shall have entered into an employment agreement
with the Buyer substantially in the form attached hereto as Exhibit D (the
---------
"Robert Shepro Employment Agreement");
- -----------------------------------
(j) Linda A. Shepro shall have entered into an employment agreement
with the Buyer substantially in the form attached hereto as Exhibit E (the
---------
"Linda Shepro Employment Agreement");
- ----------------------------------
(k) [intentionally omitted];
(l) the Buyer shall have received Affiliate Agreements from all
Company Affiliates;
(m) the Principal Stockholders and the Escrow Agent shall have entered
into the Escrow Agreement; and
(n) all actions to be taken by the Company in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
the Buyer and the Transitory Subsidiary.
5.3 Conditions to Obligations of the Company. The obligation of the
----------------------------------------
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
(a) the representations and warranties of the Buyer and the Transitory
Subsidiary set forth in Article III shall be true and correct when made on the
date hereof and shall be true and correct as of the Effective Time as if made as
of the Effective Time, except for representations and warranties made as of a
specific date, which shall be true and correct as of such date;
(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Effective Time;
(c) each of the Buyer and the Transitory Subsidiary shall have
delivered to the Company a certificate (without qualification as to knowledge or
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<PAGE>
materiality or otherwise) to the effect that each of the conditions specified in
clauses (a) and (b) of this Section 5.3 is satisfied in all respects;
(d) the Company shall have received from Hale and Dorr LLP, counsel to
the Buyer and the Transitory Subsidiary, an opinion in the form attached hereto
as Exhibit F, addressed to the Company and dated as of the Closing Date;
---------
(e) the Company shall have received an opinion from Mayer, Brown &
Platt, in a form reasonably satisfactory to the Company, dated the Closing Date,
based upon certain factual representations of the Company, the Stockholders and
the Buyer reasonably requested by such counsel, to the effect that the Merger
will constitute a reorganization for federal income tax purposes within the
meaning of Section 368(a) of the Code and, except for cash received in lieu of
fractional Merger Shares, no Stockholder who received Merger Shares in exchange
for Company Shares in the Merger shall recognize taxable gain or loss upon such
exchange;
(f) the Buyer shall have entered into the Robert Shepro Employment
Agreement;
(g) the Buyer shall have entered into the Linda Shepro Employment
Agreement;
(h) the Buyer and the Escrow Agent shall have entered into the Escrow
Agreement;
(i) the Merger Shares shall have been authorized for listing on the
Nasdaq National Market upon official notice of issuance;
(j) each of the Buyer and the Transitory Subsidiary shall have
delivered to the Company a certificate of its Secretary attesting to the
incumbency of such entity's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of such entity's Certificate of
Incorporation and By-laws; and
(k) all actions to be taken by the Buyer and the Transitory Subsidiary
in connection with the consummation of the transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transactions contemplated hereby shall be reasonably satisfactory in form
and substance to the Company.
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<PAGE>
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification. The Principal Stockholders, jointly and severally,
---------------
and the Stockholders other than the Principal Stockholders, severally, shall
indemnify the Surviving Corporation and the Buyer (the "Indemnified Persons") in
-------------------
respect of, and hold the Indemnified Persons harmless 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, fees and expenses of
attorneys, accountants, financial advisors and other experts, and other expenses
of litigation) incurred or suffered by the Indemnified Persons or any Affiliate
thereof ("Damages"):
-------
(a) resulting from, relating to or constituting any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of the
Company or the Stockholders contained in this Agreement (other than Section
2.12(f) hereof);
(b) resulting from any failure of any Stockholders to have good, valid
and marketable title to the issued and outstanding Company Shares held by such
Stockholders, free and clear of all liens, claims, pledges, options, adverse
claims or charges of any nature whatsoever;
(c) resulting from any claim by a stockholder or former stockholder of
the Company, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (i) ownership or rights to ownership of any shares of
stock of the Company; (ii) any rights of a stockholder (other than the right to
receive the Merger Shares pursuant to this Agreement or appraisal rights under
the applicable provisions of The Business Corporation Act of the State of
Illinois), including any option, preemptive rights or rights to notice or to
vote; (iii) any rights under the Articles of Incorporation or By-laws of the
Company or (iv) any claim that his, her or its shares were wrongfully
repurchased by the Company;
(d) resulting from, relating to or constituting any misrepresentation
or breach of warranty by the Company with respect to Section 2.12(f) hereof; or
(e) resulting from any federal tax liability attributable to the
conversion of the Company from a C Corporation to an S Corporation.
If a notice of audit is given, an audit is begun, an audit adjustment is (or has
been) proposed or any other claim is (or has been) made by any taxing authority
which could result in an indemnification obligation under Section 6.1(e), the
Buyer shall
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promptly notify the Principal Stockholders of such event. The Buyer shall permit
the Principal Stockholders, at the Stockholders' expense: (i) to participate in
the audit process, attend all meetings and participate fully in all material
discussions with a taxing authority as to those matters relating to the
indemnification obligation under Section 6.1(e); and (ii) to contest any claim
made by a taxing authority on audit or in a related administrative proceeding or
judicial proceeding with respect to the indemnification obligation under Section
6.1(e). The Buyer shall not settle, compromise or concede an adjustment or claim
for which the Principal Stockholders would be financially responsible under
Section 6.1(e) without the Principal Stockholders' consent, which consent shall
not be unreasonably withheld.
6.2 Method of Asserting Claims.
--------------------------
(a) All claims for indemnification by an Indemnified Person pursuant
to this Article VI shall be made in accordance with the provisions of the Escrow
Agreement.
(b) 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 Article VI, 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 such
obligation, without prior notice to or consent from the Indemnification
Representatives; (ii) such Indemnified Person may make a claim for
indemnification pursuant to this Article VI in accordance with the provisions of
the Escrow Agreement and (iii) such Indemnified Person shall be reimbursed, in
accordance with the provisions of the Escrow Agreement, for any such Damages for
which it is entitled to indemnification pursuant to this Article VI (subject to
the right of the Indemnification Representatives to dispute the Indemnified
Person's entitlement to indemnification under the terms of this Article VI).
(c) The Indemnified Person shall give prompt written notification to
the Indemnification Representatives of the commencement of any action, suit or
proceeding relating to a third party claim for which indemnification pursuant to
this Article VI may be sought; provided, however, that no delay on the part of
the Indemnified Person in notifying the Indemnification Representatives shall
relieve the Stockholders of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such failure.
Within 20 days after delivery of such notification, the Indemnification
Representatives may, upon written notice thereof to the Indemnified Person,
assume control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Person, provided the Indemnification
Representatives acknowledge in writing to the Indemnified Person that any
damages, fines, costs or other liabilities that may be assessed against the
Indemnified Person in connection with such action, suit or
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proceeding constitute Damages for which the Indemnified Person shall be entitled
to indemnification pursuant to this Article VI. If the Indemnification
Representatives do not so assume control of such defense, the Indemnified Person
shall control such defense. The party not controlling such defense may
participate therein at its own expense; provided that if the Indemnification
Representatives assume control of such defense and the Indemnified Person
reasonably concludes that the indemnifying parties and the Indemnified Person
have conflicting interests or different defenses available with respect to such
action, suit or proceeding, the reasonable fees and expenses of counsel to the
Indemnified Person shall be considered "Damages" for purposes of this Agreement.
The party controlling such defense shall keep the other party advised of the
status of such action, suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the other party with respect
thereto. The Indemnified Person shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of the
Indemnification Representatives, which shall not be unreasonably withheld. The
Indemnification Representatives shall not agree to any settlement of such
action, suit or proceeding without the prior written consent of the Indemnified
Person, which shall not be unreasonably withheld.
6.3 Survival. The representations and warranties of the Company and the
--------
Stockholders set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the
earlier of (i) the first anniversary of the Closing Date or (ii) the issuance of
the Buyer's audited consolidated financial statements for the year ending
December 31, 1997; provided, however, that (x) the representations and
warranties set forth in Section 2.12(f) hereof shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until the
first anniversary of the Closing Date and (y) the indemnification obligations
set forth in Section 6.1(e) hereof shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until March
15, 1999. The representations and warranties of the Company and the
Stockholders shall not be affected by any examination made for or on behalf of
the Buyer or the knowledge of any of the Buyer's officers, directors,
stockholders, employees or agents. If a notice is given in accordance with the
Escrow Agreement before expiration of such period, then (notwithstanding the
expiration of such time period) the representation or warranty applicable to
such claim shall survive until, but only for purposes of, the resolution of such
claim.
6.4 Limitations. Notwithstanding anything to the contrary herein: (a)
-----------
the aggregate liability of the Stockholders for Damages under this Article VI
shall not exceed the fair market value of the Escrow Property (as defined in the
---------------
Escrow Agreement), (b) the aggregate liability of the Stockholders for Damages
pursuant to Sections 6.1(a), 6.1(b) and 6.1(c) shall be subject to the
limitations set forth in Section 4(c) of the Escrow Agreement, (c) the aggregate
liability of the Stockholders for Damages pursuant to Section 6.1(d) shall be
subject to the limitations set forth in
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Section 4(c) of the Escrow Agreement, (d) the aggregate liability of the
Stockholders for Damages pursuant to Section 6.1(e) shall be subject to the
limitations set forth in Section 4(c) of the Escrow Agreement and (e) the
Stockholders shall be liable under this Article VI for only that portion of the
aggregate Damages which exceeds $60,000. Except with respect to claims based on
fraud, the rights of the Indemnified Persons under this Article VI shall be the
exclusive remedy of the Indemnified Persons with respect to claims resulting
from or relating to any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company or the Stockholders contained
in this Agreement (provided that nothing contained in this Agreement shall limit
or restrict any right or remedy the Buyer or the Surviving Corporation may have
under any environmental law). No Stockholder shall have any right of
contribution against the Company with respect to any breach by the Company of
any of its representations, warranties, covenants or agreements.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. The Parties may terminate this Agreement
------------------------
prior to the Effective Time as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice to
the Company in the event the Company or any Stockholder is in breach, and the
Company may terminate this Agreement by giving written notice to the Buyer and
the Transitory Subsidiary in the event the Buyer or the Transitory Subsidiary is
in breach, of any material representation, warranty or covenant contained in
this Agreement, and such breach is not remedied within 10 days of delivery of
written notice thereof;
(c) the Buyer may terminate this Agreement by giving written notice to
the Company if the Closing shall not have occurred on or before December 31,
1997 by reason of the failure of any condition precedent under Sections 5.1 or
5.2 hereof (unless the failure results primarily from a breach by the Buyer or
the Transitory Subsidiary of any representation, warranty or covenant contained
in this Agreement); or
(d) the Company may terminate this Agreement by giving written notice
to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before December 31, 1997 by reason of the failure of any
condition precedent under Sections 5.1 or 5.3 hereof (unless the failure results
primarily from a
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breach by the Company or any Stockholder of any representation, warranty or
covenant contained in this Agreement).
7.2 Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to Section 7.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for breaches of this Agreement); provided, however, that
-------- -------
the confidentiality provisions contained in the Confidentiality Agreement dated
October 9, 1997 between the Buyer and the Company shall survive any such
termination.
ARTICLE VII
REGISTRATION RIGHTS
8.1 Registration of Shares. At the written request of either of the
----------------------
Principal Stockholders at any time on or after June 1, 1998 but prior to June 1,
1999, the Buyer shall file with the SEC, as promptly as practicable following
such request, a registration statement on Form S-3 covering the resale to the
public by the Principal Stockholders of the Merger Shares held by the Principal
Stockholders (the "Stockholder Registration Statement"). The Buyer shall use
----------------------------------
its best efforts to cause the Stockholder Registration Statement to be declared
effective by the SEC as soon as practicable, provided that the Stockholder
--------
Registration Statement shall not be declared effective until after financial
results covering at least 30 days of combined operations of the Company and the
Buyer after the Effective Time shall have been publicly released. The Buyer
shall cause the Stockholder Registration Statement to remain effective until the
date six months after the effective date of the Stockholder Registration
Statement (the "Six-Month Date") or such earlier time as all of the Merger
--------------
Shares covered by the Stockholder Registration Statement have been sold pursuant
thereto. The Buyer and the Principal Stockholders agree that the Stockholder
Registration Statement shall not cover the resale to the public of any Merger
Shares of the Principal Stockholders that are held in escrow pursuant to the
Escrow Agreement at the time the Stockholder Registration Statement is declared
effective. Notwithstanding the foregoing, however, if Escrow Shares held by the
Principal Stockholders are released from escrow prior to the Six-Month Date and
are not otherwise included in an effective Stockholder Registration Statement,
the Buyer shall file with the SEC, as promptly as practicable following the
release of such Escrow Shares from escrow, a registration statement on Form S-3
covering the resale to the public by the Principal Stockholders of the Escrow
Shares held by the Principal Stockholders. The Buyer shall use its best efforts
to cause the registration statement referred to in the immediately preceding
sentence to be declared effective by the SEC as soon as practicable and to
remain effective until the Six-Month Date, or such earlier time as all of the
Escrow Shares covered by such registration statement have been sold pursuant
thereto. The term "Stockholder Registration Statement" as used in
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this Agreement shall be deemed to include the registration statement referred to
in the two sentences immediately preceding this sentence.
8.2 Limitations on Registration Rights.
----------------------------------
(a) The Buyer may, by written notice to the Principal Stockholders:
(i) delay the filing or effectiveness of the Stockholder Registration Statement
or (ii) suspend the Stockholder Registration Statement after effectiveness and
require that the Principal Stockholders immediately cease sales of shares
pursuant to the Stockholder Registration Statement, in the event that (A) the
Buyer files a registration statement (other than a registration statement on
Form S-4 or Form S-8 or any successor form) with the SEC for a public offering
of its securities, (B) the Buyer is engaged in any activity or transaction or
preparations or negotiations for any activity or transaction that the Buyer
desires to keep confidential for business reasons, if the Buyer determines in
good faith that the public disclosure requirements imposed on the Buyer under
the Securities Act in connection with the Stockholder Registration Statement
would require disclosure of such activity, transaction, preparations or
negotiations or (C) the Buyer is ineligible for use of a Form S-3.
(b) If the Buyer delays or suspends the Stockholder Registration
Statement or requires the Principal Stockholders to cease sales of shares
pursuant to paragraph (a) above, the Buyer shall, as promptly as practicable
following the termination of the circumstance which entitled the Buyer to do so,
take such actions as may be necessary to file or reinstate the effectiveness of
the Stockholder Registration Statement and/or give written notice to all
Principal Stockholders authorizing them to resume sales pursuant to the
Stockholder Registration Statement. If as a result thereof the prospectus
included in the Stockholder Registration Statement has been amended to comply
with the requirements of the Securities Act, the Buyer shall enclose such
revised prospectus with the notice to Principal Stockholders given pursuant to
this paragraph (b), and the Principal Stockholders shall make no offers or sales
of shares pursuant to the Stockholder Registration Statement other than by means
of such revised prospectus. Moreover, if the Buyer delays or suspends the
Stockholder Registration Statement or requires the Principal Stockholders to
cease sales of shares pursuant to clause (i) of paragraph (a) above, the Buyer
shall permit each Principal Stockholder to include in a registration statement
filed by the Buyer during such period, any Merger Shares that would have been
included in the Stockholder Registration Statement, subject to the right of the
Buyer to limit the number of Merger Shares to be included in a registration
statement relating to a unwritten offering of Common Stock of the Buyer if the
managing underwriter of such offering determines that the inclusion of such
Merger Shares in such offering would adversely affect the marketability of such
offering.
8.3 Registration Procedures.
-----------------------
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<PAGE>
(a) In connection with the filing by the Buyer of the Stockholder
Registration Statement under Section 8.2 hereof, the Buyer shall furnish to each
Principal Stockholder such number of copies as the Principal Stockholder shall
reasonably request of the prospectus, including a preliminary prospectus and any
amendments or supplements thereto, in conformity with the requirements of the
Securities Act.
(b) The Buyer shall use its best efforts to register or qualify the
Merger Shares covered by the Stockholder Registration Statement under the
securities laws of such states as the Principal Stockholders shall reasonably
request; provided, however, that the Buyer shall not be required in connection
-------- -------
with this paragraph (b) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction.
(c) If the Buyer has delivered preliminary or final prospectuses to
the Principal Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Buyer shall promptly
notify the Principal Stockholders and, if requested by the Buyer, the Principal
Stockholders shall immediately cease making offers or sales of shares under the
Stockholder Registration Statement and return all prospectuses to the Buyer.
The Buyer shall promptly provide the Principal Stockholders with revised
prospectuses and, following receipt of the revised prospectuses, the Principal
Stockholders shall be free to resume making offers and sales under the
Stockholder Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in complying with
its obligations under this Article VIII, including all registration and filing
fees, exchange listing fees, expenses for the preparation of the Stockholder
Registration Statement, prospectus and any amendments and supplements thereto,
printing and photocopy expenses, fees and expenses of counsel for the Buyer, and
fees and expenses of accountants for the Buyer, but excluding: (i) any
brokerage fees, selling commissions or underwriting discounts incurred by the
Principal Stockholders in connection with sales under the Stockholder
Registration Statement and (ii) the fees and expenses of any counsel retained by
the Principal Stockholders.
8.4 Requirements of Principal Stockholders. The Buyer shall not be
--------------------------------------
required to include any Merger Shares in the Stockholder Registration Statement
unless:
(a) the Principal Stockholder owning such shares furnishes to the
Buyer in writing such information regarding such Principal Stockholder and the
proposed sale of Merger Shares by such Principal Stockholder as the Buyer may
reasonably request in writing in connection with the Stockholder Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities; and
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<PAGE>
(b) such Principal Stockholder shall have provided to the Buyer its
written agreement:
(i) to indemnify the Buyer and each of its directors and officers
against, and hold the Buyer and each of its directors and officers harmless
from, any losses, claims, damages, expenses or liabilities (including reasonable
attorneys fees) to which the Buyer or such directors and officers may become
subject by reason of any statement or omission in the Stockholder Registration
Statement made in reliance upon, or in conformity with, a written statement by
such Principal Stockholder furnished pursuant to this Section 8.4; and
(ii) to report to the Buyer sales made pursuant to the
Stockholder Registration Statement.
8.5 Indemnification. The Buyer agrees to indemnify and hold harmless each
---------------
Principal Stockholder whose shares are included in the Stockholder Registration
Statement against any losses, claims, damages, expenses or liabilities to which
such Principal Stockholder may become subject by reason of any untrue statement
of a material fact contained in the Stockholder Registration Statement or any
omission to state therein a fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, expenses or liabilities arise out of or are based upon
information furnished to the Buyer by a Principal Stockholder for use in the
Stockholder Registration Statement. The Buyer shall have the right to assume
the defense and settlement of any claim or suit for which the Buyer may be
responsible for indemnification under this Section 8.5. This indemnification
survives registration and sale of the Merger Shares and the termination of this
Agreement.
8.6 Assignment of Rights. A Principal Stockholder may not assign any of
--------------------
its rights under this Article VIII except in connection with the transfer of
some or all of his or her Merger Shares to a child or spouse or other family
member, or trust for their benefit, provided each such transferee agrees in a
--------
written instrument delivered to the Buyer to be bound by the provisions of this
Article VIII.
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
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<TABLE>
<CAPTION>
Defined Term Section
------------ -------
<S> <C>
Accounting Firm 4.12(a)
Affiliate 2.15(f)
Affiliate Agreement 4.6
Agreement Introduction
Articles of Merger 1.1
Buyer Introduction
Buyer Common Stock 1.5(a)
Buyer Reports 3.5
CERCLA 2.22
Certificate of Merger 1.1
Certificates 1.6(a)
Closing 1.2
Closing Balance Sheet 4.10
Closing Date 1.2
Code 2.9(a)
Company Introduction
Company Accountants 4.12(a)
Company Affiliate 4.6
Company Shares 1.5(a)
Confidential Business Information 2.12(a)
Conversion Ratio 1.5(a)
Damages 6.1
Disclosure Schedule Article II
Effective Time 1.1
Employee Benefit Plan 4.3(d)
Employee Options 4.9
ERISA 2.21(a)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Property 6.4
Escrow Shares 1.5(a)
Exchange Act 2.15(f)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3
Indemnified Persons 6.1
Initial Shares 1.5(a)
Intellectual Property 2.12(a)
Linda Shepro Employment Agreement 5.2(j)
Merger 1.1
Merger Documents 1.1
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Merger Shares 1.5(a)
Most Recent Balance Sheet 2.8
Most Recent Period End 2.6
Ordinary Course of Business 2.4
Party Introduction
Permit 2.24
Principal Stockholder Article II
Qualified Plans 2.21(b)
RCRA 2.22
Robert Shepro Employment Agreement 5.2(i)
S Corporation Return 4.12(a)
SEC 3.5
Securities Act 1.6(d)
Security Interest 2.4
Six-Month Date 8.1
Stockholder Introduction
Stockholder Registration Statement 8.1
Surviving Corporation 1.1
Taxes 2.9(b)
Tax Returns 2.9(b)
Transitory Subsidiary Introduction
</TABLE>
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue any press
--------------------------------
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
-------- -------
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
10.2 No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
10.3 Entire Agreement. This Agreement (including the documents referred
----------------
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof, other than the
confidentiality provisions of the Confidentiality Agreement dated October 9,
1997 between the Buyer and the Company.
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10.4 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
10.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.6 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service, in each case to the intended recipient as
set forth below:
If to the Company or any Stockholder: Copy to:
- ------------------------------------ -------
Shepro Braun Systems, Inc. Richard W. Shepro, Esq.
30 West Monroe Mayer, Brown & Platt
Suite 300 190 South La Salle Street
Chicago, IL 60603 Chicago, IL 60603
Attn: President
If to the Buyer: Copy to:
- --------------- -------
SS&C Technologies, Inc. John A. Burgess, Esq.
Corporate Place Hale and Dorr LLP
705 Bloomfield Avenue 60 State Street
Bloomfield, CT 06002 Boston, MA 02109
Attn: Chief Executive Officer
If to the Transitory Subsidiary: Copy to:
- ------------------------------- -------
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<PAGE>
Securities Software Acquisition Corp. John A. Burgess, Esq.
c/o SS&C Technologies, Inc. Hale and Dorr LLP
Corporate Place 60 State Street
705 Bloomfield Avenue Boston, MA 02109
Bloomfield, CT 06002
Attn: Chief Executive Officer
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the substantive laws of the State of Delaware, excluding its
conflicts of laws principles.
10.9 Amendments and Waivers. The Parties may mutually amend any
----------------------
provision of this Agreement at any time prior to the Effective Time. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.10 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
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10.11 Expenses. The costs and expenses (including legal and accounting
--------
fees and expenses) incurred by the Buyer and the Transitory Subsidiary in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Buyer, and the costs and expenses (including legal and accounting
fees and expenses) incurred by the Company and the Principal Stockholders in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Company and the Principal Stockholders, respectively.
Notwithstanding the foregoing, any costs and expenses (including legal and
accounting fees and expenses) incurred by the Company in connection with this
Agreement and the transactions contemplated hereby that are in excess of $75,000
shall be borne by the Principal Stockholders.
10.12 Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that one or more of the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
10.13 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.
10.14 Incorporation of Exhibits and Schedules. The exhibits and schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
SS&C TECHNOLOGIES, INC.
/s/ William C. Stone
-----------------------------------------
By: William C. Stone
Title: Chief Executive Officer
SECURITIES SOFTWARE ACQUISITION
CORP.
/s/ William C. Stone
-----------------------------------------
By: William C. Stone
Title: President
SHEPRO BRAUN SYSTEMS, INC.
/s/ Robert C. Shepro
-----------------------------------------
By: Robert C. Shepro
Title: President
STOCKHOLDERS
/s/ Robert C. Shepro
-----------------------------------------
Robert C. Shepro
/s/ Linda A. Shepro
-----------------------------------------
Linda A. Shepro
/s/ Richard J. Moore
-----------------------------------------
Richard J. Moore
/s/ Mark L. Seaman
-----------------------------------------
Mark L. Seaman
/s/ Brian R. Shearer
-----------------------------------------
Brian R. Shearer
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<PAGE>
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ William C. Stone
-----------------------------------------
Secretary
The undersigned, being the duly elected Secretary of the Company, hereby
certifies that this Agreement has been adopted by all of the votes represented
by the outstanding Company Shares entitled to vote on this Agreement.
/s/ Linda A. Shepro
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Secretary
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<PAGE>
Schedules
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SS&C Technologies, Inc. agrees to furnish supplementally to the Securities
and Exchange Commission copies of any of the following omitted schedules upon
the request of the Commission:
Schedule 2.2 - Stockholders of Shepro Braun Systems, Inc.
Schedule 2.6 - Financial Statements
Schedule 2.9 - Tax Matters
Schedule 2.10 - Assets
Schedule 2.12 - Intellectual Property
Schedule 2.14 - Real Property Leases
Schedule 2.15 - Contracts
Schedule 2.17 - Insurance Policies
Schedule 2.18 - Litigation
Schedule 2.20 - Employees
Schedule 2.21 - Employee Benefit Plans
Schedule 2.22 - Environmental Matters
Schedule 2.24 - Permits
Schedule 2.25 - Business Relationships with Affiliates
Schedule 2.28 - Customers and Suppliers
Schedule 4.9 - List of Optionees
-47-
<PAGE>
Exhibit 99
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SS&C RELEASE
Global Financial Technologies
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FOR IMMEDIATE RELEASE CONTACT: Peg Berry, SS&C -- 860-286-2251
Cindy Lawrence -- 212-303-7611
SS&C Technologies Completes Acquisition of Shepro Braun Systems, Inc.
as Part of Key Investment in Straight Through Processing
Bloomfield, CT, December 31, 1997 - SS&C Technologies, Inc. (Nasdaq: SSNC)
today announced it has completed the acquisition of Chicago-based Shepro Braun
Systems, Inc. (SBS) as part of the Company's commitment to developing and
delivering straight through processing. The closely held SBS was acquired in
exchange for one million shares of SS&C common stock. The value of the
agreement is based on today's closing price of SS&C stock.
"This merger is strategically important because it positions SS&C as a
leader in providing our clients with real-time transaction processing in a
'straight through' environment, from trading to risk analysis, compliance,
accounting, and regulatory reporting," said Bill Stone, SS&C CEO. "We believe
this latest investment, combined with the recently completed acquisition of
Mabel Systems, our strong third quarter performance, and our confidence as we
continue to execute on our business plan, helps build our momentum as we go
forward into 1998," Mr. Stone continued.
<PAGE>
SS&C Acquires Shepro Braun - Page 2
Under the terms of the agreement, SBS President Robert Shepro will become a
Senior Vice President of SS&C, and SBS CFO Linda Shepro will become a Director
in SS&C's Asset Management Business Unit, based on multi-year employment
agreements.
Shepro Braun is a privately held software development and consulting firm,
serving hedge funds, private wealth managers, investment advisors, investment
funds, brokerage firms, and service providers to capital management firms.
Founded in 1984, Shepro Braun is headquartered in Chicago, with offices in New
York City and Greenwich, Connecticut. Additional company information is located
on the World Wide Web at www.sheprobraun.com.
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, over $1 trillion in
assets. Additional company information is located on the World Wide Web at
www.ssctech.com.
This press release includes a number of forward-looking statements within
the meaning of the Securities Act of 1933 and the Securities Exchange Act of
1934, as amended by the Private Securities Litigation Reform Act of 1995. Those
statements include statements regarding the intent, belief, or current
expectations of SS&C and members of its management as well as the assumptions on
which such statements are based, and reflect SS&C's current views with respect
to future events and financial performance. Prospective investors are cautioned
that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from historical results or those anticipated. Important
factors currently known to management that could cause actual results to differ
materially from those in forward looking statements include integration of the
recently acquired business and adverse developments with respect to the
Company's domestic or foreign operations.
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