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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-28430
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SS&C TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1169696
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
CORPORATE PLACE
705 BLOOMFIELD AVENUE
BLOOMFIELD, CONNECTICUT 06002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (860) 242-7887
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Common Stock, $.01
par value per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of March 23, 1998, the approximate aggregate market value of the common
stock held by non-affiliates of the Registrant was $129,151,719 based on the
closing sales price of $18.50 of the Registrant's Common Stock on the Nasdaq
National Market on such date.
As of March 23, 1998, 14,446,763 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF REPORT INTO
DOCUMENT WHICH INCORPORATED
- -------------------------------------------- ---------------------------------
Portions of the Registrant's 1997 Annual Items 6, 7 & 8 of Part II
Report to Stockholders
Portions of the Registrant's Proxy Statement Items 10, 11, 12 & 13 of Part III
for the Annual
Meeting of Stockholders to be held April 30,
1998
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SS&C TECHNOLOGIES, INC.
TABLE OF CONTENTS
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FORM 10-K
ITEM PAGE
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<C> <S> <C>
PART I
Item 1. Business....................................................... 2
Item 2. Properties..................................................... 9
Item 3. Legal Proceedings.............................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............ 10
Executive Officers of the Registrant........................... 10
PART II
Market for Registrant's Common Equity and Related Stockholder
Item 5. Matters........................................................ 11
Item 6. Selected Financial Data........................................ 12
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operations.......................................... 12
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..... 12
Item 8. Financial Statements and Supplementary Data.................... 12
Changes in and Disagreements with Accountants on Accounting and
Item 9. Financial Disclosure........................................... 12
PART III
Item 10. Directors and Executive Officers of the Registrant............. 13
Item 11. Executive Compensation......................................... 13
Security Ownership of Certain Beneficial Owners and
Item 12. Management..................................................... 13
Item 13. Certain Relationships and Related Transactions................. 13
PART IV
Exhibits, Financial Statement Schedules, and Reports on Form 8-
Item 14. K.............................................................. 13
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FORWARD-LOOKING INFORMATION
This Annual Report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "expects" and similar expressions
are intended to identify forward-looking statements. The important factors
discussed below under the caption "Certain Factors That May Affect Future
Operating Results," among others, could cause actual results to differ
materially from those indicated by forward-looking statements made herein and
presented elsewhere by management from time to time.
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PTS and Macro Pricing are registered trademarks, SS&C, CAMRA, CAMRA 2000,
FILMS, FILMS 2000, PTS 2000, FOTOS, Allocator Plus, EPN E-Z Link, Finesse
2000, SS&C GO Trading, Total Return, Mabel, and Antares are trademarks, and
SS&C Direct is a service mark of either SS&C Technologies, Inc. or one of its
subsidiaries. All other trademarks or trade names referred to in this Annual
Report are the property of their respective owners.
<PAGE>
PART I
ITEM 1. BUSINESS
SS&C Technologies, Inc. (the "Company") was organized as a Connecticut
corporation in March 1986 and reincorporated in Delaware in April 1996. The
Company commenced the initial public offering of its common stock, $.01 par
value per share (the "Common Stock"), on May 31, 1996, pursuant to which the
Company sold 3,026,250 shares of Common Stock and selling stockholders sold an
aggregate of 723,750 shares of Common Stock.
The Company is a leading provider of client/server-based financial software
solutions, and related consulting services, designed to improve the efficiency
and effectiveness of investment management, actuarial and analytical functions
across a broad range of financial institutions. The Company has developed a
family of software products that provides a full range of mission-critical
information management and analysis, accounting, reporting and compliance
tools to help high-level investment and actuarial professionals make informed,
real-time decisions and automate many operational functions in today's
increasingly complex and fast-moving financial markets. The Company's products
are focused on improving the effectiveness of decision-making through open,
fully integrated access to meaningful data provided on a timely basis. The
Company provides products and services to more than 500 organizations
worldwide and its customers include asset managers, insurance companies,
banks, corporate treasuries and government agencies.
All of the Company's software products feature (i) an intuitive user
interface; (ii) a high degree of automation and integration with the Company's
other systems, legacy systems, data services and third-party tools; and (iii)
a highly scalable and flexible architecture. These features are intended to
enable clients to decrease staff learning time, integrate systems more
tightly, scale the technical environment to the appropriate size and tailor
the product suite to their business requirements.
RECENT EVENTS
On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20,
1998, among the Company, Quantra and AEGON USA Realty Advisors, Inc., the
controlling stockholder of Quantra. The purchase price for the Quantra
Acquisition consisted of 546,019 shares of the Company's Common Stock,
$3,500,000 in cash and the assumption of certain of the liabilities of
Quantra. The Company used authorized but previously unissued shares of Common
Stock and cash from the proceeds from the Company's initial public offering in
connection with the acquisition. The Quantra Acquisition will be accounted for
as a purchase. Quantra is a provider of real estate equity and debt investment
management systems with its major offices in Chicago and Atlanta. Quantra's
products include Mortgage Loan Management System ("MLMS"), PRO-JECT for
Windows, SKYLINE, Real Estate Management System ("REMS") and Portfolio
Strategy System ("PSS").
The Company and Quantra also entered into an Escrow Agreement pursuant to
which $1,230,200 of the cash consideration will be held in escrow to reimburse
the Company in connection with certain acquisition costs and the breaches of
representations, warranties or covenants by Quantra.
PRODUCTS AND SERVICES
The Company offers a family of application software products designed to
address the requirements of professionals in the financial services industry
for flexible, scalable and secure analysis and reporting tools to support
automation of the investment process. The Company's family of software
products supports trading, accounting, reporting and analysis requirements of
a broad range of users within financial organizations, including senior
executives, portfolio managers, actuaries, analysts, portfolio accountants and
traders.
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The following chart summarizes the Company's principal products and services
and typical users:
PRODUCTS AND SERVICES TYPICAL USERS
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PORTFOLIO MANAGEMENT, INVESTMENT Portfolio managers and investment
ACCOUNTING operations personnel of asset
CAMRA 2000 managers, hedge funds, family wealth
Total Return managers, insurance companies,
Mabel pension funds, public funds and
banks
TRADE ORDER MANAGEMENT Securities traders and portfolio
Antares (in Beta release) managers of asset managers, hedge
funds, family wealth managers,
pension funds and other financial
institutions
ASSET/LIABILITY MANAGEMENT Insurance company CEO's, CFO's,
PTS 2000 product managers and acturial
professionals
DYNAMIC FINANCIAL ANALYSIS CEO's, CFO's and risk managers of
Finesse 2000 property and casualty insurance
companies and other industries
LOAN MANAGEMENT Mortgage loan portfolio managers and
FILMS 2000 loan service businesses
CONSULTING SERVICES AND OUTSOURCING Asset management firms, insurance
SERVICES companies, pension funds, and banks
Consulting Services
SS&C Direct
The Company's software applications are compatible with Intel x86 platforms
(IBM PC compatible or emulators) and a wide range of popular topologies,
protocols and network operating systems, including Ethernet, Token Ring,
IPX/SPX, TCP/IP, NET BEUI, Novell Netware, Windows, Windows95, Windows NT,
Pathworks and UNIX.
The prices of the Company's software products vary depending upon the
product features included and, in the case of the Company's CAMRA 2000 and
FILMS 2000 products, on the assets under management by the client. The
Company's PTS 2000 software is available for purchase by site or as an
individual CPU license. The Company's Total Return software is available for
purchase by site or on the number of concurrent users.
PORTFOLIO MANAGEMENT, INVESTMENT ACCOUNTING
CAMRA 2000
The Company's complete asset management, reporting and accounting ("CAMRA
2000") software supports the integrated management of asset portfolios by
investment professionals operating across a wide range of institutional
investment entities. CAMRA 2000 is a 32-bit, multi-user, integrated solution
tailored to support the entire portfolio management function and includes
features to execute, account for and report on all typical securities
transactions.
CAMRA 2000 is designed to account for all the activity of the investment
operation and continually update through the processing of day-to-day
securities transactions. The product accounts for both transactions and
holdings and stores the results of most accounting calculations in the
product's open, relational database, thereby providing user-friendly, flexible
data access as well as supporting data warehousing. In addition to storing
transactions and holdings data on securities, cash, and foreign exchange
forward contracts, CAMRA 2000 also stores data on custodians, brokers and
broker budgets, analytical information, general ledger entries, alternative
accounting basis, tax information and other aspects of the investment
operation. To facilitate further automation of such extensive stored data, the
Company has developed interfaces to many custodian banks, data providers and
analytic data services.
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Other CAMRA 2000 features include the following:
Comprehensive Accounting and Reporting Capabilities. CAMRA 2000 supports
four distinct yet interrelated accounting bases--GAAP, statutory, management
and tax--and has the flexibility to provide multiple alternative accrual
methods, multiple sales methods, average cost or tax lot accounting and
multiple amortization methods.
Support of Trading Transactions. CAMRA 2000 supports a wide variety of
investment and accounting transactions, ranging from buy and sell to short and
cover, swap, put, call, redemption, return of capital, settlement, account
transfer and portfolio transfer. All transactions are recorded on a real-time
basis, permitting immediate enterprise-wide access to the most current
portfolio information by authorized users.
Multi-Currency Processing. CAMRA 2000 automatically calculates transaction
and translation values in accordance with applicable accounting and industry
conventions, supports calculation of market, accounting and foreign exchange
gains and losses, and provides a full foreign exchange trading capability with
forward pricing, while taking into account such critical parameters as global
calendars (with weekends and holidays defined by countries), multiple-based
currencies and required rounding techniques.
Regulatory Compliance. CAMRA 2000 includes standard reports to meet the
annual and quarterly regulatory reporting requirements of insurance
organizations as promulgated by the National Association of Insurance
Commissioners ("NAIC"). CAMRA 2000 also supports regulatory reporting
requirements of various other regulatory agencies such as the Securities and
Exchange Commission ("SEC") and the Office of the Comptroller of the Currency
("OCC").
CAMRA 2000 is designed to facilitate seamless integration with its software
modules. Modules to CAMRA 2000 are available for performance measurement using
computations consistent with the standards of the Association for Investment
Management and Research ("AIMR"), portfolio compliance, net asset value
computations for mutual funds, optimization of trading in mortgage-backed
securities on a to be announced ("TBA") basis, client fee billing, portfolio
rebalancing and interfacing with various products of Bloomberg Trade Book,
Open Bloomberg and other analytic data services.
Total Return
Total Return is a portfolio management and partnership accounting system
oriented toward the hedge fund and family wealth markets. It is a multi-
currency system which, like CAMRA 2000, is designed to provide securities
accounting and reporting for businesses with high transaction volumes.
Partnership accounting, including the generation of tax forms 1065 and K-1,
are provided through Total Return's TR1065 module. Total Return also
incorporates a comprehensive general ledger. Performance measurement using
computations consistent with AIMR standards is also provided through a module
to the system. Other modules to Total Return provide for tax reporting and
trust reporting. Total Return also has interfaces with brokers, pricing
services, data services and front-end trading systems.
Mabel
Mabel is a portfolio management system from the Company's Netherlands-based
Mabel Systems ("Mabel") subsidiary that is used by clients throughout Europe
and the Caribbean. Mabel's functionality includes accounting and reporting,
performance measurement consistent with AIMR standards, net asset value
calculations for mutual funds and support for stock brokering and custodial
services. The Mabel system is designed to automatically map data to and from
messages in the S.W.I.F.T. ("Society for Worldwide Interbank Financial
Communications") format.
TRADE ORDER MANAGEMENT
Antares (in Beta release)
Antares is in Beta release as of December 31, 1997 and is expected to be
generally released during the third quarter of 1998. Antares is a
comprehensive trading and trade modeling system designed to integrate trade
modeling with trade order management. Modeling scenarios can be customized and
stored, including trader-
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defined formulas, in a familiar spreadsheet environment. Antares is designed
to transfer data seamlessly from modeling scenarios to trade orders. In
Antares, trades can be managed in the multiple steps of trade ordering,
filling the order and approving the trade or recorded in a single step.
Further, Antares can allocate trades across accounts at any step in the
process.
Trade blotters in Antares can be customized depending on client, product
type or trader. Full position accounting is provided across all types of
securities. Antares also accepts real-time pricing updates and can display
real-time positions and profit and loss statements. Portfolio rebalancing can
be set to occur automatically. As Antares uses an open relational database,
customized reporting is supported through its own report writing facilities or
through other third-party reporting tools. Antares also includes functionality
to automate the processing of options, futures and forward currency contracts.
For some financial institutions, the Antares trading system may serve as a
comprehensive, stand-alone investment management system. For financial
institutions with more accounting and historical reporting requirements,
Antares may serve as the front-end trading system connected to CAMRA 2000,
Total Return or other portfolio management investment accounting systems.
ASSET/LIABILITY MANAGEMENT
PTS 2000
PTS 2000 provides an economic model of insurance assets and liabilities,
generating option-adjusted cash flows to reflect the complex sets of options
and covenants frequently encountered in insurance contracts or comparable
agreements. PTS 2000 includes the following features:
Large-Scale Corporate Simulation Models. The Company and certain significant
clients have implemented a number of complex models of whole-company financial
performance. Unlike simpler systems, PTS 2000 maintains an internal
architecture patterned after the structure of insurance companies themselves,
making full-scale corporate models practical. Such corporate models are used
to facilitate capital structure decisions, revealing and measuring overall
financial performance and guiding overall risk management practice.
Option Pricing. The PTS 2000 option pricing model provides option-adjusted
valuation of assets and liabilities under a consistent conceptual framework.
The PTS 2000 option pricing model explicitly considers interest-sensitive
embedded options, providing valid interest rate risk analysis using price
behavior curves that graphically depict asset/liability performance over
shifts in the interest rate term structure.
Macro Pricing. The Company's proprietary Macro Pricing algorithm recognizes
the complex relationships within contemporary financial intermediaries and
provides a matrix of possible product and production quota options in
conformity with the profit expectations of the client.
DYNAMIC FINANCIAL ANALYSIS
Finesse 2000
The Company's Finesse 2000 system is a Dynamic Financial Analysis ("DFA")
tool designed and developed in cooperation with Ernst & Young LLP, to model
operating results, gauge the effects of reinsurance and validate pricing,
value business transactions such as mergers and acquisitions, measure the
impact of new products, predict cash flows, analyze the impact of investment
decisions and improve strategic planning. Finesse 2000 generates iterative,
computer-simulated scenarios in response to events that may have an impact on
a client's business. The results of this iterative process are stored in
Finesse 2000's "virtual general ledger," which mimics the financial accounting
that would occur if these scenarios were to occur. All simulated results are
recorded and can be easily viewed on Finesse 2000's "graphical palette," an
on-line facility that visually depicts the likely occurrence of one or more
specific events.
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LOAN MANAGEMENT
FILMS 2000
The Company's fully integrated loan management system ("FILMS 2000") enables
mortgage professionals to process, analyze and report on a comprehensive basis
information regarding their mortgage loan portfolios. Like CAMRA 2000, FILMS
2000 is a multi-user, integrated solution operating on a client/server
platform, which eliminates the need for separate, independent systems within
the mortgage loan area. FILMS 2000, which can be integrated with data stored
in the Company's CAMRA 2000 and PTS 2000 products, provides the following
features:
Application and Commitment Processing. FILMS 2000 supports the processing of
commercial and residential mortgage loans, providing on-line access to
critical evaluative information, including credit history, appraisals, LTV
ratio, broker information, duration, convexity, average life and discounted
cash flow valuation, permitting loan recommendations to be generated quickly,
consistently and easily.
Accounting and Servicing Support. FILMS 2000 supports accurate and
consistent servicing of loans, including general ledger entries at the sub-
portfolio level, with a direct interface to the corporate general ledger.
FILMS 2000 also maintains appraisals and operating statements at the proper
level to support loan and portfolio management.
Comprehensive Reports. FILMS 2000 generates and supports a wide range of
accounting, servicing and management reports. All reports can be viewed on-
line, downloaded or printed.
CONSULTING SERVICES AND OUTSOURCING SERVICES
Consulting Services
Building upon the capability and flexibility of its software products, the
Company offers a range of professional services to assist clients in
implementing the Company's software products and meeting their portfolio
management needs. To facilitate successful product implementation, the
Company's consultants assist clients with initial installation of a system,
conversion of the client's historical data and ongoing training and support.
The Company's team works closely with the client to ensure smooth transition
and operation of the Company's systems. The Company believes its commitment of
dedicated professionals to facilitate the transition process strengthens its
relationship with the client, provides the Company with valuable information
regarding client requirements and offers the opportunity for sales of
additional Company products and services to the client. The Company's
consultants have a broad range of experience in the financial services
industry and include certified public accountants, chartered financial
analysts, mathematicians and professionals in the real estate, investment,
insurance and banking industries. In addition, the Company also offers
actuarial consulting services to its insurance company and other financial
institution clients. The Company believes its commitment to professional
services facilitates the adoption of the Company's software products across
its target markets.
SS&C Direct
For those clients wishing to outsource certain portfolio accounting,
reporting and analysis functions, the Company also provides comprehensive
outsourcing services through its SS&C Direct operating unit. The Company's
consultants initially work with a client to research and evaluate data
sources, implement custodian and pricing interfaces and determine reporting
requirements and timing. The Company provides its clients with accurate,
processed data on a timely basis, enabling investment professionals to utilize
their time analyzing data and making investment decisions rather than managing
the back-office investment operations. The features of the Company's
outsourcing services include: (i) customized access rights to provide on-line
access for senior management; (ii) regular holdings reports and complete
regulatory support; (iii) disk mirroring, daily back-up of the system and
other data protection measures; and (iv) disaster recovery hot site services.
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PRODUCT SUPPORT
The Company believes its high level of service and support is critical to
its success, and an important competitive advantage. Furthermore, the Company
believes that a close and active service and support relationship is important
to client satisfaction and also provides the Company with important
information regarding evolving client requirements. For example, the Company
provides each of its significant clients with a dedicated client support
representative whose primary responsibility is to resolve questions and
concerns and act as a liaison between the client and the Company. In addition,
the Company provides direct telephone support from 8:30 a.m. to 7:00 p.m.
Eastern Time, Mondays through Thursdays, from 8:30 a.m. to 5:30 p.m. on
Fridays and also on weekends during year-end reporting, as well as use of
electronic bulletin boards and other forms of electronic data distribution
that provide clients with the latest information regarding the Company's
products. The Company also provides periodic maintenance releases of licensed
software to its clients, including regulatory updates, generally during the
fourth quarter, to enable them to meet industry reporting obligations and
other processing requirements as they evolve. The Company's service and
support activities are supplemented by a comprehensive training program,
including introductory training courses for new users and dedicated seminars
for investment professionals to familiarize them with the capabilities of the
Company's systems.
CLIENTS
The Company's clients include a wide range of financial institutions and
other organizations that require a full range of information management and
analysis, accounting, actuarial, reporting and compliance software on a timely
and flexible basis, and include asset managers, insurance companies, banks,
mutual funds, corporate treasuries, pension funds and government agencies. The
Company provides products and services to more than 500 organizations
worldwide.
SALES AND MARKETING
The Company believes that a direct sales organization is essential to the
successful implementation of its business strategy given the complexity and
importance of the operations and information the Company's products are
designed to manage and the extensive regulatory and reporting requirements of
its clients. The Company's dedicated direct sales and support staff, which is
supplemented by extensive ongoing product and sales training, is organized by
product area and situated in the Company's various sales offices.
The Company's marketing personnel are responsible for evaluating and
developing market opportunities and providing sales support. The Company's
marketing activities include generation of client leads, targeted direct mail
campaigns, seminars, advertising, trade shows, conferences and public
relations efforts. The marketing department also supports the sales force with
appropriate documentation or electronic materials for use during the sales
process.
PRODUCT DEVELOPMENT; RESEARCH AND DEVELOPMENT; BACKLOG
The Company believes that it must introduce new products and features into
the market on a regular basis to maintain its competitive advantage. To meet
these goals, the Company uses multidisciplinary teams of highly trained
finance, accounting, mathematical, actuarial, software and investment
personnel, and has invested heavily in developing a comprehensive product
analysis to meet rigorous requirements for product functionality and quality
across its target markets.
The Company's research and development engineers work closely with the
Company's marketing and support personnel to assure that product evolution
reflects developments in the marketplace and trends in client requirements.
Historically, the Company has issued a major functional release of its core
products during the third quarter of each fiscal year, including functional
enhancements, as well as an annual fourth quarter release to reflect evolving
regulatory changes in time to meet year-end reporting requirements of clients.
Although the Company has historically met its scheduled dates for product
releases and enhancements, software development is characterized by
unanticipated delays, and there can be no assurance that the Company will be
able to maintain future scheduled release dates as planned. Furthermore, there
can be no assurance that the Company's new product releases and product
enhancements will adequately address the needs of the
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marketplace or will not contain "bugs" which could cause delays in product
introduction or shipments or, if discovered in the future, require
modification of the Company's products.
As of December 31, 1997, the Company's research and development staff
consisted of 100 employees. The Company's total expenses for research and
development, excluding purchased in-process research and development, for the
years ended December 31, 1995, 1996 and 1997 were $7.7 million, $8.4 million
and $10.2 million, respectively.
Backlog is not a significant factor in the Company's business.
COMPETITION
The market for financial services software is competitive, rapidly evolving
and highly sensitive to new product introductions and marketing efforts by
industry participants. The market is also highly fragmented and served by
numerous firms, many of which serve only their respective local markets or
specific customer types, and much of the Company's competition stems from
information systems or timesharing services developed and serviced internally
by the MIS departments of financial services firms. The Company currently
faces direct competition in various segments of the financial services
industry from Thomson Financial, SunGard Data Systems, Inc., Princeton
Financial Systems (a subsidiary of State Street Bank and Trust Company), DST
Systems, Inc. and Advent Software, Inc. The Company believes that none of its
competitors currently compete against it in all of the Company's target
industry segments, although there can be no assurance that one or more may not
compete against the Company in the future in additional industry segments.
Many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources, generate
higher revenues and have greater name recognition than does the Company. There
can be no assurance that the Company's current or potential competitors will
not develop products comparable or superior to those developed by the Company
or adapt more quickly than the Company to new technologies, evolving industry
trends or changing client requirements. It is also possible that alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition may result in price reductions, reduced gross margins
and loss of market share, any of which would materially adversely affect the
Company's business, financial condition and results of operations.
The Company believes the principal competitive factors in its industry
include product performance and functionality, ease of use, scalability,
ability to integrate external data sources and processing systems, product and
company reputation, client service and support and price. Although the Company
believes that it currently competes effectively with respect to such factors,
there can be no assurance that the Company will be able to maintain its
competitive position against current and potential competitors.
PROPRIETARY RIGHTS
The Company primarily relies on a combination of copyright, trademark and
trade secret laws and license agreements to establish and protect proprietary
rights of its products. The source code for the Company's products is
protected as both a trade secret and an unpublished copyrighted work. In
addition, the Company generally enters into confidentiality and/or license
agreements with its employees, distributors, clients and potential clients and
limits access to, and distribution of, its software, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's products or
technology without authorization or to develop similar technology
independently. In addition, effective copyright and trade protection may be
unavailable or limited in certain foreign countries. In January 1996, the
Company licensed the use of certain of its source code to General American
Life Insurance Company ("GALIC") and Conning Asset Management Company,
affiliates of certain stockholders of the Company.
Because the software development industry is characterized by rapid
technological change, the Company believes that factors such as technological
and creative skills of its personnel, new product developments, frequent
product enhancements, name recognition and reliable service and support are
more important to establishing and maintaining a leadership position than
legal protections of its technology.
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EMPLOYEES
As of December 31, 1997, the Company had 318 full-time employees, consisting
of 100 employees in research and development, 70 employees in consulting and
services, 42 employees in sales and marketing, 32 employees in client support,
26 employees in finance and administration and 48 employees in the Company's
international operations. None of these employees are covered by any
collective bargaining agreements. The Company believes its relationship with
its employees is good. The future success of the Company will depend upon its
ability to attract and retain qualified personnel. Competition for such
personnel is often intense, and there can be no assurance that the Company
will be able to attract and retain adequate numbers of qualified personnel in
the future.
ITEM 2. PROPERTIES
The Company owns its corporate offices in Bloomfield, Connecticut, which
consist of approximately 14,800 square feet of office space. The Company also
leases an additional 18,000 square feet of office space in Bloomfield. The
Company has entered into a lease agreement for 54,000 square feet of office
space in Windsor, Connecticut and plans to relocate its corporate offices from
the Bloomfield location in the second quarter of 1998. The initial lease term
is for ten years and the Company has the right to extend the lease for one
additional term of five years. The lease requires annual payments of $717,000
for each of the first five years and annual payments of $757,000 for each of
the remaining five years. In support of its direct sales and service and
support operations, the Company utilizes facilities and offices in six
locations in the United States and Canada and also has offices in London,
England, Amsterdam, Netherlands and Kuala Lumpur, Malaysia.
ITEM 3. LEGAL PROCEEDINGS
On March 18, 1997, Elery G. Montagna and Marjory G. Montagna filed a
purported class action lawsuit in the United States District Court for the
Southern District of New York (the "New York Complaint") against the Company,
its Chief Executive Officer, its Executive Vice President and its Chief
Financial Officer, as well as against BT Alex.Brown Incorporated (as successor
to Alex. Brown & Sons Incorporated, "Alex.Brown") and Hambrecht & Quist LLC
("Hambrecht & Quist"), the lead managers of the Company's initial public
offering. On April 8, 1997, Marc A. Feiner filed a purported class action
lawsuit in the United States District Court for the District of Connecticut
(the "Connecticut Complaint") against the Company, its directors and its Chief
Financial Officer, as well as against Alex.Brown and Hambrecht & Quist. On
July 8, 1997, Marc A. Feiner, Joseph Aogiere, Arthur S. Davis, Theodore S.
Davis, James Gregory, Brian Kreidler, Daniel Kreidler, Robert Miller, Elery
Montagna, Marjory Montagna and Gilda Shapiro Trust filed a Consolidated
Amended Class Action Complaint in the United States District Court for the
District of Connecticut (the "Consolidated Complaint") in which the New York
Complaint and the Connecticut Complaint were consolidated and amended. The
Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs are
seeking an undetermined amount of damages and costs and expenses of the
litigation. On October 3, 1997, the Company filed a motion to dismiss the
Consolidated Complaint on the grounds that it failed to state a claim against
the Company or the individual defendants. On October 7, 1997, Alex.Brown and
Hambrecht & Quist filed a similar motion to dismiss the Consolidated Complaint
on the grounds that it failed to state a claim against them. On November 14,
1997, the plaintiffs filed an opposition to the motions to dismiss. On
December 10, 1997, Alex.Brown and Hambrecht & Quist filed a reply to such
opposition, and on December 11, 1997 the Company similarly filed a reply to
such opposition. The motions to dismiss were heard by the court on December
16, 1997 and have been taken under advisement. Although the Company believes
that it has meritorious defenses to the claims made in the lawsuit and intends
to contest the lawsuit vigorously, an adverse resolution of the lawsuit could
have a material adverse effect on the Company's financial condition and
results of operations in the period in which the litigation is resolved.
From time to time, the Company is subject to certain legal proceedings and
claims which arise in the normal course of its business. In the opinion of
management, the Company is not a party to any other litigation which it
believes could have a material adverse effect on the Company or its business.
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Chairman of the Board of Directors and
William C. Stone........ 42 Chief Executive Officer
David M. Stoner......... 56 President and Chief Operating Officer
Senior Vice President and Chief Technology
David A. Varsano........ 36 Officer
Marc W. Zimmerman....... 42 Senior Vice President, Strategic Sales
Senior Vice President, Europe, the Middle
Steven M. Helmbrecht.... 35 East and Africa ("EMEA")
Michael Morini.......... 35 Senior Vice President, Asset Management
Vice President, Chief Financial Officer
John S. Wieczorek....... 37 and Treasurer
</TABLE>
William C. Stone founded the Company in 1986 and has served as Chairman of
the Board of Directors and Chief Executive Officer since the Company's
inception. He also served as the Company's President from inception through
April 1997. Prior to founding the Company, he directed the financial services
consulting practice of KPMG Peat Marwick LLP in Hartford, Connecticut and was
Vice President of Administration and Special Investment Services at Advest,
Inc.
David M. Stoner is President, Chief Operating Officer and a member of the
Board of Directors of the Company. Mr. Stoner joined the Company in April 1997
after serving as the President and Chief Operating Officer at The Dodge Group,
Inc., a software provider of PC-based general ledger systems, from August 1996
to February 1997. He formerly served as the Executive Vice President of
Worldwide Operations of Marcam Corporation, a provider of enterprise
applications and services from December 1987 to July 1996.
David A. Varsano is Senior Vice President and Chief Technology Officer of
the Company. Mr. Varsano joined the Company in September 1995, after serving
as Vice President at Dunn & Bradstreet Software, where he was responsible for
the client/server platform and decision support business from March 1994 to
September 1995. He formerly served as Vice President at Litle & Company, where
he managed product and systems development from March 1990 to March 1994.
Marc W. Zimmerman is Senior Vice President, Strategic Sales of the Company.
Mr. Zimmerman joined the Company in August 1995, from his position as Vice
President of Market Investment Solutions, Inc., an investment software and
consulting services provider, which he joined in 1993. From 1989 to 1993 he
served as Executive Vice President of Sales and Marketing and co-founder of
Princeton Financial Systems, Inc., a provider of investment software and
consulting services to the financial services industry.
Steven M. Helmbrecht is Senior Vice President, EMEA of the Company. From
November 1996 to October 1997, Mr. Helmbrecht served as Vice President,
International of the Company. From July 1993 to November 1996, Mr. Helmbrecht
served as a sales representative for the Company. From 1989 to 1992, Mr.
Helmbrecht served as Vice President of Prime Advisors, Inc., an investment
advisory firm, where he was responsible for investment accounting and
reporting. He formerly worked at Arthur Andersen & Co. as a tax accountant,
from 1985 to 1988.
10
<PAGE>
Michael Morini is Senior Vice President, Asset Management of the Company.
Mr. Morini joined the Company in September 1997, after serving as the Senior
Vice President of Sales and Professional Services for Advent Software, Inc., a
provider of computer software and services, from October 1994 to August 1997.
From January 1994 to October 1994, he served as Vice President/General Manager
of the Northeast for American Software, Inc. He formerly served as a business
unit manager for J.D. Edwards & Co., where he managed sales, consulting and
project management teams, from January 1992 to January 1994.
John S. Wieczorek is Vice President, Chief Financial Officer and Treasurer
of the Company. Mr. Wieczorek joined the Company in October 1994 after serving
in various management positions from 1983 to 1994 and ultimately as Chief
Financial Officer at Vantage Computer Systems, Inc., a provider of computer
software and services (prior to the merger of Vantage with The Continuum
Company, Inc.).
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the directors and executive officers of
the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been trading on the Nasdaq National Market
under the symbol "SSNC" since the Company's initial public offering on May 31,
1996. The following table sets forth, for the fiscal periods indicated, the
high and low sales prices per share of Common Stock as reported on the Nasdaq
National Market:
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997
------------- ------------
PRICE RANGE PRICE RANGE
------------- ------------
QUARTER HIGH LOW HIGH LOW
------- ------ ------ ------ -----
<S> <C> <C> <C> <C>
First......................................... N/A N/A $ 8.00 $5.13
Second........................................ $23.50 $13.00 7.25 5.13
Third......................................... 15.50 6.75 11.38 5.63
Fourth........................................ 10.38 5.50 12.38 9.50
</TABLE>
There were 60 stockholders of record of the Company's Common Stock as of
March 17, 1998. The number of stockholders of record may not be representative
of the number of beneficial owners because many shares are held by
depositories, brokers or other nominees.
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain earnings, if any, to support
its growth strategy and does not anticipate paying cash dividends in the
foreseeable future. Payment of future dividends, if any, will be at the
discretion of the Company's Board of Directors after taking into account
various factors, including the Company's financial condition, operating
results, current and anticipated cash needs and plans for expansion.
On December 31, 1997, the Company acquired 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 "SBS Stockholders"). Pursuant
to the Merger Agreement, the Merger Subsidiary was merged with and into SBS,
whereupon SBS became a wholly owned subsidiary of the Company. At that time,
the outstanding shares of capital stock of SBS were exchanged for an aggregate
of 1,000,000 shares of Common Stock of the Company (the "Shares"). The Shares
were issued and sold to the SBS Stockholders in reliance on Section 4(2) of
the Securities Act of 1933, as amended, as a sale by the Company not involving
a public offering. No underwriters were involved with the issuance and sale of
the Shares.
11
<PAGE>
The following information relates to the use of proceeds from the Company's
initial public offering of Common Stock (the "Offering").
The effective date of the Company's Registration Statement on Form S-1 (File
No. 333-3094) (the "Registration Statement") relating to the Offering, for
which the following use of proceeds information is being disclosed, was May
30, 1996.
From the effective date of the Registration Statement through December 31,
1997, the Company has used the net Offering proceeds to the Company as
follows:
<TABLE>
<S> <C>
Acquisition of other business............................... $ 475,000
Repayment of indebtedness................................... $ 450,000
Working capital............................................. $ 5,859,425
Municipal bonds............................................. $37,880,775
Municipal bond funds........................................ $ 6,084,594
Corporate bonds............................................. $ 2,024,043
</TABLE>
All of the above-listed payments were direct or indirect payments to persons
other than: directors, officers, general partners of the Company or their
associates; persons owning ten percent or more of any class of equity
securities of the Company; or affiliates of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is contained under the caption
"Selected Financial Data" appearing in the Company's 1997 Annual Report to
Stockholders (the "1997 Annual Report") and is incorporated herein by this
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is contained under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the 1997 Annual Report and is incorporated herein by
this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained in the Consolidated
Financial Statements and related footnotes appearing in the 1997 Annual Report
and is incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
12
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item 10 is set forth in the proxy statement to
be provided to stockholders in connection with the Company's 1998 Annual
Meeting of Stockholders (the "Proxy Statement") under the headings "Directors
and Nominees for Director" and "Section 16(a) Beneficial Ownership Reporting
Compliance," which information is incorporated herein by reference. The name,
age and position of each executive officer of the Company is set forth under
the heading "Executive Officers of the Registrant" in Part I of this Annual
Report on Form 10-K, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item 11 is set forth in the Proxy Statement
under the headings "Compensation of Executive Officers," "Director
Compensation" and "Compensation Committee Interlocks and Insider
Participation," which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this Item 12 is set forth in the Proxy Statement
under the heading "Security Ownership of Certain Beneficial Owners and
Management," which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is set forth in the Proxy Statement
under the heading "Certain Transactions," which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents Filed as a Part of this Form 10-K:
1. Financial Statements. The Consolidated Financial Statements are
included in the 1997 Annual Report, portions of which are filed as
an exhibit to this Annual Report on Form 10-K. The Consolidated
Financial Statements include: Consolidated Balance Sheets,
Consolidated Statements of Operations, Consolidated Statements of
Cash Flows, Consolidated Statements of Changes in Stockholders'
Equity, and Notes to Consolidated Financial Statements.
2. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report on
Form 10-K.
(b) Reports on Form 8-K:
On November 24, 1997, the Company filed a Current Report on Form 8-K, dated
November 14, 1997, to report under Item 2 (Acquisition or Disposition of
Assets) the Company's acquisition of Mabel Systems BV.
13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SS&C Technologies, Inc.
By /s/ William C. Stone
-----------------------------------
WILLIAM C. STONE
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
Date: March 31, 1998
14
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ William C. Stone Chairman of the Board of
_________________________________ Directors and Chief
WILLIAM C. STONE Executive Officer
(Principal Executive
Officer)
/s/ David M. Stoner President, Chief
_________________________________ Operating Officer and
DAVID M. STONER Director
/s/ John S. Wieczorek Vice President, Chief
_________________________________ Financial Officer and
JOHN S. WIECZOREK Treasurer (Principal
Financial and
Accounting Officer)
/s/ Peter L. Bloom Director March 31, 1998
_________________________________
PETER L. BLOOM
/s/ David W. Clark, Jr. Director
_________________________________
DAVID W. CLARK, JR.
/s/ Joseph H. Fisher Director
_________________________________
JOSEPH H. FISHER
Director
_________________________________
WILLIAM E. FORD
/s/ Jonathan M. Schofield Director
_________________________________
JONATHAN M. SCHOFIELD
/s/ William W. Wyman Director
_________________________________
WILLIAM W. WYMAN
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Share Purchase Agreement, dated as of November 14, 1997, by and
among the Registrant, G.M. Hilhorst Holding B.V. and Lebam
Beheer B.V. is incorporated herein by reference to Exhibit 2 to
the Registrant's Current Report on Form 8-K, dated November 14,
1997 (File No. 0-28430).
2.2 Agreement and Plan of Merger, dated as of December 31, 1997, by
and among the Registrant, 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 is
incorporated herein by reference to Exhibit 2 to the
Registrant's Current Report on
Form 8-K, dated December 31, 1997 (File No. 0-28430).
3.1 Amended and Restated Certificate of Incorporation of the
Registrant is incorporated herein by reference to Exhibit 3.2 to
the Registrant's Registration Statement on Form S-1, as amended
(File No. 333-3094) (the "Form S-1").
3.2 Amended and Restated By-Laws of the Registrant is incorporated
herein by reference to Exhibit 3.4 to the Form S-1.
4 Specimen Certificate for shares of Common Stock, $.01 par value
per share, of the Registrant is incorporated herein by reference
to Exhibit 4 to the Form S-1.
10.1* 1993 Stock Option Plan is incorporated herein by reference to
Exhibit 10.1 to the
Form S-1.
10.2* 1994 Stock Option Plan, as amended, is incorporated herein by
reference to Exhibit 10.2 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996 (File No. 0-
28430).
10.3* 1996 Director Stock Option Plan, as amended, is incorporated
herein by reference to Exhibit 10.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 0-28430).
10.4* 1996 Employee Stock Purchase Plan, as amended, is incorporated
herein by reference to Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996 (File
No. 0-28430).
10.5* Employment Agreement between the Registrant and William C.
Stone, dated March 28, 1996, is incorporated herein by reference
to Exhibit 10.5 to the Form S-1.
10.6* Employment Agreement between the Registrant and Shane A. Chalke,
dated as of March 31, 1995, as amended, is incorporated herein
by reference to Exhibit 10.6 to the Form S-1.
10.7 Stock and Note Purchase Agreement, dated September 25, 1990, as
amended on September 20, 1994, among the Registrant and certain
stockholders of the Registrant is incorporated herein by
reference to Exhibit 10.10 to the Form S-1.
10.8 Series B Preferred Stock Purchase Agreement, dated September 20,
1994, among the Registrant and certain stockholders of the
Registrant is incorporated herein by reference to Exhibit 10.11
to the Form S-1.
10.9 Series C Preferred Stock Purchase Agreement, dated March 31,
1995, among the Registrant and certain stockholders of the
Registrant is incorporated herein by reference to Exhibit 10.12
to the Form S-1.
10.10+ Software License Agreement between the Registrant and Conning
Asset Management Company, dated January 27, 1996, is
incorporated herein by reference to Exhibit 10.15 to the Form S-
1.
10.11 Reseller Agreement between the Registrant and PFX(USA), Inc.,
dated June 22, 1993, is incorporated herein by reference to
Exhibit 10.16 to the Form S-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.12* Employment Agreement between the Registrant and David M. Stoner,
dated April 2, 1997 is incorporated herein by reference to
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997 (File No. 0-28430).
10.13*+ Senior Officer Short-Term Incentive Plan is incorporated herein
by reference to Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 (File
No. 0-28430).
10.14* Resignation Agreement and Release, dated as of October 1, 1997,
by and between the Registrant and Shane A. Chalke.
10.15 Lease Agreement, dated September 23, 1997, by and between the
Registrant and Monarch Life Insurance Company, as amended.
13 Portions of the Registrant's 1997 Annual Report to Stockholders
(which is not deemed to be "filed" except to the extent that
portions thereof are expressly incorporated by reference in this
Annual Report on Form 10-K).
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P.
27.1 Restated Financial Data Schedule for the year ended December 31,
1995.
27.2 Restated Financial Data Schedules for the three months ended
March 31, 1996 and six months ended June 30, 1996.
27.3 Restated Financial Data Schedules for the nine months ended
September 30, 1996 and year ended December 31, 1996.
27.4 Restated Financial Data Schedules for the three months ended
March 31, 1997 and six months ended June 30, 1997.
27.5 Restated Financial Data Schedule for the nine months ended
September 30, 1997.
27.6 Financial Data Schedule for the year ended December 31, 1997.
</TABLE>
- --------
* Management contract or compensatory plan or arrangement filed herewith in
response to Item 14(a)(3) of the Instructions to the Annual Report on Form
10-K.
+ Confidential treatment previously granted as to certain portions of such
document.
2
<PAGE>
EXHIBIT 10.14
RESIGNATION AGREEMENT AND RELEASE
---------------------------------
AGREEMENT made as of the 1st day of October, 1997, by and between SS&C
Technologies, Inc. (the "Company") and Shane A. Chalke ("the Employee").
WHEREAS, the Employee and the Company are parties to an Employment
Agreement dated March 31, 1995, which was amended by an Amendment dated
January 1, 1996 (collectively, the "Employment Agreement"); and
WHEREAS, the Employee desires to resign his employment with the Company;
and
WHEREAS, the parties wish to resolve amicably the Employee's separation
from the Company;
NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follows:
1. Resignation. The Employee hereby resigns his employment with the
-----------
Company pursuant to the terms of paragraph 10(b) of the Employment Agreement.
The Employee's last date of employment with the Company shall be October 1, 1997
("Termination Date"). The Employee also resigns, effective immediately, any
officer or director position he holds with the Company
2. Effect of Resignation. The Company and the Employee agree that
---------------------
Employee shall continue to be paid at his regular salary rate of $29,167.00 per
month, less applicable taxes and withholding, through the Termination Date. The
Employee shall be eligible to participate in all Company benefit plans through
the Termination
<PAGE>
Date. Thereafter, all Company benefits shall cease; provided,
however, that the Employee shall have the option of continuing health and dental
insurance coverage at his own costs for up to 18 months under the terms of
COBRA. The parties acknowledge that the Employee shall receive by mail a letter
from the Company fully describing his rights under COBRA to continue health
insurance coverage. The Company and the Employee agree that the Employee has
received any and all vacation to which he is entitled under the Company's
policies.
3. Consulting Arrangement. The Employee and the Company agree that the
----------------------
Employee shall, effective October 1, 1997, become a consultant to the Company
and provide the Company with a minimum of 50 days of strategic consulting
services during the four year period commencing October 1, 1997 ("Consulting
Period"). The Employee's consulting services shall be directed by the Company's
Chief Executive Officer and the Employee shall report directly to the Company's
Chief Executive Officer during the Consulting Period. Prior to scheduling
consulting assignments, the Company shall provide reasonable notice of the need
for the Employee to perform scheduled consulting services.
4. Vesting of Stock Options. The Employee and the Company agree that the
------------------------
Employee is vested in a total of 131, 250 shares of the Company's stock as of
the Termination Date, and that an additional 26, 250 shares will vest during the
period from October 2, 1997 to March 31, 1998 ("Extended Vesting Period").
The 26,250 shares shall be in addition to the 131, 250 shares in which the
Employee has already vested as of the Termination Date. For purposes of the
stock option agreement between the Employee and the Company dated March 31, 1995
("Stock Option
2
<PAGE>
Agreement"), the Employee shall be deemed to be a consultant of
the Company during the Extended Vesting Period. For purposes of the Stock
Option Agreement only, the Employee shall no longer be deemed either an employee
or a consultant of the Company after March 31, 1998. The parties agree that
Employee's rights regarding stock and stock options, except as expressly
modified by this paragraph, shall be governed by the terms of the Company's 1994
Stock Option Plan and any applicable stock option agreement between the parties.
5. Non-Competition, Secrecy, Proprietary Information and Inventions
----------------------------------------------------------------
Covenants of Employment Agreement. The parties acknowledgment that paragraphs
- ----------------------------------
11 through 20 of the Employment Agreement dealing with non-competition, secrecy,
proprietary information and inventions continue in full force and effect and are
incorporated by reference herein.
6. Mutual Release. The Employee hereby fully, forever, irrevocably and
--------------
unconditionally releases, remises and discharges the Company, its officers,
directors, stockholders, corporate affiliates, agents and employees from any and
all claims, charges, complaints, demands, actions, causes of action, suits,
rights, debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys' fees and costs), of every kind
and nature which he ever had or now has against the Company, its officers,
directors, stockholders, corporate affiliates, agents and employees, including,
but not limited to, all claims arising out of his employment, all employment
discrimination claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
(S)2000e et seq., the Age Discrimination in Employment Act,
------
3
<PAGE>
29 U.S.C., (S)621 et seq., the Americans With Disabilities Act, 42 U.S.C.,
------
(S)12101 et seq., the Connecticut Human Rights and Opportunities Act, Conn. Gen.
------
Stat. (S)46A-51, et seq., the Virginia Human Rights Act, VA. Code Ann.
------
(S)2.1-714 et seq., damages arising out of all employment discrimination claims,
------
wrongful discharge claims or other common law claims and damages. The Company
releases the Employee from any and all claims which it may have against the
Employee arising out of his service as an employee, officer or director of the
Company.
7. Defense and Indemnification. The Company agrees to defend and
---------------------------
indemnify the Employee for legal claims arising out of the Employee's duties as
an employee and officer of the Company in accordance with and to the limits set
forth in the Company's charter and by-laws.
8. Non-Disparagement. The parties agree that neither party shall make
-----------------
remarks which disparage the other party or their officers, directors and
employees, as applicable, or otherwise make statements which harm the reputation
of the other party.
9. Warranty on Legal Action. The Employee represents and warrants that
------------------------
he has not filed any complaints, charges, or claims for relief against the
Company, its officers, directors, stockholders, corporate affiliates, agents or
employees with any local, state or federal court or administrative agency which
currently are outstanding.
10. Nature of Agreement. The parties understand and agrees that this
-------------------
Agreement is a resignation agreement and release and does not constitute an
admission of liability or wrongdoing on the part of the Company or the Employee.
4
<PAGE>
11. Amendment. This Agreement shall be binding upon the parties and may
---------
not be abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto. This
Agreement is binding upon and shall inure to the benefit of the parties and
their respective agents, assigns, heirs, executors, successors and
administrators.
12. Validity. Should any provision of this Agreement be declared or be
--------
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and said illegal and invalid part, term or provision shall be deemed not
to be a part of this Agreement.
13. Confidentiality. The Employee understands and agrees that the terms
---------------
and contents of this Agreement, and the contents of the negotiations and
discussions resulting in this Agreement, shall be maintained as confidential by
the Employee, his agents and representatives, and none of the above shall be
disclosed except to the extent required by federal or state law or as otherwise
agreed to in writing by the authorized agent of each party.
14. Breach and Cure. The parties agree that in the event the Employee
---------------
breaches any term of this Agreement, the Company shall not be required to permit
the Employee to vest in stock options as described in paragraph 2 of this
Agreement. The Company shall also be entitled to any other remedy of law or at
equity for breach by the other party. The parties agree that prior to seeking
any legal or judicial remedy for breach of any provision of this Agreement, the
non-breaching party shall provide the breaching party with notice of the alleged
breach and a
5
<PAGE>
ten (10) day period to cure any alleged breach. For purposes of
this paragraph, notice shall be provided to the parties at the following
addresses:
SS&C Shane Chalke
----- ------------
President P.O. Box 188
705 Bloomfield Avenue Middleburg, VA 20118
Bloomfield, CT 06002
15. Entire Agreement. This Agreement contains and constitutes the entire
----------------
understanding and agreement between the parties hereto with respect to the
severance and settlement and cancels all previous oral and written negotiations,
agreements, commitments, and writings in connection therewith.
16. Applicable Law. This Agreement shall be governed by the laws of the
--------------
State of Connecticut.
17. Acknowledgments. The Employee acknowledges that he has been given
---------------
twenty-one (21) days to consider this Agreement and that the Company advised him
to consult with an attorney of his own choosing prior to signing this Agreement.
The Employee may revoke this Agreement for a period of seven (7) days after the
execution of this Agreement, and the Agreement shall not be effective or
enforceable until the expiration of this seven (7) day revocation period.
18. Voluntary Assent. The Employee affirms that no other promises or
----------------
agreements of any kind have been made to or with him by any person or entity
whatsoever to cause him to sign this Agreement, and that he fully understands
the meaning and intent of this Agreement. The Employee states and represents
that he has had an opportunity to fully discuss and review the terms of this
Agreement with
6
<PAGE>
an attorney. The Employee further states and represents that he has carefully
read this Agreement, understands the contents herein, freely and voluntarily
assents to all of the terms and conditions hereof, and signs his name of his own
free act.
19. Counterparts. This Agreement may be executed in two (2) signature
------------
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
SS&C TECHNOLOGIES, INC.
By: /s/ John S. Wieczorek Date: October 10, 1997
---------------------
Title: V.P., CFO
SHANE A. CHALKE
/s/ Shane A. Chalke Date: October 7, 1997
---------------------
7
<PAGE>
EXHIBIT 10.15
LEASE
-----
1. PARTIES.
-------
This Lease, made at Springfield, Massachusetts this 23rd day of
September, 1997, by and between MONARCH LIFE INSURANCE COMPANY, a
Massachusetts corporation, hereinafter called "Lessor", and SS&C
TECHNOLOGIES, INC., a Delaware corporation, hereinafter called "Lessee".
2. PREMISES.
--------
(a) Lessor hereby leases to Lessee premises in the building known and
numbered as 80 Lamberton Road, Windsor, Connecticut, (the
"Building"), described as follows: FORTY-EIGHT THOUSAND ONE HUNDRED
TWENTY-SIX (48,126) square feet of rentable area using an add on
factor of thirteen (13%) percent and measured in accordance with
ANSZ-265.1, Copyright 1990 (BOMA Standard Method of Floor
Measurement) on the first (1st) and second (2nd) floors of the
Building (as shown on Exhibit A attached hereto and made a part
---------
hereof) together with the right in common with others to use the
common areas and common facilities from time to time so designated
and maintained by Lessor (the "Premises"). Lessor excepts and
reserves to itself from the demise of the Premises (i) the exterior
faces of all exterior walls, windows and doors and of all walls,
windows and doors facing common areas; (ii) hallways, stairways,
shaftways, service rooms, common toilets, and elevators serving other
parts of the Building; (iii) the right to maintain, use, repair, and
replace pipes, ducts, wires, meters, and any other equipment,
machinery, apparatus, and fixtures located within or without the
Premises which service other parts of the Building; (iv) the right to
make changes, alterations, and additions to the Building, common
areas, and common facilities provided the same does not unreasonably
interfere with access to the Premises nor materially diminish their
aesthetic quality or reduce the quality of service to the Premises or
the Building; and (v) the right to enter the Premises in accordance
with the provisions of Section 13 hereof for any of the foregoing
purposes.
(b) Lessee shall also be entitled to the non-exclusive use of parking
spaces in the parking areas provided by Lessor at the Building as the
same may
<PAGE>
2
be reconfigured from time to time. Upon request of Lessor, Lessee
shall furnish Lessor with vehicle license numbers for all vehicles of
Lessee's employees entitled to park in such areas. Lessor represents
that parking is available for the Building at a ratio of 4.6 parking
spaces per one thousand (1,000) square feet of rentable area in the
Building. Lessor shall designate visitor parking available for use in
common with other tenants of the Building in that area shown as
"Visitor Parking" on Exhibit A.
---------
(c) Lessee shall have the right, without payment of rent or charges, to
exclusive use of approximately THREE THOUSAND (3,000) square feet of
space n the basement of the building for storage in the location
shown on Exhibit A, Lessee at its sole cost, may secure such space
---------
by the installation of a cage, by walls or by other reasonable means
provided that such installations do not interfere with the mechanical
systems of the Building and are constructed in accordance with
Section 8 hereof. Lessor shall have no obligation to provide Building
services to such space except for electricity lighting and heat.
3. TERM.
----
(a) The initial term (the "Initial Term") of this Lease and Lessee's
obligation to pay rent shall commence as of January 15, 1998 (the
"Commencement Date").
(b) The Initial Term of this Lease shall end at midnight on January 14,
2008, unless sooner terminated or extended as hereinafter provided.
(c) Provided that no uncured Event of Default shall exist beyond any
applicable grace period either at the date of the exercise of the
option herein granted or as of the commencement of the option term,
Lessee shall have the right to extend the term of this Lease for one
additional term of five (5) years commencing as of January 15, 2008
and terminating at 12:00 p.m. on January 14, 2013, unless sooner
terminated as herein, provided, that notice of the excise of such
option is given to Lessor not earlier than July 15, 2006 nor later
than January 15, 2007.
<PAGE>
3
4. MINIMUM ANNUAL RENT.
-------------------
(a) Initial Term. Lessee shall pay to Lessor at its office as Minimum
------------
Annual Rent, the following:
(i) For each of the first (1st) five (5) Lease Years, Minimum Annual
Rent shall be paid in the amount of SIX HUNDRED THIRTY-SEVEN
THOUSAND SIX HUNDRED SIXTY-NINE AND 50/100 ($637,669.50)
DOLLARS, payable in monthly installments in advance in the
amount of FIFTY-THREE THOUSAND ONE HUNDRED THIRTY-NINE AND
13/100 ($53,139.13) DOLLARS; and
(ii) For each of the second (2nd) five (5) Lease Years, Minimum
Annual Rent shall be paid in the amount of SIX HUNDRED SEVEY-
THREE THOUSAND SEVEN HUNDRED SIXTY-FOUR AND 00/100 ($673,764.00)
DOLLARS, payable in monthly installments in advance in the
amount of FIFTY-SIX THOUSAND ONE HUNDRED FORTY-SEVEN AND 00/100
($56,147.00) DOLLARS.
Each of such installments shall be payable on the first (1st)
calendar day of each calendar month in advance and without
demand. In the event the term of this Lease commences on a day
other than the first day of a calendar month, the Lessee shall
pay to the Lessor, on or before the Commencement Date, a pro
rata portion of the monthly installment of rent, such pro rata
portion to be based on the number of days remaining in such
partial month after the Commencement Date. Notwithstanding the
foregoing Lessee's obligation to pay Minimum Annual Rent shall
not commence until the first (1st) month following the
Commencement Date. Upon execution hereof, Lessee has paid Lessor
the sum of FIFTY-THREE THOUSAND ONE HUNDRED THIRTY-NINE AND
13/100 ($53,139.13) DOLLARS as and for the second full calendar
month installment of Minimum Annual Rent, receipt of which
Lessor hereby acknowledges. Lessee hereby covenants and agrees
to pay the rent hereby reserved as and when due, and also all
sums of money, charges or other amounts required to be paid by
the Lessee to the
<PAGE>
4
Lessor or to another person under this Lease which shall be
"rent" in addition to the rent provided for herein. Nonpayment
of additional rent when due shall constitute a default under
this Lease to the same extent, and shall entitle the Lessor to
the same remedies, as nonpayment of rent.
(b) Option Term. Minimum Annual Rent for the option term shall be
-----------
charged at the greater of
(i) the Minimum Annual Rent charged in the last Lease year of the
Initial Term or;
(ii) ninety-five (95%) percent of the "Fair Market Rent" (as such
term is hereafter defined) shall be deemed to be the yearly
rental charged by landlords within the prior twelve (12) months
for similar properties under similar terms and leases in the
Greater Hartford Market. Within thirty (30) days following
Lessee's exercise of the option to extend the initial term
hereof, Lessor shall notify Lessee of the Fair Market Rent and
the Minimum Annual Rent to be charged ("Lessor's Rent Notice").
If within thirty (30) days following receipt by Lessee of
Lessor's Rent Notice, Lessee has not by notice to Lessor either
accepted the Fair Market Rent set forth in Lessor's Rent Notice
or elected arbitration as set forth in subsection (c) hereof,
the statement of Fair Market Rent in Lessor's Rent Notice shall
be deemed agreed to. Fair Market Rent shall not include any item
of additional rent set forth in Section 5 hereof.
(c) Arbitration. If Lessee disagrees with Lessor's statement of the Fair
-----------
Market Rent as set forth in Lessor's Rent Notice, Lessee may elect to
have the Fair Market Rent determined by binding arbitration, such
election to be made as provided in subsection (b) hereof. Arbitration
shall be conducted under the auspices of the American Arbitration
Association held at Hartford, Connecticut, the costs of which shall
be borne equally by Lessor and Lessee.
<PAGE>
5
(d) Late Payment. If any installment of rent additional rent or
------------
otherwise, shall be unpaid for more than ten (10) days after the same
shall be due, Lessee shall pay a late fee of five (5%) percent of
such late installment.
5. RENT ESCALATION.
---------------
(a) Lessee's Proportionate Share. Escalation as provided in this
----------------------------
Section is based on certain concepts as hereinafter defined. The
reference to "Lessee's Proportionate Share" means the ratio of
Lessee's rentable area (which as to the Premises on the first (1st)
floor is as defined in Exhibit B attached hereto and made a part
---------
hereof; and as to the Premises on the second (2nd) floor is defined
in Exhibit B-1 attached hereto and made a part hereof) to the total
-----------
amount of rentable area available in the Building, whether occupied
or not, and such percentage in this Lease initially is THIRTY AND
66/100 (30.66%) PERCENT. Relevant data shall be handled by the
application of generally accepted accounting principles and
practices, and Lessor's operating cost records for not more than
three (3) years shall be available for review upon request by Lessee.
Lessor will send to Lessee, in the manner of a written notice
hereunder, an invoice setting forth the amount due.
(b) Impositions. Lessee agrees to pay Lessor Lessee's Proportionate
-----------
Share of any increase (and shall receive a credit for any decrease)
in real estate taxes, special district taxes (or any taxes on rents
or property income imposed in lieu of the current system of ad
valorem taxation) betterment and special assessments, but only the
annual installments thereof if permitted to be paid in such manner
(the "Impositions") payable in respect to the Building and land
described on Exhibit A-1 (the "Land") in each year during the Lease
-----------
term whether resulting from a change in assessment or rate or both
above the amount of the Impositions in the twelve (12) month period
commencing January 1, 1998 and ending on December 31, 1998 (the "Tax
Base Year"). If the last year of the term of this Lease shall not be
a full calendar year, then Lessee's obligation for increases in the
Impositions attributable to such year shall be pro rated on the basis
of the
<PAGE>
6
ratio between the number of days of such calendar years falling within
the Lease term and 365.
(c) Operating Expenses. If the "Operating Expenses" (as such term is
------------------
hereinafter defined), shall exceed those incurred by Lessor in the
calendar year 1998 (the "Operating Expense Base Year"), then Lessee
shall pay Lessor, as additional rent, Lessee's Proportionate Share of
the amount of the Operating Expenses in excess thereof in the manner
hereinafter provided. If the last year of the term of this Lease shall
not be a full calendar year, then Lessee's obligation for Operating
Expenses attributable to such year shall be pro rated on the basis of
the ratio between the number of days of such calendar year falling
within the Lease term and 365.
"Operating Expenses" shall mean any and all reasonable and necessary
expenses incurred by Lessor in connection with its ownership,
maintenance and operation of the Land, and of the Building, excluding:
(i) the Impositions, (ii) interest or amortization payments on any
mortgage, (iii) legal expenses in enforcing the terms of any lease,
(iv) expenses for repair or other work occasioned by fire or other
casualty which is covered under a standard fire policy with extended
coverage, (v) expenses incurred in the leasing or procuring of new
tenants, including lease commissions and fit-up and/or decorating
costs, and (vi) advertising expenses and expenses for renting space
for new tenants.
Operating Expenses shall include without limitation, (vii) insurance
coverage maintained on the Land and Building and for public liability
and third party property damage as adjusted by Lessor from time to
time which, in Lessor's reasonable judgment, shall be necessary,
(viii) all labor costs for Building employees, normal and customary
third party management fees, (ix) service contracts and supplies used
in connection with the cleaning, operating, labor and maintenance of
the Land and Building, (x) all repairs and decorating required to be
performed by Lessor as provided for in this Lease, (xi) Common Area
maintenance and snow removal, building supplies, (xii) equipment
purchases not subject to an allowance for depreciation and the
amortized portion of equipment purchases (using Internal Revenue
Service published useful life tables) as to
<PAGE>
7
equipment subject to such allowance for depreciation and maintenance,
(xiii) all charges for the entire Building (including leaseable
portions as well as non-leaseable portions) for electricity, steam,
oil, gas (or other fuel) and water (including sewer use fees and
including any taxes on such utilities), (xiv) the amortized cost of
any replacements to the Building or the Common Area based upon the
useful life tables published by The United States Internal Revenue
Service. In connection with the computation of labor charges and
management fees, such charges shall include salary, wages, medical,
surgical and general welfare benefits, including group life insurance
and pension payments to employees of Lessor whose labor is chargeable
to the Building, or its Building Management Agent, payroll taxes,
workmen's compensation, uniforms, dry cleaning and other charges that
may be payable by Lessor for the Building employees and such other
expenses as Lessor may deem necessary and proper in connection with
the operation and maintenance of a first-class office building and
the common areas.
In the event that the Building is less than one hundred (100%)
percent occupied, any variable expenses included in Operating
Expenses will be adjusted for the Operating Expense Base Year and for
all subsequent years and for billing purposes up to the level which
would have been spent if the Building were ninety-five (95%) percent
occupied.
(d) Payment of Additional Rent. Commencing as of the first (1st)
--------------------------
anniversary of the Commencement Date, Lessee shall pay Lessor as
additional rent monthly in advance, a sum equal to 1/12th of Lessee's
Proportionate Share of increases in Operating Expenses and
Impositions as projected by Lessor. Within ninety (90) days of the
expiration of each calendar year Lessor shall furnish Lessee with a
written statement of the actual Operating Expenses and Impositions
incurred for the prior calendar year. In the event such statement
discloses that the additional rent paid by Lessee as Lessee's
Proportionate Share of Operating Expenses and the Impositions is
greater or less than the amount actually incurred, either Lessor
shall credit Lessee with the amount of such overpayment to be applied
to the monthly installments next coming due after delivery of such
statement, or Lessee shall pay such amount within thirty (30) days
after receipt of such statement. Lessor shall
<PAGE>
8
provide to Lessee, upon Lessee's request the 1997 operating statement
for the Building within one hundred twenty (120) days following year
end.
Lessee shall have ninety (90) days following the date on which it has
received Lessor's statement of Operating Expenses and Impositions to
dispute the rental adjustment determination by submitting notice to
Lessor, which notice shall include the specifics of Lessee's dispute.
If within thirty (30) days after the submittal of Lessee's notice, no
settlement is reached, Lessee may audit Lessor's books and records
regarding the matter in dispute employing an independent Certified
Public Accounting firm selected by Lessee. In the event the audit
results in a variance of three (3%) percent or less in the rental
adjustment, Lessee shall pay the expenses involved in such audit.
Lessor shall be obligated to pay the expenses involved in such audit
only if the result is a variance of greater than three (3%) percent
in the rental adjustment.
6. USE OF PREMISES.
---------------
(a) Lessee shall use and occupy the Premises for general office use.
Lessee shall not use or occupy the Premises for any other
purpose without the prior written consent of Lessor. Lessee
shall observe and comply with the Rules and Regulations attached
hereto as Exhibit C and made a part hereof. All such Rules and
---------
Regulations shall apply to Lessee and its employees, agents,
licensees, invitees, sublessees and contractors.
(b) Lessee agrees that during the term of this Lease that: (i) no
merchandise will be displayed outside the Premises; (ii) no nuisance
will be permitted on or about the Premises; (iii) nothing shall be
done upon or about the Premises which shall be contrary to any law,
ordinance, regulation or requirement of any public authority having
jurisdiction, or which may be injurious to or materially adversely
affect the Premises; (iv) the Premises will not be overloaded,
damaged or defaced; (v) Lessee will not drill or make any holes in
the stone or brickwork; (vi) Lessee will procure all licenses and
permits which may be required for any use made of the Premises; (vii)
Lessee will not permit the emission of any objectionable noise or
odor from the Premises; (viii) Lessee will not do, or suffer to be
done, or keep,
<PAGE>
9
or suffer to be kept, or omit to do anything in, upon or about the
Premises or on any property therein any act or acts which may void
any insurance or which may create any extra premiums or increased
rate of such insurance; and (ix) no signs shall be installed on or
about the Building or on the Premises except as provided in Section
11(k) hereof.
(c) The Lessee agrees that no hazardous wastes, materials or oil (the
"Hazardous Substances") as so classified by any law or regulation
shall be stored, handled or disposed of in or about the Premises by
Lessee. The Lessee herewith indemnifies and agrees to defend and hold
the Lessor harmless from and against any and all loss, damage, or
claims arising out of the storage, handling, discharge or disposal of
the Hazardous Substances by Lessee. The indemnity contained herein
shall survive the termination of this Lease.
7. CONSTRUCTION OF THE PREMISES.
----------------------------
(a) Lessee will construct improvements to the Premises (the "Tenant
Improvements") based upon plans to be furnished to Lessor by Lessee
and approved by Lessor. Within thirty (30) days following the
execution of this Lease, Lessee shall submit plans for construction
of the Tenant Improvements for Lessor's approval, which approval
shall not be unreasonably withheld. If Lessor shall deny approval of
the Plans, such denial shall be given to Lessee stating the reasons
for such denial within ten (10) days after Lessee has submitted its
preliminary plans. If Lessor shall reject such plans, Lessee may re-
submit plans for the Tenant Improvements to Lessor for its approval,
which approval shall not be unreasonably withheld. Lessor shall have
the same option as set forth above to reject or accept the plans.
Once Lessor has accepted plans for the Tenant Improvements, Lessee
shall thereafter enter into a contract with a contractor reasonably
acceptable to Lessor for the Tenant Improvements and complete the
same within forty-five (45) days. Tenant Improvements may not include
any moveable trade fixtures, furniture, equipment, telephone or other
communications equipment or wiring.
<PAGE>
10
(b) The cost of the Tenant Improvements will be paid as follows:
(i) Lessor shall pay an amount equal to the lesser of SEVEN HUNDRED
TWENTY-ONE THOUSAND EIGHT HUNDRED NINETY and 00/100 ($721,890.00)
DOLLARS or the final cost of the Tenant Improvements (the "Tenant
Allowance") payable to Lessee, provided no uncured event of default
is then existing, within thirty (30) days after receipt of an invoice
from Lessee which invoice shall contain a detail account of all
expenses incurred in said billing period and certified by Lessee's
architect as completed to the date of such invoice in accordance with
the plans and specifications; and
(ii) Lessee shall pay the cost of the Tenant Improvements in excess
of the Tenant Allowance.
(c) Lessee shall have the right to enter the Premises in order to
undertake Lessee's Work and to install its fixtures, furniture and
communications equipment without payment of rent.
(d) Lessor shall pay to Lessee at the Commencement Date, Lessee's
reasonable documented costs, incurred with nonaffiliated vendors, for
space planning, preparation of plans for the Tenant Improvements, and
interior design fees not exceeding however FIFTY-FOUR THOUSAND SEVEN
HUNDRED NINETY and 50/100 ($54,790.50) DOLLARS. Lessee shall submit
all invoices for such costs with all supporting documentation at the
time at which Lessee seeks reimbursement for such costs.
8. ALTERATIONS.
-----------
Except as provided herein, Lessee shall make no alterations, additions or
improvements to the Premises without the prior written consent of Lessor
which consent shall not be unreasonably withheld or delayed. The term
"alterations" shall not include the installation of shelves, moveable
partitions, Lessee's equipment, and trade fixtures which may be installed
or performed without damaging existing improvements, the structural
integrity of the Building, and the mechanical systems of the Building, and
Lessor's consent shall not be required for the installation of those items.
All such alterations, additions or improvements, along with the
construction and other items of work done pursuant to Section 7 hereof,
shall become a part of the Premises and shall remain upon and
<PAGE>
11
be surrendered with the Premises at the end of the term, provided, however,
if prior to the termination of this Lease by lapse of time or otherwise, or
within fifteen (15) days thereafter Lessor so directs by written notice to
Lessee, the Lessee shall promptly remove any alterations, additions,
improvements or installations not previously approved by Lessor and all
telecommunications and computer wiring and conduit which were placed in the
Premises by Lessee and which are designated in said notice. Lessee shall
repair any damage occasioned by such removal and in default thereof Lessor
may effect said removals and repairs at Lessee's expense. Lessee shall
procure all required licenses and permits for the installation of any
equipment and/or alterations and furnish copies thereof to Lessor prior to
the commencement of any work.
9. MECHANICS' LIENS.
----------------
Prior to Lessee performing any construction or other work on or about the
Premises for which a lien could be filed against the Premises or the
Building, Lessee at the Lessor's option, shall furnish reasonably
satisfactory security for the protection of the Lessor against mechanics'
liens. Notwithstanding the foregoing, if any mechanics' or other lien shall
be filed against the Premises or the Building purporting to be for labor or
material furnished or to be furnished at the request of the Lessee, then
Lessee shall at its expense cause such lien to be discharged of record by
payment, bond or otherwise, within thirty (30) days after the filing
thereof. If Lessee shall fail to cause such lien to be discharged of record
within such thirty (30) day period, or shall fail to establish an escrow
for such claim with Lessor reasonably acceptable to Lessor, Lessor may
cause such lien to be discharged by payment, bond or otherwise, without
investigation as to the validity thereof or as to any offsets or defenses
thereto, and Lessee shall, upon demand as additional rent, reimburse Lessor
for all amounts paid and costs incurred including attorneys fees, in having
such lien discharged of record.
10. CONDITION OF PREMISES.
---------------------
(a) Lessee acknowledges and agrees that, except as expressly set forth in
this Lease, there have been no representations or warranties made by
or on behalf of Lessor with respect to the Premises or the Building
or with respect to the suitability of either for the conduct of
Lessee's business. The taking of possession of the Premises by Lessee
<PAGE>
12
shall conclusively establish that the Premises and the Building were
at such time in satisfactory condition, order and repair and
constructed by Lessor in accordance with the requirements of this
Lease.
(b) Lessor agrees that as of the Commencement Date, the Building will be
in material compliance with all laws and regulations relating to its
occupancy, provided, however, Lessor shall have no liability for
Lessee's failure to insure that Lessee's Work or any of Lessee's
subsequent alterations to the Premises shall be in compliance with
such laws and regulations.
11. BUILDING SERVICES.
-----------------
Lessor shall provide, within the standards of similar buildings in Windsor,
Connecticut, on each item, the following services and facilities:
(a) Air conditioning, ventilation and heating, through the air
conditioning system of the Building, on business days Monday through
Friday from 8:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to
1:00 p.m. Air conditioning and heating shall be provided to the
Premises upon request of Lessee for after hours operation, provided
that Lessee shall pay Lessor Lessor's direct cost to provide such
services. Lessee agrees to cooperate fully with Lessor and to abide
by all the regulations and requirements which Lessor may reasonably
prescribe for the proper functioning and protection of the air
conditioning systems. It is understood that such a system is designed
for heat loads not to exceed six (6) watts (lighting and power) of
electricity per square foot and a population not to exceed one (1)
person for each 150 square feet;
(b) Electric current for building standard level of illumination using
standard fixtures of Lessor's choice, and replacement of light globes
and/or fluorescent tubes in the standard lighting fixtures installed
in the Premises by Lessor. However, Lessor's agreement to furnish
electricity for lighting does not include electricity for
reproduction machinery, other than normal 110 voltage computers or
other equipment, except electric typewriters and desk-type adding
machines, nor any equipment requiring a greater voltage than the
lighting circuits standard in the Building. Such
<PAGE>
13
additional electrical service will be furnished, if reasonably
available, upon Lessee's tendering all costs of installation,
including wiring and separate metering, and agreeing in writing to
pay the cost of current as additional rent, provided, however, the
service capacity of electricity at the electric closet shall not
exceed six (6) watts per square foot. Special installations, such as
computers, which in the opinion of Lessor require additional
electrical services (including primary service and transformers)
shall be made at Lessee's expense and paid prior to such
installation. Lessor reserves the right to install electric submeters
to measure Lessee's electric consumption and to rebill Lessee for
such usage exceeding that which Lessor provides in subsection (a) and
in this subsection (b);
(c) Maintenance of service of the public toilet rooms in the Building;
(d) Maintenance of standard hardware and draperies installed in the
Premises by Lessor;
(e) Maintenance and waxing of composition tile floors;
(f) Cleaning of outside and inside of exterior window panes;
(g) Cleaning and maintenance of common areas in the Building;
(h) Continuous elevator service during regular business days and hours,
and service via at least one car per elevator bank at all other
times;
(i) Janitor service, including the removal of debris, cleaning of space,
dusting of furniture, desks and pictures, vacuuming and wall washing
where washable materials are used to cover walls, in a manner
befitting a first-class office building performed in accordance with
Exhibit D attached hereto and made a part hereof;
---------
(j) Tempered and cold water for lavatory and drinking purposes; if Lessee
requires water for additional purposes, Lessee shall pay the cost
thereof as shown on a meter to be installed and maintained at
Lessee's expense to measure such consumption; and
(k) Signage (for letters "SS&C") on the I-91 (east) side and north side
of the Building with letter
<PAGE>
14
size and style comparable to the "ADVO" and "Xerox" signs on
buildings in Windsor (the "Building Sign"); a tenant identification
panel on the sign at the Lamberton Road side (west side) of the
Building at the driveway entrance (the "Driveway Sign"); and Lessor
will install a monument sign dedicated to Lessee's exclusive use at
the landscaped area adjacent to the west side entrance (the "Monument
Sign") which Monument Sign shall be substantially similar to the
monument sign at the East Side of the Building (I-91 side). Lessor
agrees that no other tenant identification sign shall be located on
the west side of the Building immediately adjacent to the west side
entrance to the Building.
Lessor shall not be liable in damages or otherwise for delay or
failure in furnishing any of the foregoing services or facilities
where such delay or failure is excusable pursuant to the provisions
of Section 25 hereof. In no event shall such delay or failure,
regardless of cause, constitute an eviction of Lessee or termination
of this Lease.
12. ASSIGNMENT AND SUBLETTING.
-------------------------
Except as hereafter provided, Lessee shall have no right to sublet all or
any part of the Premises, or assign, pledge, mortgage or otherwise encumber
this Lease without the prior written consent of Lessor which as to
subleases shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Lessee may assign this Lease or sublease the
Premises or any portion thereof, without Lessor's consent (but with prior
notice to Lessor of such assignment or sublease accompanied by a copy of
such assignment or sublease and an agreement by the assignee or sublessee
to be bound by the terms of the Lease) to any corporation or other entity
which controls, is controlled by, or is under common control with Lessee,
to any corporation or other entity resulting from the merger or
consolidation with Lessee, or to any person or entity which acquires the
assets of Lessee as a going concern of the business that is being conducted
on the Premises or to any entity having a net worth not less than that of
Lessee as of the date of the execution of this Lease.
<PAGE>
15
13. ACCESS TO PREMISES.
------------------
Lessor, its employees and agents shall have the right to enter the Premises
at all reasonable times (upon one (1) business day's notice) for the
purpose of examining or inspecting the same, showing the same to
prospective purchasers, mortgagees or tenants (but as to tenant inspections
only during the last lease year of any term provided that the same has not
been extended), and making such alterations, repairs, improvements or
additions to the Premises or to the Building as Lessor may deem necessary
or desirable. If representatives of Lessee shall not be present to open and
permit entry into the Premises at any time when such entry by Lessor is
necessary or permitted hereunder, Lessor may enter by means of a master key
(or forcibly in the event of any emergency) without liability to Lessee and
without such entry constituting an eviction of Lessee or termination of
this Lease. Lessor shall have the right to enter the basement storage area
to make inspections and repairs to any of Lessor's equipment located
therein without prior notice to Lessee.
14. REPAIRS.
-------
(a) Lessor shall make, at its sole cost and expense, all repairs
necessary to maintain the plumbing in the public rest rooms, heating,
ventilating, air conditioning and electrical systems, windows, floors
(excluding carpeting), the roof, foundations, and other structural
elements of the Building, the elevators, parking lots, common areas,
and all other items installed or furnished by Lessor; provided,
however, that Lessor shall not be obligated for any of such repairs
until the expiration of a reasonable period of time after written
notice from Lessee that such repair is needed. In no event shall
Lessor be obligated under this Section to repair any damage caused by
any negligence, malfeasance, or negligent omission of the Lessee or
its employees, agents, invitees, licensees, sublessees, or
contractors.
(b) Except as the Lessor is obligated for repairs as provided
hereinabove, Lessee shall make, at its sole cost and expense, all
repairs necessary to maintain the Premises and shall keep the
Premises and the fixtures therein in neat and orderly condition. If
the Lessee refuses or neglects to make such repairs or fails to
diligently prosecute the same to completion, after written notice
from Lessor of the need therefor, Lessor may make such
<PAGE>
16
repairs at the expense of Lessee and such expense shall be
collectible as additional rent.
(c) Lessor shall not be liable by reason of any injury to or interference
with Lessee's business arising from the making of any repairs,
alterations, additions or improvements in or to the Premises or the
Building or to any appurtenances or equipment therein except as a
result of Lessor's negligence, malfeasance or negligent omission.
There shall be no abatement of rent because of such repairs,
alterations, additions or improvements, except as provided in Section
17 hereof.
15. SURRENDER OF PREMISES.
---------------------
At the end of the term of this Lease, Lessee shall surrender the Premises
to Lessor, together with all alterations, additions and improvements
thereto, in broom clean condition and in good order and repair except for
ordinary wear and tear and damage for which Lessee is not obligated to make
repairs under this Lease. Subject to the provisions of Section 8 hereof and
if Lessee is not then in default under the terms hereof, Lessee shall have
the right at the end of the term hereof to remove any equipment, furniture,
trade fixtures or other personal property placed in the Premises by Lessee,
provided that Lessee shall promptly repair any damage to the Premises
caused by such removal. Lessee shall remove all alterations, additions,
improvements or installations as to which Lessor shall have made the
election provided for in Section 8 hereof. Lessee shall repair all damage
to the Premises caused by such removal and restore the Premises to the
condition in which they were prior to the installation of the items so
removed. Lessee shall surrender the Premises to Lessor at the end of the
term hereof, without notice of any kind.
<PAGE>
17
16. INDEMNIFICATION, LIABILITY AND INSURANCE.
----------------------------------------
(a) Lessee shall indemnify, hold harmless and defend Lessor from and
against any and all costs, expenses (including reasonable counsel
fees), liabilities, losses, damages, suits, actions, fines,
penalties, claims or demands of any kind and asserted by or on behalf
of any person or governmental authority, arising out of or in any way
connected with, and Lessor shall not be liable to Lessee on account
of (i) any failure by Lessee to perform any of the agreements, terms,
covenants or conditions of this Lease required to be performed by
Lessee; (ii) any failure by Lessee, its contractors or invitees to
comply with any statutes, ordinances, regulations or orders of any
governmental authority with respect to the Premises; (iii) any
accident, death or personal injury, or damage to or loss or theft of
property, which shall occur in or about the Premises except as the
same may be caused solely by the negligence, malfeasance or negligent
omission of Lessor, its employees or agents; (iv) the release or
improper storage or disposal of any Hazardous Substances by Lessee;
or (v) the receipt of any notice or the commencement of any
proceedings with respect to any of the matters set forth in clauses
(i) through (iv) inclusive. The indemnification set forth herein
shall survive the termination of this Lease.
(b) Lessor shall indemnify, hold harmless and defend Lessee from and
against any and all costs, expenses (including reasonable counsel
fees), liabilities, losses, damages, suits, actions, fines,
penalties, claims or demands of any kind and asserted by or on behalf
of any person or governmental authority, arising out of or in any way
connected with, and Lessee shall not be liable to Lessor on account
of (i) any failure by Lessor, its contractors or invitees to perform
any of the agreements, terms, covenants or conditions of this Lease
required to be performed by Lessor; (ii) any failure by Lessor to
comply with any statutes, ordinances, regulations or orders of any
governmental authority; (iii) any accident, death or personal injury,
or damage to or loss or theft of property, which shall occur in or
about the Premises except as the same may be caused solely by the
negligence of Lessee, its employees or agents; (iv) the release or
improper storage or disposal of any Hazardous Substances by Lessor;
or (v) the
<PAGE>
18
receipt of any notice or the commencement of any proceedings with
respect to any of the matters set forth in clauses (i) through (iv)
inclusive. The indemnification set forth herein shall survive the
termination of this Lease except if terminated pursuant to Section 22
hereof.
(c) Lessee shall provide Comprehensive General Liability Insurance for
the protection of Lessor and Lessee with limits for Bodily Injury
Coverage of One Million and 00/100 ($1,000,000.00) Dollars per
occurrence and Three Million and 00/100 ($3,000,000.00) Dollars in
the aggregate and One Million and 00/100 ($1,000,000.00) Dollars for
Property Damage Liability naming the Lessor as an additional insured
therein, and shall furnish Lessor before Commencement Date
certificates of said insurance which state the limits insured and
contain clauses stating (i) that the policy will not be materially
changed or canceled by Lessee without thirty (30) days prior written
notice to Lessor, (ii) that new certificates of said insurance must
be filed with Lessor prior to ten (10) days of the expiration date,
and (iii) that the insurance company issuing such policy waives all
rights of subrogation against the Lessor in a form satisfactory to
Lessor's counsel if such waiver is obtainable without affecting
Lessee's right to recover under such policy; and Lessee hereby waives
any right of recovery against Lessor for loss or injury to the extent
Lessee is protected by insurance containing such waiver of
subrogation clause. Insurance coverage shall be written with a
company having a rating of "A-XII" or better in A.M. Bests Policy
Holders Guide or "A" or better in Standard and Poors.
(d) Lessor shall carry standard form extended coverage for fire insurance
of the Building shell and core in the amount of their full
replacement value with a deductible not greater than TWENTY-FIVE
THOUSAND AND 00/100 ($25,000.00) DOLLARS, and such other insurance of
such types and amounts as Lessor, in its reasonable discretion, shall
deem reasonably appropriate. The cost of any such insurance may be
included in the Operating Expenses. Lessor hereby releases Lessee and
its agents or employees, from responsibility for, and waives its
entire claim and recovery for, any loss or damage arising from any
cause covered by insurance carried or required to be carried by
Lessor. Lessor shall provide notice to the insurance carrier(s)
<PAGE>
19
of this waiver of subrogation, and shall cause such carrier(s) to
waive all rights of subrogation against Lessee.
17. FIRE OR OTHER CASUALTY.
----------------------
(a) If the Premises are not "Materially Damaged" by fire or other
casualty, the damage shall be repaired by and at the expense of
Lessor, and the rent until such repairs shall be made shall be
apportioned from the date of such fire or other casualty according to
the part of the Premises which is usable by Lessee. Lessor agrees to
repair such damage within a reasonable period of time after receipt
from Lessee of written notice of such damage, except that Lessee
agrees to repair and replace its own furniture, furnishings and
equipment. If "non material" damage (i.e., damage which, can in the
reasonable judgment of Lessor, can be repaired in ninety (90) days)
to the Premises shall occur and Lessor has failed to restore the
Premises within ninety (90) days thereafter, Lessee shall have the
right to terminate this Lease by notice to Lessor.
(b) If the Premises are "Materially Damaged" by fire or other casualty,
or if the Building shall be "Materially Damaged" such that Lessor
shall decide to demolish it or not to rebuild it, then or in any such
events Lessor or Lessee shall have the right to terminate this Lease
upon notice to the other, and thereupon the term of this Lease shall
expire by lapse of time upon the third day after such notice is
given, and Lessee shall vacate the Premises and surrender the same to
Lessor. Upon the termination of this Lease under the conditions
hereinbefore provided, Lessee's liability for rent shall cease as of
the day following the casualty.
(c) For purposes hereof, "Materially Damaged" shall mean damage that
cannot be repaired (in the reasonable judgment of Lessor) within one
hundred eighty (180) days of occurrence thereof (or within ninety
(90) days of the occurrence if the same shall occur in the last Lease
Year of the Term and Lessee shall not elect to exercise its extension
rights). If Lessor commences repair work and it takes longer than one
hundred eighty (180) days to complete such repair (or ninety (90)
days, as applicable), Lessee shall have the right to terminate this
Lease by notice to Lessor.
<PAGE>
20
18. SUBORDINATION AND ATTORNMENT.
----------------------------
(a) Lessee accepts this Lease subject and subordinate to any first
mortgage or mortgages (including, without limitation, the notes or
other obligations secured thereby and any and all renewals,
modifications, consolidations, replacements or extensions of any such
mortgages or the notes or other obligations secured thereby) easement
or restriction of record now in existence or hereinafter made from
time to time, affecting the fee title or the leasehold estate to the
Building or the real property on which the Building is located (or
any part thereof) or Lessor's interest therein but only on the
condition that Lessee's rights under this Lease will be recognized
and its right of possession not disturbed. Lessee also accepts this
Lease subject and subordinate to all easements, restrictions and
instruments in the chain of fee title to the Building or the real
property on which the Building is located, including any and all
renewals, modifications, consolidations, replacements or extensions
of such instruments. Lessee shall execute, acknowledge and deliver to
the holder of any such mortgage or to any of the parties to such
instruments, at any time upon demand by such holder or by any such
party, any releases, certificates or other documents that may be
required by such holder or by any such party, for the purpose of
evidencing the subordination of this Lease to such mortgages or
instruments or to any renewals, modifications, consolidations,
replacements or extensions thereof. In the event of a sale under any
mortgage (or any note or other obligation secured thereby) to which
this Lease is subordinate, or a taking of possession of the Premises
by the mortgagee or other person acting for or through the mortgagee
under any mortgage to which this Lease is subordinate, then and upon
the happening of any such events, Lessee shall attorn to and
recognize as Lessor hereunder the party who, but for this Lease,
would be entitled to possession of the Premises.
(b) Lessee agrees that in the event of any act or omission of Lessor
which would give Lessee the right, immediately or after lapse of a
period of time, to cancel or terminate this Lease, or to claim a
partial or total eviction, Lessee shall not exercise such right (i)
until it has given written notice of such act or omission to Lessor
<PAGE>
21
and the holder of each superior mortgage whose name and address shall
previously have been furnished to Lessee in writing, and (ii) unless
such act or omission shall be one which is not capable of being
remedied by Lessor or such mortgage holder within a reasonable period
of time, until a reasonable period for remedying such act or omission
shall have elapsed following the giving of such notice and following
the time when such holder or Lessor shall have become entitled under
such superior mortgage or superior lease, as the case may be, to
remedy the same (which reasonable period shall be the period to which
Lessor would be entitled under this Lease or otherwise, after similar
notice to effect such remedy), provided such holder or Lessor shall
with due diligence given Lessee written notice of intention to, and
commence and continue to remedy such act or omission.
19. CONDEMNATION.
------------
In the event that the Premises or any material part thereof or material
portion of the parking area which results in a reduction below 4.6 spaces
per 1,000 square feet of rentable area, or access to Lamberton Road shall
be condemned for public use or any conveyance shall be made pursuant to
condemnation order, and such parts or portions cannot be replaced by
substantially similar facilities and, then in that event, upon the vesting
of title to the same for such public use, this Lease upon the election of
either Lessor or Lessee shall terminate, anything herein contained to the
contrary notwithstanding. In the event of such termination of this Lease,
all rent paid in advance shall be apportioned as of the date of such
termination. Notwithstanding the foregoing provisions of this Section, in
the event that only a part of the Premises shall be so taken and the part
not so taken shall be sufficient for the operation of Lessee's business as
conducted prior to the condemnation, Lessee at its election, made in
writing within ten (10) business days following such taking, may retain the
part not so taken and there shall be a proportional reduction in the rent.
All compensation awarded or paid upon such a total or partial taking of the
Premises shall belong to and be the property of the Lessor without any
participation by the Lessee; provided, however, that nothing contained
herein shall be construed to preclude the Lessee from prosecuting any claim
directly against the condemning authority in such condemnation proceedings
for losses, including damage
<PAGE>
22
to, or cost of removal of, trade fixtures, furniture, and other personal
property belonging to the Lessee or for relocation expenses as provided by
statute but excluding the lost value of the leasehold; provided, however,
that no such claim shall diminish or otherwise adversely affect the
Lessor's award or the award of any mortgagee.
20. ESTOPPEL CERTIFICATES.
---------------------
Lessor and Lessee shall at any time and from time to time, within twenty
(20) days following written request from the other or any mortgagee,
execute, acknowledge and deliver to the requesting party or mortgagee a
written statement certifying that this Lease is in full force and effect
(to the extent the same is accurate) and unmodified (or, if modified,
stating the nature of such modification), certifying the date to which the
rent reserved hereunder has been paid, and certifying that there are not,
to the requested party's knowledge, any uncured defaults on the part of the
requesting party or specifying such defaults if any are claimed. Any such
statement may be relied upon by any prospective purchaser or mortgagee of
all or any part of the Building or the land. The requested party's failure
to deliver such statement within said twenty (20) day period shall be
conclusive upon the requested party that this Lease is in full force and
effect and unmodified, and that there are no uncured defaults in the
requesting party's performance hereunder.
21. EVENT OF DEFAULT.
----------------
The occurrence of any of the following shall constitute an Event of Default
and breach of this Lease by Lessee:
(a) A failure continuing for ten (10) days after notice to Tenant to pay,
when due, any installment of Minimum Annual Rent or Additional Rent
hereunder or any such other sum herein required to be paid by Lessee,
provided, however, such notice of default shall not be required more
than twice in any calendar year.
(b) A failure by Lessee to observe and perform any other provisions or
covenants of this Lease to be observed or performed by Lessee, where
such failure continues for thirty (30) days after written notice
thereof from Lessor to Lessee provided, however, that if the nature
of the default is such that the same cannot reasonably be cured
within such thirty (30) day period, Lessee shall not be
<PAGE>
23
deemed to be in default if within such period Lessee shall commence
such cure and thereafter diligently prosecute the same to completion
within sixty (60) days.
(c) The making by Lessee of any assignment for the benefit of creditors;
the adjudication that Lessee is bankrupt, insolvent, or unable to pay
its debts; the filing by or against Lessee of a petition to have
Lessee adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case
of a petition filed against Lessee, the same is dismissed within
sixty (60) days after the filing thereof); the appointment of a
trustee or receiver to take possession of substantially all of
Lessee's assets located in the Premises or of Lessee's interest in
this Lease (unless possession is restored to Lessee within thirty
(30) days after such appointment); or the attachment, execution or
levy against, or other judicial seizure of, substantially all of
Lessee's assets located in the Premises or of Lessee's interest in
this Lease (unless the same is discharged within thirty (30) days
after issuance thereof).
22. REMEDIES.
--------
Upon the occurrence of any such event of default set forth above:
(a) Lessor may perform for the account of Lessee any such default of
Lessee and immediately recover as additional rent any expenditures
made and the amount of any obligations incurred in connection
therewith plus interest of five (5%) percent per annum above the
national prime rate of interest announced by BankBoston, N.A. for
such expenditures from the date of any such expenditure;
(b) Lessor may accelerate all rent and additional rent due for the
balance of the term of this Lease and declare the same to be
immediately due and payable;
(c) In determining the amount of any future payments due Lessor, due to
increases in Operating Expenses, Lessor may make such determination
based upon the amount of Operating Expenses paid by Lessee for the
full year immediately prior to such default;
<PAGE>
24
(d) Lessor, at its option, may serve notice upon Lessee that this Lease
and the then unexpired term hereof shall cease and expire and become
absolutely void in the manner provided by law; and thereupon this
Lease and the term hereof granted, as well as the right, title and
interest of the Lessee hereunder, shall wholly cease and expire and
become void in the same manner and with the same force and effect
(except as to Lessee's liability) as if the date fixed in such notice
were the date herein granted for expiration of the term of this
Lease. Thereupon, Lessee shall immediately quit and surrender to
Lessor the Premises, and Lessor may enter into and repossess the
Premises by summary proceedings, and remove all occupants thereof
and, at Lessor's option, any property thereon without being liable to
indictment, prosecution or damages therefor. No such expiration or
termination of this Lease shall relieve Lessee of its liability and
obligations under this Lease, whether or not the Premises shall be
relet;
(e) In case of any such termination, Lessee will indemnify Lessor each
month against all loss of rent and all obligation which Lessor may
incur by reason of any such termination between the time of
termination and the expiration of the term of the Lease; or at the
election of Lessor, exercised at the time of the termination or at
any time thereafter, Lessee will indemnify Lessor each month until
the exercise of the election against all loss of rent and other
obligations which Lessor may incur by reason of such termination
during the period between the time of the termination and the
exercise of the election, and upon the exercise of the election
Lessee will pay to the Lessor as damages such amount as at the time
of the exercise of the election represents the amount by which the
rental value of the Premises for the period from the exercise of the
election until the expiration of the term shall be less than the
amount of rent and other payments provided herein to be paid by
Lessee to Lessor during said period. It is understood and agreed that
at the time of the termination or at any time thereafter Lessor may
rent at a fair rental the Premises, and for a term which may expire
after the expiration of the term of this Lease, provided, however,
that if said premises are rented as aforesaid then the amount of rent
received in such case shall be applied to reduce Lessee's liability
for rent under this Lease; that Lessee shall be liable for any
expenses
<PAGE>
25
incurred by Lessor in connection with obtaining possession of the
Premises, with removing from the Premises property of Lessee and
persons claiming under it (including warehouse charges), with putting
the Premises into good condition for reletting, and with any
reletting, including, but without limitation, reasonable attorneys'
fees and brokers' fees, and that any monies collected from any
reletting shall be applied first to the foregoing expenses and then
to the payment of rent and all other payments due from Lessee to
Lessor.
(f) Lessor may, at any time after the occurrence of any event of default,
attempt in its own name, as agent for Lessee if this Lease not be
terminated or in its own behalf if this Lease be terminated, to relet
all or any part of such Premises for and upon such terms and to such
persons, firms or corporations and for such period or periods as
Lessor, in its sole discretion, shall determine, including a term
beyond the termination of this Lease; and Lessor shall not be
required to accept any tenant offered by Lessee or observe any
instruction given by Lessee about such reletting. For the purpose of
such reletting, Lessor may decorate or make repairs, changes,
alterations or additions in or to the Premises to the extent deemed
by Lessor desirable or convenient; and the cost of such decoration,
repairs, changes, alterations or additions shall be charged to and be
payable by Lessee as additional rent hereunder, as well as any
reasonable brokerage and legal fees expended by Lessor; and any sums
collected by Lessor from any new tenant obtained on account of the
Lessee shall be credited against the balance of the rent due
hereunder as aforesaid. Lessee shall pay to Lessor monthly, on the
days when the rent would have been payable under this Lease, the
amount due hereunder less the amount obtained by Lessor from such new
Lessee;
(g) The rights and remedies given to Lessor in this Lease are distinct,
separate and cumulative remedies; and no one of them, whether or not
exercised by Lessor, shall be deemed to be in exclusion of any of the
others.
23. WAIVER.
------
The failure or delay on the part of either party to enforce or exercise at
any time any of the provisions, rights or remedies in this Lease shall
in no way be
<PAGE>
26
construed to be a waiver thereof, nor in any way to affect the validity of
this Lease or any part hereof, or the right of the party to thereafter
enforce each and every such provision, right or remedy. No waiver of any
breach of this Lease shall be held to be a waiver of any other or
subsequent breach. The receipt by Lessor of rent at a time when the rent is
in default under this Lease shall not be construed as a waiver of such
default. The receipt by Lessor of a lesser amount than the rent due shall
not be construed to be other than a payment on account of the rent then
due, nor shall any statement on Lessee's check or any letter accompanying
Lessee's check be deemed an accord and satisfaction, and Lessor may accept
such payment without prejudice to Lessor's right to recover the balance of
the rent due or to pursue any other remedies provided in this Lease. No act
or thing done by Lessor or Lessor's agents or employees during the term of
this Lease shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such a surrender shall be valid unless in
writing and signed by Lessor.
24. QUIET ENJOYMENT.
---------------
If and so long as Lessee pays the rent reserved hereunder and observes and
performs all of the covenants, conditions and provisions on Lessee's part
to be observed and performed hereunder, Lessee shall and may peaceably and
quietly have, hold and enjoy the Premises for the entire term hereof,
subject to all of the provisions of this Lease.
25. UNFORESEEN DELAY.
----------------
The provisions of this Section shall be applicable if there shall occur,
during the term hereof or Lessee shall be unable to perform its obligations
under this Lease (except for its obligations to pay rent and to maintain
insurance), or any renewal or extension thereof, any strike, lockout, or
labor dispute; inability to obtain labor or materials or reasonable
substitutes therefor; inability or difficulty in obtaining fuel,
electricity, services or supplies from the sources from which they are
normally obtained; or act of God, governmental restriction, regulation, or
control, enemy or hostile governmental action, civil commotion,
insurrection, revolution, sabotage, or fire or other casualty or any other
condition or cause beyond the reasonable control of the Lessor. If the
Lessor shall, as the result of such event, fail punctually to perform any
obligation required in
<PAGE>
27
Sections 7, 11, 14, 17 and 19 hereof, then such obligation shall be
punctually performed as soon as practicable after such event shall abate.
If the Lessor shall, as a result of such event, be unable to exercise any
right or option within any time limit provided therefor in this Lease, such
time limit shall be deemed extended for a period equal to the duration of
such event.
26. SUCCESSORS.
----------
The respective rights and obligations provided in this Lease shall bind and
shall inure to the benefit of the parties hereto, their legal
representatives, heirs, successors and assigns; provided, however, that no
rights shall inure to the benefit of any successor of Lessee unless
Lessor's written consent for the transfer to such successor has first been
obtained as provided in Section 12.
27. GOVERNING LAW.
-------------
This Lease shall be construed, governed and enforced in accordance with the
laws of the State of Connecticut.
28. SEPARABILITY.
------------
If any provisions of this Lease shall be held to be invalid, void or
unenforceable, the remaining provisions hereof shall in no way be affected
or impaired and such remaining provisions shall remain in full force and
effect.
29. HOLDING OVER.
------------
If the Lessee retains possession of the Premises or any part thereof after
the termination of the term, the Lessee shall pay the Lessor rent at one
hundred fifty (150%) percent the monthly rate specified in Section 4 for
the time the Lessee thus remains in possession and, in addition thereto,
shall pay the Lessor for all damages, consequential as well as direct,
sustained by reason of the Lessee's retention of possession. The provisions
of this Section do not exclude the Lessor's rights to summary process or
any other right hereunder. Lessee shall indemnify and hold Lessor harmless
from and against any and all loss or liability resulting from the failure
of Lessee to surrender possession of the Premises in accordance with the
terms and conditions of this Lease.
<PAGE>
28
30. CAPTIONS.
--------
Marginal captions, titles or exhibits and the table of contents to this
Lease are for convenience and reference only, and are in no way to be
construed as defining, limiting or modifying the scope of intent of the
various provisions of this Lease.
31. NOTICES.
-------
All notices required or permitted hereunder shall be deemed sufficiently
given if sent by (a) certified mail return receipt requested; (b) by
recognized delivery service, such as Federal Express; or (c) sent by
facsimile and confirmed by notice given either by mail or delivery service
within forty-eight (48) hours following facsimile transmission addressed to
the Lessor and Lessor's Agent or Lessee, as the case may be as follows:
To Lessor: Monarch Life Insurance Company
One Monarch Place
Springfield, MA 01133
Attn: Vice President - Real Estate
Phone: (413) 784-6814
Fax: (413) 784-6820
with a copy to: Farley Whittier Partners
100 Pearl Street
Hartford, CT 06103
Attn: 80 Lamberton Road
Property Manager
Phone: (860) 525-9171
Fax: (860) 249-7916
To Lessee: SS&C Technologies, Inc.
80 Lamberton Road
Windsor, CT 06095
Attn: Chief Financial Officer
Phone:
Fax:
with a copy to: Rome, McGuigan, Sabanosh, P.C.
One State Street
Hartford, CT 06103
Attn: Helga M. Woods, Esquire
Phone: (860) 493-3554
Fax: (860) 724-3921
Either party may change its address by notice so given to the other. Notice
shall be deemed given two (2) business days following deposit to the mail
or when
<PAGE>
29
signature receipt is obtained by overnight delivery or upon facsimile
transmission on a business day provided subsequent confirmation is
obtained.
32. BROKERS.
-------
Lessor and Lessee warrant and represent to each other that they have dealt
with no broker or third person with respect to this Lease or the Premises
except Lee Forsthoffer and Farley Whittier Partners (the "Broker"). The
party breaching the foregoing covenant covenants and agrees to indemnify
the other party against any brokerage claims by third persons, except for
commissions due the Broker which shall be paid for by Lessor and in
furtherance thereof, at the nonbreaching party's request, to enter and
defend, in the nonbreaching party's name and behalf, any action or
proceeding commenced against the nonbreaching party to establish any such
brokerage claim. The indemnification hereunder shall include the
nonbreaching party's reasonable attorneys' fees in resisting any such
brokerage claim.
33. DEFINITIONS AND INTERPRETATIONS.
-------------------------------
(a) The words "Lessor" and "Lessee" and the pronouns referring thereto,
as used in this Lease, shall mean, where the context requires or
admits, the persons or company named herein as Lessor and as Lessee,
respectively, and their respective heirs, legal representatives,
successors and assigns, irrespective of whether singular or plural,
masculine, feminine or neuter. The word "Lessor" as used herein,
means only the owner for the time being of Lessor's interest in this
Lease, that is, in the event of any transfer of Lessor's interest in
this Lease the transferor shall cease to be liable, and shall be
released from all liability for the performance or observance of any
agreements or conditions on the part of Lessor to be performed or
observed subsequent to the time of said transfer, it being understood
and agreed that from and after said transfer the transferee shall be
liable for the performance and observance of said agreements and
conditions.
<PAGE>
30
(b) This Lease contains the entire and only agreement between the
parties, and no oral statements or representations or prior written
matter not contained in this Lease shall not have any force or
effect. This Lease shall not be modified in any way except by a
writing subscribed by both parties.
(c) Wherever in this Lease provision is made for the doing of any act by
any person it is understood and agreed that said act shall be done by
such person at its own cost and expense unless a contrary intent is
expressed.
(d) Lessee hereby waives for itself and all persons claiming by, through,
or under it, any right of redemption or for the restoration of the
operation of this Lease under any present or future law in case
Lessee shall be dispossessed for any cause, or in case Lessor shall
obtain possession of the Premises as herein provided.
34. WAIVER OF REDEMPTION.
--------------------
Lessee hereby waives for itself and all persons claiming by, through, or
under it, any right of redemption or for the restoration of the operation
of this Lease under any present or future law in case Lessee shall be
dispossessed for any cause, or in case Lessor shall obtain possession of
the Premises as herein provided.
35. RIGHT OF FIRST NOTICE/REFUSAL.
-----------------------------
If at any time, or from time to time, Lessor receives an offer from a third
party offeror (the "Offeror") to lease any portion of the FORTY THOUSAND
(40,000) square feet of useable square feet in the middle highbay (shown
on Exhibit A as the "Offer Space"), provided no uncured Event of Default of
---------
Lessee is then existing hereunder, Lessor shall furnish written notice
("Lessor's Notice") to Lessee of any such offer (an "Offer") which Lessor
intends to accept, setting forth all of the terms and conditions of such
Offer, including the identity of the Offeror. For the period through the
first (1st) anniversary date of the Commencement Date, Lessee shall have
the option to lease the Offer Space on the same terms for the Premises as
set forth herein, said option to be exercised by notice to Lessor within
ten (10) business days following receipt of Lessor's Notice, in which
event, this Lease shall be modified to include such additional space.
Lessee shall have the right for the
<PAGE>
31
period following the first (1st) anniversary date of the Commencement Date,
exercisable within ten (10) business days of its receipt of Lessor's
Notice, to accept the Offer by notice to Lessor. In the event Lessee
notifies Lessor of its intention to accept such Offer within said time
period, Lessor and Lessee shall enter into a lease on the terms and
conditions set forth in the Offer. In the event Lessee fails to so notify
Lessor within said ten (10) business day period, Lessor shall thereafter
have the right to accept the Offer by the Offeror on the same terms and
conditions as specified in the Offer or on terms and conditions more
favorable to Lessor. The right of first refusal shall continue as to any
portion of the Offer Space not leased to a third party or if the Offeror
shall fail to enter into a lease within six (6) months.
36. EXECUTION.
---------
This Lease shall become effective when it has been signed by a duly
authorized officer or representative of each of the parties and delivered
to the other party. This Lease is being executed simultaneously in four (4)
counterparts, two (2) of which shall be delivered to Lessee. Each of such
fully executed counterparts shall be deemed original and it shall not be
necessary in making proof of this Lease to produce or account for more than
one such counterpart.
37. EXHIBITS.
--------
Attached to this Lease and made part hereof, and initialed on behalf of
both parties simultaneously with the execution of this Lease, are
Exhibits A to D inclusive.
---------- -
38. ENTIRE AGREEMENT.
----------------
This Lease, including the Exhibits hereto, contains all the agreements,
conditions, understandings, representations and warranties made between the
parties hereto with respect to the subject matter hereof, and may not be
modified orally or in any manner other than by an agreement in writing
signed by both parties hereto or their respective successors in interest.
<PAGE>
32
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as a
sealed instrument and have initialed the Exhibits and any Riders hereto, in four
(4) counterparts the day and year first above written.
Witnessed by: LESSOR:
MONARCH LIFE INSURANCE COMPANY
/s/ Denise M. Pepe
- ------------------------------
/s/ Stephen A Shatz
- ------------------------------ By:/s/ Albert D. Morrison, Jr.
-----------------------------
Albert D. Morrison, Jr.
Its Vice President
Witnessed by: LESSEE:
SS&C TECHNOLOGIES, INC.
/s/ Helga M. Woods
- ------------------------------
/s/ John S. Wieczorek
- ------------------------------ By:/s/ William C. Stone
-----------------------------
Name: William C. Stone
Title: Chief Executive Officer
COMMONWEALTH OF MASSACHUSETTS
Hampden, ss. September 23, 1997
Then personally appeared before me the above-named ALBERT D. MORRISON, JR.,
to me personally known to be the Vice President of MONARCH LIFE INSURANCE
COMPANY as aforesaid and acknowledged the foregoing instrument to be the free
act and deed of MONARCH LIFE INSURANCE COMPANY.
/s/ Kimberly A. Oliveri
------------------------------
Notary Public
My Commission Expires: 2/22/02
STATE OF CONNECTICUT
COUNTY OF HARTFORD September 23, 1997
Then personally appeared before me the above-named William C. Stone, to me
personally known to be the Chief Executive Officer of SS&C TECHNOLOGIES, INC. as
aforesaid and acknowledged the foregoing instrument to be the free act and deed
of SS&C TECHNOLOGIES, INC.
/s/ Helga M. Woods
------------------------------
Commissioner of Superior Court:
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
This First Amendment to Lease is entered into as of November 18, 1997,
between LAMBERTON LLC, a Delaware limited liability corporation (hereafter
"Lessor") and SS&C TECHNOLOGIES, INC., a Delaware corporation (the "Lessee").
Preliminary Statement
---------------------
Monarch Life Insurance Company and Lessee entered into a Lease dated
September 23, 1997 (the "Lease") regarding certain property located at 80
Lamberton Road, Windsor, Connecticut. The Lessor's interest in the Lease has
been assigned to the Lessor in conjunction with Lessor's acquisition of the
Building. Lessor and Lessee now desire to amend the Lease as hereafter set
forth.
NOW, THEREFORE, in consideration of ONE AND 00/100 ($1.00) DOLLAR and other
valuable consideration the receipt of which is hereby acknowledged, it is agreed
as follows:
1. All capitalized terms set forth herein shall have the same meaning as
set forth in the Lease unless a contrary intent is expressed herein.
2. Section 2.(a) is herewith deleted in its entirety and in its place and
stead the following is inserted:
"2. PREMISES.
--------
(a) Lessor hereby leases to Lessee premises in the building
known and numbered as 80 Lamberton Road, Windsor, Connecticut,
(the "Building"), described as follows: FIFTY-FOUR THOUSAND EIGHTY-TWO
(54,082) square feet of rentable area using an add on factor of thirteen
(13%) percent and measured in accordance with ANSZ-265.1, Copyright 1990
(BOMA Standard Method of Floor Measurement) on the first (1st) and second
(2nd) floors and in the "highbay" space of the Building (as shown on
Exhibit A attached hereto and made a part hereof) together with the right
---------
in common with others to use the common areas and common facilities from
time to time so designated and maintained by Lessor (the "Premises").
Lessor excepts and reserves to itself from the demise of the Premises (i)
the exterior faces of all exterior walls, windows and doors and of all
walls, windows and doors facing common areas; (ii) hallways, stairways,
shaftways, service rooms, common toilets, and elevators serving other parts
of the
<PAGE>
2
Building; (iii) the right to maintain, use, repair, and replace pipes,
ducts, wires, meters, and any other equipment, machinery, apparatus, and
fixtures located within or without the Premises which service other parts
of the Building; (iv) the right to make changes, alterations, and additions
to the Building, common areas, and common facilities provided the same does
not unreasonably interfere with access to the Premises nor materially
diminish their aesthetic quality or reduce the quality of service to the
Premises or the Building; and (v) the right to enter the Premises in
accordance with the provisions of Section 13 hereof for any of the
foregoing purposes."
3. Section 4.(a), subsections (i) and (ii) are herewith deleted in their
entirety and in their place and stead the following are inserted:
"4. MINIMUM ANNUAL RENT.
-------------------
(a) Initial Term. Lessee shall pay to Lessor at its office as
------------
Minimum Annual Rent, the following:
(i) For each of the first (1st) five (5) Lease Years,
Minimum Annual Rent shall be paid in the amount of SEVEN HUNDRED SIXTEEN
THOUSAND FIVE HUNDRED EIGHTY-SIX AND 50/100 ($716,586.50) DOLLARS, payable
in monthly installments in advance in the amount of FIFTY-NINE THOUSAND
SEVEN HUNDRED FIFTEEN AND 54/100 ($59,715.54) DOLLARS; and
(ii) For each of the second (2nd) five (5) Lease Years,
Minimum Annual Rent shall be paid in the amount of SEVEN HUNDRED FIFTY-
SEVEN THOUSAND ONE HUNDRED FORTY-EIGHT AND 00/100 ($757,148.00) DOLLARS,
payable in monthly installments in advance in the amount of SIXTY-THREE
THOUSAND NINETY-FIVE AND 67/100 ($63,095.67) DOLLARS.
Each of such installments shall be payable on the first (1st)
calendar day of each calendar month in advance and without demand. In the
event the term of this Lease commences on a day other than the first day of
a calendar month, the Lessee shall pay to the Lessor, on or before the
Commencement Date, a pro rata portion of the monthly installment of rent,
such pro rata portion to be based on the number of days remaining in such
partial month after the Commencement Date. Notwithstanding the foregoing
Lessee's obligation to pay Minimum Annual Rent shall not commence until the
first (1st) month following the Commencement Date. Upon execution hereof,
Lessee has paid Lessor the sum of FIFTY-NINE THOUSAND SEVEN
<PAGE>
3
HUNDRED FIFTEEN AND 54/100 ($59,715.54) DOLLARS as and for the second full
calendar month installment of Minimum Annual Rent, receipt of which Lessor
hereby acknowledges. Lessee hereby covenants and agrees to pay the rent
hereby reserved as and when due, and also all sums of money, charges or
other amounts required to be paid by the Lessee to the Lessor or to another
person under this Lease which shall be "rent" in addition to the rent
provided for herein. Nonpayment of additional rent when due shall
constitute a default under this Lease to the same extent, and shall entitle
the Lessor to the same remedies, as nonpayment of rent."
4. Section 5.(a) is herewith deleted in its entirety and in its place and
stead the following is inserted:
"5. RENT ESCALATION.
---------------
(a) Lessee's Proportionate Share. Escalation as provided in this
----------------------------
Section is based on certain concepts as hereinafter defined. The reference
to "Lessee's Proportionate Share" means the ratio of Lessee's rentable area
(which as to the Premises on the first (1st) floor and in the "highbay"
space is as defined in Exhibit B attached hereto and made a part hereof;
---------
and as to the Premises on the second (2nd) floor and in the "highbay" space
is as defined in Exhibit B-1 attached hereto and made a part hereof) to the
-----------
total amount of rentable area available in the Building, whether occupied
or not, and such percentage in this Lease initially is THIRTY-FOUR AND
45/100 (34.45%) PERCENT. Relevant data shall be handled by the application
of generally accepted accounting principles and practices, and Lessor's
operating cost records for not more than three (3) years shall be available
for review upon request by Lessee. Lessor will send to Lessee, in the
manner of a written notice hereunder, an invoice setting forth the amount
due."
5. Section 7.(a) is herewith amended by deleting the following clause
which appears in the fourth (4th) and fifth (5th) lines thereof: "Within thirty
(30) days following the execution of this Lease," and in its place and stead,
inserting the following:
"Not later than November 30, 1997,".
6. Section 7.(b)(i) is herewith deleted in its entirety and in its place
the following:
"7.(b)(i) Lessor shall pay an amount equal to the lesser of EIGHT
HUNDRED ELEVEN THOUSAND TWO HUNDRED THIRTY AND 00/100 ($811,230.00) DOLLARS
or the final
<PAGE>
4
cost of the Tenant Improvements (the "Tenant Allowance") payable to Lessee,
provided no uncured event of default is then existing, within thirty (30)
days after receipt of an invoice from Lessee which invoice shall contain a
detail account of all expenses incurred in said billing period and
certified by Lessee's architect as completed to the date of such invoice in
accordance with the plans and specifications; and"
7. Section 7.(d) is herewith deleted in its entirety and in its place the
following:
"7.(d) Lessor shall pay to Lessee at the Commencement Date, Lessee's
reasonable documented costs, incurred with nonaffiliated vendors, for space
planning, preparation of plans for the Tenant Improvements, and interior
design fees not exceeding however EIGHTY-ONE THOUSAND ONE HUNDRED TWENTY-
THREE AND 00/100 ($81,123.00) DOLLARS. Lessee shall submit all invoices for
such costs with all supporting documentation at the time at which Lessee
seeks reimbursement for such costs."
8. All notices required to be sent to the Lessor pursuant to Section 31.
of the Lease shall be sent to the following address:
"Lamberton LLC
c/o Showe Management Corporation
1225 Dublin Road
Columbus, OH 43215
Attn: Mr. Kevin M. Showe
President"
9. Until the Commencement Date, all notices required to be sent to the
Lessee pursuant to Section 31 of the Lease shall be sent to the following
address:
"SS&C Technologies, Inc.
705 Bloomfield Avenue
Bloomfield, CT 06002
Attn: Mr. John Wieczorek
Chief Financial Officer"
and thereafter to the address set forth in the Lease.
10. Section 35. is herewith deleted in its entirety and in its place and
stead the following is inserted:
"35. RIGHT OF FIRST NOTICE/REFUSAL.
-----------------------------
If at any time, or from time to time, Lessor receives an offer
from a third party offeror (the "Offeror") to lease any portion of the SIX
THOUSAND NINE HUNDRED SIX
<PAGE>
5
(6,906) square feet of useable square feet in the middle highbay (shown on
Exhibit A as the "Offer Space"), provided no uncured Event of Default of
---------
Lessee is then existing hereunder, Lessor shall furnish written notice
("Lessor's Notice") to Lessee of any such offer (an "Offer") which Lessor
intends to accept, setting forth all of the terms and conditions of such
Offer, including the identity of the Offeror. For the period through the
first (1st) anniversary date of the Commencement Date, Lessee shall have
the option to lease the Offer Space on the same terms for the Premises as
set forth herein, said option to be exercised by notice to Lessor within
ten (10) business days following receipt of Lessor's Notice, in which
event, this Lease shall be modified to include such additional space.
Lessee shall have the right for the period following the first (1st)
anniversary date of the Commencement Date, exercisable within ten (10)
business days of its receipt of Lessor's Notice, to accept the Offer by
notice to Lessor. In the event Lessee notifies Lessor of its intention to
accept such Offer within said time period, Lessor and Lessee shall enter
into a lease on the terms and conditions set forth in the Offer. In the
event Lessee fails to so notify Lessor within said ten (10) business day
period, Lessor shall thereafter have the right to accept the Offer by the
Offeror on the same terms and conditions as specified in the Offer or on
terms and conditions more favorable to Lessor. The right of first refusal
shall continue as to any portion of the Offer Space not leased to a third
party or if the Offeror shall fail to enter into a lease within six (6)
months."
11. Exhibit A to the Lease is deleted and in its place and stead is
---------
inserted Exhibit A to this Amendment.
---------
12. Except as provided herein, the Lease shall remain of full force and
effect and is herewith ratified and confirmed.
13. This Amendment shall become effective when it has been signed by a
duly authorized officer or representative of each of the parties and delivered
to the other party. This Amendment is being executed simultaneously in two (2)
counterparts, one (1) of which shall be delivered to Lessee. Each of such fully
executed counterparts shall be deemed original and it shall not be necessary in
making proof of this Amendment to produce or account for more than one such
counterpart.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the day and year first written above.
Witnessed by: LESSOR:
LAMBERTON LLC
By Monarch Hawaii, LLC
its sole Member
By One Keahole Partners,
its manager
By National Housing Corporation of Hawaii, Inc., its
general partner
/s/ Laura Piland By: /s/ Kevin M. Showe
- -------------------------- -----------------------------
Name: Kevin M. Showe
Its: Vice President
/s/ Michelle Oglobee
- --------------------------
Witnessed by: LESSEE:
SS&C TECHNOLOGIES, INC.
/s/ Christopher Whiteman
- -------------------------
/s/ Michael M. Vehlies By: /s/ John S. Wieczorek
- ------------------------- ---------------------------
Name: John S. Wieczorek
Title: VP, CFO
STATE OF OHIO
COUNTY OF FRANKLIN NOV. 7, 1997
Then personally appeared before me the above-named KEVIN M. SHOWE, to me
personally known to be the Vice President of National Housing Corporation of
Hawaii, Inc., and acknowledged the foregoing instrument to be the free act and
deed of said corporation.
/s/ Patricia Beebout
------------------------------
Notary Public
My Commission Expires: 10/4/00
<PAGE>
7
STATE OF CONNECTICUT
COUNTY OF HARTFORD NOV. 18, 1997
Then personally appeared before me the above-named John Wieczorek, to me
personally known to be the Vice President of SS&C TECHNOLOGIES, INC. and
acknowledged the foregoing instrument to be the free act and deed of SS&C
TECHNOLOGIES, INC.
/s/ Helga M. Woods
------------------------------
Commissioner of Superior Court
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1993 1994 1995(1) 1996 1997(2)
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 (in thousands, except per share data)
STATEMENT OF OPERATIONS DATA
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses $ 3,128 $ 5,714 $11,983 $16,352 $22,948
Maintenance 1,458 2,321 4,548 7,007 9,670
Professional services 2,230 4,733 6,780 8,175 9,574
-----------------------------------------------------------------------
Total revenues 6,816 12,768 23,311 31,534 42,192
-----------------------------------------------------------------------
Cost of revenues:
Software licenses 145 197 784 1,245 1,191
Maintenance 415 1,125 1,248 2,257 3,220
Professional services 583 1,957 4,740 5,402 6,165
-----------------------------------------------------------------------
Total cost of revenues 1,143 3,279 6,772 8,904 10,576
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Gross profit 5,673 9,489 16,539 22,630 31,616
-----------------------------------------------------------------------
Operating expenses:
Selling and marketing 1,762 3,141 5,635 9,023 12,059
Research and development 2,114 3,388 7,720 8,414 10,245
General and administrative 917 1,562 3,099 5,338 7,802
Write-off of purchased in-process
research and development -- -- 7,889 -- 861
-----------------------------------------------------------------------
Total operating expenses 4,793 8,091 24,343 22,775 30,967
-----------------------------------------------------------------------
Operating income (loss) 880 1,398 (7,804) (145) 649
Interest income (expense), net (200) 20 57 914 2,176
Other income -- -- -- 158 --
-----------------------------------------------------------------------
Income (loss) before income taxes 680 1,418 (7,747) 927 2,825
Provision (benefit) for income taxes 120 661 (3,024) 414 1,029
-----------------------------------------------------------------------
Net income (loss) $ 560 $ 757 $(4,723) $ 513 $ 1,796
- --------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share $ 0.10 $ 0.13 $ (0.74) $ 0.05 $ 0.13
- --------------------------------------------------------------------------------------------------------------------------------
Basic weighted average number of
common shares-Outstanding 5,672 5,645 6,351 10,571 13,540
- --------------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share $ 0.10 $ 0.12 $ (0.74) $ 0.04 $ 0.13
- --------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average number of
common and equivalent shares-Outstanding 5,704 6,307 6,351 12,617 13,937
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------------------------------------------------------
December 31 (in thousands)
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,987 $ 3,084 $ 1,594 $36,286 $23,660
Working capital 2,507 3,441 3,552 53,502 57,194
Total assets 6,493 11,912 22,788 77,613 85,308
Long-term obligations 2,318 472 2,688 377 250
Redeemable convertible preferred stock 750 750 750 - --
Stockholders' equity 33 5,121 9,493 64,168 67,751
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On March 31, 1995, the Company purchased substantially all of the assets of
Chalke Incorporated for a purchase price of $12.7 million. See Notes 2 and 11 of
Notes to the Company's Consolidated Financial Statements.
(2) On November 14, 1997, the Company acquired Mabel Systems BV for a purchase
price of $2.5 million. See Notes 2 and 11 of Notes to the Company's Consolidated
Financial Statements.
<PAGE>
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company is a leading provider of client/server-based software solutions, and
related consulting services, designed to improve the efficiency and
effectiveness of the investment management function within a broad range of
organizations in the financial services industry. The Company was founded in
1986 to provide consulting services to support the investment management
functions of financial services organizations. In 1989, as a result of a joint
development arrangement, the Company introduced its first product, CAMRA
("Complete Asset Management, Reporting and Accounting"), a DOS-based program
designed to address the management of asset portfolios by mid- and large-size
financial institutions. In 1993, the Company released its first Windows-based
version of CAMRA and has continued to enhance the level of CAMRA's functionality
each year thereafter. In 1996, the Company released CAMRA 2000, a fully
functional 32-bit Windows based version of CAMRA. A majority of the Company's
revenues historically have been derived from sales of the CAMRA system. In 1993,
the Company introduced its FILMS ("Fully Integrated Loan Management System")
product, enabling mortgage professionals to process, analyze and report on a
comprehensive basis, information regarding their loan portfolios. On March 31,
1995, the Company acquired substantially all of the assets and operations of
Chalke Incorporated ("Chalke"), a supplier of asset/liability management and
modeling software and consulting services to the financial services industry.
Chalke's primary software product, PTS ("Profit Testing System"), provides an
economic model of insurance liabilities and assets to facilitate capital,
financial and risk management. On November 14, 1997, the Company acquired all of
the outstanding capital stock of Mabel Systems BV ("Mabel"), a supplier of
investment management software to the financial services industry. Mabel's
software product provides accounting, reporting, performance measurement, and
net asset value calculations for mutual funds and support for stock brokering
and custodial services. On December 31, 1997, the Company acquired all of the
outstanding stock of Shepro Braun Systems, Inc. ("Shepro"), a provider of
software and consulting services to the investment management and financial
services marketplace. Shepro's primary product, Total Return, is a portfolio
management and partnership accounting system oriented toward the hedge fund and
private wealth markets.
The Company enters into license, maintenance and professional services contracts
to provide software and services to its clients. License fees for the Company's
CAMRA and FILMS products are based on assets under management, while underlying
fees for PTS and Total Return software are determined on a per-CPU or per-site
basis or on the number of current users, and maintenance is provided on an
annually renewable basis for approximately 20% of the underlying software
license fee. License revenues are recognized upon the later of delivery of
software to the client or the completion of any significant vendor obligations
remaining after delivery, provided that collection of the resulting receivable
is considered probable. Maintenance revenues are recognized ratably over the
life of the contract. Professional services revenues are provided on a time and
material basis and are recognized as they are performed.
The Company's results of operations for 1995 reflect the acquisition of
substantially all of the assets and operations of Chalke for a purchase price of
$12.7 million (the "Chalke Acquisition"). In connection with the Chalke
Acquisition, which was accounted for under the purchase method, the Company
incurred a charge to operations of $7.9 million associated with the write-off of
purchased in-process research and development related to Chalke products that
were under development at the time of acquisition but had not yet reached
technological feasibility. The balance of the purchase price was allocated to
operating assets of $2.2 million, goodwill of $1.8 million and purchased
completed software of $795,000. The operating results of Chalke have been
included in the Company's operating results since the date of acquisition.
Deferred revenues of $1.5 million, including approximately $1.0 million of
annual maintenance revenues, for which Chalke had previously invoiced and
collected the cash, were not included in the Company's operating results. As
part of the allocation of the purchase price, the Company accrued the costs to
perform the obligations remaining under these maintenance contracts. Subsequent
to 1995, the Company recognized revenues and associated expenses in accordance
with normal accounting policies as the Chalke maintenance contracts were
renewed.
The Company's results of operations for 1997 reflect the acquisition of Mabel
for a purchase price of $850,000 plus 72,816 shares of Common Stock of the
Company with a
<PAGE>
15
value of $750,000 and the assumption of liabilities (the "Mabel Acquisition").
In connection with the Mabel Acquisition, which was accounted for under the
purchase method, the Company incurred a charge to operations of $0.9 million
associated with the write-off of purchased in-process research and development
related to Mabel products that were under development at the time of acquisition
but had not yet reached technological feasibility. The balance of the purchase
price was allocated to goodwill of $0.3 million, purchased completed software of
$0.6 million and net operating assets of $0.7 million. The operating results of
Mabel have been included in the Company's operating results since the date of
acquisition.
The Company's results of operations for all years presented reflect the
acquisition of Shepro for 1.0 million shares of Common Stock of the Company (the
"Shepro Acquisition"). In connection with the Shepro Acquisition, which was
accounted for under the pooling-of-interests method, the Company has included
Shepro's operating results with the Company's operating results for each period
presented.
YEARS ENDED DECEMBER 31, 1995, 1996, 1997
Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Software licenses include hardware and
third-party software that is delivered as part of certain contracts. The
hardware and third-party software account for less than 5% of software license
revenues and less than 2.5% of total revenues in any year presented. Total
revenues increased 35% from $23.3 million in 1995 to $31.5 million in 1996, and
increased 34% to $42.2 million in 1997. The increase from 1995 to 1996 was
primarily attributable to sales of PTS 2000, which was released in the second
quarter of 1996, as well as the full-year inclusion of maintenance clients from
Chalke and increased demand for the Company's professional services. Inclusion
of the operating results of Chalke since the acquisition accounted for
approximately $4.2 million of the Company's total revenues during 1995. The
increase in 1997 revenues was due primarily to an increase in sales of CAMRA
2000 both domestically and internationally, and an increase in the number of
clients contracting for maintenance.
Software Licenses. Software license revenues increased 36% from $12.0 million in
1995 to $16.4 million in 1996, and increased 40% to $22.9 million in 1997. The
increase from 1995 to 1996 was primarily attributable to sales of PTS 2000,
which was added to the Company's product line in the second quarter of 1996. In
addition to PTS license sales, the Company has continued growth with its asset
management products, CAMRA and FILMS. The increase from 1996 to 1997 was
primarily attributable to an increase in sales of CAMRA2000 in North America,
Europe and Asia-Pacific.
Maintenance. Maintenance revenues increased 54% from $4.5 million in 1995 to
$7.0 million in 1996, and increased 38% to $9.7 million in 1997. The majority of
the growth from 1995 to 1996 was due to the addition of Chalke's maintenance
clients. CAMRA maintenance contracts also grew in this same period, due to a
continued increase in the Company's installed base of clients as a result of
additional license sales. The increase in maintenance revenues from 1996 to 1997
was primarily due to the continued growth in the Company's installed base of
clients.
Professional Services. Professional services increased 21% from $6.8 million in
1995 to $8.2 million in 1996, and increased 17% to $9.6 million in 1997. Demand
for the Company's implementation, conversion and training services has increased
primarily due to the Company's increasing number of license sales. As a result
of the Chalke Acquisition, the Company also includes actuarial consulting
services in its professional services revenues.
Cost of Revenues
The total cost of revenues increased 31% from $6.8 million in 1995 to $8.9
million in 1996, and increased 19% to $10.6 million in 1997. The gross margin
percentage increased from 71% in 1995 to 72% in 1996 to 75% in 1997, primarily
due to an increase in the gross margin percentage for professional services.
Cost of Software Licenses. Cost of software license revenues relates primarily
to royalties, as well as the costs of product media, packaging, documentation
and labor involved in the distribution of the Company's software. Included in
the cost of software license revenues is the cost of certain hardware and
third-party software that is delivered as part of certain contracts. The cost of
software license revenues increased 59% from $0.8 million in 1995 to $1.2
million in 1996, and remained stable at $1.2 million in 1997. The cost of
software license revenues as a percentage
<PAGE>
16
of these revenues was 7%, 8%, and 5% in 1995, 1996, and 1997, respectively. The
decrease in the cost of software license revenues as a percentage of revenues
was primarily attributable to an increase in the average sales price of license
sales without a corresponding increase in costs.
Cost of Maintenance. Cost of maintenance revenues primarily comprises technical
customer support and development costs associated with product and regulatory
updates. The cost of maintenance revenues increased 81% from $1.2 million in
1995 to $2.3 million in 1996, and increased 43% to $3.2 million in 1997,
representing 27%, 32%, and 33%, respectively, of maintenance revenues in those
years. The increases in cost of maintenance revenues were primarily due to
increased headcount attributable to the development of a dedicated support
infrastructure to service the existing installed asset management and analytics
client base.
Cost of Professional Services. Cost of professional services revenues consist
primarily of the cost related to personnel utilized to provide implementation,
conversion and training services to the Company's software licensees, as well as
system integration, custom programming and actuarial consulting services. The
cost of professional services revenues increased 14% from $4.7 million in 1995
to $5.4 million in 1996, and increased 14% to $6.2 million in 1997, representing
70%, 66%, and 64%, respectively, of professional services revenues in those
years. The increases in cost of professional services revenues were attributable
to increased headcount in order to meet the increased demand. Increased
utilization, improved efficiencies and increased rates charged for consulting
time contributed to reducing the cost of professional services revenues as a
percentage of professional services revenues from 1995 to 1997.
Operating Expenses
Selling and Marketing. Selling and marketing expenses consist primarily of the
cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions, and travel and entertainment. Such
expenses also include the cost of branch sales offices, advertising, trade
shows, marketing and promotional materials. Selling and marketing expenses
increased 60% from $5.6 million in 1995 to $9.0 million in 1996, and increased
34% to $12.1 million in 1997, representing 24%, 29%, and 29%, respectively, of
total revenues in those years. The increases in sales and marketing expenses
were largely attributable to costs associated with the hiring of additional
sales and marketing personnel, including recruiting fees, and expanding
international operations to include a dedicated international sales and
marketing operation.
Research and Development. Research and development expenses consist primarily of
personnel costs attributable to the development of new software products and the
enhancement of existing products. Research and development expenses increased 9%
from $7.7 million in 1995 to $8.4 million in 1996, and increased 22% to $10.2
million in 1997, representing 33%, 27%, and 24%, respectively, of total revenues
in those years. The Company's research and development expenses in 1995 and 1997
do not include the charge to operations of $7.9 million and $0.9 million
associated with the write-off of purchased in-process research and development
related to Chalke and Mabel products, respectively, that were under development
at the time of their respective acquisitions but had not yet reached
technological feasibility. See "Write-off of Purchased In-Process Research and
Development" below. Research and development expenses increased from 1995 to
1996 primarily due to ongoing development of Finesse 2000, and further
development of the Windows-based versions of CAMRA and FILMS. PTS 2000 was
released in the second quarter of 1996, while the Company discontinued
development of COPE as a stand-alone product during 1996. Research and
development expenses increased from 1996 to 1997 primarily due to continued
development of the Windows-based versions of CAMRA and FILMS, development of
enhancements to the functionality of each product and the development of
Antares.
General and Administrative. General and administrative expenses primarily
comprise personnel costs related to management, accounting, human resources and
administration and associated overhead costs, as well as fees for professional
services. General and administrative expenses increased 72% from $3.1 million in
1995 to $5.3 million in 1996 and increased 46% to $7.8 million in 1997,
representing 13%, 17%, and 18%, respectively, of total revenues in those years.
During 1995, the Company's general and administrative expenses included expenses
associated with the recruitment of several of the Company's executive officers
as well as the leasing of additional space to accommodate the Company's expanded
operations. During 1996, the Company recorded bad debt expense of $1.0 million,
the primary factor in the increase in general and administrative expenses. Other
factors related to the increase in general and administrative expenses included
increases in professional fees of $0.2 million, primarily
<PAGE>
17
related to the Company's status as a public company. The inclusion of Chalke for
the entire year also contributed to the increase in general and administrative
expenses during 1996. During 1997, the Company recorded a charge of $1.2 million
for the closing of its Virginia office facility and the announced move of its
corporate headquarters. An increase in bad debt expense from $1.0 million in
1996 to $1.6 million in 1997, additions to management and related recruiting
fees, and an increase in professional fees, also contributed to the increase in
general and administrative expenses in 1997.
Write-off of Purchased In-Process Research and Development. In the first quarter
of 1995, the Company expensed $7.9 million of purchased in-process research and
development associated with two products acquired in March 1995 as part of the
Chalke Acquisition. In the fourth quarter of 1997, the Company expensed $0.9
million of purchased in-process research and development associated with the
Mabel product acquired in November 1997. Because these products had not reached
technological feasibility at the time of the respective acquisitions and, in the
Company's judgment, there was no alternative use for the related research and
development, such in-process research and development was charged to expense.
Interest Income (Expense). Net interest income increased from $57,000 in 1995 to
$0.9 million in 1996 and to $2.2 million in 1997. The increases were due to the
interest earned on investing the proceeds from the private sale of stock in 1995
and the Company's initial public offering in May 1996.
Provision (Benefit) for Income Taxes. The Company had effective tax rates of
approximately (39)%, 45% and 36% in 1995, 1996, and 1997, respectively.
Primarily as a result of the write-off of purchased in-process research and
development related to the Chalke Acquisition, the Company recognized a tax
benefit of $3.0 million in 1995. The increase in the 1996 effective tax rate
from 1995 was primarily related to losses from foreign operations for which
there is no tax benefit, and an increase in the disallowance of meals and
entertainment expenses, both of which were partially offset by interest income,
which was primarily exempt from federal income taxes. The decrease in the 1997
tax rate from 1996 was primarily related to the effects of interest income which
was primarily exempt from federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, 1996, and 1997, the Company financed its operations primarily
through cash flows generated from operations and from private and public sales
of securities. Cash used in operations was $2.4 million and $0.2 million in 1995
and 1996, respectively, and cash provided by operations in 1997 was $9.6
million. The decrease in cash used in operations from 1995 to 1996 was primarily
attributable to the increase in operating profits and an increase in accrued
expenses and deferred maintenance revenues. Net accounts receivable increased
$3.2 million from 1995 to 1996, while unbilled accounts receivable increased
$0.4 million during the same period. Total revenues increased $8.2 million from
1995 to 1996. The net increase in cash provided by operations from 1996 to 1997
was primarily attributable to an increase in operating profits, improved
collections on accounts receivable, and an increase in accrued expenses and
deferred revenues. Total revenues increased $10.7 million from 1996 to 1997
while net accounts receivable decreased $1.4 million, and unbilled accounts
receivable increased $1.0 million. The improvement in accounts receivable
collection can be attributed to an increased focus on resolving specific client
issues, negotiating date-driven accelerated payment terms in contracts, and
suspended services for nonpayment.
Investing activities used cash of $8.6 million, $17.2 million and $22.0 million
in 1995, 1996, and 1997, respectively. In 1995, the Company used cash of $7.4
million to finance the Chalke Acquisition. The remaining $1.1 million was used
to acquire property and equipment. Investing activities in 1996 included $15.6
million for the purchase of investments in marketable securities and $1.6
million to acquire equipment and capitalized software. Investing activities in
1997 included $19.5 million for the purchase of investments in marketable
securities, $2.1 million to acquire equipment and capitalized software, and $0.1
million to partially finance the Mabel Acquisition.
Net cash of $9.5 million provided by financing activities in 1995 included the
issuance of Convertible Preferred Stock of $7.3 million and the issuance of
Common Stock upon the exercise of warrants for $1.5 million related to the
financing of Chalke. Net cash of $52.1 million provided by financing activities
in 1996 resulted from proceeds of $52.7 million from the issuance of Common
Stock in the Company's initial public offering and proceeds of
<PAGE>
18
$0.8 million from the exercise of stock options, partially offset by the
repayment of $1.5 million of debt. Net cash of $0.6 million used in financing
activities in 1997 included $2.0 million in repayment of debt, partially offset
by the proceeds from the exercise of options and employee stock purchase plan of
$0.8 million and the release of restricted cash supporting a letter of credit of
$0.5 million.
As of December 31, 1997, the Company had $23.7 million in cash and cash
equivalents and $35.1 million of highly liquid marketable securities. The
Company believes that its current cash balances and net cash provided by
operating activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months.
The Share Purchase Agreement in connection with the Mabel Acquisition provides
for a payment in 2001 by the Company to the former Mabel shareholders,
contingent on their continued employment by the Company, and based on revenues
generated by the Mabel division from 1998-2000. The payment can range from $0 to
$1.9 million.
Year 2000 Compliance
The Company recognizes that it must ensure that its products and operations will
not be adversely impacted by the so-called "Year 2000" systems and software
failures which can arise in certain time-sensitive functions. The Company is
currently testing its products and expects them to be Year 2000 compliant in
1998. Costs associated with the testing and modifications, to make the Company's
products Year 2000 compliant, if any, are not expected to have a material
adverse effect on the Company's business, financial condition, or results of
operations. In addition, the Company is in the process of identifying
anticipated costs, problems, and uncertainties associated with making its
internal-use operating systems Year 2000 compliant. In general, the Company
expects to resolve the Year 2000 issue with respect to its computer systems and
software applications through upgrade, conversion, modification, or replacement,
of non-compliant systems and applications. There can be no assurance, however,
that the systems of other parties upon which the Company's business also relies
will be Year 2000 compliant. The costs of becoming Year 2000 compliant, or the
failure thereof by the Company or other parties, could have a material adverse
effect on the Company's business, financial condition, or results of operations.
CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Fluctuations in Quarterly Performance. The Company's revenues and operating
results historically have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a number
of factors, including the timing, size, and nature of the Company's individual
license transactions; the timing of the introduction and the market acceptance
of new products or product enhancements by the Company or its competitors; the
relative proportions of revenues derived from license fees, maintenance,
consulting, and other recurring revenues and professional services; changes in
the Company's operating expenses; personnel changes and fluctuations in economic
and financial market conditions. The timing, size, and nature of individual
license transactions are important factors in the Company's quarterly operating
results. Many such license transactions involve large dollar amounts, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that the Company will be successful in closing large license
transactions on a timely basis or at all.
Dependence on Financial Services Industry. The Company's clients include a range
of organizations in the financial services industry, and the success of such
clients is intrinsically linked to the health of the financial markets. In
addition, because of the capital expenditures required in connection with an
investment in the Company's products, the Company believes that demand for its
products could be disproportionately affected by fluctuations, disruptions,
instability, or downturns in the financial markets, which may cause clients and
potential clients to exit the industry or delay, cancel, or reduce any planned
expenditures for investment management systems and software products. Any
resulting decline in demand for the Company's products could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
Product Concentration. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA, PTS, FILMS, and Total Return
software and the provision of maintenance and consulting services in connection
therewith. The Company currently expects that the licensing of CAMRA, PTS,
FILMS, and Total Return software, and the provision of related services, will
account for a substantial portion of its revenues for the foreseeable
<PAGE>
19
future. As a result, factors adversely affecting the pricing of or demand for
such products and services, such as competition or technological change, could
have a material adverse effect on the Company's business, financial condition,
and results of operations.
Management of Growth. The Company's business has grown significantly in size and
complexity over the past several years. The growth in the size and complexity of
the Company's business as well as its client base has placed and is expected to
continue to place a significant strain on the Company's management and
operations. The Company's ability to compete effectively and to manage future
growth, if any, will depend on its ability to continue to implement and improve
operational, financial, and management information systems on a timely basis and
to expand, train, motivate, and manage its work force. There can be no assurance
that the Company's personnel, systems, procedures, and controls will be adequate
to support the Company's operations. If the Company's management is unable to
manage growth effectively, the quality of the Company's products and its
business, financial condition, and results of operations could be materially
adversely affected.
Integration of Operations. The Company's success is dependent in part on its
ability to complete its integration of the operations of Mabel and Shepro in an
efficient and effective manner. The successful integration in a rapidly changing
financial services industry may be more difficult to accomplish than in other
industries. The combination of the three companies will require, among other
things, integration of the companies' respective product offerings and
coordination of their sales and marketing and research and development efforts.
There can be no assurance that such integration will be accomplished smoothly or
successfully. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations. The
integration of certain operations will require the dedication of management
resources which may temporarily distract attention from the day-to-day business
of the combined company. The inability of management to successfully integrate
the operations of the three companies could have a material adverse effect on
the business, financial condition, and results of operations of the Company.
Competition. The market for financial services software is competitive, rapidly
evolving, and highly sensitive to new product introductions and marketing
efforts by industry participants. Although the Company believes that none of its
competitors currently competes against the Company in each of the industry
segments served by the Company, there can be no assurance that such competitors
will not compete against the Company in the future in additional industry
segments. In addition, many of the Company's current and potential future
competitors have significantly greater financial, technical, and marketing
resources, generate higher revenues, and have greater name recognition than does
the Company.
Rapid Technological Change. The market for the Company's products and services
is characterized by rapidly changing technology, evolving industry standards,
and new product introductions. The Company's future success will depend in part
upon its ability to enhance its existing products and services and to develop
and introduce new products and services to meet changing client requirements.
The process of developing software products such as those offered by the Company
is extremely complex and is expected to become increasingly complex and
expensive in the future with the introduction of new platforms and technologies.
There can be no assurance that the Company will successfully complete the
development of new products in a timely fashion or that the Company's current or
future products will satisfy the needs of the financial markets.
Dependence on Database Supplier. The relational database design in many of the
Company's software products incorporates PFXplus, a "C"-based database
management system licensed to the Company by POWERflex Corporation Proprietary
Limited, an Australian vendor ("Powerflex"). If Powerflex were to increase its
fees under the license agreement, the Company's results of operations could be
materially adversely affected. Moreover, if Powerflex were to terminate the
license agreement, the Company would have to seek an alternative relational
database for its software products. While the Company believes that it could
migrate its products to an alternative database, there can be no assurance that
the Company would be able to license in a timely fashion a database with similar
features and on terms acceptable to the Company.
Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company relies
on a combination of trade secret, copyright, and trademark law, nondisclosure
agreements and technical measures to protect its proprietary technology. There
can be no assurance that the steps taken by the Company to limit access
<PAGE>
20
to its proprietary technology will be adequate to deter misappropriation or
independent third-party development of such technology.
Product Defects and Product Liability. The Company's software products are
highly complex and sophisticated and could from time to time contain design
defects or software errors that could be difficult to detect and correct.
Errors, bugs, or viruses may result in loss of or delay in market acceptance or
loss of client data. Although the Company has not experienced material adverse
effects resulting from any software defects or errors, there can be no assurance
that, despite testing by the Company and its clients, errors will not be found
in new products, which errors could result in a delay in or inability to achieve
market acceptance and thus could have a material adverse impact upon the
Company's business, financial condition, and results of operations.
Key Personnel. The Company's success is dependent in part upon its ability to
attract, train, and retain highly-skilled technical, managerial, and sales
personnel. The loss of services of one or more of the Company's key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company continues to hire a significant
number of additional sales, service, and technical personnel. Competition for
the hiring of such personnel in the software industry is intense. Locating
candidates with the appropriate qualifications, particularly in the desired
geographic location, can be difficult. Although the Company expects to continue
to attract and retain sufficient numbers of highly skilled employees for the
foreseeable future, there can be no assurance that the Company will do so.
Risks Associated with International Operations. The Company intends to continue
to expand its international sales activity as part of its business strategy. To
accomplish such continued expansion, the Company must establish additional
foreign operations and hire additional personnel, requiring significant
management attention and financial resources that could materially adversely
affect the Company's business, financial condition, or results of operations. An
increase in the value of the U.S. dollar relative to foreign currencies could
make the products more expensive and, therefore, potentially less competitive in
those markets. An increasing portion of the Company's international sales are
denominated in foreign currency. The Company hedges some of this risk; however,
significant fluctuations in the value of foreign currencies could have an
adverse effect on the earnings of the Company. In addition, the Company's
international business may be subject to a variety of risks, including
difficulties in obtaining U.S. export licenses, potentially longer payment
cycles, increased costs associated with maintaining international marketing
efforts, the introduction of non-tariff barriers and higher duty rates, and
difficulties in enforcement of contractual obligations and intellectual property
rights. There can be no assurance that such factors will not have a material
adverse effect on the Company's business, financial condition, or results of
operations.
Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing, size, and nature of licensing transactions and new product introductions
by the Company or its competitors. Investors should not use historical trends to
anticipate future results and should be aware that the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarterly variations in operating results and other factors, including those
discussed above.
ACCOUNTING PRONOUNCEMENTS.
In June 1997, the FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130)
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 130 establishes standards for reporting
and display of comprehensive income, which is defined as the equity of a
business enterprise during a period from nonowner sources. SFAS No. 130 is
effective for years beginning after December 15, 1997 and requires restatement
of financial statements for all prior years presented. The adoption of SFAS No.
130, to be included in the Company's March 1998 financial statements, is
expected to only impact the presentation of financial information.
SFAS No. 131 requires public companies to report all financial and descriptive
information about operating segments in their financial statements and requires
selected information about operating segments to be reported in interim
financial reports issued to shareholders. Operating segment financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after Decem-
<PAGE>
21
ber 15, 1997 and requires presentation of comparative information for prior
periods presented. The adoption of SFAS No. 131 is only expected to impact the
way the Company reports information about its operating segments.
In October 1997, the AICPA issued Statement of Position ("SOP") No. 97-2,
Software Revenue Recognition, which is effective in fiscal years beginning after
December 15, 1997. Retroactive application of the provisions of SOP 97-2 is
prohibited. The adoption of SOP 97-2, which will begin with financial statements
for the three months ending March 31, 1998, is not expected to have a material
impact on the Company's business, financial condition, and results of
operations.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
SS&C Technologies, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of SS&C
Technologies, Inc. and Subsidiaries (the "Company") as of December 31, 1996 and
1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SS&C Technologies,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 25, 1998, except Note 14,
the Subsequent Events footnote,
for which the date is March 20, 1998
<PAGE>
22
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
December 31 (in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $36,286 $23,660
Investments in marketable securities 15,580 35,058
Accounts receivable, net of allowance for doubtful
accounts of $1,166 and $1,558, respectively 9,012 7,591
Unbilled accounts receivable, net of allowance for doubtful
accounts of $300 and $678, respectively 3,681 5,472
Prepaid expenses and other current assets 954 1,563
Refundable income taxes 353 384
Deferred income taxes 704 773
-----------------------
Total current assets 66,570 74,501
-----------------------
Property and equipment:
Land 106 106
Building and leasehold improvements 1,225 1,324
Equipment, furniture, and fixtures 4,687 6,448
-----------------------
6,018 7,878
Less accumulated depreciation (2,632) (3,860)
-----------------------
Net property and equipment 3,386 4,018
-----------------------
Unbilled accounts receivable-related party (Note 13) 630 420
Unbilled accounts receivable 1,387 828
Deferred income taxes 3,230 3,205
Restricted cash equivalents 505 -
Goodwill, net of accumulated amortization
of $631 and $1,000, respectively (Notes 2 and 11) 1,173 1,134
Intangible and other assets, net of accumulated amortization
of $1,018 and $655, respectively (Notes 2 and 11) 732 1,202
-----------------------
Total assets $77,613 $85,308
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt-related party (Note 3) 1,390 668
Current portion of long-term debt-other (Note 3) 687 313
Accounts payable 561 1,440
Accrued expenses 2,742 4,077
Accrued bonus payable 416 1,663
Deferred licensing and professional services revenues 1,382 1,618
Deferred maintenance revenues 5,890 7,528
-----------------------
Total current liabilities 13,068 17,307
-----------------------
Long-term debt: (Note 3)
Related party 264 250
Other 113 -
-----------------------
Total liabilities 13,445 17,557
-----------------------
Commitments and contingencies (Notes 6, 8, and 12)
Stockholders' equity: (Note 4)
Common stock, $0.01 par value, 25,000 shares authorized;
13,388 and 13,745 shares issued and outstanding, respectively 134 137
Additional paid-in capital 67,305 69,089
Accumulated deficit (3,271) (1,475)
-----------------------
Total stockholders' equity 64,168 67,751
-----------------------
Total liabilities and stockholders' equity $77,613 $85,308
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 (in thousands, except per share data)
<S> <C> <C> <C>
Revenues:
Software licenses $11,983 $16,352 $22,948
Maintenance 4,548 7,007 9,670
Professional services 6,780 8,175 9,574
--------- -----------------------------
Total revenues 23,311 31,534 42,192
--------- -----------------------------
Cost of revenues:
Software licenses 784 1,245 1,191
Maintenance 1,248 2,257 3,220
Professional services 4,740 5,402 6,165
--------- -----------------------------
Total cost of revenues 6,772 8,904 10,576
--------- -----------------------------
Gross profit 16,539 22,630 31,616
--------- -----------------------------
Operating expenses:
Selling and marketing 5,635 9,023 12,059
Research and development 7,720 8,414 10,245
General and administrative 3,099 5,338 7,802
Write-off of purchased in-process research and development 7,889 - 861
--------- -----------------------------
Total operating expenses 24,343 22,775 30,967
--------- -----------------------------
Operating income (loss) (7,804) (145) 649
Interest income, net 57 914 2,176
Other income (Note 3) - 158 -
--------- -----------------------------
Income (loss) before income taxes (7,747) 927 2,825
Provision (benefit) for income taxes (Note 5) (3,024) 414 1,029
--------- -----------------------------
Net income (loss) $(4,723) $ 513 $ 1,796
- --------------------------------------------------------------------------------------------- -----------------------------
Basic earnings (loss) per share $ (0.74) $ 0.05 $ 0.13
- --------------------------------------------------------------------------------------------- -----------------------------
Basic weighted average number of common
shares outstanding 6,351 10,571 13,540
- --------------------------------------------------------------------------------------------- -----------------------------
Diluted earnings (loss) per share $ (0.74) $ 0.04 $ 0.13
- --------------------------------------------------------------------------------------------- -----------------------------
Diluted weighted average number of common
and common equivalent shares outstanding 6,351 12,617 13,937
- --------------------------------------------------------------------------------------------- -----------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1996 1997
- ---------------------------------------------------------------------------------------------------------------------------
Year ended December 31 (in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ (4,723) $ 513 $ 1,796
----------------------------------------
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 1,327 1,923 2,002
Deferred income taxes (3,615) (610) (44)
Income tax benefit related to exercise of stock options - 161 221
Purchased in-process research and development 7,889 - 861
Provision for doubtful accounts 517 1,027 1,592
Changes in operating assets and liabilities, excluding effects from
acquisitions:
Accounts receivable (1,279) (3,933) 812
Unbilled accounts receivable (3,175) (687) (1,745)
Prepaid expenses and other current assets (420) (267) (563)
Refundable income taxes (12) (722) (31)
Accounts payable (113) 114 879
Accrued expenses (538) 644 1,959
Deferred licensing and professional services revenues (173) 39 236
Deferred maintenance revenues 1,912 1,583 1,638
----------------------------------------
Total adjustments 2,320 (728) 7,817
----------------------------------------
----------------------------------------
Net cash provided by (used in) operating activities (2,403) (215) 9,613
----------------------------------------
Cash flows from investing activities:
Additions to property and equipment, net (1,131) (1,537) (1,767)
Acquisition of Chalke, net of cash received (Note 11) (7,426) - -
Acquisition of Mabel, net of cash received (Note 11) - - (72)
Additions to capitalized software and other intangibles - (115) (359)
Investments in marketable securities, net - (15,580) (19,478)
----------------------------------------
Net cash used in investing activities (8,557) (17,232) (21,676)
----------------------------------------
Cash flows from financing activities:
Repayment of debt (27) (1,489) (1,959)
Proceeds from notes payable 695 125 75
Issuance of convertible preferred stock 7,316 - -
Issuance of common stock 1,481 52,666 269
Exercise of options 5 837 547
Transfer of cash from restricted cash equivalents - - 505
----------------------------------------
Net cash provided by (used in) financing activities 9,470 52,139 (563)
----------------------------------------
Net increase (decrease) in cash and cash equivalents (1,490) 34,692 (12,626)
Cash and cash equivalents, at beginning of year 3,084 1,594 36,286
----------------------------------------
Cash and cash equivalents, at end of year $ 1,594 $36,286 $23,660
- ---------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
- ---------------------------------------------------------------------------------------------------------------------------
Cash paid for:
Interest $ 28 $ 257 $152
----------------------------------------
Income taxes 616 1,586 677
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Supplemental disclosure of non-cash investing activities:
As more fully described in Note 11, effective March 31, 1995, the Company
purchased all of the assets of Chalke Incorporated for $12.7 million.
As more fully described in Note 11, effective November 14, 1997, the Company
purchased all of the outstanding stock of Mabel Systems BV for $2.5
million.
As more fully described in Note 11, effective December 31, 1997, the Company
purchased all of the outstanding stock of Shepro Braun Systems, Inc. for
1.0 million shares of the Company's common stock.
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
25
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series B Series C
Convertible Convertible Common
Preferred Stock Preferred Stock Stock Treasury Stock
--------------------------------------------------- ---------------
Retained
Addi- Earnings Total
For the Years ended Number Number Number tional (Accu- Number Stock-
December 31, 1995, 1996, of of of Paid-in mulated of holders'
and 1997 (in thousands) Shares Amount Shares Amount Shares Amount Capital Deficit) Shares Cost Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, at December 31, 1994 153 $ 31 - $ - 7,005 $ 70 $ 6,527 $ 939 1,351 $(2,405) $ 5,162
Issuance of Series C
convertible
preferred stock - - 155 31 - - 7,285 - - - 7,316
Exercise of options - - - - 60 1 4 - - - 5
Issuance of common stock - - - - 1,015 10 1,471 - - - 1,481
Net loss - - - - - - - (4,723) - - (4,723)
- -------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1995 153 31 155 31 8,080 81 15,287 (3,784) 1,351 (2,405) 9,241
Exercise of options - - - - 267 3 834 - - - 837
Conversion of Series B
and C preferred stock
to common stock (153) (31) (155) (31) 3,079 31 31 - - - -
Conversion of Series A
preferred stock to
common stock - - - - 248 2 748 - - - 750
Issuance of common stock - - - - 3,065 31 52,635 - - - 52,666
Income tax benefit related
to exercise of stock
options - - - - - - 161 - - - 161
Retirement of treasury
stock - - - - (1,351) (14) (2,391) - (1,351) 2,405 -
Net income - - - - - - - 513 - - 513
- -------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1996 - - - - 13,388 134 67,305 (3,271) - - 64,168
Exercise of options - - - - 230 2 545 - - - 547
Issuance of common stock - - - - 127 1 1,018 - - - 1,019
Income tax benefit related
to exercise of stock
options - - - - - - 221 - - - 221
Net income - - - - - - - 1,796 - - 1,796
- -------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1997 - $ - - $ - 13,745 $ 137 $69,089 $ (1,475) - $ - $67,751
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
26
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1. ORGANIZATION
SS&C Technologies, Inc. and Subsidiaries ("SS&C" or the "Company") (formerly
named Securities Software & Consulting, Inc.) is a leading provider of
client/server-based software solutions, and related consulting services,
designed to improve the efficiency and effectiveness of a broad range of
organizations in the financial services industry. The Company has developed a
family of software products that provides a full range of mission-critical
information management and analysis, accounting, reporting, and compliance tools
to help high-level investment professionals make informed real-time decisions
and automate many operational functions in today's increasingly complex and
fast-moving financial markets. The Company's products are focused on improving
the effectiveness of decision making through open, fully integrated access to
the quantitative analysis of transactions-based data, allowing investment
professionals to manage and analyze large amounts of data in the aggregate and
in detail on a timely basis.
The Company operates in one business segment and currently derives substantially
all of its revenue from the licensing of its CAMRA, PTS, FILMS, and Total Return
applications software to the financial services industry and the provision of
related maintenance, consulting, and training services in the areas of
investments, investment accounting, and software development. A majority of the
Company's revenues have historically been derived from sales of the CAMRA
system. The Company expects that the licensing of these products and the related
services will account for a substantial portion of its revenues in the future.
The Company's clients include a range of organizations that manage investment
portfolios, including asset managers, insurance companies, banks, mutual funds,
public and private pension funds, hedge funds, corporate treasuries, and
government agencies. The success of many of the Company's clients is
intrinsically linked to the health of the financial markets. Demand for its
products could be affected by fluctuations or downturns in the financial
markets, which may cause clients and potential clients to exit the industry or
delay, cancel, or reduce any planned expenditures for investment management
systems and software products.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, SS&C Ventures, Inc., SS&C
Technologies, Limited, SS&C Pacific, Inc., SS&C Technologies Sdn. Bhd., Shepro
Braun Systems, Inc. and Mabel Systems BV. All intercompany activity has been
eliminated in preparing the consolidated financial statements.
Revenue Recognition
The Company recognizes revenues in accordance with the Statement of Position
("SOP") No. 91-1 on software revenue recognition issued by the American
Institute of Certified Public Accountants ("AICPA").
The Company licenses the right to use its software products to customers under
perpetual license agreements. The Company generally recognizes license revenues
on delivery of the software to the customer provided that collection of the
resulting receivable is considered probable, unless the Company has significant
future obligations remaining under the license agreement or there is significant
uncertainty about customer acceptance. If there are significant future
obligations or uncertainty about customer acceptance, revenue is recognized when
such obligations are satisfied and any uncertainty about acceptance becomes
insignificant.
The Company occasionally enters into license agreements requiring significant
customization of the Company's soft-
<PAGE>
27
ware. These agreements are accounted for by the Company on a percentage of
completion basis. This method requires estimates to be made for costs to
complete the agreement utilizing an estimate of development man hours remaining.
Due to uncertainties inherent in the estimation process, it is at least
reasonably possible that completion costs may be revised. Such revisions are
recognized in the period in which the revisions are determined. Provisions for
estimated losses on uncompleted contracts are determined on a
contract-by-contract basis, and are made in the period in which such losses are
first estimated or determined.
The Company's software license agreements include a short-term, generally
six months or less, warranty period that the Company does not consider to be a
cancellation privilege.
The Company records accounts receivable and related deferred revenues upon the
execution of contracts for license and licensed lease agreements and upon
billing for maintenance agreements. Revenues from maintenance agreements are
recognized ratably over the term of the agreement. Unbilled accounts receivable
principally reflect revenues recognized pursuant to license agreements for which
milestone amounts are not contractually billable. Unbilled accounts receivable,
including those related to lease agreements, which are not contractually
billable in one year have been classified as noncurrent.
Professional services revenues include consulting and training provided to
customers, generally on a time and materials basis. Professional services
revenues are recognized as the services are performed.
The Company records an allowance for doubtful accounts based on individual
customer analyses. Write-offs of accounts receivable were $34,000, $69,000, and
$822,000 for the years ended December 31, 1995, 1996, and 1997, respectively.
Research and Development
Research and development costs associated with computer software are charged to
expense as incurred. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, capitalization of internally developed computer
software costs begins upon the establishment of technological feasibility based
on a working model. Capitalized software costs of $115,000 and $454,000 are
included in the December 31, 1996 and 1997 balance sheets, respectively, under
"Intangible and other assets."
The Company's policy is to amortize these costs upon a product's general release
to the customer. Amortization of capitalized software costs is calculated by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. It is reasonably possible that
those estimates of anticipated future gross revenues, the remaining estimated
economic life of the product, or both could be reduced significantly due to
competitive pressures.
Cash and Cash Equivalents and
Marketable Securities
The Company considers all highly liquid debt instruments with original
maturities of three months or less at the date of acquisition to be cash
equivalents. Debt securities with original maturities of more than three months
at the date of acquisition are classified as marketable securities. All
marketable securities mature within 12 months and are classified as current
assets. The Company classifies its entire investment portfolio of $55.3 million
at December 31, 1997, consisting of debt securities issued by state and local
governments of the United States and corporations, as available for sale
securities. With the cost of the debt securities approximating the fair market
value of the securities, no unrealized gain or loss has been recognized. The
Company did not have any material realized gains or losses during 1995, 1996,
and 1997.
Restricted Cash Equivalents
The Company had a letter of credit agreement with a U.S. bank for $505,000 in
connection with the purchase of the main-frame based investment accounting line
of business of an unrelated entity. The purchase agreement required the Company
to maintain an irrevocable letter of credit until the debt was paid in full. In
accordance with the terms of the letter of credit agreement, the Company had a
$505,000 certificate of deposit with the bank which is restricted to serve as
collateral for the letter of credit. The letter of credit was released in
January 1997 upon the settlement of the debt (see Note 3).
Hedging Transactions
The Company purchases from time to time forward contracts to attempt to minimize
the impact of exchange rate gains or losses from foreign currency transactions.
The forward contracts entered into are for periods of less than six months.
There were no outstanding forward contracts
<PAGE>
28
at December 31, 1996. The Company had one forward contract outstanding at
December 31, 1997, which liquidated in February 1998.
Property and Equipment
Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using a combination of straight-line and accelerated
methods over the estimated useful lives of the assets as follows:
Description
- --------------------------------------------------------------------------------
Building 31.5 years
Equipment 3-5 years
Furniture and fixtures 7-10 years
Leasehold improvements shorter of lease
term or estimated
useful life
- --------------------------------------------------------------------------------
Maintenance and repairs are expensed as incurred. The costs of sold or retired
assets are removed from the related asset and accumulated depreciation accounts
and any gain or loss is included in operations.
Goodwill and Intangible Assets
Goodwill, associated with the Company's Chalke and Mabel acquisitions described
in Note 11, is being amortized on a straight-line basis over its estimated life
of approximately five years. The carrying amount of goodwill is evaluated for
future recoverability on a periodic basis, relying on a number of factors,
including the estimated life of the customer base under the annual maintenance
agreements, operating results for each division, business plans, budgets and
economic projections, and undiscounted cash flows. In addition, the Company's
evaluation considers non-financial data such as market trends, product
development cycles and changes in management's market emphasis. Amortization
expense associated with goodwill was $271,000, $361,000, and $369,000 for the
years ended December 31, 1995, 1996, and 1997, respectively.
Other intangible assets, excluding complete technology, are being amortized on a
straight-line basis over their estimated lives of two to three years. Complete
technology is amortized over approximately six years based on the ratio
that current gross revenues of the product bear to the total of current and
anticipated future gross revenues of the product.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents, marketable
securities, and trade receivables. The Company invests its cash in deposits with
commercial banks or in municipal bond and bond funds with broker/dealers.
Concentrations of credit risk, with respect to trade receivables, are limited
due to the large number of customers comprising the Company's customer base and
their dispersion across many geographies. As of December 31, 1996 and 1997, the
Company had no significant concentrations of credit risk.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS 109, an asset and liability approach
is used to recognize deferred tax assets and liabilities for the future tax
consequences of items that have already been recognized in its financial
statements and tax returns. A valuation allowance is established against net
deferred tax assets if, based on the weight of available evidence, it is more
likely than not that some or all of the net deferred tax assets will not be
realized.
Foreign Currency
The functional currency of each foreign subsidiary is the local currency.
Accordingly, assets and liabilities of foreign subsidiaries are translated to
U.S. dollars at period end exchange rates and stockholders' equity at historical
rates. Revenues and expenses are translated using the average rates during the
period. The effects of foreign currency translation adjustments are immaterial
to the results of operations and the financial position of the Company.
Revenues from foreign sources totalled $5.4 million in 1997. Revenues from
foreign sources for 1995 and 1996 were immaterial to the total revenues of the
Company. Total assets in foreign locations were immaterial to the total assets
of the Company.
Basic and Diluted Earnings Per Share
The Company adopted SFAS No. 128, "Earnings Per Share," in 1997. Earnings per
share for all periods presented have been restated to conform to the
requirements of SFAS 128. The standard requires the replacement of the current
primary earnings per share presentation with a basic earnings per share
presentation. Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. The standard also requires
companies with complex capital stock structures to disclose diluted earnings per
<PAGE>
29
share and, among other things, a reconciliation of the numerator and denominator
for purposes of the calculation. Diluted earnings per share is computed based
upon the weighted average number of common shares and common equivalent shares
outstanding after certain adjustments described below. The computation of
diluted earnings per share is based on net income (loss) divided by the weighted
average number of common and common equivalent shares outstanding during the
period after giving effect to all stock splits. Common equivalent shares
comprise stock options and warrants using the treasury stock method. Common
equivalent shares from stock options and warrants are excluded from the
computation if their effect is antidilutive. In addition, all preferred stock is
considered to be a common stock equivalent based on its terms and conditions
except that in 1995 all 3.3 million shares of preferred stock are excluded as
the effect of inclusion would be antidilutive.
Options to purchase 1.5 million and 1.0 million shares were outstanding at
December 31, 1995 and 1997, respectively, but were not included in the
computation of diluted earnings per share because the effect of including the
options would be antidilutive.
Income available to stockholders is the same for basic and diluted earnings per
share. A reconciliation of the shares outstanding is as follows (in thousands):
1995 1996 1997
- --------------------------------------------------------------------------------
Basic weighted average shares outstanding 6,351 10,571 13,540
Weighted average common stock
equivalents-options - 660 397
Weighted average preferred stock - 1,386 -
------ ------ ------
Diluted weighted average shares outstanding 6,351 12,617 13,937
- --------------------------------------------------------------------------------
See Note 14 for issuance of shares subsequent to year end.
Accounting Standards
In June 1997, the FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130)
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 130 establishes standards for reporting
and display of comprehensive income, which is defined as the equity of a
business enterprise during a period from nonowner sources. SFAS No. 130 is
effective for years beginning after December 15, 1997 and requires restatement
of financial statements for all prior years presented. The adoption of SFAS No.
130, to be included in the Company's March 1998 financial statements, is
expected to only impact the presentation of financial information.
SFAS No. 131 requires public companies to report all financial and descriptive
information about operating segments in their financial statements and requires
selected information about operating segments to be reported in interim
financial reports issued to shareholders. Operating segment financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after December 15, 1997
and requires presentation of comparative information for prior periods
presented. The adoption of SFAS No. 131 is expected to impact the way the
Company reports information about its operating segments.
In October 1997, the AICPA issued Statement Of Position ("SOP") No. 97-2,
Software Revenue Recognition, which is effective in fiscal years beginning after
December 15, 1997. Retroactive application of the provisions of SOP 97-2 from
the previously issued SOP on software revenue recognition is prohibited. The
adoption of SOP 97-2, which will begin with financial statements for the three
months ending March 31, 1998, is not expected to have a material impact on
the Company's business, financial condition, and results of operations.
Reclassification
Certain amounts in the 1996 consolidated financial statements have been
reclassified to be comparable with the 1997 presentation. These classifications
have had no effect on net income, working capital, or net equity.
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
----------------
1996 1997
- -------------------------------------------------------------------------------
7.91% note payable, due to a related party $ 1,390 $ --
6.81% note payable 450 --
Note payable to former Mabel shareholders, at
no interest, due in three equal installments on
November 14, 1998, 1999, and 2000 -- 375
Due to former Mabel shareholders -- 286
9% notes payable to former Shepro sellershareholders,
payable on demand; paid in full in January 1998 264 257
Variable note payable to a bank, due July 1998, interest
paid monthly at the prime rate plus 0.75%,
paid in full in January 1998 125 200
Variable note payable to a bank, due in 36 equal
installments of principal, interest paid monthly
at the prime rate plus 0.75%, due December 1998,
paid in full in January 1998 208 108
9.5% note payable to a bank, due June 1998,
paid in full in January 1998 17 5
----------------
2,454 1,231
Less current portion-related party (1,390) (668)
Less current portion-other (687) (313)
----------------
Long-term debt $ 377 $ 250
- -------------------------------------------------------------------------------
<PAGE>
30
The 7.91% note payable to a related party was issued in connection with the
Company's acquisition of the assets and operations of Chalke Incorporated
("Chalke") (see Note 11). The term of the promissory note dated March 31, 1995
was for repayment in two equal installments of $1,500,000 on March 31, 1996 and
March 31, 1997. The promissory note included interest accruing annually from
March 31, 1995 at the applicable federal rate. The applicable rate at March 31,
1995 was 7.91%. The present value of the $3,000,000 two-year loan at 7.91% was
$2,678,000. Interest expense for the years ended December 31, 1995, 1996, and
1997 was $187,000, $193,000, and $162,000, respectively.
The 6.81% note payable was issued in connection with the Company's acquisition
of packaged software and related assets (see Note 11). The note was issued at
$505,000 and required the Company to make periodic payments on the debt based
upon specific percentages of revenues collected by the Company related to
customers utilizing the acquired product. In connection with the outstanding
note payable of $450,000 and invoices and accrued interest of $138,000, a
settlement was reached in December 1996 whereby the Company would pay $450,000
in total for all of the outstanding obligations. The payment was made in January
1997. The balance of $138,000 is included in other income on the accompanying
1996 statement of operations.
The note payable to former Mabel shareholders was issued in connection with the
Company's acquisition of the assets and operations of Mabel Systems BV
("Mabel") (see Note 11). The terms of the purchase agreement are for the Company
to pay $375,000 in three equal installments of $125,000 on the first, second and
third anniversary of the closing date of the acquisition. Each payment is
conditional on the continued employment of the former shareholders with the
Company as of the date of the payment. Due to former Mabel shareholders of
$286,000 is the remaining amount on the final adjustment of the purchase price
to be paid based on the final net equity of Mabel as of the closing date, as
stipulated in the share purchase agreement.
The 9% notes payable to former Shepro shareholders represent loans made to
Shepro by certain former shareholders of Shepro. There were no restated payment
terms and the loans were paid in full in January 1998. The notes payable to a
bank were issued to provide working capital for Shepro and to secure financing
for computer equipment. Outstanding balances at December 31, 1997 were paid in
full in January 1998.
4. CAPITAL STOCK
During 1994, the Company authorized the issuance of 152,778 shares of a new
series of preferred stock, Series B convertible preferred stock (the "Series B
stock"). On September 20, 1994, the Company entered into a stock purchase
agreement in which it issued 152,778 shares of Series B stock at $40.00 per
share, before costs of the transaction.
During 1995, the Company authorized the issuance of 155,132 shares of a new
series of preferred stock, Series C convertible preferred stock (the "Series C
stock"). On March 31, 1995 and April 13, 1995, the Company entered into stock
purchase agreements in which it issued the 155,132 shares of Series C stock at
$47.50 per share, before transaction costs.
In connection with the issuance of the Series C stock, holders of outstanding
warrants exercised their rights to purchase 900,000 shares of common stock for
$1,401,000. At the time of issuance of the Series C stock, the authorized shares
of common stock were increased from 10,224,720 to 11,673,400. At December 31,
1995, 3,326,600 shares of the common stock were reserved for issuance upon the
conversion of the Series A, Series B, and Series C stock. At December 31, 1996
and 1997, 2,920,000 and 3,039,000 shares, respectively, were reserved for the
stock option plans.
On April 25, 1996, the Company reincorporated in the State of Delaware and
exchanged each outstanding share of common stock for ten shares of common stock,
$.01 par value, and exchanged each outstanding share of preferred stock Series
A, Series B, and Series C for one share of preferred stock Series A, Series B,
and Series C, respectively. Effective with the reincorporation, all the treasury
stock was extinguished. Holders of outstanding options were entitled, upon
exercise, to purchase ten times the number of common stock shares provided in
each option, at an exercise price per share of one-tenth the price per share
provided in the option. The outstanding preferred stock was converted into ten
shares of common stock for each share of preferred stock. The Company authorized
a total of 25,000,000 shares of common stock, $.01 par value, and a total of
1,000,000 shares of preferred stock, $.01 par value. The outstanding Series A,
Series B, and Series C preferred stock was subsequently converted into common
stock on June 5, 1996, the closing date of the Company's initial public
offering. As of December 31, 1997 there was no preferred stock outstanding.
<PAGE>
31
The Company consummated an initial public offering of 3,750,000 shares of common
stock on June 5, 1996, of which 723,750 shares were sold by selling
stockholders. The Company received proceeds from the offering of approximately
$52,639,000, net of underwriting discounts and commissions and offering expenses
payable by the Company.
All shares, warrants, options, and par values have been restated in the
financial statements and footnotes to reflect the effects of the split of the
Company's common stock.
5. INCOME TAXES
The sources of income (loss) before income taxes were as follows:
1995 1996 1997
- --------------------------------------------------------------------------------
Year Ended December 31, (in thousands)
US $(7,483) $1,527 $3,599
Foreign (264) (600) (774)
------------------------------
Income (loss) before income taxes $(7,747) $ 927 $2,825
- --------------------------------------------------------------------------------
The income tax provision (benefit) for the years ended December 31, 1995, 1996,
and 1997 consist of the following:
1995 1996 1997
- --------------------------------------------------------------------------------
Year Ended December 31 (in thousands)
Current:
Federal $ 434 $736 $1,080
Foreign -- -- 63
State 157 202 283
Deferred:
Federal (2,757) (427) (280)
State (858) (97) (117)
- --------------------------------------------------------------------------------
Total $(3,024) $414 $1,029
- --------------------------------------------------------------------------------
The effective tax rates were (39.0)%, 44.7%, and 36.4% for the years ended
December 31, 1995, 1996, and 1997, respectively, and are reconciled from the
expected tax expense (benefit) (the expected tax expense (benefit) is computed
by applying the U.S. Federal corporate income tax rate of 34% to income before
income taxes) as follows:
1995 1996 1997
- --------------------------------------------------------------------------------
Year Ended December 31 (in thousands)
Computed "expected" tax
expense (benefit) $(2,507) $ 302 $ 960
Increase (decrease) in income taxes
resulting from: State income taxes
(net of Federal income tax benefit) (459) 70 110
Tax exempt interest income -- (327) (553)
Tax effects of foreign operations -- 306 326
Meals and entertainment 38 61 50
Other (96) 2 136
----------------------------------
Income tax expense (benefit) $(3,024) $ 414 $ 1,029
- --------------------------------------------------------------------------------
The components of the net deferred tax asset at December 31, 1996 and 1997 are
as follows:
1996 1997
- --------------------------------------------------------------------------------
(in thousands)
Deferred tax assets $4,707 $ 5,375
Deferred tax liabilities (773) (1,397)
-----------------------
Net deferred tax asset $3,934 $ 3,978
- --------------------------------------------------------------------------------
The components of deferred income taxes at December 31, 1996 and 1997 are as
follows:
1996 1997
- --------------------------------------------------------------------------------
(in thousands)
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------------
Purchased in-process
research and development $2,922 $ -- $2,810 $ --
Accounting method
change-cash to accrual -- 609 -- 305
Accounting method
change-advance payments 588 -- 441 --
Capitalized software -- -- -- 181
Acquired technology 336 -- 461 --
Accrued expenses 352 119 582 118
Accounts receivable 471 -- 1,081 793
Other 38 45 -- --
-----------------------------------------
Total $4,707 $ 773 $5,375 $1,397
- --------------------------------------------------------------------------------
<PAGE>
32
6. LEASES
The Company is obligated under noncancelable operating leases for office space
and office equipment. Total related expense for the years ended December 31,
1995, 1996, and 1997 was $652,000, $1,064,000, and $1,203,000, respectively.
Future minimum lease payments under these operating leases are as follows (in
thousands):
Year ending December 31,
- --------------------------------------------------------------------------------
1998 $ 1,779
1999 1,525
2000 1,439
2001 1,248
2002 767
Thereafter 3,786
-------
$10,544
- --------------------------------------------------------------------------------
The Company leases a portion of its building and subleases other office space to
unrelated parties under noncancelable leases. The Company received rent under
these leases of $19,000, $54,000, and $99,000 for the years ended December 31,
1995, 1996, and 1997, respectively. Minimum, future lease receipts under these
leases are as follows (in thousands):
Year ending December 31,
- --------------------------------------------------------------------------------
1998 $ 444
1999 430
2000 417
2001 434
2002 67
------
$1,792
- --------------------------------------------------------------------------------
7. RELOCATION EXPENSES
The Company closed its Virginia office facility in October 1997 and relocated
certain employees to its corporate headquarters. The Company expensed $0.5
million related to the office facility closing, including severance packages and
outplacement services totalling $0.1 million for nine employees. The amount
accrued as of December 31, 1997 was $0.2 million, primarily for unoccupied lease
fees under the current lease.
In 1997, the Company also announced plans to relocate its corporate facilities.
In connection with the relocation, and in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121) and EITF No.
94-3, the Company has recognized in general and administrative expense an
impairment loss of $0.5 million on the building and furniture it currently
occupies and uses. Under the current lease, the Company is also obligated to
continue making payments from the expected date of the relocation through
November 30, 1998. Unoccupied lease fees of $143,000 were included in general
and administrative expense for the year ended December 31, 1997.
8. LICENSE AND ROYALTY AGREEMENTS
During 1995, the Company was a party to two license and royalty agreements as a
result of the joint development of software products. One of these agreements
was with a related party. The related party development partner was paid a 3%
royalty based on a percentage of license fee revenues collected related to the
Company's CAMRA and FILMS products. The second agreement called for royalty
payments of 3% on a certain module until $22,000 had been paid. The total
royalty expense included in the cost of software licensing revenues under these
agreements of $187,000 for the year ended December 31, 1995, includes $166,000,
to a related party. As more fully described in Note 13, on January 27, 1996, the
Company licensed its CAMRA and FILMS applications software and certain other
programs to the related party pursuant to a software license agreement. Under
the terms of this agreement, all outstanding accounts receivable and accounts
payable between the parties as of January 27, 1996 were forgiven, including
amounts payable by the Company under certain royalty agreements. The agreement
also terminated the requirement for the Company to pay royalties to the related
party in the future. The second agreement was paid in full during 1996. The
Company has no future obligations under royalty agreements related to CAMRA and
FILMS products.
The Company is also a party to a royalty agreement as a result of the joint
development of Finesse 2000. Under the terms of the agreement, the joint
developer will receive a 10% royalty on all software license revenues of Finesse
2000 until $349,000 has been paid. Total royalty expense for 1997 was $54,000.
The Company also has non-exclusive rights, acquired by the Company in the Chalke
acquisition, to integrate software into certain Company products. Under the
terms of the agreement, the licensor of the software is paid minimum monthly
royalties and additional royalties based on a per-
<PAGE>
33
centage of the related license fee revenues collected. These payments range
between 20% and 43% of sales of the related software products. The Company also
entered into an agreement in 1996 which allows the Company to integrate software
into a certain Company product. Under this agreement, the licensor is paid
$1,500 for the first 200 clients that purchase the Company's product containing
this software and a maintenance agreement for that product. The fee is reduced
to $1,000 per client for each client thereafter. The Company is obligated to pay
on a cumulative basis at least $25,000 per quarter. The total royalty expense
under these agreements for the years ended December 31, 1996 and 1997 was
$452,000 and $425,000, respectively.
In connection with the Shepro acquisition, the Company was a party to a
development and royalty agreement with an unrelated third party. The agreement
called for a royalty of 20% on all software license sales for the core modules
developed during the project, up to a full recovery of all costs incurred by the
third party on this project. The total royalty expense under this agreement for
the years ended December 31, 1995, 1996, and 1997 was $46,000, $195,000, and
$184,000, respectively. The Company made the final payment on outstanding
royalties in February 1998. The Company is also a party to a development and
royalty agreement for the development of a trading system. Under this agreement,
if the system is accepted, the Company will pay a 20% royalty on all software
license sales of the trading system, up to $100,000. There is a clause in the
agreement that allows for an additional royalty amount so the net cost of the
system to the customer would be no more than 75% of the amount the Company
charges to other customers. There is no set fee at this time. If the system is
not accepted, the limit on the royalty is $400,000. As of December 31, 1997, the
customer had not accepted the system and no royalties have been accrued.
9. DEFINED CONTRIBUTION PLANS
On January 1, 1992, the Company established its 401(k) Profit Sharing Plan and
Trust (the "Plan"). The Plan covers substantially all employees. Each employee
may elect to contribute to the Plan, through payroll deductions, up to 15% of
his or her salary, subject to certain limitations. The Plan provides for a
Company match of employees' contributions in an amount equal to 50% of an
employee's contributions up to $1,000, in addition to discretionary
contributions as determined by the Board of Directors.
In connection with the acquisition of Shepro, the Company assumed the pre-
existing deferred compensation plan for Shepro employees, which was established
in January 1995. Under the plan, each eligible employee may elect to contribute
to the plan up to 15% of their salary, subject to certain limitations. This plan
provides for a Company match in an amount equal to 25% of an employee's
contributions up to 6%.
During the years ended December 31, 1995, 1996, and 1997, the Company incurred
$88,000, $102,000, and $158,000, respectively, of expense related to these
plans.
10. STOCK OPTION AND PURCHASE PLANS
During 1993, the Board of Directors approved an employee stock option plan
("1993 Plan") which was in place through December 1994 and reserved 1,000,000
shares of common stock for issuance under this plan. During 1994, the Board of
Directors approved a new plan ("1994 Plan"), effective January 1, 1995, for
which 1,000,000 shares of common stock were reserved. The 1994 Plan was amended
in October 1995 and April 1996 to reserve additional shares of common stock for
issuance under the plan, bringing the total shares of common stock reserved for
issuance to 3,000,000. Options issued under the 1993 Plan remain under the terms
of that plan. There were options to purchase 25,500 shares of common stock
outstanding under the 1993 Plan at December 31, 1997. No new options will be
granted under this plan. Options under the 1993 Plan are fully vested and expire
in 1998. Generally, options outstanding under the 1994 Plan vest ratably over
three, four or five years and expire ten years subsequent to the grant. There
were options to purchase 2,231,700 shares of common stock outstanding under the
1994 Plan at December 31, 1997 and 432,208 shares available for option grants.
The purchase price of the shares subject to each option granted will not be less
than 100% of the fair market value of the Company's common stock at the date of
grant. Options granted prior to the issuance of the Series B preferred stock are
exercisable for five years from the date of grant. Options issued subsequent to
the Series B preferred stock have vesting periods of three to five years from
the date of grant. As of December 31, 1997, options to purchase 25,500 and
515,236 shares of common stock were then exercisable under the 1993 Plan and
1994 Plan, respec-
<PAGE>
34
tively. As of December 31, 1996, options to purchase 128,000 and 353,916 shares
of common stock were then exercisable under the 1993 Plan and 1994 Plan,
respectively.
In April 1996, the Company also adopted the 1996 Director Stock Option Plan
which provides for non-employee directors to receive options to purchase common
stock of the Company at an exercise price equal to the fair market value of the
common stock at the date of grant. The Company has reserved a total of 150,000
shares of common stock for issuance under this plan. As of December 31, 1997,
30,000 shares had been issued under the Director Stock Option Plan.
The following table summarizes stock option transactions for the years ended
December 31, 1995, 1996 and 1997.
Weighted
Average
Exercise
Shares Price
- --------------------------------------------------------------------------------
Outstanding at December 31, 1994 630,000 $1.93
Granted 1,074,000 4.34
Canceled (167,500) 2.06
Exercised (60,000) 0.08
-----------------------
Outstanding at December 31, 1995 1,476,500 3.75
Granted 217,000 8.31
Canceled (152,500) 5.13
Exercised (266,792) 3.14
-----------------------
Outstanding at December 31, 1996 1,274,208 4.49
Granted 1,526,500 8.60
Canceled (283,208) 5.12
Exercised (230,300) 2.38
-----------------------
Outstanding at December 31, 1997 2,287,200 $7.37
- --------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 12/31/97 Life (Years) Price at 12/31/97 Price
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.07-$0.07 25,500 0.5 $0.07 25,500 $0.07
4.00-5.75 892,700 7.0 $4.83 391,416 $4.25
6.00-8.63 594,000 9.0 $7.07 101,742 $7.03
9.00-11.00 775,000 9.9 $10.76 22,078 $9.00
- ---------------------------------------------------------------------------------------
</TABLE>
The exercise price for each of the above grants was determined by the Board of
Directors of the Company to be equal to the fair market value of the Company's
common stock on the date of grant. Exercise prices for grants are determined by
the closing sale price of the stock on the Nasdaq National Market on the date of
the grant.
In April 1996, the Company adopted the 1996 Employee Stock Purchase Plan which
permits employees of the Company to purchase shares of common stock pursuant to
payroll deductions at a price equal to 85% of the fair market value of the
Company's common stock on either the first or last day of the purchase period,
whichever is lower. The initial purchase period was from October 1, 1996 to
March 31, 1997. The second purchase period was from April 1, 1997 to September
30, 1997. The third purchase period was from October 1, 1997 to March 31, 1998.
As of December 31, 1997, employees had deposited with the Company, through
payroll deductions, $82,000 to purchase shares through the stock purchase plan
at March 31, 1998. The Company reserved a total of 200,000 shares of common
stock for issuance under this Plan.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the stock option plans and employee stock purchase plan. Had
compensation cost for the Company's stock option plans and employee stock
purchase plan been determined consistent with SFAS No. 123, the Company's net
income (loss) and earnings per share would have been adjusted to the pro forma
amounts (in thousands, except per share data) indicated in the table below:
1995 1996 1997
- --------------------------------------------------------------------------------
Net income (loss) as reported $ (4,723) $ 513 $ 1,796
- --------------------------------------------------------------------------------
Net income (loss) pro forma $ (4,934) $ 24 $ 653
- --------------------------------------------------------------------------------
Basic earnings (loss) per share, as reported $ (0.74) $ 0.05 $ 0.13
- --------------------------------------------------------------------------------
Basic earnings (loss) per share, pro forma $ (0.78) $ 0.00 $ 0.05
- --------------------------------------------------------------------------------
Diluted earnings (loss) per share, as reported $ (0.74) $ 0.04 $ 0.13
- --------------------------------------------------------------------------------
Diluted earnings (loss) per share, pro forma $ (0.78) $ 0.00 $ 0.05
- --------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995, 1996, and 1997: dividend yield of 0%;
expected volatility of 0%, 80%, and 66% in 1995, 1996, and 1997, respectively;
risk-free interest rate of 6.8%, 6.1%, and 6.1% in 1995, 1996, and 1997,
respectively; and expected lives of 5.5 years for 1995 and 1996, and 5 years in
1997. The compensation cost for the stock option plans was $211,000,
<PAGE>
35
$472,000, and $1,075,000 for 1995, 1996, and 1997, respectively. The
weighted-average fair value of options granted using this option-pricing model
in 1995, 1996, and 1997 was $1.34, $5.87, and $3.91, respectively.
The fair value of each estimated stock grant under the employee stock purchase
plan is based on the price of the stock at the beginning of the offering period
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1997, respectively: dividend yield of
0%; expected volatility of 80% and 66%; risk-free interest rate of 5.32% and
5.33%; and expected lives of six months. The compensation cost for the employee
stock purchase plan was $17,000 and $68,000 for 1996 and 1997, respectively.
11. ACQUISITIONS
On December 31, 1997, the Company acquired all of the outstanding stock of
Shepro Braun Systems, Inc. ("Shepro"), a provider of software and consulting
services to the investment management and financial services marketplace, for
1,000,000 shares of Common Stock of the Company in exchange for the 10,400
shares of common stock of Shepro in a business combination accounted for as a
pooling-of-interests. Accordingly, the financial statements for all periods
prior to the combination have been restated to reflect the combined operations.
The results of operations presented below for the years ended December 31, 1995,
1996, and 1997 present the Company and Shepro as stand-alone entities. There
were no intercompany transactions and no adjustments to net assets of the
combining companies to adopt the same accounting practices.
Total
Company Shepro Company
- ------------------------------------------------------------------------------
(in thousands)
1995
Revenues $ 18,802 $ 4,509 $ 23,311
- ------------------------------------------------------------------------------
Net loss $ (4,349) $ (374) $ (4,723)
- ------------------------------------------------------------------------------
1996
Revenues $ 26,407 $ 5,127 $ 31,534
- ------------------------------------------------------------------------------
Net income $ 473 $ 40 $ 513
- ------------------------------------------------------------------------------
1997
Revenues $ 36,527 $ 5,665 $ 42,192
- ------------------------------------------------------------------------------
Net income (loss) $ 1,917 $ (121) $ 1,796
- ------------------------------------------------------------------------------
Shepro had elected to be treated as a Subchapter S Corporation for income tax
purposes and, as such, no Federal income taxes have been provided related to
the results of Shepro's operations in the statement of operations presented.
On November 14, 1997, the Company acquired all of the outstanding stock of Mabel
Systems BV for $2.5 million, which includes $100,000 of direct costs associated
with the acquisition. The purchase has been paid in the form of cash for
$475,000, 72,816 shares of common stock of the Company valued at $750,000,
$375,000 due in three equal annual installments of $125,000 on the anniversary
date of the transaction, the assumption of liabilities of $623,000, and
$286,000 due to former Mabel Shareholders. The share purchase agreement also
calls for a contingent payment to be made in 2001. The payment is contingent on
the continued employment of the former Mabel shareholders and is based on the
revenues generated by the Mabel division. The payment can range from $0 to $1.9
million for revenues over $12 million. The acquisition was accounted for as a
purchase and, accordingly, the net assets and results of operations of Mabel
have been included in the consolidated financial statements from the acquisition
date. The purchase price was first allocated to tangible assets based on their
net realizable value or fair market value on the date of the acquisition. The
remaining portion of the purchase price is allocated to identified intangible
assets and goodwill.
The following summarizes the allocation of the purchase price.
- ------------------------------------------------------------------------------
Cash $ 403
Accounts receivable 260
Other 46
Equipment and furniture 21
Complete technology 588
Incomplete technology 861
Goodwill 330
------
$2,509
- ------------------------------------------------------------------------------
The allocation to complete technology is based on future risk-adjusted
discounted cash flows. Complete technology has been capitalized and included in
the caption "Intangible and other assets" in the accompanying consolidated
balance sheets. Amortization expense associated with complete technology was
$47,000 for the year ended December 31, 1997.
The allocation to incomplete technology is also based on future risk-adjusted
discounted cash flows and has been expensed in 1997, in accordance with
generally accepted accounting principles. Incomplete technology relates to the
<PAGE>
36
objective of making Mabel's software Windows compliant. A majority of the Mabel
modules must be rewritten and translated to English and a full, rigorous test
program must be conducted before the Windows application can be considered
technologically feasible. As of the acquisition date, the incomplete technology
had not achieved technological feasibility and had no alternative uses.
The unaudited pro forma condensed consolidated results of operations presented
below for the years ended December 31, 1996 and 1997, assumes the Mabel
acquisition occurred at the beginning of the year. The unaudited pro forma
condensed statement of operations for the year ended December 31, 1997 excludes
the $861,000 write-off of purchased in-process research and development.
1996 1997
- --------------------------------------------------------------------------------
(in thousands except per share data)
Total revenues $33,002 $43,521
Operating income 1,205 1,750
Net income 702 2,751
Basic earnings per share 0.07 .20
Diluted earnings per share 0.06 .20
- --------------------------------------------------------------------------------
These pro forma results are not necessarily indicative of results of operations
that would have actually occurred had the acquisition taken place at the
beginning of each period, or of future operations of the combined companies.
On March 31, 1995, the Company purchased substantially all of the assets and
operations of Chalke for $12,703,000. The purchase has been paid in the form of
cash of $7,426,000, net of cash received from Chalke and a line of credit
repayment, a promissory note with a present value of $2,678,000, the assumption
of liabilities of $2,599,000, including the costs of effecting the transaction.
The Chalke acquisition was accounted for as a purchase and, accordingly, the net
assets and results of operations of Chalke have been included in the
consolidated financial statements from the acquisition date. The purchase price
was first allocated to tangible assets based on their net realizable value or
fair market value on the date of the acquisition. The remaining portion of the
purchase price is allocated to identified intangible assets and goodwill.
The following summarizes the allocation of the purchase price (in thousands).
- -------------------------------------------------------------------------------
Cash $ 49
Accounts receivable 1,581
Property and equipment 572
Complete technology 795
Other assets 13
Incomplete technology 7,889
Goodwill 1,804
-------
Total purchase price $12,703
- -------------------------------------------------------------------------------
The allocation to complete technology is based on future risk-adjusted
discounted cash flows. Complete technology has been capitalized and included in
the caption "Intangible and other assets" in the accompanying consolidated
balance sheets. Amortization expense associated with complete technology was
$243,000 for the years ended December 31, 1996 and 1997.
The allocation to incomplete technology is also based on future risk-adjusted
discounted cash flows and has been expensed in 1995, in accordance with
generally accepted accounting principles. The incomplete technology had not
achieved technological feasibility and had no alternative uses.
The values allocated to complete and incomplete technology were determined after
extensive evaluation of the status of the products as they existed at the time
of acquisition, an assessment of their commercial viability and, in the case of
the two products considered to be incomplete technology, an analysis of the
additional costs necessary to reach technological feasibility.
The COPE product consisted of several modules, all of which were necessary to
meet the needs of its target market--large financial institutions. As of the
acquisition date, development of none of the modules had been completed and the
validity of the relevant algorithms had not been validated. PTS 2000 was also
incomplete as the product existed only as an early stage prototype and the core
development was still in the tool set and the object-oriented design stage.
Neither product had any alternative future use (in other research and
development projects or otherwise) as they were not commercially viable at the
time of acquisition and could not be utilized with any of the Company's existing
products. The Company discontinued the development of COPE as a stand-alone
product in 1996.
<PAGE>
37
Future discounted cash flows require estimates of future revenues and expenses,
analysis of future market conditions and an estimate of the future economic life
of the product. Estimates were based on management's analysis of the data
available at the time. It is reasonably possible that the estimates could change
significantly in the near term as, in the case of incomplete technology, the new
products are introduced into the market and the existing complete technology
product faces new competitive pressures.
The Company assumed the current liabilities of Chalke as of March 31, 1995,
totaling $3,025,000, which included an outstanding line of credit, trade
accounts payable, and various accrued expenses. The line of credit was repaid by
the Company in accordance with the purchase agreement.
In August 1994, the Company acquired packaged software and other assets from an
unrelated entity for a purchase price of $840,000. Payment of the purchase price
consisted of cash of $160,000 at the closing; the Company's agreement, under
separately executed licensing and maintenance agreements, to provide the seller
with a CAMRA software license and five years of maintenance valued at $75,000
and $100,000, respectively; and a note payable for the remaining $505,000 which
was subsequently reduced by $55,000 in a non-cash exchange for a license
agreement. The acquisition has been accounted for as a purchase and,
accordingly, the assets and results of operations are included in the
consolidated financial statements from the acquisition date. The assets received
in the acquisition, principally the packaged software and customer lists, net of
accumulated amortization of $373,000 and $653,000 as of December 31, 1995 and
1996, respectively, are included in intangible and other assets. In 1997, the
assets received in the acquisitions were fully amortized and written off.
Amortization was being provided over a three-year period. The results of
operations from this acquisition are immaterial.
12. COMMITMENTS AND CONTINGENCIES
On March 18, 1997 and April 8, 1997, two separate purported class action
lawsuits ("Complaints") were filed against the Company, certain of its officers
and the two leading managers of the Company's initial public offering. On July
8, 1997, a Consolidated Amended Class Action Complaint was filed in the United
States District Court for the District of Connecticut (the "Consolidated
Complaint") in which the Complaints were consolidated and amended.
The Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs in the suit
are seeking an undetermined amount of damages and costs and expenses of the
litigation. The Company and the leading managers have each filed a motion to
dismiss the Consolidated Complaint on the grounds that it fails to state a claim
against the Company and the leading managers, respectively. The plaintiffs have
filed an opposition to the motion to dismiss, to which each of the Company and
the leading managers have filed a reply to such opposition. The Company believes
it has meritorious defenses to the claims made in the lawsuit and intends to
contest the Consolidated Complaint vigorously; however, legal counsel for the
Company is unable to predict, with any degree of certainty, the outcome of such
claims. While the resolution of these claims could affect the Company's results
of operations in future periods, the Company does not expect these matters to
have a material adverse effect on its consolidated financial position. However,
the Company is unable to predict the ultimate outcome or the potential financial
impact of these claims.
13. RELATED PARTY TRANSACTIONS
In 1995, the Company entered into licensing and maintenance contracts with
several related parties that have ownership interests in the Company, as well as
representation on the Company's Board of Directors. Total licensing, maintenance
and professional services fee revenues under these agreements were $263,000 for
the year ended December 31, 1995. Amounts collected under these agreements
totaled $295,000 for the year ended December 31, 1995. At December 31, 1995,
$228,000 remained payable from these parties to the Company.
As described in Note 8, the Company licensed its CAMRA and FILMS applications
software and certain other programs to a related party for a total purchase
price of $2,055,000, including a five-year maintenance program beginning in
February 1996. The purchase price was allocated to license fees of $1,544,000,
maintenance fees over the five-year period of $375,000 and deferred interest of
$136,000 resulting from an extended payment plan. Terms include $900,000 payable
upon execution of the agreement and quarterly installments of $53,000 for five
years. All out-
<PAGE>
38
standing receivables and payables between the parties as of January 27, 1996,
including those described in the previous paragraph, were forgiven, resulting in
an additional $105,000 allocated to the purchase price. Interest was imputed at
9% for payments on the license fee. The amount collected from the related party
during the year ended December 31, 1997 was $212,000, including sales tax and
other products not related to this agreement.
The Company also licenses its CAMRA applications software to another related
party from which the Company derived revenues of $63,000 in 1995. This license
was transferred under the agreement dated January 27, 1996 such that all
licenses and maintenance agreements with these three related parties, which are
affiliated with each other, are governed by one agreement.
The Company has employment agreements with certain executive officers and
certain other employees. Certain agreements contain non-compete clauses for
periods ranging from one to two years.
14. SUBSEQUENT EVENTS
On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20, 1998,
among the Company, Quantra and AEGON USA Realty Advisors, Inc., the controlling
stockholder of Quantra. The purchase price for the Quantra Acquisition consisted
of 546,019 shares of the Company's Common Stock, $3,500,000 in cash and the
assumption of certain liabilities of Quantra, plus the costs of effecting the
transaction. The Company used authorized but previously unissued shares of
Common Stock and cash from working capital in connection with the acquisition.
The Quantra Acquisition will be accounted for as a purchase. The Company and
Quantra also entered into an Escrow Agreement pursuant to which $1,230,200 of
the cash consideration will be held in escrow to reimburse the Company in
connection with certain acquisition costs and the breaches of representations,
warranties or covenants, if any, by Quantra. Quantra is a provider of real
estate equity and debt investment management software systems.
On March 9, 1998, the Company announced the signing of a letter of intent to
purchase substantially all of the shares of capital stock of Savid
International, Inc., a supplier of financial software specifically designed to
help organizations manage their debt and derivative portfolios. The Company
expects that the Savid acquisition will be accounted for as a purchase.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary Name Jurisdiction of Organization
- --------------- ----------------------------
SS&C Ventures, Inc. Connecticut
SS&C Pacific, Inc. Delaware
SS&C Technologies Limited United Kingdom
SS&C Technologies Sdn. Bhd. Malaysia
Mabel Systems B.V. Illinois
Shepro Braun Systems, Inc. Netherlands
Financial Automation, Ltd. Illinois
Quantra Software Corporation Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the Registration Statements of
SS&C Technologies, Inc. on Form S-8 (File numbers 333-07205, 333-07207, 333-
07211 and 333-07213) of our report dated February 25, 1998, except Note 14, the
Subsequent Events footnote, for which the date is March 20, 1998, on our audits
of the consolidated financial statements of SS&C Technologies, Inc. and
Subsidiaries as of December 31, 1996 and 1997, and for the years ended December
31, 1995, 1996 and 1997, which report is incorporated by reference from the 1997
Annual Report to Stockholders in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
Hartford, Connecticut
March 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,594
<SECURITIES> 0
<RECEIVABLES> 11,622
<ALLOWANCES> 506
<INVENTORY> 0
<CURRENT-ASSETS> 13,658
<PP&E> 4,481
<DEPRECIATION> 1,614
<TOTAL-ASSETS> 22,785
<CURRENT-LIABILITIES> 9,897
<BONDS> 0
0
812
<COMMON> 71
<OTHER-SE> 9,097
<TOTAL-LIABILITY-AND-EQUITY> 22,785
<SALES> 23,311
<TOTAL-REVENUES> 23,311
<CGS> 0
<TOTAL-COSTS> 6,772
<OTHER-EXPENSES> 7,720
<LOSS-PROVISION> 317
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,747)
<INCOME-TAX> (3,024)
<INCOME-CONTINUING> (4,723)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,723)
<EPS-PRIMARY> (0.74)
<EPS-DILUTED> (0.34)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 2,122 53,160
<SECURITIES> 0 0
<RECEIVABLES> 10,768 11,732
<ALLOWANCES> 655 638
<INVENTORY> 0 0
<CURRENT-ASSETS> 12,638 64,235
<PP&E> 3,405 5,166
<DEPRECIATION> 1,804 2,017
<TOTAL-ASSETS> 21,992 74,485
<CURRENT-LIABILITIES> 10,849 10,049
<BONDS> 0 0
0 0
0 0
<COMMON> 152 217
<OTHER-SE> 9,151 63,238
<TOTAL-LIABILITY-AND-EQUITY> 21,992 74,485
<SALES> 7,952 15,593
<TOTAL-REVENUES> 7,952 4,088
<CGS> 0 0
<TOTAL-COSTS> 1,913 4,088
<OTHER-EXPENSES> 2,023 4,139
<LOSS-PROVISION> 168 151
<INTEREST-EXPENSE> 22 0
<INCOME-PRETAX> 331 656
<INCOME-TAX> 208 274
<INCOME-CONTINUING> 123 382
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 123 382
<EPS-PRIMARY> 0.01 0.04
<EPS-DILUTED> 0.01 0.03
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 DEC-31-1996
<CASH> 49,949 36,286
<SECURITIES> 0 15,580
<RECEIVABLES> 12,798 16,176
<ALLOWANCES> 692 1,466
<INVENTORY> 0 0
<CURRENT-ASSETS> 63,105 66,570
<PP&E> 5,720 6,018
<DEPRECIATION> 2,303 2,632
<TOTAL-ASSETS> 73,697 77,613
<CURRENT-LIABILITIES> 9,489 13,068
<BONDS> 0 0
0 0
0 0
<COMMON> 245 137
<OTHER-SE> 63,009 67,614
<TOTAL-LIABILITY-AND-EQUITY> 73,697 77,613
<SALES> 21,435 31,534
<TOTAL-REVENUES> 21,435 31,534
<CGS> 0 0
<TOTAL-COSTS> 5,958 8,904
<OTHER-EXPENSES> 5,890 8,414
<LOSS-PROVISION> 205 1,027
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (47) 927
<INCOME-TAX> 15 414
<INCOME-CONTINUING> (62) 513
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (62) 513
<EPS-PRIMARY> (0.01) 0.05
<EPS-DILUTED> (0.01) 0.04
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997
<CASH> 43,215 29,452
<SECURITIES> 10,843 26,139
<RECEIVABLES> 14,570 13,563
<ALLOWANCES> 1,502 2,145
<INVENTORY> 0 0
<CURRENT-ASSETS> 67,286 67,016
<PP&E> 6,329 6,667
<DEPRECIATION> 2,863 3,558
<TOTAL-ASSETS> 77,750 77,249
<CURRENT-LIABILITIES> 13,230 11,344
<BONDS> 0 0
0 0
0 0
<COMMON> 138 139
<OTHER-SE> 63,927 65,339
<TOTAL-LIABILITY-AND-EQUITY> 77,750 77,249
<SALES> 7,530 18,034
<TOTAL-REVENUES> 7,530 18,034
<CGS> 0 0
<TOTAL-COSTS> 2,567 5,109
<OTHER-EXPENSES> 2,249 4,631
<LOSS-PROVISION> 79 771
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (97) 1,138
<INCOME-TAX> 70 404
<INCOME-CONTINUING> (167) 734
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (167) 734
<EPS-PRIMARY> (0.01) 0.05
<EPS-DILUTED> (0.01) 0.05
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 25,262
<SECURITIES> 29,661
<RECEIVABLES> 16,319
<ALLOWANCES> 2,406
<INVENTORY> 0
<CURRENT-ASSETS> 69,544
<PP&E> 7,300
<DEPRECIATION> 3,387
<TOTAL-ASSETS> 79,680
<CURRENT-LIABILITIES> 13,753
<BONDS> 0
0
0
<COMMON> 139
<OTHER-SE> 65,390
<TOTAL-LIABILITY-AND-EQUITY> 79,680
<SALES> 28,570
<TOTAL-REVENUES> 28,570
<CGS> 0
<TOTAL-COSTS> 7,672
<OTHER-EXPENSES> 7,219
<LOSS-PROVISION> 1,037
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 1,438
<INCOME-TAX> 513
<INCOME-CONTINUING> 925
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 925
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,660
<SECURITIES> 33,058
<RECEIVABLES> 15,869
<ALLOWANCES> 1,558
<INVENTORY> 0
<CURRENT-ASSETS> 74,501
<PP&E> 7,878
<DEPRECIATION> 3,860
<TOTAL-ASSETS> 85,308
<CURRENT-LIABILITIES> 17,307
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> 67,614
<TOTAL-LIABILITY-AND-EQUITY> 85,308
<SALES> 42,192
<TOTAL-REVENUES> 42,192
<CGS> 0
<TOTAL-COSTS> 10,576
<OTHER-EXPENSES> 10,245
<LOSS-PROVISION> 1,592
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,825
<INCOME-TAX> 1,029
<INCOME-CONTINUING> 1,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,796
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
