<PAGE>
File No. 333-37551
Filed Pursuant to Rule 424(b)(1)
PROSPECTUS
$65,000,000
[GRAPHIC OMITTED]
Systems & Computer Technology Corporation
5% Convertible Subordinated Debentures Due 2004
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The Debentures offered hereby are convertible at any time prior to
maturity, unless previously redeemed, into Common Stock at a conversion price
of $52.75 per share, subject to adjustment in certain events. The Common Stock
is quoted on the Nasdaq National Market under the symbol "SCTC." On October 16,
1997, the closing price for the Common Stock was $42 11/32 per share. The
Debentures have been approved for quotation on the Nasdaq SmallCap Market under
the symbol "SCTCG."
The Debentures are redeemable, in whole or in part, at any time on or
after October 15, 2000, at the option of the Company, at the redemption prices
set forth herein, plus accrued interest. The Debentures are unsecured and
subordinated in right of payment to all present and future Senior Indebtedness
of the Company. See "Description of Debentures."
---------------------
See "Risk Factors" beginning on page 7 for a description of certain risks that
should be considered in connection with an investment in the Debentures offered
hereby.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions(2) Company(1)(3)
- --------------------------------------------------------------------------------
Per Debenture ...... 100% 3.0% 97.0%
- --------------------------------------------------------------------------------
Total(4) ............ $65,000,000 $1,950,000 $63,050,000
================================================================================
(1) Plus accrued interest, if any, from October 22, 1997.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $195,000.
(4) The Company has granted the several Underwriters an option, exercisable
within 30 days from the date hereof, to purchase up to an additional
$9,750,000 principal amount of Debentures solely to cover over-allotments.
If such option is exercised in full, the total Price to Public will be
$74,750,000, the total Underwriting Discounts and Commissions will be
$2,242,500, and the total Proceeds to Company will be $72,507,500. See
"Underwriting."
The Debentures are offered by the several Underwriters subject to receipt
and acceptance of such Debentures by them. The Underwriters reserve the right
to reject any order in whole or in part. It is expected that the Debentures
will be ready for delivery on or about October 22, 1997.
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Unterberg Harris Janney Montgomery Scott Inc.
October 17, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES OR THE
COMMON STOCK, INCLUDING PURCHASES OF DEBENTURES OR COMMON STOCK TO STABILIZE
THE MARKET PRICE OF THE DEBENTURES OR COMMON STOCK, PURCHASES OF DEBENTURES TO
COVER SOME OR ALL OF A SHORT POSITION IN THE DEBENTURES MAINTAINED BY THE
UNDERWRITER AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Such materials also may be
accessed through the Commission's Internet Web site located at
http://www.sec.gov. Copies of such material may be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933 (the "Securities Act"), of which this
Prospectus constitutes a part, with respect to the securities offered hereby.
The Registration Statement, including exhibits and schedules thereto, may be
obtained from the Commission's principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by
the Commission. Statements contained in this Prospectus as to the contents of
any document referred to are not necessarily complete and in each instance
reference is made to the copy of the appropriate document filed as an exhibit
to, or incorporated by reference into, the Registration Statement, each
statement being qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed with the Commission (File No. 0-11521)
pursuant to the Exchange Act are hereby incorporated by reference: (a) Annual
Report on Form 10-K of the Company for the fiscal year ended September 30,
1996, (b) Quarterly Reports on Form 10-Q of the Company for the quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997, and (c) Current Report on
Form 8-K of the Company dated April 9, 1997. In addition, all documents filed
by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination of
this offering shall be deemed to be incorporated by reference herein and to be
a part of this Prospectus from the respective dates of filing of such
documents. Such incorporation by reference shall not be deemed to incorporate
by reference the information referred to in Item 402(a)(8) of Regulation S-K.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purpose of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the foregoing
documents described above which have been incorporated by reference in this
Prospectus other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Such request
should be directed to Systems & Computer Technology Corporation, 4 Country View
Road, Malvern, Pennsylvania 19355, Attention: Secretary, (610) 647-5930.
2
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As used in this Prospectus, references to a "fiscal" year refer to the
fiscal year ending September 30 of such year. Unless otherwise indicated, all
information and data in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.
BANNER(R) and SCT(R) are registered trademarks of the Company and
BANNER2000(TM) and ADAGE(TM) are trademarks of the Company. All other trade
names referenced herein are the service marks, trademarks or registered
trademarks of their respective companies or organizations.
FORWARD LOOKING STATEMENTS
This Prospectus, including any document incorporated herein by reference,
contains certain forward-looking statements that involve substantial risks and
uncertainties as more fully described below. When used in this Prospectus or in
any such documents incorporated herein by reference, the words "anticipate,"
"believe," "estimate," "expect" and similar expressions as they relate to the
Company or its management are intended to identify such forward-looking
statements. From time to time, the Company or its representatives have made or
may make forward-looking statements, orally or in writing. Such forward-looking
statements may be included in various filings made by the Company with the
Commission, or in press releases or oral statements made by or with the
approval of an authorized executive officer of the Company. The Company's
actual results, performance or achievements could differ materially from the
results expressed in, or implied by, these forward-looking statements.
Potential risks and uncertainties that could affect the Company's future
operating results include, without limitation, the effect of publicity on
demand for the Company's products and services, general economic conditions,
the Company's ability to attract and retain highly skilled technical,
managerial, sales and marketing personnel, continued market acceptance of the
Company's products and services, the timing of the receipt of software
licenses, the timing of services contracts and renewals, the timing and
complexity of large transactions, continued competitive and pricing pressures
in the marketplace, the Company's ability to develop and market new and updated
products and enhancements cost effectively and on a timely basis, and the
Company's ability to complete fixed-price contracts profitably. See "Risk
Factors."
3
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THE COMPANY
SCT develops, licenses and supports a suite of client/server, enterprise
software and provides a range of information technology ("IT") outsourcing
services. In addition, the Company offers a series of related services
including systems implementation, systems integration and maintenance and
enhancements. The Company's served vertical markets are higher education,
manufacturing and distribution, utilities and local government.
SCT Products and Services
SCT software and services allow clients to enhance their ability to
compete through improved quality of information. The Company's focus on four
vertical markets enables it to develop and utilize a base of industry expertise
to deliver products and services which address specific client requirements. By
offering a continuum of IT solutions ranging from application software to
large-scale outsourcing contracts, the Company makes available technology and
management tools to enable clients to manage information resources efficiently
and cost-effectively. For the nine months ended June 30, 1997, IT outsourcing
services accounted for 35% of total revenue, software sales accounted for 25%,
software services accounted for 21% and maintenance and enhancements accounted
for 19%.
Application Software. The Company develops and licenses application
software to each of its served vertical markets. The component applications of
the BANNER product line are developed for a client/server, ORACLE relational
database environment. ADAGE software, introduced to the process manufacturing
market in 1995, is an object oriented, enterprise resource planning ("ERP")
system which combines client/server technology with multi-site functionality
using a number of relational database platforms including Oracle and Microsoft
SQL Server. The following are the Company's key application software products:
BANNER2000 and Plus2000. BANNER2000 is SCT's net-centric, object-based
software for administrative computing in higher education. This suite of
software applications is built with a business process orientation and a
business enterprise focus. The software enables institutions to process
student information including financial aid, student records, admissions
and registration in a centralized or distributed information environment
using workflow, imaging, and end-user self service. In addition, BANNER2000
offers systems to assist with common administrative functions, including
human resources and financial management. Plus2000 offers a suite of web
enabled administrative applications to traditional mainframe and
minicomputer-based institutions.
BANNER Internet Applications. SCT's web enabled applications address client
requirements for decentralized routine processing and inquiry while
maintaining centralized control of information and access. These
applications are currently available for the higher education market under
the product names "Web for Student," "Web for Employees" and "Web for
Faculty & Advisors."
ADAGE. SCT offers its ADAGE ERP software to the manufacturing and
distribution industry. ADAGE employs a series of workflows composed of
industry-specific objects and business rules that model key business
processes across the supply chain. ADAGE enables users to integrate
corporate functions such as manufacturing planning, sales forecasting,
procurement, inventory management, distribution and finance. ADAGE is
designed to meet the specific requirements of process manufacturers
including food and beverage, chemicals, metals, minerals, and consumer
packaged goods manufacturers on the Windows NT and UNIX platforms.
BANNER CIS. For utilities, SCT provides BANNER CIS (customer information
system) to gas, electric, water, wastewater, refuse, and other utilities.
BANNER CIS is rule-based, can be quickly adapted for changes in business
strategy and provides utilities with customer management, marketing, and
supply chain management tools to support their changing needs and
competitive requirements. BANNER CIS assists utilities in providing
customer service, responding to customer inquiries, supporting new service
offerings, generating accurate and timely billing, and managing back office
resources.
BANNER for Local Governments. SCT offers a variety of administrative
products including BANNER Courts, Records Indexing, Finance and Human
Resources to address the requirements of local governments that are seeking
simplified access to public information. For example, BANNER Courts helps
to streamline complex court processing including docket management,
scheduling and document management.
4
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Software Services, Maintenance and Enhancements. SCT provides support
services to its software licensees, including implementation, modification,
user training, and consulting services. When purchasing a license for SCT
software, clients typically purchase specific initial services, such as
installation support and training. In addition to a license of the Company's
application software, SCT offers maintenance agreements usually for terms
ranging from one to seven years, which entitle clients to telephone support,
regulatory updates and functional and technical enhancements. The annual
maintenance fee generally is 15% of the license fee, and generally increases
each year by a specified percentage. SCT also provides systems integration
services in connection with the implementation of the Company's application
software. Modifications to existing software or SCT products can be contracted
on either a fixed price or time and materials basis.
IT Outsourcing. SCT provides OnSite services, a range of IT outsourcing
services which encompass end-user computing solutions, network management,
applications outsourcing, and business process outsourcing. These services are
designed to assume total or partial control and responsibility of clients'
information resources, generally on a long-term basis. The Company provides
management, staffing and support with skilled information systems personnel and
industry specialists who are knowledgeable in both computer-based technologies
and the functional aspects of clients' activities. In addition to offering
OnSite comprehensive data center outsourcing, SCT provides separate service
offerings allowing for scaleable contracts based upon client need. The
Company's SinglePoint Solutions assist utilities and energy companies in
serving the newly deregulated utility market. By combining software
applications, IT outsourcing and operations management, a utility or energy
service company can access SCT's application software products while SCT
operates the client's back office functions.
Markets
SCT primarily serves the higher education, manufacturing and distribution,
utilities and local government markets. For the first nine months of fiscal
year 1997, approximately 44% of the Company's revenue was derived from higher
education, approximately 23% was derived from local government, approximately
22% was derived from utilities, and approximately 11% was derived from
manufacturing and distribution. The Company's foreign operations represented
approximately 6% of the Company's revenue for the first nine months of fiscal
year 1997.
Higher Education. SCT has developed substantial functional knowledge and
technical expertise about the IT requirements of higher education institutions.
As institutions attempt to reduce administrative costs and focus on improving
the quality of academic programs, the Company believes that efficient
administrative systems that support a customer-centric, self-service paradigm
are increasingly important. In the United States, SCT targets the 2,200
institutions with over 2,000 students for its software and services. SCT serves
this market with its BANNER2000, Plus2000, web enabled administrative software
and OnSite services.
Utilities. SCT provides application software and services to a target
market of approximately 1,000 water, gas and electric utilities. The Company
believes that the deregulation of the utility market in the U.S. and the U.K.
is driving significant investment in IT and customer services. Clients range
from mid-size municipalities to investor-owned utilities serving millions of
customers.
Manufacturing and Distribution. ADAGE ERP software and OnSite services are
marketed to the process manufacturing industry. The Company believes that ERP
systems are being increasingly adopted by manufacturers, which are
re-engineering their business processes to serve customers better. SCT's target
market consists of the 8,400 process manufacturers and distributors which have
over $100 million in annual revenue.
Local Government. The IT services and application software market for
local government jurisdictions is highly fragmented, with many competitors,
including in-house computing departments of local governments, custom software
programmers and packaged application software vendors. The Company serves its
target market of approximately 1,000 local government entities with its
applicable BANNER software products and its OnSite services.
5
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Strategy
The Company's goal is to be a leading provider of solutions to clients in
its four vertical markets by providing both application software and IT
services. The Company seeks to accomplish this objective by: (i) focusing on
specific vertical markets in which the Company can utilize its established
reputation, market presence, and broad functional and technical expertise; (ii)
providing comprehensive IT solutions consisting of application software and
professional and outsourcing services and making these solutions available for
numerous industry standard platforms; (iii) offering object oriented,
enterprise wide software solutions which are designed for flexible, rapid
implementation and which allow users to accurately model the operation of their
organization, and (iv) supplementing its growth through strategic acquisitions,
which the Company has done in the past and regularly reviews as a means to
expand its business.
Nine Month Revenue
In the first nine months of fiscal year 1997, revenue increased 29% to
$203.0 million from the corresponding period in fiscal year 1996. Software
sales experienced significant growth in this period, increasing 51% to $50.6
million from the corresponding period in fiscal year 1996. This increase was
due primarily to increased licenses of ADAGE ERP software in the second and
third quarters, increased BANNER software licenses to the higher education
market during the third quarter and increased licenses of BANNER CIS software
to the utility market in the first and second quarters of fiscal year 1997.
The Company was incorporated in Delaware in 1968. Unless the context
otherwise requires, "SCT" or the "Company" refers to Systems & Computer
Technology Corporation and its subsidiaries. The Company's executive offices
are located at 4 Country View Road, Malvern, Pennsylvania 19355, and its
telephone number is (610) 647-5930.
SUMMARY TERMS OF THE DEBENTURES
<TABLE>
<S> <C>
Securities Offered ......... $65,000,000 principal amount of 5% Convertible Subordinated
Debentures due 2004 (the "Debentures").
Interest Payment Dates ...... April 15 and October 15, commencing April 15, 1998.
Conversion Rights ............ Convertible into Common Stock at a conversion price of $52.75 per share,
subject to adjustment under certain circumstances (the "Conversion
Price").
Optional Redemption ......... Redeemable by the Company, in whole or in part, on or after October 15,
2000 at a redemption price of 102.5% of par, declining thereafter to par
on or after October 15, 2003.
Subordination ............... Subordinated to all existing and future Senior Indebtedness.
Maturity ..................... October 15, 2004.
</TABLE>
See "Description of Debentures."
6
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors
in addition to the other information set forth in this Prospectus before making
any decision to invest in the securities offered hereby.
Quarterly Fluctuations of Results of Operations
The Company has experienced significant variability of revenues from
quarter to quarter depending primarily on new software license signings, which
are typically concentrated in the last month of each quarter. As the Company's
expenses are relatively fixed in the short term, the Company's operating
results for a particular quarter could be adversely affected to the extent that
anticipated license signings in any quarter are not realized as expected. The
Company's revenues may fluctuate as a result of other factors as well,
including seasonal patterns of capital spending by clients, the timing and
receipt of orders, competition, pricing, new product introductions by the
Company or its competitors, levels of market acceptance for new products, and
general economic and political factors.
Fixed Price Contracts
Many OnSite service contracts provide for payment on a multi-year fixed
fee basis. The Company negotiates the fee to be charged based on its estimate
of the total expenses to be incurred in providing the services. In the event
the Company's costs to perform an OnSite services contract become greater than
originally anticipated, the Company's profit on that contract would be reduced
and, in an extreme case, the Company may suffer a loss.
Additionally, shorter term system integration contracts have begun to
constitute a larger portion of the Company's business. These system integration
contracts typically are performed on a fixed fee basis and require the Company
to incur significant software modification, customization and integration costs
in order to add functionality to a client's existing system. Similar to the
OnSite service contracts, if the Company's costs to perform a particular system
integration contract become greater than originally anticipated, the Company's
profit on that contract would be reduced or, in an extreme case, the Company
may suffer a loss. For example, the Company incurred additional costs in its
international utility business in the second half of fiscal year 1997 as a
result of contract delays and overruns.
Revenue is recognized as work is performed on the Company's services
contracts. Since services are typically provided at a greater rate during the
early part of a services contract and at a lesser rate in the later part, while
billings often remain constant, revenues in excess of billings result. Revenues
in excess of billings may also result in connection with software services
contracts where billings are sometimes milestone based. Although the Company's
contracts typically provide for the payment of the amount of revenues accrued
in excess of billings in the event of early terminations of the contract, there
can be no assurance that the Company will be able to recover such amounts from
the client in the event of early terminations.
Certain of the Company's contracts are subject to "fiscal funding"
clauses, which provide that in the event of budgetary constraints, the client
is entitled to reduce the level of services to be provided by the Company with
a corresponding reduction in the fee to be paid by the client, or in certain
circumstances, to terminate the services altogether. While the Company has not
been impacted materially by early terminations or reductions in service from
the use of fiscal funding provisions in the past, there can be no assurance
that such provisions will not give rise to early terminations or reductions of
service in the future. If clients of the Company representing a substantial
portion of the Company's revenues were to invoke the fiscal funding provisions
of their OnSite services contracts, the Company's results of operations would
be adversely affected.
Competition
In each of its markets, SCT has multiple competitors, which compete based
on a variety of factors, including customer size, geographic location, and
computing environment. Many established competitors have greater marketing,
technical and financial resources than the Company, and there can be no
assurance that SCT will be able to continue to compete successfully with
existing or new competitors or that such competitors will not develop products
or offer services that are superior to the Company's products and services or
that achieve greater market acceptance. Further, there can be no assurance that
the Company will be able to maintain and enhance its competitive position.
7
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Technological Change and New Products; Software Protection
The application software industry is characterized by rapid technological
advances, changes in customer requirements, product introductions and evolving
industry standards. The Company believes that its future success will depend on
its ability to continue to develop and market new products and enhancements
cost-effectively, which will necessitate continued investment in research and
development and sales and marketing. There can be no assurance that the
Company's existing products will not be rendered obsolete or non-competitive by
new industry standards or changing technology, that the Company will be able to
develop and market new products successfully or that the Company's new product
offerings will be accepted by its markets. Furthermore, programs as complex as
those offered by the Company may contain undetected errors or bugs when they
are first introduced or as new versions are released. There can be no assurance
that, despite testing by the Company and by third-party test sites, errors will
not be found in new product offerings, with the possible result of
unanticipated costs and delays in market acceptance of these products. The
Company believes that one of the factors that has resulted in the increase in
the demand for its software during fiscal year 1997 has been the year 2000
problem presently being encountered by certain organizations. The Company
anticipates that such increased demand will diminish over time as organizations
resolve the year 2000 problem.
The Company is substantially dependent upon copyright, trade secret laws
and internal non-disclosure safeguards generally incorporated in its software
license agreements to protect its software and to provide it with certain
competitive advantages. Although the Company believes that its functional
expertise in its markets serves to reduce the potential impact to the Company
which might result from misappropriation of intellectual property or trade
secrets, there can be no assurance that its existing or future copyrights and
other measures used by the Company will afford protection against competitors
with similar software or against infringing software.
Dependence on Qualified Technical Personnel
The Company's success depends on its ability to attract and retain
personnel with the technical skills and experience required to meet its
clients' specific needs. The Company must continually identify and recruit
technical personnel in each of its markets to fill new positions and to replace
technical personnel who have departed. The application software industry has
high turnover rates, and the demand for employees has, to date, substantially
exceeded supply. This has resulted in intense competition for technical
personnel and the Company expects such competition to increase in the future.
There can be no assurance that the Company will attract and retain the
personnel required for expanded operations. Failure to attract and retain such
personnel or an increase in the Company's employee turnover rate could have a
material adverse effect on the Company's business, operating results and
financial condition.
Contract Performance and OnSite Services Risks
The Company's OnSite services contracts require the Company to assume a
significant level of responsibility for developing or maintaining systems on
behalf of clients. Many of the Company's OnSite services contracts are critical
to the operations of its clients' businesses. The Company's failure or
inability to complete such engagements to its clients' satisfaction could have
a material adverse effect on its clients' operations and, consequently, may
give rise to claims against the Company for damages or otherwise damage its
reputation, any of which could have a material adverse effect on the Company's
business, operating results and financial condition. Moreover, certain of the
Company's more recent OnSite services contracts provide financial penalties in
the event the Company does not meet stated performance levels.
Management of Growth
The continuation of the growth in Company revenues will depend, in part,
on the success of certain new product offerings including ADAGE. In the event
one or more new product offerings of the Company are unsuccessful, the
Company's financial position or results of operations could be adversely
affected. In addition, the Company may continue to grow through acquisitions.
Future acquisitions will require integration of the acquired operations into
those of the Company. There can be no assurance that the Company will be able
to manage its expansion or successfully integrate acquired operations. The
failure to do so could adversely affect the Company's financial position or
results of operations.
8
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Dependence on Key Management and Sales Personnel
The success of the Company's business is dependent upon certain key
management and sales personnel. In addition, the Company believes that to
succeed in the future it will be required to continue to attract, retain and
motivate additional talented and qualified management and sales personnel, who
are in high demand. There can be no assurance that the Company will be able to
retain its key employees or that it will be able to continue to attract,
assimilate and retain other skilled management and sales personnel. The loss of
certain of its existing key personnel or the inability to attract and retain
additional qualified employees in the future could have a material adverse
effect on the Company.
Subordination
The Debentures will be subordinated in right of payment to all present and
future Senior Indebtedness (as hereafter defined) of the Company. The Indenture
does not prohibit or limit the incurrence of additional Senior Indebtedness.
See "Description of the Debentures - Subordination."
Legal Proceedings
In October 1995, a purported class action lawsuit was filed against the
Company and certain of its officers and directors. The lawsuit alleges
violations of certain disclosure and related provisions of the federal
securities laws and seeks damages in an unspecified amount as well as equitable
relief. A number of the plaintiffs' claims have been dismissed, and the Company
believes that the remaining allegations in the lawsuit are without merit.
Although the Company is defending against the lawsuit vigorously, the ultimate
outcome of the matter cannot presently be determined.
Absence of Public Market for the Debentures; Volatility of Securities Prices
There is currently no public market for the Debentures. The Debentures
will be traded in the over-the-counter market and quoted on Nasdaq, and there
can be no assurance that an active trading market will develop for the
Debentures or, if developed, that such market can be sustained. The Debentures
may trade at a discount from the initial offering price, depending upon
prevailing interest rates and other factors. Furthermore, the market price for
similar securities, announcements of technological innovations, new commercial
products or new contract signings by the Company or its competitors,
developments concerning proprietary technologies, regulatory developments and
general economic and political factors, as well as period-to-period
fluctuations in financial results, may have a significant impact on the market
price of the Debentures and the Common Stock into which the Debentures are
convertible.
Anti-Takeover Provisions; Possible Issuance of Preferred Stock
The Company's Certificate of Incorporation and By-Laws contain provisions
that could have the effect of delaying, deferring or preventing an unsolicited
change in the control of the Company, which may adversely affect the market
price of the Common Stock or the ability of stockholders to participate in a
transaction in which they might otherwise receive a premium for their shares
over the then-current market price. These provisions require a supermajority
vote of the voting stock for removal of directors and a supermajority vote of
the directors to approve a merger, consolidation, sale of substantially all of
the assets of the Company or similar transaction. Additionally, the Company's
Board of Directors is classified, which makes it more difficult for a third
party to change its composition. The Indenture's Change in Control provisions
may, in certain circumstances, make more difficult or discourage a takeover of
the Company and, thus, the removal of incumbent management. Further, the
Company's Certificate of Incorporation authorizes the Board of Directors to
issue Preferred Stock without shareholder approval and on such terms as the
Board of Directors may determine. Although no shares of Preferred Stock are
currently outstanding and the Company has no present plans to issue any such
shares, the rights of the holders of shares of Common Stock will be subject to,
and may be adversely affected by, the rights of holders of any Preferred Stock
that may be issued in the future.
9
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the Debentures in this
offering are estimated to be $62,855,000 ($72,312,500 if the Underwriters'
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and estimated offering expenses. The net proceeds of
this offering will be used for working capital and general corporate purposes,
including product development and possible future acquisitions. The Company
currently does not have any commitments or agreements for any acquisition.
Pending application of the net proceeds as described above, the net proceeds of
this offering will be invested in U.S. Treasury securities and other investment
grade, interest-bearing instruments.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1997 and as adjusted to give effect to the sale of the
Debentures hereby and the application of the estimated net proceeds therefrom
as described in "Use of Proceeds."
<TABLE>
<CAPTION>
June 30, 1997
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Actual As Adjusted
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(In thousands)
<S> <C> <C>
Current portion of long-term debt .................................... $ 7,385 $ 7,385
======== ========
Long-term debt:
Notes payable ......................................................... $ 750 $ 750
Senior Revolving Credit Agreement .................................... -- --
Convertible Subordinated Debentures due 2004 ........................ -- 65,000
-------- --------
Total long-term debt ............................................. 750 65,750
Stockholders' equity:
Preferred Stock, $.10 par value per share, 3,000,000 shares authorized,
none issued ...................................................... -- --
Common Stock, $.01 par value per share, 24,000,000 shares authorized,
17,317,436 issued (1) ............................................. 173 173
Capital in excess of par value ....................................... 89,408 89,408
Retained Earnings ................................................... 54,202 54,202
Less:
Held in treasury, 1,150,941 common shares at cost .................. (2,959) (2,959)
Notes receivable from stockholders ................................. (610) (610)
-------- --------
Total stockholders' equity ....................................... 140,214 140,214
-------- --------
Total capitalization ................................................ $148,349 $213,349
======== ========
</TABLE>
- ------------
(1) Excludes 2,543,497 shares of Common Stock reserved for issuance under
currently outstanding options at an average exercise price of $14.21 per
share.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of September 30,
1992, 1993, 1994, 1995 and 1996 and for the years then ended are derived from
the consolidated financial statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. The selected consolidated financial
data as of and for the nine months ended June 30, 1996 and 1997 are derived
from unaudited consolidated financial statements which, in management's
opinion, include all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position and the results of operations for these periods. The results of
operations for the nine months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the full year ending
September 30, 1997. The information set forth below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto, and
other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------
1992(1)(3) 1993(3) 1994(2)
-------------- --------------- ---------------
(In thousands, except share and per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue:
OnSite services ........................... $ 43,683 $ 53,685 $ 63,979
Software sales ........................... 24,983 27,540 34,540
Maintenance and enhancements ............... 13,088 26,046 30,270
Software services ........................ 8,393 12,439 18,172
Interest and other revenue ............... 736 458 1,253
------------ ------------- -------------
90,883 120,168 148,214
Expenses:
Cost of OnSite services .................. 35,098 42,403 50,095
Cost of software sales and maintenance
and enhancements ........................ 19,987 23,578 27,055
Cost of software services .................. 7,236 10,776 14,606
Selling, general and administrative ...... 22,073 31,172 36,144
Charge for purchased research and
development .............................. 7,693 0 0
Interest expense ........................... 443 1,016 2,520
------------ ------------- -------------
92,530 108,945 130,420
Income (Loss) Before Income Taxes and
Extraordinary Credit ..................... (1,647) 11,223 17,794
Provision for income taxes .................. 803 4,511 6,148
------------ ------------- -------------
Income (Loss) Before Extraordinary Credit (2,450) 6,712 11,646
Extraordinary Credit: Utilization of
operating loss carry forwards ............ 180 2,901 0
------------ ------------- -------------
Net income (loss) ........................ $ (2,270) $ 9,613 $ 11,646
============ ============= =============
Earnings per share:
Primary .................................... $ (0.19) $ 0.75 $ 0.86
Fully diluted .............................. $ -- $ 0.74 $ 0.83
Weighted average common shares and
equivalents outstanding:
Primary .................................... 11,848,423 12,780,223 13,517,146
Fully Diluted .............................. -- 13,195,672 15,817,862
Ratio of earnings to fixed charges(4) ...... -- 8.3x 6.6x
Balance Sheet Data:
Working Capital ........................... $ 20,159 $ 50,432 $ 59,239
Total Assets .............................. 72,487 110,082 128,809
Long Term Debt (net of current portion) . 12,610 34,500 34,500
Stockholders Equity ........................ 40,674 51,282 65,481
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
--------------------------------
1995(1) 1996 1996 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
OnSite services ........................... $ 66,904 $ 84,183 $ 62,079 $ 70,149
Software sales ........................... 40,376 46,821 33,382 50,554
Maintenance and enhancements ............... 35,145 42,013 30,923 38,003
Software services ........................ 31,631 41,552 29,917 43,899
Interest and other revenue ............... 2,092 689 590 406
------------- ------------- ------------- -------------
176,148 215,258 156,891 203,011
Expenses:
Cost of OnSite services .................. 51,927 67,852 50,210 57,190
Cost of software sales and maintenance
and enhancements ........................ 31,681 38,546 27,833 33,063
Cost of software services .................. 27,082 36,586 27,116 36,150
Selling, general and administrative ...... 43,746 53,921 39,660 51,064
Charge for purchased research and
development .............................. 8,700 0 0 0
Interest expense ........................... 2,696 2,350 1,724 1,123
------------- ------------- ------------- -------------
165,832 199,255 146,543 178,590
Income (Loss) Before Income Taxes and
Extraordinary Credit ..................... 10,316 16,003 10,348 24,421
Provision for income taxes .................. 7,258 6,884 4,407 9,906
------------- ------------- ------------- -------------
Income (Loss) Before Extraordinary Credit 3,058 9,119 5,941 14,515
Extraordinary Credit: Utilization of
operating loss carry forwards ............ 0 0 0 0
------------- ------------- ------------- -------------
Net income (loss) ........................ $ 3,058 $ 9,119 $ 5,941 $ 14,515
============= ============= ============= =============
Earnings per share:
Primary .................................... $ 0.22 $ 0.62 $ 0.39 $ 0.95
Fully diluted .............................. $ 0.21 $ 0.61 $ 0.39 0.87
Weighted average common shares and
equivalents outstanding:
Primary .................................... 14,029,700 14,696,274 15,095,911 15,270,714
Fully Diluted .............................. 14,399,182 16,781,274 15,095,911 17,293,334
Ratio of earnings to fixed charges(4) ...... 4.1x 5.8x 5.2x 14.1x
Balance Sheet Data:
Working Capital ........................... $ 63,555 $ 67,389 $ 63,082 $ 76,929
Total Assets .............................. 150,983 163,259 162,828 193,099
Long Term Debt (net of current portion) . 31,790 31,590 31,690 750
Stockholders Equity ........................ 85,565 96,796 91,902 140,214
</TABLE>
- ------------
(1) Includes charges of $7,693 and $8,700 for purchased research and
development in the years ended September 30, 1992 and 1995, respectively.
Results without the charge for purchased research and development would
have been:
<TABLE>
<CAPTION>
1992 1995
-------- --------
<S> <C> <C>
Income before extraordinary credit ........................ $3,628 $11,758
Fully diluted income per share before extraordinary credit $ 0.29 $ 0.80
</TABLE>
(2) Effective October 1, 1993, the Company adopted FAS 109, "Accounting for
Income Taxes," with an immaterial cumulative effect. Prior to 1994, the
benefits of net operating loss and tax credit carryforwards were
classified as extraordinary credits.
(3) The classification of expenses between the cost of software sales and
maintenance and enhancements and the cost of software services has been
estimated for 1992 and 1993 to facilitate comparability with subsequent
years' presentations.
(4) Earnings were inadequate to cover fixed charges for 1992. The coverage
deficiency amounted to $1,647,000. If the charge for purchased research
and development referred to in Note (1) were not included, the ratio for
1992 would have been 8.0x.
11
<PAGE>
DESCRIPTION OF DEBENTURES
The Debentures are to be issued under an Indenture, dated as of October
15, 1997 (the "Indenture"), between the Company and First Union National Bank,
as Trustee (the "Trustee"). A copy of the Indenture substantially in the form
in which it is to be executed has been filed as an exhibit to the Registration
Statement. The following summarizes the material provisions of the Indenture
and is subject to, and qualified in its entirety by reference to, all the
provisions of the Indenture, including the definition therein of certain terms.
Wherever particular articles, sections or defined terms of the Indenture are
referred to, it is intended that such articles, sections or defined terms shall
be incorporated herein by reference.
General
The Debentures will be limited to $65,000,000 aggregate principal amount
(or $74,750,000 aggregate principal amount assuming exercise in full of the
Underwriters' over-allotment option), will be unsecured subordinated
obligations of the Company, and will mature on October 15, 2004. The Debentures
will bear interest from October 22, 1997 at the rate per annum shown on the
cover page of this Prospectus. Interest will be payable semi-annually on April
15 and October 15 of each year ("Interest Payment Dates"), subject to certain
exceptions, commencing April 15, 1998, to the person in whose name the
Debenture is registered at the close of business on the first day of April or
October, as the case may be ("Regular Record Date"), next preceding such
Interest Payment Date. Principal of, premium, if any, and interest on the
Debentures will be payable, and the Debentures will be convertible and
exchangeable and transfers thereof will be registrable, at the office of the
Trustee or the office or agency of the Company maintained for such purpose in
the City of Philadelphia or New York and at any other office or agency
maintained by the Company for such purpose, provided that at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto as it appears in the Debenture Register. All payments
of interest and principal will be made in United States Dollars. (Sections
3.01, 3.05, 3.07, 10.02, 12.02 and 13.01)
The Debentures will be issued only in registered form without coupons in
denominations of $1,000 or any integral multiple thereof. (Section 3.02) No
service charge will be made for any registration of transfer or exchange of
Debentures, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith. (Section
3.05)
Conversion Rights
The Debentures will be convertible into Common Stock at any time prior to
redemption (except as set forth in the following sentence) or maturity,
initially at the conversion price stated on the cover page hereof. The right to
convert Debentures called for redemption will terminate at the close of
business on the Business Day immediately preceding a Redemption Date and will
be lost if not exercised prior to that time. (Section 12.01) See "Optional
Redemption."
Debentures surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except Debentures called
for redemption on a Redemption Date within such period) must be accompanied by
payment of an amount equal to the interest thereon which the registered Holder
is to receive. No other adjustment for interest or dividends is to be made upon
conversion. (Sections 3.07 and 12.02) Fractional shares of Common Stock will
not be issued upon conversion, but in lieu thereof, the Company will pay a cash
adjustment based upon market price. (Section 12.03)
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) under certain circumstances, including: (i) the issuance of
Common Stock as a dividend or distribution on Common Stock; (ii) the issuance
to all holders of Common Stock of rights or warrants entitling them to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price; (iii) certain subdivisions and combinations of Common
Stock; (iv) the issuance as a dividend or distribution to all holders of Common
Stock of shares of capital stock of the Company (other than Common Stock) or
evidences of indebtedness, cash or other assets of the Company (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above and dividends and distributions in connection with the
liquidation, dissolution or winding up of the
12
<PAGE>
Company or paid exclusively in cash); (v) dividends or other distributions
consisting exclusively of cash (excluding any cash portion of distributions
referred to in clause (iv)) to all holders of Common Stock to the extent such
distributions, combined with (A) all such all-cash distributions made within
the preceding 12 months in respect of which no adjustment has been made, plus
(B) any cash and the fair market value of other consideration paid in respect
of any tender offers by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 10% of the Company's market capitalization (being the
product of the then current market price of the Common Stock times the number
of shares of Common Stock then outstanding) on the record date for such
distribution; and (vi) the purchase of Common Stock pursuant to a tender offer
made by the Company or any of its subsidiaries to the extent that the aggregate
consideration, together with (X) any cash and the fair market value of any
other consideration paid in any other tender offer expiring within the 12
months preceding such tender offer in respect of which no adjustment has been
made, plus (Y) the aggregate amount of any such all-cash distributions referred
to in clause (v) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of the Company's market capitalization
on the expiration of such tender offer. (Section 12.04) In the case of certain
consolidations or mergers to which the Company is a party or the conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, each Debenture then outstanding would, without the consent of any
Holders of Debentures, become convertible only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer by a holder of the number of shares of Common Stock into
which the Debenture might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon the
consolidation, merger, conveyance or transfer (provided that if the kind or
amount of securities, cash or other property so receivable is not the same for
each non-electing share, the kind and amount so receivable by each non-electing
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the non-electing shares). (Section 12.10)
Subordination of Debentures
The Debentures will be subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Senior
Indebtedness. (Section 13.01) Senior Indebtedness is defined to include the
principal of, premium, if any, interest and other amounts due on any
indebtedness, including fees and costs of collection, whether now outstanding
or hereafter created, incurred, assumed or guaranteed by the Company, for money
borrowed from others (including obligations under capitalized leases or
purchase money indebtedness) or in connection with the acquisition by the
Company or a Subsidiary of any other business or entity, or in respect of
letters of credit or bid, performance or surety bonds issued for the account or
on the credit of the Company or a Subsidiary, and, in each case, all renewals,
extensions and refundings thereof, other than (i) any such indebtedness as to
which, in the instrument creating or evidencing the same, it is provided that
such indebtedness is not superior in right of payment to the Debentures, (ii)
indebtedness of the Company to any Affiliate and (iii) the Debentures. (Section
1.01) At September 30, 1997, the Company had approximately $3,774,000 of
outstanding indebtedness that would have constituted Senior Indebtedness under
the Indenture. The Indenture does not limit the amount of Senior Indebtedness
that the Company may incur.
No payments of principal of, premium, if any, or interest on the
Debentures may be made and no Debentures may be redeemed, retired or purchased
if the Company is then in default in the payment of any Senior Indebtedness or
if at the time any other Event of Default under the terms of any Senior
Indebtedness exists permitting acceleration thereof. Upon any payment or
distribution of assets of the Company in the event of any insolvency,
reorganization, liquidation or similar proceeding, all Senior Indebtedness must
be repaid in full (including any interest thereon accruing after the
commencement of any proceeding) before the Holders will be entitled to receive
or retain any payment. If the Debentures are declared due and payable before
their Stated Maturity because of the occurrence of an Event of Default, no
payment may be made in respect of the Debentures unless and until all Senior
Indebtedness shall have been paid in full. (Section 13.02)
By reason of such subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Indebtedness may recover more, ratably,
than Holders, and creditors of the Company who are neither holders of Senior
Indebtedness nor Holders may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Holders.
13
<PAGE>
Optional Redemption
The Debentures will be redeemable upon not less than 30 nor more than 60
days' notice by mail at any time, as a whole or in part, at the election of the
Company, at a Redemption Price equal to the percentage of the principal amount
set forth below if redeemed in the 12-month period beginning October 15 of the
years indicated:
Redemption
Year Price
---- ----------
2000 102.500
2001 101.667
2002 100.833
and thereafter at a Redemption Price equal to 100% of the principal amount,
with accrued interest to the Redemption Date (subject to the right of Holders
of record on Regular Record Dates to receive interest due on an Interest
Payment Date), provided that the Company may not redeem any Debentures prior to
October 15, 2000. (Sections 2.03, 11.01, 11.04, 11.05 and 11.06)
Certain Rights to Require Repurchase of Debentures by the Company
In the event of any Change in Control (as defined below) of the Company
occurring after the date of issuance of the Debentures and on or prior to
Maturity, each Holder of Debentures will have the right, at the Holder's
option, to require the Company to repurchase all or any part of the Holder's
Debentures on the date (the "Repurchase Date") that is 75 days after the date
the Company gives notice of the Change in Control as described below at a price
(the "Repurchase Price") equal to 100% of the principal amount thereof,
together with accrued and unpaid interest to the Repurchase Date. (Section
14.01) On or prior to the Repurchase Date, the Company shall deposit with the
Trustee or a Paying Agent an amount of money sufficient to pay the Repurchase
Price of the Debentures which are to be repaid on the Repurchase Date. (Section
14.03) Neither the Board of Directors of the Company nor the Trustee, acting
alone or together, can modify or waive this required repurchase of the
Debentures.
Failure by the Company to repurchase the Debentures when required under
the preceding paragraph will result in an Event of Default under the Indenture
whether or not such repurchase is permitted by the subordination provisions of
the Indenture. (Section 5.01)
On or before the 15th day after the occurrence of a Change in Control, the
Company is obligated to mail to all Holders a notice of the event constituting
and the date of such Change in Control, the Repurchase Date, the date by which
the repurchase right must be exercised, the Repurchase Price for Debentures,
and the procedures which a Holder must follow to exercise a repurchase right.
To exercise the repurchase right, a Holder of a Debenture must deliver, on or
before the 10th day prior to the Repurchase Date, written notice to the Company
(or an agent designated by the Company for such purpose) and to the Trustee of
the Holder's exercise of such right, together with the certificates evidencing
the Debentures with respect to which the right is being duly exercised, duly
endorsed for transfer. (Section 14.02)
A "Change in Control" shall occur when: (i) all or substantially all of
the Company's assets are sold as an entirety to any person or related group of
persons; (ii) there shall be consummated any consolidation or merger of the
Company (A) in which the Company is not the continuing or surviving corporation
(other than a consolidation or merger with a wholly owned subsidiary of the
Company in which all shares of Common Stock outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for the same
consideration) or (B) pursuant to which the Common Stock is converted into
cash, securities or other property, in each case other than a consolidation or
merger of the Company in which the holders of the Common Stock immediately
prior to the consolidation or merger have, directly or indirectly, at least a
majority of the common stock of the continuing or surviving corporation
immediately after such consolidation or merger, or (iii) any person, or any
persons acting together which would constitute a "group" for purposes of
Section 13(d) of the Exchange Act, together with any Affiliates thereof, shall
acquire beneficial ownership (as defined in Rule 13d-3 under the Exchange Act)
of at least 50% of the total voting power of all classes of capital stock of
the Company entitled to vote generally in the election of directors of the
Company. Notwithstanding clause (iii) of the foregoing definition, a Change in
Control shall not be deemed to have occurred solely by virtue of the Company,
any Subsidiary, any employee stock purchase plan, stock option plan or other
stock incentive plan or program, retirement
14
<PAGE>
plan or automatic dividend reinvestment plan or any substantially similar plan
of the Company or any Subsidiary or any person holding securities of the
Company for or pursuant to the terms of any such employee benefit plan, filing
or becoming obligated to file a report under or in response to Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report) under the Exchange
Act disclosing beneficial ownership by it of shares or securities of the
Company, whether in excess of 50% or otherwise. (Section 14.05) A
recapitalization or a leveraged buyout or similar transaction involving members
of Management or their Affiliates will constitute a Change in Control if it
meets the foregoing definition.
Notwithstanding the foregoing, a Change in Control as described above
shall not be deemed to have occurred if (i) the Current Market Price of the
Common Stock on the date of a Change in Control is at least equal to 105% of
the Conversion Price of the Debentures in effect immediately preceding the time
of such Change in Control, or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction giving rise to such Change
in Control to the holders of Common Stock consists of shares of common stock
that are, or immediately upon issuance will be, listed on a national securities
exchange or quoted on the Nasdaq National Market, and as a result of such
transaction the Debentures become convertible solely into such common stock, or
(iii) the consideration in the transaction giving rise to such Change in
Control to the holders of Common Stock consists of cash or securities that are,
or immediately upon issuance will be, listed on a national securities exchange
or quoted on the Nasdaq National Market, or a combination of cash and such
securities, and the aggregate fair market value of such consideration (which,
in the case of such securities, shall be equal to the average of the daily
Closing Price of such securities during the 10 consecutive trading days
commencing with the sixth trading day following consummation of such
transaction) is at least 105% of the Conversion Price of the Debentures in
effect on the date immediately preceding the Closing Date of such transaction.
(Section 14.05)
There is no definition of the phrase "all or substantially all" as applied
to the Company's assets and used in the definition of Change in Control in the
Indenture, and there is no clear definition of such phrase under applicable
law. As a result of the uncertainty of the meaning of this phrase, in the event
the Company were to sell a significant amount of its assets, the Holders and
the Company may disagree over whether the sale gave rise to the right of
Holders to require the Company to repurchase the Debentures. In such case, the
Holders would likely not be able to require the Company to repurchase unless
and until the disagreement were resolved in favor of the Holders.
The right to require the Company to repurchase Debentures as a result of
the occurrence of a Change in Control could create an Event of Default under
Senior Indebtedness, as a result of which any repurchase could, absent a
waiver, be blocked by the subordination provisions of the Debentures. See
"Subordination of Debentures." The Company's ability to pay cash to the Holders
upon a repurchase may be limited by certain financial covenants contained in
the Company's Senior Indebtedness.
In the event a Change in Control occurs and the Holders exercise their
rights to require the Company to repurchase Debentures, the Company intends to
comply with applicable tender offer rules under the Exchange Act, including
Rules 13e-4 and 14e-1, as then in effect, with respect to any such purchase.
The Change in Control purchase feature of the Debentures may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent Management. The Change in Control purchase
feature, however, is not the result of Management's knowledge of any specific
effort to accumulate shares of Common Stock or to obtain control of the Company
by means of a merger, tender offer, solicitation or otherwise, or part of a
plan by Management to adopt a series of antitakeover provisions. Instead, the
Change in Control purchase feature is a standard term contained in other
similar debt offerings and the specific terms of this feature result from
negotiations between the Company and the Underwriters. Management has no
present intention to engage in a transaction involving a Change in Control.
The foregoing provisions would not necessarily afford Holders protection
in the event of highly leveraged or other transactions involving the Company
that may adversely affect Holders.
Sinking Fund
There will be no sinking fund established for the retirement of the
Debentures.
15
<PAGE>
Modification of the Indenture
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of two-thirds in principal
amount of the Outstanding Debentures provided that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debenture
affected thereby, (i) change the stated maturity date of the principal of, or
any installment of interest on, the Debentures, (ii) reduce the principal
amount of, the rate of interest thereon, or any premium payable on, any
Debentures, (iii) change the place of payment where, or the coin or currency in
which, any Debenture or any payment or the interest thereon is payable, (iv)
impair the right to institute suit for the enforcement of any such payment when
due, (v) adversely affect the conversion rights of the Holders, (vi) modify the
provisions of the Indenture with respect to the subordination of the Debentures
in a manner adverse to the Holders, (vii) adversely affect the right to require
the Company to repurchase Debentures on a Change in Control, or (viii) reduce
the percentage in principal amount of Debentures the consent of whose Holders
is required for modification or amendment of the Indenture or for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults. (Section 9.02)
Events of Default; Notice and Waiver
The following are to be Events of Default: (i) default in the payment of
any interest, continued for 30 days; (ii) default in the payment of principal
or premium, if any, when due; (iii) default in the payment of the Repurchase
Price in respect of any Debenture on the Repurchase Date in accordance with the
Indenture; (iv) default in the performance of any other covenant continued for
60 days after written notice to the Company as provided in the Indenture; (v)
default in respect of indebtedness of the Company for money borrowed which
results in acceleration of the maturity of $1 million or more of indebtedness,
if such acceleration is not rescinded or indebtedness discharged within 30 days
after written notice to the Company as provided in the Indenture; and (vi)
certain events in bankruptcy, insolvency or reorganization. (Section 5.01) If
any Event of Default shall happen and be continuing, the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Debentures may
declare the Debentures due and payable immediately. (Section 5.02) At any time
after a declaration of acceleration with respect to the Debentures has been
made, but before a judgment or decree based on acceleration has been obtained,
the Holders of a majority in principal amount of the Outstanding Debentures
may, under certain circumstances, rescind and annul such acceleration. (Section
5.02)
No Holder will have any right to institute any proceeding with respect to
the Indenture or for any remedy under the Indenture unless (i) the Holder
previously has given to the Trustee written notice of a continuing Event of
Default, (ii) the Holders of not less than 25% in principal amount of the
Outstanding Debentures have made written request, and offered reasonable
indemnity, to the Trustee to institute proceedings as trustee, and (iii) within
60 days after such request, the Trustee has neither instituted such proceeding
nor received from the Holders of a majority in aggregate principal amount of
the Outstanding Debentures a direction inconsistent with the request. (Section
5.07)
The Indenture will provide that the Trustee will be under no obligation,
subject to the duty of the Trustee during default to act with the required
standard of care, to exercise any of its rights or powers under the Indenture
at the request or direction of any of the Holders, unless such Holders shall
have offered to the Trustee indemnification satisfactory to the Trustee.
(Section 6.03) Subject to such provisions for indemnification of the Trustee,
the Holders of a majority in principal amount of the Outstanding Debentures
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. (Section 5.12)
The Holders of a majority in principal amount of the Outstanding
Debentures may on behalf of the Holders of all Debentures waive compliance by
the Company with certain restrictive provisions of the Indenture. (Section
10.07) The Holders of a majority in principal amount of the Outstanding
Debentures may on behalf of the Holders of all Debentures waive certain past
defaults except a default in payment of the principal of (or premium, if any)
or interest on any Debenture or in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
Holder of each Outstanding Debenture affected. (Section 5.13)
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Consolidation, Merger, Conveyance or Transfer
The Indenture provides that the Company shall not consolidate with or
merge into any other corporation or convey or transfer its properties and
assets substantially as an entirety to any person, unless (i) any such
successor assumes the Company's obligations under the Debentures and the
Indenture, (ii) after giving effect thereto, no Event of Default shall have
occurred and be continuing, and (iii) certain other conditions under the
Indenture are met. (Section 8.01) Upon any such consolidation or merger, or any
such conveyance or transfer of the properties and assets of the Company
substantially as an entirety, the successor corporation formed by such
consolidation, or into which the Company is merged, or to which such conveyance
or transfer is made, shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor corporation had been named as the Company. The Company as
the predecessor corporation shall be relieved of all obligations and covenants
under the Indenture. (Section 8.02)
Governing Law
The Indenture will provide that the Debentures will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law.
The Trustee
First Union National Bank will be the Trustee under the Indenture.
DESCRIPTION OF CAPITAL STOCK
Common Stock
The authorized capital stock of the Company includes 24,000,000 shares of
Common Stock, par value $.01 per share, of which, on June 30, 1997, 16,166,495
were issued and outstanding. Holders of Common Stock have no preemptive rights.
The outstanding shares of Common Stock are fully paid and non-assessable.
Holders of Common Stock are entitled to dividends when, as and if declared by
the Board of Directors of the Company out of any funds legally available to the
Company for that purpose. A holder of Debentures will not be entitled to
receive dividends actually declared and paid, if any, with respect to the
Common Stock unless such holder has first exercised the conversion rights
associated with the Debentures, and then only to the extent such holder has so
converted Debentures into shares of Common Stock.
Holders of Common Stock are entitled to one vote per share held of record
with respect to all matters submitted to a vote of the stockholders. There is
no cumulative voting for the election of directors.
The Company's Board of Directors is divided into three classes, each of
which is elected for a three-year term, with one class being elected each year.
Directors may be removed, only for cause, and only with the approval of 66 2/3%
of the voting power of the stock entitled to vote in the election of directors
(the "voting stock"). The classification of directors has the effect of making
it more difficult for a third party to change the composition of the Board of
Directors without the support of the incumbent Board. At least two annual
stockholder meetings, instead of one, will be required to effect a change in
the control of the Board, unless stockholders controlling at least 66 2/3% of
the voting stock vote to remove directors for cause.
The Company's Certificate of Incorporation provides that unless approved
by two-thirds of the Directors of the Company, the Company cannot engage in (i)
a merger or consolidation, (ii) a sale, lease or exchange of substantially all
of its assets, or (iii) a reclassification, recapitalization or other
transaction designed to decrease the number of holders of the Company's voting
stock (other than repurchases of stock for cancellation or the Company's
treasury and other than redemptions permitted by the terms of the security),
without the affirmative vote of holders of at least 66 2/3% of all stock
entitled to vote thereon.
In connection with a liquidation, dissolution or winding up of the
Company, holders of Common Stock will be entitled to receive pro rata the
assets remaining after creditors of the Company and the holders of any
Preferred Stock have been paid in full.
The Transfer Agent for the Common Stock is Registrar and Transfer Company,
Cranford, New Jersey.
Preferred Stock
The Company is authorized to issue 3,000,000 shares of Preferred Stock,
par value $.10 per share, and to establish and issue shares of Preferred Stock
in series and to fix, determine and vary the voting rights, designations,
preferences, qualifications, privileges, options, conversion rights and other
special rights of each series of Preferred Stock. As of the date of this
Prospectus no shares of Preferred Stock were issued and outstanding.
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UNDERWRITING
The Underwriters named below (the "Underwriters"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the principal amount of Debentures indicated below
opposite their respective names at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will purchase
all the Debentures offered hereby if any such Debentures are purchased.
Principal Amount
Underwriters of Debentures
------------ -----------------
Unterberg Harris .................. 32,500,000
Janney Montgomery Scott Inc. ...... 32,500,000
------------
Total ........................... $65,000,000
============
The Company has been advised that the Underwriters propose initially to
offer the Debentures to the public at the offering price set forth on the cover
page of this Prospectus and to certain selected dealers (who may include the
Underwriters) at such price less a concession not in excess of 1.80% of the
principal amount thereof. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of 0.25% to certain other dealers. After
the initial offering, the offering price and other selling terms may be changed
by the Underwriters. The Debentures are offered subject to receipt and
acceptance by the Underwriters, and to certain other conditions, including the
right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30 day period after the date of this Prospectus, to purchase up to a
maximum of $9,750,000 in principal amount of additional Debentures from the
Company at the initial offering price less the underwriting discount shown on
the cover page of this Prospectus. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the
Debentures offered hereby. To the extent the Underwriters exercise the option,
the Underwriters will be committed, subject to certain conditions, to purchase
a principal amount of such additional Debentures in approximately the same
proportion as set forth in the above table.
The Company has agreed to indemnify the Underwriters against certain
liabilities that may be incurred in connection with this offering, including
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
The Company has agreed that it will not sell or dispose of, and the
Company's directors and executive officers have agreed that they will not sell
or dispose of, any shares of Common Stock without the prior written consent of
either of the Underwriters until 90 days after the effective date of the
Registration Statement of which this Prospectus is a part. Such lock-up
restriction does not apply to (i) sales or other transfers of up to 50,000
shares of Common Stock owned by Michael J. Emmi, the Company's Chairman,
President and Chief Executive Officer, and up to 10,000 shares of Common Stock
owned by each of the other executive officers and directors of the Company (an
aggregate of 120,000 shares), (ii) issuances by the Company under employee
stock plans, upon exercise of options outstanding at the commencement of this
offering and upon conversion of the Debentures, or (iii) private sales,
transfers or issuances subject to the lock-up restriction.
Thomas I. Unterberg, a Managing Director of Unterberg Harris, also serves
as a director of the Company in his individual capacity. Mr. Unterberg and
other partners of Unterberg Harris beneficially own 188,600 shares of Common
Stock. The Underwriters have provided investment banking services to the
Company and may continue to do so in the future.
In connection with this offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the Debentures or Common Stock. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M under the
Exchange Act pursuant to which the Underwriters may bid for, or purchase,
Debentures or Common Stock for the purpose of stabilizing the market price. The
Underwriters also may create a short position by selling more Debentures in
connection with this offering than it is committed to purchase from the
Company, and in such case may purchase Debentures in the open market following
completion of this offering to cover all or a portion of such short position.
In addition, the Underwriters may impose "penalty bids" whereby it may reclaim
from a dealer participating in
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this offering the selling concession with respect to Debentures that are
distributed in this offering, but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Debentures or the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph is required, and,
if they are undertaken, they may be discontinued at any time.
LEGAL MATTERS
The validity of the securities offered hereby is being passed upon for the
Company by Pepper, Hamilton & Scheetz LLP. Certain legal matters relating to
this offering have been passed upon for the Underwriters by Cravath, Swaine &
Moore.
EXPERTS
The consolidated financial statements of Systems & Computer Technology
Corporation appearing in the Company's Annual Report on Form 10-K for the year
ended September 30, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus, and, if given
or made, such information or representations must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy any security other than the securities to which
it relates, nor does it constitute an offer to sell or a solicitation of an
offer to buy such securities by anyone in any jurisdiction in which such offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that information contained herein is correct as of any time subsequent to the
date hereof.
--------------------
TABLE OF CONTENTS
Page
-----
Available Information ................................................ 2
Documents Incorporated by Reference ................................. 2
The Company ......................................................... 4
Summary Terms of the Debentures ....................................... 6
Risk Factors ......................................................... 7
Use of Proceeds ...................................................... 10
Capitalization ...................................................... 10
Selected Consolidated Financial Data ................................. 11
Description of Debentures ............................................. 12
Description of Capital Stock .......................................... 17
Underwriting ......................................................... 18
Legal Matters ......................................................... 19
Experts ............................................................... 19
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<PAGE>
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$65,000,000
[GRAPHIC OMITTED]
SYSTEMS & COMPUTER
TECHNOLOGY
CORPORATION
5% Convertible Subordinated
Debentures Due 2004
-----------------
PROSPECTUS
-----------------
Unterberg Harris
Janney Montgomery Scott Inc.
October 17, 1997
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