<PAGE>
As filed with the Securities and Exchange Commission on June , 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
SunGard Data Systems Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 7379 51-0267091
<S> <C> <C>
(State or other
jurisdiction of
incorporation or (Primary Standard Industrial (I.R.S. Employer
organization) Classification Code Number) Identification No.)
</TABLE>
SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, Pennsylvania 19087
610-341-8700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------
Lawrence A. Gross, Esquire
Vice President and General Counsel
SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, Pennsylvania 19087
610-341-8700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
Copies to:
<TABLE>
<S> <C>
Francis E. Dehel, Esquire Fredric C. Jacobs, Esquire
Louis M. Rappaport, Esquire Law Offices of Fredric C. Jacobs
Blank Rome Comisky & McCauley LLP 214 Bushkill Street
One Logan Square Easton, PA 18042-1886
Philadelphia, PA 19103
</TABLE>
----------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this Registration
Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed maximum
Title of each class of Amount Proposed maximum aggregate Amount of
securities to be to be offering price offering registration
registered registered(1) per share price fee
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share........ 1,200,000 See footnote (2) $4,995,000(/2/) $1,389
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The amount of common stock of the Registrant to be registered has been
determined based upon the estimated maximum number of shares which are
issuable in the merger described herein to shareholders of Pentamation
Enterprises, Inc.
(2) Pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended,
the proposed maximum offering price is based upon the book value of
Pentamation's shares being acquired in the proposed merger transaction, as
of March 31, 1999.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this proxy statement/prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This proxy +
+statement/prospectus is not an offer to sell these securities and is not +
+soliciting an offer to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROPOSED MERGER--YOUR VOTE IS VERY IMPORTANT
SUNGARD DATA SYSTEMS INC.
The boards of directors of SunGard Data Systems Inc. and Pentamation
Enterprises, Inc. have approved the acquisition of Pentamation by SunGard
through a merger by which Pentamation will become a wholly-owned subsidiary of
SunGard.
In the merger, shareholders of Pentamation will receive a range of
approximately 1.0405122 to 1.1536120 shares of SunGard common stock in exchange
for each share of Pentamation common stock. An aggregate of approximately
950,000 to 1,100,000 shares of SunGard common stock will be issued in the
merger. SunGard's common stock is traded on the New York Stock Exchange under
the symbol "SDS."
The merger cannot be completed unless Pentamation shareholders approve the
merger. Pentamation has scheduled a special meeting for Pentamation
shareholders to vote on the merger. Your vote is very important.
Whether or not you plan to attend the special meeting, please take the time
to vote by completing and mailing the enclosed proxy card to Pentamation. If
you sign, date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote in favor of the proposal submitted
at the special meeting.
PENTAMATION ENTERPRISES, INC.
Only shareholders of record of Pentamation common stock as of May 30, 1999
are entitled to attend and vote at the special meeting. The date, time and
place of the special meeting is as follows:
[ ], 1999
4:00 p.m., local time
The Corporate Offices of Pentamation
The Marketplace, 1st Floor
Five Bethlehem Plaza
Bethlehem, Pennsylvania 18018
This document provides you with detailed information about the proposed
merger. We encourage you to read this entire document carefully. Please pay
particular attention to the matters referred to under "Risk Factors" beginning
on page 11.
In addition, you may obtain information about SunGard from documents that
SunGard has filed with the Securities and Exchange Commission. See "Where To
Find More Information" on page 44.
Neither the Securities and Exchange Commission nor
any state securities regulator has approved the
SunGard common stock to be issued in the merger or
determined if this document is accurate or adequate.
Any representation to the contrary is a criminal
offense.
Proxy statement/prospectus dated June , 1999, and first mailed to shareholders
on or about June , 1999.
<PAGE>
June , 1999
PENTAMATION ENTERPRISES, INC.
One Bethlehem Plaza
Bethlehem, PA 18018
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY [ ], 1999
TO THE SHAREHOLDERS OF PENTAMATION ENTERPRISES, INC.:
You are cordially invited to attend a special meeting of shareholders of
Pentamation Enterprises, Inc. to be held at 4:00 p.m., local time, on July ,
1999 at the corporate offices of Pentamation, located at The Marketplace, 1st
Floor, Five Bethlehem Plaza, Bethlehem, Pennsylvania 18018 for the following
purposes.
To consider and vote upon a proposal to (i) approve the agreement and plan
of reorganization and related agreement and plan of merger, dated as of May 6,
1999, among Pentamation, the principal shareholders of Pentamation, SunGard
Data Systems Inc., a Delaware corporation, and PEI Acquisition, Inc., a
Pennsylvania corporation and wholly-owned subsidiary of SunGard, and (ii)
approve the merger of PEI Acquisition, Inc. with and into Pentamation pursuant
to which Pentamation will become a wholly-owned subsidiary of SunGard and each
outstanding share of Pentamation common stock will be converted into the right
to receive a number of shares of SunGard common stock determined pursuant to
the share exchange formulas in the agreement and plan of merger; all on and
subject to the terms and conditions contained in the merger documents.
To transact such other business as may properly be brought before the
Pentamation special meeting, or any adjournments or postponements to the
Pentamation special meeting.
Information relating to the above proposal is set forth in the attached
proxy statement/prospectus. Shareholders of record at the close of business on
May 30, 1999 are entitled to notice of, and to vote at, the Pentamation special
meeting and any adjournments or postponements of the special meeting. The
presence, in person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast on the
particular matter at the meeting will constitute a quorum. Approval of the
merger will require the affirmative vote of a majority of the votes cast by
Pentamation shareholders. All shareholders are cordially invited to attend the
Pentamation special meeting in person.
By order of the Board of Directors
David P. Bloys
Secretary
Bethlehem, Pennsylvania
June , 1999
Whether or not you expect to attend the Pentamation special meeting, please
complete, date and sign the enclosed proxy card and mail it promptly in the
enclosed envelope in order to ensure representation of your shares. No postage
needs to be affixed if the proxy card is mailed in the United States.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE SUNGARD/PENTAMATION MERGER............... 1
SUMMARY.................................................................. 2
Selected Historical Financial Information............................... 6
Market Price Information................................................ 8
Comparative Per Share Data.............................................. 10
RISK FACTORS............................................................. 11
Risks Relating to the Merger............................................ 11
Risks Relating to SunGard............................................... 12
RECENT DEVELOPMENTS...................................................... 15
THE PENTAMATION SPECIAL MEETING.......................................... 16
General................................................................. 16
Record Date............................................................. 16
Stock Entitled to Vote.................................................. 16
Quorum; Required Vote................................................... 16
Voting and Revocation of Proxies........................................ 16
Board Recommendation.................................................... 17
Solicitation of Proxies................................................. 17
Rights of Dissenting Pentamation Shareholders........................... 17
THE MERGER AND RELATED TRANSACTIONS...................................... 18
Background of the Merger................................................ 18
SunGard's Reasons for the Merger........................................ 18
Pentamation's Reasons for the Merger.................................... 19
Interests of Pentamation's Directors and Executive Officers in the
Merger................................................................. 20
Voting Agreements....................................................... 20
Escrow Agreement........................................................ 21
Resale Restrictions..................................................... 21
Rights of Dissenting Pentamation Shareholders........................... 21
Dissenters Rights Procedures............................................ 22
Material Federal Income Tax Consequences................................ 24
Anticipated Accounting Treatment........................................ 25
Regulatory Matters...................................................... 25
New York Stock Exchange Listing......................................... 25
THE MERGER DOCUMENTS..................................................... 26
General................................................................. 26
Merger Consideration.................................................... 26
Stock Options........................................................... 27
Stock Ownership Following the Merger.................................... 28
Exchange Procedures for Pentamation Stock............................... 28
Escrow Agreement and Indemnification Claims............................. 28
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Representations and Warranties........................................... 29
Covenants................................................................ 30
Non-Solicitation......................................................... 32
Conditions to the Merger................................................. 32
Termination.............................................................. 33
Expenses................................................................. 33
Amendment; Waiver........................................................ 33
Nondisclosure and Noncompetition Restrictions............................ 33
INFORMATION CONCERNING PENTAMATION........................................ 34
Business of Pentamation.................................................. 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PENTAMATION................................................ 35
General.................................................................. 35
Results of Operations.................................................... 35
Liquidity and Capital Resources.......................................... 36
Principal Shareholders of Pentamation.................................... 37
COMPARISON OF CAPITAL STOCK............................................... 37
Description of SunGard Capital Stock..................................... 37
Description of Pentamation Capital Stock................................. 38
COMPARISON OF RIGHTS OF HOLDERS OF SUNGARD COMMON STOCK AND HOLDERS OF
PENTAMATION COMMON STOCK................................................. 39
Percentage of Voting Stock; Influence Over Affairs....................... 39
Dividends................................................................ 39
Directors................................................................ 40
Cumulative Voting........................................................ 40
Limitation on Directors' Liability; Indemnification of Officers and
Directors............................................................... 40
Call of Special Meetings of Shareholders................................. 41
Action of Shareholders Without a Meeting................................. 41
Amendments to Certificate of Incorporation............................... 41
Amendments to Bylaws..................................................... 42
Certain Business Combinations............................................ 42
EXPERTS................................................................... 43
LEGAL MATTERS............................................................. 43
WHERE TO FIND MORE INFORMATION............................................ 44
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................. 44
Appendix A Reorganization Agreement
Appendix B Merger Agreement
Appendix C Escrow Agreement
Appendix D Dissenters Rights Statute
</TABLE>
This document incorporates important business and financial information
about SunGard that is not included in or delivered with this document. Copies
of this information are available to any person to whom this document is
delivered, upon written or oral request. Written requests for documents
relating to SunGard should be directed to Lawrence A. Gross, Vice President and
General Counsel of SunGard, SunGard Data Systems Inc., 1285 Drummers Lane,
Wayne, Pennsylvania, 19087, and oral requests should be directed to Mr. Gross
at 610-341-8700. In order to ensure timely delivery of the documents requests
should be made by [ ,] 1999.
i
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE SUNGARD/PENTAMATION MERGER
Q: Why is Pentamation agreeing to the merger with SunGard?
A: The Pentamation board of directors believes that the merger is in the best
interests of Pentamation and its shareholders. To review Pentamation's
reasons for the merger, see pages 19 and 20.
Q: What will happen to the shares of Pentamation in the merger?
A: In the merger, Pentamation shareholders will receive shares of SunGard
common stock in exchange for each for their shares of Pentamation common
stock. No fractional shares of SunGard common stock will be issued. In lieu
of fractional shares, the number of shares of stock to be issued to each
shareholder shall be rounded up or down to the nearest whole number of
shares of SunGard common stock.
Q: When will the merger be completed?
A: Pentamation and SunGard expect that the merger will become effective
promptly after shareholders of Pentamation approve the merger; provided
that the other conditions to the merger have been satisfied. A special
meeting of Pentamation Shareholders is scheduled for July , 1999.
Q: What should I do now?
A: You should mail your completed and signed proxy card in the enclosed
postage paid envelope as soon as possible so that your shares will be
represented at the special meeting.
Q: Can I change my vote after I have mailed in a signed proxy card?
A: Yes. You can change your vote in one of the following ways at any time
before your proxy is voted at the special meeting. You can revoke your
proxy by submitting a later dated signed proxy with respect to the same
shares orby delivering a written revocation to Pentamation's Secretary.
Alternatively, you can attend the special meeting in person, revoke your
proxy and vote your shares at the meeting. Attendance at the meeting will
not in and of itself constitute a revocation of a proxy.
Q: What other matters will be voted on at the special meeting?
A: We do not expect to ask Pentamation shareholders to vote on any matter other
than approval of the merger.
Q: Should I send in my share certificates now?
A: No. After the merger is completed, you will be sent written instructions for
sending in your share certificates and receiving the SunGard common stock to
which you are entitled.
Q: When will I receive shares of SunGard common stock in the merger?
A: If the merger is completed, SunGard will issue common stock to Pentamation
shareholders who have returned their Pentamation share certificates together
with a completed letter of transmittal supplied by SunGard's exchange agent,
Norwest Bank N.A. Pentamation shareholders will receive stock certificates
representing 90% of their shares of SunGard common stock to be issued in the
merger. The remaining 10% of their shares of SunGard common stock will be
held in escrow and released to Pentamation shareholders one year after the
merger is completed, less the number of shares, if any, that may be returned
to SunGard to satisfy claims SunGard may have against Pentamation under the
merger documents. Pentamation and the principal shareholders of Pentamation
made statements or promises about Pentamation, called representations and
warranties, in the merger documents. If these statements or promises turn
out to be incorrect, SunGard may have a claim against Pentamation, which
would be satisfied solely out of the escrowed shares.
Q: Whom should I call with questions and to obtain additional copies of this
document?
A: You should call David P. Bloys, Secretary of Pentamation at (610) 691-3616.
1
<PAGE>
SUMMARY
This summary highlights selected information from this document and does not
contain all of the information that may be important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where To Find More Information" on page .
We have included page references parenthetically to direct you to a more
complete discussion of the topics presented in this summary. Unless the context
otherwise requires, all references to SunGard mean SunGard and its subsidiaries
and all references to Pentamation mean Pentamation and its subsidiaries.
The Companies
SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, Pennsylvania 19807
610-341-8700
SunGard provides computer services, principally proprietary processing
services and software to the financial services industry, and computer disaster
recovery services.
Pentamation Enterprises, Inc.
One Bethlehem Plaza
Bethlehem, PA 18018
610-691-3616
Pentamation develops, markets and sells information systems for school
districts and local governments.
The Merger (page 18)
We have entered into an agreement and plan of reorganization, which is
attached as Appendix A, and a related agreement and plan of merger, which is
attached as Appendix B. We encourage you to read these merger documents because
they are the legal documents that govern the merger.
As a result of the merger, Pentamation will become a wholly-owned subsidiary
of SunGard and Pentamation common stock will be converted into SunGard common
stock as described below.
The Pentamation Special Meeting (page 16)
A special meeting of Pentamation shareholders will be held at the corporate
offices of Pentamation, located at The Marketplace, 1st Floor, Five Bethlehem
Plaza, Bethlehem, Pennsylvania 18018 on [ ], 1999 at p.m., local time.
The purpose of the Pentamation special meeting is to vote upon the proposal to
approve the merger.
Who is Entitled to Vote; What Vote is Required (page 16)
You are entitled to vote any shares of Pentamation common stock held by you
at the close of business on May 30, 1999, the record date, at the Pentamation
special meeting. On the record date, there were 817,734 outstanding Pentamation
shares, each of which will be entitled to one vote.
The presence, in person or by proxy, of shareholders entitled to cast at
least a majority of the votes which all shareholders are entitled to cast on
the particular matter at the meeting will constitute a quorum. Approval of the
merger will require the affirmative vote of a majority of the votes cast by
Pentamation shareholders.
Pentamation shareholders who own approximately 75% of the Pentamation shares
outstanding on the record date have entered into voting agreements with SunGard
in which these shareholders have agreed to vote their Pentamation shares in
favor of the merger.
Escrow Agreement (page 21)
In connection with the merger, Pentamation shareholders will be asked to
sign an escrow agreement with SunGard, a copy of which is attached as Appendix
C. Under the escrow agreement, the escrow agent will maintain an account for
each Pentamation shareholder containing the shareholder's stock being held in
escrow in accordance with the terms of the escrow agreement. The escrowed
stock, representing 10% of the stock to be issued in the merger, will be held
by the escrow agent in escrow for one year after completion of the merger and
used to satisfy any claims for indemnification by SunGard under the
reorganization agreement. See "The Merger Documents-Escrow Agreement and
Indemnification Claims."
2
<PAGE>
Merger Consideration (page 26)
If the shareholders of Pentamation approve the merger and SunGard and
Pentamation complete the merger, you will receive SunGard common stock in
exchange for your shares of Pentamation common stock. The exact number of
shares of SunGard common stock you will receive will be based upon an exchange
ratio that will not be fixed until the effective date of the merger. The
exchange ratio represents the number of shares of SunGard common stock that
Pentamation shareholders will receive for each share of Pentamation common
stock. The exchange ratio will be based on the average of the closing sale
prices of SunGard common stock over a 20 trading day period ending two days
prior to the effective date of the merger and upon the number of Pentamation
shares outstanding when the merger is completed.
Listed below is the approximate exchange ratio which would apply if the 20-
day average closing price of SunGard common stock was equal to the price listed
next to that ratio:
<TABLE>
<CAPTION>
Then each share of
Pentamation common
stock would be converted
into the following
approximate number
If the SunGard 20-day of shares of
average closing price is: SunGard common stock:
- ------------------------- ------------------------
<S> <C>
$30.00 1.1536120
31.00 1.1536120
32.00 1.1536120
33.00 1.1186531
34.00 to 46.00 1.0857520
47.00 1.0626508
48.00 1.0405122
49.00 1.0405122
</TABLE>
Please note that because the exchange ratio will be based upon the average
closing price of SunGard's common stock and because the market price of the
shares of SunGard common stock may fluctuate, Pentamation shareholders cannot
be sure as of the date of the special meeting of the market value of the shares
of SunGard common stock they will receive.
It is a condition to Pentamation's obligation to complete the merger that
the average price of SunGard common stock over a 20 trading day period ending
two days prior to the effective date of the merger is greater than or equal to
$32 per share.
No fractional shares of SunGard common stock will be issued in connection
with the merger. In lieu of fractional shares, the number of shares of SunGard
common stock to be issued to each shareholder will be rounded up or down to the
nearest whole number of shares.
Federal Income Tax Consequences (page 24)
SunGard received an opinion from its outside counsel that the merger will
constitute a "reorganization" within the meaning of the Internal Revenue Code
of 1986. This means that, as a general matter, Pentamation shareholders will
not be subject to tax as a result of the exchange of Pentamation shares solely
for SunGard common stock in the merger. Pentamation shareholders also will not
be able to take into account any losses on their Pentamation shares.
Dissenters Rights (page 22)
Pennsylvania corporate law grants Pentamation shareholders dissenters
rights. Pentamation shareholders have the right to dissent from the merger and
obtain payment of the fair value of their Pentamation common stock if they
follow the procedures set forth under the Pennsylvania dissenters rights
statute, a copy of which is attached as Appendix D. These procedures generally
require that a Pentamation shareholder who wishes to dissent file with
Pentamation a written notice of intention to dissent prior to the vote on the
merger proposal, make no change in the beneficial ownership of their
Pentamation shares from the date of filing until the effective time of the
merger and
3
<PAGE>
refrain from voting for the approval of the merger proposal. Other requirements
are set forth in the Pennsylvania dissenters rights statute. Dissenters rights
will be forfeited if these requirements are not fully, precisely and timely
satisfied. It is a condition to the closing of the merger that holders of less
than 10% of Pentamation's outstanding stock exercise their dissenters rights.
See "The Merger and Related Transactions B Dissenters Rights" and a copy of the
text of Subchapter D attached as Appendix D to this proxy statement/prospectus.
Reasons for the Merger (page 18)
In reaching its decision to approve the merger, the Pentamation board of
directors considered a number of factors, including:
. The value of the consideration to be received by the shareholders of
Pentamation, including the fact that the merger is expected to be treated as
a tax-free reorganization;
. Publicly available financial information regarding SunGard; and
. The opportunity for holders of Pentamation Stock to continue participating
in the potential for the future growth of Pentamation through the ownership
of SunGard common stock following the merger.
Recommendation of the Pentamation Board of Directors (page 17)
The board of directors of Pentamation has determined that the merger is fair
to and in the best interests of Pentamation and its shareholders. Therefore,
the board of directors of Pentamation recommends that Pentamation shareholders
vote to approve the merger.
Conditions to the Merger (page 32)
SunGard and Pentamation will complete the merger only if the conditions to
the merger that SunGard and Pentamation have agreed to are either satisfied or
waived. These conditions include, among other things, that:
. the merger has been approved by the Pentamation shareholders;
. the independent accountants for each of Pentamation and SunGard have
delivered a letter to SunGard to the effect that the merger will qualify as
a pooling of interests for accounting purposes;
. the holders of at least 90% of Pentamation=s outstanding stock execute the
escrow agreement;
. there is no material adverse change in the business, assets, financial
condition or financial performance of Pentamation;
. the average price of SunGard common stock over a 20 trading day period
ending two days prior to the effective date of the merger is greater than or
equal to $32 per share; and
. Pentamation has completed its purchases of (i) real estate and (ii) the
automobile fleet, each previously leased by Pentamation, from a partnership
owned by the principal shareholders of Pentamation in consideration for
Pentamation common stock.
Termination of the Merger (page 33)
SunGard and Pentamation can agree to terminate the merger documents without
completing the merger, and either of SunGard or Pentamation can terminate the
merger documents under various circumstances, including if the merger is not
completed by August 31, 1999, or if the conditions to the merger are not
satisfied or waived by August 31, 1999.
Regulatory Matters (page 25)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits us from
completing the merger until after SunGard and Pentamation furnished information
and materials to the Antitrust Division of the Department of Justice and to the
Federal Trade Commission and a required waiting period will end on July 8,
1999. SunGard and Pentamation filed the required information and the required
waiting period has ended. However, the Antitrust Division of the Department of
Justice and the Federal Trade Commission continue to have the authority to
challenge the merger on antitrust grounds before or after the merger is
completed.
Accounting Treatment (page 25)
SunGard and Pentamation expect that the merger will be accounted for as a
pooling of
4
<PAGE>
interests, meaning that the companies will be treated as if they had always
been combined for accounting and financial reporting purposes. It is a
condition to the merger that SunGard obtains from both Pentamation's and
SunGard's independent accountants letters addressing the qualification of the
merger for pooling of interests accounting treatment.
Voting Agreements (page 20)
Pentamation shareholders who own approximately 75% of the Pentamation shares
outstanding on the record date have entered into voting agreements with SunGard
in which these shareholders have agreed to vote their Pentamation shares in
favor of the merger.
Share Ownership of Management (page 37)
On the record date, directors and executive officers of Pentamation and
their affiliates had voting control over 649,664 shares of Pentamation common
stock, or approximately 79% of the shares outstanding on the record date. This
number includes the shares covered by the voting agreements described above. In
addition, a partnership owned by two directors of Pentamation will receive
approximately 91,000 shares of Pentamation common stock in exchange for the
sale of real estate and automobiles previously leased by Pentamation from that
partnership.
Interests of Certain Persons in the Merger (page 20)
There are directors and executive officers of Pentamation who may be deemed
to have interests in the merger that are in addition to the interests of
Pentamation shareholders generally. As a condition of the merger, prior to the
completion of the merger, Pentamation has agreed to purchase real estate and
automobiles leased by Pentamation from a partnership owned by Jeffrey P.
Feather and David P. Bloys. The purchase of the real estate and the automobiles
is required under applicable accounting rules in order for the merger to be
accounted for as a pooling of interests. In addition, Donald V. Appleton,
President of Pentamation will receive options for the purchase of SunGard
common stock in consideration for the cancellation of his options to purchase
Pentamation common stock outstanding as of the effective date of the merger.
Effects of the Merger on the Rights of Pentamation's Shareholders (page 39)
When the merger is completed, Pentamation's shareholders will become
stockholders of SunGard. SunGard is a company governed by Delaware law and
SunGard's existing charter and bylaws. As a result, the rights of Pentamation's
shareholders will change.
5
<PAGE>
Selected Historical Financial Information of SunGard
The following selected historical consolidated financial data of SunGard
should be read in conjunction with the consolidated financial statements of
SunGard that are incorporated by reference in this document. All of the
selected historical consolidated financial data of SunGard has been restated
for three pooling of interests transactions completed during the first four
months of 1999. One of the pooling-of-interests transactions was with Automated
Securities Clearance, Ltd. (ASC). ASC was an "S" corporation prior to the
merger with SunGard; therefore, all income passed through directly to and all
income taxes were paid directly by the shareholder of ASC. Pro forma net income
is presented because generally accepted accounting principles require that pro
forma income taxes be reflected on the Statement of Income for all periods
presented, thereby reflecting income taxes which would have been paid by ASC if
ASC had been a "C" corporation.
<TABLE>
<CAPTION>
As of or for the
Three Months Ended
March 31, As of or for the Year Ended December 31,
-------------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- ---------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Income
Statement Data:
Revenues............... $ 331,788 $285,493 $1,252,591 $996,242 $765,979 $595,372 $480,562
Income (loss) from
operations............ (20,424) 40,918 216,200 153,745 77,965 91,190 75,559
Pro forma net income
(loss)................ (5,855) 22,930 128,574 92,022 47,433 55,117 47,022
Pro forma net income
(loss) per share:
Basic.................. $ (0.05) $ 0.20 $ 1.12 $ 0.84 $ 0.45 $ 0.57 $ 0.50
Diluted................ $ (0.05) $ 0.19 $ 1.08 $ 0.80 $ 0.43 $ 0.54 $ 0.47
Historical Balance Sheet
Data:
Total assets........... $1,317,745 $952,446 $1,147,183 $906,165 $781,075 $624,654 $522,949
Total short-term and
long-term debt........ $ 18,228 $ 20,144 $ 17,582 $ 21,928 $ 41,594 $ 12,703 $ 12,545
Stockholders' equity... $ 971,683 $678,255 $ 809,935 $647,951 $536,664 $452,188 $382,738
</TABLE>
6
<PAGE>
Selected Financial Information of Pentamation
The following selected financial data for the years ended September 30,
1998, 1997, 1996, 1995 and 1994 are derived from the audited financial
statements of Pentamation. The financial data for the six months ended March
31, 1999 and 1998 is derived from reviewed financial statements but is
unaudited. The financial data for the six months ended March 31, 1999 and 1998
include all adjustments, consisting of normal recurring accruals, which
Pentamation considers necessary for a fair presentation of its financial
position and the results of operations for these periods. Operating results for
the six months ended March 31, 1999 are not necessarily indicative of the
results that may be expected for the entire year ending September 30, 1999. The
data should be read in conjunction with the financial statements, related
notes, and other financial information concerning Pentamation included herein.
See "Index to Financial Statements of Pentamation."
<TABLE>
<CAPTION>
Six Months Ended
March 31, Year Ended September 30,
----------------- ---------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------- ------- ------- ------- -------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Income
Statement Data:
Revenues................ $ 17,531 $ 12,682 $27,337 $21,959 $23,254 $21,300 $18,833
Income from operations.. 549 747 1,134 807 1,708 1,532 1,218
Net income.............. 300 472 636 478 1,033 883 682
Income per share:
Basic.................. $ 0.37 $ 0.56 $ 0.76 $ 0.55 $ 1.21 $ 1.00 $ .71
Diluted................ $ 0.36 $ 0.55 $ 0.75 $ 0.55 $ 1.21 $ 1.00 $ .71
<CAPTION>
March 31, September 30,
----------------- ---------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- ------- ------- ------- ------- -------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Total assets............ $ 20,720 $ 16,775 $20,823 $15,904 $13,089 $12,436 $10,308
Total short term and
long term debt......... $ 3,310 $ 5,491 $ 4,435 $ 3,349 $ 1,513 $ 1,250 $ 1,450
Stockholders' equity.... $ 4,995 $ 4,595 $ 4,605 $ 4,233 $ 3,708 $ 3,498 $ 3,153
</TABLE>
7
<PAGE>
Market Price Information
Since June 4, 1997, SunGard common stock has been listed and traded on the
New York Stock Exchange under the symbol "SDS." Previously, SunGard common
stock was listed on the Nasdaq Stock Market and the London Stock Exchange under
the symbol "SNDT." There is no established public trading market for
Pentamation's common stock. As a result, the market value of shares of
Pentamation common stock is not readily ascertainable.
The following table sets forth, for the periods indicated, the reported high
and low sale prices of SunGard common stock as reported on the New York Stock
Exchange since June 4, 1997 and on the Nasdaq Stock Market prior to June 4,
1997. Neither SunGard nor Pentamation has paid any regular dividends.
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
SunGard
Fiscal Year Ended December 31, 1997:
First Quarter...................................... $25 3/8 $18 1/2
Second Quarter..................................... 24 3/4 20 3/4
Third Quarter...................................... 27 1/8 23
Fourth Quarter..................................... 31 7/16 22 1/2
Fiscal Year Ended December 31, 1998:
First Quarter...................................... 37 3/8 28 1/16
Second Quarter..................................... 40 31 7/16
Third Quarter...................................... 40 31 1/4
Fourth Quarter..................................... 39 11/16 21 11/16
Fiscal Year Ending December 31, 1999:
First Quarter...................................... 41 15/16 32 7/8
Second Quarter (through June 21, 1999)............. 39 15/16 27 9/16
</TABLE>
On May 5, 1999, the last full trading day prior to the execution of the
agreement, the reported high sale price on the New York Stock Exchange of
SunGard common stock was $30.875 and the reported low sale price on the New
York Stock Exchange of SunGard common stock was $29.6875. Also, on that date,
the last reported sale price on the New York Stock Exchange of SunGard common
stock was $30.125 per share.
The following table sets forth:
. the closing sale price per share of SunGard common stock as reported on
the New York Stock Exchange;
. the applicable exchange ratio that will be used in the merger if the
average stock price on which the exchange ratio is based equals the
closing sale prices reflected in the table; and
. the equivalent per share price of one share of Pentamation common stock
on May 5, 1999, the last trading day prior to the execution of the
agreement, and on [ ], 1999, the most recent date for which prices
were available prior to printing this document.
<TABLE>
<CAPTION>
SunGard Applicable Equivalent
Common Exchange Pentamation
Stock Ratio Per Share Price
------- ---------- ---------------
<S> <C> <C> <C>
May 5, 1999............................ $30.125 1.1536120 $34.753
[ ], 1999.......................... $ 1.1536120 $
</TABLE>
8
<PAGE>
The equivalent Pentamation per share price was calculated by multiplying the
closing sale price per share of SunGard common stock reflected in the table by
the applicable exchange ratio that would be used in the merger if the average
stock price on which the exchange ratio is based equaled the closing sale
prices reflected in the table. The equivalent Pentamation per share prices
reflect the value of SunGard common stock that Pentamation shareholders would
receive for each share of Pentamation common stock exchanged in the merger if
the average stock price of SunGard common stock on which the exchange ratio is
based equals the closing sale prices of SunGard common stock reflected in the
table.
Because the market price of SunGard common stock may fluctuate, the market
price per share of the shares of SunGard common stock that holders of
Pentamation common stock will receive in the merger may increase or decrease
prior to the merger. See "Risk Factors" on page .
Pentamation shareholders are urged to obtain a current market quotation for
SunGard common stock. No assurance can be given as to the future prices of, or
markets for, SunGard common stock.
9
<PAGE>
Comparative Per Share Data
The following table presents historical and pro forma per share data for
SunGard and historical and equivalent pro forma per share data for Pentamation.
This information is provided for illustrative purposes only and assumes that
the merger had occurred as of the beginning of each of the periods presented.
Estimated costs of the merger of approximately $600,000 are excluded from the
pro forma information. The pro forma information should not be relied upon as
necessarily indicative of the historical results that would have been obtained
if the companies had been combined during those periods or the results that
will be obtained in the future. The equivalent pro forma per share amounts for
Pentamation are calculated by multiplying the SunGard combined pro forma per
share amounts by an assumed exchange ratio of 1.1536120. The historical book
value per share is computed by dividing total stockholders' equity by the
number of shares outstanding at the end of the period. The pro forma book value
per share is computed by dividing pro forma stockholders' equity by the pro
forma number of shares outstanding as of the end of each of the periods
presented.
This information should be read in conjunction with the historical financial
statements and the related notes of SunGard and Pentamation, all of which are
included elsewhere or are incorporated by reference in this document. See
"Unaudited Pro Forma Financial Information" beginning on page 44.
<TABLE>
<CAPTION>
As of or for the As of or for the
Three Months Ended Year Ended
March 31, December 31,
-------------------------------------
1999 1998 1998 1997 1996
--------- -------------- ----- -----
(In thousands, except per share
amounts)
<S> <C> <C> <C> <C> <C>
Historical--SunGard:
Diluted pro forma net income (loss) per
common share.......................... $(0.05) $ 0.19 $1.08 $0.80 $0.43
Book value per common sharE............ 8.24 5.99 6.98 5.77 5.01
Historical--Pentamation:
Diluted net income per common share.... 0.48 0.38 0.75 0.55 1.21
Book value per common share............ 6.12 5.29 5.56 4.93 4.30
Pro Forma Combined Per SunGard Share:
Diluted pro forma net income (loss) per
common share.......................... (0.05) 0.20 1.07 0.80 0.44
Book value per common share............ 8.18 5.95 6.93 5.72 4.98
Pentamation Per Share Equivalents:
Diluted net income (loss) per common
share................................. (0.06) 0.23 1.23 0.92 0.51
Book value per common share............ 9.44 6.86 7.99 6.60 5.74
</TABLE>
10
<PAGE>
RISK FACTORS
In determining whether you should vote in favor of the merger you should
consider carefully the risks associated with the merger and with ownership of
SunGard common stock following the merger. Some of these risks are described
below.
Risks Relating to the Merger
The exchange ratio in the merger is based on the market prices of SunGard
common stock over a period of time prior to the effective date of the merger
and will fluctuate within a specified range. Pentamation shareholders will not
know the final value of the SunGard common stock they will receive until the
effective date of the merger.
The exchange ratio, which is the multiple of a share of SunGard common stock
that Pentamation shareholders will receive for each share of Pentamation common
stock, is based on the average of the closing prices of SunGard common stock
over a period of time prior to the effective date of the merger.
Pentamation shareholders will not know the final exchange ratio and the
final value of the SunGard common stock they will receive until the effective
date of the merger. The market prices of SunGard common stock as of various
recent dates are set forth in the Summary under "Market Price Information."
Pentamation shareholders should obtain recent market quotations for SunGard
common stock. SunGard common stock historically has been subject to price
volatility. No assurance can be given as to the market price of SunGard common
stock at any time.
Pentamation could lose customers due to the merger.
Some of Pentamation's existing customers, particularly customers that are in
the same business as SunGard, may take the opportunity following a change of
control of Pentamation to review their contractual relationships. These reviews
could result in delayed or lost sales to either SunGard or Pentamation.
The merger is intended to qualify for pooling of interests accounting
treatment. If the merger fails to qualify for pooling of interests accounting
treatment, the combined financial results of SunGard and Pentamation could be
adversely affected.
The merger is intended to qualify for pooling of interests treatment under
generally accepted accounting principles. It is a condition to closing that
SunGard receive the opinion of PricewaterhouseCoopers LLP to this effect.
However, if the merger at any time is determined to not qualify for pooling of
interests treatment, the combined financial results of SunGard and Pentamation
could be adversely affected.
Under pooling of interests treatment, the accounts of SunGard will be
combined with those of Pentamation at their historical carrying amounts and
SunGard's financial statements for all prior periods will be restated, if
material, to reflect the accounts of SunGard as if the two companies had been
combined for all periods. If the merger does not qualify for pooling of
interests treatment, the purchase method of accounting may be applied. Under
the purchase method, the fair market value of the SunGard common stock issued
in the merger would be recorded as the cost of acquiring Pentamation's
business. That cost would be allocated to the individual assets of Pentamation
that were acquired and liabilities of Pentamation's that were assumed according
to their respective fair values. The fair market value of the SunGard common
stock to be issued in the transaction is in excess of the amounts at which the
net assets are carried in Pentamation's accounts. The excess would be allocated
to intangible assets and amortized as an expense over the estimated useful life
of each intangible asset.
Future sales of shares issued in the merger could adversely affect SunGard's
stock price.
Depending upon the exchange ratio, an aggregate of approximately 950,000 to
1,100,000 shares of SunGard common stock will be issued in the merger. These
shares will be immediately freely tradeable in the market except for shares
issued to affiliates of Pentamation which will become freely tradeable after
SunGard has published financial results covering at least 30 days of combined
operations. Sales of a substantial number of shares of SunGard common stock
could adversely affect the market price of SunGard common stock.
11
<PAGE>
Risks Relating to SunGard
SunGard's growth strategy depends in part on acquisitions. If SunGard is
unable to acquire businesses on favorable terms or successfully integrate and
manage the businesses acquired, SunGard's business and financial results may
suffer.
SunGard intends to grow by expanding its existing businesses and by
acquiring similar or complementary businesses, including acquisitions that are
intended to qualify for pooling of interests accounting treatment. This growth
strategy is subject to a number of risks that could adversely affect SunGard's
business and financial results, including:
. SunGard may not be able to find suitable businesses to acquire on
affordable terms;
. competition from other acquirors and stock market fluctuations may make
it more difficult for SunGard to find and complete acquisitions;
. SunGard may have to raise money in the debt or equity markets to finance
future acquisitions;
. one or more acquisitions may not qualify for pooling of interests
accounting treatment; and
. at any given time, a large number of shares of SunGard common stock
issued to acquire businesses may become freely tradeable in the market.
. The Financial Accounting Standards Board, or FASB, recently voted
unanimously to eliminate the use of pooling of interests accounting
treatment beginning on January 1, 2001. In addition, FASB is considering
a variety of proposals to change the treatment of purchase accounting.
The resolution of these proposed changes may adversely affect SunGard's
ability to continue to grow by acquiring similar or complementary
businesses.
The businesses acquired by SunGard may perform worse than expected or may be
more difficult to integrate and manage than expected. If that happens, SunGard
may suffer a number of adverse consequences, including:
. SunGard may have to devote unanticipated financial and management
resources to the acquired businesses;
. SunGard may not be able to realize expected operating efficiencies; and
. SunGard may have to write off goodwill or other intangible assets if the
acquisition was accounted for as a purchase.
SunGard's success depends in part on adapting its computer services and
software to changes in technology and changes in its customers' businesses. If
SunGard does not successfully update its services and software, or if its new
products or services are not timely delivered or well received by customers,
SunGard's business and financial results may suffer.
SunGard's ability to successfully update its services and software and
timely develop and deliver new products and services required by its customers
is subject to a number of risks which could adversely affect SunGard's business
and financial results, including:
. SunGard may find it difficult to update its services and software and
timely develop and deliver its new products and services in a cost-
effective manner, especially when faced with rapid technological changes
that are hard to predict; and
. SunGard may find it difficult to update its services and software to
keep pace with business, regulatory and other developments in the
financial services industry in which most of SunGard's customers
operate.
12
<PAGE>
SunGard's business is dependent largely on the financial services industry.
If that industry does poorly, SunGard's business and financial results may
suffer.
SunGard sells most of its computer services and software to banks, mutual
funds, brokers, insurance companies and other financial services firms. If the
financial services industry or SunGard's customers in the financial services
industry experience problems, SunGard's business and financial results could be
adversely affected. For example, SunGard may suffer if securities trading
activity declines, the number or value of managed portfolios decreases, or
there is continued consolidation among firms in the financial services
industry.
The advent of year 2000, including any failure by SunGard to make its
products year 2000 compliant or to fulfill year 2000 commitments to customers,
may adversely affect SunGard's business and financial results.
SunGard has made many of its products year 2000 compliant so that they can
handle dates in the year 2000 and beyond. However, SunGard is still working on
making some of its most important products year 2000 compliant. In addition,
SunGard has made commitments to some customers that need to convert from non-
year 2000 compliant systems, and as a result, SunGard must meet significant
development obligations and complete conversions prior to the end of 1999.
SunGard's year 2000 compliance efforts are subject to a number of risks which
could adversely affect SunGard's business and financial results, including:
. SunGard may not be able to make all of its important products year 2000
compliant;
. SunGard may not be able to timely meet its year 2000 commitments to
customers;
. SunGard may have to add personnel and buy new software and hardware
earlier than planned to complete its year 2000 compliance efforts, which
could cause an unexpected increase in expenses;
. SunGard's expenses may increase faster than expected because year 2000
issues are causing a shortage in the availability of experienced
programmers; and
. SunGard may encounter unanticipated year 2000 problems, like a problem
with another company's software or hardware that interacts with
SunGard's products or that is used by SunGard.
SunGard believes that year 2000 compliance issues have caused some
acceleration of software buying and conversion activity. As a result, SunGard's
rate of internal growth may decline in the second half of 1999 or in the year
2000, which could adversely affect SunGard's business and financial results.
Forward-looking Statements May Prove Inaccurate.
This document contains or incorporates by reference forward-looking
statements made by SunGard and Pentamation that are subject to risks and
uncertainties and that may change at any time and differ from actual results.
Forward-looking statements include information about possible or assumed future
financial results of SunGard and Pentamation and usually contain words such as
"believes," "expects," "anticipates," or similar expressions. SunGard and
Pentamation derive most of their forward-looking statements from their
operating budgets and forecasts, which are based upon many detailed
assumptions. While SunGard and Pentamation believe that their assumptions are
reasonable, they caution that there are inherent difficulties in predicting
certain important factors such as:
. the timing and magnitude of software sales and services;
. the effect of year 2000 issues on software and services buying
decisions;
. the timing and scope of technological advances and year 2000 compliance;
. the integration and performance of acquired businesses;
. the effects of competitive pressures;
13
<PAGE>
. the prospects for future acquisitions; and
. the overall condition of the financial services industry.
These and other factors, some of which are discussed in this section or
elsewhere in this document and some of which are discussed in the documents
incorporated by reference, could affect the future financial results of SunGard
and Pentamation and could cause those results to differ materially from those
expressed in any forward-looking statements contained in or incorporated by
reference in this document.
14
<PAGE>
RECENT DEVELOPMENTS
SunGard
On March 9, 1999, SunGard signed an agreement to acquire Oshap Technologies
Ltd. (Oshap). Oshap is an Israeli-based technology company which has two
principal majority-owned subsidiaries. One majority-owned subsidiary, MINT
Software Technologies Ltd. is a leading provider to the financial services
industry of software solutions that enable the integration of disparate
applications and networks. The other majority-owned subsidiary, Decalog N.V.
(Decalog), provides comprehensive software solutions that enable global asset
management organizations to automate critical steps in the investment
management process. The acquisition is expected to be accounted for as a
pooling of interests. A maximum of approximately 5,750,000 shares of SunGard
common stock will be issued in connection with the acquisition of Oshap.
SunGard also will offer to acquire the minority interests in MINT and Decalog
at a fixed price, which could result in an additional issuance of approximately
450,000 shares of SunGard common stock, plus a cash payment of between
$25,000,000 and $35,000,000. Also, options to buy common stock of MINT and
Decalog will be converted into approximately 500,000 options to buy shares of
common stock of SunGard. Total merger costs in connection with this
acquisition, consisting primarily of investment banking, legal, accounting, and
printing fees, are estimated to be approximately $5,000,000. These merger
costs, which generally are not deductible for income tax purposes, will be
recorded as an operating expense during the quarter in which the acquisition is
completed, which is expected to be the third quarter of 1999. The acquisition
of the minority interests will result in recording intangible assets of
approximately $51,000,000.
During the year ended December 31, 1998, Oshap recorded total revenues of
$32,319,000, and a net loss (before an extraordinary gain, which totaled
$3,074,000 after-tax) of $1,902,000. During the three months ended March
31,1999, Oshap recorded total revenues of $10,599,000, and a net loss of
$3,303,000. The net loss during the three months ended March 31, 1999 included
a write-off of approximately $2,020,000 (both before and after-tax) for fees
incurred in connection with the aborted initial public offerings of MINT and
Decalog, which had been planned prior to SunGard signing the agreement to
acquire Oshap, and $1,500,000 for Oshap's proportional share of one-time after-
tax items incurred by Tecnomatix Technologies Ltd., a minority-owned
investment. During the three months ended March 31, 1998, Oshap recorded total
revenues of $6,426,000 and net income of $463,000.
15
<PAGE>
THE PENTAMATION SPECIAL MEETING
General
The Pentamation special meeting is scheduled to be held on , 1999
at a.m., eastern standard time, at the corporate offices of Pentamation
located at The Marketplace, 1st Floor, Five Bethlehem Plaza, Bethlehem,
Pennsylvania 18018. The purpose of the Pentamation special meeting is to
consider and vote upon the proposed merger.
Record Date
The close of business on May 30, 1999 has been fixed by the Pentamation
board of directors as the Pentamation record date for the determination of
holders of shares of Pentamation common stock entitled to notice of and to vote
at the Pentamation special meeting. Only holders of record of Pentamation
common stock as of May 30, 1999, are entitled to notice of, and to vote at, the
Pentamation special meeting.
Stock Entitled to Vote
As of the close of business on the record date, there were 817,734 shares of
Pentamation common stock outstanding. Holders of Pentamation common stock will
be entitled to one vote for each share of Pentamation common stock that they
held on May 30, 1999. Accordingly, as of the record date, the holders of
Pentamation common stock are entitled to cast, in the aggregate, 817,734 votes.
Quorum; Required Vote
The presence, in person or by proxy of shareholders entitled to cast at
least a majority of the votes which all shareholders are entitled to cast on
the particular matter at the meeting will constitute a quorum for purposes of
conducting business at the Pentamation special meeting. Under Pennsylvania law
and Pentamation's charter, the affirmative vote of a majority of the votes cast
by Pentamation shareholders is necessary to approve the proposed merger.
Voting and Revocation of Proxies
Shares of Pentamation common stock represented by a proxy properly signed
and received at or prior to the Pentamation special meeting, unless
subsequently revoked, will be voted in accordance with the instructions on the
proxy. If you sign and return your proxy without indicating any voting
instructions, the shares of Pentamation common stock represented by the proxy
will be voted "for" the proposed merger. You may revoke your proxy and reclaim
your right to vote at any time by giving written notice of revocation to the
Secretary of Pentamation at any time before it is voted, by submitting to
Pentamation a duly executed, later-dated proxy or by voting the shares subject
to the proxy by written ballot at the Pentamation special meeting. You should
send all written notices of revocation and other communications with respect to
revocation of Pentamation proxies to: Pentamation Enterprises, Inc., One
Bethlehem Plaza, Bethlehem, PA 18018, Attention: David P. Bloys, Secretary.
Attendance at the Pentamation special meeting will not, in and of itself,
constitute a revocation of a proxy.
The Pentamation board of directors is not aware of any business to be acted
upon at the Pentamation special meeting other than as described in this proxy
statement/prospectus. If, however, other matters are brought before the
Pentamation special meeting, including, among other things, a motion to adjourn
or postpone the Pentamation special meeting to another time or place for the
purpose of soliciting additional proxies or otherwise, the persons appointed as
proxies will have discretion to vote or act on the matters according to their
best judgment. However, no proxy which is voted against the proposed merger
will be voted in favor of any adjournment or postponement. The grant of a proxy
will also confer discretionary authority on the persons named in the proxy to
vote on matters incident to the conduct of the Pentamation special meeting.
16
<PAGE>
Abstentions will be counted as shares present for purposes of determining
whether a quorum is present but will not be voted for or against the proposed
merger. Abstentions also will not be counted as votes cast for purposes of
determining whether sufficient votes have been received to approve the proposed
merger. Accordingly, abstentions will have no effect on the outcome of the vote
with respect to the proposed merger.
Board Recommendation
On May 6, 1999, the Board of Directors of Pentamation, in an action by
unanimous written consent, approved the reorganization agreement and merger
agreement and the transactions necessary to complete the merger. Prior to
reaching its decision, the Pentamation Board of Directors had received
information from its financial advisors, legal counsel, and others regarding
various aspects of SunGard, including its products, employees, suppliers and
management. Based on this information and a description of the terms of the
reorganization agreement and the merger agreement, the Board of Directors
approved the reorganization agreement, the merger agreement and the merger and
authorized the filing of a registration statement, the obtaining of all
regulatory approvals, and the performance of all additional actions necessary,
appropriate or advisable in order to complete the merger. The Board of
Directors of Pentamation recommends that the shareholders of Pentamation vote
FOR approval and adoption of the reorganization agreement and the merger
agreement and the transactions contemplated by the merger documents.
Solicitation of Proxies
The proxies are being solicited on behalf of the Pentamation board of
directors. The solicitation of proxies may be made by directors, officers and
regular employees of Pentamation in person or by mail, telephone, facsimile or
telegraph without additional compensation payable for that solicitation. The
cost of the solicitation will be borne by Pentamation.
Rights of Dissenting Pentamation Shareholders
Except as otherwise described in this proxy statement/prospectus, each
Pentamation shareholder who delivers to Pentamation a written demand for
appraisal of the shareholder's shares before the Pentamation special meeting
and who otherwise complies with the applicable procedures under Pennsylvania
law will be entitled to receive the fair value of his or her shares of
Pentamation stock in cash if the merger is completed. See "The Merger--Rights
of Dissenting Pentamation Shareholders."
It is a condition to the obligation of SunGard to complete the merger that
the aggregate number of shares of stock owned by those shareholders of
Pentamation who have exercised, or given notice of their intent to exercise,
their dissenters' rights will be less than ten percent of the total number of
outstanding shares of Pentamation stock.
17
<PAGE>
THE MERGER AND RELATED TRANSACTIONS
Background of the Merger
During 1998, SunGard concluded that the market for providing computer
information software and services to nonprofit organizations, principally
school districts and local governments, was a suitable complement to SunGard's
existing business that provides software and services to nonprofit entities.
After performing preliminary research on various providers of such software and
services to nonprofit entities, SunGard made initial contact with Pentamation
in the summer of 1998 to determine its potential interest in pursuing
acquisition discussions with SunGard.
In September 1998, senior officers of SunGard and Pentamation met to conduct
a preliminary discussion of the potential business and financial benefits of
combining the two companies.
At a special meeting in December 1998, SunGard's management apprised
SunGard's board of directors of these initial discussions, and SunGard's board
authorized SunGard's management to continue to pursue discussions with
Pentamation. In late December 1998, representatives of Janney Montgomery Scott,
Pentamation's advisors, and SunGard conducted preliminary discussions regarding
the financial terms of a transaction between SunGard and Pentamation. From
January 1999 through mid-March 1999, SunGard and Pentamation and its financial
advisors continued to have discussions regarding the financial terms of a
potential transaction as well as to explore the potential benefits of a
potential combination of the two companies. As a result of those discussions,
in January 1999 the senior managements of both SunGard and Pentamation
separately determined that an acquisition of Pentamation by SunGard was in the
best interests of each company and its stockholders, and the parties signed a
letter of intent dated January 25, 1999. A revised letter of intent was signed
on March 25, 1999. Subsequent to that date, SunGard conducted a "due diligence"
investigation of Pentamation, and the senior officers of SunGard and
Pentamation conducted negotiations to establish the terms of the merger
documents, which were signed on May 6, 1999. The merger was approved by the
Board of Directors of SunGard on March 30, 1999 and by the Board of Directors
of Pentamation on , 1999.
SunGard's Reasons for the Merger's
The SunGard Board of Directors has unanimously determined that the terms of
the reorganization agreement and the merger agreement are fair to, and in the
best interests of, SunGard and its stockholders. In reaching its determination,
the SunGard Board of Directors consulted with SunGard's management, as well as
its legal counsel and accountants, and gave significant consideration to a
number of factors bearing on its decision. The following are the reasons the
SunGard Board of Directors believes the merger will be beneficial to SunGard
and its stockholders:
. SunGard seeks to grow both internally and through the acquisition of
complementary businesses. The products of Pentamation provide customers
with leading-edge software solutions for K through 12 school districts
and local governments. These products will complement and broaden
SunGard's existing product lines in its business that provides software
and services to nonprofit organizations.
. The combination of the technologies and product development resources of
SunGard and Pentamation should enable SunGard to respond more
effectively to the rapid technological change and continuing emergence
of systems for nonprofit organizations.
. SunGard believes there is a significant potential enhancement of the
strategic and market position of the combined entity beyond that
achievable by SunGard alone.
In addition to the reasons set forth above, in the course of its
deliberations concerning the merger, the SunGard Board of Directors consulted
with SunGard's management, legal counsel and accountants and reviewed a number
of other factors relevant to the merger, including:
. Information concerning the business, assets, operations, properties,
management, financial condition, operating results, competitive position
and prospects of SunGard and Pentamation;
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. The expected tax and accounting treatment of the merger;
. Reports from legal counsel on specific terms of the merger documents and
the voting agreements executed by certain directors, officers and other
affiliates of Pentamation; and
. SunGard's belief that the management styles and corporate cultures of
the two companies would be complementary.
The SunGard Board of Directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including:
. The possibility of management disruption associated with the merger and
the risk that key technical and management personnel of Pentamation or
SunGard might not continue with Pentamation or SunGard;
. The possibility that the merger might adversely affect Pentamation's or
SunGard's relationship with certain of their respective customers; and
. The risk that the potential benefits of the merger might not be
realized.
The SunGard Board of Directors concluded, however, that the benefits of the
transaction to SunGard and its stockholders outweighed the risks associated
with the foregoing factors.
The foregoing discussion of the information and factors considered by the
SunGard Board of Directors is not intended to be exhaustive, but is believed to
include all material factors considered by the SunGard Board of Directors. In
view of the wide variety of factors considered by the SunGard Board of
Directors, the SunGard Board of Directors did not consider it practicable to
quantify or otherwise assign relative weight to the specific factors.
Pentamation's Reasons for the Merger
On May 6, 1999, the Board of Directors of Pentamation, in an action by
unanimous written consent, approved the reorganization agreement and merger
agreement and the transactions necessary to consummate the merger. Prior to
reaching its decision, the Pentamation Board of Directors had received
information from its financial advisors, legal counsel, and others regarding
various aspects of SunGard, including its products, employees, suppliers and
management. Based on this information and a description of the terms of the
reorganization agreement and the merger agreement, the Board of Directors
approved the reorganization agreement, the merger agreement and the merger and
authorized the filing of a registration statement, the obtaining of all
regulatory approvals, and the performance of all additional actions necessary,
appropriate or advisable in order to consummate the merger. The Board of
Directors of Pentamation recommends that the shareholders of Pentamation vote
FOR approval and adoption of the reorganization agreement and the merger
agreement and the transactions contemplated in those documents.
In reaching its conclusion to enter into the reorganization agreement and
the merger agreement and to recommend that the shareholders of Pentamation vote
FOR the approval and adoption of those agreements, the directors of Pentamation
considered a number of factors, including, without limitation, the following:
. The value of the consideration to be received by the shareholders of
Pentamation, including the fact that the merger was expected to be
treated as a tax-free reorganization and that, with the merger, the
shareholders of Pentamation are acquiring an interest in a larger, more
diverse enterprise;
. The publicly available financial information regarding SunGard, and the
information regarding SunGard common stock, the relative financial
performance of SunGard, the business reputation and capabilities of
SunGard and its management, SunGard's financial strength, and the
liquidity and the historical performance of the publicly traded SunGard
common stock;
. The opportunity for holders of Pentamation Stock to continue
participating in the potential for the future growth of Pentamation
through the ownership of SunGard common stock following the merger;
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<PAGE>
. The perceived strengths of Pentamation and SunGard combined, including
the potential developments and information that are expected to be
shared between the two companies after the merger is consummated; and
. the likelihood that the merger will be consummated.
In view of the wide variety of factors considered by the board of directors
of Pentamation in connection with its evaluation of the terms of the proposed
merger, the board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching its determinations.
Interests of Pentamation's Directors and Executive Officers in the Merger
General. There are directors and executive officers of Pentamation who may
be deemed to have interests in the merger that are in addition to the interests
of Pentamation shareholders generally. These interests are discussed below. The
Pentamation board of directors was aware of these interests at the time the
merger was approved.
Real Estate. David P. Bloys and Jeffrey P. Feather, who are officers and
principal shareholders of Pentamation, are partners of GLS, a Pennsylvania
partnership that owns Five Bethlehem Plaza, Bethlehem, Pennsylvania, which is
real estate that Pentamation presently leases for its operations. In connection
with the merger, Pentamation will purchase the real estate for approximately
87,000 shares of Pentamation common stock, subject to adjustment so that the
partnership receives the same number of SunGard shares upon completion of the
merger as the partnership would have received if the real estate had been sold
directly to SunGard in exchange for SunGard shares for a purchase price equal
to the net fair market value of the real estate. The real estate has an
appraised fair market value of $7,500,000. As of March 31, 1999, the mortgage
balance on the real estate was $3,921,459. This purchase is required in order
to account for the merger as a pooling of interests. See "The Merger and
Related Transactions--Anticipated Accounting Treatment."
Automobiles. GLS, a partnership of which David P. Bloys and Jeffrey P.
Feather are partners, owns automobiles leased and utilized by Pentamation in
its operations. In connection with the merger, Pentamation will purchase the
automobiles for approximately 4,000 shares of Pentamation common stock, subject
to adjustment so that the partnership receives the same number of SunGard
shares upon completion of the merger as the partnership would have received if
the automobiles had been sold directly to SunGard in exchange for SunGard
shares for a purchase price equal to the net fair market value of the
automobiles. The automobiles have an appraised fair market value of $917,475.
As of March 31, 1999, the loan balance associated with the automobiles was
$790,855. This purchase is required in order to account for the merger as a
pooling of interests. See "The Merger and Related Transaction--Anticipated
Accounting Treatment."
Pentamation Options. Donald V. Appleton, the President of Pentamation, has
options to purchase 25,000 shares of Pentamation common stock. All of these
options are immediately exercisable. Upon completion of the merger, all such
options, if not previously exercised, will be assumed by SunGard. These options
will continue to have, and be subject to, the same terms and conditions set
forth in the option agreement under which they were issued and evidenced
(subject to the appropriate adjustments to the exercise price and number of
shares subject to the options based upon the merger exchange ratio.)
Voting Agreements
In connection with the merger, Pentamation shareholders who own 612,884
shares of Pentamation common stock, constituting approximately 75% of the
Pentamation shares outstanding on the record date, have entered into voting
agreements with SunGard in which these shareholders have agreed to vote their
Pentamation shares in favor of the merger.
Each Pentamation shareholder who executed a voting agreement also delivered
to SunGard an irrevocable proxy to vote their shares in favor of the merger. In
addition, each Pentamation shareholder who executed the
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<PAGE>
voting agreement with respect to shares owned beneficially, but not of record,
agreed to use their reasonable best efforts to cause the record owner of the
shares they beneficially owned to execute and deliver to SunGard an irrevocable
proxy to vote their shares in favor of the merger.
Escrow Agreement
Under the escrow agreement, the escrow agent will maintain an account for
each Pentamation stockholder containing the stockholder's stock being held in
escrow in accordance with the terms of the escrow agreement. The escrowed
stock, representing 10% of the stock to be issued in connection with the
merger, will be held by the escrow agent in escrow for one year after
completion of the merger and used to satisfy any claims for indemnification by
SunGard under section 5.3 and section 14.1 of the reorganization agreement. See
"The Merger Documents--Escrow Agreement and Indemnification Claims".
Resale Restrictions
The SunGard common stock issued in connection with the merger will be freely
transferable, except that shares issued to any Pentamation shareholder who is
an affiliate of Pentamation or who becomes an affiliate of SunGard are subject
to a number of restrictions on resale. An affiliate is defined generally as
including directors, executive officers and other persons who control a
company. Pentamation shareholders who may be deemed affiliates have executed
affiliate agreements which:
. prohibit the affiliate from selling or otherwise reducing his risk in
any capital stock or options of Pentamation, and
. prohibit the affiliate from selling or otherwise reducing his risk in
any capital stock or options of SunGard
during the period which begins 30 days prior to consummation of the merger and
ends on the earlier of:
. the date on which financial results covering at least 30 days of post-
merger combined operations of SunGard and Pentamation have been
published by SunGard, and
. the date the agreement is terminated.
In addition, the affiliate agreements further prohibit the sale, transfer or
other disposition of SunGard common stock received by the affiliates in the
merger at any time after the restricted period referred to above unless the
sale, transfer or other disposition complies with the requirements of the
federal securities laws. The purpose of the affiliate agreements is to comply
with the requirements of federal securities laws and pooling of interests
accounting rules.
Rights of Dissenting Pentamation Shareholders
The following discussion is not a complete statement of the law pertaining
to dissenters rights under Pennsylvania Business Corporation Law, referred to
as the PA BCL, and is qualified in its entirety by the full text of section
1930 and Subchapter D of Chapter 15 of the PA BCL, which is referred to as
Subchapter D. Subchapter D is reprinted in its entirety as Appendix D to this
proxy statement/prospectus. Any Pentamation shareholder who desires to exercise
his or her dissenters rights should review carefully Subchapter D and is urged
to consult a legal advisor before electing or attempting to exercise their
rights. All references in Subchapter D to a "shareholder" and in this summary
to a "Pentamation shareholder" or a "holder of Pentamation stock" are to the
record holder of shares as to which dissenters rights are asserted.
Subject to the exceptions stated below, holders of Pentamation stock who
comply with the applicable procedures summarized below will be entitled to
dissenters rights under Subchapter D. Voting against, abstaining from voting or
failing to vote on approval and adoption of the proposed merger will not
constitute a demand for appraisal within the meaning of Subchapter D.
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<PAGE>
Pentamation shareholders electing to exercise dissenters rights under
Subchapter D must not vote for approval of the proposed merger. A vote by a
shareholder against the proposed merger is not required to exercise dissenters
rights. However, if a shareholder returns a signed proxy but does not specify a
vote against the proposed merger or a direction to abstain, the proxy, if not
revoked prior to the special meeting of shareholders, will be voted for
approval of the proposed merger, which will have the effect of waiving that
shareholder's dissenters rights. It is a condition to the closing of the merger
that holders of less than 10% of Pentamation's outstanding stock exercise their
dissenters rights.
What Are Dissenters Rights? Pentamation shareholders who follow the
procedures of Subchapter D will be entitled to receive from Pentamation the
fair value of their shares, immediately before the effective time of the
Pentamation merger. Fair value takes into account all relevant factors but
excludes any appreciation or depreciation in anticipation of the merger.
Pentamation shareholders who elect to exercise their dissenters rights must
comply with all of the procedures to preserve those rights.
Shares Eligible for Dissenters Rights. Generally, if you chose to assert
your dissenters rights, you must dissent as to all of the shares you own. The
PA BCL distinguishes between record holders and beneficial owners. You may
assert dissenters rights as to fewer than all the shares registered in your
name only if you are not the beneficial owner of the shares with respect to
which you do not exercise dissenters rights.
Record Holder Who is Not the Beneficial Owner. A record holder may assert
dissenters rights on behalf of the beneficial owner. If you are a registered
owner and you wish to exercise dissenters rights on behalf of the beneficial
owner, you must disclose the name and address of the person or persons on whose
behalf you dissent. In that event, your rights shall be determined as if the
dissenting shares and the other shares were registered in the names of the
beneficial holders.
Beneficial Owner Who is Not the Record Holder. A beneficial owner of
Pentamation common stock who is not also the record holder, may assert
dissenters rights. If you are a beneficial owner who is not the record holder
and you wish to assert your dissenters rights you must submit a written consent
of the record holder to the Secretary of Pentamation prior to the vote, but in
no event later than the Pentamation special meeting. You may not dissent with
respect to some but less than all shares you own.
Dissenters Rights Procedures
Notice of Intention to Dissent. If you wish to exercise your dissenters
rights, you must follow the procedures set forth in Appendix D. You must file a
written notice of intention to demand the fair value of your shares with the
Secretary of Pentamation prior to the vote, but in no event later than the
Pentamation special meeting. You must not make any change in your beneficial
ownership of Pentamation shares from the date you file the notice until the
effective time of the merger. You must refrain from voting your shares for the
adoption of the merger proposal.
Notice of Approval. If the Pentamation shareholders approve the merger
proposal, Pentamation will mail a notice to all dissenters who filed a notice
of intention to dissent prior to the vote on the merger proposal and who
refrained from voting for the adoption of the merger proposal. Pentamation
expects to mail the notice of approval promptly after the merger. The notice of
approval will state where and when a demand for payment must be sent and where
the certificates for eligible shares must be deposited in order to obtain
payment. The notice of approval will also supply a form for demanding payment
which includes a request for certification of the date on which the holder, or
the person on whose behalf the holder dissents, acquired beneficial ownership
of the shares. The demand form will be accompanied by a copy of Subchapter D.
If you assert your dissenters rights, you must ensure that Pentamation
receives your demand form and your certificates on or before the demand
deadline. All mailings to Pentamation are at your risk. Accordingly,
Pentamation recommends that your notice of intention to dissent, demand form
and stock certificates be sent by certified mail only, by overnight courier or
by hand delivery.
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If you fail to file a notice of intention to dissent, fail to complete and
return the demand form, or fail to deposit stock certificates with Pentamation,
each within the specified time periods, you will lose your dissenters rights
under Subchapter D. You will retain all rights of a shareholder, or beneficial
owner, until those rights are modified by completion of the merger.
Payment of Fair Value by Pentamation. Upon timely receipt of the completed
demand form, the PA BCL requires Pentamation to either: remit to dissenters who
complied with the procedures, the amount Pentamation estimates to be the fair
value for such dissenting shares; or give written notice that no such
remittance will be made.
Pentamation will determine whether to make such a remittance or to defer
payment for such shares until completion of the necessary appraisal
proceedings. Pentamation may consider the number of shares, if any, with
respect to which shareholders dissented and any objections that may be raised
with respect to the standing of the dissenting shareholder.
The remittance or notice will be accompanied by: (i) the closing balance
sheet and statement of income of Pentamation for the fiscal year ended
September 30, 1998 or the latest available interim financial statements; (ii) a
statement of Pentamation's estimate of the fair value of the shares; and (iii)
notice of the right of the dissenter to demand payment or supplemental payment,
as the case may be, accompanied by a copy of Subchapter D.
Return of Deposited Certificates. If Pentamation does not remit the amount
of its estimate of the fair value of the shares, it will return any deposited
certificates with a notation that a demand for payment in accordance with
Subchapter D has been made. If shares carrying this notation are transferred
after that, each new certificate issued may bear a similar notation, together
with the name of the original dissenting holder or owner of such shares. A
transferee of such shares will not acquire by this transfer any rights in
Pentamation other than those which the original dissenter had after making
demand for payment of their fair value.
Dissenting Shareholders Estimate of Fair Value. If Pentamation gives notice
of its estimate of the fair value of your shares, without remitting this
amount, or remits payment of its estimate of the fair value of your shares and
you believe that the amount remitted or stated is less than the fair value of
such shares, you may send to Pentamation your own estimate of the fair value of
the shares. Such estimate shall be deemed a demand for payment of the amount of
the deficiency. If you do not file a holder's estimate within 30 days after the
mailing by Pentamation of its remittance or notice, you will only be entitled
to the amount stated in the notice or remitted to you by Pentamation.
Resort to Court for Relief. If, after the later of, 60 days after the
effective time of the merger or after the timely receipt of any holder's
estimate, demands remain unpaid, Pentamation may file an application for
relief, requesting the court determine the fair value of the shares. We cannot
assure you that Pentamation will file this application.
In the court proceeding all dissenters, wherever residing, whose demands
have not been settled will be made parties to any such appraisal proceeding.
The court may appoint an appraiser to receive evidence and recommend a decision
on the issue of fair value. Each dissenter made a party will be entitled to
recover an amount equal to the fair value of the dissenter's shares, plus
interest, or if Pentamation previously remitted any amount to the dissenter,
any amount by which the fair value of the dissenter's shares is found to exceed
the amount previously remitted, plus interest.
If Pentamation fails to file an application for relief, any dissenter who
made a demand and who has not already settled his or her claim against
Pentamation may file an application for relief in the name of Pentamation at
any time within 30 days after the expiration of the 60- day period after the
merger or after the timely receipt of any holder's estimate. If a dissenter
does not file an application within the 30-day period, each dissenter entitled
to file an application shall be paid Pentamation's estimate of the fair value
of the shares and no more, and may bring an action to recover any amount not
previously remitted.
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Costs and Expenses of Court Proceedings. The costs and expenses of the court
proceedings, including the reasonable compensation and expenses of the
appraiser appointed by the court, will be determined by the court and assessed
against Pentamation. The court may, however, apportion and assess any part of
the costs and expenses of court proceedings as it deems appropriate against all
or some of the dissenters who are parties and whose action in demanding
supplemental payment the court finds to be in bad faith. If Pentamation fails
to comply substantially with the requirements of Subchapter D, the court may
assess fees and expenses of counsel and of experts for the parties as it deems
appropriate against Pentamation and in favor of any or all dissenters. The
court may assess fees and expenses of counsel and experts against either
Pentamation or a dissenter, if the court finds that a party acted in bad faith.
If the court finds that the services of counsel for any dissenter substantially
benefitted other dissenters similarly situated and should not be assessed
against Pentamation, it may award counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who benefitted.
No Right to an Injunction. Under Pennsylvania corporate law, a Pentamation
shareholder has no right to obtain, in the absence of fraud or fundamental
unfairness, an injunction against the merger proposal, nor any right to
valuation and payment of the fair value of the holder's shares because of the
merger proposal, except to the extent provided by the dissenters rights
provisions of Subchapter D. Pennsylvania corporate law also provides that,
absent fraud or fundamental unfairness, the rights and remedies provided by
Subchapter D are exclusive.
Material Federal Income Tax Consequences
The following is a summary description of the material United States federal
income tax consequences of the merger to Pentamation and the Pentamation
shareholders who receive SunGard common stock in the merger or perfect
dissenters' rights. This summary does not address tax considerations which may
affect the
treatment of special status taxpayers such as financial institutions, broker-
dealers, life insurance companies, tax-exempt organizations, investment
companies and foreign taxpayers or of Pentamation shareholders who do not hold
their Pentamation stock as a capital asset at the date the merger is completed
or to the extent their Pentamation stock was received in connection with the
sale of real estate and automobiles by the GLS partnership. In addition, no
information is provided in this summary with respect to the tax consequences of
the merger either under applicable foreign, state or local laws or to persons
who acquired Pentamation common stock under employee stock options or otherwise
as compensation.
The following discussion is based on the Internal Revenue Code of 1986, as
in effect on the date of this proxy statement/prospectus, without consideration
of the particular facts or circumstances of any particular holder of
Pentamation stock. Pentamation and SunGard have not sought and will not seek
any rulings from the Internal Revenue Service, with respect to any of the
matters discussed in this summary. It is a condition to the closing that Blank
Rome Comisky & McCauley LLP, counsel to SunGard, render an opinion that the
merger will qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986. Provided that the merger qualifies as a
statutory merger under applicable state law:
. the merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Internal Revenue Code of
1986;
. no gain or loss will be recognized by SunGard upon the exchange of
Pentamation stock solely in exchange for SunGard common stock;
. no gain or loss will be recognized by Pentamation shareholders upon the
exchange of their Pentamation stock solely for SunGard common stock;
. the basis of SunGard common stock received by Pentamation shareholders
in the merger will be the same as the basis of their Pentamation stock
surrendered in exchange therefor;
. for capital gains purposes, the holding period of SunGard common stock
received by Pentamation shareholders in the merger will include the
period during which the Pentamation stock surrendered in exchange
therefor was held, provided that the Pentamation stock is held as a
capital asset at the date the merger is completed.
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This opinion will not address the federal income tax consequences with
respect to the SunGard stock received by GLS or its partners in connection with
the sale of real estate and automobiles by the GLS partnership to Pentamation
prior to the completion of the merger.
A Pentamation shareholder who perfects dissenters rights with respect to his
or her shares of Pentamation stock, and who does not withdraw his or her
rights, should, in general, treat the difference between the tax basis of the
shares of Pentamation stock held by the Pentamation stockholder with respect to
which dissenters rights are perfected and the amount received in payment
therefor as capital gain or loss. However, depending on the Pentamation
shareholder's particular circumstances, this amount might be treated for
federal tax purposes as dividend by SunGard.
The foregoing is a general discussion of the material federal tax
consequences of the merger for Pentamation and Pentamation shareholders and is
included for general information only. The foregoing discussion does not take
into account the particular facts and circumstances of each Pentamation
shareholder's tax status and attributes. Accordingly, each Pentamation
shareholder should consult his or her own tax advisor regarding the specific
tax consequences of the merger, including the application and effect of
federal, state, local and other tax laws and the possible effects of changes in
these tax laws.
Anticipated Accounting Treatment
The merger is intended to be accounted for as a pooling of interests for
financial reporting purposes in accordance with generally accepted accounting
principles. SunGard's obligation to complete the merger is conditioned upon its
receipt of letters from PricewaterhouseCoopers L.L.P., SunGard's independent
accountants, and Halbert, Katz & Co., P.C., Pentamation's independent
accountants, that the merger may be accounted for as a pooling of interests.
SunGard has the right to waive the condition that the merger be accounted
for as a pooling of interests. If the merger is consummated but fails to
qualify for pooling of interests accounting treatment, then the transaction may
be accounted for as a purchase. Under that method, the fair market value of the
SunGard common stock issued in the merger would be recorded as the cost of
acquiring Pentamation's business. That cost would be allocated to the
individual assets of Pentamation that were acquired and liabilities of
Pentamation that were assumed according to their respective fair values. The
fair market value of the SunGard common stock to be issued in the merger is in
excess of the amounts at which the net assets are carried in Pentamation's
accounts. The excess would be allocated to intangible assets and amortized as
an expense over the estimated useful life of each intangible asset. As a
result, if the merger fails to qualify for pooling of interests accounting
treatment, and the transaction is accounted for under the purchase method, the
combined financial results of SunGard and Pentamation could be adversely
affected.
Regulatory Matters
SunGard and Pentamation have filed notification and report forms with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice in connection with the merger as required by the HSR Act. These filings
commenced a 30-day waiting period under the HSR Act which must elapse before
Pentamation and SunGard may complete the merger. These filings have been made
and the waiting period will end on July 8, 1999. The Department of Justice and
the Federal Trade Commission will continue to have the authority to challenge
the merger on antitrust grounds before or after the merger is completed even
though the waiting period ended. There can be no assurance that a challenge to
the merger on antitrust grounds will not be made, or if a challenge is made,
that SunGard and Pentamation would prevail or would not be required to
terminate the reorganization agreement, divest assets, license proprietary
technology to third parties or accept conditions in order to complete the
merger. SunGard does not have any obligation under the reorganization agreement
to dispose of any assets or make any changes to its operations or make any
commitments to any governmental agency even if these actions might facilitate
the completion of the merger.
New York Stock Exchange Listing
SunGard will cause the shares of SunGard common stock to be issued in
connection with the merger to be listed on the New York Stock Exchange upon the
effective date of the merger.
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THE MERGER DOCUMENTS
General
The following is a summary of the material provisions of the merger
documents, consisting of the reorganization agreement and the merger agreement.
A copy of the reorganization agreement is attached as Appendix A to this proxy
statement/prospectus and a copy of the merger agreement is attached as Appendix
B to this proxy statement/prospectus. The merger documents are incorporated
into this proxy statement/prospectus by reference, and you are urged to read
them carefully.
The merger documents provide for the merger of a newly-formed, wholly-owned
subsidiary of SunGard with and into Pentamation. As a result of the merger, the
SunGard subsidiary will cease to exist, Pentamation will become a wholly owned
subsidiary of SunGard and Pentamation shareholders will become stockholders of
SunGard. Pentamation will continue as the surviving corporation of the merger
and will retain all of its separate corporate existence, with all its rights
and powers unaffected by the merger. The merger will become effective upon the
filing of articles of merger with the Pennsylvania Secretary of the
Commonwealth or at any later time that may be specified in the articles of
merger. The filing of the articles of merger is anticipated to take place as
soon as practicable after the adoption and approval of the merger by the
Pentamation shareholders, if the other conditions to the merger are satisfied
or waived. We currently anticipate that the merger will be completed, and the
merger will be effective, shortly after the meeting of Pentamation shareholders
to approve the merger. There can be no assurance, however, that the conditions
to the merger will be satisfied by that time, or at all, or that the merger
documents will not be terminated. See "--Conditions to the Merger" and "The
Merger and Related Transactions--Regulatory Matters."
Merger Consideration
Pentamation Common Stock. When the merger is completed, each outstanding
share of Pentamation common stock will be converted into the right to receive
SunGard common stock. The number of shares of SunGard common stock into which
each share of Pentamation common stock will be converted will vary based upon:
. the average of the closing sale prices of SunGard common stock over a 20
trading day period ending two days prior to the effective date of the
merger and
. the fair market value of the real estate and automobiles purchased by
Pentamation from GLS, a partnership owned by Jeffrey P. Feather and
David P. Bloys, less the debt to which such assets are subject. This net
amount will be payable as part of the merger consideration by dividing
that amount by the SunGard average stock price as determined above. The
number of shares resulting from this calculation is sometimes referred
to as the additional shares. It is expected that the fair market value
less debt of these assets will be approximately $3,700,000 when the
merger is completed.
The actual exchange ratios will be determined as follows:
. if the average stock price is between $34 and $46, each share of
Pentamation common stock will be converted into SunGard common stock
determined by dividing (a) 915,000 shares of SunGard common stock plus
the additional shares by (b) the number of Pentamation shares
outstanding or issuable upon the exercise of stock options as of the
date the merger is completed.
. if the average stock price is less than $34, each share of Pentamation
common stock will be converted into SunGard common stock determined by
dividing (a) the number of shares of SunGard common stock resulting from
dividing $31,110,000 by the average stock price, but in no event more
than 972,188 shares, plus the additional shares by (b) the number of
Pentamation shares outstanding or issuable upon the exercise of stock
options as of the date the merger is completed.
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. if the average stock price is greater than $46, each share of
Pentamation common stock will be converted into SunGard common stock
determined by dividing (a) the number of shares of SunGard common stock
resulting from dividing $42,090,000 by the average stock price, but in
no event less
than 876,875 shares, plus the additional shares by (b) the number of
Pentamation shares outstanding or issuable upon the exercise of stock
options as of the date the merger is completed.
Listed below is the approximate exchange ratios which would apply if the
20-day average closing price of SunGard common stock was equal to the price
listed next to that ratio:
<TABLE>
<CAPTION>
Then each share of
Pentamation common
stock would be converted
into the following
approximate number
If the SunGard 20-day of shares of
average closing price is: SunGard common stock:
------------------------- ------------------------
<S> <C>
$30.00 1.1536120
31.00 1.1536120
32.00 1.1536120
33.00 1.1186531
34.00 to 46.00 1.0857520
47.00 1.0626508
48.00 1.0405122
49.00 1.0405122
</TABLE>
Please note that because the exchange ratio will be based upon the average
closing price of SunGard common stock and because the market price of the
shares of SunGard common stock may fluctuate, Pentamation shareholders cannot
be sure as of the date of the special meeting of the market value of the
shares of SunGard common stock they will receive.
It is a condition to Pentamation's obligation to complete the merger that
the average price of SunGard common stock over a 20 trading day period ending
two days prior to the effective date of the merger is greater than or equal to
$32 per share.
No Fractional Shares. No fractional shares of SunGard common stock will be
issued in connection with the merger. In lieu of fractional shares, the number
of shares of SunGard stock to be issued to each shareholder shall be rounded
up on down to the nearest whole number of shares of SunGard common stock.
Stock Options
Upon completion of the merger, all rights with respect to Pentamation
common stock under each Pentamation option to acquire Pentamation common stock
then outstanding will be converted into and become rights to acquire SunGard
common stock, and SunGard will substitute a SunGard stock option in exchange
for each Pentamation option. As of the record date, there were options
outstanding to purchase a total of 25,000 shares of Pentamation common stock
all of which were held by Donald V. Appleton, President of Pentamation. In the
event such options have not been exercised by Mr. Appleton prior to the
effective date of the merger:
. the number of shares of SunGard common stock subject to each Pentamation
option will be equal to the number of shares of Pentamation common stock
subject to each Pentamation option immediately prior to the completion
of the merger, multiplied by the merger exchange ratio, rounded to the
nearest whole share; and
27
<PAGE>
. the exercise price per share under each Pentamation option will be
adjusted by dividing the exercise price per share under the Pentamation
option by the merger exchange ratio and rounded up to the nearest cent;
and
The options will be subject to adjustment as appropriate to reflect any
stock split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction subsequent to the completion of
the merger.
Stock Ownership Following the Merger
Based on the number of shares of Pentamation common stock issued and
outstanding as of the record date and assuming an average SunGard stock price
of $ during the 20 day measurement period, closing price per share
of SunGard common stock on June , 1999, and after giving effect to the
approximately shares of Pentamation common stock to be issued to GLS in
consideration for the sale of certain real estate and automobiles, an aggregate
of approximately shares of SunGard common stock will be issued
to Pentamation shareholders. Based on the number of shares of SunGard common
stock issued and outstanding as of May 30, 1999, and after giving effect to the
additional shares of SunGard common stock that are proposed to be issued in the
merger, assuming no exercise of outstanding options to purchase SunGard common
stock or Pentamation common stock, the former shareholders of Pentamation would
hold approximately % of SunGard's total issued and outstanding shares.
Exchange Procedures for Pentamation Stock
SunGard will designate its transfer agent, Norwest Bank, N.A., to act as the
"exchange agent" under the merger documents and the escrow agreement. As soon
as is practicable after the date the merger is completed, SunGard or the
exchange agent will mail or deliver, to each Pentamation stockholder as of May
30, 1999, instructions for use in surrendering his or her Pentamation stock
certificates to the exchange agent. Upon the surrender of a Pentamation stock
certificate to the exchange agent in accordance with the instructions, the
exchange agent will exchange the Pentamation stock certificate for:
. new certificates representing 90% of the number of shares of SunGard
common stock into which the shares of Pentamation stock represented by
the Pentamation stock certificate have been converted in accordance with
the merger documents, which will be promptly delivered as instructed by
the holder, and
. new certificates for the balance of the number of shares of SunGard
common stock into which the shares of Pentamation stock represented by
the Pentamation stock certificate have been converted in accordance with
the merger documents, which will be held in escrow and distributed in
accordance with the terms of the escrow agreement.
If applicable, the new certificates will be accompanied by any distributions
due with respect to shares of SunGard common stock that were paid to SunGard's
shareholders of record as of a date between the date the merger is completed
and the date of distribution of the certificates. Until surrendered to the
exchange agent, each outstanding Pentamation stock certificate will be deemed
to evidence ownership of the number of shares of SunGard common stock into
which the shares of Pentamation stock have been converted in accordance with
the merger agreement, subject to the escrow requirement described above.
Escrow Agreement and Indemnification Claims
In connection with the merger, Pentamation shareholders will be asked to
sign an escrow agreement with SunGard, a copy of which is attached as Appendix
C. It is a condition to SunGard's obligation to complete the merger that the
holders of at least 90% of Pentamation's outstanding stock execute the escrow
agreement. However, the terms of the escrow agreement will be binding on each
Pentamation shareholder by virtue of the merger and regardless of whether such
Pentamation shareholder has executed the escrow agreement.
28
<PAGE>
Under the escrow agreement, the escrow agent will maintain an account for
each Pentamation shareholder containing the shareholders' stock being held in
escrow in accordance with the terms of the escrow agreement. The escrowed
stock, representing 10% of the stock to be issued to in connection with the
merger, will be held by the escrow agent in escrow and used to satisfy any
claims for indemnification by SunGard under section 5.3 or section 14.1 of the
reorganization agreement. The escrowed stock will be distributed to the
Pentamation shareholders one year after the date the merger is completed, less
the shares used to pay any claims made by SunGard for indemnification matters
under section 5.3 or section 14.1 of the reorganization agreement. For purposes
of paying indemnification claims, the shares will be valued based upon the
average of the closing sale prices of SunGard common stock during the 20
trading days ending two trading days prior to the completion of the merger.
The escrow agreement provides that each of the Pentamation shareholders will
grant to Jeffrey P. Feather the full power and authority to represent them for
the purpose of handling claims under the escrow agreement, including settling
all related disputes, and agreeing to any waiver, consent or amendment under or
to the escrow agreement; provided that no waiver, consent or amendment will
affect the method of allocation of payments from the escrowed stock with
respect to any Pentamation shareholder who does not expressly consent to such
change.
The escrow agreement provides for the indemnification of the exchange agent
by SunGard and the Pentamation shareholders from any action, claim or
proceeding, arising out of or relating in any way to the escrow agreement or
any transaction to which the escrow agreement relates. This indemnification
will not be available if the action, claim or proceeding is the result of the
willful misconduct or gross negligence of the escrow agent.
A copy of the escrow agreement is attached as Appendix D.
Representations and Warranties
The reorganization agreement contains statements and promises, called
representations and warranties, made by Pentamation and SunGard. Some of
Pentamation's representations and warranties relate to the following:
. organization of Pentamation and its subsidiaries;
. effect of the reorganization agreement;
. capital stock and ownership;
. financial and corporate records;
. compliance with law;
. financial statements;
. assets;
. obligations;
. operations since latest balance sheet;
. accounts receivable;
. tangible property;
. real property;
. environmental matters;
. software and intangibles;
. contracts;
. employee and independent contractor matters;
. employee benefit plans;
. customers, prospects and suppliers;
. tax matters;
. proceedings and judgments;
. insurance;
. questionable payments;
29
<PAGE>
. related party transactions;
. broker fees;
. acquisition proposals;
. matters concerning affiliates;
. accounting matters;
. vote required;
. anti-trust regulatory requirements; and
. full disclosure.
Some of SunGard's representations and warranties relate to the following:
. organization;
. effect of reorganization agreement;
. capital stock and ownership
. filings with the SEC;
. investment matters.
To review all of the representations and warranties contained in the
reorganization agreement you should read the reorganization agreement which is
attached as Appendix A.
The reorganization agreement provides that if the representations and
warranties of Pentamation are determined to have been incorrect at the time the
reorganization agreement was signed or at the time the merger is completed,
SunGard may make claims against the Pentamation shareholders for any resulting
losses suffered by SunGard. Pentamation shareholders will not have liability
for any representation or warranty if a claim for indemnification is not made
by April 30, 2000 with respect to matters expected to be encountered in the
routine audit process of a wholly owned subsidiary of SunGard, or by 12 months
after the completion of the merger with respect to all other matters, except
that there is no time limit for losses suffered by SunGard with respect to any
matter involving:
. pending litigation disclosed by Pentamation in excess of disclosed
amounts;
. intentional misrepresentation, fraud or a criminal matter;
. title to or infringement caused by any software, technology, service or
product which, at any time before the completion of the merger, was
marketed, licensed, maintained, supported, owned, or claimed to have
been owned by Pentamation;
. record or beneficial ownership of any shares of capital stock or
membership interests in Pentamation or its subsidiaries;
. taxes;
. environmental matters; or
. covenants or other obligations to be performed after the completion of
the merger.
Covenants
The reorganization agreement includes several covenants and agreements of
Pentamation and SunGard which govern their actions until the merger is
completed. These covenants and agreements include the following which require
that:
. Pentamation conduct its business in a diligent manner and not make any
material change in its business practices;
. Pentamation preserve intact its current business organization, keep
available the services of its current officers, employees, salesmen,
agents and representatives and maintain the goodwill of its customers,
suppliers, and other persons or entities having a business relationship
with Pentamation;
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<PAGE>
. Pentamation consult regularly with SunGard as to the management of its
business and affairs;
. Pentamation shall:
. maintain its real property and tangible property in good condition
and repair,
. maintain its insurance policies and permits in full force and
effect,
. repair, restore or replace any of its assets that are damaged,
destroyed, lost or stolen,
. comply with all applicable contracts, permits and laws,
. properly file all tax returns, annual reports and other returns and
reports required to be filed by it, and
. fully pay when due all taxes and fees;
. Pentamation maintain its corporate existence and good standing in its
jurisdiction of incorporation and its good standing in each jurisdiction
where it is currently qualified as a foreign corporation, and not amend
its articles of incorporation or bylaws;
. without SunGard's prior written consent, Pentamation will not:
. generally act other than in the ordinary course of its business
consistent with its past practices;
. even in the ordinary course of its business consistent with past
practices, incur any obligation or enter into any contract or
transaction, involving, in any single case, an amount exceeding
$50,000 or, in the aggregate, an amount exceeding $100,000, except
with respect to draws on its existing line of credit in the ordinary
course of business;
. permit or cause a breach or default under any agreement;
. alter its capitalization; or
. enter into any contract that commits it to take any action
inconsistent with any of the provisions of the merger documents;
. Pentamation shall submit to SunGard monthly financial statements
prepared in accordance with generally accepted accounting principles;
. Pentamation provide SunGard with reasonable access to its personnel,
facilities, assets, existing books, records, tax returns, work papers
and other documents and permit and assist SunGard to contact its
customers, prospects and suppliers;
. Pentamation and its principal shareholders shall use their best efforts
to obtain all consents necessary to complete the merger;
. Pentamation and the principal shareholders shall not engage in
discussions with any third party regarding an acquisition of
Pentamation;
. Pentamation and its principal shareholders promptly advise SunGard of
any fact to their knowledge that would have been required to be
disclosed under the Reorganization Agreement;
. Pentamation and the principal shareholders shall not take any action
that would prevent the merger from being accounted as a pooling of
interests;
. Pentamation and its principal shareholders on the one hand, and SunGard
on the other hand, shall make all necessary anti-trust regulatory
filings with the appropriate governmental agencies;
. Neither Pentamation nor its principal shareholders shall transfer,
dispose of or encumber any shares of Pentamation stock;
. SunGard shall maintain its corporate existence and good standing in the
State of Delaware, and not amend its charter or bylaws in any manner
that would be inconsistent with its obligations under the merger
documents;
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<PAGE>
. SunGard shall not enter into any contract that commits it to take any
action that would be inconsistent with any of the provisions of the
merger documents;
. SunGard shall permit Pentamation, its principal shareholders and
authorized representatives access to all publicly available information
concerning SunGard;
. SunGard, Pentamation and the principal shareholders shall use their
respective best efforts to complete the merger;
. SunGard shall file all reports required to be filed with the Securities
and Exchange Commission; and
. SunGard shall promptly advise Pentamation and its principal shareholders
of any fact to its knowledge that would have been required to be
disclosed under the reorganization agreement.
To review all of the covenants and agreements contained in the
reorganization agreement, you should read the reorganization agreement which is
attached as Appendix A.
Non-Solicitation
In the merger documents, Pentamation and the principal shareholders agreed
that they will not solicit, initiate, encourage, or respond to any inquiries or
proposals from, or participate in any discussions or negotiations with, any
third parties concerning any merger, consolidation or similar transaction, any
bulk sale of Pentamation's or its subsidiaries' assets or any sale of
Pentamation's or its subsidiaries' capital stock. You should read the
reorganization agreement which is attached as Appendix A for a more complete
discussion of the nonsolicitation provision.
Conditions to the Merger
The completion of the merger depends upon the satisfaction or waiver of
certain conditions, including, among other things:
. the registration statement must become effective in accordance with the
provisions of the Securities Act, and no stop order shall have been
issued by the SEC with respect to the registration statement;
. the independent accountants for Pentamation and SunGard each shall have
delivered a letter to SunGard to the effect that the merger may be
accounted for as a pooling of interests;
. the merger must be approved by Pentamation's shareholders;
. the representations and warranties of the parties are not false or
misleading in any material respect;
. all of the terms and conditions of the reorganization agreement must be
substantially satisfied or performed;
. there may not be any legal proceeding, judgment or new law that seeks to
or does prohibit or restrain, or that seeks damages as a result of, the
completion of the merger or any of the other transactions provided for
in the merger documents;
. there may not be any material adverse change or loss that affects
Pentamation or its business, assets, financial condition or financial
performance since the date of the reorganization agreement;
. the escrow agreement must have been signed by the holders of at least
90% of Pentamation's outstanding stock;
. the sale to Pentamation of the facilities located at Five Bethlehem
Plaza, Bethlehem, PA, from which Pentamation operates, must be completed
and Pentamation must have obtained title, title insurance, title surveys
and other documentation acceptable to SunGard;
. if SunGard has elected to obtain environmental surveys with respect to
the Bethlehem property, such surveys must show that the property is in
compliance with environmental laws;
. the sale to Pentamation of the fleet of automobiles leased by
Pentamation must be completed; and
. the waiting period under the HSR Act must have expired or been
terminated.
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<PAGE>
In addition, it is a condition to the obligations of Pentamation to complete
the merger that the average price of SunGard common stock over a 20 trading day
period ending two days prior to the effective date of the merger is greater
than or equal to $32 per share. In the event that the average price of SunGard
common stock is less than $32 per share, Pentamation may either waive such
condition and complete the merger, or postpone the completion of the merger
until the condition is satisfied. If this condition is not satisfied by August
31, 1999, Pentamation could also terminate the merger.
To review all of the conditions to the merger, you should read the
reorganization agreement attached as Appendix A.
Termination
The reorganization agreement may be terminated prior to the completion of
the merger, whether before or after approval of the merger by the shareholders
of Pentamation;
. by mutual written consent of Pentamation and SunGard; or
. by either Pentamation or SunGard if the merger is not completed by
August 31, 1999, unless the failure to complete the merger is because of
a failure by the terminating party to perform any obligation required to
be performed by that party;
Expenses
All fees and expenses incurred in connection with the merger documents and
the transactions contemplated by the merger documents will be paid by the party
incurring those expenses, whether or not the merger is completed.
Amendment; Waiver
The merger documents may not be amended except by an instrument in writing
signed on behalf of each of the parties. No waiver under the merger documents
will be enforceable unless it is in writing and signed by the party against
whom the enforcement of that waiver is being sought. Pentamation may agree to
any amendment or supplement to the merger documents, or a waiver of any
provision of the merger documents, either before or after the approval of the
shareholders of Pentamation is obtained and without seeking further shareholder
approval, so long as such amendment, supplement or waiver does not result in a
decrease in the merger exchange ratio or have a material adverse effect on the
shareholders of Pentamation.
Nondisclosure and Noncompetition Restrictions
In the merger documents, Pentamation and each of Jeffrey P. Feather, David
P. Bloys, and Donald V. Appleton agreed with SunGard that during the later of
the period which ends five years after the effective date of the merger or the
period which ends two years after their employment with SunGard terminates,
they will not:
. communicate with or solicit any person who is a customer, prospect,
supplier, employee, salesman, agent or representative of, or consultant
to SunGard in an effort to obtain the person as a customer, supplier,
employee, salesman, agent or representative of or consultant to, any
other person that is competitive with or similar to the SunGard
enterprise resource planning business;
. market or sell any software, technology, product or service that is
similar to or competitive with any proprietary software, technology,
product or services of the SunGard enterprise resource planning
business;
. establish, own, manage, operate, finance or control, or participate in
the establishment, ownership, management, operation, financing or
control of, or be a director, officer, employee, salesman, agent or
representative of, or consultant to any business that competes with or
is similar to the SunGard enterprise resource planning business;
They have also agreed not to disclose or use any confidential or proprietary
information of the SunGard business, including the Pentamation business.
The provisions of the noncompetition restrictions will not apply to Mr.
Appleton in the event that his employment is terminated by SunGard without
cause after the completion of the merger.
33
<PAGE>
INFORMATION CONCERNING PENTAMATION
Business of Pentamation
Pentamation develops, markets and sells information systems for school
districts and local governments. Its integrated systems include the hardware,
network design, application software and implementation necessary to provide a
total solution to its customers' information needs. Pentamation also provides
all necessary software and hardware installation, end user training,
documentation, specialized software enhancements, data conversions and, as
described below, support and maintenance services required by its customers.
Pentamation began operations in January 1970 and has been based in Bethlehem,
Pennsylvania since that time. The Company has approximately 326 employees.
Pentamation's education systems are currently used by over 500 school
districts ranging in size from a few hundred to over 60,000 students. Its K-12
information systems include financial, human resource and student management
systems and applications.
Pentamation's government systems are currently serving hundreds of local
government organizations throughout the United States. Pentamation is a leader
is providing financial, human resource and revenue management information
support systems for local governments.
Pentamation also provides extensive and effective support services for its
products for its customers. Support services are provided through a fully
automated service call management system, a web-accessible knowledge base, an
automated call distribution system and centralized call center.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PENTAMATION
General
Pentamation provides information systems for school districts and local
governments. Its information systems include the hardware, network design,
application software and implementation necessary to provide an integrated
solution to its customers' information requirements.
Pentamation's revenues come from three primary sources: the sale of new
systems, implementation and other services associated with sales, and support
and maintenance services.
Pentamation's growth over the years in revenue and income has come from
increased sales and an expanding customer base. The Company maintains its own
internal full-time sales force. In many cases, sales are completed through a
competitive process wherein the Company responds to requests for proposals from
government agencies and school districts.
While the overall trend in revenues and profits has been positive, revenues
can fluctuate when viewed on a quarter to quarter or year to year basis.
Pentamation utilizes line of credit bank financing to the extent necessary
to supplement the self funding of its operations.
Results of Operations
Revenues. Net revenue for the six months ended March 31, 1999 totaled
$17,531,000, an increase of 36% from the same period in 1998. Revenues from
software licenses grew 95%, from $3,475,000 to $6,759,000, and software
training and installation revenues grew 158%, from $935,000 to $2,411,000. The
revenue and installation growth was attributable to strong backlog resulting
from the introduction of new products and increased sales performance in the
preceding year. Additionally, in September, 1998, Pentamation completed the
acquisition of TreSun, Inc., a Florida based supplier of application software
for local governments, which also accounted in part for the increased revenues.
Revenues from software maintenance services grew 18%, from $3,297,000 to
$3,880,000, in the comparative six-month periods due to the increase in
software sales. Revenue per employee was $58,000 for the six months ended March
31, 1999, and $49,000 for the same period in 1998.
Net revenue in 1998 increased 24% to $27,337,000 from $21,952,000 in 1997
and 18% from $23,254,000 in 1996. The increase was due to strong software sales
during 1997 and 1998, as well as the services associated with the
implementation of new sales.
Due to the increase in installed systems, software maintenance revenue
increased 36% from 1996 to 1998. Sales per employee were $101,000, $90,000 and
$110,000 in 1998, 1997 and 1996, respectively.
Expenses. Operating expenses for the six months ended March 31, 1999 totaled
$16,982,000, an increase of 42% over the same period in 1998. This increase was
due to staff expansion and the use of additional office space and equipment.
Headcount increased from 275 at March 31, 1998 to 321 at March 31, 1999.
Operating margin was 3% for the six months ended March 31, 1999 and 6% for the
same period in 1998. An expense of $485,000 and $922,000 for acceleration of
capitalized software in service was recorded for the periods ended September
30, 1998 and March 31, 1999 for certain capitalized software products, which in
management's view had no significant continuing value.
Marketable securities held for certain company employees as part of a
deferred compensation plan are recorded as an asset. As such, increases and
decreases in market value of these securities result in increases and decreases
in compensation expense and corresponding increases and decreases in net
unrealized gains on marketable securities available for sale. Compensation
expense for the six months ended March 31, 1999 under these principles was
approximately $136,000. No such compensation expense was recorded for the six
months ended March 31, 1998.
35
<PAGE>
Operating expenses in 1998 increased 24% to $26,203,000 from $21,152,000 in
1997 and increased 22% from $21,547,000 in 1996. The increase was due primarily
to increased staffing levels required to support the new business and growing
customer base and the staffing and associated expenses necessary to insure that
Pentamation's software products are year 2000 compliant.
Headcount increased from 1996 to 1998 by 90, and payroll expenses increased
42% from 1996 to 1998. Operating margins were 4%, 4% and 7% in 1998, 1997 and
1996, respectively.
Income Tax. Income tax expense for the year ended September 30, 1998 was
$389,000, an effective rate of 38% compared to 39% and 36% for the same period
in 1997 and 1996.
Liquidity and Capital Resources
At March 31, 1999, cash was up by $168,000 from a year earlier. This change
was the result of fluctuations in sales and collections, which can vary greatly
from month to month due to timing of sales and billing. Receivables were
$8,325,000, up from $6,351,000 a year earlier, due to higher sales. The ratio
of total current assets to total current liabilities was 0.83:1 at March 31,
1999 and 1.17:1 at March 31,1998.
At September 30, 1998, Pentamation had cash of $425,000, up from $137,000 at
September 30, 1997. Receivables at September 30, 1998 were $8,145,000 and the
ratio of total current assets to total current liabilities was 0.85:1. Cash at
September 30, 1997 and September 30, 1996 was $136,000 and $412,000. The ratio
of current total assets to total current liabilities was 1.00:1 and 1.01:1 at
September 30, 1997 and September 30, 1996.
As of March 31, 1999, Pentamation had an unsecured line of credit of
$5,000,000 from a local bank. This line of credit was $5,000,000, $3,250,000
and $3,000,000 at September 30, 1998, September 30, 1997 and September 30,
1996, respectively. Amounts outstanding were $1,250,000, $1,300,000 and $0 on
the same dates.
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<PAGE>
Principal Shareholders of Pentamation
The following table sets forth as of the record date information with
respect to the beneficial ownership of Pentamation common stock by (i) each
person who is the beneficial owner of more than 5% of the outstanding shares of
Pentamation, (ii) each director of Pentamation (iii) each of the executive
officers of Pentamation and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Name Shares Percent
---- ------- -------
<S> <C> <C>
Jeffrey P. Feather,
Director, Chairman and
Chief Executive
Officer................ 321,384 (/1/) 39.3%
David P. Bloys,
Director, Vice Chairman,
Secretary and
Treasurer.............. 326,030 (/2/) 39.9%
Donald V. Appleton,
President............... 27,250 (/3/) 3.2%
All directors and
executive officers (3
persons)................ 674,664 (/3/) 80.1%
Joseph A. Sullivan
(/4/)................... 60,000 7.4%
</TABLE>
- --------
(1) Includes shares held by Mr. Feather's spouse and minor child.
(2) Includes shares held by Mr. Bloys as custodian for his children.
(3) Includes options held by Mr. Appleton to acquire 25,000 shares.
(4) Mr. Sullivan is a former director and officer of Pentamation.
The amounts shown do not include approximately 91,000 shares of Pentamation
common stock, subject to adjustment, to be issued to GLS, a partnership owned
by Messrs. Feather and Bloys, in connection with the sale of real estate and
automobiles leased by Pentamation from GLS. When issued and assuming no
adjustment, GLS will beneficially own approximately 10.0% of the outstanding
Pentamation common stock. Mr. Feather will beneficially own approximately
366,884 shares or 40.4% of the outstanding Pentamation common stock and Mr.
Bloys will beneficially own 371,530 shares or 40.9% of the outstanding
Pentamation common stock.
Comparison of Capital Stock
Description of SunGard Capital Stock
The authorized capital stock of SunGard consists of 320,000,000 shares of
SunGard common stock, and 5,000,000 shares of preferred stock, $0.01 par value.
SunGard Common Stock. As of the June [ ], 1999, there were approximately
[ ] shares of SunGard common stock outstanding, held of record by
approximately [ ] stockholders. SunGard common stock is listed and traded on
the NYSE under the symbol "SDS." Holders of SunGard common stock are entitled
to one vote per share on all matters to be voted upon by the stockholders. The
stockholders may not cumulate votes in connection with the election of
directors. The holders of SunGard common stock are entitled to receive ratably
dividends, if any, declared from time to time by the SunGard board of directors
out of funds legally available for dividends. In the event of a liquidation,
dissolution or winding up of SunGard, the holders of SunGard common stock are
entitled to share ratably in all assets remaining after payment of liabilities.
The SunGard common stock has no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the SunGard common stock. All outstanding shares of SunGard
common stock are fully paid and non-assessable, and the shares of SunGard
common stock to be outstanding upon completion of the merger will be fully paid
and non-assessable.
SunGard Preferred Stock. SunGard has 5,000,000 shares of SunGard preferred
stock authorized and no shares are outstanding. The SunGard board of directors
has the authority to issue up to 5,000,000 shares of SunGard preferred stock in
one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any unissued and undesignated shares of
SunGard preferred stock and to fix the
37
<PAGE>
number of shares constituting any series and the designations of such series,
without any further vote or action by the stockholders. Although it presently
has no intention to do so, the SunGard board of directors, without stockholder
approval, can issue SunGard preferred stock with voting and conversion rights
which could adversely affect the voting power or other rights of the holders of
SunGard common stock. The issuance of SunGard preferred stock may have the
effect of delaying, deferring or preventing a change in control of SunGard.
SunGard Transfer Agent and Registrar. The transfer agent and registrar for
the SunGard common stock is Norwest Bank Minnesota, N.A., Shareholder Services
Administration, 161 N. Concorde Exchange, P.O. Box 738, South St. Paul, MN
55075 and its telephone number is (651) 450-4064.
Description of Pentamation Capital Stock
Pentamation is authorized by its Articles of Incorporation, as amended, to
issue 5,000,000 shares of common stock, $.015 par value per share. As of May 6,
1999, there were 817,734 shares outstanding and held of record by 109
shareholders. Pentamation acts as its own transfer agent and registrar with
respect to its common stock.
The holders of Pentamation common stock are entitled to one vote per share
on all matters to be voted upon the by the shareholders. Shareholders may
cumulate votes in connection with the election of directors. The holders of
common stock are entitled to receive such dividends, if any, as may be declared
from time to time by the Board of Directors out of funds legally available
therefor.
In the event of liquidation, dissolution or winding up of Pentamation, or
the merger or consolidation of Pentamation with another corporation in which
Pentamation's shareholders receive distributions of cash, assets or securities
as a result of such consolidation or merger, or the sale, transfer or other
disposition of all or substantially all the assets of Pentamation, the holders
of shares of Pentamation common stock are entitled to share ratably in all
Pentamation assets available for distribution.
Shares of Pentamation common stock have no preemptive or conversion rights
or other subscription rights. All outstanding shares of Pentamation common
stock are fully paid and nonassessable.
38
<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF SUNGARD
COMMON STOCK AND HOLDERS OF PENTAMATION COMMON STOCK
Upon completion of the merger, the holders of Pentamation common stock will
become holders of SunGard common stock. There are certain material differences
between the rights and privileges of the holders of Pentamation common stock
and the holders of SunGard common stock.
SunGard is incorporated under the laws of the State of Delaware and
Pentamation is incorporated under the laws of the Commonwealth of Pennsylvania.
As a result, the rights of stockholders of SunGard are governed by the Delaware
General Corporation Law, referred to as the DGCL, the restated certificate of
incorporation of SunGard and the amended and restated bylaws of SunGard, and
the rights of shareholders of Pentamation are governed by the Pennsylvania
Business Corporation Law, referred to as the PA BCL, the Pentamation articles
of incorporation and the Pentamation bylaws. If the merger is consummated, the
shareholders of Pentamation will become stockholders of SunGard. The following
is a summary of the material differences between the rights of holders of
Pentamation common stock and the rights of holders of SunGard common stock.
These differences arise from differences between the DGCL and the PA BCL, as
well as from differences between the corporate governing instruments of SunGard
and Pentamation. This summary does not purport to identify all of the
differences that may be material to Pentamation shareholders and is subject to
the detailed provisions of the relevant laws and governing instruments. This
summary should be read in conjunction with "Comparison of Capital Stock."
Percentage of Voting Stock; Influence Over Affairs
Upon completion of the merger, the percentage ownership of SunGard by each
former Pentamation shareholder will be substantially less than the Pentamation
shareholder's current percentage ownership of Pentamation. Accordingly, former
Pentamation shareholders will have a significantly smaller voting influence
over the affairs of SunGard than they currently enjoy over the affairs of
Pentamation.
Dividends
SunGard. Under the DGCL, a corporation may pay dividends out of surplus,
defined as the excess of net assets over capital. If no such surplus exists,
dividends may be paid out of its net profits for the fiscal year, provided that
dividends may not be paid out of net profits if the capital of such corporation
is less than the aggregate amount of capital represented by the outstanding
stock of all classes having a preference upon distribution of assets.
SunGard's certificate provides that when and as dividends are declared on
the common stock, the holders of common stock are entitled to share equally,
share for share, in the dividends. Under SunGard's certificate, holders of
preferred stock will be entitled to dividends as designated by the board of
directors.
Pentamation. Under the PA BCL, a corporation is prohibited from making a
distribution to shareholders if, after giving effect thereto:
. that corporation would be unable to pay its debts as they become due in
the usual course of business; or
. the total assets of that corporation would be less than the sum of its
total liabilities plus the amount that would be needed, if that
corporation were then dissolved, to satisfy the rights of shareholders
having superior preferential rights upon dissolution to the shareholders
receiving such distribution. For the purpose of valuing the assets of
the corporation, the board of directors may base its determination on
one or more of the following: the book value, or the current value, of
the corporation's assets and liabilities, unrealized appreciation and
depreciation of the corporation's assets and liabilities or any other
method that is reasonable in the circumstances.
39
<PAGE>
The Pentamation bylaws provide that, subject to the PA BCL and the
Pentamation charter, the board of directors may declare dividends upon the
outstanding shares of the corporation.
Directors
SunGard. SunGard's bylaws provide that its board of directors will not
consist of less than two nor more than eight directors, with the exact number
to be determined by the board of directors. The number of directors is
currently fixed at eight. Directors are elected at each annual meeting of
stockholders and serve until the next annual meeting of stockholders or until
their directors are duly elected and qualified.
Pentamation. Pentamation's bylaws provide that its board of directors will
consist of seven directors; provided that (i) whenever all the shares of
Pentamation are owned beneficially and of record by either one or two
shareholders, the number of directors may be less than three, but not less than
the number of shareholders; and (ii) whenever there are three or more
shareholders, there must be at least three directors.
Cumulative Voting
SunGard. Because SunGard's certificate does not provide for cumulative
voting for directors, each stockholder who is entitled to vote at an election
of directors has the right to vote the number of shares owned by him or her for
as many persons as there are directors to be elected, but may not cumulate his
or her votes for directors.
Pentamation. Because Pentamation's articles do not opt-out of cumulative
voting for directors, each shareholder who is entitled to vote at an election
of directors, has the right to multiply the number of votes to which he or she
may be entitled by the total number of directors to be elected in the same
election and may cast the whole number of his votes for one candidate or may
distribute them among any two or more candidates.
Limitation on Directors Liability; Indemnification of Officers and Directors
SunGard. The DGCL provides, in substance, that Delaware corporations have
the power, under specified circumstances, to indemnify their directors,
officers, employees and agents in connection with actions, suits or proceedings
brought against them by third parties and in connection with actions or suits
by or in the right of the corporation, by reason of the fact that they were or
are such directors, officers, employees and agents, against expenses (including
attorney's fees) and, in the case of actions, suits or proceedings brought by
third parties, against judgments, fines and amounts paid in settlement actually
and reasonably incurred in any such action, suit or proceedings.
SunGard's bylaws provide for indemnification to the fullest extend permitted
by the Delaware General Corporation Law.
As permitted by the DGCL, SunGard's certificate eliminates the personal
liability of its directors to SunGard and its stockholders, in certain
circumstances, for monetary damages arising from a breach of the director's
duty of care. Additionally, SunGard has entered into indemnification agreements
(in the form approved by SunGard's stockholders at its 1987 Annual Meeting)
with each of its directors and officers. These agreements provide
indemnification to the fullest extent permitted by law and, in certain
respects, provide greater protection than that specifically provided by the
DGCL. The agreements do not provide indemnification for, among other things,
conduct that is adjudged to be fraud, deliberate dishonesty or willful
misconduct.
SunGard has obtained directors' and officers' liability insurance that
covers certain liabilities, including liabilities to SunGard and its
stockholders, in the amount of $20 million.
40
<PAGE>
Pentamation. Under the PA BCL, a corporation may include in its bylaws a
provision, adopted by a vote of its shareholders, which eliminates the personal
liability of its directors, as such, for monetary damages for any action taken
or the failure to take any action unless: (i) such directors have breached or
failed to perform their duties; and (ii) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness. A Pennsylvania
corporation is not empowered, however, to eliminate personal liability where
the responsibility or liability of a director is pursuant to any criminal
statute or is for the payment of taxes pursuant to any federal, state or local
law. The Pentamation articles and bylaws do not contain such a provision.
The provisions of the PA BCL regarding indemnification are substantially
similar to those of the DGCL. Unlike the DGCL, however, the PA BCL expressly
permits indemnification in connection with any action, including a derivative
action, unless a court determines that the acts or omissions giving rise to the
claim constituted willful misconduct or recklessness. The Pentamation bylaws
provide for indemnification of representatives against liability incurred by
reason of the fact that such representative was serving in an indemnified
capacity within the scope permitted by the PA BCL, so long as the indemnified
person acted in good faith, in what he reasonably believed to be in the best
interest of Pentamation, and in the case of a criminal action or proceeding,
had no reasonable cause to believe that his conduct was unlawful.
Pentamation has not obtained directors' and officers' liability insurance.
Call of Special Meetings of Shareholders
SunGard. SunGard's bylaws provide that a special meeting of its stockholders
may be called at any time by the board, the chairman of the board or the
president, and must be called upon written request from the holders of a
majority of the outstanding shares of capital stock of SunGard entitled to vote
at the meeting.
Pentamation. Under the PA BCL, special meetings of shareholders may be
called by the board of directors, by any officers or by any other persons as
provided in the bylaws, and, unless otherwise provided in the articles, by
shareholders entitled to cast at least 20% of the votes that all shareholders
are entitled to cast at a particular meeting. The Pentamation bylaws, however,
provide that special meetings of the shareholders may only be called at any
time by the President, and not any other officers of Pentamation.
Action of Shareholders Without a Meeting
SunGard. SunGard's bylaws provide that any action required to or which may
be taken at an annual or special meeting may be taken without a meeting by a
consent in writing by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to take the action at a meeting
at which all shares entitled to vote thereon were present and voted.
Pentamation. Under the PA BCL, any corporate action may be taken without a
meeting by unanimous written consent unless otherwise restricted by the bylaws
of the corporation, and may be taken with partial written consent if the bylaws
of a corporation so provide. The Pentamation bylaws allow shareholders to take
action without a meeting only by unanimous written consent.
Amendments to Certificate of Incorporation
SunGard. Under the DGCL, unless the certificate of incorporation imposes a
higher voting requirement, the approval of the holders of a majority of the
stock entitled to vote, and a majority of each class entitled to vote as a
class, is required in order to amend any provision of a corporation's
certificate of incorporation. SunGard's certificate does not impose any higher
voting requirement with respect to the amendment of its certificate of
incorporation.
41
<PAGE>
Pentamation. Under the PA BCL, an amendment to the articles requires the
approval of the board of directors followed by the affirmative vote of a
majority of the votes cast by all shareholders entitled to vote thereon and, if
any class or series of shares is entitled to vote thereon as a class, the
affirmative vote of a majority of the votes cast in each such class vote.
Furthermore, the PA BCL provides that, unless otherwise provided in the
articles, an amendment of the articles of a corporation need not be adopted by
the board of directors prior to its submission to the shareholders for approval
if it is proposed by a petition of shareholders entitled to cast at least 10%
of the votes that all shareholders are entitled to cast thereon. Pentamation's
articles do not require any higher voting requirements with respect to the
amendment of the articles.
Amendments to Bylaws
SunGard. SunGard's bylaws may be altered, amended or repealed, in whole or
in part, by the affirmative vote of a majority of the members of SunGard's
board or by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of SunGard entitled to vote.
Pentamation. The Pentamation bylaws may be amended or repealed by the vote
of shareholders entitled to cast at least a majority of the votes which all
Pentamation's shareholders are entitled to cast or by the vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
Certain Business Combinations
SunGard. The DGCL provides that, subject to certain limited exceptions, the
approval of the holders of a majority of the stock entitled to vote is required
for any merger or consolidation of a Delaware corporation with another
corporation or the sale, lease or exchange of all or substantially all of that
corporation's assets. SunGard's certificate does not impose any higher voting
requirements for the approval of these actions.
Section 203 of the DGCL also restricts certain transactions between a
corporation organized under Delaware law (or its majority-owned subsidiaries)
and any person holding 15% or more of the corporation's outstanding voting
stock, who together with his, her or its affiliates or associates is defined as
an "Interested Stockholder." Section 203 prevents, for a period of three years
following the date that a person becomes an Interested Stockholder, the
following types of transactions between the corporation and the Interested
Stockholder (unless certain conditions, described below, are met):
. mergers or consolidations;
. sales, leases, exchanges or other transfers of 10% or more of the
aggregate assets of the corporation;
. issuances or transfers by the corporation of any stock of the
corporation which would have the effect of increasing the Interested
Stockholder's proportionate share of the stock of any class or series of
the corporation;
. any other transaction which has the effect of increasing the
proportionate share of the stock of any class or series of the
corporation which is owned by the Interested Stockholder; and
. receipt by the Interested Stockholder of the benefit (except
proportionately as a stockholder) of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation.
The three-year ban does not apply if either the proposed transaction or the
transaction by which the Interested Stockholder became an Interested
Stockholder is approved by the board of directors of the corporation prior to
the date the person becomes an Interested Stockholder. Additionally, an
Interested Stockholder may avoid the statutory restriction if, upon the
consummation of the transaction where the stockholder becomes an Interested
Stockholder, the stockholder owns at least 85% of the outstanding voting stock
of the corporation without regard to those shares owned by the corporation's
officers and directors and certain employee stock plans. Business combinations
are also permitted within the three-year period if
42
<PAGE>
approved by the board of directors and authorized at an annual or special
meeting of stockholders by the holders of at least 662/3% of the outstanding
voting stock not owned by the Interested Stockholder. In addition, any
transaction is exempt from the statutory ban if it is proposed at a time when
the corporation has proposed, and a majority of certain continuing directors of
the corporation have approved, a transaction with a party who is not an
Interested Stockholder of the corporation (or who becomes such with board
approval) if the proposed transaction involves:
. certain mergers or consolidations involving the corporation;
. a sale or other transfer of over 50% of the aggregate assets of the
corporation; or
. a tender or exchange offer for 50% or more of the outstanding voting
stock of the corporation.
Section 203 does not apply to corporations which do not have a class of
voting stock that is listed on a national securities exchange, authorized for
quotation with a registered national securities association, or held of record
by more than 2,000 shareholders. Otherwise, section 203 applies automatically
to Delaware corporations unless the corporation's original certificate of
incorporation contains a provision expressly electing not to be governed by
section 203 or the corporation has amended its certificate of incorporation or
bylaws in accordance with section 203 to provide that the corporation will not
be governed by section 203. SunGard has not adopted an amendment to its
certificate or bylaws exempting it from section 203, which accordingly applies
to SunGard.
Pentamation. The PA BCL provides that, subject to certain limited
exceptions, the approval of the holders of a majority of the votes cast is
required for any merger or consolidation of a Pennsylvania corporation with
another corporation or the sale, lease or exchange of all or substantially all
of that corporation's assets. Under the PA BCL, an abstention is not considered
a vote cast and therefore has no effect on the outcome of the shareholder vote.
Pentamation's articles do not impose any higher voting requirements for the
approval of these actions. Although the PA BCL contains provisions that may
restrict certain business combinations between a corporation and interested
shareholders, these statutory restrictions do not apply to Pentamation.
EXPERTS
The consolidated balance sheets of SunGard and subsidiaries as of December
31, 1998 and 1997 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1998, incorporated in this document and in the
registration statement by reference to the Annual Report on Form 10-K of
SunGard for the year ended December 31, 1998, have been so incorporated in
reliance upon the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of Pentamation and subsidiaries as of
September 30, 1998 and 1997 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1998 contained in this document have been so
incorporated in reliance upon the report of Halbert, Katz & Co., P.C.,
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the shares of SunGard common stock offered by this document
will be passed upon for SunGard by Blank Rome Comisky & McCauley LLP.
43
<PAGE>
WHERE TO FIND MORE INFORMATION
SunGard filed a registration statement on Form S-4 to register with the SEC
the SunGard common stock to be issued to Pentamation shareholders in the
merger. This document is a part of that registration statement and constitutes
a prospectus of SunGard in addition to a proxy statement of Pentamation for the
Pentamation special meeting. As allowed by the SEC, this document does not
contain all the information that can be found in the registration statement or
the exhibits to the registration statement. SunGard files annual, quarterly and
special reports, proxy statements and other information and Pentamation files
annual reports and other information with the SEC. You can read and copy any
reports, statements or other information we file at the SEC's Public Reference
Rooms at 450 Fifth Street, N.W., Washington, D.C., 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the Public Reference Room.
SunGard's SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
http://www.sec.gov.
The SEC allows SunGard to "incorporate by reference" information into this
document, which means that SunGard can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
document incorporates by reference the documents set forth below that SunGard
previously filed with the SEC. These documents contain important information
about SunGard and its finances.
<TABLE>
<CAPTION>
SunGard SEC Filings (File No. 1-12989) Period
-------------------------------------- ----------------------------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1998
Quarterly Report on Form 10-Q...................... Quarter ended March 31, 1999
Current Report on Form 8-K......................... Filed on , 1999
Registration Statement on Form 8-A................. Filed on May 14, 1997
</TABLE>
SunGard is also incorporating by reference additional documents that it may
file with the SEC between the date of this document and the date of the
Pentamation special meeting.
SunGard has supplied all information contained or incorporated by reference
in this document relating to SunGard and Pentamation has supplied all this
information relating to Pentamation.
You should rely only on the information contained or incorporated by
reference in this document to vote on the merger. We have not authorized anyone
to provide you with information that is different from what is contained in
this document. This document is dated June , 1999. You should not assume that
the information contained in this document is accurate as of any date other
than June , 1999, and neither the mailing of the document to shareholders nor
the issuance of SunGard common stock in the merger shall create any implication
to the contrary.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
SunGard expects that the merger will be accounted for as a pooling of
interests, which means that for accounting and financial reporting purposes
SunGard will treat SunGard and Pentamation as if they had always been combined.
The pro forma information is provided for illustrative purposes only and should
not be relied upon as necessarily being indicative of the historical results
that SunGard and Pentamation would have had if the companies actually had
always been combined, or the results which may be obtained in the future.
The Unaudited Pro Forma Combined Condensed Financial Data should be read
along with the historical financial statements and the related notes of SunGard
and Pentamation which are incorporated by reference in this document.
44
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet (1)
December 31, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents
and short-term
investments............ $ 283,692 $ -- $ -- $ 283,692
Accounts receivable,
net.................... 297,416 8,492 -- 305,908
Prepaid expenses and
other current assets... 31,710 2,841 -- 34,551
Deferred income taxes... 22,315 (107) -- 22,208
---------- ------- ------- ----------
Total current
assets............. 635,133 11,226 -- 646,359
Property and equipment,
net.................... 144,757 1,625 1,029 (5) 147,411
Intangible and other
long-term assets....... 367,293 7,868 -- 375,161
---------- ------- ------- ----------
Total assets........ $1,147,183 $20,719 $ 1,029 $1,168,931
========== ======= ======= ==========
Liabilities and
Stockholders' Equity:
Short-term and current
portion of long-term
debt................... $ 14,766 $ 624 $ -- $ 15,390
Accounts payable........ 16,198 2,140 -- 18,338
Accrued compensation and
benefits............... 90,723 1,774 -- 92,497
Other accrued expenses.. 73,211 1,328 -- 74,539
Deferred revenues....... 139,534 6,777 -- 146,311
---------- ------- ------- ----------
Total current
liabilities........ 334,432 12,643 -- 347,075
Long-term debt.......... 2,816 3,532 4,763 (5) 11,111
---------- ------- ------- ----------
337,248 16,175 4,763 358,186
---------- ------- ------- ----------
Stockholders' Equity:
Preferred stock....... -- -- -- --
Common stock.......... 1,161 20 (9)(2)(5) 1,172
Capital in excess of
par value............ 294,243 1,772 (3,725)(2)(5) 292,290
Notes receivable from
stockholders......... -- (570) -- (570)
Restricted stock plans
and deferred
compensation......... (1,591) -- -- (1,591)
Retained earnings..... 524,095 6,035 -- 530,130 (3)
Accumulated other
comprehensive income
(loss)............... (6,933) 43 -- (6,890)
---------- ------- ------- ----------
810,975 7,300 (3,734) 814,541
Treasury stock.......... (1,040) (2,756) -- (3,796)
---------- ------- ------- ----------
Total stockholders'
equity............... 809,935 4,544 (3,734) 810,745
---------- ------- ------- ----------
Total liabilities and
stockholders'
equity............... $1,147,183 $20,719 $ 1,029 $1,168,931
========== ======= ======= ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
45
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet (1)
December 31, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents and
short-term investments... $119,460 $ 137 $ -- $119,597
Accounts receivable, net.. 239,368 6,843 -- 246,211
Prepaid expenses and other
current assets........... 25,356 1,425 -- 26,781
Deferred income taxes..... 21,409 (191) -- 21,218
-------- ------- ------- --------
Total current assets.. 405,593 8,214 -- 413,807
Property and equipment,
net...................... 131,689 1,608 948 (5) 134,245
Intangible and other long-
term assets.............. 368,883 5,613 -- 374,496
-------- ------- ------- --------
Total assets.......... $906,165 $15,435 $ 948 $922,548
======== ======= ======= ========
Liabilities and
Stockholders' Equity:
Short-term and current
portion of long-term
debt..................... $ 18,848 $ 417 $ -- $ 19,265
Accounts payable.......... 20,586 1,486 -- 22,072
Accrued compensation and
benefits................. 61,095 1,683 -- 62,778
Other accrued expenses.... 38,629 408 -- 39,037
Deferred revenues......... 115,976 4,276 -- 120,252
-------- ------- ------- --------
Total current
liabilities.......... 255,134 8,270 -- 263,404
Long-term debt............ 3,080 2,932 4,824 (5) 10,836
-------- ------- ------- --------
258,214 11,202 4,824 274,240
-------- ------- ------- --------
Stockholders' Equity:
Preferred stock......... -- -- -- --
Common stock............ 1,124 20 (9)(2)(5) 1,135
Capital in excess of par
value.................. 240,494 1,772 (3,867)(2)(5) 238,399
Notes receivable from
stockholders........... (500) (695) -- (1,195)
Restricted stock plans
and deferred
compensation........... (1,532) -- -- (1,532)
Retained earnings....... 415,502 5,495 -- 420,997 (3)
Accumulated other
comprehensive income
(loss)................. (6,646) 75 -- (6,571)
-------- ------- ------- --------
648,442 6,667 (3,876) 651,233
Treasury stock............ (491) (2,434) -- (2,925)
-------- ------- ------- --------
Total stockholders'
equity................. 647,951 4,233 (3,876) 648,308
-------- ------- ------- --------
Total liabilities and
stockholders' equity... $906,165 $15,435 $ 948 $922,548
======== ======= ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
46
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet (1)
December 31, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents and
short-term investments... $100,918 $ 412 $ -- $101,330
Accounts receivable, net.. 187,916 6,728 -- 194,644
Prepaid expenses and other
current assets........... 19,121 842 -- 19,963
Deferred income taxes..... 14,846 (315) -- 14,531
-------- ------- ------- --------
Total current assets.. 322,801 7,667 -- 330,468
Property and equipment,
net...................... 116,788 1,305 740 (5) 118,833
Intangible and other long-
term assets.............. 341,486 3,823 -- 345,309
-------- ------- ------- --------
Total assets.......... $781,075 $12,795 $ 740 $794,610
======== ======= ======= ========
Liabilities and
Stockholders' Equity:
Short-term and current
portion of long-term
debt..................... $ 35,827 $ 138 $ -- $ 35,965
Accounts payable.......... 15,547 1,223 -- 16,770
Accrued compensation and
benefits................. 47,876 1,477 -- 49,353
Other accrued expenses.... 34,228 716 -- 34,944
Deferred revenues......... 105,166 4,158 -- 109,324
-------- ------- ------- --------
Total current
liabilities.......... 238,644 7,712 -- 246,356
Long-term debt............ 5,767 1,375 3,372 (5) 10,514
-------- ------- ------- --------
244,411 9,087 3,372 256,870
-------- ------- ------- --------
Stockholders' Equity:
Preferred stock......... -- -- -- --
Common stock............ 657 20 (9)(2)(5) 668
Capital in excess of par
value.................. 222,840 1,772 (2,623)(2)(5) 221,989
Notes receivable from
stockholders........... (1,385) (700) -- (2,085)
Restricted stock plans
and deferred
compensation........... (2,043) -- -- (2,043)
Retained earnings....... 318,357 5,016 -- 323,373 (3)
Accumulated other
comprehensive loss..... (287) -- -- (287)
-------- ------- ------- --------
538,139 6,108 (2,632) 541,615
Treasury stock............ (1,475) (2,400) -- (3,875)
-------- ------- ------- --------
Total stockholders'
equity................. 536,664 3,708 (2,632) 537,740
-------- ------- ------- --------
Total liabilities and
stockholders' equity... $781,075 $12,795 $ 740 $794,610
======== ======= ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
47
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income (1)
For the year ended December 31, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues.................... $1,252,591 $27,337 $ -- $1,279,928
Operating expenses,
excluding merger and
restructuring costs........ 1,024,544 26,203 (448)(5) 1,050,299
---------- ------- ----- ----------
228,047 1,134 448 229,629
Merger and restructuring
costs...................... 11,847 -- -- 11,847
---------- ------- ----- ----------
Operating income............ 216,200 1,134 448 217,782
Net interest income
(expense).................. 6,915 (109) (448)(5) 6,358
---------- ------- ----- ----------
Income before income taxes.. 223,115 1,025 -- 224,140(3)
Income taxes................ 93,147 389 -- 93,536
---------- ------- ----- ----------
Net income.................. $ 129,968 $ 636 $ -- $ 130,604(3)
========== ======= ===== ==========
Pro forma net income........ $ 128,574 $ 636 $ -- $ 129,210
========== ======= ===== ==========
Pro forma basic net income
per common share........... $ 1.12 $ 0.76 -- $ 1.12
Shares used to compute pro
forma basic net income per
common share............... 114,477 838 129 (2) 115,444
Pro forma diluted net income
per common share........... $ 1.08 $ 0.75 -- $ 1.07
Shares used to compute pro
forma diluted net income
per common share........... 119,522 848 130 (2) 120,500
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
48
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income (1)
For the year ended December 31, 1997
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues.................... $996,242 $21,959 $ -- $1,018,201
Operating expenses,
excluding merger and
restructuring costs........ 828,828 21,152 (347)(5) 849,633
-------- ------- ---- ----------
167,414 807 347 168,568
Merger and restructuring
costs...................... 13,669 -- -- 13,669
-------- ------- ---- ----------
Operating income............ 153,745 807 347 154,899
Net interest income
(expense).................. 2,637 (26) (347)(5) 2,264
-------- ------- ---- ----------
Income before income taxes.. 156,382 781 -- 157,163(3)
Income taxes................ 62,528 303 -- 62,831
-------- ------- ---- ----------
Net income.................. $ 93,854 $ 478 $ -- $ 94,332(3)
======== ======= ==== ==========
Pro forma net income........ $ 92,022 $ 478 $ -- $ 92,500
======== ======= ==== ==========
Pro forma basic net income
per common share........... $ 0.84 $ 0.55 -- $ 0.84
Shares used to compute pro
forma basic net income per
common share............... 109,764 862 132 (2) 110,758
Pro forma diluted net income
per common share........... $ 0.80 $ 0.55 -- $ 0.80
Shares used to compute pro
forma diluted net income
per common share........... 114,689 862 132 (2) 115,683
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
49
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income (1)
For the year ended December 31, 1996
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $765,979 $23,254 $ -- $789,233
Operating expenses, excluding
merger and restructuring
costs........................ 636,931 21,546 (284)(5) 658,193
-------- ------- ----- --------
129,048 1,708 284 131,040
Merger and restructuring
costs........................ 51,083 -- -- 51,083
-------- ------- ----- --------
Operating income.............. 77,965 1,708 284 79,957
Net interest and other income
(expense).................... 5,265 (87) (284)(5) 4,894
-------- ------- ----- --------
Income before income taxes.... 83,230 1,621 -- 84,851(3)
Income taxes.................. 33,855 588 -- 34,443
-------- ------- ----- --------
Net income.................... $ 49,375 $ 1,033 $ -- $ 50,408(3)
======== ======= ===== ========
Pro forma net income.......... $ 47,433 $ 1,033 $ -- $ 48,466
======== ======= ===== ========
Pro forma basic net income per
common share................. $ 0.45 $ 1.21 -- $ 0.46
Shares used to compute pro
forma basic net income per
common share................. 104,660 855 131 (2) 105,646
Pro forma diluted net income
per common share............. $ 0.43 $ 1.21 -- $ 0.44
Shares used to compute pro
forma diluted net income per
common share................. 110,243 855 131 (2) 111,229
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
50
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet (1)
March 31, 1999
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents
and short-term
investments............ $ 361,106 $ 185 $ -- $ 361,291
Accounts receivable,
net.................... 289,728 8,325 -- 298,053
Prepaid expenses and
other current assets... 33,814 2,139 -- 35,953
Deferred income taxes... 28,264 (141) -- 28,123
---------- ------- ------ ----------
Total current
assets............. 712,912 10,508 -- 723,420
Property and equipment,
net.................... 146,475 1,602 1,062 (5) 149,139
Intangible and other
long-term assets....... 458,358 8,128 -- 466,486
---------- ------- ------ ----------
Total assets........ $1,317,745 $20,238 $1,062 $1,339,045
========== ======= ====== ==========
Liabilities and
Stockholders' Equity:
Short-term and current
portion of long-term
debt................... $ 15,665 $ 1,196 $ -- $ 16,861
Accounts payable........ 14,586 1,458 -- 16,044
Accrued compensation and
benefits............... 82,130 2,213 -- 84,343
Other accrued expenses.. 90,320 1,089 -- 91,409
Deferred revenues....... 140,798 7,172 -- 147,970
---------- ------- ------ ----------
Total current
liabilities........ 343,499 13,128 -- 356,627
Long-term debt.......... 2,563 2,114 4,712 (5) 9,389
---------- ------- ------ ----------
346,062 15,242 4,712 366,016
---------- ------- ------ ----------
Stockholders' Equity:
Preferred stock....... -- -- -- --
Common stock.......... 1,179 20 (9)(2)(5) 1,190
Capital in excess of 495,123 1,772 (3,641)(2)(5) 493,254
par value............
Notes receivable from
stockholders......... -- (561) -- (561)
Restricted stock plans
and deferred
compensation......... (1,268) -- -- (1,268)
Retained earnings..... 486,109 6,431 -- 492,540 (3)
Accumulated other
comprehensive income
(loss)............... (9,460) 90 -- (9,370)
---------- ------- ------ ----------
971,683 7,752 (3,650) 975,785
Treasury stock.......... -- (2,756) -- (2,756)
---------- ------- ------ ----------
Total stockholders'
equity............... 971,683 4,996 (3,650) 973,029
---------- ------- ------ ----------
Total liabilities and
stockholders'
equity............... $1,317,745 $20,238 $1,062 $1,339,045
========== ======= ====== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
51
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income (1)
For the three months ended March 31, 1999
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues..................... $331,788 $9,260 $ -- $341,048
Operating expenses, excluding
merger and restructuring
costs....................... 270,812 8,622 (202)(5) 279,232
-------- ------ ----- --------
60,976 638 202 61,816
Merger and restructuring
costs....................... 81,400 -- -- 81,400
-------- ------ ----- --------
Operating income (loss)...... (20,424) 638 202 (19,584)
Net interest income
(expense)................... 3,275 (24) (202)(5) 3,049
-------- ------ ----- --------
Income (loss) before income
taxes....................... (17,149) 614 -- (16,535)(3)
Income taxes................. 26,011 218 -- 26,229
-------- ------ ----- --------
Net income (loss) before
extraordinary gain.......... ($43,160) $ 396 $ -- ($42,764)(3)
Extraordinary gain on sale of
subsidiaries, net of income
taxes....................... 10,371 -- -- 10,371
-------- ------ ----- --------
Net income (loss)............ ($32,789) $ 396 $ -- ($32,393)
======== ====== ===== ========
Pro forma net income (loss).. ($5,855) $ 396 $ -- ($5,459)
======== ====== ===== ========
Pro forma basic net income
(loss) per common share,
before extraordinary item... ($0.14) $ 0.48 -- ($0.13)
Pro forma basic net income
(loss) per common share,
after extraordinary item.... ($0.05) $ 0.48 -- ($0.05)
Shares used to compute pro
forma basic net income
(loss) per common share..... 117,489 818 126 (2) 118,433
Pro forma diluted net income
(loss) per common share,
before extraordinary item... ($0.14) $ 0.48 -- ($0.13)
Pro forma diluted net income
(loss) per common share,
after extraordinary item.... ($0.05) $ 0.48 -- ($0.05)
Shares used to compute pro
forma diluted net income
(loss) per common share..... 117,489 828 116 (2) 118,433 (4)
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
52
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Balance Sheet (1)
March 31, 1998
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents and
short-term investments.... $140,665 $ 41 $ -- $140,706
Accounts receivable, net... 259,788 6,780 -- 266,568
Prepaid expenses and other
current assets............ 23,731 1,855 -- 25,586
Deferred income taxes...... 22,435 (88) -- 22,347
-------- ------- ------ --------
Total current assets... 446,619 8,588 -- 455,207
Property and equipment,
net....................... 142,250 1,624 911 (5) 144,785
Intangible and other long-
term assets............... 363,577 6,241 -- 369,818
-------- ------- ------ --------
Total assets........... $952,446 $16,453 $ 911 $969,810
======== ======= ====== ========
Liabilities and
Stockholders' Equity:
Short-term and current
portion of long-term
debt...................... $ 17,309 $ 417 $ -- $ 17,726
Accounts payable........... 22,419 1,513 -- 23,932
Accrued compensation and
benefits.................. 51,348 1,660 -- 53,008
Other accrued expenses..... 56,154 869 -- 57,023
Deferred revenues.......... 124,126 3,453 -- 127,579
-------- ------- ------ --------
Total current
liabilities........... 271,356 7,912 -- 279,268
Long-term debt............. 2,835 4,078 4,704 (5) 11,617
-------- ------- ------ --------
274,191 11,990 4,704 290,885
-------- ------- ------ --------
Stockholders' Equity:
Preferred stock.......... -- -- -- --
Common stock............. 1,132 20 (9)(2)(5) 1,143
Capital in excess of par
value................... 250,489 1,772 (3,784)(2)(5) 248,477
Notes receivable from
stockholders............ (485) (694) -- (1,179)
Restricted stock plans
and deferred
compensation............ (1,393) -- -- (1,393)
Retained earnings........ 436,008 5,821 -- 441,829 (3)
Accumulated other
comprehensive income
(loss).................. (7,005) 75 -- (6,930)
-------- ------- ------ --------
678,746 6,994 (3,793) 681,947
Treasury stock............. (491) (2,531) -- (3,022)
-------- ------- ------ --------
Total stockholders'
equity.................. 678,255 4,463 (3,793) 678,925
-------- ------- ------ --------
Total liabilities and
stockholders' equity.... $952,446 $16,453 $ 911 $969,810
======== ======= ====== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
53
<PAGE>
SunGard Data Systems Inc.
Pro Forma Combined Condensed Statement of Income (1)
For the three months ended March 31, 1998
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
SunGard Pentamation Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues...................... $285,493 $6,514 $ -- $292,007
Operating expenses, excluding
merger and restructuring
costs........................ 236,428 6,137 (212)(5) 242,353
-------- ------ ----- --------
49,065 377 212 49,654
Merger and restructuring
costs........................ 8,147 -- -- 8,147
-------- ------ ----- --------
Operating income.............. 40,918 377 212 41,507
Net interest income
(expense).................... 1,236 (6) (212)(5) 1,018
-------- ------ ----- --------
Income before income taxes.... 42,154 371 -- 42,525(3)
Income taxes.................. 18,432 44 -- 18,476
-------- ------ ----- --------
Net income.................... $ 23,722 $ 327 $ -- $ 24,049(3)
======== ====== ===== ========
Pro forma net income.......... $ 22,930 $ 327 $ -- $ 23,257
======== ====== ===== ========
Basic pro forma net income per
common share................. $ 0.20 $ 0.38 $ 0.20
Shares used to compute basic
pro forma net income per
common share................. 112,757 857 132(2) 113,746
Diluted pro forma net income
per common share............. $ 0.19 $ 0.38 -- 0.20
Shares used to compute pro
forma diluted net income per
common share................. 118,015 867 133(2) 119,015
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
54
<PAGE>
SunGard Data Systems Inc.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
(Unaudited)
Note 1--Basis of Presentation
The unaudited pro forma combined financial information has been presented
based solely on historical financial results of SunGard and Pentamation, and is
not necessarily indicative of the results which would have been obtained if the
acquisition of Pentamation by SunGard had actually occurred during the periods
presented.
All historical financial information of SunGard has been restated, as
required by generally accepted accounting principles, to include the historical
financial information of Automated Securities Clearance, Ltd., Sterling
Wentworth Corporation, and FDP Corporation, all of which were acquired by
SunGard in pooling-of-interests transactions during the first four months of
1999.
Pentamation has a fiscal year which ends on September 30. SunGard reports
all financial information on a calendar year basis. The pro forma financial
information for the periods presented combine SunGard's calendar year with
Pentamation's fiscal year, except that the three months ended March 31, 1999
presents Pentamation as if their fiscal period were converted to a calendar
period as of December 31, 1998.
Note 2--Exchange Ratio
Under the agreement, excluding the purchase of automobiles and facilities
(see Note 5), each outstanding Pentamation common share will be converted into
a maximum of 1.1536120 shares of SunGard Common Stock. The actual exchange
ratio, excluding the purchase of automobiles and facilities (see Note 5), will
range from 1.0405122 to 1.1536120, depending upon the average closing price of
SunGard Common Stock during the 20 trading day period ending 2 days prior to
the effective date of the arrangement. All options to purchase Pentamation
common shares will be converted into options to purchase shares of SunGard
Common Stock, using the same exchange ratio.
The maximum exchange ratio was used in computing shares and per share
amounts in the accompanying unaudited pro forma combined condensed financial
information.
Note 3--Merger Costs
All pro forma information excludes merger costs, estimated to be
approximately $600,000. These costs are principally comprised of legal,
accounting and printing costs.
Note 4--Antidilutive shares
The number of dilutive shares used in the calculation of pro forma diluted
net income per common share during the three months ended March 31, 1999
excludes 4,509,000 shares because those shares are antidilutive due to a net
loss during the period.
Note 5--Automobiles and Facilities
Under the Reorganization Agreement, facilities and automobiles currently
leased by Pentamation and owned by a partnership controlled by certain
affiliates of Pentamation will be sold to Pentamation prior to the consummation
of the merger between SunGard and Pentamation. Also, the debt directly related
to the automobiles and facilities will be assumed by SunGard. Additional shares
of SunGard Common Stock will be issued based on the fair market value of the
automobiles and facilities, as determined by an independent appraisal, less the
fair market value of the debt directly related to the automobiles and
facilities. The number of SunGard shares estimated to be issued is
approximately 110,000 shares. The issuance of these additional shares is not
material to the pro forma financial information presented. The pro forma
adjustments represent the approximate book value of the automobiles and
facilities, and the related debt. The estimated costs for interest,
depreciation, taxes, and operating expenses offset the rent expense paid by
Pentamation to the Partnership.
55
<PAGE>
Index to Financial Statements
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Pentamation Enterprises, Inc.--Independent Accountants' Report.......... F-2
Consolidated Balance Sheets as of September 30, 1998 and 1997........... F-3
Consolidated Statements of Income for the years ended September 30,
1998, 1997 and 1996.................................................... F-4
Consolidated Statements of Shareholders' Equity for the years ended
September 30, 1998, 1997 and 1996...................................... F-5
Consolidated Statements of Cash Flow for the years ended September 30,
1998, 1997 and 1996.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Pentamation Enterprises, Inc.--Independent Accountants' Report.......... F-14
Consolidated Balance Sheets as of March 3, 1999 and 1998................ F-15
Consolidated Statements of Income for the six months ended
March 31, 1999 and 1998................................................ F-16
Consolidated Statements of Shareholders' Equity for the six months ended
March 31, 1999 and 1998................................................ F-17
Consolidated Statements of Comprehensive Income for the six months ended
March 31, 1999 and 1998................................................ F-18
Consolidated Statements of Cash Flows for the six months ended March
31,1999 and 1998....................................................... F-19
Notes to Consolidated Financial Statements.............................. F-20
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
Board of Directors and Shareholders
Pentamation Enterprises, Inc. and Subsidiaries
Bethlehem, Pennsylvania
We have audited the accompanying consolidated balance sheets of Pentamation
Enterprises, Inc. and Subsidiaries as of September 30, 1998 and 1997, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended September 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Pentamation Enterprises, Inc. and Subsidiaries as of September 30, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended September 30, 1998, in conformity with
generally accepted accounting principles.
Halbert, Katz & Co., P.C.
November 18, 1998
F-2
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash.............................................. $ 425,481 $ 136,832
Trade receivables, less allowance for doubtful
accounts of $129,000 and $64,600 at September
30, 1998 and 1997, respectively.................. 6,518,825 5,286,860
Earned but unbilled receivables................... 1,626,888 1,557,302
Prepaid expenses and other current assets......... 1,216,389 1,020,495
Deferred income taxes............................. 382,300 277,800
------------ ------------
Total current assets.......................... 10,169,883 8,279,289
------------ ------------
Property and equipment, net of accumulated
depreciation of $5,080,638 and $4,361,268 at
September 30, 1998 and 1997, respectively......... 1,707,324 1,608,139
Software products, net of accumulated amortization
of $6,769,762 and $5,369,320 at September 30, 1998
and 1997, respectively............................ 8,491,802 5,612,837
------------ ------------
10,199,126 7,220,976
------------ ------------
Other assets:
Marketable securities available for sale.......... 381,548 340,145
Deposits.......................................... 72,475 63,900
------------ ------------
454,023 404,045
------------ ------------
Total assets.................................. $ 20,823,032 $ 15,904,310
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Short-term and current portion of long-term
debt............................................. $ 604,183 $ 417,000
Accounts payable.................................. 1,652,053 1,486,033
Accrued compensation and benefits................. 2,339,964 1,683,947
Other accrued expenses............................ 375,458 398,414
Accrued income taxes.............................. -- 9,000
Deferred revenue.................................. 6,926,122 4,275,811
------------ ------------
Total current liabilities..................... 11,897,780 8,270,205
------------ ------------
Long-term debt..................................... 3,831,079 2,932,500
Deferred income taxes.............................. 489,000 468,800
------------ ------------
4,320,079 3,401,300
------------ ------------
Total liabilities............................. 16,217,859 11,671,505
------------ ------------
Commitments and contingencies...................... -- --
------------ ------------
Shareholders' equity:
Common stock, authorized 5,000,000 shares; stated
value $.015; issued and outstanding 817,734
shares in 1998, and 858,103 shares in 1997
(excluding 501,727 shares in 1998 and 461,358
shares in 1997, held in the treasury)............ 19,792 19,792
Additional paid-in capital........................ 1,771,739 1,771,739
Retained earnings................................. 6,130,833 5,494,680
------------ ------------
7,922,364 7,286,211
Less:
Treasury stock, at cost......................... (2,756,267) (2,434,228)
Notes receivable for common stock............... (603,990) (694,645)
Net unrealized gain on marketable securities
available for sale............................. 43,066 75,467
------------ ------------
4,605,173 4,232,805
------------ ------------
Total liabilities and shareholders' equity.... $ 20,823,032 $ 15,904,310
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended September 30,
-------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................ $27,337,075 $21,959,309 $23,254,371
----------- ----------- -----------
Costs and expenses:
Cost of sales and direct
operating........................ 17,169,382 14,304,766 14,845,169
Sales marketing and
administration................... 6,505,701 5,391,162 5,388,322
Product development............... 407,815 263,349 288,456
Amortization and depreciation..... 2,119,812 1,193,037 1,024,574
----------- ----------- -----------
26,202,710 21,152,314 21,546,521
----------- ----------- -----------
Income from operations.............. 1,134,365 806,995 1,707,850
Interest and miscellaneous income... 60,226 45,234 33,794
Interest expense.................... (169,438) (71,429) (120,729)
----------- ----------- -----------
Income before taxes................. 1,025,153 780,800 1,620,915
Income taxes........................ 389,000 303,000 588,000
----------- ----------- -----------
Net income.......................... $ 636,153 $ 477,800 $ 1,032,915
=========== =========== ===========
Basic net income per common share... $ .76 $ .55 $ 1.21
=========== =========== ===========
Shares used to compute basic net
income
per common share................... 837,612 862,241 854,773
=========== =========== ===========
Diluted net income per common
share.............................. $ .75 $ .55 $ 1.21
=========== =========== ===========
Shares used to compute diluted net
income
per common share................... 847,612 862,241 854,773
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Notes gain on
receivable marketable
Additional for securities Total
Common paid-in Retained Treasury common available shareholders'
stock capital earnings stock stock for sale equity
-------- ----------- ----------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1995................... $ 19,792 $ 1,502,691 $ 3,983,965 ($ 2,008,520) $ -- $ -- $ 3,497,928
Issuance of notes
receivable for the
purchase of 100,000
shares of treasury
stock.................. -- -- -- (700,000) -- (700,000)
Purchase of 117,540
shares of treasury
stock at cost.......... -- -- -- (822,780) -- -- (822,780)
Sales of 100,000 shares
of treasury stock...... -- 269,048 -- 430,952 -- -- 700,000
Net income.............. -- -- 1,032,915 -- -- -- 1,032,915
-------- ----------- ----------- ------------ ---------- -------- -----------
Balance, September 30,
1996................... 19,792 1,771,739 5,016,880 (2,400,348) (700,000) -- 3,708,063
Proceeds from collection
of notes receivable.... -- -- -- -- 5,355 -- 5,355
Purchase of 4,840 shares
of treasury stock at
cost................... -- -- -- (33,880) -- -- (33,880)
Net unrealized gain on
marketable securities
available for sale..... -- -- -- -- -- 75,467 75,467
Net income.............. -- -- 477,800 -- -- -- 477,800
-------- ----------- ----------- ------------ ---------- -------- -----------
Balance, September 30,
1997................... 19,792 1,771,739 5,494,680 (2,434,228) (694,645) 75,467 4,232,805
Proceeds from collection
of notes receivable.... -- -- -- -- 90,655 -- 90,655
Purchase of 40,369
shares of treasury
stock at cost.......... -- -- -- (322,039) -- -- (322,039)
Net unrealized loss on
marketable securities
available for sale..... -- -- -- -- -- (32,401) (32,401)
Net income.............. -- -- 636,153 -- -- -- 636,153
-------- ----------- ----------- ------------ ---------- -------- -----------
Balance, September 30,
1998................... $19,792 $1,771,739 $6,130,833 ($2,756,267) ($603,990) $43,066 $4,605,173
======== =========== =========== ============ ========== ======== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income............................... $ 636,153 $ 477,800 $ 1,032,915
---------- ---------- -----------
Reconciliation of net income to cash
flow from operations:
Depreciation and amortization.......... 2,119,812 1,193,037 1,024,574
Bad debts expense...................... 100,000 64,612 167,002
Deferred income taxes.................. (84,300) (43,000) 70,000
Accounts receivable and other current
assets................................ (1,065,328) (504,297) (559,266)
Accounts payable and accrued expenses.. 638,608 161,271 401,049
Deferred revenue....................... 2,570,881 118,060 (270,542)
---------- ---------- -----------
4,279,673 989,683 832,817
---------- ---------- -----------
Net cash provided by operating
activities.......................... 4,915,826 1,467,483 1,865,732
---------- ---------- -----------
Cash flows from investing activities:
Cash paid for property and equipment..... (762,805) (904,530) (682,882)
Cash paid for software products.......... (3,165,585) (2,382,302) (1,368,488)
Cash paid for acquired business, net of
cash acquired........................... (1,126,599) -- --
Decrease in notes receivable for common
stock................................... 90,655 5,355 --
Purchase of marketable securities,
available for sale...................... ( 73,804) (264,678) --
---------- ---------- -----------
Net cash used in investing
activities.......................... (5,038,138) (3,546,155) (2,051,370)
---------- ---------- -----------
Cash flows from financing activities:
Repayments of debt....................... (467,000) (173,000) (1,387,500)
Borrowings from notes payable............ 1,200,000 2,010,000 1,650,000
Purchase of treasury stock............... (322,039) (33,880) (822,780)
---------- ---------- -----------
Net cash provided by financing
activities.......................... 410,961 1,803,120 (560,280)
---------- ---------- -----------
Net increase (decrease) in cash........... 288,649 (275,552) (745,918)
Cash, beginning of year................... 136,832 412,384 1,158,302
---------- ---------- -----------
Cash, end of year......................... $ 425,481 $ 136,832 $ 412,384
========== ========== ===========
Supplemental disclosure of cash flow
Information
Cash paid during the year:
Interest, net of capitalized interest of
$237,475, $187,440 and $44,991 for the
years ended September 30, 1998, 1997
and 1996, respectively.................. $ 169,595 $ 54,070 $ 155,117
========== ========== ===========
Income taxes........................... $ 565,830 $ 334,425 $ 678,490
========== ========== ===========
Noncash investing and financing activities
Long-term debt incurred in connection with
TreSun Corporation acquisition........... $ 352,762 $ -- $ --
========== ========== ===========
The Company retired fully depreciation
assets................................... $ -- $ -- $ 1,315,458
========== ========== ===========
Officers of the Company acquired 100,000
shares of the Company's treasury stock
through the issuance of notes
receivable............................... $ -- $ -- $ 700,000
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1998, 1997 and 1996
Note 1 Operations and summary of significant accounting policies
Nature of operations
Pentamation Enterprises, Inc. ("the Company"), which was organized in 1969,
markets application software and associated computer hardware, software
support, hardware maintenance and technical services primarily to K-12
education institutions and local governments throughout the United States.
Payments for software products can be extended beyond one year, depending on
customer's installation schedule. The Company grants credit in the normal
course of business to its customers in those sectors and requires no
collateral. There is no geographical concentration of credit risk.
The financial statements include the accounts of Pentamation Enterprises,
Inc. and its wholly-owned subsidiaries, individually and collectively referred
to as "the Company". All intercompany accounts and transactions have been
eliminated in consolidation.
The presentation of 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
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.
Revenue and cost recognition
Software
The Company recognizes revenue upon delivery of all software and hardware
portions of sales contracts. Revenue from installation of software and hardware
based on contractual agreements is recognized over the period the installation
is performed.
Software and hardware costs are accrued upon the recognition of the related
revenue. Installation costs are recognized as incurred.
Technical and maintenance (including deferred revenue recognition)
The Company provides technical and maintenance services to its customers
under various contractual arrangements with the remaining terms ranging from
one month to five years. The Company recognizes revenue as services are
performed over the terms of the related contracts. Computer software
maintenance and customer support costs and the costs of developing computer
programs for customers for a fee under contractual arrangements are expensed as
incurred.
Capitalized computer software development costs and research and development
expenditures
Capitalized computer software development costs consist of costs to
internally develop software and externally purchase software. Capitalization of
software development costs begins upon the establishment of technological
feasibility. The ongoing assessment of recoverability of capitalized software
development costs requires considerable judgment by management with respect to
certain external factors, including, but not limited to, technological
feasibility, anticipated future gross revenues, estimated economic life and
changes in software and hardware technologies. Management monitors the
estimates that affect the recoverability of these development costs.
F-7
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
Capitalized software development costs and amortization and accumulated
amortization of capitalized software development costs are as follows:
<TABLE>
<CAPTION>
Capitalized Software Development
Costs
-------------------------------------
Accumulated Amortization
Year ended September 30, Capitalized amortization expense
------------------------ ----------- ------------ ------------
<S> <C> <C> <C>
1998................................. $2,990,000 $6,770,000 $1,400,000
========== ========== ==========
1997................................. $2,267,000 $5,369,000 $ 592,000
========== ========== ==========
1996................................. $1,306,000 $4,777,000 $ 524,000
========== ========== ==========
</TABLE>
Included in capitalized software development costs is capitalized interest cost
of $237,000, $187,000 and $45,000 in 1998, 1997 and 1996, respectively.
Capitalized computer software in service includes externally purchased
computer software at its fair market value at the time of acquisition of
$3,373,000 and $2,083,000 at September 30, 1998 and 1997, respectively.
The Company amortizes capitalized software development costs over their
expected life (generally 5 to 7 years). Due to inherent technological changes
in the software development industry, the period over which such capitalized
software costs are being amortized may have to be accelerated.
During 1998, management determined that the net book value of certain
Company capitalized software products had no continuing value. Accordingly, an
expense of approximately $485,000 for acceleration of amortization of
capitalized software in service was recorded.
Research and development costs are expensed as incurred and approximated
$408,000, $263,000 and $288,000 in the years ended September 30, 1998, 1997 and
1996, respectively. Substantially all of the Company's research and development
activities relate to development of new computer software to be marketed and
sold. Research and development activities include costs incurred for the
conceptual formulation or translation of knowledge into a design to establish
technological feasibility.
Equipment, furniture and fixtures and depreciation
Equipment and furniture and fixtures are stated at cost. The cost and
accumulated depreciation of assets sold or retired is eliminated from the
accounts, and the resulting gain or loss is included in income.
Normal maintenance and repair expenditures are expensed as incurred; major
renewals or improvements which extend the life or increase the value of assets
are capitalized.
The cost of equipment and furniture and fixtures is depreciated over the
estimated useful lives of the related assets using the straight-line method.
The estimated useful lives generally used for major asset categories are as
follows:
<TABLE>
<CAPTION>
Estimated
Asset class useful life
----------- ------------
<S> <C>
Computer equipment in service................................... 3 to 5 years
Capitalized computer software in service........................ 5 to 7 years
Furniture and fixtures.......................................... 5 to 7 years
</TABLE>
F-8
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
Marketable securities available for sale
Marketable securities available for sale are valued at their market value in
accordance with Statement of Financial Accounting Standards No. 115. The gain
or loss on sale of marketable securities is computed using the specific
identification method.
Advertising
Advertising costs are charged directly to operations when incurred. Total
advertising costs incurred during the years ended September 30, 1998, 1997 and
1996, were approximately $86,000, $52,000 and $70,000, respectively.
Reclassifications
The financial statements for the years ended September 30, 1997 and 1996,
have been reclassified to conform with the presentation for the year ended
September 30, 1998.
Note 2 Acquisition
On September 29, 1998, the Company acquired TreSun Corporation in a business
combination accounted for as a purchase. TreSun Corporation is primarily
engaged in designing, developing, selling, installing and maintaining
proprietary data processing software systems for local governments. The results
of operations of the TreSun Corporation have been included in the accompanying
financial statements since the date of acquisition. The cost of the acquisition
was approximately $1,724,000, which includes a value of $1,114,000 for the
capitalized software acquired (purchase software). This software is being
amortized over 7 years. The acquisition agreement also provided for contingent
consideration of 20% of the software revenues collected in excess of $200,000
during the first 12 months after the closing date; 20% of the software revenues
collected in excess of $200,000 during the second 12 months following the
closing date and a final payment of 20% of the software revenues collected
during the 36 months following the closing date less any contingency payments
previously paid. No accrual for contingent consideration has been recorded.
Note 3 Marketable securities available for sale
The following is a summary of marketable securities classified as available
for sale.
<TABLE>
<CAPTION>
Gross Unrealized Holding
------------------------
Fair
value Cost Gains Losses
-------- -------- ------- -------
<S> <C> <C> <C> <C>
September 30, 1998:
Marketable equity securities........... $381,548 $338,482 $44,371 ($1,305)
======== ======== ======= =======
September 30, 1997:
Marketable equity securities........... $340,145 $264,678 $75,467 $ --
======== ======== ======= =======
</TABLE>
For the years ended September 30, 1998, 1997 and 1996, there were no sales
and gains or losses on marketable securities available for sale.
Note 4 Notes receivable for common stock
Notes receivable for common stock consists of two notes receivable
aggregating $604,000 ($695,000 at September 30, 1997) from officers of the
Company. These notes bear interest at the Internal Revenue adjusted applicable
federal rate (6% at September 30, 1998 and 1997) and mature in June, 2002.
F-9
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
Note 5 Long-term debt
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
---------- ----------
<S> <C> <C>
Line of credit/Note payable, bank
The Company has available, pursuant to the terms of the
second amendment to revolving credit agreement dated
December 29, 1997, a $5,000,000 ($3,250,000 at
September 30, 1997) unsecured line of credit at
interest rates including prime less 3/8% (7.875% at
September 30, 1998) or LIBOR plus 2% (7.645% to a
maximum of $2,500,000 of the line of credit) as
selected by the Company. The interest rate at September
30, 1997 was prime less .125% (8.375%). Participation
in the line may be in the form of borrowing and/or
letters of credit up to a maximum of $5,000,000.
Outstanding letters of credit are considered as usage
of the line. The line of credit expires October 31,
1999. At September 30, 1998, the Company had an
outstanding letter of credit of $50,000 and the unused
portion of the line was $3,700,000..................... $1,250,000 $1,300,000
Term loans payable, bank
The Company has a term loan (original amount $1,650,000)
with interest payable at prime (8.25% and 8.5% at
September 30, 1998 and 1997, respectively). Principal
payments are due in amounts of $68,750 per quarter for
twenty-four quarters commencing October 2, 1996........ 1,100,000 1,375,000
In April 1997, the Company entered into a term loan for
$710,000, with interest payable at prime less .25%
(8.00% and $8.25% at September 30, 1998 and 1997,
respectively). Principal payments are due in amounts of
$35,500 per quarter for twenty quarters commencing July
1, 1997................................................ 532,500 674,500
In September, 1998, the Company entered into a term loan
for $1,200,000 with interest at 7.65% for the
acquisition of the TreSun Corporation. Principal and
interest payments are due in monthly installments of
$24,131 for sixty months commencing November 1, 1998... $1,200,000 $ --
Acquisition obligation
As part of the acquisition of TreSun Corporation (see
Note 2) the Company incurred an acquisition obligation
to the selling shareholders for $400,000. This
obligation is payable $200,000 on October 31, 1999 and
$200,000 on October 31, 2000. There is no stated
interest; inputed interest of 8% ($47,238) has been
recorded............................................... 352,762 --
---------- ----------
4,435,262 3,349,500
Less short-term and current portion of long-term debt... 604,183 417,000
---------- ----------
$3,831,079 $2,932,500
========== ==========
</TABLE>
The line of credit and term loans are uncollateralized but require the
Company to maintain certain financial covenants. In addition, the loan
agreements include certain restrictions on the sale of assets, pledging of
accounts receivable and borrowing by the Company.
F-10
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending September 30, 1999................................... $ 604,183
Year ending September 30, 2000................................... 2,071,362
Year ending September 30, 2001................................... 822,190
Year ending September 30, 2002................................... 637,386
Year ending September 30, 2003................................... 276,162
Year ending September 30, 2004................................... 23,979
----------
$4,435,262
==========
</TABLE>
Note 6 Income taxes
The Company has provided for the effects of income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." Deferred income taxes are provided in recognition of temporary
differences between financial and income tax reporting and consist of the
following:
<TABLE>
<CAPTION>
September 30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax asset:
Deferred compensation.............................. $ 167,000 $ 108,800
Allowance for bad debts............................ 43,800 22,000
Vacation accrual................................... 171,500 147,000
--------- ---------
382,300 277,800
Valuation allowance.................................. -- --
--------- ---------
Net deferred tax assets.............................. 382,300 277,800
Deferred tax liability, depreciation and
amortization........................................ ( 489,000) ( 468,800)
--------- ---------
Net deferred tax liability........................... ($106,700) ($191,000)
========= =========
</TABLE>
In prior years, the Company reduced its effective state tax rate resulting
principally from a change in states where the Company conducts its business.
This change, which is expected to continue in the future, resulted in a
decrease in the Company's current and deferred income tax liabilities.
Accordingly, the Company's current and deferred income tax liabilities are
based on the reduced rate applicable to subsequent years.
The components of the provision for income tax expense are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Current......................................... $473,300 $346,000 $518,000
Deferred........................................ ( 84,300) ( 43,000) 70,000
-------- -------- --------
$389,000 $303,000 $588,000
======== ======== ========
</TABLE>
Note 7 Salary redirection and savings plan
The Company established a Salary Redirection and Savings Plan under Section
401(k) of the Internal Revenue Code (the "Plan") in October 1984. All employees
are eligible to participate in the Plan at the beginning of the calendar
quarter following employment. The Company matches employee contributions which
F-11
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
can be up to a maximum of 50% of the first 6% of employee contributions. The
Plan establishes vesting requirements upon the Company's contribution based on
years of service. Forfeitures are returned to the Company. The Company's
contribution to the Plan for the year ended September 30, 1998 was
approximately $260,000, net of forfeitures of approximately $10,000. The
Company's contributions to the Plan for the years ended September 30, 1997 and
1996, were approximately $239,000 and $202,000, respectively.
Note 8 Stock option
Effective February 1, 1998, as part of a revised executive compensation
agreement for the Company's newly promoted President and Chief Operating
Officer, the Company granted a stock option for the purchase of 25,000 shares
of the Company's common stock. This option vested immediately at a price of
$6.00 per share and expires January 31, 2005. As of September 30, 1998, these
shares had not been exercised or forfeited and remain exercisable.
The Company applies APB Opinion #25 in accounting for this stock option.
Accordingly, no compensation was recognized for the year ended September 30,
1998. Had compensation costs been determined on the basis of fair value
pursuant to FASB Statement No. 123, net income would have reduced as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------
1998 1997 1996
-------- -------- ----------
<S> <C> <C> <C>
Net income:
As reported................................... $636,153 $477,800 $1,032,915
======== ======== ==========
Pro forma..................................... $570,153 $477,800 $1,032,915
======== ======== ==========
Earnings per share:
As reported................................... $ .76 $ .55 $ 1.21
======== ======== ==========
Pro forma..................................... $ .68 $ .55 $ 1.21
======== ======== ==========
</TABLE>
Because there is no market for the Company's stock, fair value of these
options was determined based on the value of treasury shares purchased prior to
and after the issuance of this stock option.
Note 9 Commitments and contingencies
Related party transactions
Operating leases
The Company's leasing arrangements are primarily for the use of office space
for its operations, equipment and vehicles. Total rental expense, including
short-term cancelable leases, for the years ended September 30, 1998, 1997 and
1996 were approximately $1,297,000, $1,086,000 and $931,000, respectively.
F-12
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
September 30, 1998, 1997 and 1996
Future minimum rental commitments as of September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Office
Year space Equipment Vehicles Total
---- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
1999............................... $ 835,000 $ 66,000 $344,000 $1,245,000
2000............................... 817,000 66,000 230,000 1,113,000
2001............................... 811,000 55,000 110,000 976,000
2002............................... 811,000 -- -- 811,000
2003............................... 659,000 -- -- 659,000
Thereafter......................... 3,679,000 -- -- 3,679,000
---------- -------- -------- ----------
Total.............................. $7,612,000 $187,000 $684,000 $8,483,000
========== ======== ======== ==========
</TABLE>
The information above includes data relating to leases of certain vehicles
and real estate from GLS, a partnership controlled by certain officers and
principal shareholders of the Company. Rental expense under the GLS leases for
the years ended September 30, 1998, 1997 and 1996 was $1,195,000, $995,000 and
$890,000, respectively. Minimum rental commitments at September 30, 1998, under
the GLS leases approximated $7,872,000, exclusive of operating costs which are
the responsibility of the Company and possible rent increases for consumer
price index adjustments.
Other commitments
The Company has entered into an agreement with its two major shareholders to
repurchase 200,000 shares of stock from each shareholder in the event of death,
permanent disability or retirement. Pursuant to the agreement, the purchase
price of such shares is 175% of the Company's net book value per share as of
the close of the latest fiscal year end. Payments under this agreement could be
extended by the Company for a period of 10 years. Disability and term life
insurance on each of the two major shareholders would fund a majority of this
purchase. This agreement terminates if the Company is purchased or merges with
another company in a pooling of interest transaction.
Cash
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash.
Year 2000
Management has assessed the Company's exposure to date sensitive computer
software programs that may not be operative subsequent to 1999 and has
implemented a requisite course of action to minimize Year 2000 risk and ensure
that neither significant costs nor disruption of normal business operations are
encountered. However, because there is no guarantee that all systems of outside
vendors or other entities affecting the Company's operations will be 2000
compliant, the Company remains susceptible to consequences of the Year 2000
issue.
F-13
<PAGE>
Independent Accountants' Report
Board of Directors and Shareholders
Pentamation Enterprises, Inc. and Subsidiaries
Bethlehem, Pennsylvania
We have reviewed the accompanying balance sheets of Pentamation Enterprises,
Inc. and Subsidiaries as of March 31, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, comprehensive income
and cash flows for the six months ended March 31, 1999 and 1998. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
Halbert, Katz & Co., P.C.
May 19, 1999
F-14
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash............................................... $ 185,453 $ 17,389
Marketable securities available for sale........... 491,327 --
Trade receivables, less allowance for doubtful
accounts of $39,000 and $24,000 at March 31, 1999
and 1998, respectively............................ 7,140,346 3,650,064
Earned but unbilled receivables.................... 1,184,923 2,700,649
Prepaid expenses and other current assets.......... 1,575,524 1,137,492
Deferred income taxes.............................. 340,500 308,000
----------- -----------
Total current assets............................. 10,918,073 7,813,594
----------- -----------
Property and equipment, net of accumulated
depreciation of $5,465,574 and $4,715,465 at March
31, 1999 and 1998, respectively.................... 1,601,773 1,533,007
Software products, net of accumulated amortization
of $8,363,230 and $5,749,279 at March 31, 1999 and
1998, respectively................................. 8,127,817 6,939,693
----------- -----------
9,729,590 8,472,700
----------- -----------
Other assets:
Marketable securities available for sale........... -- 424,382
Deposits........................................... 72,475 63,900
----------- -----------
72,475 488,282
----------- -----------
Total assets..................................... $20,720,138 $16,774,576
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term and current portion of long-term debt... $ 1,196,562 $ 417,000
Accounts payable................................... 1,458,245 960,055
Accrued compensation and benefits.................. 2,213,084 1,691,410
Other accrued expenses............................. 1,044,161 671,194
Accrued income taxes............................... 45,584 44,830
Deferred revenue................................... 7,172,402 2,865,432
----------- -----------
Total current liabilities........................ 13,130,038 6,649,921
----------- -----------
Long-term debt...................................... 2,113,519 5,074,000
Deferred income taxes............................... 481,500 456,000
----------- -----------
2,595,019 5,530,000
----------- -----------
Total liabilities................................ 15,725,057 12,179,921
----------- -----------
Commitments and contingencies....................... -- --
----------- -----------
Shareholders' equity:
Common stock, authorized 5,000,000 shares; stated
value $.015; issued and outstanding 817,734 shares
in 1999, and 839,779 shares in 1998 (excluding
501,727 shares in 1999 and 479,682 shares in 1998,
held in the treasury)............................. 19,792 19,792
Additional paid-in capital......................... 1,771,739 1,771,739
Retained earnings.................................. 6,430,571 5,967,163
----------- -----------
8,222,102 7,758,694
Less:
Treasury stock, at cost........................... (2,756,267) (2,565,614)
Notes receivable for common stock................. (560,976) (684,871)
Net unrealized gain on marketable securities
available for sale................................ 90,222 86,446
----------- -----------
4,995,081 4,594,655
----------- -----------
Total liabilities and shareholders' equity....... $20,720,138 $16,774,576
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Six months ended March
31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues............................................ $17,531,334 $12,681,916
----------- -----------
Costs and expenses:
Cost of sales and direct operating................ 11,039,308 8,116,496
Sales marketing and administration................ 3,735,896 2,873,623
Product development............................... 228,389 210,733
Amortization and depreciation..................... 1,978,405 734,156
----------- -----------
16,981,998 11,935,008
----------- -----------
Income from operations.............................. 549,336 746,908
Interest and miscellaneous income................... 30,885 43,469
Interest expense.................................... (96,483) (49,894)
----------- -----------
Income before taxes................................. 483,738 740,483
Income taxes........................................ 184,000 268,000
----------- -----------
Net income.......................................... $ 299,738 $ 472,483
=========== ===========
Basic net income per common share................... $ .37 $ .56
=========== ===========
Shares used to compute basic net income per common
share.............................................. 817,734 849,340
=========== ===========
Diluted net income per common share................. $ .36 $ .55
=========== ===========
Shares used to compute diluted net income per common
share.............................................. 827,734 859,340
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Unrealized
Notes gain on
receivable marketable
Additional for securities Total
Common paid-in Retained Treasury common available shareholders'
stock capital earnings stock stock for sale equity
------- ---------- ---------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1997................... $19,792 $1,771,739 $5,494,680 $(2,434,228) $(694,645) $75,467 $4,232,805
Proceeds from collection
of notes receivable.... -- -- -- -- 9,774 -- 9,774
Purchase of 18,324
shares of treasury
stock at cost.......... -- -- -- (131,386) -- -- (131,386)
Net unrealized gain on
marketable securities
available for sale..... -- -- -- -- -- 10,979 10,979
Net income.............. -- -- 472,483 -- -- -- 472,483
------- ---------- ---------- ----------- --------- ------- ----------
Balance, March 31,
1998................... $19,792 $1,771,739 $5,967,163 $(2,565,614) $(684,871) $86,446 $4,594,655
======= ========== ========== =========== ========= ======= ==========
Balance, September 30,
1998................... $19,792 $1,771,739 $6,130,833 $(2,756,267) $(603,990) $43,066 $4,605,173
Proceeds from collection
of notes receivable.... -- -- -- -- 43,014 -- 43,014
Net unrealized gain on
marketable securities
available for sale..... -- -- -- -- -- 47,156 47,156
Net income.............. -- -- 299,738 -- -- -- 299,738
------- ---------- ---------- ----------- --------- ------- ----------
Balance, March 31,
1999................... $19,792 $1,771,739 $6,430,571 $(2,756,267) $(560,976) $90,222 $4,995,081
======= ========== ========== =========== ========= ======= ==========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
Six months ended March 31,
--------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net income........................................ $ 299,738 $ 472,483
Other comprehensive income:
Unrealized holding gains arising during the
period, net of income taxes of $46,000 and
$29,000 for the six months period ended March
31, 1999 and 1998, respectively................ 47,156 10,979
------------- -------------
Comprehensive income.............................. $ 346,894 $ 483,462
------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
March 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) In Cash
Cash flows from operating activities:
Net income........................................... $ 299,738 $ 472,483
Reconciliation of net income to cash flow from
operations:
Depreciation and amortization...................... 1,978,405 734,156
Bad debts expense.................................. 45,000 40,612
Deferred income taxes.............................. (11,700) (43,000)
Accounts receivable and other current assets....... (583,691) 335,841
Accounts payable and accrued expenses.............. 409,553 (209,905)
Deferred revenue................................... 246,280 (1,410,379)
---------- ----------
Net cash provided by (used in) operating
activities...................................... 2,383,585 (80,192)
---------- ----------
Cash flows from investing activities:
Cash paid for property and equipment................. (279,387) (279,067)
Cash paid for software products...................... (1,229,482) (1,706,814)
Decrease in notes receivable for common stock........ 43,014 9,774
Purchase of marketable securities, available for
sale................................................ (16,623) (73,258)
---------- ----------
Net cash used in investing activities............ (1,482,478) (2,049,365)
---------- ----------
Cash flows from financing activities:
Repayment of debt.................................... (1,141,135) (208,500)
Borrowings from notes payable........................ -- 2,350,000
Purchase of treasury stock........................... -- (131,386)
---------- ----------
Net cash provided by (used in) financing
activities...................................... (1,141,135) 2,010,114
---------- ----------
Net decrease in cash................................... (240,028) (119,443)
Cash, beginning of year................................ 425,481 136,832
---------- ----------
Cash, end of year...................................... $ 185,453 $ 17,389
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year:
Interest, net of capitalized interest of $66,659 and
$133,954 for the years ended March 31, 1999, and
1998, respectively.................................. $ 96,483 $ 41,494
========== ==========
Income taxes......................................... $ 149,881 $ 275,170
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1999 and March 31, 1998
Note 1--Operations and summary of significant accounting policies
Nature of operations
Pentamation Enterprises, Inc. ("the Company"), which was organized in 1969,
markets application software and associated computer hardware, software
support, hardware maintenance and technical services primarily to K-12
education institutions and local governments throughout the United States.
Payments for software products can be extended beyond one year, depending on
customer's installation schedule. The Company grants credit in the normal
course of business to its customers in those sectors and requires no
collateral. There is no geographical concentration of credit risk.
The financial statements include the accounts of Pentamation Enterprises,
Inc. and its wholly-owned subsidiaries, individually and collectively referred
to as "the Company". All intercompany accounts and transactions have been
eliminated in consolidation.
The presentation of 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
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.
Revenue recognition
Prior to October 1, 1998:
The Company recognizes revenue upon delivery of all software and
hardware portions of sales contracts. Revenue from installation of software
and hardware based on contractual agreements is recognized over the period
the installation is performed.
Software and hardware costs are accrued upon the recognition of the
related revenue. Installation costs are recognized as incurred.
The Company provides technical and maintenance services to its customers
under various contractual arrangements with the remaining terms ranging
from one month to five years. The Company recognizes revenue as services
are performed over the terms of the related contracts. Computer software
maintenance and customer support costs and the costs of developing computer
programs for customers for a fee under contractual arrangements are
expensed as incurred.
Subsequent to September 30, 1998:
Effective October 1, 1998, the Company adopted the provisions of
Statement of Position 97-2 Software Revenue Recognition, as amended.
Accordingly, the Company recognizes revenue upon delivery of all software
and hardware portions of sale contracts. For multiple element license
contracts, the license fee is allocated to the various elements based on
fair value. When a multiple element arrangement includes rights to
postcontract customer support (principally maintenance, technical and
training services) revenue is recognized as services are performed over the
term of the contract. For arrangements to deliver software that require
significant modifications or customization, as specified in the contract,
the application revenue is recognized on the percentage of completion
method.
F-20
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
Capitalized computer software development costs and research and development
expenditures
Capitalized computer software development costs consist of costs to
internally develop software and externally purchase software. Capitalization of
software development costs begins upon the establishment of technological
feasibility. The ongoing assessment of recoverability of capitalized software
development costs requires considerable judgment by management with respect to
certain external factors, including, but not limited to, technological
feasibility, anticipated future gross revenues, estimated economic life and
changes in software and hardware technologies. Management monitors the
estimates that affect the recoverability of these development costs.
Capitalized software development costs and amortization and accumulated
amortization of capitalized software development costs are as follows:
<TABLE>
<CAPTION>
Capitalized Software Development
Costs
-------------------------------------
Accumulated Amortization
Capitalized amortization expense
----------- ------------ ------------
<S> <C> <C> <C>
Six months ended March 31, 1999...... $1,137,000 $8,363,000 $1,593,000
========== ========== ==========
Six months ended March 31, 1998...... $1,600,000 $5,749,000 $ 380,000
========== ========== ==========
</TABLE>
Included in capitalized software development costs is capitalized interest
cost of $67,000 and $134,000 in 1999 and 1998, respectively.
Capitalized computer software in service includes externally purchased
computer software at its fair market value at the time of acquisition of
$3,465,000 and $2,189,000 at March 31, 1999 and 1998, respectively.
The Company amortizes capitalized software development costs over their
expected life (generally 5 to 7 years). Due to inherent technological changes
in the software development industry, the period over which such capitalized
software costs are being amortized may have to be accelerated.
During the six months ended March 31, 1999, management determined that the
net book value of certain Company capitalized software products had no
continuing value. Accordingly, an expense of approximately $922,000 for
acceleration of capitalized software in service was recorded.
Research and development costs are expensed as incurred and approximated
$228,000 and $211,000 for the six months ended March 31, 1999 and 1998,
respectively. Substantially all of the Company's research and development
activities relate to development of new computer software to be marketed and
sold. Research and development activities include costs incurred for the
conceptual formulation or translation of knowledge into a design to establish
technological feasibility.
Equipment, furniture and fixtures and depreciation
Equipment and furniture and fixtures are stated at cost. The cost and
accumulated depreciation of assets sold or retired is eliminated from the
accounts, and the resulting gain or loss is included in income.
Normal maintenance and repair expenditures are expensed as incurred; major
renewals or improvements which extend the life or increase the value of assets
are capitalized.
F-21
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
The cost of equipment and furniture and fixtures is depreciated over the
estimated useful lives of the related assets using the straight-line method.
The estimated useful lives generally used for major asset categories are as
follows:
<TABLE>
<CAPTION>
Estimated
Asset class useful life
----------- ------------
<S> <C>
Computer equipment in service................................... 3 to 5 years
Capitalized computer software in service........................ 5 to 7 years
Furniture and fixtures.......................................... 5 to 7 years
</TABLE>
Marketable securities available for sale
Marketable securities available for sale are valued at their market value in
accordance with Statement of Financial Accounting Standards No. 115. The gain
or loss on sale of marketable securities is computed using the specific
identification method.
Advertising
Advertising costs are charged directly to operations when incurred. Total
advertising costs incurred during the six months ended March 31, 1999 and 1998
was approximately $58,000 and $32,000, respectively.
Reclassifications
The financial statements for the year six months ended March 31, 1998 have
been reclassified to conform with the presentation for the six months ended
March 31, 1999.
Future adoption of Statement of Financial Standards No. 133
The Company anticipates the future adoption of Statement of Financial
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities
will not have a material effect on the financial statements.
Note 2--Acquisition
On September 29, 1998, the Company acquired TreSun Corporation in a business
combination accounted for as a purchase. TreSun Corporation is primarily
engaged in designing, developing, selling, installing and maintaining
proprietary data processing software systems for local governments. The results
of operations of the TreSun Corporation have been included in the accompanying
financial statements since the date of acquisition. The cost of the acquisition
was approximately $1,724,000, which includes a value of $1,114,000 for the
capitalized software acquired (purchase software). This software is being
amortized over 7 years. The acquisition agreement also provided for contingent
consideration of 20% of the software revenues collected in excess of $200,000
during the first 12 months after the closing date; 20% of the software revenues
collected in excess of $200,000 during the second 12 months following the
closing date and a final payment of 20% of the software revenues collected
during the 36 months following the closing date less any contingency payments
previously paid. No accrual for contingent consideration has been recorded.
Note 3--Marketable securities available for sale
Marketable securities available for sale are Company assets held for certain
Company employees as part of a deferred compensation plan. As such, increases
and decreases in market value of these assets result in
F-22
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
increases and decreases in compensation expense and corresponding increases and
decreases in net unrealized gains on marketable securities available for sale.
Compensation expense for the six months ended March 31, 1999 was approximately
$136,000. No compensation expense was recorded for the six months ended March
31, 1998.
The following is a summary of marketable securities classified as available
for sale.
<TABLE>
<CAPTION>
Gross
unrealized
Fair holding
value Cost gains
-------- -------- ----------
<S> <C> <C> <C>
March 31, 1999:
Marketable equity securities.................. $491,327 $355,104 $136,222
======== ======== ========
March 31, 1998:
Marketable equity securities.................. $424,382 $337,936 $ 86,446
======== ======== ========
</TABLE>
For the six months ended March 31, 1999 and 1998, there were no sale of
securities or realized gains or losses from sale of securities.
Note 4--Comprehensive income
During the six months ended March 31, 1999, the Company adopted Financial
Accounting Standards Board (FASB) Statement No. 130, Reporting Comprehensive
Income. This statement requires the reporting of comprehensive income in
addition to net income from operations. Comprehensive income is a more
comprehensive inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income.
At March 31, 1999, the Company's Other Comprehensive Income is the
unrealized holding gains on available for sale securities.
Note 5--Notes receivable, officers and employees
Included in notes receivable, officers and employees are two notes
receivable aggregating $560,976 ($685,000 at March 31, 1998) from officers of
the Company. These notes bear interest at the Internal Revenue adjusted
applicable federal rate (approximately 5% at March 31, 1999 and 1998) and
mature in June, 2002.
F-23
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
Note 6--Long-term debt
Line of credit/Note payable, bank
<TABLE>
<CAPTION>
March 31,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
The Company has available, pursuant to the terms of the
second amendment to revolving credit agreement dated
December 29, 1997, a $5,000,000 unsecured line of
credit at interest rates including prime less 3/8%
(7.375% and 8.125% at March 31, 1999 and 1998, respec-
tively) or LIBOR plus 2% as selected by the Company.
Participation in the line may be in the form of borrow-
ing and/or letters of credit up to a maximum of
$5,000,000. Outstanding letters of credit are consid-
ered as usage of the line. The line of credit expires
October 31, 1999. At March 31, 1999 and 1998, the Com-
pany had an outstanding letter of credit of $50,000 and
the unused portion of the line was $4,550,000 and
$1,300,000, respectively............................... $ 400,000 $3,650,000
The Company has a term loan (original amount $1,650,000)
with interest payable at prime (7.75% and 8.50% at
March 31, 1999 and 1998, respectively). Principal
payments are due in amounts of $68,750 per quarter for
twenty-four quarters commencing October 2, 1996........ 962,500 1,237,500
In April 1997, the Company entered into a term loan for
$710,000, with interest payable at prime less .25%
(7.50% and 8.25% at March 31, 1999 and 1998,
respectively). Principal payments are due in amounts of
$35,500 per quarter for twenty quarters commencing July
1, 1997................................................ 461,500 603,500
In September, 1998, the Company entered into a term loan
for $1,200,000 with interest at 7.65% for the
acquisition of the TreSun Corporation. Principal and
interest payments are due in monthly installments of
$24,131 for sixty months commencing November 1, 1998... 1,117,365 --
As part of the acquisition of TreSun Corporation (see
Note 2) the Company incurred an acquisition obligation
to the selling shareholders for $400,000. This
obligation is payable $200,000 on October 31, 1999 and
$200,000 on October 31, 2000. There is no stated
interest; inputed interest of 8% ($47,238) has been
recorded............................................... 368,716 --
---------- ----------
3,310,081 5,491,000
Less current portion.................................... 1,196,562 417,000
---------- ----------
$2,113,519 $5,074,000
========== ==========
</TABLE>
Acquisition obligation
The line of credit and term loans are uncollateralized but require the
Company to maintain certain financial covenants. In addition, the loan
agreements include certain restrictions on the sale of assets, pledging of
accounts receivable and borrowing by the Company.
F-24
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
Year ending March 31, 2000....................................... $1,196,562
Year ending March 31, 2001....................................... 845,854
Year ending March 31, 2002....................................... 663,314
Year ending March 31, 2003....................................... 438,831
Year ending March 31, 2004....................................... 165,520
----------
$3,310,081
==========
</TABLE>
Note 7--Income taxes
The Company has provided for the effects of income taxes in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." Deferred income taxes are provided in recognition of temporary
differences between financial and income tax reporting and consist of the
following:
<TABLE>
<CAPTION>
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax asset:
Deferred compensation............................... $ 178,600 $ 164,000
Allowance for bad debts............................. 28,700 15,000
Vacation accrual.................................... 179,200 158,000
--------- ---------
386,500 337,000
Valuation allowance................................... -- --
--------- ---------
Net deferred tax assets............................... 386,500 337,000
--------- ---------
Deferred tax liabilities:
Depreciation and amortization....................... (481,500) (456,000)
Unrealized gain on trading securities............... (46,000) (29,000)
--------- ---------
(527,500) (485,000)
--------- ---------
Net deferred tax liability............................ $(141,000) $(148,000)
========= =========
</TABLE>
In prior years, the Company reduced its effective state tax rate resulting
principally from a change in states where the Company conducts its business.
This change, which is expected to continue in the future, resulted in a
decrease in the Company's current and deferred income tax liabilities.
Accordingly, the Company's current and deferred income tax liabilities are
based on the reduced rate applicable to subsequent years.
The components of the provision for income tax expense are as follows:
<TABLE>
<CAPTION>
Six months ended
March 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Current................................................... $149,700 $311,000
Deferred.................................................. 34,300 (43,000)
-------- --------
$184,000 $268,000
======== ========
</TABLE>
F-25
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
Note 8--Salary redirection and savings plan
The Company established a Salary Redirection and Savings Plan under Section
401(k) of the Internal Revenue Code (the "Plan") in October 1984. All employees
are eligible to participate in the Plan at the beginning of the calendar
quarter following employment. The Company matches employee contributions which
can be up to a maximum of 50% of the first 6% of employee contributions. The
Plan establishes vesting requirements upon the Company's contribution based on
years of service. Forfeitures are returned to the Company. The Company's
contribution to the Plan for the six months ended March 31, 1999 was
approximately $151,000, net of forfeitures of approximately $27,000. The
Company's contribution to the Plan for the six months ended March 31, 1998 was
approximately $133,900.
Note 9--Stock option
Effective February 1, 1998, as part of a revised executive compensation
agreement for the Company's newly promoted President and Chief Operating
Officer, the Company granted a stock option for the purchase of 25,000 shares
of the Company's common stock. This option vested immediately at a price of
$6.00 per share and expires January 31, 2005. As of March 31, 1999, these
shares had not been exercised or forfeited and remain exercisable.
The Company applies APB Opinion #25 in accounting for this stock option.
Accordingly, no compensation was recognized in the financial statements for the
six months ended March 31, 1999 and 1998. Had compensation costs been
determined on the basis of fair value, pursuant to FASB Statement No. 123, net
income as reported would have been as follows.
<TABLE>
<CAPTION>
Six months ended
March 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Net income:
As reported.............................................. $299,738 $472,483
======== ========
Pro forma................................................ $299,738 $438,483
======== ========
Earnings per share:
As reported.............................................. $ .37 $ .56
======== ========
Pro forma................................................ $ .37 $ .52
======== ========
</TABLE>
Because there is no market for the Company's stock, fair value of these
options was determined based on the value of treasury shares purchased prior to
and after the issuance of this stock option.
Note 10--Commitments and contingencies
Related party transactions
Operating leases
The Company's leasing arrangements are primarily for the use of office space
for its operations, equipment and vehicles. Total rental expense, including
short-term cancelable leases, for the six months ended March 31, 1999 and 1998
was approximately $703,000 and $642,000, respectively.
F-26
<PAGE>
Pentamation Enterprises, Inc. and Subsidiaries
Notes to Consolidated Financial Statements--(Continued)
March 31, 1999 and March 31, 1998
Future minimum rental commitments as of March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Office
Year space Equipment Vehicles Total
---- ---------- --------- -------- ----------
<S> <C> <C> <C> <C>
2000................................ $ 886,000 $ 95,000 $330,000 $1,311,000
2001................................ 826,000 95,000 238,000 1,159,000
2002................................ 811,000 50,000 94,000 955,000
2003................................ 753,000 23,000 -- 776,000
2004................................ 672,000 19,000 -- 691,000
Thereafter.......................... 3,368,000 -- -- 3,368,000
---------- -------- -------- ----------
Total............................. $7,316,000 $282,000 $662,000 $8,260,000
========== ======== ======== ==========
</TABLE>
The information above includes data relating to leases of certain vehicles
and real estate from GLS, a partnership controlled by certain officers and
principal shareholders of the Company. Rental expense under the GLS leases for
the six months ended March 31, 1999 and 1998 was $605,000 and $594,000,
respectively. Minimum rental commitments at March 31, 1999, under the GLS
leases approximated $7,590,000, exclusive of operating costs which are the
responsibility of the Company and possible rent increases for consumer price
index adjustments.
Other commitments
The Company has entered into an agreement with its two major shareholders to
repurchase 200,000 shares of stock from each shareholder in the event of death,
permanent disability or retirement. Pursuant to the agreement, the purchase
price of such shares is 175% of the Company's net book value per share as of
the close of the latest fiscal year end. Payments under this agreement could be
extended by the Company for a period of 10 years. Disability and term life
insurance on each of the two major shareholders would fund a majority of this
purchase. This agreement terminates if the Company is purchased or merges with
another company in a pooling of interest transaction.
Cash
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts. The Company believes it is not exposed to any significant credit
risk on cash.
Year 2000
Management has assessed the Company's exposure to date sensitive computer
software programs that may not be operative subsequent to 1999 and has
implemented a requisite course of action to minimize Year 2000 risk and ensure
that neither significant costs nor disruption of normal business operations are
encountered. However, because there is no guarantee that all systems of outside
vendors or other entities affecting the Company's operations will be 2000
compliant, the Company remains susceptible to consequences of the Year 2000
issue.
F-27
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
dated May 6, 1999
FOR THE ACQUISITION OF
PENTAMATION ENTERPRISES, INC.
BY
SUNGARD DATA SYSTEMS INC.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1: Defined Terms.......................................................... A-2
Section 2: The Merger............................................................. A-6
Section 3: Representations of Pentamation and the Principal Shareholders.......... A-6
3.1 Organization......................................................... A-6
3.2 Effect of Agreement.................................................. A-7
3.3 Capital Stock and Ownership.......................................... A-8
3.4 Financial and Corporate Records...................................... A-8
3.5 Compliance with Law.................................................. A-9
3.6 Financial Statements................................................. A-9
3.7 Assets............................................................... A-10
3.8 Obligations.......................................................... A-10
3.9 Operations Since the Latest Balance Sheet Date....................... A-10
3.10 Accounts Receivable.................................................. A-11
3.11 Tangible Property.................................................... A-11
3.12 Real Property........................................................ A-12
3.13 Environmental........................................................ A-16
3.14 Software and Intangibles............................................. A-18
3.15 Contracts............................................................ A-19
3.16 Employees and Independent Contractors................................ A-20
3.17 Employee Benefit Plans............................................... A-21
3.18 Customers, Prospects and Suppliers................................... A-22
3.19 Taxes................................................................ A-23
3.20 Proceedings and Judgments............................................ A-23
3.21 Insurance............................................................ A-24
3.22 Questionable Payments................................................ A-24
3.23 Related Party Transactions........................................... A-24
3.24 Brokerage Fees....................................................... A-24
3.25 Acquisition Proposals................................................ A-25
3.26 Affiliate Matters.................................................... A-25
3.27 Accounting Matters................................................... A-25
3.28 Vote Required........................................................ A-25
3.29 HSR Act.............................................................. A-25
3.30 Full Disclosure...................................................... A-25
Section 4: Representations of SunGard and Newco................................... A-26
4.1 Organization......................................................... A-26
4.2 Agreement............................................................ A-26
4.3 SunGard's Stock...................................................... A-26
4.4 SEC Filings.......................................................... A-26
4.5 Investment Matters................................................... A-27
Section 5: Securities Filings and Approval of the Pentamation Shareholders........ A-27
5.1 Registration Statement............................................... A-27
5.2 Pentamation Shareholder Approval..................................... A-27
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.3 Pentamation's and Principal Shareholders' Representations as to
the Registration Statement.......................................... A-27
5.4 SunGard's and Newco's Representations as to the Registration
Statement............................................................ A-28
5.5 State Securities Filings............................................. A-29
Section 6: Certain Obligations of Pentamation and Shareholders Pending Closing.... A-29
6.1 Voting and Cooperation Agreement..................................... A-29
6.2 Management Representation Letter..................................... A-29
6.3 Tax Representation Certificate....................................... A-29
6.4 Affiliate Agreements................................................. A-29
6.5 Conduct of the Pentamation Companies' Business....................... A-30
6.6 Interim Financial Statements......................................... A-31
6.7 SunGard's General Due Diligence Investigation........................ A-31
6.8 SunGard's Environmental Due Diligence Investigation.................. A-32
6.9 Consents............................................................. A-32
6.10 Acquisition Proposals................................................ A-32
6.11 Advice of Changes.................................................... A-33
6.12 S-4 Financial Statements............................................. A-33
6.13 Pooling of Interests................................................. A-33
6.14 HSR Act Filings...................................................... A-33
6.15 Best Efforts......................................................... A-34
Section 7: Certain Obligations of SunGard and Newco Pending Closing............... A-34
7.1 Corporate Status..................................................... A-34
7.2 The Principal Shareholders' Due Diligence Investigation.............. A-34
7.3 Consents............................................................. A-34
7.4 SEC Reports.......................................................... A-34
7.5 Advice of Changes.................................................... A-34
7.6 HSR Act Filings...................................................... A-35
7.7 Best Efforts......................................................... A-35
Section 8: Conditions Precedent to Pentamation's and Principal Shareholders'
Closing Obligations.................................................... A-35
8.1 Effectiveness of Registration Statement.............................. A-35
8.2 Approval of the Pentamation Shareholders............................. A-35
8.3 SunGard's and Newco's Representations................................ A-35
8.4 SunGard's and Newco's Performance.................................... A-35
8.5 Absence of Proceedings............................................... A-35
8.6 HSR Act.............................................................. A-36
8.7 Average Stock Price.................................................. A-36
Section 9: Conditions Precedent to SunGard's and Newco's Closing Obligations...... A-36
9.1 Effectiveness of Registration Statement.............................. A-36
9.2 Qualification for Pooling Treatment.................................. A-36
9.3 Approval of the Pentamation Shareholders............................. A-36
9.4 Pentamation's and the Principal Shareholders' Representations........ A-36
9.5 Pentamation's and the Principal Shareholders' Performance............ A-36
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
9.6 Absence of Proceedings............................................... A-36
9.7 Adverse Changes...................................................... A-37
9.8 Escrow Agreement..................................................... A-37
9.9 Real Property Purchase Agreement..................................... A-37
9.10 Automobile Purchase Agreement........................................ A-37
9.11 HSR Act.............................................................. A-37
9.12 Repayment of Company Loans by Principal Shareholders................. A-37
9.13 Real Estate Documents................................................ A-37
Section 10: Closing............................................................... A-38
10.1 Closing.............................................................. A-38
10.2 Principal Shareholders' Obligations at Closing....................... A-39
10.3 SunGard's and Newco's Obligations at Closing......................... A-41
Section 11: Certain Obligations of The Principal Shareholders after Closing....... A-42
11.1 Receipts............................................................. A-42
11.2 Restrictions on Dispositions of SunGard Stock........................ A-42
11.3 Cooperation with SunGard and Newco................................... A-42
11.4 Phantom Stock Plan................................................... A-42
Section 12: Certain Obligations of the Stockholders, SunGard and/or
the Surviving Corporation after Closing............................... A-43
12.1 Tax Periods Through the Closing Date................................. A-43
12.2 Tax Periods After and Including the Closing Date..................... A-43
12.3 Audits............................................................... A-43
12.4 Disposition of Employee Benefit Plans................................ A-43
12.5 Delivery of Certificates............................................. A-43
Section 13: Restrictive Covenants of the Principal Shareholders................... A-44
13.1 Certain Acknowledgments.............................................. A-44
13.2 Nondisclosure Covenants.............................................. A-44
13.3 Noncompetition Covenants............................................. A-45
13.4 Certain Exclusions................................................... A-45
13.5 Enforcement of Covenants............................................. A-46
13.6 Scope of Covenants................................................... A-46
Section 14: Indemnification....................................................... A-46
14.1 Principal Shareholders' Indemnification.............................. A-46
14.2 Indemnification Procedures........................................... A-47
14.3 Limits on Indemnification............................................ A-48
14.4 Exceptions to Limitations............................................ A-48
14.5 Recovery............................................................. A-49
14.6 Setoff and Holdback.................................................. A-49
Section 15: Other Provisions...................................................... A-49
15.1 Termination.......................................................... A-49
15.2 Publicity............................................................ A-50
15.3 Fees and Expenses.................................................... A-50
15.4 Notices.............................................................. A-50
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
15.5 Survival............................................................. A-50
15.6 Release for Joint and Several Liability.............................. A-50
15.7 Interpretation of Representations.................................... A-51
15.8 Reliance by SunGard and Newco........................................ A-51
15.9 Entire Understanding................................................. A-51
15.10 Parties in Interest.................................................. A-51
15.11 Waivers.............................................................. A-52
15.12 Severability......................................................... A-52
15.13 Counterparts......................................................... A-52
15.14 Section Headings..................................................... A-52
15.15 References........................................................... A-52
15.16 Controlling Law...................................................... A-52
15.17 Jurisdiction and Process............................................. A-52
15.18 Post-Closing Actions by the Surviving Corporation.................... A-52
15.19 No Third-Party Beneficiaries......................................... A-52
15.20 Nature of Transactions............................................... A-53
15.21 Bankruptcy Qualification............................................. A-53
15.22 Right of Representative to Act for Principal Shareholder............. A-53
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
PARTIES: PENTAMATION ENTERPRISES, INC.
a Pennsylvania corporation ("Pentamation")
One Bethlehem Plaza
Bethlehem, PA 18018
JEFFREY P. FEATHER ("FEATHER")
One Bethlehem Plaza
Bethlehem, PA 18018
DAVID P. BLOYS ("BLOYS")
One Bethlehem Plaza
Bethlehem, PA 18018
DONALD V. APPLETON ("APPLETON")
One Bethlehem Plaza
Bethlehem, PA 18018
SUNGARD DATA SYSTEMS INC.
a Delaware corporation ("SunGard")
1285 Drummers Lane
Wayne, Pennsylvania 19087
PEI ACQUISITION INC.
a Pennsylvania corporation ("Newco")
1285 Drummers Lane
Wayne, Pennsylvania 19087
DATE: May 6, 1999
Background: Pentamation and its wholly owned subsidiaries are in the business
of providing information support systems and software for financial, human
resources and revenue management for local governments and K-12 educational
institutions (the "Pentamation Business"). Feather, Bloys and Appleton
(collectively, the "Principal Shareholders") own, collectively, approximately
75% of the issued and outstanding shares of capital stock of Pentamation (the
"Pentamation Stock"). At Closing, the parties desire that Newco, a wholly owned
subsidiary of SunGard, be merged with and into Pentamation (the "Merger") on the
terms and subject to the conditions set forth in this Agreement and Plan of
Reorganization (the "Agreement") and the Agreement and Plan of Merger dated this
date and designated as Exhibit A hereto (the "Plan"). The Board of Directors of
Pentamation has determined that the Merger, and the other transactions
contemplated by this Agreement and the Plan (collectively, the "Transactions")
are in the best interests of Pentamation and its shareholders. The respective
Boards of Directors of SunGard and Newco have determined that the Transactions
are in the best interests of SunGard and Newco and their respective
stockholders.
Intending to be legally bound, in consideration of the mutual agreements
contained herein and subject to the satisfaction of the terms and conditions set
forth herein, the parties hereto agree as follows:
<PAGE>
Section 1: Defined Terms
Certain defined terms used in this Agreement and not specifically defined
in context are defined in this Section 1 as follows:
1.1 "Accounts Receivable" means (a) any right to payment for goods sold,
leased or licensed or for services rendered, whether or not it has been earned
by performance, whether billed or unbilled, and whether or not it is evidenced
by any Contract (as defined in Section 1.6); (b) any note receivable; or (c) any
other receivable or right to payment of any nature.
1.2 "Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including Cash Assets (as defined in Section 1.3),
prepayments, deposits, escrows, Accounts Receivable, Tangible Property (as
defined in Section 1.38), Real Property (as defined in Section 1.32), Software
(as defined in Section 1.36), Contract Rights (as defined in Section 1.7),
Intangibles (as defined in Section 1.17) and goodwill, and claims, causes of
action and other legal rights and remedies.
1.3 "Cash Asset" means any cash on hand, cash in bank or other accounts,
readily marketable securities, and other cash-equivalent liquid assets of any
nature.
1.4 "Code" means the Internal Revenue Code of 1986, as amended.
1.5 "Consent" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application, notice or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person (as defined in Section
1.22), which is necessary in order to take a specified action or actions in a
specified manner and/or to achieve a specified result.
1.6 "Contract" means any written or oral contract, agreement, instrument,
order, arrangement, commitment or understanding of any nature, including sales
orders, purchase orders, leases, subleases, data processing agreements,
maintenance agreements, license agreements, sublicense agreements, loan
agreements, promissory notes, security agreements, pledge agreements, deeds,
mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture
agreements, buy-sell agreements, options or warrants.
1.7 "Contract Right" means any right, power or remedy of any nature under
any Contract, including rights to receive property or services or otherwise
derive benefits from the payment, satisfaction or performance of another party's
Obligations (as defined in Section 1.19), rights to demand that another party
accept property or services or take any other actions, and rights to pursue or
exercise remedies or options.
1.8 "Employee Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other plan, program, policy or arrangement for or regarding
bonuses, commissions, incentive compensation, severance, vacation, deferred
compensation, pensions, profit sharing, retirement, payroll savings, stock
options, stock purchases, stock awards, stock ownership, phantom stock, stock
appreciation rights, medical/dental expense payment or reimbursement,
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<PAGE>
disability income or protection, sick pay, group insurance, self insurance,
death benefits, employee welfare or fringe benefits of any nature; but not
including employment Contracts with individual employees.
1.9 "Encumbrance" means any lien, superlien, security interest, pledge,
right of first refusal, mortgage, easement, covenant, restriction, reservation,
conditional sale, prior assignment, or other encumbrance, claim, burden or
charge of any nature.
1.10 "Environmental Laws" means all applicable Laws (including common law,
consent decrees and administrative orders) relating to the health, safety and
the protection of the environment, including those governing the use,
generation, handling, treatment, storage, transportation and disposal or cleanup
of Hazardous Substances, all as amended.
1.11 "GAAP" means generally accepted accounting principles under current
United States accounting rules and regulations, consistently applied. In no
event shall the consistent application of the historical accounting policies
used by the Pentamation Companies have priority over GAAP, regardless of
materiality.
1.12 "Governmental Authority" means any federal, state, county, municipal
or other Governmental department, entity, authority, commission, board, bureau,
court, agency or any instrumentality of any of the foregoing.
1.13 "Hazardous Substances" means any substance, waste, contaminant,
pollutant or material that has been determined by any United States federal
government authority, or any state or local government authority having
jurisdiction over any Real Property, to be capable of posing a risk of injury or
damage to health, safety, property or the environment, including (a) all
substances, wastes, contaminants, pollutants and materials defined, designated
or regulated as hazardous, dangerous or toxic pursuant to any Law of any state
in which any Real Property is located or any United States Law, and (b)
asbestos, polychlorinated biphenyls ("PCB's"), petroleum, petroleum products and
urea formaldehyde.
1.14 "Improvements" mean the buildings together with and including all
other structures, parking areas, fixtures or other improvements on, over or
under the Land.
1.15 "Including" means including but not limited to.
1.16 "Insurance Policy" means any public liability, product liability,
general liability, comprehensive, property damage, vehicle, life, hospital,
medical, dental, disability, worker's compensation, key man, fidelity bond,
theft, forgery, errors and omissions, directors' and officers' liability, or
other insurance policy of any nature.
1.17 "Intangible" means any name, corporate name, fictitious name,
trademark, trademark application, service mark, service mark application, trade
name, brand name, product name, slogan, trade secret, know-how, patent, patent
application, copyright, copyright application, design, logo, formula, invention,
product right, technology or other intangible asset of any nature, whether in
use, under development or design, or inactive.
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<PAGE>
1.18 "Judgment" means any order, writ, injunction, citation, award, decree
or other judgment of any nature of any foreign, federal, state or local court,
governmental body, administrative agency, regulatory authority or arbitration
tribunal.
1.19 "to the knowledge of the Principal Shareholders and Pentamation" or
"to the knowledge of Principal Shareholders, GLS and Pentamation" or "to our
knowledge" or similar terms means that none of the Principal Shareholders, nor
any of the directors, officers, partners or members of any of the Pentamation
Companies (as defined in Section 1.26) or GLS (as defined in Section 3.11), as
applicable, have any actual knowledge, implied knowledge or belief that the
statement made is incorrect. For this purpose, "implied knowledge" means all
information available in the books, records and files of any of the Pentamation
Companies or GLS, as applicable, and all information that any of the
stockholders, directors, officers, partners, or members of any of the
Pentamation Companies or GLS, as applicable, should have known in the course of
operating and managing the business and affairs of any of the Pentamation
Companies or GLS, as applicable.
1.20 "Land" means, collectively, that certain real property more
particularly described in Schedule 1.20 attached hereto and made a part hereof,
-------------
together with all property rights, easements, tenements, hereditaments, rights-
of-way, development rights, air rights, entitlements, unused densities,
privileges and appurtenances thereto; all leases, rents and profits derived
therefrom, all right, title and interest of Seller in and to any land lying in
the bed of any street, road, highway or avenue, open or proposed, public or
private, in front of or adjoining all or any part of the Land to the center line
thereof, all right, title and interest of Seller in and to any unpaid award or
payment which may now or hereafter be payable in respect of any taking, by
condemnation of any portion of the Land or Improvements by any Governmental
Authority; and all right, title and interest of Seller in and to any unpaid
award for damage or destruction to the Land or any part thereof by reason of any
fire or other casualty, or resulting from any change of grade of any street,
road, highway or avenue adjacent thereto; all strips and gores adjoining, and
adjacent to the Land; and all oil, gas and mineral rights.
1.21 "Law" means any provision of any foreign, federal, state or local law,
statute, ordinance, charter, constitution, treaty, code, rule, regulation or
guidelines (including those of self-regulatory organizations such as the New
York Stock Exchange and the National Association of Securities Dealers, Inc.).
1.22 "Leases" means all leases of space located within the Improvements and
upon the Land, which shall include all exhibits, amendments and modifications
thereof. A schedule of the Leases is included in the Rent Roll attached as
Schedule 1.33.
- -------------
1.23 "Licenses" means all licenses, permits, approvals, certificates of
occupancy and authorizations which affect the Real Property, and its operations,
all of which are listed on Schedule 1.23 attached hereto and made a part hereof,
-------------
and all of which shall be in effect as of the date hereof and as of the Closing
Date.
1.24 [Intentionally Omitted].
A-4
<PAGE>
1.25 "Obligation" means any debt, liability or obligation of any nature,
whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown
or otherwise.
1.26 "Pentamation Companies" means Pentamation and any subsidiaries of
Pentamation.
1.27 "Permit" means any license, permit, approval, waiver, order,
authorization, right or privilege of any nature, granted, issued, approved or
allowed by any foreign, federal, state or local governmental body,
administrative agency or regulatory authority.
1.28 "Permitted Use" means the use of the Property as office buildings
(with ancillary retail use), and accessory parking, in full compliance with all
applicable Laws.
1.29 "Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, limited liability company, partnership, association,
cooperative, trust, estate, governmental body, administrative agency, regulatory
authority or other entity of any nature.
1.30 "Proceeding" means any demand, claim, suit, action, litigation,
investigation, arbitration, administrative hearing, condemnation or other
proceeding of any nature.
1.31 "Property" means the Tangible Property, Real Property, Land, Leases
and Improvements.
1.32 "Real Property" means any real estate, land, building, condominium,
town house, structure or other real property of any nature, all shares of stock
or other ownership interests in cooperative or condominium associations or other
forms of ownership or leasehold interest through which interests in real estate
may be held, and all appurtenant and ancillary rights thereto, including
easements, covenants, water rights, sewer rights and utility rights.
1.33 "Rent Roll" means a complete and correct list of all the Leases,
setting forth with respect to each of the Leases the following information: (a)
the name of the Tenant; (b) the date of the Lease; (c) any modifications or
amendments to the Lease; (d) the term of the Lease; (e) options to renew, expand
or purchase, if any; (f) the rent Including, and describing, base rent,
percentage rent, if any, and any additional rentals payable under the Lease; (g)
the amount of the security deposit, if any; (h) the square footage of the leased
premises; and (i) a description of any defaults under the Lease. The current
Rent Roll for the Bethlehem Real Property is attached hereto as Schedule 1.33.
-------------
1.34 "SEC" means the United States Securities and Exchange Commission.
1.35 "Service Contracts" means all service contracts, vendor agreements,
leases, equipment leases, installment sales contracts, maintenance agreements,
employment agreements, management agreements, utility contracts, cable service
agreements, collective bargaining agreements and/or union contracts, yellow
pages or other advertising agreements, and any other agreements affecting the
Property or any portion thereof, and any and all contracts and agreements for
any matters that relate to or could impact revenues or expenses for the Property
or any portion thereof. A schedule of the Service Contracts is attached hereto
as Schedule 1.35.
-------------
A-5
<PAGE>
1.36 "Software" means any computer program, operating system, applications
system, firmware or software of any nature, whether operational, under
development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in machine-
readable form, programming language or any other language or symbols, and
whether stored, encoded, recorded or written on disk, tape, film, memory device,
paper or other media of any nature.
1.37 "SunGard Stock" means shares of common stock, $0.01 par value per
share, of SunGard.
1.38 "Tangible Property" means any furniture, fixtures, leasehold
improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies or other tangible personal property of any
nature.
1.39 "Tax" means (a) any foreign, federal, state or local income, earnings,
profits, gross receipts, franchise, capital stock, net worth, sales, use, value
added, occupancy, general property, real property, personal property, intangible
property, transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security, retirement or other tax of any nature; (b) any
foreign, federal, state or local organization fee, qualification fee, annual
report fee, filing fee, occupation fee, assessment, sewer rent or other fee or
charge of any nature; or (c) any deficiency, interest or penalty imposed with
respect to any of the foregoing.
1.40 "Tenants" means all of the respective parties who have executed the
Leases as tenants.
Section 2: The Merger
Subject to the terms and conditions of this Agreement and the Plan, Newco
shall be consolidated and merged with and into Pentamation (the "Surviving
Corporation") in accordance with the provisions of this Agreement and the
provisions of the Plan. The closing of the Merger and the other Transactions
shall take place on the Closing Date (as defined in Section 10.1) and shall be
effective on the Effective Date (as defined in Section 10.1).
Section 3: Representations of Pentamation and the Principal Shareholders
Knowing that SunGard and Newco rely thereon, Pentamation and each of the
Principal Shareholders, jointly and severally, represent and warrant to SunGard
and Newco as of the date of this Agreement, and covenant with SunGard and Newco,
as follows:
3.1 Organization. Each of the Pentamation Companies is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its formation. Each of the Pentamation Companies possesses the
full corporate power and authority to enter into and perform this Agreement.
Each of the Pentamation Companies possesses the full corporate power and
authority to own its Assets and to conduct its business as and where presently
conducted. Each of the Pentamation Companies is duly qualified or registered to
do business in each jurisdiction where the ownership or leasing of properties or
assets by it, or the operation of the Pentamation Business, requires such
qualification. Schedule 3.1 lists all subsidiaries of each of the Pentamation
------------
Companies. Except as set forth on Schedule 3.1, none of the Pentamation
------------
Companies owns any securities of any corporation
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<PAGE>
or any other interest in any Person. None of the Pentamation Companies has any
predecessors other than as set forth on Schedule 3.1. Schedule 3.1 states, for
------------ ------------
each of the Pentamation Companies (a) its exact legal name; (b) its corporate
business form and jurisdiction and date of formation; (c) its federal employer
identification number (if applicable); (d) its headquarters address, telephone
number and facsimile number; (e) its directors and officers, indicating all
current title(s) of each individual; (f) its registered agent and/or office in
its jurisdiction of formation (if applicable); (g) all foreign jurisdictions in
which it is qualified or registered to do business, the date it so qualified or
registered, and its registered agent and/or office in each such jurisdiction (if
applicable); (h) all fictitious, assumed or other names of any type that are
registered or used by it or under which it has done business at any time since
such company's date of incorporation; and (i) any name changes,
recapitalizations, mergers, reorganizations or similar events since its date of
formation. Accurate and complete copies of articles or certificates of
incorporation, bylaws, operating agreements, articles and memorandum of
association and other organization and related documents, each as amended to
date, and all Contracts relating to the acquisition, to the extent applicable,
of each of the Pentamation Companies (or their affiliates or predecessors) have
been delivered to SunGard. Since the date of its incorporation: (a) the
activities of Pentamation Delaware, Inc. have been confined to the maintenance
and management of the corporation's intangible investments and the collection
and distribution of the income from such investments or from tangible property
physically located outside the State of Delaware; and (b) Pentamation Delaware,
Inc. has not engaged in any activity contrary to Section 1902(b)(8) of Title 30
of the Delaware Code. For purposes of the previous sentence, "intangible
investments" shall include, without limitation, investments in stocks, bonds,
notes and other debt obligations (including debt obligations of affiliated
corporations), patents, patent applications, trademarks, trademark applications,
trade names, copyrights and similar types of intangible assets. Except for
Pentamation and Pentamation Delaware, Inc., the other Pentamation Companies do
not have any Assets or Obligations and have not conducted business since January
1, 1989.
3.2 Effect of Agreement. Pentamation's execution, delivery and
performance of this Agreement and the Plan, and its consummation of the
Transactions have been duly authorized by all necessary corporate actions by its
board of directors and do not constitute a violation of or default under its
articles of incorporation, bylaws, articles and/or other organizational
documents. For Pentamation and each of the Principal Shareholders, its or his
execution, delivery and performance of this Agreement and Plan, and its or his
consummation of the Transactions, (a) except as stated on Schedule 3.2, do not
------------
constitute a default or breach (immediately or after the giving of notice,
passage of time or both) under any Contract to which he or any of the
Pentamation Companies is a party or by which he or any of the Pentamation
Companies is bound, (b) do not constitute a violation of any Law or Judgment
that is applicable to him or any of the Pentamation Companies, or to the
business or Assets of any of the Pentamation Companies, or to the Transactions,
(c) do not accelerate or otherwise modify any Obligation of any of the
Pentamation Companies, (d) except as stated on Schedule 3.2, do not result in
------------
the creation of any Encumbrance upon, or give to any third party any interest
in, any of the business or Assets, or any of the capital stock of or interests
in, any of the Pentamation Companies, and (e) except (i) as stated on Schedule
--------
3.2, (ii) for the filing of the Articles of Merger with the proper officials of
- ---
the Commonwealth of Pennsylvania and (iii) for filings which may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), do not require the Consent of any Person. This Agreement
constitutes the valid and legally binding agreement of Pentamation and each of
the Principal Shareholders, enforceable against Pentamation and each of the
Principal Shareholders
A-7
<PAGE>
in accordance with its terms. Certified copies of the resolutions duly adopted
by the board of directors of Pentamation, authorizing Pentamation to execute,
deliver and perform this Agreement and the Plan, are attached to Schedule 3.2.
------------
There exists no right of first refusal or other preemptive right with respect to
any of the Pentamation Companies or the stock, business or Assets of any of the
Pentamation Companies.
3.3 Capital Stock and Ownership. The authorized capital stock of
Pentamation consists of 5,000,000 shares of common stock, no par value, with a
stated value of $.015 per share, of which 817,734 shares are issued and
outstanding and 501,727 as held in treasury (the "Pentamation Stock"). The
capital structure of each of the other Pentamation Companies is set forth on
Schedule 3.3. With respect to Pentamation, Schedule 3.3 is an accurate and
- ------------ ------------
complete list of (a) the full legal names of all shareholders, (b) the addresses
of their respective current principal residences, (c) their social security
numbers or federal tax identification numbers, and (d) the numbers of, type of
shares and tax basis in the shares owned of record by them and the certificate
numbers of the stock or share certificates representing such shares or the date
of subscription agreements under which shares were acquired. Pentamation is the
sole record and beneficial owner of the shares of capital stock of each other
Pentamation Companies, and Pentamation has good and marketable title to such
shares, free and clear of any Encumbrance. Except as provided on Schedule 3.3,
------------
none of the Pentamation Companies has ever authorized, offered, sold or issued
any securities other than ordinary shares of common stock or membership
interests as described in this Section. There are no outstanding offers to
issue or sell any capital stock of the Pentamation Companies except pursuant to
outstanding options to purchase Pentamation Stock described on Schedule 3.3.
------------
Except for the Principal Shareholders and the other shareholders listed on
Schedule 3.3, there are no other record or beneficial owners of any shares of
- ------------
Pentamation Stock or any other securities of the Pentamation Companies. Except
for the shares listed on Schedule 3.3 with respect to each of the Pentamation
------------
Companies, there were and currently are no other issued or outstanding shares of
capital stock and membership interests. All of the issued and outstanding
shares of capital stock of each of the Pentamation Companies have been duly
authorized and validly issued, and are fully paid and nonassessable, with no
liability attaching to the ownership thereof. All offerings, sales and
issuances by each of the Pentamation Companies of any shares of capital stock or
membership interests were conducted in compliance with all applicable federal
and state securities Laws and all applicable state corporation and applicable
foreign Laws. Schedule 33B is an accurate and complete list of all outstanding
------------
options granted by Pentamation including the names of all of the holders of
record, their addresses of record, their social security numbers, the number of
options granted, the class of capital stock for which such option may be
exercised, the date of grant, the exercise price, and whether or not such
options have vested as of the date of this Agreement. All options granted have
been duly authorized. Attached to Schedule 33B are complete and accurate copies
------------
of all options plans. Except as described on Schedule 3.3B, there are no
-------------
outstanding options, puts, calls, warrants, subscriptions, stock appreciation
rights, phantom stock, or other Contracts or Contract Rights relating to the
offering, sale, issuance, redemption or disposition of any shares of capital
stock, or other securities of any of the Pentamation Companies. Upon the
consummation of the Merger, SunGard shall have good and marketable title to all
of the issued and outstanding capital stock of the Surviving Corporation, free
and clear of any Encumbrance.
3.4 Financial and Corporate Records. The books and records of each of the
Pentamation Companies are and have been properly prepared and maintained in form
and
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<PAGE>
substance adequate for preparing financial statements in accordance with GAAP,
and such books and records fairly and accurately reflect all of the Assets and
Obligations of each of the Pentamation Companies and all Contracts and other
transactions to which each of the Pentamation Companies is or was a party or by
which each of the Pentamation Companies or the business or Assets of each of the
Pentamation Companies is or was affected. Accurate and complete copies of the
contents of the minute books and stock books of each of the Pentamation
Companies have been delivered to SunGard and Newco. Such minute books and stock
books include (a) minutes of all meetings of the shareholders, board of
directors and any committees of the board of directors at which any material
action was taken, which minutes accurately record all material actions taken at
such meetings, (b) accurate and complete written statements of all actions taken
by the shareholders, board of directors and any committees of the board of
directors without a meeting, and (c) accurate and complete records of the
subscription, issuance, transfer and cancellation of all shares of capital stock
and all other securities since the date of incorporation or formation. None of
the shareholders, board of directors or any committee of the board has taken any
material action other than those actions reflected in the records referenced in
clauses (a) and (b) of the preceding sentence. Schedule 3.4 is an accurate and
------------
complete list of all bank accounts, other accounts, certificates of deposit,
marketable securities, other investments, safe deposit boxes, lock boxes and
safes of each of the Pentamation Companies and the names of all officers,
employees or other individuals who have access thereto or are authorized to make
withdrawals therefrom or dispositions thereof.
3.5 Compliance with Law. The operations of each of the Pentamation
Companies, the conduct of the business of each of the Pentamation Companies, as
and where such business has been or presently is conducted, and the ownership,
possession and use of the Assets of each of the Pentamation Companies have
complied and currently do comply with all applicable Laws. Except as set forth
on Schedule 3.5, each of the Pentamation Companies has obtained and holds all
------------
Permits required for the lawful operation of its business as and where such
business is presently conducted. All Permits held by the Pentamation Companies
are listed on Schedule 3.5, and copies of such Permits have been delivered to
------------
SunGard and Newco.
3.6 Financial Statements. Pentamation's fiscal year ends on September 30.
Schedule 3.6A includes accurate and complete copies of the following audited
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consolidated financial statements ("Annual Financial Statements") of the
Pentamation Companies: (a) a balance sheet of the Pentamation Companies as of
the end of each of the two most recent fiscal years; and (b) statements of
income, statements of stockholders' equity, and statements of cash flows for the
two most recent fiscal years, and notes thereto. Schedule 3.6B includes
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accurate and complete copies of all the following unaudited consolidated
financial statements ("Interim Financial Statements") of the Pentamation
Companies: an unaudited balance sheet (the "Latest Balance Sheet") as of
December 31, 1998 (the "Latest Balance Sheet Date") and related unaudited
financial statements, included but not limited to, unaudited statements of
operations, unaudited statements of stockholders' equity and unaudited
statements of cash flows prepared by the management of Pentamation on an ongoing
basis since the Annual Financial Statements. All of the Annual Financial
Statements were (x) prepared in accordance with GAAP; (y) fairly present the
financial condition and results of operations of the Pentamation Companies as of
the dates and for the periods indicated; and (z) were audited by Halbert, Katz &
Co., P.C. whose reports thereon are without qualification or explanatory
paragraphs. All of the Interim Financial Statements were prepared in accordance
with GAAP
A-9
<PAGE>
except as described on Schedule 3.6B, and all adjustments that are necessary for
-------------
a fair presentation thereof (consisting only of normal recurring adjustments)
have been made.
3.7 Assets. Schedule 3.7 includes detailed lists of all Assets of each of
------------
the Pentamation Companies as reflected on the Latest Balance Sheet, including
(a) Cash Assets, itemized by bank or other account, showing cost and market
value if different from cost; (b) Accounts Receivable, showing customer names,
individual invoice dates, individual invoice amounts and allowances for doubtful
accounts, or, in the case of earned but not billed receivables, customer names
and individual dates on which the receivables are billable; (c) other current
Assets, itemized by category and with appropriate explanation; (d) Tangible
Property, grouped as to type, showing cost, accumulated depreciation and net
book value; and (e) Software and Intangibles, showing cost or amount
capitalized, accumulated amortization and net book value. Each of the
Pentamation Companies has good and marketable title to all of its respective
Assets and has the right to transfer all rights, title and interest in such
Assets, free and clear of any Encumbrance. Except for the Assets listed on
Schedule 3.7, no other Assets are necessary to operate, or have been material to
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the operation of, the business of any of the Pentamation Companies.
3.8 Obligations. Schedule 3.8 includes detailed lists of all Obligations
------------
of each of the Pentamation Companies reflected on the Latest Balance Sheet,
itemized by balance sheet account, and with aggregate net balances equal to the
balances on the Latest Balance Sheet, including (a) accounts payable, (b)
accrued expenses and reserves, itemized by category and with appropriate
explanation, (c) deferred revenues, itemized by customer and time periods, and
(d) other current and long-term liabilities. None of the Pentamation Companies
has any Obligations other than (i) Obligations reflected on the Latest Balance
Sheet, (ii) Obligations set forth in Schedule 3.8, (iii) Obligations under
------------
Contracts of the type listed or not required to be listed on Schedule 3.15,
-------------
provided that as of the Latest Balance Sheet Date, no such Obligation consisted
of or resulted from a default under or violation of any such Contract, and (iv)
Obligations incurred since the Latest Balance Sheet Date and not in breach of
any of the representations and warranties made in Section 3.9. Except as
described on Schedule 3.8, none of the Obligations of any of the Pentamation
------------
Companies are guaranteed by any Person. As of March 31, 1999, Pentamation has
accrued $316,914 of bonus payable under the Phantom Stock Plan (as defined in
Section 11.4).
3.9 Operations Since the Latest Balance Sheet Date. Except as set forth
on Schedule 3.9, from the Latest Balance Sheet Date to the date of this
------------
Agreement:
(a) Except in the ordinary course of their respective businesses
consistent with their past practices, none of the Pentamation Companies has (i)
created or assumed any Encumbrance upon any of its business or Assets, (ii)
incurred any Obligation, (iii) made any loan or advance to any Person; (iv)
assumed, guaranteed or otherwise become liable for any Obligation of any Person;
(v) committed for any capital expenditure; (vi) purchased, leased, sold,
abandoned or otherwise acquired or disposed of any business or Assets; (vii)
waived any right or canceled any debt or claim; (viii) assumed or entered into
any Contract other than this Agreement; (ix) increased, or authorized an
increase in, the compensation or benefits paid or provided to any of their
directors, officers, employees, salesmen, agents or representatives; or (x) done
anything else outside the ordinary course of business, whether or not
specifically described in any of the foregoing clauses.
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<PAGE>
(b) Even in the ordinary course of their respective businesses
consistent with their respective past practices, none of the Pentamation
Companies has incurred any Obligation, made any loan to any Person, acquired or
disposed of any business or Assets, entered into any Contract (other than
customer contracts) or other transaction, or done any of the other things
described in Section 3.9(a), involving an amount exceeding $50,000 in any single
case or $100,000 in the aggregate.
(c) There has been no material adverse change or material casualty
loss affecting any of the Pentamation Companies or their business, Assets or
financial condition, and there has been no adverse change in the financial
performance of any of the Pentamation Companies.
(d) None of the Pentamation Companies has (i) incurred any outstanding
bank debt or notes payable; (ii) incurred any outstanding indebtedness to any
current or former shareholder, member, director or officer of any of the
Pentamation Companies (excluding compensation and benefits due to such Persons
in their capacities as employees, officers or directors of any of the
Pentamation Companies and excluding indebtedness described on Schedule 3.23) or
-------------
to any affiliate (as such term is defined for purposes of the Exchange Act) of
any of the Pentamation Companies or any of such company's shareholders, members,
directors or officers; or (iii) had any Obligation for any overdrafts with
respect to any of its bank accounts or other Cash Assets; or (iv) paid any
dividend or made any other distribution of Cash Assets or other Assets to or on
behalf of any of the shareholders or members of any of the Pentamation Companies
(excluding compensation and benefits due to such Persons in their capacities as
employees, officers or directors of any of the Pentamation Companies ); or (v)
accrued any deferred bonuses or compensation due to any shareholder, member,
employee or agent of any of the Pentamation Companies, or paid any such deferred
bonuses or compensation except to the extent such deferred bonuses or
compensation was accrued on the Latest Balance Sheet.
3.10 Accounts Receivable. All Accounts Receivable listed in Schedule 3.7
------------
arose in the ordinary course of business and are proper and valid accounts
receivable. There are no refunds, discounts, rights of setoff or assignment
affecting any such Accounts Receivable. Proper amounts of deferred revenues
appear on the books and records of each of the Pentamation Companies in
accordance with GAAP, with respect to all of the Pentamation Companies' (a)
billed but unearned Accounts Receivable; (b) previously billed and collected
Accounts Receivable still unearned; and (c) unearned customer deposits.
3.11 Tangible Property. Each of the Pentamation Companies has good and
marketable title to all of its respective Tangible Property, free and clear of
any Encumbrances except as set forth in the Latest Balance Sheet or Schedule
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3.8. Except as set forth on Schedule 3.11, all of the Tangible Property of each
- --- -------------
of the Pentamation Companies is located at the offices or facilities of the
Pentamation Companies and each of the Pentamation Companies has the full and
unqualified right to require the immediate return of any of its respective
Tangible Property which is not located at its offices or facilities. All
Tangible Property of each of the Pentamation Companies, wherever located, is in
good condition, ordinary wear and tear excepted, and is sufficient for the
respective operations and business of each of the Pentamation Companies as
presently conducted. A copy of the Agreement dated May 6, 1999 between GLS, a
Pennsylvania partnership, ("GLS") and Pentamation (the "Automobile Purchase
Agreement") pursuant to which Pentamation will purchase all of the
A-11
<PAGE>
automobiles owned by GLS and used in the Pentamation Business (the
"Automobiles") is attached to Schedule 3.11. GLS has, and upon closing of the
-------------
Automobile Purchase Agreement will transfer to Pentamation, good and marketable
title to the Automobiles, free and clear of any Encumbrance except as set forth
in the Automobile Purchase Agreement.
3.12 Real Property.
(a) Schedule 3.12 is a detailed list of all Real Property owned,
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leased or occupied by any of the Pentamation Companies ("Pentamation Real
Property"), identifying the particular location and, as applicable, rental cost
and name of landlord. Except as provided in the next sentence, none of the
Pentamation Companies owns any Real Property. With respect to the Real Property
known as "The Marketplace, Five Bethlehem Plaza" (the "Bethlehem Real Property")
Pentamation at Closing will have, good, marketable and insurable legal title (at
regular rates) in fee simple absolute to all of the Bethlehem Real Property,
free and clear of any Encumbrance except current property taxes accrued but not
yet due and payable, and rights of tenants in possession under Leases set forth
in the Rent Roll. A copy of the Agreement dated May 6, 1999, between GLS and
Pentamation (the "Real Property Purchase Agreement") pursuant to which
Pentamation will purchase the Bethlehem Real Property is attached to Schedule
--------
3.12. Pentamation has received the report of Imperial Realty that the fair
- ----
market value of the Bethlehem Real Property is $7,500,000, a copy of which has
been provided to SunGard. As of the date of this Agreement, the Bethlehem Real
Property is subject to indebtedness of approximately $3,650,000 Pentamation
shall deliver accurate and complete copies of the deeds, most recent title
reports, title searches, title insurance policies, surveys, plot plans,
environmental reports, structural reports, Americans with Disabilities Act
("ADA") compliance reports and most recent appraisals for the Bethlehem Real
Property to SunGard and Newco within thirty (30) days of the date of this
Agreement. Schedule 3.12 sets forth the cost, accumulated depreciation and net
-------------
book value for the Bethlehem Real Property. All of the Pentamation Real
Property is structurally sound and in good condition, ordinary wear and tear
excepted, and is sufficient to satisfy the current operational requirements of
the Pentamation Companies. None of the Pentamation Real Property, nor the
ownership, possession, occupancy, maintenance or use thereof, is in violation
of, or breach or default under, any Contract or Law, and no notice or threat
from any lessor, governmental body or other Person has been received by any of
the Pentamation Companies or served upon any such Pentamation Real Property
claiming any violation of, or breach, default or liability under, any Contract
or Law, or requiring or calling attention to the need for any work, repairs,
construction, alteration, installations or environmental remediation. No
casualty has occurred with respect to any of the Pentamation Real Property
within the last six (6) months which has had a material adverse effect on the
use, operation or occupancy of the Pentamation Real Property. No Proceedings
are pending or to our knowledge threatened which would affect the zoning or use
any of the Pentamation Real Property. To our knowledge, no portion of any
Pentamation Real Property is within an identified flood plain or other
designated flood hazard area as established under any Law or otherwise by any
governmental authority. All of the Pentamation Real Property has direct legal
access to, abuts, and is served by a publicly dedicated and maintained road,
which road does and shall provide a valid and legal means of ingress and egress
thereto and therefrom, without additional expense. All utilities, including
water, gas, telephone, electricity, sanitary and storm sewers, are currently
available to all of the Pentamation Real Property at normal and customary rates,
and are adequate to serve such Pentamation Real Property for each of the
Pentamation Companies' current operations and current use thereof.
A-12
<PAGE>
(b) No Tenant or other occupant under any of the Leases, no licensor
and no other person, firm, corporation or other entity has any right or option
to acquire the Bethlehem Real Property or any portion thereof or lease or occupy
any space, except as specified in the Rent Roll. Pentamation has the exclusive
right to purchase the Bethlehem Real Property and Pentamation shall not and the
Principal Shareholders shall cause GLS not to engage in any negotiations with or
solicit offers from any other party relating to the sale of the Bethlehem Real
Property without the prior written consent of SunGard, which consent SunGard may
withhold in its sole and exclusive discretion.
(c) There is no default or breach by Pentamation, GLS nor, to our
knowledge, any other party, under the Leases or under any other leases,
covenants, conditions, restrictions, rights-of-way or easements which may affect
the Pentamation Real Property or any portion(s) thereof which require
performance or compliance by the owner of the Pentamation Real Property and no
condition or circumstance exists which with the giving of notice or the passage
of time or both would constitute a default or breach by Pentamation, GLS nor, to
our knowledge, any other party, under any such Leases or other leases,
covenants, conditions, restrictions, rights-of-way or easements.
(d) Schedule 3.12 includes a list of all of the Service Contracts
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affecting the Bethlehem Real Property and there are no other Service Contracts
with respect to the Bethlehem Real Property. All of the Service Contracts are
in full force and effect, there is no default by any party under any Service
Contract and no event has occurred that with the giving of notice or passage of
time, or both, would constitute a default thereunder. All of the Service
Contracts are the result of bona fide arms length negotiations between the
parties thereto, and Pentamation has no interest in any of the parties providing
services thereunder. Neither Pentamation nor its Principal Shareholders has
received any notice that any party to any Service Contract intends to cancel or
terminate its Service Contract. Except as set forth on Schedule 3.12, all of
-------------
the Service Contracts are cancelable by Pentamation upon thirty (30) days'
notice. To the best of our knowledge, there are no agreements (written or oral)
other than the Leases, Service Contracts, or the Licenses, any portion thereof
or the use thereof or which could impact the revenues or expenses of the
Bethlehem Real Property.
(e) The Pentamation Companies and GLS are not, and to our knowledge no
other party is, currently contesting the real estate tax assessments for the
Bethlehem Real Property. The Land is separately assessed for real property tax
assessment purposes and is not combined with any other real property for tax
assessment purposes.
(f) Neither Pentamation, the Principal Shareholders, nor GLS has
received written notice from any Governmental Authority, any of the Tenants, any
insurer, or any other party (a) that either the Pentamation Real Property or the
use or operation thereof is currently in violation of any Law and to our
knowledge, including GLS, no such notice has been issued; (b) that Pentamation
or GLS is currently in violation or with the passage of time will be in
violation of any Laws or the recommendations of any insurance carrier or board
of fire underwriters affecting the Pentamation Real Property or that any
investigation has commenced or is contemplated regarding any such possible
violation, or (c) asserting that Pentamation or GLS is required to perform work
at the Pentamation Real Property and no such notices have been issued.
A-13
<PAGE>
(g) The Licenses at each Pentamation Real Property are in full force
and effect as of date hereof, have not been modified or amended, and there are
no defaults thereunder.
(h) Except for Tenants, there are no Persons other than Pentamation in
possession of any portion of the Pentamation Real Property as lessees, tenants
at sufferance or trespassers.
(i) The Leases described on the Rent Roll comprise all of the Leases
presently existing and each is in full force and effect as of date hereof. None
of the Leases has been modified, altered, or amended in any respect, and no
Tenant has the right to cancel or terminate its Lease, except as set forth in
the Rent Roll. No Tenant has any right to renew or extend its Lease or any
interest in the Bethlehem Real Property other than a leasehold possessory
interest. Except as specified on the Rent Roll, all of the Leases are the
result of bona fide arms length negotiations between the parties thereto and
Pentamation has no interest in any of the Tenants except as identified on
Schedule 3.12. There are no leases, tenancies or other rights of occupancy or
- -------------
use for any portion of the Bethlehem Real Property other than as set forth in
the Rent Roll. Neither Pentamation, nor GLS nor any Tenant is in default under
any Lease and no event has occurred that with the giving of notice or passage of
time or both would constitute a default thereunder. Except as specified on the
Rent Roll each of the Tenants is in possession of its respective premises. No
Tenant has any offsets, defenses, claims or causes of actions against GLS or
Pentamation arising out of matters occurring prior to Closing. There is no
Tenant contesting any tax, percentage rent, operating costs or other escalation
payments or occupancy charges or any other amounts payable under its specific
Lease. All Tenants have furnished insurance certificates indicating that the
insurance coverage required by their respective Leases is in full force and
effect.
(j) No brokerage or leasing commissions (including any renewals or
residuals) or other compensation are due or payable to any Person with respect
to or on account of any of the Leases or the leases for the Pentamation Real
Property, except as specified on the Rent Roll.
(k) All taxes with respect to any employee of GLS or with respect to
any of GLS's operations, required to be paid or collected by GLS in the
operation of the Bethlehem Real Property, or with respect to real estate taxes
and similar taxes have been collected and paid to the appropriate Governmental
Authority. GLS shall be responsible for the payment of all such taxes due and
owing through the date preceding the conveyance of the Bethlehem Real Property
to Pentamation. Further, GLS shall file all necessary returns, petitions and
request any statutory audits under state and local law so as to release
Pentamation and SunGard prior to or after Closing from any transferee liability
with respect to any such taxes.
(l) Except as identified on Schedule 3.12, there are no employees of
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GLS or any management company at the Bethlehem Real Property or otherwise who,
by reason of any Law or by reason of any union or other employment contract,
written or otherwise or any other reason whatsoever, would become employees of
Pentamation or SunGard as a result of the purchase of the Bethlehem Real
Property by Pentamation.
(m) The Bethlehem Real Property is presently zoned for the Permitted
Use, is in full compliance with all Laws, and the Improvements comply with the
zoning classification
A-14
<PAGE>
of, or other zoning requirements for, the Land. Neither Pentamation, nor GLS nor
the Principal Shareholders has any knowledge of any fact, action or proceeding,
whether actual, pending or threatened, which would affect such zoning or could
result in a modification or termination of such zoning. Pentamation shall not
take any action prior to Closing which would affect the current zoning
classification of the Land.
(n) There are no outstanding special assessments or impact fees
imposed by any Governmental Authority which affects any portion of the
Pentamation Real Property.
(o) The Land has full, free and adequate vehicular and pedestrian
access to and from public highways and roads, and there are no facts or
conditions to our knowledge which would result in the termination of such
access.
(p) No commitments relating to the Bethlehem Real Property have been
made to any Governmental Authority, utility company, school board, church or
other religious body or any owner or homeowners' association, merchant's
association or any other organization, group or individual which would impose an
obligation upon Pentamation or SunGard or its successors or assigns to make any
contribution or dedication of money or land or to construct, install or maintain
any improvements of a public or private nature on or off the Land; and no
Governmental Authority has imposed any requirement that any owner of the Land
pay directly or indirectly any special fees or contributions or incur any
expenses or obligations in connection with the Land.
(q) The Pentamation Real Property and the present uses are in full
compliance with all applicable Laws and the requirements of any insurance
policy, board of fire underwriters or any board exercising similar functions.
Pentamation is in full compliance with all Laws in its operation, use and
management of the Pentamation Real Property. All Licenses and Permits are in
full force and effect and are registered in the name of Pentamation. True and
correct copies of all Licenses and Permits are attached hereto as Exhibit 3.12.
------------
(r) All of the insurance policies listed in Schedule 3.21 are in full
-------------
force and effect. No notice has been given by any insurer of the Bethlehem Real
Property or any portion thereof, with respect to any portion of the Bethlehem
Real Property, or by any board of fire underwriters (or other body exercising
similar functions) requesting the performance of any repairs, alterations or
other work on the Bethlehem Real Property.
(s) All Licenses, Permits and the requisite certificates of the local
board of fire underwriters (or other body exercising similar functions) have
been issued for the Improvements, have been paid in full and are in full force
and effect. Certificates of Occupancy have been issued for the Improvements,
and each of the premises which are subject to the Leases to the extent required
by applicable Law. No additional certificates of occupancy, licenses or other
permits are required for the current use or operation of the Bethlehem Real
Property. To the best of our knowledge and the knowledge of GLS: (a) there are
no structural defects in any of the Improvements; (b) the heating, electrical,
plumbing, air conditioning, building equipment, and other Tangible Property
contained in the Bethlehem Real Property are free from defects, are in good
condition and working order and are adequate in quantity and quality for normal
operations; and (c) the roofs of all of the Improvements are free of physical
leaks and are watertight and the Improvements are free from termites.
A-15
<PAGE>
(t) All water, storm and sanitary sewer, gas, electricity, telephone
and other utilities serving the Bethlehem Real Property are supplied directly to
the Bethlehem Real Property by facilities of public utilities and the costs of
installation of such utilities have been fully paid.
(u) The parking facilities at the Bethlehem Real Property comply with
all Laws and with all parking commitments made by the Pentamation under any
Leases or other documents. Except as stated on Schedule 3.12, there are no
-------------
offsite parking facilities used in connection with the operation of the
Pentamation Real Property. Pentamation does not own or lease any adjacent
property to the Pentamation Real Property.
(v) Neither the air, mineral, oil or gas rights over the Bethlehem
Real Property nor any other "development rights" with respect to the Bethlehem
Real Property have been assigned, transferred, leased or encumbered.
(w) Neither Pentamation, GLS nor the Principal Shareholders has not
filed any fictitious name filings or registrations with respect to any names
used in connection with the Bethlehem Real Property. This includes, but is not
limited to, names used in connection with any restaurants, lounges, bars, or any
other portion of the Bethlehem Real Property.
(x) There are no property interests, buildings, structures, or other
improvements that are owned or held by GLS or the Principal Shareholders and
which are necessary or useful for the operation of the Pentamation Business that
are not being conveyed pursuant to the Real Property Purchase Agreement or the
Automobile Purchase Agreement.
(y) Feather and Bloys are the sole partners of GLS.
3.1 Environmental. Except as set forth in Schedule 3.13:
(a) (i) Neither the Pentamation Companies, GLS, nor the Principal
Shareholders has caused or permitted any Hazardous Substances to be
manufactured, refined, treated, discharged, disposed of, deposited or otherwise
released in, on, under or from any of the Pentamation Real Property or any Real
Property previously owned, leased, occupied, operated, managed, possessed or
otherwise held by any of the Pentamation Companies ("Former Pentamation Real
Property"); and
(ii) To the knowledge of the Principal Shareholders, Pentamation
and GLS, before their ownership or lease of any of the Pentamation Real Property
or Former Pentamation Real Property, no Hazardous Substances have been
manufactured, refined, treated, discharged, disposed of, deposited or otherwise
released therein, thereon or therefrom.
(b) Neither the Pentamation Companies, GLS nor the Principal
Shareholders has not caused or permitted any Hazardous Substances to have been
stored, used, generated, transported, handled or otherwise present on any of the
Pentamation Real Property or Former Pentamation Real Property, and no Hazardous
Substances currently are stored, used, generated, transported, handled or
otherwise present thereon, except for (1) any concentrations or quantities that
occur naturally thereon or that are present in construction materials, office
equipment or other office furnishings used in the existing improvements
A-16
<PAGE>
thereon, and (2) normal quantities of those Hazardous Substances customarily
used in the conduct of general administrative and executive office activities
and use and maintenance of computer systems (e.g. copier fluids and cleaning
supplies), in accordance with applicable Law. Notwithstanding the foregoing
exceptions, no asbestos-containing materials, PCBs or urea formaldehyde are
present in or on any of the Pentamation Real Property; and
(c) To the knowledge of the Principal Shareholders, GLS and
Pentamation, before their ownership or lease of any of the Pentamation Real
Property or Former Pentamation Real Property, no Hazardous Substances were
stored, used, generated, transported, handled or otherwise present thereon
except for any concentrations or quantities that occur naturally thereon.
(d) All of the Former Pentamation Real Property and the operations of
the Pentamation Companies thereon were operated in compliance with applicable
Environmental Laws, and all of the Pentamation Real Property and the operations
of the Pentamation Companies thereon have been and currently are being operated
in compliance with applicable Environmental Laws. To the knowledge of the
Principal Shareholders, Pentamation and GLS, there is not any radon, asbestos or
PCB's or any condition with respect to surface soil, subsurface soil, ambient
air, surface waters, groundwaters, leachate, run-on or run-off, stream or other
sediments, wetlands or similar environmental media on, in, under, above or off
any of the Pentamation Real Property or Former Pentamation Real Property, which
radon, asbestos, PCB's or condition does or may (a) require investigation and/or
remedial or corrective action on or off such Pentamation Real Property or Former
Pentamation Real Property, including off-site disposal locations, by any of the
Pentamation Companies or other owner thereof, (b) require compliance by any of
the Pentamation Companies with permit requirements, standards or Environmental
Laws, and/or (c) result in any claim for personal injury, property damage or
natural resources damage or any other Proceeding against SunGard, Newco or any
of their affiliates by governmental entities or other Persons (any such radon,
asbestos, PCB's or condition is referred to as an "Pentamation Environmental
Condition"). None of the Pentamation Companies, GLS or the Principal
Shareholders has taken any action or omitted to take any action that has caused
or will cause a Pentamation Environmental Condition to exist.
(e) None of the Pentamation Companies, the Principal Shareholders or
GLS has received any written notice that any part of the Pentamation Real
Property or the Former Pentamation Real Property or the operations of the
Pentamation Companies or GLS is the subject of any Proceeding or Judgment, and,
to the knowledge of the Principal Shareholders, GLS and Pentamation, no part of
the Pentamation Real Property or the Former Pentamation Real Property or the
operations of the Pentamation Companies or GLS is the subject of any Proceeding
or Judgment. None of the Pentamation Companies, the Principal Shareholders or
GLS has received any written notice from any governmental authority or other
Person regarding any environmental, health or safety matters.
(f) There is no sinkhole, coastal zone, flood plain, flood hazard area
or wetlands in or on the Pentamation Real Property, which would restrict any
development or use of the Pentamation Real Property as an office, data
processing facility and electronic communications network facility.
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<PAGE>
(g) The Pentamation Companies and GLS will provide SunGard and Newco
within thirty (30) days from the date hereof with copies of any and all
applications, correspondence, affidavits, reports, forms, maps, plans, studies
and other documents relating to environmental, health and safety matters in
their possession, custody or control. These studies shall include, but not be
limited to, any environmental or engineering studies, any tests or testing
performed on the Pentamation Real Property or the Former Pentamation Real
Property, and copies of any reports issued by any government authority regarding
such Pentamation Real Property or Former Pentamation Real Property.
(h) No Proceeding has been started, no Judgment has been issued and no
Encumbrance has been created against or affecting any of the Pentamation
Companies or GLS or any of the Pentamation Real Property or Former Pentamation
Real Property regarding any Pentamation Environmental Condition or arising from
any Environmental Law, nor is any such Proceeding, Judgment or Encumbrance
pending or anticipated by the Pentamation Companies, the Principal Shareholders
or GLS.
(i) No information request has been issued to any of the Pentamation
Companies or GLS pursuant to Section 104 of the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq. or
-- ---
any other Environmental Laws with regard to the Pentamation Real Property or
Former Pentamation Real Property or any activities conducted thereon, including
off-site waste disposal.
(j) None of the Pentamation Real Property or the Pentamation Former
Real Property is or has ever been listed in the United States Environmental
Protection Agency's National Priorities List or in any other list, schedule,
log, inventory or record, however defined, maintained by any governmental
authority with respect to sites where there is, has been or may be a release or
threat of a release of any Hazardous Substances. To the knowledge of the
Pentamation Companies, the Principal Shareholders and GLS, no off-site waste
disposal location to which the such parties' wastes have been taken appear or
have appeared on any such list.
3.14 Software and Intangibles. Set forth on Schedule 3.14 is an accurate
-------------
and complete list and description of all Software and Intangibles owned,
marketed, licensed, supported, maintained, used or under development by any of
the Pentamation Companies, and, in the case of Software, a product description,
the language in which it is written and the type of hardware platform(s) on
which it runs. No other Software or Intangibles is used to operate the business
of any of the Pentamation Companies. Except as explained on Schedule 3.14, each
-------------
of the Pentamation Companies has good and marketable title to, and has the full
right to use, all of its respective Software and Intangibles listed on Schedule
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3.14, free and clear of any Encumbrance. No rights of any third party are
- ----
necessary to market, license, sell, modify, update, and/or create derivative
works for the Software or Intangibles listed on Schedule 3.14. Except as set
-------------
forth on Schedule 3.14, all of such Software and Intangibles were created as a
-------------
work for hire (as defined under U.S. copyright law) by regular full time
employees of the Pentamation Companies. To the extent that any author or
developer of any Software or Intangibles was not a regular full-time salaried
employee of any of the Pentamation Companies at the time such person contributed
to such Software or Intangibles, such author or developer has irrevocably
assigned to the Pentamation Companies in writing all copyrights and other
proprietary rights in such person's work on the Software or Intangibles. With
respect to the Software listed on Schedule 3.14, (a) the Pentamation Companies
-------------
maintain machine-readable
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<PAGE>
master-reproducible copies, source code listings, technical documentation and
user manuals for the most current releases or versions thereof and for all
earlier releases or versions thereof currently being supported by them; (b) in
each case, the machine-readable copy substantially conforms to the corresponding
source code listing; (c) it is written in the language set forth on Schedule
--------
3.14, for use on the hardware set forth on Schedule 3.14 with standard operating
- ---- -------------
systems; (d) it can be maintained and modified by reasonably competent
programmers familiar with such language, hardware and operating systems; (e) in
each case, it operates in accordance with the user manual therefor without
material operating defects; and (f) in each case, each component of such
Software that creates, accepts, displays, stores, retrieves, accesses,
recognizes, distinguishes, compares, sorts, manipulates, processes, calculates,
converts or otherwise uses dates or date-related data, except as set forth on
Schedule 3.14, will do so accurately, without any operating defects, loss of
- -------------
functionality or degradation in performance or volume capacity, using dates in
the twentieth and twenty-first centuries, and will not be adversely affected by
the advent of the year 2000, the advent of the twenty-first century, or the
transition from the twentieth century through the year 2000 and into the twenty-
first century. None of the Software or Intangibles listed on Schedule 3.14, or
-------------
their respective past or current uses, including the preparation, distribution,
marketing or licensing, has violated or infringed upon, or is violating or
infringing upon, any Software, technology, patent, copyright, trade secret or
other Intangible of any Person. The Pentamation Companies have adequately
maintained all trade secrets and copyrights with respect to the Software. To the
knowledge of the Principal Shareholders and Pentamation, no Person is violating
or infringing upon, or has violated or infringed upon at any time, any of the
Software or Intangibles listed on Schedule 3.14. None of the Software or
-------------
Intangibles listed on Schedule 3.14 is owned by or registered in the name of any
-------------
current or former owner, shareholder, member, partner, director, executive,
officer, employee, salesman, agent, customer, representative or contractor of
any of the Pentamation Companies or any of the Principal Shareholders nor does
any such Person have any interest therein or right thereto, including the right
to royalty payments.
3.15 Contracts. Schedule 3.15 is an accurate and complete list of all of
-------------
the following types of Contracts to which any of the Pentamation Companies is a
party or by which any of the Pentamation Companies is bound (collectively, the
"Specified Contracts"), grouped into the following categories and, where
applicable, subdivided by product line or division: (a) Software license,
Software maintenance, services and other customer Contracts; (b) Contracts for
the purchase or lease of Real Property or otherwise concerning Real Property
owned or used by any of the Pentamation Companies; (c) loan agreements,
mortgages, notes, guarantees and other financing Contracts; (d) Contracts for
the purchase, lease and/or maintenance of computer equipment and other
equipment, Contracts for the purchase, license, lease and/or maintenance of
Software under which any of the Pentamation Companies is the purchaser,
licensee, lessee or user, and other supplier Contracts; (e) employment,
consulting and sales representative Contracts (excluding Contracts which
constitute Employee Benefit Plans listed on Schedule 3.17, and excluding oral
-------------
Contracts with employees for "at will" employment); (f) Contracts under which
any rights in and/or ownership of any Software product, technology or other
Intangible of any of the Pentamation Companies, or any prior version thereof, or
any part of the customer base, business or Assets of any of the Pentamation
Companies, or any shares or other ownership interests in any of the Pentamation
Companies (or any of their predecessors) was acquired; and (g) other material
Contracts (excluding Contracts which constitute Insurance Policies listed on
Schedule 3.21 and excluding this Agreement and all other Contracts entered into
- -------------
between any of the Pentamation
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<PAGE>
Companies and SunGard, or among any of the Pentamation Companies, SunGard and
other parties in connection herewith). A description of each oral Specified
Contract is included on Schedule 3.15, and copies of each written Specified
-------------
Contract have been delivered to SunGard and Newco. Except as set forth on
Schedule 3.15, each of the customers of the Pentamation Companies has signed and
- -------------
is bound by a written Contract that is not materially different from the
applicable form agreement attached as part of Schedule 3.15 (including but not
-------------
limited to the provisions regarding Software ownership, use and disclosure and
limitations of liability), and the provisions of each such customer Contract are
binding on the customer and enforceable by the Pentamation Companies. With
respect to each applicable customer Contract, Schedule 3.15 includes, as of the
-------------
dates specified in such Schedule, a complete description of all work remaining
to be performed under such Contracts together with an estimate of the number of
person hours required to complete such work, and all credits granted to or other
adjustments made for the customer to be applied against future payments or
purchases. Except as provided on Schedule 3.15, all customers have accepted the
-------------
Software, products and/or services described in their respective customer
Contracts. Except as set forth on Schedule 3.15, with respect to each of the
-------------
Specified Contracts, none of the Pentamation Companies is in default thereunder
nor would be in default thereunder with the passage of time, the giving of
notice, or both. Except as set forth on Schedule 3.15, to the knowledge of the
-------------
Principal Shareholders and Pentamation, none of the other parties to any
Specified Contract is in default thereunder or would be in default thereunder
with the passage of time, the giving of notice or both. Except as set forth on
Schedule 3.15, none of the Pentamation Companies has given or received any
- -------------
notice of default or notice of termination with respect to any Specified
Contract, and each Specified Contract is in full force and effect in accordance
with its terms. The Specified Contracts are all the Contracts necessary and
sufficient to operate the business of the Pentamation Companies. Except as set
forth on Schedule 3.15, there are no currently outstanding proposals or offers
-------------
submitted by any of the Pentamation Companies to any customer, prospect,
supplier or other Person which, if accepted, would result in a legally binding
Contract of such company involving an amount or commitment exceeding $50,000 in
any single case or an aggregate amount or commitment exceeding $100,000 in the
aggregate.
3.16 Employees and Independent Contractors. Schedule 3.16A is a list of
--------------
all of the employees of each of Pentamation Companies and (a) their titles or
responsibilities; (b) their social security numbers and principal residence
address; (c) their dates of hire; (d) their current salaries or wages and all
bonuses, commissions and incentives paid at any time during the past twelve
months; (e) their last compensation changes and the dates on which such changes
were made; (f) any specific bonus, commission or incentive plans or agreements
for or with them; and (g) any outstanding loans or advances made to them.
Schedule 3.16B is a list of all sales representatives and independent
- --------------
contractors engaged by each of the Pentamation Companies and (a) their tax
identification numbers and state or country of residence; (b) their payment
arrangements (if not set forth in a Contract listed or described on Schedule
--------
3.15); and (c) brief description of their jobs or projects currently in
- ----
progress. Except as limited by any employment Contracts listed on Schedule 3.15
-------------
and except for any limitations of general application which may be imposed under
applicable employment Laws, each of the Pentamation Companies has the right to
terminate the employment of each of its employees at will and to terminate the
engagement of any of its independent contractors without payment to such
employee or independent contractor other than for services rendered through
termination and without incurring any penalty or liability other than liability
for severance pay in accordance with such company's severance pay policy as
described on Schedule 3.16A.
--------------
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<PAGE>
Each of the Pentamation Companies is in full compliance with all Laws respecting
employment practices. None of the Pentamation Companies has ever been a party to
or bound by any union or collective bargaining Contract, nor is any such
Contract currently in effect or being negotiated by or on behalf of any of the
Pentamation Companies. Since the respective incorporation or formation dates of
each of the Pentamation Companies, none of the Pentamation Companies has
experienced any labor problem that was or is material to it. Each of the
Pentamation Companies' relations with its employees are currently on a good and
normal basis. Except as set forth on Schedule 3.16A, each of the Pentamation
--------------
Companies' current and past employees has signed an employee agreement which
contains certain restrictive covenants substantially in the form attached to
Schedule 3.16A. Except as set forth on Schedule 3.16B, each of the Pentamation
- -------------- --------------
Companies' current and past contractors has signed agreements with the
Pentamation Companies containing restrictions that adequately protect the
proprietary and confidential information of the Pentamation Companies and vest
in the Pentamation Companies the full ownership of items developed by such
contractor. Except as indicated on Schedule 3.16A, since January 1, 1999, no
--------------
employee of any of the Pentamation Companies having an annual salary of $50,000
or more has indicated an intention to terminate or has terminated his or her
employment with such company. To the knowledge of the Principal Shareholders and
Pentamation, the Transactions will not adversely affect relations with any
employees of any of the Pentamation Companies.
3.17 Employee Benefit Plans. Schedule 3.17 sets forth an accurate and
-------------
complete list of all of Pentamation Companies' Employee Benefit Plans
(collectively referred to as "Pentamation's Employee Benefit Plans"). Except as
set forth on Schedule 3.17, none of the Pentamation Companies has (a)
-------------
established, maintained or contributed to (or has been obligated to contribute
to) any Employee Benefit Plans, (b) proposed any Employee Benefit Plans which it
plans to establish or maintain or to which it plans to contribute, or (c)
proposed any changes to any Employee Benefit Plans now in effect. Accurate and
complete copies and descriptions of all of Pentamation's Employee Benefit Plans,
all employees affected or covered by Pentamation's Employee Benefit Plans, and
all Liabilities and Obligations thereunder are attached to Schedule 3.17. If
-------------
permitted and/or required by applicable Law, the Pentamation Companies have
properly submitted all of Pentamation's Employee Benefit Plans in good faith to
meet the applicable requirements of ERISA and/or the Code to the Internal
Revenue Service (the "IRS") for its approval within the time prescribed therefor
under applicable federal regulations. Favorable letters of determination of
such tax-qualified status from the IRS are attached to Schedule 3.17. With
-------------
respect to Pentamation's Employee Benefit Plans, the Pentamation Companies will
have made, on or before the Closing Date (as defined in Section 10.1), all
payments required to be made by them on or before the Closing Date and will have
accrued (in accordance with GAAP) as of the Closing Date all payments due but
not yet payable as of the Closing Date, so there will not have been, nor will
there be, any Accumulated Funding Deficiencies (as defined in ERISA or the Code)
or waivers of such deficiencies. The Pentamation Companies have delivered to
SunGard and Newco an accurate and complete copy of the most current Form 5500
and any other form or filing required to be submitted to any governmental agency
with regard to any of Pentamation's Employee Benefit Plans and the most current
actuarial report with regard to any of Pentamation's Employee Benefit Plans.
All of Pentamation's Employee Benefit Plans are, and have been, operated in full
compliance with their provisions and with all applicable Laws including ERISA
and the Code and the regulations and rulings thereunder. The Pentamation
Companies and all fiduciaries of Pentamation's Employee Benefit Plans have
complied with the provisions of Pentamation's Employee Benefit Plans and with
all applicable Laws including ERISA and the Code and the
A-21
<PAGE>
regulations and rulings thereunder. There have been no Reportable Events (as
defined in ERISA), no events described in Sections 4062, 4063 or 4064 of ERISA,
and no termination or partial termination (including any termination or partial
termination attributable to this sale) of any of Pentamation's Employee Benefit
Plans. There would be no Obligation of any of the Pentamation Companies under
Title IV of ERISA if any of Pentamation's Employee Benefit Plans were terminated
as of the Closing Date. None of the Pentamation Companies has incurred, nor will
incur, any withdrawal liability, nor do any of the Pentamation Companies have
any contingent withdrawal liability, under ERISA to any Multiemployer Plan (as
defined in ERISA or the Code). None of the Pentamation Companies has incurred,
or will incur, any Obligation to the Pension Benefit Guaranty Corporation (or
any successor thereto). Neither the execution and delivery of this Agreement nor
the consummation of the Transactions will (x) result in any payment (including
any severance, unemployment compensation or golden parachute payment) becoming
due from any of the Pentamation Companies under any of Pentamation's Employee
Benefit Plans, (y) increase any benefits otherwise payable under any of
Pentamation's Benefit Plans, or (z) result in the acceleration of the time of
payment or vesting of any such benefits to any extent. There are no pending
Proceedings that have been asserted or instituted against any of Pentamation's
Employee Benefit Plans, the Assets of any of the trusts under such plans, the
plan sponsor, the plan administrator or any fiduciary of any such plan (other
than routine benefit claims), and, to the knowledge of the Principal
Shareholders and Pentamation, there are no facts which could form the basis for
any such Proceeding. There are no investigations or audits of any of
Pentamation's Employee Benefit Plans, any trusts under such plans, the plan
sponsor, the plan administrator or any fiduciary of any such plan that have been
instituted or, to the knowledge of the Principal Shareholders and Pentamation,
threatened, and, to the knowledge of the Principal Shareholders and Pentamation,
there are no facts which could form the basis for any such investigation or
audit. Except as disclosed in Schedule 3.17, no event has occurred nor will
-------------
occur which will result in any of the Pentamation Companies having an Obligation
in connection with any Employee Benefit Plan established, maintained,
contributed to or to which there has been an obligation to contribute (currently
or previously) by it or by any other entity which, together with any of the
Pentamation Companies, constitute elements of either (i) a controlled group of
corporations (within the meaning of Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (within the meaning of Sections 414(c)
of the Code or 4001 of ERISA), (iii) an affiliated service group (within the
meaning of Section 414(m) of the Code), or (iv) another arrangement covered by
Section 414(o) of the Code.
3.18 Customers, Prospects and Suppliers. Each customer of the Pentamation
Companies is listed in the list of customers included as part of Schedule 3.18.
-------------
Schedule 3.18 is a complete list of all current prospects and suppliers of each
- -------------
of the Pentamation Companies. Except as set forth on Schedule 3.18, since
-------------
January 1, 1994, none of the customers or suppliers of any of the Pentamation
Companies has given notice or otherwise indicated to such company that it will
or intends to terminate or not renew its Contract with such company before the
scheduled expiration date or otherwise terminate its relationship with such
company. The relationship of each of the Pentamation Companies with their
respective customers is currently on a good and normal basis, and none of the
Pentamation Companies has experienced any problems with customers or suppliers
since January 1, 1994. To the knowledge of the Principal Shareholders and
Pentamation, the Transactions will not adversely affect relations with any of
the customers or suppliers of any of the Pentamation Companies. Pentamation has
delivered to SunGard and Newco an accurate and complete copy of the most recent
customer surveys, if any, of each of the Pentamation Companies.
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<PAGE>
3.19 Taxes. Schedule 3.19 is an accurate and complete list of all federal,
-------------
state, local, foreign and other Tax returns and reports (including information
returns) (collectively "Returns") filed by each of the Pentamation Companies
with respect to its last five (5) fiscal years. Accurate and complete copies of
all federal, state, local and foreign income, sales and use Tax Returns filed by
each of the Pentamation Companies with respect to its last five fiscal years are
attached to Schedule 3.19, and accurate and complete copies of all other Tax
-------------
Returns listed thereon have been delivered to SunGard and Newco. Except as
explained on Schedule 3.19, (a) each of the Pentamation Companies has properly
-------------
and timely filed all Tax Returns required to be filed by it, all of which were
accurately prepared and completed; (b) each of the Pentamation Companies has
properly withheld from payments to its employees, agents, representatives,
contractors, suppliers and other third parties all amounts required by Law to be
withheld for Taxes; (c) each of the Pentamation Companies has paid all Taxes
required to be paid by it; (d) no audit of any of the Pentamation Companies by
any governmental taxing authority has ever been conducted, is currently pending
or, to the knowledge of the Principal Shareholders and Pentamation, is
threatened; (e) no notice of any proposed Tax audit, or of any Tax deficiency or
adjustment, has been received by any of the Pentamation Companies, and there is
no reasonable basis for any Tax deficiency or adjustment to be assessed against
any of the Pentamation Companies; and (f) there are no agreements or waivers
currently in effect that provide for an extension of time for the assessment of
any Tax against any of the Pentamation Companies. None of the Pentamation
Companies has filed a consent under Code Section 341(f) concerning collapsible
corporations. None of the Pentamation Companies has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that will not be deductible under Code Section
280G. None of the Pentamation Companies has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which is Pentamation, or has any liability for the Taxes of any
person or entity other than any of the Pentamation Companies under Treas. Reg.
(S)1.1502-6 or any similar provision of state, local or foreign law, as
transferee or successor, by contract or otherwise. The unpaid taxes of the
Pentamation Companies did not, as of the Latest Balance Sheet, exceed the
reserve for tax liability set forth on the face of the Latest Balance Sheet.
3.20 Proceedings and Judgments. Except as described on Schedule 3.20, (a)
-------------
no Proceeding is currently pending or, to the knowledge of the Principal
Shareholders and Pentamation, threatened, nor has any Proceeding occurred at any
time since January 1, 1994, to which any of the Pentamation Companies is or was
a party, or by which any of the Pentamation Companies or any Assets or business
of any of the Pentamation Companies is or was affected; (b) no Judgment is
currently outstanding, nor has any Judgment been outstanding at any time since
January 1, 1994, against any of the Pentamation Companies, or by which any of
the Pentamation Companies or any Assets or business of any of the Pentamation
Companies is or was affected; and (c) no breach of contract, breach of warranty,
tort, negligence, infringement, product liability, discrimination, wrongful
discharge or other claim of any nature has been asserted or, to the knowledge of
the Principal Shareholders and Pentamation, threatened by or against any of the
Pentamation Companies at any time since January 1, 1994, and there is no basis
for any such claim. As to each matter described on Schedule 3.20, accurate and
-------------
complete copies of all pertinent pleadings, judgments, orders, correspondence
and other legal documents have been delivered to SunGard and Newco. The lien
held by the Pennsylvania Department of Revenue and filed on July 25, 1985 in the
Court of Common Pleas of Northampton County, Pennsylvania (the "1985 Lien") has
been satisfied,
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<PAGE>
discharged and paid in full. If any of the Pentamation Companies is served with
process or receives notice that a Proceeding may be commenced against it, the
Pentamation Companies shall promptly notify SunGard.
3.21 Insurance. Schedule 3.21 is an accurate and complete list and
-------------
description of all Insurance Policies (excluding Insurance Policies that
constitute Pentamation's Employee Benefit Plans described on Schedule 3.17)
-------------
owned or maintained by any of the Pentamation Companies and/or any of their
predecessors at any time since January 1, 1994. Except as indicated on Schedule
--------
3.21, all such Insurance Policies are or were on an "occurrence" rather than a
- ----
"claims made" basis. None of the Pentamation Companies has received notice of
cancellation with respect to any such current Insurance Policy, and there is no
basis for the insurer thereunder to terminate any such current Insurance Policy.
Except as indicated on Schedule 3.21, accurate and complete copies of all
-------------
Insurance Policies described on Schedule 3.21 have been delivered to SunGard and
-------------
Newco. Each such Insurance Policy is or was in full force and effect during the
period(s) of coverage indicated on Schedule 3.21. Except as described on
-------------
Schedule 3.21, there are no claims that are pending under any of the Insurance
- -------------
Policies described on Schedule 3.21.
-------------
3.22 Questionable Payments. None of the Principal Shareholders, nor any
current or former partners, owners, shareholders, members, directors,
executives, officers, representatives, agents or employees of any of the
Pentamation Companies (when acting in such capacity or otherwise on behalf of
any of the Pentamation Companies or any of their predecessors), (a) has used or
is using any corporate funds for any illegal contributions, gifts, entertainment
or other unlawful expenses relating to political activity; (b) has used or is
using any corporate funds for any direct or indirect unlawful payments to any
foreign or domestic government officials or employees; (c) has violated or is
violating any provision of the Foreign Corrupt Practices Act of 1977, (d) has
established or maintained, or is maintaining, any unlawful or unrecorded fund of
corporate monies or other properties; (e) has made at any time since January 1,
1994, any false or fictitious entries on the books and records of any of the
Pentamation Companies; (f) has made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature using corporate funds
or otherwise on behalf of any of the Pentamation Companies ; or (g) made any
material favor or gift that is not deductible for federal income tax purposes
using corporate funds or otherwise on behalf of any of the Pentamation
Companies.
3.23 Related Party Transactions. Except as described on Schedule 3.23 and
-------------
except for any employment Contracts listed on Schedule 3.15, there are no real
-------------
estate leases, personal property leases, loans, guarantees, Contracts,
transactions, understandings or other arrangements of any nature between or
among any of the Pentamation Companies and any current or former partner, owner,
stockholder, member, director, officer or controlling Person of any of the
Pentamation Companies (or any of their respective predecessors) or any other
Person affiliated with any of the Pentamation Companies (or any of their
respective predecessors). Schedule 3.23 identifies each person who is an
-------------
"affiliate" (as that term is defined in Rule 145 under the Securities Act of
1933, as amended (the "1933 Act")) of the Pentamation Companies as of the date
of this Agreement.
3.24 Brokerage Fees. Except as set forth on Schedule 3.24, no Person
-------------
acting on behalf of any of the Pentamation Companies or any of the Principal
Shareholders is or shall be entitled to any brokerage or finder's fee in
connection with the Transactions.
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<PAGE>
3.25 Acquisition Proposals. Except as disclosed on Schedule 3.25, since
-------------
January 1, 1998, none of the Pentamation Companies nor any of the Principal
Shareholders has, directly or indirectly, solicited, initiated or responded to
any inquiries or proposals from, or participated in any discussions or
negotiations with, or provided any non-public information to, any Person or
group (other than SunGard and its officers, employees, representatives and
agents) concerning any sale of all or substantially all of the Assets of any of
the Pentamation Companies, any sale of shares of capital stock, membership
interests or other securities of any of the Pentamation Companies, or any
merger, consolidation or similar transaction involving any of the Pentamation
Companies.
3.26 Affiliate Matters. None of the shareholders of the Pentamation
Companies has or will sell any shares of capital stock or other securities of
the Pentamation Companies or of SunGard at any time during the 30-day period
ending on the Closing Date.
3.27 Accounting Matters. To the knowledge of Pentamation, none of the
Pentamation Companies nor any affiliate (as that term is used in Rule 145 under
the 1933 Act) of any of the Pentamation Companies has taken or agreed to take,
or plans to take, any action that could prevent SunGard from accounting for the
merger as a "pooling of interests" in accordance with generally accepted
accounting principals, Accounting Principles Board Opinion No. 16 and all
published rules, regulations and policies of the SEC. Halbert, Katz & Co.,
P.C. has confirmed in a letter dated the date of this Agreement and addressed to
Pentamation, an executed copy of which has been delivered to SunGard, that
Halbert, Katz & Co., P.C. concurs with the Pentamation's management's conclusion
that, as of the date of such letter, no condition exists that would preclude
SunGard from accounting for the Merger as a "pooling of interests" in accordance
with generally accepted accounting principals, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies of the SEC.
Schedule 3.27 identifies each person who is an "affiliate" (as that term is
- -------------
defined in Rule 145 under the 1933 Act) of the Pentamation Companies as of the
date of this Agreement.
3.28 Vote Required. The affirmative vote of the holders of a majority of
the shares of Pentamation Stock outstanding on the record date for the
Pentamation Shareholders' Meeting (the "Required Pentamation Shareholder Vote")
is the only vote of the holders of any class or series of the Pentamation
capital stock necessary to approve the Transactions.
3.29 HSR Act. Pentamation is the "ultimate parent" of Pentamation as such
term is defined in the HSR Act. Except as set forth on Schedule 3.29, upon
-------------
consummation of the transactions provided for herein, no shareholder of
Pentamation will hold an aggregate total amount of SunGard's voting securities
in excess of $15,000,000. Except as set forth on Schedule 3.29, no Person is
-------------
required to file a Premerger Notification and Report Form pursuant to the HSR
Act in connection with the Transactions.
3.30 Full Disclosure. No representation or warranty made by Pentamation or
the Principal Shareholders in this Agreement or pursuant hereto (a) contains any
untrue statement of any fact; or (b) omits to state any fact that is necessary
to make the statements made, in the context in which made, not false or
misleading in any respect. The copies of documents attached as Schedules to
this Agreement or otherwise delivered to SunGard and Newco in connection with
the Transactions, are accurate and complete, and are not missing any amendments,
modifications, correspondence or other related papers which would be pertinent
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<PAGE>
to SunGard's or Newco's understanding thereof in any respect. To the knowledge
of the Principal Shareholders and Pentamation, there is no fact that has not
been disclosed to SunGard and Newco in the Schedules to this Agreement or
otherwise in writing, that was or is or, so far as any of the Principal
Shareholders can reasonably foresee, will have a material adverse effect on any
of the Pentamation Companies, the business, Assets or financial condition of any
of the Pentamation Companies or the ability of Pentamation or any of the
Principal Shareholders to perform their respective obligations under this
Agreement.
Section 4: Representations of SunGard and Newco
Knowing that Pentamation and the Principal Shareholders rely thereon,
SunGard and Newco, jointly and severally, represent and warrant to Pentamation
and the Principal Shareholders as of the date of this Agreement, and covenant
with Pentamation and the Principal Shareholders, as follows:
4.1 Organization. SunGard and Newco each is a corporation that is duly
organized, validly existing and in good standing under the Laws of the State of
Delaware and the Commonwealth of Pennsylvania, respectively. SunGard and Newco
each possess the full corporate power and authority to own its Assets, conduct
its business as and where such business is presently conducted, and enter into
this Agreement. All of the issued and outstanding shares of capital stock of
Newco are owned by SunGard.
4.2 Agreement. Each of SunGard's and Newco's execution, delivery and
performance of this Agreement, and its consummation of the Transactions, (a)
have been duly authorized by all necessary corporate actions by their respective
boards of directors; (b) do not constitute a violation of or default under their
respective charters or bylaws; (c) do not constitute a default or breach
(immediately or after the giving of notice, passage of time or both) under any
Contract to which SunGard or Newco is a party or by which SunGard or Newco is
bound; (d) do not constitute a violation of any Law or Judgment that is
applicable to it or to their respective businesses or Assets, or to the
Transactions; and (e) except (i) as stated on Schedule 4.2, (ii) for the filing
------------
of the Articles of Merger with the proper officials of the Commonwealth of
Pennsylvania and (iii) for filings which may be required under the HSR Act, do
not require the Consent of any Person. This Agreement constitutes the valid and
legally binding agreement of each of SunGard and Newco, enforceable against each
of them in accordance with its terms.
4.3 SunGard's Stock. The authorized capital stock of SunGard is
320,000,000 shares SunGard Stock, of which approximately 115,323,000 shares were
issued and outstanding as of December 31, 1998, and 5,000,000 shares of
preferred stock, $0.01 par value per share, none of which is issued or
outstanding. The shares of SunGard Stock to be issued as consideration for the
purchase, when issued, shall be validly authorized and validly issued.
4.4 SEC Filings. SunGard has provided to the Principal Shareholders
copies of the following reports and documents filed by SunGard with the SEC:
(a) SunGard's Annual Report on Form 10-K for the year ended December 31, 1998;
(b) SunGard's 1998 Annual Report to Stockholders; and (c) SunGard's April 3,
1999 Proxy Statement.
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<PAGE>
4.5 Investment Matters. SunGard is acquiring the Pentamation Stock for
its own account for investment purposes only and not with a view to, or for sale
in connection with, any resale or distribution thereof.
Section 5: Securities Filings and Approval of the Pentamation
Shareholders
5.1 Registration Statement. As promptly as practicable after the
execution of this Agreement, SunGard shall prepare and file such registration
statement (the "Registration Statement") as shall be necessary to register under
the 1933 Act the shares of SunGard Stock to be issued and delivered to the
Shareholders in accordance with this Agreement and the Plan. Pentamation and
each of the Principal Shareholders shall promptly provide to SunGard all
information concerning the business, financial condition and affairs of
Pentamation and/or such Principal Shareholder that may be required or reasonably
requested by SunGard in connection with the preparation or filing of the
Registration Statement, including without limitation the financial statements,
financial statement schedules and auditor's consents required to be included
therein, and shall otherwise cooperate and cause their representatives to
cooperate with SunGard in the preparation of the Registration Statement. As
promptly as is practicable after the date hereof, Pentamation shall cause
Halbert, Katz & Co., P.C. to conduct a review, in accordance with generally
accepted auditing standards, of the financial statements of Pentamation as of
and for the period ended March 31, 1999 (the "Reviewed Interim Financial
Statements") and to deliver such Reviewed Interim Financial Statements to
SunGard (the delivery of which is a condition precedent to SunGard's obligation
to file the Registration Statement). The parties shall use their best efforts
to cause the Registration Statement to become effective as soon as practicable
and to distribute copies of SunGard's prospectus and Pentamation's proxy
statement contained in such Registration Statement (the "Proxy
Statement/Prospectus") to the shareholders. After the execution of this
Agreement and until the Closing Date, Pentamation and each Principal Shareholder
shall promptly advise SunGard of any facts that should be set forth in an
amendment or supplement to the Proxy Statement/Prospectus or the Registration
Statement, and each party shall take all actions that may be necessary to keep
the Proxy Statement/Prospectus and the Registration Statement current and
effective until the Closing Date. Except with the prior written consent of
SunGard or except as provided in Section 152, neither Pentamation nor any
Principal Shareholder shall publish any communication, other than the Proxy
Statement/Prospectus, relating to this Agreement, the Plan or the Transactions.
SunGard shall not be required to maintain the effectiveness of the Registration
Statement or the Proxy Statement/Prospectus for the purpose of resale by
affiliates of Pentamation.
5.2 Pentamation Shareholder Approval. As promptly as practicable after the
Registration Statement becomes effective, and in accordance with applicable law,
Pentamation will duly hold a meeting of the shareholders (the "Shareholders
Meeting") for the purpose of voting on the Merger. Pentamation and the
Principal Shareholders shall recommend the Merger to the shareholders for
approval. Except with the prior written consent of SunGard, neither Pentamation
nor any Principal Shareholder shall distribute any materials to the shareholders
in connection with the Shareholders Meeting other than the Proxy
Statement/Prospectus. After the shareholders shall have approved the Merger,
such approval shall not be revocable. Pentamation shall solicit proxies from the
shareholders for use at the Shareholders Meeting.
5.3 Pentamation's and Principal Shareholders' Representations as to the
Registration Statement. Pentamation and the Principal Shareholders, jointly and
severally, represent and
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warrant to SunGard and Newco and covenant with SunGard and Newco that, at the
time the Registration Statement shall become effective and at all times
subsequent to effectiveness up to and including the Closing Date, the
Registration Statement and all amendments or supplements thereto, with respect
to information furnished by Pentamation, any Principal Shareholder or its or
their representatives regarding Pentamation, (a) will comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act") and the respective rules and regulations
thereunder, and (b) will not contain any untrue statement of any material fact,
or omit to state any fact required to be stated therein or necessary to make the
statements made therein, in the context in which made, not misleading in any
material respect. Each Principal Shareholder severally represents and warrants
to SunGard and Newco and covenants with SunGard and Newco that, at the time the
Registration Statement shall become effective and at all times subsequent to
effectiveness up to and including the Closing Date, the Registration Statement
and all amendments or supplements thereto, with respect to information furnished
by such Principal Shareholder regarding such Principal Shareholder, (a) will
comply in all material respects with the provisions of the 1933 Act, the 1934
Act and the respective rules and regulations thereunder, and (b) will not
contain any untrue statement of any material fact, or omit to state any fact
required to be stated therein or necessary to make the statements made therein,
in the context in which made, not misleading in any material respect.
Pentamation and the Principal Shareholders, jointly and severally, represent and
warrant to SunGard and Newco and covenant with SunGard and Newco that the
information furnished by Pentamation, any Principal Shareholder or its or their
representatives regarding Pentamation for use in the filings described in or
contemplated by this Agreement will not contain any untrue statement of any
material fact, or omit to state any fact required to be stated therein or
necessary to make the statements made therein, in the context in which made, not
misleading in any material respect. Each Principal Shareholder severally
represents and warrants to SunGard and Newco and covenants with SunGard and
Newco that the information furnished by such Principal Shareholder regarding
such Principal Shareholder for use in the filings described in or contemplated
by this Agreement will not contain any untrue statement of any material fact, or
omit to state any fact required to be stated therein or necessary to make the
statements made therein, in the context in which made, not misleading in any
material respect. Pentamation and the Principal Shareholders, jointly and
severally, shall indemnify and hold harmless SunGard, Newco, each Person who
controls SunGard and/or Newco (within the meaning of Section 15 of the 1933 Act)
and SunGard's and Newco's respective directors, officers and representatives, in
accordance with the procedures set forth in Section 14.2, from and against any
and all losses, claims, liabilities, damages and expenses (including reasonable
attorneys' fees and court costs) that arise out of or are based upon a breach of
any of the joint and several warranties, representations and covenants of
Pentamation and the Principal Shareholders in this Section 53. Each Principal
Shareholder severally shall indemnify and hold harmless SunGard, Newco, each
Person who controls SunGard and/or Newco (within the meaning of Section 15 of
the 1933 Act) and SunGard's and Newco's respective directors, officers and
representatives, in accordance with the procedures set forth in Section 14.2,
from and against any and all losses, claims, liabilities, damages and expenses
(including reasonable attorneys' fees and court costs) that arise out of or are
based upon a breach of any of the several warranties, representations and
covenants of such Principal Shareholder in this Section 53.
5.4 SunGard's and Newco's Representations as to the Registration
Statement. SunGard and Newco, jointly and severally, warrant and represent to
Pentamation and the
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Principal Shareholders and covenant with Pentamation and the Principal
Shareholders that, at the time the Registration Statement shall become effective
and at all times subsequent to effectiveness up to and including the Closing
Date, the Registration Statement and all amendments or supplements thereto, with
respect to the information therein furnished by SunGard, Newco or their
representatives, (a) will comply in all material respects with the provisions of
the 1933 Act, the 1934 Act and the respective rules and regulations thereunder,
and (b) will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading. SunGard and Newco, jointly and
severally, warrant and represent to Pentamation and the Principal Shareholders
that all information furnished by SunGard, Newco or their respective
representatives for use in the filings described in or contemplated by this
Agreement and the Plan shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading. SunGard and Newco, jointly
and severally, shall indemnify and hold harmless Pentamation, the Principal
Shareholders and the directors, officers and representatives of Pentamation, in
accordance with the procedures set forth in Section 14.2, from and against any
and all losses, claims, liabilities, damages and expenses (including reasonable
attorneys' fees and court costs) that arise out of or are based upon a breach of
any of the warranties, representations and covenants of this Section 54.
5.5 State Securities Filings. SunGard shall make all filings under
applicable state securities laws that are required in connection with the
Transactions. Pentamation and each Principal Shareholder shall cooperate with
SunGard and furnish all information that may be required or reasonably requested
by SunGard in connection with such filings.
Section 6: Certain Obligations of Pentamation and Shareholders Pending Closing
6.1 Voting and Cooperation Agreement. At the time of execution of this
Agreement, each of the Principal Shareholders shall deliver to SunGard a duly
executed Voting and Cooperation Agreement in the form of Exhibit B attached
hereto ("Voting and Cooperation Agreement").
6.2 Management Representation Letter. At the time of execution of this
Agreement, Pentamation and the Principal Shareholders shall deliver to SunGard a
copy of the management representation letter from the Pentamation Companies to
PricewaterhouseCoopers L.L.P., in form and substance satisfactory to
PricewaterhouseCoopers L.L.P.
6.3 Tax Representation Certificate. Within ten (10) days of the date of
this Agreement, Pentamation and the Principal Shareholders shall deliver to
SunGard a tax representation certificate from Pentamation and the Principal
Shareholders in a form and substance satisfactory to SunGard's counsel, in order
to render a tax opinion relating to the Registration Statement on Form S-4 under
the 1933 Act and the 1934 Act to be filed in connection with the transactions
hereunder.
6.4 Affiliate Agreements. At the time of execution of this Agreement,
Pentamation and the Principal Shareholders shall deliver to SunGard duly signed
Affiliate Agreements, in the form of Exhibit C hereto ("Affiliate Agreements")
from each "affiliate" (as that term is defined in Rule 145 under the 1933 Act)
of the Pentamation Companies.
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6.5 Conduct of the Pentamation Companies' Business. Between the date of
this Agreement and the Closing Date, except with the prior written consent of
SunGard:
(a) The Pentamation Companies shall, and the Principal Shareholders
shall cause the Pentamation Companies to, (i) conduct their business in a
diligent manner, (ii) not make any material change in their business practices,
and (iii) use their best efforts to preserve their business organization intact,
keeping available the services of their current officers, employees, salesmen,
agents and representatives, and maintaining the goodwill of their customers,
suppliers and other Persons having business relations with any of the
Pentamation Companies. Each Principal Shareholder involved in the daily
business operations of any of the Pentamation Companies shall remain actively
involved in such daily business operations, consistent with his past practices.
The Principal Shareholders shall regularly consult with SunGard as to the
management of the business and affairs of the Pentamation Companies.
(b) Except in the ordinary course of business of the Pentamation
Companies consistent with past practices, the Pentamation Companies shall not,
and the Principal Shareholders shall not permit any of the Pentamation Companies
to, (i) create or assume any Encumbrances upon any of their business or Assets,
(ii) incur any Obligation, (iii) make any loan or advance, (iv) assume,
guarantee or otherwise become liable for any Obligation of any Person, (v)
commit for any capital expenditure, (vi) purchase, lease, sell, abandon or
otherwise acquire or dispose of any business or Assets, (vii) waive any right or
cancel any debt or claim, (viii) assume or enter into any Contract other than
this Agreement (and any other Contract contemplated herein), (ix) increase, or
authorize an increase in, the compensation or benefits paid or provided to any
of their directors, officers, employees, salesmen, agents or representatives, or
(x) do anything else outside the ordinary course of their business consistent
with its past practices, whether or not specifically described in any of the
foregoing clauses.
(c) Even in the ordinary course of the business of the Pentamation
Companies consistent with their past practices, none of the Pentamation
Companies shall, and the Principal Shareholders shall not permit any of the
Pentamation Companies to, borrow any funds (excluding draws on Pentamation's
existing line of credit in the ordinary course of business consistent with past
practices), lend any funds, purchase any goods or services, lease any equipment,
incur any debt, Obligation, or enter into any Contract (excluding Customer
Contracts and related commitments entered into in the ordinary course of
business consistent with past practices) or other transaction involving, in any
single case, an amount exceeding $50,000 or, in the aggregate, an amount
exceeding $100,000.
(d) The Pentamation Companies shall not, and the Principal
Shareholders shall not permit any of the Pentamation Companies to, (i) permit or
cause a breach or default by them under any of their Contracts, Insurance
Policies, licenses or Permits, (ii) adopt or enter into any new Employee Benefit
Plan or modify any existing Employee Benefit Plan, (iii) participate in any
merger, consolidation or reorganization, (iv) begin to engage in any new type of
business, (v) acquire the business or any bulk assets of any other Person, (vi)
completely or partially liquidate or dissolve, or (vii) terminate any part of
their business.
(e) The Pentamation Companies shall and the Principal Shareholders
shall cause the Pentamation Companies to, (i) maintain their Real Property and
Tangible Property in good condition and repair, (ii) maintain their Insurance
Policies and Permits in full force and effect, (iii) repair, restore or replace
any of their Assets that are damaged, destroyed, lost or
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stolen, (iv) comply with all applicable Contracts, Permits and Laws, (v)
properly file all Tax returns, annual reports and other returns and reports
required to be filed by them, and (vi) fully pay when due all Taxes and fees
payable by them.
(f) The Pentamation Companies shall and the Principal Shareholders
shall cause the Pentamation Companies to, maintain their corporate existence and
good standing in their respective jurisdictions of incorporation and their good
standing in each jurisdiction where they are currently qualified as a foreign
corporation. The Pentamation Companies shall not and the Principal Shareholders
shall not permit the Pentamation Companies to, amend their certificates of
incorporation, bylaws or similar organizational documents.
(g) The Pentamation Companies shall not, and the Principal
Shareholders shall not permit any of the Pentamation Companies to, redeem,
retire or purchase, or create, grant or issue any options, warrants or other
Contracts or Contract Rights with respect to, any shares of Pentamation Stock,
or any other capital stock or other securities of any of the Pentamation
Companies, or create, grant or issue any stock options, stock appreciation
rights, phantom shares or other similar rights.
(h) Except in connection with the Pentamation Merger, the Principal
Shareholders shall not, nor shall any of the Pentamation Companies sell, assign,
give, pledge or otherwise transfer, dispose of or encumber any shares of the
Pentamation Stock, or any other capital stock or other securities of any of the
Pentamation Companies owned or held by it or him.
(i) Each Pentamation Company and each Principal Shareholder shall
maintain all shares of the Pentamation Stock owned or held by it or him free and
clear of all Encumbrances.
(j) None of the Pentamation Companies shall, nor shall any Principal
Shareholder buy, sell or engage in any other transaction involving SunGard
Stock, other securities of SunGard or any equity interests in SunGard, other
than the Merger and the other Transactions.
(k) None of the Pentamation Companies shall, nor shall any of the
Principal Shareholders enter into any Contract that commits it or him to take
any action or omit to take any action that would be inconsistent with any of the
provisions of this Section 6.5 or any other provisions of this Agreement or the
Plan.
6.6 Interim Financial Statements. For each calendar month that ends
between the Latest Balance Sheet Date and the Closing Date, Pentamation shall,
and the Principal Shareholders shall cause Pentamation to, promptly prepare and
deliver to SunGard monthly financial statements, which shall be prepared in
accordance with GAAP and shall reflect all adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of the
financial condition of the Pentamation Companies as of the end of such month and
of the results of operations of the Pentamation Companies for such month.
6.7 SunGard's General Due Diligence Investigation. Between the date of
this Agreement and the Closing Date, the Pentamation Companies and the Principal
Shareholders shall (a) permit SunGard and its authorized representatives to have
reasonable access to the
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facilities and offices of the Pentamation Companies during normal business
hours, to observe the operations of the Pentamation Companies, to meet with the
officers and employees of the Pentamation Companies, to contact the customers,
prospects and suppliers of the Pentamation Companies, and to audit, examine and
copy the files, books and records and other documents and papers of the
Pentamation Companies, and (b) provide to SunGard and its authorized
representatives all information concerning the business, Assets and financial
condition of the Pentamation Companies, the Principal Shareholders and the
Pentamation Stock that SunGard reasonably requests.
6.8 Sungard's Environmental Due Diligence Investigation.
(a) Between the date of this Agreement and the Closing Date, SunGard
and Newco and their agents and representatives shall have the right, without the
obligation, to enter upon any or all of the Pentamation Real Property for the
purpose of testing and conducting such Phase 1, Phase 2 or other environmental
assessments as they deem necessary or appropriate, including but not limited to
taking soil borings and undertaking groundwater investigations. The Pentamation
Companies shall notify SunGard and Newco of any dangerous conditions on the
Pentamation Real Property, including conditions which due to the nature of the
inspection or testing to be performed by or on behalf of SunGard and Newco may
pose a dangerous condition to them or their agents or representatives.
(b) Between the date of this Agreement and the Closing Date, the
Pentamation Companies shall provide SunGard and Newco and their agents and
representatives with access to the Pentamation Real Property at reasonable times
and shall cooperate in the conduct of the environmental assessments, including
complying fully and completely with any reasonable requests for information and
documents. SunGard's and Newco's inspections and investigations shall be
conducted in a manner which does not unreasonably interfere with the Pentamation
Companies' operations.
(c) If SunGard and Newco receive a report with respect to the
environmental condition of any of the Pentamation Real Property which is in any
way unsatisfactory to SunGard or Newco, SunGard and Newco may terminate this
Agreement pursuant to Section 15.1 hereof.
6.9 Consents. Between the date of this Agreement and the Closing Date,
the Pentamation Companies and the Principal Shareholders shall in good faith use
their best efforts to obtain all Consents and approvals of all lenders, lessors,
vendors, customers and other Persons necessary to permit the Merger and the
other Transactions to be consummated without violating any loan agreement, lease
or other material contract to which any of the Pentamation Companies is a party
or by which any of the Pentamation Companies is bound, and to give the notices
and make the filings described on Schedule 3.2.
------------
6.10 Acquisition Proposals. Between the date of this Agreement and the
Closing Date, none of the Pentamation Companies, nor any of the Principal
Shareholders, nor any officer, employee, representative or agent of Pentamation
shall, directly or indirectly, solicit, initiate, encourage or respond to any
inquiries or proposals from, or participate in any discussions or negotiations
with, or provide any non-public information to, any Person or group (other than
SunGard and its officers, employees, representatives and agents) concerning any
bulk sale of any Assets of the Pentamation Companies, any sale of shares of
capital stock or
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other securities of any of the Pentamation Companies, or any merger,
consolidation or similar transaction involving any of the Pentamation Companies.
Each Principal Shareholder shall immediately advise SunGard of, and communicate
to SunGard the terms of, any such inquiry or proposal received by any of the
Pentamation Companies or any Principal Shareholder.
6.11 Advice of Changes. Between the date of this Agreement and the Closing
Date, Pentamation and each Principal Shareholder shall promptly advise SunGard,
in writing, of any fact of which any of them obtains knowledge and that, if
existing or known as of the date of this Agreement, would have been required to
be set forth or disclosed in or pursuant to this Agreement (it being understood
that such advice shall not be deemed to modify the representations, warranties
and covenants of Pentamation and/or of any Principal Shareholder contained in
this Agreement).
6.12 S-4 Financial Statements. Pentamation shall prepare annual and
quarterly financial statements of the type and for the periods required for use
in the Registration Statement on Form S-4 under the 1933 Act and the 1934 Act
(collectively, the "S-4 Financial Statements") which financial statements shall
be prepared in accordance with GAAP and applicable SEC requirements. The S-4
Financial Statements shall be substantially identical to the Annual Financial
Statements and Interim Financial Statements attached to Schedule 3.6A and
-------------
Schedule 3.6B, respectively, except that the S-4 Financial Statements shall not
- -------------
have the exceptions to GAAP noted in Schedule 3.6A and 3.6B, respectively. The
------------- ----
annual financial statements contained in such S-4 Financial Statements shall be
audited by Halbert, Katz & Co., P.C., whose reports shall be without
qualification or explanatory paragraphs. Pentamation and each of the Principal
Shareholders represent and warrant and covenant that (a) all of the audited
annual financial statements contained in the S-4 Financial Statements will (i)
be prepared in accordance with GAAP; and (ii) fairly present the financial
condition and results of operations of Pentamation as of the dates and for the
periods indicated; and (b) the unaudited interim financial statements contained
in the S-4 Financial Statements will be prepared in accordance with GAAP, and
all adjustments that are necessary for a fair presentation thereof (consisting
only of normal recurring adjustments) will be made.
6.13 Pooling of Interests. Each of the Pentamation Companies and the
Principal Shareholders agree (a) not to take any action from the date of this
Agreement to the Closing Date that would adversely affect the ability of SunGard
to account for the Merger as a "pooling of interests," and (b) to use its
reasonable best efforts to attempt to ensure that none of its "affiliates" (as
that term is used in Rule 145 under the 1933 Act) takes any action that could
adversely affect the ability of SunGard to account for the Merger as a "pooling
of interests." Pentamation agrees to provide to Halbert, Katz & Co., P.C. and
PricewaterhouseCoopers L.L.P. such letters as shall be reasonably requested by
Halbert, Katz & Co., P.C. and PricewaterhouseCoopers L.L.P. with respect to the
letters referred to in Sections 3.27 and 9.2.
6.14 HSR Act Filings. As soon as is practical after the date of this
Agreement, (a) Pentamation and the Principal Shareholders shall make all filings
under the HSR Act, that are required to be made by them in connection with the
transactions contemplated by this Agreement, and (b) Pentamation and the
Principal Shareholders shall cooperate with SunGard and Newco in connection with
the filings by the SunGard and Newco under the HSR Act, including, but not
limited to, providing all information reasonably requested by the SunGard and
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Newco and taking all actions reasonably requested by the SunGard and Newco to
cause the early termination of all applicable waiting periods under the HSR Act.
6.15 Best Efforts. Pentamation and each Principal Shareholder shall use
its or his best efforts to consummate the Merger and the other Transactions
(including without limitation the transactions contemplated by the Real Property
Purchase Agreement and the Automobile Purchase Agreement) as of the earliest
practicable date. Neither Pentamation nor any of the Principal Shareholders
shall take, or cause to be taken, or to the best of their ability permit to be
taken, any action that would impair the prospect of completing the Merger and
the other Transactions (including without limitation the transactions
contemplated by the Real Property Purchase Agreement and the Automobile Purchase
Agreement).
Section 7: Certain Obligations of SunGard and Newco Pending Closing
7.1 Corporate Status. Between the date of this Agreement and the Closing
Date:
(a) SunGard and Newco each shall maintain their corporate existence
and good standing in the State of Delaware, and the Commonwealth of
Pennsylvania, respectively, and shall not amend their respective charters or
bylaws in any manner that would be inconsistent with their respective
obligations under this Agreement.
(b) Neither SunGard nor Newco shall enter into any Contract that
commits them to take any action or omit to take any action that would be
inconsistent with any of the provisions of this Section 7.1 or any other
provisions of this Agreement.
7.2 The Principal Shareholders' Due Diligence Investigation. Between the
date of this Agreement and the Closing Date, upon the Pentamation Companies'
request, SunGard shall (a) permit Pentamation, the Principal Shareholders and
their authorized representatives to visit SunGard's facilities during normal
business hours, to meet with SunGard's key officers, and (b) provide to
Pentamation, the Principal Shareholders and their authorized representatives all
publicly available information concerning SunGard and its subsidiaries and their
businesses, assets and financial condition, that Pentamation and the Principal
Shareholders reasonably request.
7.3 Consents. Between the date of this Agreement and the Closing Date,
SunGard and Newco shall in good faith cooperate with the Pentamation Companies
and the Principal Shareholders in their efforts to obtain the consents and
approvals, and to give the notices and make the filings, described in Schedule
--------
4.2.
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7.4 SEC Reports. Between the date of this Agreement and the Closing Date,
SunGard shall file all reports and other filings required to be filed by it
under the 1934 Act, and SunGard shall deliver to the Principal Shareholders,
promptly after they become publicly available, all registration statements,
proxy statements, reports and other filings, and all amendments thereto, that
SunGard files with the SEC.
7.5 Advice of Changes. Between the date of this Agreement and the Closing
Date, SunGard shall promptly advise Pentamation and the Principal Shareholders,
in writing, of any fact of which it obtains knowledge and that, if existing or
known as of the date of this Agreement, would have been required to be set forth
or disclosed pursuant to a representation
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or warranty in this Agreement (it being understood that such advice shall not be
deemed to modify the representations, warranties and covenants of SunGard and/or
Newco contained in this Agreement).
7.6 HSR Act Filings. As soon as is practical after the date of this
Agreement, (a) SunGard and Newco shall make all filings under the HSR Act that
are required to be filed by them in connection with the transactions
contemplated by this Agreement, and (b) SunGard and Newco shall cooperate with
Pentamation and the Principal Shareholders, in connection with the filings by
Pentamation and the Principal Shareholders under the HSR Act, including, but not
limited to, providing all information reasonably requested by Pentamation and
the Principal Shareholders and taking all actions reasonably requested by
Pentamation and the Principal Shareholders to cause the early termination of all
applicable waiting periods.
7.7 Best Efforts. SunGard and Newco shall use their best efforts to
consummate the Merger and the other Transactions as of the earliest practicable
date, and neither SunGard nor Newco shall take, or cause to be taken, or to the
best of their ability permit to be taken, any action that would impair the
prospect of completing the Merger and the other Transactions.
Section 8: Conditions Precedent to Pentamation's and
Principal Shareholders' Closing Obligations
Each obligation of Pentamation and the Principal Shareholders to be
performed on the Closing Date shall be subject to the satisfaction of each of
the conditions stated in this Section 8, except to the extent that such
satisfaction is waived by the Principal Shareholders in writing.
8.1 Effectiveness of Registration Statement. The Registration Statement
shall have become effective under the 1933 Act, no stop order suspending its
effectiveness shall be in effect, and no stop order proceeding with respect
thereto shall be pending or threatened.
8.2 Approval of the Pentamation Shareholders. The Merger shall have been
duly approved by the affirmative vote of Pentamation shareholders entitled to
cast at least a majority of the votes entitled to be cast by the holders of
outstanding shares of Pentamation Stock.
8.3 SunGard's and Newco's Representations. All representations,
warranties and certifications made by SunGard and/or Newco in this Agreement or
pursuant hereto shall not have been false or misleading in any material respect.
8.4 SunGard's and Newco's Performance. All of the terms and conditions of
this Agreement to be satisfied or performed by SunGard and/or Newco on or before
the Closing Date shall have been substantially satisfied or performed.
8.5 Absence of Proceedings. No Proceeding shall have been instituted
(excluding any Proceeding instituted by or on behalf of any of the Pentamation
Companies or any Stockholder), no Judgment shall have been issued, and no new
Law shall have been enacted, on or before the Closing Date, that seeks to or
does prohibit or restrain, or that seeks damages as a result of, the
consummation of the Merger or any of the other Transactions.
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8.6 HSR Act. All applicable waiting periods with respect to the
transactions contemplated by this Agreement shall have expired under the HSR
Act, and neither the Federal Trade Commission nor the Antitrust Division of the
Department of Justice shall have (a) required any party to divest itself of any
assets in order to consummate such transactions, or (b) taken any actions to
prohibit the consummation of such transactions.
8.7 Average Stock Price. The Market Value of SunGard Stock (as defined in
the Plan) shall be greater than or equal to $32.00.
Section 9: Conditions Precedent to SunGard's and Newco's Closing Obligations
Each obligation of SunGard and Newco to be performed on the Closing Date
shall be subject to the satisfaction of each of the conditions stated in this
Section 9, except to the extent that such satisfaction is waived by SunGard in
writing.
9.1 Effectiveness of Registration Statement. The Registration Statement
shall have become effective under the 1933 Act, no stop order suspending its
effectiveness shall be in effect, and no stop order proceeding with respect
thereto shall be pending or threatened.
9.2 Qualification for Pooling Treatment. SunGard shall have received (i)
letters from PricewaterhouseCoopers L.L.P., dated as of a date prior to the date
that the Registration Statement is filed with the SEC and as of the Closing Date
and (ii) a letter from Halbert, Katz & Co. P.C. dated as of the Closing Date, to
the effect that, based on the facts known to such accountants as of such date,
the Merger will qualify as a "pooling of interests" in accordance with generally
accepted accounting principles, Accounting Principles Board Opinion No. 16 and
all published rules, regulations and policies of the SEC, if closed and
consummated in accordance with this Agreement and the Plan. The receipt of such
a letter from PricewaterhouseCoopers L.L.P. dated as of a date prior to the date
that the Registration Statement is filed with the SEC shall also be a condition
precedent to SunGard's and Newco's obligation to file the Registration
Statement.
9.3 Approval of the Pentamation Shareholders. The Merger shall have been
duly approved by the affirmative vote of Pentamation shareholders entitled to
cast at least a majority of the votes entitled to be cast by the holders of
outstanding shares of Pentamation Stock.
9.4 Pentamation's and the Principal Shareholders' Representations. All
representations, warranties and certifications made by Pentamation and/or any
Principal Shareholder in this Agreement or pursuant hereto shall not have been
false or misleading in any material respect.
9.5 Pentamation's and the Principal Shareholders' Performance. All of the
terms and conditions of this Agreement to be satisfied or performed by
Pentamation and/or any Principal Shareholder on or before the Closing Date shall
have been substantially satisfied or performed.
9.6 Absence of Proceedings. No Proceeding shall have been instituted
(excluding any such Proceeding initiated by or on behalf SunGard or any of its
subsidiaries), no Judgment shall have been issued, and no new Law shall have
been enacted, on or before the Closing
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Date, that seeks to or does prohibit or restrain, or that seeks damages as a
result of, the consummation of the Merger or any of the other Transactions.
9.7 Adverse Changes. There shall not have been any material adverse
change or material casualty loss affecting the Pentamation Companies or their
business, Assets or financial condition, between the date of this Agreement and
the Closing Date, and there shall not have been any material adverse change in
the financial performance of the Pentamation Companies between the date of this
Agreement and the Closing Date.
9.8 Escrow Agreement. The Escrow Agreement (as defined in Section
10.2(h)) shall have been signed by the holders of at least 90% of the
outstanding Pentamation Stock.
9.9 Real Property Purchase Agreement. Closing of the transactions
contemplated under the Real Property Purchase Agreement shall been completed in
accordance with the terms of such agreement.
9.10 Automobile Purchase Agreement. Closing of the transactions
contemplated under the Automobile Purchase Agreement shall been completed in
accordance with the terms of such agreement.
9.11 HSR Act. All applicable waiting periods with respect to the
transactions contemplated by this Agreement shall have expired under the HSR
Act, and neither the Federal Trade Commission nor the Antitrust Division of the
Department of Justice shall have (a) required any party to divest itself of any
assets in order to consummate such transactions, or (b) taken any actions to
prohibit the consummation of such transactions.
9.12 Repayment of Company Loans by Principal Shareholders. Each of the
Principal Shareholders shall have made payment in full of all outstanding
principal and accrued and unpaid interest with respect to all loans made by the
Company to such Principal Shareholder. Any amount which remains unpaid on the
Closing Date shall be repaid by withholding from the shares of SunGard Stock to
be issued to such Principal Shareholder at the Closing that number of shares of
SunGard Stock (rounded to the nearest whole share) equal to (a) the amount which
remains unpaid divided by (b) the Market Value of SunGard Stock, as defined in
the Plan.
9.13 Real Estate Documents. On or prior to the Closing Date:
9.13.1 Title. Pentamation shall own the Bethlehem Real Property in
fee simple absolute and possess good and marketable title to the Bethlehem Real
Property subject only to those easements, restrictions, or encumbrances approved
by SunGard, in its sole and absolute discretion, prior to Closing.
9.13.2 Title Insurance. Pentamation shall furnish SunGard with a
1992 ALTA owner's title insurance policy issued by a national title insurance
company acceptable to SunGard, dated within 90 days prior to the Closing Date,
insuring the Bethlehem Real Property in the amount of $7,500,000 and naming
Pentamation as the insured owner. Said title insurance policy shall have the
standard and general exceptions deleted, as well as the creditors' rights
exception, and shall include the survey, access, tax parcel, contiguity, and
restrictions (PA Endorsement 104) endorsements.
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9.13.3 Survey. Pentamation shall provide to SunGard an "as-built"
survey completed within 90 days prior to the Closing Date, and prepared in
accordance with the Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys, including Items 1-11 and 13 from Table A of the Optional Survey
Responsibilities and Specifications. The survey shall show the Bethlehem Real
Property free and clear of any easements and encroachments unless otherwise
acceptable to SunGard and shall be prepared with reference to the title
insurance policy.
9.13.4 Tenant Estoppel Letters. Pentamation shall provide SunGard
with original, executed estoppel letters in the form attached hereto as Exhibit
D from all Tenants, licensees and occupants of the Bethlehem Real Property.
9.13.5 Landlord Estoppel Letters. Pentamation shall provide
SunGard with original, executed estoppel letters in the form attached hereto as
Exhibit E from all landlords of any Pentamation Real Property, along with any
consents required under any leases for the Pentamation Real Property.
9.13.6 Mortgagor's Consent. Pentamation shall furnish SunGard with
proof of the consent by the mortgagee on the Bethlehem Real Property to the
assignment and assumption of the debt on that property, to the extent that such
consent is required in connection with Pentamation's acquisition of the
Bethlehem Real Property from GLS and any subsequent consent required as a result
of this Reorganization Agreement.
9.13.7 Environmental Report. SunGard shall have the right to
obtain a Phase I, and, to the extent required, a Phase II environmental
assessment of the Bethlehem Real Property within ninety (90) days prior to the
Closing Date. In the event that SunGard elects to obtain such environmental
reports, it is a condition precedent to SunGard's obligations hereunder that
such reports show that the Bethlehem Real Property is free and clear of any
Hazardous Substances and in compliance with Environmental Laws.
9.13.8 Miscellaneous. Pentamation shall provide SunGard with proof
of payment of any transfer taxes owed as a result of Pentamation's acquisition
of the Bethlehem Real Property, proof that all condominium fees and dues have
been paid in full through the Closing Date and proof of the receipt of any other
consents required in connection with the Pentamation Real Property (for example,
from any condominium association).
Section 10: Closing
10.1 Closing. The closing of the Merger (the "Closing") shall be held on a
date designated by SunGard which shall be no later than the second business day
after the satisfaction or waiver of the conditions contained in Sections 8 and 9
(the "Closing Date"), at a time and location that is mutually acceptable to the
parties. On the Closing Date or as soon thereafter as is practicable, the
parties shall cause the Plan and proper Articles of Merger to be filed with the
proper officials of the Commonwealth of Pennsylvania, and the parties shall take
such further actions as may be required by the Commonwealth of Pennsylvania, and
any other applicable Laws in connection with the consummation of the Merger.
The Merger shall be effective on the date such filing is made with the
Commonwealth of Pennsylvania (the "Effective Date").
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10.2 Principal Shareholders' Obligations at Closing. At the Closing, the
Principal Shareholders shall deliver the following to SunGard:
(a) Stock certificates, or affidavits of loss in form reasonably
acceptable to SunGard and duly executed, representing all of the issued and
outstanding shares of Pentamation Stock held by the Principal Shareholders and
their affiliates, together with assignments separate from certificate in blank,
dated the Effective Date and duly executed by the Pentamation shareholder.
(b) Stamps or other proper evidence of the payment of any stock
transfer or similar Taxes due as a result of the transfer of Pentamation Stock
by any Principal Shareholder pursuant to the Transactions.
(c) All instruments or documents necessary to change the names of the
individuals who have access to or are authorized to make withdrawals from or
dispositions of all bank accounts, other accounts, certificates of deposits,
marketable securities, other investments, safe deposit boxes, lock boxes and
safes of the Pentamation Companies described on Schedule 34 and all keys and
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combinations to all safe deposit boxes, lock boxes and safes of the Pentamation
Companies and other depositories described on Schedule 34.
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(d) A certificate, dated the Closing Date, in form and substance
satisfactory to SunGard, signed by the President and Chief Financial Officer of
Pentamation and by each of the Principal Shareholders, certifying, jointly and
severally, that (i) all representations and warranties made by Pentamation
and/or the Principal Shareholders in this Agreement are correct in all material
respects as of the Closing Date, as if made on and as of the Closing Date,
except for changes contemplated or permitted by this Agreement, (ii) all of the
terms and conditions of this Agreement to be satisfied or performed by
Pentamation and/or any Principal Shareholder on or before the Closing Date have
been substantially satisfied or performed, and (iii) there has not been any
material adverse change or material casualty loss affecting any of the
Pentamation Companies, or their business, Assets or financial condition, between
the date of this Agreement and the Closing Date, and there has not been any
material adverse change in the Pentamation Companies' financial performance
between the date of this Agreement and the Closing Date.
(e) Proper documentary evidence that the transaction contemplated by
the Real Property Purchase Agreement and the Automobile Purchase Agreement have
been completed in accordance with the terms of this agreement.
(f) Articles of Merger for the Commonwealth of Pennsylvania, in form
and substance, acceptable to the parties ("Articles of Merger"), dated the
Closing Date and duly executed by Pentamation.
(g) The original signed copies of all Consents listed on Schedule 32.
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(h) An escrow agreement, substantially in the form attached hereto as
Exhibit F ("Escrow Agreement"), dated the Closing Date, and duly executed by
Pentamation, each of the Principal Shareholders and the holders of at least 90%
of the outstanding Pentamation Stock.
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(i) All of the original minute books, stock and share books and
similar records of the Pentamation Companies (including those of any applicable
predecessors and including original stock or share certificates evidencing
Pentamation's ownership of each of its subsidiaries) and duly executed
resignations, dated the Effective Date, of all directors and officers of the
Pentamation Companies other than as specified by SunGard.
(j) Good standing certificates or equivalent for each of the
Pentamation Companies, dated no earlier than ten (10) days before the Closing
Date, from the applicable jurisdiction of formation or organization and from
each other jurisdiction in which it is qualified or registered to do business as
a foreign corporation or company limited by shares.
(k) A certificate of Secretary of Pentamation as to the incumbency and
signatures of the officers of Pentamation executing this Agreement and the
documents delivered pursuant hereto.
(l) Copies of the resolutions duly adopted by the board of directors
and shareholders of Pentamation authorizing Pentamation to execute, deliver and
perform this Agreement and the Plan and to consummate the Transactions,
certified by an officer of Pentamation as in full force and effect, without
modification or rescission, on and as of the Closing Date.
(m) Such opinions of counsel representing Pentamation and the
Principal Shareholders, addressed to SunGard and dated the Closing Date, in form
and substance acceptable to SunGard.
(n) A General Release of the Pentamation Companies in form acceptable
to SunGard, dated the Closing Date and duly executed by each of the Principal
Shareholders and the directors and officers of the Pentamation Companies.
(o) Proper documentary evidence that the 1985 Lien has been satisfied,
discharged and paid in full.
(p) A Share Conversion Table after calculating the Number of Fully
Diluted Common Shares and the Merger Exchange Ratio (as defined in the Plan)
setting forth: (i) the name of each Pentamation shareholder, (ii) the number of
shares of Pentamation Stock owned by such shareholder and (iii) the number of
shares of SunGard Stock to be received by each such shareholder in connection
with the transactions hereunder, executed by Pentamation and the Principal
Shareholders.
(q) All of the documents required to be delivered pursuant to Section
9.13.
(r) A report from Asset Control Services addressed to Pentamation as
to the fair market value of the Automobiles as of the date of transfer of the
Automobiles to Pentamation pursuant to the Automobile Purchase Agreement (the
"Automobile FMV").
(s) Proper documentary evidence of the amount of indebtedness to which
the Automobiles were subject as of the date of transfer of the Automobiles to
Pentamation pursuant to the Automobile Purchase Agreement (the "Automobile
Indebtedness").
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(t) Proper documentary evidence of the amount of indebtedness to which
the Bethlehem Real Property was subject as of the date of transfer of the
Bethlehem Real Property to Pentamation pursuant to the Real Property Purchase
Agreement (the "Bethlehem Real Property Indebtedness").
10.3 SunGard's and Newco's Obligations at Closing. At the Closing, SunGard
and Newco shall deliver the following to the Principal Shareholders:
(a) The Certificate of Merger duly executed by Newco.
(b) The Escrow Agreement duly executed by SunGard.
(c) A certificate, dated the Closing Date, in form and substance
satisfactory to the Principal Shareholders, signed by a Vice President and the
Chief Financial or Chief Accounting Officer of SunGard, certifying that (i) all
representations and warranties made by SunGard and/or Newco in this Agreement
are correct in all material respects as of the Closing Date, as if made on and
as of the Closing Date, except for changes contemplated or permitted by this
Agreement and (ii) all of the terms and conditions of this Agreement to be
satisfied or performed by SunGard and/or Newco on or before the Closing Date
have been substantially satisfied or performed.
(d) Good standing certificates for SunGard and Newco, dated no earlier
than ten (10) days before the Closing Date, from the State of Delaware.
(e) Copies of the resolutions duly adopted by the board of directors
of SunGard and by the board of directors and the sole shareholder of Newco,
authorizing SunGard and Newco, respectively, to execute, deliver and perform
this Agreement and to consummate the Transactions, certified by an officer of
SunGard or Newco, respectively, as in full force and effect, without
modification or rescission, on and as of the Closing Date.
(f) A certificate of Secretary of each of SunGard and Newco as to the
incumbency and signatures of the officers of SunGard and Newco executing this
Agreement and the documents delivered pursuant hereto.
(g) All other agreements, certificates, instruments, opinions of
counsel and documents reasonably requested by the Principal Shareholders in
order to fully consummate the Transactions and carry out the purposes and intent
of this Agreement.
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Section 11: Certain Obligations of the Principal Shareholders after Closing
11.1 Receipts. The Principal Shareholders shall deliver to SunGard
receipts acknowledging receipt of certificates representing the shares of
SunGard Stock.
11.2 Restrictions on Dispositions of SunGard Stock. From and after the
Closing Date, none of the Principal Shareholders shall sell, assign, give,
pledge (except in connection with fully recourse bank loans) or otherwise
transfer, dispose of or reduce his or its risk relating to any of his or its
shares of capital stock or other securities of SunGard until SunGard shall have
published financial results covering at least 30 days of post-Merger combined
operations of SunGard and the Pentamation Companies, and, thereafter, except in
compliance with applicable federal and state securities laws.
11.3 Cooperation with SunGard and Newco. From and after the Closing Date,
(a) each of the Principal Shareholders shall fully cooperate to transfer to
SunGard and Newco the full control and enjoyment of the Pentamation Business and
Assets of the Pentamation Companies, (b) none of the Principal Shareholders
shall take any action, directly or indirectly, alone or together with others,
that obstructs or impairs the smooth assumption by SunGard and Newco of the
Pentamation Business; (c) each Principal Shareholder shall fully cooperate with
SunGard and Newco in connection with the preparation and audit of any financial
statements of the Pentamation Companies for periods before the Closing Date,
including, where appropriate, the signing of such management representation
letters are required in connection with such audit; and (d) the Principal
Shareholders shall promptly deliver to SunGard and Newco all correspondence,
papers, documents and other items and materials received by any of the Principal
Shareholders or found to be in the possession of any of the Principal
Shareholders which pertain to the Pentamation Business or the Assets. At any
time and from time to time after the Closing Date, at SunGard's request and
without further consideration (but at SunGard's expense), each of the Principal
Shareholders shall promptly execute and deliver all such further agreements,
certificates, instruments and documents and perform such further actions as
SunGard may reasonably request, in order to fully consummate the Merger and the
other Transactions and to fully carry out the purposes and intent of this
Agreement, including, but not limited to, such documents and actions as may be
required in connection with the continuation or termination of the employee
benefit plans of the Pentamation Companies, the adoption by the Surviving
Corporation of SunGard's employee benefit plans, and the filing of tax returns
of the Pentamation Companies for all periods ending on, before or including the
Closing Date.
11.4 Phantom Stock Plan. The Company's FY '97 Three Year Phantom Stock
Plan ("Phantom Stock Plan") shall continue through and until September 30, 1999
at which time it shall be terminated and no further awards shall be granted or
made thereunder by the Company; provided however, that any properly accrued
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obligations of the Company with respect to the Phantom Stock Plan as of
termination (without giving effect to any extraordinary changes to Pentamation's
net book value per share as a result of the consummation of the Merger and the
other Transactions contemplated hereby) shall be paid in accordance with the
terms of the Phantom Stock Plan.
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Section 12: Certain Obligations of the Stockholders, SunGard
and/or the Surviving Corporation after Closing
12.1 Tax Periods Through the Closing Date. The Principal Shareholders
shall prepare or cause to be prepared all Tax Returns with respect to the
Surviving Corporation and each of its subsidiaries for taxable periods ending on
or before the Closing Date ("Short-Period Returns") and shall provide the Short-
Period Tax Returns to SunGard at least thirty (30) days before the due date
therefor, as extended by any proper extension. The Principal Shareholders shall
include on the Short-Period Returns the income of the Surviving Corporation and
each of its subsidiaries for all applicable periods ending on or before the
Closing Date. SunGard shall review the Short-Period Returns but shall not
change their content without the Principal Shareholders' consent (which shall
not be unreasonably withheld), and shall cause the Surviving Corporation and
each of its subsidiaries to timely file the Short-Period Returns. The income of
the Surviving Corporation and each of its subsidiaries through the Closing Date
shall be computed as if its taxable year ended on and included the Closing Date.
12.2 Tax Periods After and Including the Closing Date. SunGard shall
timely prepare and file or cause to be timely prepared and filed all Tax Returns
for the Surviving Corporation and its subsidiaries required to be filed for
taxable periods ending after the Closing Date. SunGard shall timely pay or cause
to be paid the amount of Taxes due shown on such Returns.
12.3 Audits. SunGard shall have sole control over all audits and other
proceedings that relate to Taxes of the Surviving Corporation and any of its
subsidiaries.
12.4 Disposition of Employee Benefit Plans. As soon as is practicable
after the Effective Date, SunGard and the executives of the Pentamation
Companies shall review the Employee Benefits Plans of the Pentamation Companies
to determine which such plans should remain in effect as plans of the Surviving
Corporation and which should be replaced with SunGard's Employee Benefit Plans,
with a view toward replacing all of the Employee Benefit Plans of the
Pentamation Companies with SunGard's Employee Benefit Plans except where cost
factors or unusual circumstances dictate otherwise. If such termination of the
Pentamation Companies' employee benefit plans causes any timing gap in
comparable SunGard coverage, then the Pentamation Companies' relevant benefit
plan will be continued until such timing gap does not exist.
12.5 Delivery of Certificates. As soon as practicable, SunGard shall
deliver to the shareholders certificates representing the shares of SunGard
Stock to which the shareholders are entitled in accordance with the Plan, which
provides that SunGard shall promptly deliver to the Principal Shareholders
certificates representing 90% of the number of shares of SunGard Stock into
which shares of Pentamation Stock are converted, with the balance of the shares
to be held in escrow pursuant to the Escrow Agreement, provided, however, that
SunGard may withhold such certificate from any Pentamation shareholder until
such shareholder has executed the Escrow Agreement.
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Section 13: Restrictive Covenants of the Principal Shareholders.
13.1 Certain Acknowledgments. Each of the Principal Shareholders expressly
acknowledges that:
(a) The Enterprise Resource Planning businesses (collectively,
"SunGard's ERP Business") conducted by the Pentamation Companies and that
conducted by other subsidiaries of SunGard, now or in the future (SunGard and
all such existing and future subsidiaries of SunGard, including the Pentamation
Companies post-Closing are referred to as the "SunGard Group") involve the
provision of information support systems and software for financial, human
resources and revenue management for governments and educational institutions
and all related Software and services which SunGard may in the future develop
internally or obtain through acquisition.
(b) SunGard's ERP Business is highly competitive, is marketed
throughout the United States, throughout Europe and in many other locations
worldwide, and requires long sales "lead times" often exceeding one year.
(c) The SunGard Group expends substantial time and money, on an
ongoing basis, to train its employees, maintain and expand its customer base,
and improve and develop its Software, technology, databases, products and
services.
(d) In connection with the Transactions, during his tenure as a
shareholder, director and/or employee of the Pentamation Companies before
Closing, and, if applicable, during his or her tenure as an employee of the
SunGard Group after Closing, he has had and will continue to have access to,
receive, learn, develop and/or conceive proprietary and confidential knowledge
and information of the SunGard Group; such knowledge and information must be
kept in strict confidence to protect SunGard's ERP Business and maintain the
SunGard Group's competitive positions in the marketplace; and such knowledge and
information would be useful to competitors of the SunGard Group for indefinite
periods of time.
(e) The covenants of this Section 13 (the "Covenants") are a material
part of the agreement among the parties hereto and are an integral part of the
obligations of the Principal Shareholders hereunder; the Covenants are supported
by good and adequate consideration; and the Covenants are reasonable and
necessary to protect the legitimate business interests of the SunGard Group.
13.2 Nondisclosure Covenants. At all times after the Closing Date, except
with SunGard's prior written consent, or except in connection with the proper
performance of services for and as an employee of the SunGard Group, the
Principal Shareholders shall not, directly or indirectly, in any capacity:
(a) Communicate, publish or otherwise disclose to any Person, or use
for the benefit of any Person, any confidential or proprietary property,
knowledge or information of the SunGard Group or concerning any of its business,
Software, Assets or financial condition, no matter when or how such knowledge or
information was acquired, including (i) the identity of customers and prospects,
their specific requirements, and the names, addresses and telephone numbers of
individual contacts at customers and prospects; (ii) prices, renewal dates and
other detailed terms of customer and supplier contracts and proposals; (iii)
pricing policies,
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marketing and sales strategies, methods of delivering products and services, and
product and service development projects and strategies; (iv) source code,
object code, formats, user manuals, technical manuals and other documentation
for Software products; (v) screen designs, report designs and other designs,
concepts and visual expressions for Software products; (vi) designs, concepts,
know-how, user manuals, technical manuals and other documentation for trading
systems, communications networks and related technologies; (vii) employment and
payroll records; (viii) forecasts, budgets and other nonpublic financial
information; and (ix) expansion plans, management policies, methods of
operation, and other business strategies and policies.
(b) Disclose, use or refer to any proprietary Software, technology,
products or services or other confidential or proprietary knowledge or
information of the SunGard Group, no matter when or how acquired, for any
purpose not in furtherance of the businesses and interests of the SunGard Group,
including the purposes of designing, developing, marketing and/or selling any
Software, technology, products or services that are similar to (visually or
functionally) or competitive with any proprietary Software, technology, products
or services of the SunGard Group.
13.3 Noncompetition Covenants. During the period beginning on the Closing
Date and ending on the fifth anniversary of the Closing Date or, if later, two
years after termination of employment with the SunGard Group, except with
SunGard's prior written consent, none of the Principal Shareholders shall,
directly or indirectly, in any capacity, at any location worldwide:
(a) Communicate with or solicit any Person who is or during such
period becomes a customer, prospect, supplier, employee, salesman, agent or
representative of, or a consultant to, the SunGard Group, in any manner that
interferes or might interfere with such Person's relationship with the SunGard
Group, or in an effort to obtain any such Person as a customer, employee,
supplier, salesman, agent or representative of, or a consultant to, any other
Person that conducts a business competitive with or similar to all or any part
of SunGard's ERP Business.
(b) Market or sell, in any manner other than in furtherance of the
business and interests of the SunGard Group, any Software, technology, products
or services that is similar to (visually or functionally) or competitive with
any proprietary Software, technology, products or services of the SunGard Group.
(c) Establish, own, manage, operate, finance or control, or
participate in the establishment, ownership, management, operation, financing or
control of, or be a director, officer, employee, salesman, agent or
representative of, or be a consultant to, any Person that conducts a business
competitive with or similar to all or any part of SunGard's ERP Business.
13.4 Certain Exclusions. For purposes of this Section 13, confidential and
proprietary knowledge and information of the SunGard Group shall not include any
knowledge and information that is now known by or readily available to the
general public, or that becomes known by or readily available to the general
public other than as a result of any breach of this Section 13. The ownership
by any of the Principal Shareholders of not more than one percent of the
outstanding securities of any public company shall not, by itself, constitute a
breach of the Covenants of Section 13.3, even if such public company competes
with the SunGard
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Group. The provisions of Section 13.3(b) and Section 13.3(c) shall not apply to
Appleton in the event that his employment with the SunGard Group is terminated
by the SunGard Group without cause.
13.5 Enforcement of Covenants. Each of the Principal Shareholders
expressly acknowledges that it would be extremely difficult to measure the
damages that might result from any breach of the Covenants, and that any breach
of the Covenants will result in irreparable injury to the SunGard Group for
which money damages could not adequately compensate. If a breach of the
Covenants occurs, SunGard shall be entitled, in addition to all other rights and
remedies that SunGard may have at law or in equity, to have an injunction issued
by any competent court enjoining and restraining any or all of the Principal
Shareholders and all other Persons involved therein from continuing such breach.
The existence of any claim or cause of action that any or all of the Principal
Shareholders or any such other Person may have against any member of the SunGard
Group shall not constitute a defense or bar to the enforcement of any of the
Covenants. If SunGard must resort to litigation to enforce any of the Covenants
that has a fixed term, then such term shall be extended for a period of time
equal to the period during which a breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a breach occurred or, if later, the last day of the original
fixed term of such Covenant.
13.6 Scope of Covenants. If any Covenant, or any part thereof, or the
application thereof, is construed to be invalid, illegal or unenforceable, then
the other Covenants, or the other portions of such Covenant, or the application
thereof, shall not be affected thereby and shall be enforceable without regard
thereto. If any of the Covenants is determined to be unenforceable because of
its scope, duration, geographical area or other factor, then the court making
such determination shall have the power to reduce or limit such scope, duration,
area or other factor, and such Covenant shall then be enforceable in its reduced
or limited form.
Section 14: Indemnification
14.1 Principal Shareholders' Indemnification. From and after the Closing
Date, each of the Principal Shareholders, jointly and severally, shall indemnify
and hold harmless the members of the SunGard Group, and their respective
successors and assigns, and their respective directors, officers, employees,
agents and representatives, from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs and expenses,
including reasonable attorney's fees and court costs, arising out of or caused
by, directly or indirectly, any of the following:
(a) Any misrepresentation, breach or failure of any warranty or
representation made by Pentamation and/or the Principal Shareholders in or
pursuant to this Agreement.
(b) Any failure or refusal by Pentamation and/or the Principal
Shareholders to satisfy or perform any covenant, term or condition of this
Agreement required to be satisfied or performed by any or all of them.
(c) Any matters disclosed in Schedule 3.20 to the extent that such
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matters result in liability or losses in excess of those contemplated in such
Schedule.
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(d) Any Proceeding against the SunGard Group by any Person (other than
the Principal Shareholders) arising out of or caused by, directly or indirectly,
any act or omission of any of the Pentamation Companies, or any of their
stockholders, members, directors, officers, employees, agents or
representatives, occurring at any time on or before the Closing Date.
(e) Any deficiency, adjustment or assessment for Taxes made against or
imposed upon any of the Pentamation Companies (or any of their predecessors or
successors) with respect to any period ending on or before the Closing Date.
The right of the SunGard Group to indemnification under this Section 14.1(e)
shall not be affected by the fact that such deficiency, adjustment or assessment
is made against or imposed upon SunGard as a result of the fact that, after the
Closing Date, the Pentamation Companies shall be included in the consolidated
federal income tax returns filed by SunGard.
(f) Any Proceeding against the SunGard Group arising under any
Environmental Laws in connection with or arising from any Pentamation
Environmental Conditions existing at any time on or before the Closing Date.
14.2 Indemnification Procedures. With respect to each event, occurrence or
matter (an "Indemnification Matter") as to which the SunGard Group (the
"Indemnitee") is entitled to indemnification from the Principal Shareholders
(the "Indemnitor") under Section 14.1:
(a) Within ten (10) days after the Indemnitee receives written
documents underlying the Indemnification Matter or, if the Indemnification
Matter does not involve a third party action, suit, claim or demand, promptly
after the Indemnitee first has actual knowledge of the Indemnification Matter,
the Indemnitee shall give notice to the Indemnitor ("Claim Notice") of the
nature of the Indemnification Matter and the amount demanded or claimed in
connection therewith ("Claim Amount"), together with copies of any such written
documents.
(b) If a third party action, suit, claim or demand is involved, then,
upon receipt of the Indemnification Notice, the Indemnitor shall, at its expense
and through counsel of its choice, promptly assume and have sole control over
the litigation, defense or settlement (the "Defense") of the Indemnification
Matter, except that (i) the Indemnitee may, at its option and expense and
through counsel of its choice, participate in (but not control) the Defense;
(ii) if the Indemnitee reasonably believes that the handling of the Defense by
the Indemnitor may have a material adverse effect on the Indemnitee, its
business or financial condition, or its relationship with any customer,
prospect, supplier, employee, salesman, consultant, agent or representative,
then the Indemnitee may, at its option and expense and through counsel of its
choice, assume control of the Defense, provided that the Indemnitor shall be
entitled to participate in the Defense at its expense and through counsel of its
choice; (iii) the Indemnitor shall not consent to any Judgment, or agree to any
settlement, without the Indemnitee's prior written consent; and (iv) if the
Indemnitor does not promptly assume control over the Defense or, after doing so,
does not continue to prosecute the Defense in good faith, the Indemnitee may, at
its option and through counsel of its choice, but at the Indemnitor's expense,
assume control over the Defense. In any event, the Indemnitor and the
Indemnitee shall fully cooperate with each other in connection with the Defense,
including by furnishing all available documentary or other evidence as is
reasonably requested by the other.
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(c) The final amount owed by the Indemnitor to the Indemnitee (if any)
shall be determined by a final Judgment (without further right of appeal) or by
a settlement agreement or similar Contract executed by the parties involved
("Indemnification Amount"). At any time after such Judgment is rendered or such
settlement agreement or similar Contract is executed, the Indemnitee may give
notice to the Indemnitor ("Payment Notice") demanding payment of the
Indemnification Amount.
14.3 Limits on Indemnification. Indemnitor's liability under this Section
14 shall be limited as follows (except as provided in Section 14.4):
(a) Threshold. No amount shall be payable by the Indemnitor under
this Section 14 unless and until the aggregate amount otherwise payable by the
Indemnitor under this Section 14 exceeds One Hundred Thousand Dollars
($100,000), in which event the Indemnitor shall pay such aggregate amount and
all future amounts payable by the Indemnitor under this Section 14.
(b) Ceiling. The Indemnitor's total liability under this Section 14
shall not exceed the product of (i) the number of shares of SunGard Stock issued
pursuant to the Plan on the Closing Date and (ii) the Market Value of SunGard
Stock (as defined in the Plan); provided however, that the total liability of
any Principal Shareholder under this Section 14 shall not exceed the product of
(i) number of shares of SunGard Stock issued pursuant to the Plan to such
Principal Shareholder (including any shares of SunGard Stock issued to
shareholders who are affiliates (as defined in the 1933 Act) of such Principal
Shareholder and any shares of SunGard Stock issued to such Principal Shareholder
or his affiliates held pursuant to the Escrow Agreement) and (ii) the Market
Value of SunGard Stock (as defined in the Plan).
(c) Time Periods.
(i) With respect to Indemnification Matters expected to be
encountered in the routine audit process of a wholly owned subsidiary of
SunGard, the Indemnitor shall not be liable as to any such Indemnification
Matter for which the Indemnitee does not give an Indemnification Notice to the
Indemnitor in accordance with 14.2(a) by April 30, 2000.
(ii) With respect to Indemnification Matters set forth in Section
14.1(c), there shall be no time limit.
(iii) With respect to all other Indemnification Matters, the
Indemnitor shall not be liable as to any such Indemnification Matter for which
the Indemnitee does not give an Indemnification Notice to the Indemnitor in
accordance with Section 14.2(a) within twelve (12) months after the Closing
Date.
14.4 Exceptions to Limitations. None of the limitations set forth in
Section 14.3 shall apply in the case of any Indemnification Matter involving (a)
intentional misrepresentation, fraud or a criminal matter, (b) title to or
infringement caused by any Software, technology, service or product which, at
any time before Closing, was marketed, licensed, maintained, supported, owned,
or claimed to have been owned by any of the Pentamation Companies; (c) record
or beneficial ownership of any shares of capital stock or membership interests
in any
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of the Pentamation Companies; (d) Taxes, (e) Environmental Matters or (f)
covenants or other obligations to be performed after Closing.
14.5 Recovery. The SunGard Group shall be entitled to recover from any or
all of the Principal Shareholders and/or the other shareholders of Pentamation,
any applicable amounts for indemnification payments hereunder as follows:
(a) To the extent that the Escrowed Stock (as defined and valued in
the Escrow Agreement) is available and sufficient to cover the Indemnification
Amount, the Indemnification Amount shall be satisfied by a distribution of
Escrowed Stock to SunGard in accordance with the Escrow Agreement.
(b) To the extent that the Escrowed Stock is not available or
sufficient to cover the Indemnification Amount, each of the Principal
Shareholders shall, jointly and severally, pay all or the remaining balance of
the Indemnification Amount to SunGard within five (5) business days after the
Payment Notice is given.
14.6 Setoff and Holdback. In addition to all other rights and remedies
that the Indemnitee may have, the Indemnitee shall have the right to setoff,
against any cash or liquid assets due to the Indemnitor (whether under this
Agreement, any of the other Contracts contemplated by this Agreement, or
otherwise), any Indemnification Amounts for which the Indemnitee is entitled to
indemnification under this Section 14. The Indemnitee's rights to
indemnification under this Section 14 shall not be in any manner limited by or
to this right of setoff. If any Indemnification Matters are pending at a time
when the Indemnitee is required to pay or deliver any such cash or liquid assets
due to the Indemnitor, then the Indemnitee shall have the right, upon notice to
the Indemnitor, to withhold from such payment or delivery, until final
determination of such pending Indemnification Matters, the total amount for
which the Indemnitor may become liable as a result thereof, as determined by the
Indemnitee reasonably and in good faith. Any payment or delivery by the
Indemnitee to the Indemnitor of cash or liquid assets held back by the
Indemnitee in accordance with this Section 14.6 shall be accompanied by interest
(in like kind) from the date on which such payment or delivery was originally
due, calculated at an annual rate equal to the Eurodollar rate published in the
"Money Rates" section (or such future section as may replace it) of The Wall
Street Journal (Eastern Edition) on such original due date.
Section 15: Other Provisions
15.1 Termination. At any time before the Closing, whether or not the
Merger has been approved by Pentamation's shareholders, this Agreement may be
terminated and the Merger abandoned in accordance with any of the following
methods:
(a) By the mutual written consents of SunGard and Pentamation,
authorized by their respective boards of directors.
(b) By written notice from SunGard to Pentamation, or from Pentamation
to SunGard, if it becomes certain (for all practical purposes) that any of the
conditions to the closing obligations of the party giving such notice cannot be
satisfied on or before August 31, 1999, for a reason other than such party's
default, and such party is not willing to waive the satisfaction of such
condition.
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(c) By written notice from SunGard to Pentamation, or from Pentamation
to SunGard, if the Closing does not occur on or before August 31, 1999 for any
reason other than a breach of this Agreement by the party giving such notice.
15.2 Publicity. At all times after the Closing Date, without the prior
written consent of SunGard, neither Pentamation nor any of the Principal
Shareholders shall make any public announcement regarding the Transactions, nor
shall they in any manner disseminate any information regarding the Pentamation
Companies, SunGard or the Transactions.
15.3 Fees and Expenses. SunGard shall pay all of the fees and expenses
incurred by it and/or Newco and the Principal Shareholders shall pay any fees
and expenses incurred by any of them, or the Pentamation Companies in
negotiating and preparing this Agreement (and all other Contracts and documents
executed in connection herewith or therewith) and in consummating the
Transactions. The Pentamation Companies and the Principal Shareholders shall
not, collectively, incur legal fees and expenses, accounting fees and expenses,
valuation fees and expenses and investment banking fees and expenses with
respect to the Transactions exceeding a total of $200,000 (excluding real estate
transfer taxes payable with respect to the Real Property Purchase Agreement and
sales taxes payable with respect to the Automobile Purchase Agreement). All
legal fees and accounting fees incurred by the Pentamation Companies and the
Principal Shareholders shall be reasonable and based upon the actual time spent
on the Transactions and on standard hourly rates.
15.4 Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one (1) business day
after being sent by a nationally recognized overnight delivery service, postage
or delivery charges prepaid or five (5) business days after being sent by
registered or certified mail, return receipt requested, postage charges prepaid.
Notices also may be given by prepaid facsimile and shall be effective on the
date transmitted if confirmed within 48 hours thereafter by a signed original
sent in one of the manners provided in the preceding sentence. Notices to
Pentamation (prior to Closing) and each of the Principal Shareholders shall be
sent to their respective addresses stated on Page 1 of this Agreement, and
copies of notices to Pentamation (prior to Closing) and the Principal
Shareholders shall be sent simultaneously to Fredric C. Jacobs, Esquire, 214
Bushkill Street, Easton, PA 18042-1886. Notices to SunGard, Newco and/or
Pentamation (after Closing) shall be sent to SunGard's address stated on page
one of this Agreement to the attention of its General Counsel, with a copy sent
simultaneously to the same address to the attention of its Chief Financial
Officer. Any party may change its address for notice and the address to which
copies must be sent by giving notice of the new addresses to the other parties
in accordance with this Section 15.4, provided that any such change of address
notice shall not be effective unless and until received.
15.5 Survival. All representations, warranties and covenants made in this
Agreement or pursuant hereto shall survive the date of this Agreement, the
Closing Date and the consummation of the Transactions, subject to the provisions
of Sections 14.3 and 14.4.
15.6 Release for Joint and Several Liability. Effective from and after the
Closing Date, each of the Principal Shareholders hereby releases, remises and
forever discharges Pentamation, and its predecessors, successors and assigns,
and the directors, officers,
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employees, agents and representatives of the foregoing, of and from any and all
actions, causes of action, suits, claims, demands, debts, liabilities and
obligations of any nature, fixed or contingent, known or unknown, whether at law
or in equity, by reason of any representation, warranty, and/or covenant made,
or any obligation undertaken, by Pentamation, jointly and severally with the
Principal Shareholders, pursuant to this Agreement or any other agreements or
documents executed in connection with the Transactions, including but not
limited to, any claim or cause of action that any of the Principal Shareholders
may have against Pentamation for contribution or indemnification. Without
limiting the generality of the foregoing, each of the Principal Shareholders
release, remise and discharge Pentamation and the Surviving Corporation from any
claim for indemnification or contribution for Indemnification Matters for which
such Principal Shareholders may be liable arising under Section 14.
15.7 Interpretation of Representations. Each representation and warranty
made in this Agreement or pursuant hereto is independent of all other
representations and warranties made by the same parties, whether or not covering
related or similar matters, and must be independently and separately satisfied.
Exceptions or qualifications to any such representation or warranty shall not be
construed as exceptions or qualifications to any other representation or
warranty.
15.8 Reliance by SunGard and Newco. Notwithstanding the right of SunGard
and Newco to investigate the business, Assets and financial condition of the
Pentamation Companies, and notwithstanding any knowledge obtained or obtainable
by SunGard and Newco as a result of such investigation, SunGard and Newco have
the unqualified right to rely upon, and have relied upon, each of the
representations and warranties made by the Principal Shareholders and
Pentamation in this Agreement or pursuant hereto.
15.9 Entire Understanding. This Agreement, together with the Exhibits and
Schedules hereto, the Plan, the Affiliate Agreements, the Voting and Cooperation
Agreement and the Escrow Agreement, state the entire understanding among the
parties with respect to the subject matter hereof, and supersede all prior oral
and written communications and agreements, and all contemporaneous oral
communications and agreements, with respect to the subject matter hereof,
including all confidentiality letter agreements and letters of intent previously
entered into among some or all of the parties hereto. No amendment or
modification of this Agreement shall be effective unless in writing and signed
by the party against whom enforcement is sought.
Pentamation may agree to any amendment or supplement to this Agreement, or
a waiver of any provision of this Agreement, either before or after the approval
of the shareholders of Pentamation is obtained (as contemplated by this
Agreement) and without seeking further shareholder approval, so long as such
amendment, supplement or waiver does not result in a decrease in the Merger
Exchange Ratio (as defined in the Plan) or have a material adverse effect on the
shareholders of Pentamation.
15.10 Parties in Interest. This Agreement shall bind, benefit, and be
enforceable by and against Pentamation, SunGard and Newco and their respective
successors and assigns, and the Principal Shareholders and their respective
heirs, estates and personal representatives. No party shall in any manner assign
any of its or his rights or obligations under this Agreement without the express
prior written consent of the other parties.
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15.11 Waivers. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of, or
shall preclude any other or further exercise of, any right, power or remedy.
15.12 Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
15.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
15.14 Section Headings. Section and subsection headings in this Agreement
are for convenience of reference only, do not constitute a part of this
Agreement, and shall not affect its interpretation.
15.15 References. All words used in this Agreement shall be construed to
be of such number and gender as the context requires or permits.
15.16 Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
15.17 Jurisdiction and Process. In any action between or among any of the
parties, whether arising out of this Agreement or otherwise, (a) each of the
parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Pennsylvania, (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the Commonwealth of Pennsylvania, (c) each of the parties irrevocably waives the
right to trial by jury, (d) each of the parties irrevocably consents to service
of process by first class certified mail, return receipt requested, postage
prepaid, to the address at which such party is to receive notice in accordance
with Section 15.4, and (e) the prevailing parties shall be entitled to recover
their reasonable attorneys' fees and court costs from the other parties.
15.18 Post-Closing Actions by the Surviving Corporation. No action taken
by the Surviving Corporation after the Closing, with respect to this Agreement,
the Plan, or the Transactions, including any waiver, consent or approval, shall
be effective unless approved in writing by a majority of the Surviving
Corporation's Board of Directors.
15.19 No Third-Party Beneficiaries. No provision of this Agreement is
intended to or shall be construed to grant or confer any right to enforce this
Agreement, or any remedy for breach of this Agreement, to or upon any Person
other than the parties hereto, including any
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customer, prospect, supplier, employee, contractor, salesman, agent or
representative of any of the Pentamation Companies.
15.20 Nature of Transactions. The parties intend that the Merger and the
other Transactions shall constitute a pooling-of-interests under GAAP and a tax-
free reorganization under the Internal Revenue Code of 1986, as amended.
15.21 Bankruptcy Qualification. Each representation or warranty made in or
pursuant to this Agreement regarding the enforceability of any Contract shall be
qualified to the extent that such enforceability may be effected by bankruptcy,
insolvency and other similar Laws or equitable principles (but not those
concerning fraudulent conveyance) generally affecting creditors' rights and
remedies.
15.22 Right of Representative to Act for Principal Shareholder. Each of
the Principal Shareholders expressly grants to Feather (the "Representative")
the full power and authority to represent such Principal Shareholder and to take
any and all actions with respect to this Agreement on behalf of such Principal
Shareholder including, but not limited to, (a) administering any Indemnification
Matter on behalf of the Principal Shareholders, agreeing to the settlement of
any Indemnification Matter and otherwise handling and negotiating
Indemnification Matters; and (b) agreeing to any waiver, consent or amendment
under or to this Agreement, provided that no such waiver, consent or amendment
shall affect the amount or allocation of payments of Merger Consideration to any
Principal Shareholder who does not expressly consent thereto in writing. Each of
the Principal Shareholders acknowledges that this Section 15.22 is intended to
have the broadest possible scope for the purpose of promoting the efficient
negotiation and handling of all matters which arise under or in connection with
this Agreement.
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Witness the due execution and delivery hereof, intending to be legally
bound hereby, as of the date first stated above.
SUNGARD DATA SYSTEMS INC. PEI ACQUISITION INC.
By: _________________________ By: _____________________
Name: _______________________ Name: ___________________
Title: ______________________ Title: __________________
PENTAMATION ENTERPRISES, INC.
By: _________________________
Name: _______________________
Title: ______________________
PRINCIPAL SHAREHOLDERS:
_____________________________
Jeffrey P. Feather
_____________________________
David P. Bloys
_____________________________
Donald V. Appleton
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APPENDIX B
AGREEMENT AND PLAN OF MERGER
PARTIES: PENTAMATION ENTERPRISES, INC.
a Pennsylvania corporation ("Pentamation")
One Bethlehem Plaza
Bethlehem, PA 18018
SUNGARD DATA SYSTEMS INC.
a Delaware corporation ("SunGard")
1285 Drummers Lane
Wayne, Pennsylvania 19087
PEI ACQUISITION INC.
a Pennsylvania corporation ("Newco")
1285 Drummers Lane
Wayne, Pennsylvania 19087
DATE: May 6, 1999
BACKGROUND: Newco is a wholly-owned subsidiary of SunGard. Pentamation,
SunGard, Newco and Jeffrey P. Feather, David P. Bloys and Donald V. Appleton
(collectively, the "Principal Shareholders") have entered into an Agreement and
Plan of Reorganization, dated this date (the "Reorganization Agreement"), that
contemplates the consolidation and merger of Newco with and into Pentamation
(the "Merger") in accordance with the provisions of the Reorganization Agreement
and the provisions of this Agreement and Plan of Merger (this "Plan").
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and subject to the satisfaction of the terms and conditions set forth herein and
in the Reorganization Agreement, the parties hereto, intending to be legally
bound, agree as follows:
1. Merger. On the Effective Date (as defined below), Newco shall be
consolidated and merged with and into Pentamation in accordance with the
provisions of this Plan and in compliance with the Pennsylvania Business
Corporation Law and any other applicable corporate laws (the "Corporation
Laws"), and the Merger shall have the effect provided for in the Corporation
Laws. Pentamation (sometimes referred to as the "Surviving Corporation") shall
be the surviving corporation of the Merger and shall continue to exist and to be
governed by the laws of the Commonwealth of Pennsylvania. The corporate
existence and identity of Pentamation, with its purposes and powers, shall
continue unaffected and unimpaired by the Merger, and Pentamation shall become a
wholly owned subsidiary of SunGard after the Effective Date. On the Effective
Date, Pentamation shall succeed to and be fully vested with the corporate
existence and identity of Newco, and the separate corporate existence and
identity of Newco shall cease.
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2. Name. The name of the Surviving Corporation shall be "Pentamation
Enterprises, Inc."
3. Articles. Immediately after the Merger, the Articles of Incorporation
of the Surviving Corporation shall be the Articles of Incorporation of
Pentamation immediately prior to the Merger.
4. Bylaws. Immediately after the Merger, the Bylaws of the Surviving
Corporation shall be the Bylaws of Pentamation immediately prior to the Merger.
5. Directors. Immediately after the Merger, the directors of the
Surviving corporation shall be the following persons, who shall serve in
accordance with the Bylaws of the Surviving Corporation:
Robert F. Clarke
Lawrence A. Gross
Michael J. Ruane
6. Officers. Immediately after the Merger, the officers of the Surviving
Corporation shall be the following persons, who shall serve in accordance with
the Bylaws of the Surviving Corporation:
Jeffrey P. Feather... Chief Executive Officer
Donald V. Appleton... President, Chief Operating Officer
David Madea.......... Vice President-Finance, Chief Financial Officer
Sara G. Armstrong.... Vice President, Assistant Secretary
Andrew P. Bronstein.. Vice President, Assistant Secretary, Treasurer
Lawrence A. Gross.... Vice President, Secretary
Michael J. Ruane..... Assistant Vice President, Assistant Secretary
7. Conversion of Newco Stock. On the Effective Date, all of the shares
of common stock of Newco, issued and outstanding immediately before the
Effective Date shall, by virtue of the Merger and without any action on the part
of the holder thereof, be automatically converted into and become that total
number of shares of common stock, no par value, with a stated value of $.015
per share, of the Surviving Corporation as shall be equal to the total number of
shares of Pentamation Stock (as defined in Section 8(a)) issued and outstanding
on the Effective Date. It is the intention of the parties that, immediately
after the Merger, SunGard shall own all of the issued and outstanding capital
stock of the Surviving Corporation.
8. Conversion of Pentamation Capital Stock.
(a) On the Effective Date, each share of Pentamation capital stock
("Pentamation Stock") issued and outstanding immediately before the Effective
Date, shall, by virtue of the Merger and without any action on the part of the
holder thereof, be automatically converted into and become that number of shares
of common stock of SunGard, $0.01 par value per share ("SunGard Stock") as shall
be equal to the result of the following formula with the result rounded off to
seven decimal places (such result is hereinafter referred to as the "Merger
Exchange Ratio"):
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(i) If the Market Value of SunGard Stock (as hereinafter
defined) is greater than or equal to $34.00 and less than or equal to $46.00,
then the Merger Exchange Ratio shall be equal to the result of the following
formula:
915,000 + Additional Shares
---------------------------------------------
Number of Fully Diluted Pentamation Shares
(ii) If the Market Value of SunGard Stock is less than $34.00,
then the Merger Exchange Ratio shall be equal to the result of the following
formula; provided that the total shares of SunGard Stock issued in consideration
for the Pentamation Shares shall not exceed 972,188 plus the Additional Shares:
[ $31,110,000 + Additional Shares x 1
----------------- -------------------------------------
Market Value of Number of Fully Diluted Pentamation
SunGard Stock] Shares
(iii) If the Market Value of SunGard Stock is greater than
$46.00, then the Merger Exchange Ratio shall be equal to the result of the
following formula; provided that the total shares of SunGard Stock issued in
consideration for the Pentamation Shares shall not exceed 876,875 plus the
Additional Shares:
[ $42,090,000 + Additional Shares x 1
----------------- -------------------------------------
Market Value of Number of Fully Diluted Pentamation
SunGard Stock] Shares
As used in this Plan:
(b) the "Market Value of SunGard Stock" shall equal the arithmetic
average of the last reported sale prices of one share of SunGard Stock, as
reported on The New York Stock Exchange during the twenty (20) trading days
ending on and including the trading day two days before the Closing Date; and
(c) the "Number of Fully Diluted Pentamation Shares" shall equal the
sum of (i) the shares of Pentamation Stock issued and outstanding on the
Effective Date and (ii) that number of additional shares of Pentamation Stock
that would be issued and outstanding on the Effective Date assuming the exercise
or conversion of all options, warrants or rights (whether exercisable or
convertible then or in the future) to purchase or acquire Pentamation Stock
which options, warrants or rights are outstanding on the Effective Date. As of
the date of the Plan, the Number of Fully Diluted Pentamation Shares is 842,734.
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(d) Additional Shares means that number of shares of SunGard Stock as
shall be determined by the following formula:
[$7,500,000 - Bethlehem Real Property Indebtedness] + [Automobile FMV -
-----------------------------------------------------------------------
Automobile Indebtedness]
------------------------
Market Value of SunGard Stock
The terms "Automobile FMV," "Automobile Indebtedness" and "Bethlehem Real
Property Indebtedness" shall be as determined pursuant to Sections 10.2(r), (s)
and (t), respectively, of the Reorganization Agreement.
(e) If, between the date of the Reorganization Agreement and the
Effective Date, there is a change in the number of issued and outstanding shares
of SunGard Stock as a result of a stock split, reverse stock split, stock
dividend, reclassification, exchange of shares or similar recapitalization, then
the number of shares of SunGard Stock and prices per share of SunGard Stock set
forth in Section 8(a) and the Market Value of SunGard Stock shall be
appropriately adjusted. The number of shares of SunGard Stock and prices per
share of SunGard Stock set forth in Section 8(a) and the Market Value of SunGard
Stock shall not be adjusted as a result of any other changes in the number of
issued and outstanding shares of SunGard Stock, such as changes resulting from
acquisitions or offerings or changes resulting from exercises of stock options,
purchases or awards of stock, or similar transactions under SunGard's stock
option, purchase and award plans.
(f) No fractional shares of SunGard Stock shall be issued as a result
of the Merger. In lieu of the issuance of fractional shares, the number of
shares of SunGard Stock to be issued to each shareholder in accordance with this
Plan shall be rounded up or down to the nearest whole number of shares of
SunGard Stock.
9. Stock Options. On the Effective Date, all options to acquire shares
of Pentamation Stock that are issued and outstanding immediately before the
Effective Date and which have been described in Schedule 3.3B to the
Reorganization Agreement (collectively, the "Options"), by virtue of the Merger
and without any action on the part of the holder thereof, shall be automatically
exchanged for and substituted with options to purchase SunGard Stock under the
applicable SunGard stock option plan except that (a) the number of shares
issuable upon exercise of such Options shall be that number of shares of SunGard
Stock (rounded off to the nearest whole number of shares) equal to the number of
shares of Pentamation Stock issuable upon exercise of such Options immediately
before the Effective Date, multiplied by the Merger Exchange Ratio, (b) the
exercise price per share of SunGard Stock under such Options shall be that
amount (rounded up to the nearest whole cent) equal to the exercise price per
share of Pentamation Stock under such Options immediately before the Effective
Date, divided by the Merger Exchange Ratio and (c) the terms of the Options as
to exerciseability, vesting and termination shall be as provided in the Options.
10. Pentamation Stock held by Pentamation. On the Effective Date, any
shares of Pentamation Stock that are held by Pentamation (as treasury shares)
immediately before the Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, be automatically canceled.
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11. Exchange Procedures. SunGard shall designate its transfer agent to
act as the "Exchange Agent" under this Plan. As soon as is practicable after
the Effective Date, SunGard or the Exchange Agent shall mail, to each
shareholder, instructions for use in effecting the surrender of their respective
certificates representing shares of Pentamation Stock to the Exchange Agent.
Upon the surrender of all of such certificates to the Exchange Agent by a
shareholder in accordance with such instructions, the Exchange Agent shall
exchange such certificates for (a) a new certificate representing 90% of the
SunGard Stock to be issued to such shareholder pursuant to this Plan ("Closing
Stock"), which shall be promptly delivered to the shareholder (or in accordance
with instructions provided by the shareholder) provided, however, that SunGard
my withhold such certificate from any shareholder until such shareholder has
executed the Escrow Agreement (as hereafter defined); and (b) a new certificate
for the balance of the SunGard Stock to be issued to such shareholder pursuant
to this Plan ("Escrow Stock"), which shall be held in escrow and distributed in
accordance with the terms of the Escrow Agreement attached as Exhibit F to the
Reorganization Agreement ("Escrow Agreement"). The term of the Escrow Agreement
shall be binding on each Pentamation shareholder by virtue of the Merger and
regardless of whether such Pentamation shareholder has executed the Escrow
Agreement. If applicable, such certificates shall be accompanied by any
distributions due with respect to shares of SunGard Stock that were paid to
SunGard's stockholders of record as of a date between the Effective Date and the
date of distribution of either the certificate representing the Closing Stock or
the certificate representing the Escrow Stock. Until all of a shareholder's
certificates representing shares of Pentamation Stock are surrendered in
accordance with the foregoing, the outstanding certificates which have not been
surrendered shall be deemed to evidence ownership of the number of shares of
SunGard Stock to be issued to such shareholder pursuant to this Plan, subject to
the escrow requirement described above.
12. Effective Date. As used in this Plan, the "Effective Date" shall mean
the date upon which proper Articles of Merger for the Merger have been duly
signed and filed with the proper officials of the Commonwealth of Pennsylvania.
13. Entire Understanding. This Plan, together with the Reorganization
Agreement (and the Exhibits and Schedules thereto), states the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior oral and written communications and agreements, and all
contemporaneous oral communications and agreements, with respect to the subject
matter hereof. No amendment or modification of this Plan, and no waiver of any
provision of this Plan, shall be effective unless in writing and signed by the
party against whom enforcement is sought. Pentamation may agree to any
amendment or supplement to this Plan, or a waiver of any provision of this Plan,
either before or after the approval of the shareholders is obtained (as
contemplated by the Reorganization Agreement) and without seeking further
shareholder approval, so long as such amendment, supplement or waiver does not
have a material adverse effect on the shareholders. The obligations of the
parties under this Plan shall be subject to all of the terms and conditions of
the Reorganization Agreement. If the Reorganization Agreement is terminated in
accordance with its terms, then this Plan shall simultaneously terminate, and
the Merger shall be abandoned without further action by the parties hereto.
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<PAGE>
14. Parties in Interest. This Plan shall bind, benefit and be enforceable
by and against the parties hereto and their respective successors and assigns.
No party hereto shall in any manner assign any of its rights or obligations
under this Plan without the express prior written consent of the other parties.
Nothing in this Plan or the Reorganization Agreement is intended to confer, or
shall be deemed to confer, any rights or remedies upon any persons other than
the parties hereto and their respective stockholders and directors.
15. Severability. If any provision of this Plan is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
16. Counterparts. This Plan may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Plan to produce or
account for more than one counterpart hereof.
17. Section Headings. Section and subsection headings in this Plan are
for convenience of reference only, do not constitute a part of this Plan, and
shall not affect its interpretation.
18. References. All words used in this Plan shall be construed to be of
such number and gender as the context requires or permits.
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<PAGE>
IN TESTIMONY WHEREOF, each undersigned corporation has caused this Agreement
and Plan of Merger to be signed by a duly authorized officer as of the date
first stated above.
PENTAMATION ENTERPRISES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
SUNGARD DATA SYSTEMS INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
PEI ACQUISITION INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
B-7
<PAGE>
APPENDIX C
ESCROW AGREEMENT
PARTIES: PENTAMATION ENTERPRISES, INC.
a Pennsylvania corporation ("Pentamation")
One Bethlehem Plaza
Bethlehem, PA 18018
JEFFREY P. FEATHER ("Feather")
One Bethlehem Plaza
Bethlehem, PA 18018
DAVID P. BLOYS ("Bloys")
One Bethlehem Plaza
Bethlehem, PA 18018
DONALD V. APPLETON ("Appleton")
One Bethlehem Plaza
Bethlehem, PA 18018
THE SHAREHOLDERS OF PENTAMATION
LISTED ON THE SIGNATURE PAGES HERETO
SUNGARD DATA SYSTEMS INC.
a Delaware corporation ("SunGard")
1285 Drummers Lane
Wayne, Pennsylvania 19087
NORWEST BANK, MINNESOTA, N.A. ("Escrow Agent")
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0069
DATE: [_________ __,] 1999
BACKGROUND:
A. Feather, Bloys and Appleton (collectively, the "Principal
Shareholders"), Pentamation, SunGard and Newco are parties to an Agreement and
Plan of Reorganization dated as of May 6, 1999 (the "Reorganization Agreement")
and a related Plan of Merger dated as of May 6, 1999 ("Plan of Merger"),
providing for the merger of Newco with and into Pentamation with the conversion
of all outstanding shares of Pentamation Stock (as defined in the Reorganization
Agreement) into shares of SunGard Stock (as defined in the Plan of Merger), ten
percent (10%) of which, or [_____________] shares of SunGard Stock (the
"Escrowed Stock"), are being deposited with the Escrow Agent to be held in
accordance with this Agreement.
B. Pentamation and SunGard have delivered to the Escrow Agent a list of
names and addresses of Pentamation shareholders (hereinafter, the
"Shareholders") showing as to
<PAGE>
each the number of shares of SunGard Stock (including fractional shares) to be
deposited in respect of the shares of Pentamation Stock owned by such
Shareholder.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Shareholders General Indemnification. From and after the Closing Date
(as defined in the Reorganization Agreement), each of the Shareholders, jointly
and severally, joins in and agrees to be bound by the obligations of the
Principal Shareholders to indemnify and hold harmless, and hereby agrees to
indemnify and hold harmless, the members of the SunGard Group (as defined in the
Reorganization Agreement), and their respective successors and assigns, and
their respective directors, officers, employees, agents and representatives,
from and against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs and expenses, including without
limitation reasonable attorney's fees and court costs, arising out of or caused
by, directly or indirectly, any of the matters set forth in Section 5.3 or
Section 14.1 of the Reorganization Agreement, subject to the terms, conditions
and limitations set forth in Section 14 of the Reorganization Agreement;
provided, however, that the liability of any Shareholder hereunder (other than
the Principal Shareholders) shall be limited to their shares of Escrowed Stock
held hereunder. Nothing in this Agreement shall be deemed to modify, limit or
affect the Obligations (as defined in the Reorganization Agreement) of any
Principal Shareholder under the Reorganization Agreement.
2. Shareholder Accounts. The Escrow Agent shall maintain an account
("Escrow Account") for each Shareholder showing the number of shares of the
Escrowed Stock held by the Escrow Agent for him or her. As soon as practicable
after the date hereof, the Escrow Agent shall mail to each Shareholder a
statement showing the number of shares of the Escrowed Stock held by the Escrow
Agent in his or her Escrow Account. Subsequent Escrow Account statements shall
be mailed to the Shareholders following any reservation in accordance with
Section 3 hereof or any distribution in accordance with Section 4 hereof. All
reservations and distributions of the Escrowed Stock shall be against the
Shareholders' Escrow Accounts on a pro rata basis, based upon the respective
numbers of shares of the Escrowed Stock initially deposited therein, and in all
cases rounded to the nearest whole share. If, between the date of this
Agreement and date on which the last share of Escrowed Stock is distributed
pursuant to Section 5, there is a change in the number of issued and outstanding
shares of SunGard Stock as a result of a stock split, reverse stock split, stock
dividend, reclassification, exchange of shares or similar recapitalization, then
any SunGard Stock payable with respect thereto shall be added to and become part
of the Escrow Account.
3. Valuation of Escrowed Stock. For all purposes of this Agreement, the
value of each share of the Escrowed Stock shall be $[ ] ("Valuation Price")
the arithmetic average of the last reported sale prices of one share of SunGard
Stock as reported on the New York Stock Exchange during the twenty (20) trading
days ending on and including the trading day two days before the Closing Date
(as defined in the Reorganization Agreement). If, between the date of this
Agreement and date on which the last share of Escrowed Stock is distributed
pursuant to Section 5, there is a change in the number of issued and outstanding
shares of SunGard Stock as a result of a stock split, reverse stock split, stock
dividend, reclassification, exchange of shares or similar recapitalization, then
the Valuation Price shall be appropriately adjusted.
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<PAGE>
4. Reservations of Escrowed Stock. Whenever SunGard gives an Claim
Notice (as defined in the Reorganization Agreement) to the Shareholders, it
shall send a copy thereof to the Escrow Agent. Promptly after receipt of an
Indemnification Notice, the Escrow Agent shall reserve on the records of the
Escrow Accounts such number of shares of the Escrowed Stock (rounded to the
nearest whole share) as is equal to the Claim Amount (as defined in the
Reorganization Agreement) set forth in such Indemnification Notice divided by
the Valuation Price, or, if less, all remaining shares of the Escrowed Stock
("Reserved Shares").
5. Distributions of Escrowed Stock. The Escrow Agent shall distribute
the Escrowed Stock in accordance with the following provisions:
a. The Escrow Agent shall distribute shares of the Escrowed Stock at
such time and in such manner as is set forth in any written agreement or written
instructions signed by SunGard and the Representative (as defined in Section 16)
and delivered to the Escrow Agent.
b. Whenever SunGard gives a Payment Notice (as defined in the
Reorganization Agreement) to the Representative, it shall send a copy thereof to
the Escrow Agent. Within five (5) business days after receipt of a Payment
Notice, the Escrow Agent shall distribute from the Escrow Accounts to SunGard
(by delivery of a proper share certificate therefor) such number of shares of
the Escrowed Stock (rounded to the nearest whole share) as is equal to the
Indemnification Amount (as defined in the Reorganization Agreement) set forth in
such Payment Notice divided by the Valuation Price, or, if less, all remaining
shares of the Escrowed Stock.
c. If there are no Claim Notices outstanding on the first
anniversary of the date of this Agreement ("Anniversary"), then, within five (5)
business days after the Anniversary, the Escrow Agent shall distribute to each
of the Shareholders (by delivery of a proper share certificate therefor) any
remaining shares of the Escrowed Stock then held in his or her Escrow Account.
d. If there are Indemnification Notices outstanding on the
Anniversary, then (i) within five (5) business days after the Anniversary, the
Escrow Agent shall distribute to each of the Shareholders (by delivery of a
proper share certificate therefor) any remaining shares of the Escrowed Stock
then held in his Escrow Account other than Reserved Shares, (ii) as each such
outstanding Indemnification Notice is resolved, the Escrow Agent shall
distribute to SunGard any Escrowed Stock to which SunGard becomes entitled in
accordance with Section 4b hereof, and (iii) within five (5) business days after
the last such outstanding Indemnification Notice is resolved and any
corresponding distributions to SunGard are made, the Escrow Agent shall
distribute to each of the Shareholders (by delivery of a proper share
certificate therefor) any remaining shares of the Escrowed Stock then held in
his or her Escrow Account.
6. Voting of Escrowed Shares. Shareholders shall have the right to vote
their respective shares of Escrowed Stock held by the Escrow Agent.
7. Resignation and Removal of Escrow Agent. The Escrow Agent may resign
at any time or be removed by the mutual consent of SunGard and the
Representative upon notice given at least 30 days before the effective date of
such resignation or removal; provided that
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<PAGE>
no resignation or removal of the Escrow Agent and no appointment of a successor
Escrow Agent shall be effective unless and until the successor Escrow Agent
accepts its appointment as Escrow Agent in accordance with this Section 7. If
the Escrow Agent resigns or is removed but SunGard and the Representative fail
to agree upon a successor Escrow Agent within 30 days after they receive notice
of such resignation or removal, then SunGard shall have the right to appoint a
successor Escrow Agent which shall be a commercial bank or trust company having
a combined capital and surplus of at least $100,000,000. Any successor Escrow
Agent, whether appointed by the mutual agreement of SunGard and the
Representative or otherwise, shall execute and deliver to the predecessor Escrow
Agent an instrument accepting such appointment, and thereupon such successor
Escrow Agent shall, without further act, become vested with all the estates,
properties, rights, powers and duties of the predecessor Escrow Agent as if
originally named herein.
8. Liability of Escrow Agent; Expenses. The Escrow Agent shall have no
liability or obligation hereunder except for its willful misconduct or gross
negligence. The Escrow Agent may rely upon any instrument, not only as to its
due execution, validity and effectiveness, but also as to the truth and accuracy
of any information contained therein, which the Escrow Agent shall in good faith
believe to be genuine, to have been signed or presented by the person or persons
purporting to sign the same, and to conform to the provisions of this Agreement.
The Escrow Agent may consult legal counsel selected by it in the event of any
dispute or question of the construction of any of the provisions hereof or of
the Reorganization Agreement or of its duties hereunder, and shall incur no
liability and shall be fully protected in acting in accordance with the opinion
or instruction of such counsel. The fees and expenses of the Escrow Agent
charged and incurred in performing its obligations hereunder shall be borne by
SunGard. Escrow Agent shall be entitled to compensation for its services as
stated in the fee schedule attached hereto as Exhibit A, which such compensation
shall be paid by SunGard. The fee agreed upon for the services rendered
hereunder is intended as full compensation for Escrow Agent's services as
contemplated by this Agreement; provided that, if the conditions for the
disbursement of funds under this Agreement are not fulfilled, or Escrow Agent
renders any material service not contemplated in this Agreement, or there is any
assignment of interest in the subject matter of this Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or Escrow
Agent is made a party to any litigation pertaining to this Agreement or the
subject matter hereof, then Escrow Agent shall be reasonably compensated for
such extraordinary services and reimbursed for all costs and expenses, including
reasonable attorneys fees, occasioned by any such delay, controversy, litigation
or event, and the same shall be recoverable from SunGard.
9. Indemnification of Escrow Agent. SunGard and each of the
Shareholders, jointly and severally, hereby indemnify and hold harmless Escrow
Agent from and against any and all loss, liability, cost, damage and expense,
including, without limitation, reasonable attorneys fees, which Escrow Agent may
suffer or incur by reason of any action, claim or proceeding brought against
Escrow Agent arising out of or relating in any way to this Agreement or any
transaction to which this Agreement relates, unless such action, claim or
proceeding is the result of the willful misconduct or gross negligence of Escrow
Agent.
10. Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one business day
after being sent by a nationally recognized overnight delivery service, or three
business days after being sent by registered or
C-4
<PAGE>
certified mail, return receipt requested, in each case postage or delivery
charges prepaid. Notices may also be given by prepaid facsimile and shall be
effective on the date transmitted if confirmed within 48 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Notices
to SunGard and Newco shall be sent to their respective addresses stated on page
one of this Agreement to the attention of SunGard's General Counsel, with a copy
sent simultaneously to the same address to the attention of SunGard's Chief
Financial Officer. Notices to the Shareholders shall be sent to the Principal
Shareholders as representative of the Shareholders at their respective addresses
stated on page one of this Agreement and counsel to the Principal Shareholders
(at their respective addresses set forth in the Reorganization Agreement).
Notices to the Escrow Agent (including any Payment Notice), shall be sent to its
address stated on page one of this Agreement to the attention of
[_______________], with copies sent simultaneously to, as applicable, SunGard or
the Principal Shareholders and counsel to the Principal Shareholders (at their
respective addresses set forth in the Reorganization Agreement).
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED
UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA, EXCEPT THAT THE FIDUCIARY
DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF MINNESOTA.
12. Assignment; Binding Effect. The rights of the Shareholders hereunder
are personal and may not be assigned or otherwise transferred except by
operation of law. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
13. Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original and all of which together shall constitute one
and the same instrument.
14. Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to the subject matter hereof and cannot be
changed, modified or terminated except by written amendment.
15. Severability. If any provision of this Agreement is construed to be
invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto. Each
Shareholder agrees that the failure of any other Shareholder to execute and
deliver this Agreement shall not affect in any way the validity or
enforceability of this Agreement or the rights of SunGard or Pentamation under
this Agreement, the Plan of Merger or the Reorganization Agreement.
16. Right of Representative to Act for Shareholders. Each of the
Shareholders expressly grants to the Principal Shareholder designated pursuant
to this Section (the "Representative") the full power and authority to represent
such Shareholder and to take any and all actions with respect to this Agreement
on behalf of such Shareholder including, but not limited to, (a) administering
any Indemnification Matter (as defined in the Reorganization Agreement) on
behalf of the Shareholders, agreeing to the settlement of any Indemnification
Matter and otherwise handling and negotiating Indemnification Matters; and (b)
agreeing to any waiver, consent or amendment under or to this Agreement,
provided that no such waiver, consent or amendment shall affect the method of
allocation of payments from the Escrowed
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<PAGE>
Stock as set forth in Section 5 hereof with respect to any Shareholder who does
not expressly consent thereto. Each of the Shareholders acknowledge that this
Section 16 is intended to have the broadest possible scope of the purpose of
promoting the efficient negotiation and handling of all matters which arise
under or in connection with this Agreement. The Representative shall be Jeffrey
P. Feather.
WITNESS THE DUE EXECUTION AND DELIVERY OF THIS ESCROW AGREEMENT AS OF THE
DATE FIRST STATED ABOVE.
SUNGARD DATA SYSTEMS INC.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
PENTAMATION ENTERPRISES, INC.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
PRINCIPAL SHAREHOLDERS:
__________________________________________________
Jeffrey P. Feather
__________________________________________________
David P. Bloys
__________________________________________________
Donald V. Appleton
NORWEST BANK, MINNESOTA, N.A.
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
C-6
<PAGE>
PENTAMATION SHAREHOLDERS
(Please sign and print your name exactly as it appears on your certificate)
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
__________________________ ________________________________________________
Print Name: Address
C-7
<PAGE>
APPENDIX D
SUBCHAPTER D. DISSENTERS RIGHTS
[Pa.C.S.] (S) 1571. Application and effect of subchapter
(A) GENERAL RULE.-- Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of
election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).
(B) EXCEPTIONS.--
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed
to determine the shareholders entitled to notice of and to vote at the
meeting at which a plan specified in any of section 1930, 1931(d),
1932(c) or 1952(d) is to be voted on, are either:
<PAGE>
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any
such shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in
the case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or solely
into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the plan
or the terms of the transaction entitle all shareholders of the class to
vote thereon and require for the adoption of the plan or the effectuation
of the transaction the affirmative vote of a majority of the votes cast by
all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c) (relating
to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of
the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter
regardless of the fact, if it be the case, that the acquisition was
accomplished by the issuance of voting shares of the corporation to be
outstanding immediately after the acquisition sufficient to elect a
majority or more of the directors of the corporation.
(C) GRANT OF OPTIONAL DISSENTERS RIGHTS.-- The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(D) NOTICE OF DISSENTERS RIGHTS.-- Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
<PAGE>
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair
value of their shares by complying with the terms of this subchapter;
and
(2) a copy of this subchapter.
(E) OTHER STATUTES.-- The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(F) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.-- This subchapter may not be
relaxed by any provision of the articles.
(G) CROSS REFERENCES.-- See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
[Pa.C.S.] (S) 1572. Definitions
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"CORPORATION." The issuer of the shares held or owned by the dissenter before
the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
"DISSENTER." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"FAIR VALUE." The fair value of shares immediately before the effectuation of
the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"INTEREST." Interest from the effective date of the corporate action until the
date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
[Pa.C.S.] (S) 1573. Record and beneficial holders and owners
<PAGE>
(A) RECORD HOLDERS OF SHARES.-- A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(B) BENEFICIAL OWNERS OF SHARES.-- A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
[Pa.C.S.] (S) 1574. Notice of intention to dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
[Pa.C.S.] (S) 1575. Notice to demand payment
(A) GENERAL RULE.-- If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to
obtain payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
<PAGE>
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on
whose behalf the shareholder dissents, acquired beneficial ownership of
the shares.
(4) Be accompanied by a copy of this subchapter.
(B) TIME FOR RECEIPT OF DEMAND FOR PAYMENT.-- The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
[Pa.C.S.] (S) 1576. Failure to comply with notice to demand payment, etc.
(A) EFFECT OF FAILURE OF SHAREHOLDER TO ACT.-- A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(B) RESTRICTION ON UNCERTIFICATED SHARES.-- If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(C) RIGHTS RETAINED BY SHAREHOLDER.-- The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
[Pa.C.S.] (S) 1577. Release of restrictions or payment for shares
(A) FAILURE TO EFFECTUATE CORPORATE ACTION.-- Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(B) RENEWAL OF NOTICE TO DEMAND PAYMENT.-- When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(C) PAYMENT OF FAIR VALUE OF SHARES.-- Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
<PAGE>
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not
more than 16 months before the date of remittance or notice together
with the latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(D) FAILURE TO MAKE PAYMENT.-- If the corporation does not remit the amount of
its estimate of the fair value of the shares as provided by subsection (c), it
shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had after
making demand for payment of their fair value.
[Pa.C.S.] (S) 1578. Estimate by dissenter of fair value of shares
(A) GENERAL RULE.-- If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(B) EFFECT OF FAILURE TO FILE ESTIMATE.-- Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
[Pa.C.S.] (S) 1579. Valuation proceedings generally
(A) GENERAL RULE.-- Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
<PAGE>
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(B) MANDATORY JOINDER OF DISSENTERS.-- All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(C) JURISDICTION OF THE COURT.-- The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(D) MEASURE OF RECOVERY.-- Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(E) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION.-- If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the corporation
may do so in the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an application
within the 30-day period, each dissenter entitled to file an application shall
be paid the corporation's estimate of the fair value of the shares and no more,
and may bring an action to recover any amount not previously remitted.
[Pa.C.S.] (S) 1580. Costs and expenses of valuation proceedings
(A) GENERAL RULE.-- The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(B) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEARS.-- Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds
<PAGE>
that the party against whom the fees and expenses are assessed acted in bad
faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to
the rights provided by this subchapter.
(C) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS.-- If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefited.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Delaware General Corporation Law provides, in substance, that Delaware
corporations shall have the power, under specified circumstances, to indemnify
their directors, officers, employees and agents in connection with actions,
suits or proceedings brought against them by third parties and in connection
with actions or suits by or in the right of the corporation, by reason of the
fact that they were or are such directors, officers, employees and agents,
against expenses (including attorney's fees) and, in the case of actions, suits
or proceedings brought by third parties, against judgments, fines and amounts
paid in settlement actually and reasonably incurred in any such action, suit or
proceeding.
The Registrant's Bylaws provide for indemnification to the fullest extent
permitted by the Delaware General Corporation Law. As permitted by the Delaware
General Corporation Law, the Registrant has adopted an amendment to its Amended
and Restated Certificate of Incorporation to eliminate the personal liability
of its directors to the Registrant and its stockholders, in certain
circumstances, for monetary damages arising from a breach of the director's
duty of care. Additionally, the Registrant has entered into indemnification
agreements (in the form approved by the Registrant's stockholders at its 1987
Annual Meeting) with each of its directors and officers. These agreements
provide indemnification to the fullest extent permitted by law and, in certain
respects, provide greater protection than that specifically provided by the
Delaware General Corporation Law. The agreements do not provide indemnification
for, among other things, conduct that is adjudged to be fraud, deliberate
dishonesty or willful misconduct.
The Registrant has obtained directors' and officers' liability insurance
that covers certain liabilities, including liabilities to the Registrant and
its stockholders, in the amount of $20 million.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibits
- ------- --------
<S> <C>
2.1 Agreement and Plan of Reorganization dated May 6, 1999 among SunGard, PEI
Acquisition Inc., Pentamation and the principal shareholders (included in the Proxy
Statement-Prospectus as Appendix A).
2.2 Agreement and Plan of Merger dated May 6, 1999 among SunGard, PEI Acquisition Inc.,
and Pentamation (included in the Proxy Statement-Prospectus as Appendix B).
2.3 Form of Escrow Agreement among Pentamation, SunGard, PEI Acquisition Inc., the
principal shareholders, the shareholders of Pentamation and the Escrow Agent
(included in the Proxy Statement-Prospectus as Appendix C).
5.1 Legal Opinion of Blank Rome Comisky & McCauley LLP.
8.1 Tax Opinion of Blank Rome Comisky & McCauley LLP.
23.1 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.2 Consent of Halbert, Katz & Co., P.C., certified public accountants.
23.3 Consent of Blank Rome Comisky & McCauley LLP (included in Exhibit 5.1).
23.4 Consent of Blank Rome Comisky & McCauley LLP (included in Exhibit 8.1).
24.1 Power of Attorney (see page II-4).
99.1 Form of Voting Agreement and Irrevocable Proxy.
99.2 Form of Affiliate Agreement.
99.3 Form of Pentamation Proxy.
</TABLE>
(b) Financial Statement Schedules
II-1
<PAGE>
No financial data schedules are required for the Registrant or Pentamation.
(c) Item 4(b) Reports
None--not applicable.
Item 22. Undertakings.
(1) The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the Proxy Statement/Prospectus pursuant
to Items 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(2) The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(3) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the Restated Certificate of
Incorporation (the "Certificate of Incorporation") and the Amended and Restated
Bylaws (the "Bylaws") of the Registrant and the Delaware General Corporation
Law, the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the question has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by its is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(5) (A) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(B) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (A) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Wayne, Pennsylvania, on the date
indicated.
SUNGARD DATA SYSTEMS INC.
Date: June 22, 1999 By: /s/ James L. Mann
James L. Mann,
Chief Executive Officer,
President and Chairman of the
Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears
below hereby authorizes James L. Mann and Michael J. Ruane and each of them, as
Attorney-in-Fact, to sign on his behalf individually and in each capacity
stated below, and to file, any amendments, including post-effective amendments,
to this registration statement.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James L. Mann Chief Executive Officer, June 22, 1999
____________________________________ President, and Chairman of
James L. Mann the Board of Directors
(principal executive
officer)
/s/ Michael J. Ruane Chief Financial Officer and June 22, 1999
____________________________________ Vice President--Finance
Michael J. Ruane (principal financial
officer)
/s/ Andrew P. Bronstein Vice President and June 22, 1999
____________________________________ Controller
Andrew P. Bronstein (principal accounting
officer)
/s/ Gregory S. Bentley Director June 22, 1999
____________________________________
Gregory S. Bentley
/s/ Michael C. Brooks Director June 22, 1999
____________________________________
Michael C. Brooks
/s/ Albert A. Eisentat Director June 22, 1999
____________________________________
Albert A. Eisentat
/s/ Bernard Goldstein Director June 22, 1999
____________________________________
Bernard Goldstein
/s/ Michael Roth Director June 22, 1999
____________________________________
Michael Roth
/s/ Malcolm I. Ruddock Director June 22, 1999
____________________________________
Malcolm I. Ruddock
/s/ Lawrence J. Schoenberg Director June 22, 1999
____________________________________
Lawrence J. Schoenberg
</TABLE>
II-3
<PAGE>
EXHIBIT 5.1
OPINION OF BLANK ROME COMISKY & MCCAULEY LLP
June , 1999
SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, PA 19087
Re: Sungard Data Systems Inc.
Registration Statement on Form S-4
----------------------------------
Gentlemen:
We have acted as counsel to SunGard Data Systems Inc. ("SunGard") in
connection with the Registration Statement on Form S-4 (the "Registration
Statement") to be filed by SunGard pursuant to the Securities Act of 1933, as
amended, relating to the issuance of up to 1,200,000 shares (the "Shares")of
common stock, par value $0.01 per share, of SunGard (the "Common Stock") in
connection with the proposed merger ("Merger") of PEI Acquisition, Inc., a
Pennsylvania corporation ("Newco"), with and into Pentamation Enterprises, Inc.,
a Pennsylvania corporation ("Pentamation"). This opinion is furnished pursuant
to the requirements of Item 601(b)(5) of Regulation S-K.
In rendering this opinion, we have examined only the documents listed on
Exhibit "A" attached hereto. We have not performed any independent
investigation other than the document examination described above. Our opinion
is therefore qualified in all respects by the scope of that document
examination. We have assumed and relied on the truth, completeness,
authenticity and due authorization of all documents and records examined and the
genuineness of all signatures. This opinion is limited to the laws of the State
of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
Shares, when issued in the manner contemplated by the Registration Statement,
will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Proxy Statement-Prospectus, which is part of the Registration
Statement.
Very truly yours,
BLANK ROME COMISKY & McCAULEY LLP
<PAGE>
EXHIBIT "A"
1. SunGard's Amended and Restated Certificate of Incorporation and all
amendments thereto.
2. SunGard's Amended and Restated By-Laws.
3. Good Standing Certificate issued by the Secretary of State of the State of
Delaware.
4. Resolutions adopted by the Board of Directors relating to transactions
contemplated by the Registration Statement.
5. SunGard's Registration Statement on Form S-4.
6. The Agreement and Plan of Reorganization and the Agreement and Plan of
Merger.
<PAGE>
Exhibit 8.1
June 22, 1999
SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, PA 19087
Re: Acquisition of Pentamation Enterprises, Inc.
--------------------------------------------
Gentlemen:
You have requested our opinion concerning certain Federal income tax
consequences of the merger of PEI Acquisition, Inc., an entity incorporated
under the Pennsylvania Business Corporation Law, as amended ("Sub"), and a
wholly-owned subsidiary of SunGard Data Systems Inc., a Delaware business
corporation, ("Parent"), with and into Pentamation Enterprises, Inc., an entity
incorporated under the Pennsylvania Business Corporation Law ("Pentamation").
The terms of the merger are described in the Proxy Statement/ Prospectus
contained in the Registration Statement on Form S-4 of Parent to be filed with
the Securities and Exchange Commission (the "Registration Statement"). Our
opinion is based upon our understanding of the facts of and incident to the
transaction, as are set forth in the Registration Statement, and upon the
condition that those facts are true, correct and complete. Further, our opinion
is issued in reliance upon the Officer's Certificates of Parent and Sub and the
Officer's Certificate of Pentamation (attached as exhibits hereto) relating to
the truth, correctness and completeness of those facts and the facts in the
Registration Statement, including the financial statements and exhibits that are
a part thereof. Those exhibits include the Agreement and Plan of Reorganization
and the Agreement and Plan of Merger both dated as of May 6, 1999 by and between
Parent, Sub and Pentamation (together, the "Plan of Merger"). This opinion is
being furnished pursuant to the Plan of Merger, and all capitalized terms
herein, unless otherwise specified, have the meanings assigned thereto in the
Plan of Merger.
In connection with our opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Plan of Merger, the Prospectus and such other documents as we have deemed
necessary or appropriate as a basis for the opinions set forth below. In our
examination we have
<PAGE>
SunGard Data Systems Inc.
Page 2
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to any facts material
to this opinion which we did not independently establish or verify, we have
relied upon statements and representations of officers and other representatives
of Parent, Sub, Pentamation and others. In particular, we have relied upon
certain representations of the managements of Parent, Sub and Pentamation in the
Officer's Certificates which are attached hereto.
In rendering our opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code")/1/, Treasury
Regulations and the pertinent judicial authorities and interpretive rulings of
the Internal Revenue Service (the "Service").
Based solely upon the foregoing and provided that the Merger and the other
transactions contemplated by the Plan of Merger are consummated in the manner
described in the Prospectus, we are of the opinion that under present law, for
federal income tax purposes:
1. The Merger of Sub into Pentamation will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
2. SunGard will recognize no gain or loss upon the exchange of
Pentamation stock solely for shares of SunGard Common Stock. Code Section
354(a).
3. Pentamation shareholders will recognize no gain or loss upon
their exchange of Pentamation stock solely for shares of Parent Common Stock.
Code Section 354(a).
___________________
/1/ Unless otherwise indicated, all section references are to sections of
the Code.
<PAGE>
SunGard Data Systems Inc.
Page 3
4. The basis of the Parent Common Stock received by the shareholders
of Pentamation will be same as the basis of the Pentamation stock surrendered in
exchange. Code Section 358(a)(1).
5. The holding period of the Parent Common Stock received by a
Pentamation shareholder will include the period during which the Pentamation
stock surrendered in exchange therefor was held by such Pentamation shareholder,
provided that the Pentamation stock surrendered was a capital asset in the hands
of such Pentamation shareholder on the date of the exchange. Code Section
1223(a).
This opinion does not address the federal income tax consequences with
respect to the SunGard stock received by the GLS partnership or its partners in
connection with the sale of real estate and automobiles by the GLS partnership
to Pentamation prior to the completion of the merger.
This letter expresses our views only as to the specific issues addressed
above. No opinion is expressed concerning the Federal income tax treatment of
the transaction under any provision of the Code not specifically referenced
herein, including the tax treatment of the substitution by Parent of any options
to purchase Pentamation Common Stock. No opinion is expressed with respect to
state and local taxes, Federal or state securities law, or any other Federal,
state or local law not expressly referenced herein.
Our opinions set forth our legal judgement, and are not binding on the
Service or any other person. Therefore, there can be no assurance that the
conclusions set forth herein would be sustained by a court if challenged.
Further, the opinions set forth represent our conclusions based upon the
documents reviewed by us and the facts presented to us. Any material amendments
to such documents or changes in any significant fact could affect the opinions
expressed herein.
We are pleased to offer this opinion based upon the Federal income tax laws
as of this date. No assurances can be provided as to future changes in or
administrative or judicial interpretations of these laws.
<PAGE>
SunGard Data Systems Inc.
Page 4
This opinion is being delivered in connection with the filing of the
Registration Statement and pursuant to the requirements of Item 601(b)(8) of
Regulation S-K promulgated by the Securities and Exchange Commission. It is
intended solely for the benefit of SunGard and may not be relied upon or
utilized for any other purposes or by any other person and may not be made
available to any other person without our prior written consent.
We hereby consent to the use of this Opinion as an exhibit to the
Registration Statement to be filed by SunGard Data Systems Inc. with the
Securities and Exchange Commission and to the use of our name in the
Registration Statement.
Very truly yours,
BLANK ROME COMISKY & McCAULEY LLP
cms
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 of our report dated February 11, 1999, on our audits of the
consolidated financial statements of SunGard Data Systems, Inc. as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998, which report is included in Sungard Data Systems Inc.'s Annual Report
on Form 10-K. We also consent to the reference to our Firm under the heading
"Experts" in the registration statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 22, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated November 18, 1998 and May 19, 1999, with respect to
the financial statements of Pentamation Enterprises, Inc. included in the
Registration Statement (Form S-4) of SunGard Data Systems Inc., for the
registration of 1,200,000 shares of its common stock.
Halbert, Katz & Co., P.C.
Philadelphia, PA
June 21, 1999
<PAGE>
EXHIBIT 99.1
VOTING AND COOPERATION AGREEMENT
PARTIES: JEFFREY P. FEATHER ("FEATHER")
One Bethlehem Plaza
Bethlehem, PA 18018
DAVID P. BLOYS ("BLOYS")
One Bethlehem Plaza
Bethlehem, PA 18018
DONALD V. APPLETON ("APPLETON")
One Bethlehem Plaza
Bethlehem, PA 18018
SUNGARD DATA SYSTEMS INC.
a Delaware corporation ("Acquiror")
1285 Drummers Lane
Wayne, PA 19087
DATE: May 6, 1999
BACKGROUND: Acquiror, PEI Acquisition, Inc., a Pennsylvania corporation and a
wholly-owned subsidiary of Acquiror ("Newco"), and Pentamation Enterprises,
Inc., a Pennsylvania corporation (the "Company"), are entering into an Agreement
and Plan of Reorganization dated as of the date hereof (the "Reorganization
Agreement"), and a related Plan of Merger dated as of the date hereof (the
"Plan"), which provide (subject to the conditions set forth therein) for the
merger of Newco with and into the Company (the "Merger"). Feather, Bloys and
Appleton are shareholders (collectively, the "Shareholders") of the Company.
As a condition to the willingness of Acquiror and Newco to enter into the
Reorganization Agreement and the Plan, Acquiror and Newco have required that the
Shareholders enter into, and in order to induce Acquiror and Newco to enter into
the Reorganization Agreement, the Shareholders have agreed to enter into, this
Agreement.
Intending to be Legally Bound, in consideration of the foregoing and the
mutual agreements contained herein and in the Reorganization Agreement and Plan,
the parties hereto agree as follows:
1. Certain Definitions
(a) All capitalized terms used but not otherwise defined in this
Agreement have the meanings ascribed to such terms in the Reorganization
Agreement or the Plan.
<PAGE>
(b) "Expiration Date" shall mean the earlier of (i) the date upon
which the Reorganization Agreement is validly terminated pursuant to Section
15.1 thereof, and (ii) the date upon which the Merger becomes effective in
accordance with the terms and conditions of the Reorganization Agreement and the
Plan.
(c) A Shareholder shall be deemed to "Own" or to have acquired
"Ownership" of a security if the Shareholder: (i) is a record owner of such
security; or (ii) is a "beneficial owner" (within the meaning of Rule 13d-3
under the Exchange Act) of such security.
(d) The "Record Date" for a particular matter shall be the date fixed
for persons entitled: (i) to receive notice of, and to vote at, a meeting of the
shareholders of the Company called for the purpose of voting on such matter; or
(ii) to take action by written consent of the shareholders of the Company with
respect to such matter.
(e) "Subject Securities" shall mean: (i) all securities of the Company
(including shares of Company Common Stock and all options, warrants and other
rights to acquire shares of Company Common Stock) Owned by the Shareholders
(individually or jointly) as of the date of this Agreement; and (ii) all
additional securities of the Company (including all additional shares of Company
Common Stock and all additional options, warrants and other rights to acquire
shares of Company Common Stock) of which the Shareholders (individually or
jointly) acquire Ownership during the period from the date of this Agreement
through the Expiration Date.
(f) A Person shall be deemed to have effected a "Transfer" of a
security if such Person directly or indirectly; (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security; or (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such security or any
interest therein.
2. Transfer of Subject Securities
(a) Transferee of Subject Securities to be Bound by this Agreement.
Each of the Shareholders, jointly and severally, agrees that, during the period
from the date of this Agreement through the Expiration Date, such Shareholder
shall not cause or permit any Transfer of any of the Subject Securities Owned by
such Shareholder to be effected unless each Person to which any of such Subject
Securities, or any interest in any of such Subject Securities, is or may be
transferred shall have: (a) executed a counterpart of this Agreement and a proxy
in the form attached hereto as Exhibit A (with such modifications as Acquiror
may reasonably request); and (b) agreed in writing to hold such Subject
Securities (or interest in such Subject Securities) subject to all of the terms
and provisions of this Agreement.
(b) Transfer of Voting Rights. Each of the Shareholders, jointly and
severally, agrees that, during the period from the date of this Agreement
through the Expiration Date, such Shareholder shall ensure that: (a) none of the
Subject Securities Owned by such Shareholder is deposited into a voting trust;
and (b) no proxy is granted, and no agreement or
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<PAGE>
similar agreement is entered into, with respect to any of the Subject Securities
Owned by such Shareholder.
3. Voting of Shares.
(a) Agreement. Each of the Shareholders, jointly and severally,
covenants and agrees that, during the period from the date of this Agreement
through the Expiration Date, at any meeting of the shareholders of the Company,
however called, and at every adjournment or postponement thereof, and in any
written action by consent of the shareholders of the Company, unless otherwise
directed in writing by Acquiror, such Shareholder shall (i) appear, or cause the
holder of record as of the Record Date to appear, at any annual or special
meeting of shareholders of the Company (including the Company's Shareholder
Meeting) for the purpose of establishing a quorum, and (ii) vote or cause to be
voted all issued and outstanding shares of Company Common Stock that are Owned
by such Shareholder (individually or jointly) as of the Record Date: in favor of
the Merger, the execution and delivery by the Company of the Reorganization
Agreement and the Plan and the adoption and approval of the terms thereof and in
favor of the other Transactions and each of the actions contemplated by the
Reorganization Agreement and the Plan and any action required in furtherance
hereof or thereof.
(b) Proxy. Contemporaneously with the execution of this Agreement:
(i) each of the Shareholders shall deliver to Acquiror a proxy in the form
attached hereto as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein (the "Proxy");
and (ii) each of the Shareholders shall cause to be delivered to Acquiror an
additional proxy (in the form attached hereto as Exhibit A) executed on behalf
of the record owner of any issued and outstanding shares of Company Common Stock
that are owned beneficially (but are not owned of record) by such Shareholder.
4. Representations and Warranties of Shareholders. Each of the
Shareholders, jointly and severally, represents and warrants to Acquiror as
follows:
(a) Authorization. Each of the Shareholders has the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement and the Proxy and to perform his, her or its obligations hereunder and
thereunder. This Agreement and the Proxy have been duly executed and delivered
by each of the Shareholders and constitute legal, valid and binding obligations
of the Shareholders, enforceable against each of the Shareholders in accordance
with its terms.
(b) No Conflicts, Required Filings and Consents.
(i) The execution and delivery of this Agreement and the Proxy by each
of the Shareholders do not, and the performance of this Agreement and the Proxy
by each of the Shareholders will not: (A) conflict with or violate any Law,
order, decree or judgment applicable to any of the Shareholders or by which any
of the Shareholders or any of their properties are bound or affected; or (B)
result in any breach of or constitute a default or breach (immediately or after
the giving of notice, passage of time, or both) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the
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<PAGE>
creation of an Encumbrance on any of the Subject Securities pursuant to, any
Contract to which any of the Shareholders is a party or by which any of the
Shareholders or any of their properties are bound or affected.
(ii) The execution and delivery of this Agreement and the Proxy by
each of the Shareholders do not, and the performance of this Agreement and the
Proxy by each of the Shareholders will not, require any Consent of any Person.
(c) Title to Subject Securities. As of the date hereof, each of the
Shareholders Own in the aggregate (including shares owned of record and shares
owned beneficially) the number of issued and outstanding shares of Company
Common Stock set forth below such Shareholder's name on the signature page
hereof, and the number of options, warrants and other rights to acquire shares
of Company Common Stock set forth below such Shareholder's name on the signature
page hereof, and do not directly or indirectly Own, any shares of capital stock
of the Company, or any option, warrant or other right to acquire any shares of
capital stock of the Company, other than the shares and options, warrants and
other rights set forth below such Shareholder's name on the signature page
hereof.
(d) Accuracy of Representations. The representations and warranties
of each of the Shareholders contained in this Agreement are accurate in all
respects as of the date of this Agreement, will be accurate in all respects at
all times through the Expiration Date and will be accurate in all respects as of
the date of the consummation of the Merger as if made on that date.
5. Other Covenants of the Shareholders.
(a) Shareholders Meeting and Pre-Closing Cooperation. Each of the
Shareholders, jointly and severally, covenants and agrees that (i) upon the
request of Acquiror, each Shareholder shall promptly take any and all actions
necessary or desirable to cause the Company Shareholders Meeting to be held
pursuant to the Pennsylvania Business Corporation Law of 1988, as amended, or
any other applicable law, and (ii) each Shareholder shall cause the Company to
perform all of the terms and conditions of the Reorganization Agreement and the
Plan to be satisfied or performed by the Company on or before the Closing Date,
including the obligations under Sections 5 and 6 of the Reorganization
Agreement.
(b) Further Assurances. At any time and from time to time after the
date hereof through the Closing Date, and without additional consideration, each
of the Shareholders will cooperate with Acquiror, take such action and execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, proxies, consents and other instruments as
Acquiror may reasonably request for the purpose of effectively carrying out and
furthering the intent of the Reorganization Agreement, the Plan and this
Agreement.
(c) Legend. Immediately after the execution of this Agreement (and
from time to time prior to the Expiration Date upon the acquisition by any of
the Shareholders (individually or jointly) of Ownership of any shares of Company
Common Stock), each of the Shareholders shall instruct the Company to cause each
certificate of such Shareholder
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<PAGE>
evidencing any issued and outstanding shares of Company Common Stock Owned by
such Shareholder (individually or jointly) to bear a legend in the following
form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT DATED
AS OF MAY 6, 1999, AS IT MAY BE AMENDED, BY AND AMONG JEFFREY P.
FEATHER, DAVID P. BLOYS, DONALD V. APPLETON AND SUNGARD DATA
SYSTEMS INC., A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER.
6. Miscellaneous.
(a) Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made by the Shareholders in this
Agreement shall survive (i) the consummation of the Merger and the other
Transactions, (ii) any termination of the Reorganization Agreement, and (iii)
the Expiration Date.
(b) Notices. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally or one (1) business day
after being sent by a nationally recognized overnight delivery service, postage
or delivery charges prepaid or five (5) business days after being sent by
registered or certified mail, return receipt requested, postage charges prepaid.
Notices also may be given by prepaid facsimile and shall be effective on the
date transmitted if confirmed within 48 hours thereafter by a signed original
sent in one of the manners provided in the preceding sentence. Notices to
Acquiror shall be sent to its address stated on page one of this Agreement to
the attention of Acquiror's General Counsel, with a copy sent simultaneously to
the same address to the attention of Acquiror's Chief Financial Officer.
Notices to the Shareholders shall be sent to their respective addresses stated
on page one of this Agreement, with a copy sent simultaneously to Fredric C.
Jacobs, Esquire, 214 Bushkill Street, Easton, PA 18042-1886. Any party may
change its address for notice and the address to which copies must be sent by
giving notice of the new addresses to the other parties in accordance with this
Section 6(b), provided that any such change of address notice shall not be
effective unless and until received.
(c) Entire Understanding. This Agreement and the other agreements
referred to herein, state the entire understanding among the parties with
respect to the subject matter hereof, and supersede all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(d) Waivers. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or
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<PAGE>
remedy by any party, and no course of dealing between or among any of the
parties, shall constitute a waiver of or shall preclude any other for further
exercise of, any right, power or remedy.
(e) Severability. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
the invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
(g) Section Headings. Section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
(h) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
(i) CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(j) Jurisdiction and Process. In any action between or among any of
the parties, whether arising out of this Agreement or otherwise, (i) each of the
parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Pennsylvania, (ii) if
any such action is commenced in a state court, then, subject to applicable law,
no party shall object to the removal of such action to any federal court located
in the Commonwealth of Pennsylvania, (iii) each of the parties irrevocably
waives the right to trial by jury, (iv) each of the parties irrevocably consents
to service of process by first class certified mail, return receipt requested,
postage prepaid, to the address at which such party is to receive notice in
accordance with Section 6(b), and (v) the prevailing parties shall be entitled
to recover their reasonable attorneys' fees and court costs from the other
parties.
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<PAGE>
(k) Non-exclusivity. The rights and remedies of Acquiror hereunder
are not exclusive of or limited by any other rights or remedies which Acquiror
may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative).
(l) Bankruptcy Qualification. Each representation or warranty made in
or pursuant to this Agreement regarding the enforceability of any Contract shall
be qualified to the extent that such enforceability may be effected by
bankruptcy, insolvency and other similar Laws or equitable principles (but not
those concerning fraudulent conveyance) generally affecting creditors' rights
and remedies.
(m) Construction. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement. As used in this Agreement, the words "include" and "including"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation".
(n) Assignment; Binding Effect. Except as provided herein, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by either of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except that
Acquiror may assign all or any of its rights hereunder to any wholly-owned
subsidiary of Acquiror. Subject to the preceding sentence, this Agreement shall
be binding upon each of the Shareholders and his, her or its heirs, successors
and assigns, and shall inure to the benefit of Acquiror and its successors and
assigns. Without limiting any of the restrictions set forth in Section 2 or
elsewhere in this Agreement, this Agreement shall be binding upon any Person to
whom any Subject Securities are transferred. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective heirs, successors and assigns any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
(o) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that Acquiror shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of proper jurisdiction, this being
in addition to any other remedy to which Acquiror is entitled at law or in
equity.
(p) Other Agreements and Independence of Obligations. Nothing in this
Agreement shall limit any of the rights or remedies of Acquiror or any of the
obligations of the Shareholders under any Affiliate Agreement between Acquiror
and any of the Shareholders or under any other agreement. The covenants and
obligations of the Shareholders set forth in this Agreement shall be construed
as independent of any other agreement or arrangement between any or all of the
Shareholders, on the one hand, and the Company or Acquiror, on the other. The
existence of any claim or cause of action by any or all of the Shareholders
against the Acquiror or the Company shall not constitute a defense to the
enforcement of any of such covenants or obligations against any or all of the
Shareholders.
[balance of page intentionally blank]
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Voting and
Cooperation Agreement to be executed as of the date first stated above.
SUNGARD DATA SYSTEMS INC.
By: ____________________________
Print name:
Print title:
SHAREHOLDERS:
________________________________
Name: Jeffrey P. Feather
Number of issued and outstanding shares of Company
Common Stock owned of record as of the date of
this Agreement:
_____________
Number of additional issued and outstanding shares
of Company Common Stock owned beneficially (but
not of record) as of the date of this Agreement:
_____________
Number of options, warrants and other rights to
acquire shares of Company Common Stock owned of
record as of the date of this Agreement:
_____________
Number of additional options, warrants and other
rights to acquire shares of Company Common Stock
owned beneficially (but not of record) as of the
date of this Agreement:
_____________
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<PAGE>
_______________________________
Name: David P. Bloys
Number of issued and outstanding shares of Company
Common Stock owned of record as of the date of
this Agreement:
_______________
Number of additional issued and outstanding shares
of Company Common Stock owned beneficially (but
not of record) as of the date of this Agreement:
_______________
Number of options, warrants and other rights to
acquire shares of Company Common Stock owned of
record as of the date of this Agreement:
_______________
Number of additional options, warrants and other
rights to acquire shares of Company Common Stock
owned beneficially (but not of record) as of the
date of this Agreement:
_______________
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<PAGE>
__________________________
Name: Donald V. Appleton
Number of issued and outstanding shares of Company
Common Stock owned of record as of the date of
this Agreement:
________________
Number of additional issued and outstanding shares
of Company Common Stock owned beneficially (but
not of record) as of the date of this Agreement:
________________
Number of options, warrants and other rights to
acquire shares of Company Common Stock owned of
record as of the date of this Agreement:
________________
Number of additional options, warrants and other
rights to acquire shares of Company Common Stock
owned beneficially (but not of record) as of the
date of this Agreement:
________________
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<PAGE>
EXHIBIT A
FORM OF IRREVOCABLE PROXY
IRREVOCABLE PROXY
The undersigned Shareholders of Pentamation Enterprises, Inc., a
Pennsylvania corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoint and constitute Lawrence A. Gross, Richard C.
Tarbox and SunGard Data Systems Inc., a Delaware corporation ("Acquiror"), and
each of them, the attorneys and proxies of the undersigned with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to (i) the issued and outstanding shares of capital stock of the
Company owned of record by the undersigned as of the date of this proxy, which
shares are specified on the final page of this proxy and (ii) any and all other
shares of capital stock of the Company which the undersigned (individually or
jointly) may acquire after the date hereof. (The shares of the capital stock of
the Company referred to in clauses (i) and (ii) of the immediately preceding
sentence are collectively referred to as the "Shares.") Upon the execution
hereof, all prior proxies given by the undersigned with respect to any of the
Shares are hereby revoked, and no subsequent proxies will be given with respect
to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with the Voting and Cooperation Agreement, dated as of the date
hereof, between Acquiror and the undersigned (the "Agreement"), and is granted
in consideration of Acquiror entering into the Agreement and Plan of
Reorganization, dated as of the date hereof, among Acquiror, PEI Acquisition
Inc., a Pennsylvania corporation and wholly owned subsidiary of Acquiror, and
the Company (the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings ascribed to such terms in the
Agreement.
The attorneys and proxies named above will be empowered, and may exercise
this proxy, at any time during the period from the date hereof through the
Expiration Date at any meeting of the shareholders of the Company, however
called, and at every adjournment or postponement thereof, or in any written
action by consent of shareholders of the Company, to (i) appear, or cause the
holder of record as of the Record Date to appear, at any annual or special
meeting of shareholders of the Company (including the Company's Shareholders
Meeting) for the purpose of establishing a quorum, and (ii) vote or cause to be
voted the shares (A) in favor of the Merger and the other Transactions, the
execution and delivery by the Company of the Reorganization Agreement and the
Plan and the adoption and approval of the terms thereof and in favor of the
Transactions and each of the other actions contemplated by the Reorganization
Agreement and the Plan and any action required in furtherance hereof and
thereof; (B) against any other action, agreement or transaction that would,
directly or indirectly, result in an Acquisition Transaction; and (C) against
any action, agreement or transaction that is intended or could reasonably be
expected (x) to facilitate a person other than the Acquiror in acquiring the
Company or (y) to impede, interfere with, delay, postpone, discourage or
materially adversely affect the consummation of the Merger.
The undersigned Shareholders may vote the Shares on all other matters.
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<PAGE>
This proxy shall be binding upon the heirs, successors and assigns of the
undersigned (including any transferee of any of the Shares).
Any term or provision of this proxy which is invalid or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this proxy or affecting the validity or
enforceability of any of the terms or provisions of this proxy in any other
jurisdiction. If any provision of this proxy is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
This proxy shall terminate upon the Expiration Date.
Dated: May , 1999
SHAREHOLDERS:
_________________________________
Name: Jeffrey P. Feather
Number of shares of Company Common Stock
owned of record as of the date of this
proxy: ______________
_________________________________
Name: David P. Bloys
Number of shares of Company Common Stock
owned of record as of the date of this
proxy: ______________
_________________________________
Name: Donald V. Appleton
Number of shares of Company Common Stock
owned of record as of the date of this
proxy: ______________
A-2
<PAGE>
EXHIBIT 99.2
AFFILIATE AGREEMENT
PARTIES: THE PERSON NAMED AS SHAREHOLDER ON THE
SIGNATURE PAGE HERETO (the "Shareholder")
One Bethlehem Plaza
Bethlehem, PA 18018
SUNGARD DATA SYSTEMS INC.
a Delaware corporation ("Acquiror")
1285 Drummers Lane
Wayne, PA 19087
DATE: May 6, 1999
Background: Shareholder is a shareholder and/or optionholder of, and is an
officer and/or director of, Pentamation Enterprises, Inc., a Pennsylvania
corporation (the "Company"). Acquiror, the Company and PEI Acquisition, Inc., a
Pennsylvania corporation and a wholly owned subsidiary of Acquiror ("Newco"),
have entered into an Agreement and Plan of Reorganization dated as of the date
hereof (the "Reorganization Agreement") and the related Plan of Merger dated as
of the date hereof ("Plan"), providing for the merger of Newco with and into the
Company (the "Merger"). The Reorganization Agreement contemplates that, upon
consummation of the Merger, (i) holders of shares of the common stock of the
Company will receive shares of common stock of Acquiror ("Acquiror Common
Stock") in exchange for their shares of common stock of the Company and (ii) the
Company will become a wholly owned subsidiary of Acquiror. It is accordingly
contemplated that Shareholder will receive shares of Acquiror Common Stock in
the Merger. Shareholder understands that the Acquiror Common Stock being issued
in the Merger will be issued pursuant to a registration statement on Form S-4,
and that Shareholder may be deemed an "affiliate" of the Company: (i) as such
term is defined for purposes of paragraphs (c) and (d) of Rule 145 under the
Securities Act of 1933, as amended (the "Act"); and (ii) for purposes of
determining Acquiror's eligibility to account for the Merger as a "pooling of
interests" under Accounting Series Releases 130 and 135, as amended, of the
Securities and Exchange Commission (the "SEC"), and under other applicable
"pooling of interests" accounting requirements.
Intending to be Legally Bound, in consideration of the foregoing and the
mutual agreements contained herein and in the Reorganization Agreement and the
Plan, the parties hereto agree as follows:
1. Representations and Warranties of Shareholder. Shareholder represents
and warrants to Acquiror as follows:
(a) Shareholder is the holder and "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the number
of shares of common stock of the Company set forth beneath Shareholder's
signature on the signature page hereof
<PAGE>
(the "Company Shares"), and Shareholder has good and valid title to the Company
Shares, free and clear of any liens, pledges, security interests, adverse
claims, equities, options, proxies, charges, encumbrances or restrictions of any
nature.
(b) Shareholder has carefully read this Affiliate Agreement and, to
the extent Shareholder felt necessary, has discussed with counsel the
limitations imposed on Shareholder's ability to sell, transfer or otherwise
dispose of the Company Shares and the shares of Acquiror Common Stock that
Shareholder is to receive in the Merger (the "Acquiror Shares"). Shareholder
fully understands the limitations this Affiliate Agreement places upon
Shareholder's ability to sell, transfer or otherwise dispose of the Company
Shares and the Acquiror Shares.
(c) Shareholder understands that the representations, warranties and
covenants set forth in this Affiliate Agreement will be relied upon by Acquiror
and its counsel and accountants for purposes of determining Acquiror's
eligibility to account for the Merger as a "pooling of interests" and for
purposes of determining whether Acquiror should proceed with the Merger.
2. Representation and Warranty of Acquiror. Acquiror represents and
warrants to Shareholder that it shall make available adequate current public
information as required by Rule 144(c) promulgated by the SEC under the Act.
3. Prohibitions Against Transfer.
(a) Shareholder agrees that, during the period from the date 30 days
prior to the date of consummation of the Merger through the date on which
financial results covering at least 30 days of post-Merger combined operations
of Acquiror and the Company have been published by Acquiror (within the meaning
of the applicable "pooling of interests" accounting requirements):
(i) Shareholder shall not sell, transfer or otherwise dispose
of, or reduce Shareholder's interest in or risk relating to, (A) any capital
stock of the Company (including, without limitation, the Company Shares and any
additional shares of capital stock of the Company acquired by Shareholder,
whether upon exercise of a stock option or otherwise), except pursuant to and
upon consummation of the Merger, or (B) any option or other right to purchase
any shares of capital stock of the Company, except pursuant to and upon
consummation of the Merger; and
(ii) Shareholder shall not sell, transfer or otherwise dispose
of, or reduce Shareholder's interest in or risk relating to, (A) any shares of
capital stock of Acquiror (including without limitation the Acquiror Shares and
any additional shares of capital stock of Acquiror acquired by Shareholder,
whether upon exercise of a stock option or otherwise), or (B) any option or
other right to purchase any shares of capital stock of Acquiror.
(b) Shareholder agrees that Shareholder shall not effect any sale,
transfer or other disposition of any Acquiror Shares unless:
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<PAGE>
(i) such sale, transfer or other disposition is effected
pursuant to an effective registration statement under the Act;
(ii) such sale, transfer or other disposition is made in
conformity with the requirements of Rule 145(d)(1), (2) or (3) under the Act, as
evidenced by a broker's letter and a representation letter executed by
Shareholder(satisfactory in form and content to Acquiror) stating that such
requirements have been met;
(iii) counsel reasonably satisfactory to Acquiror shall have
advised Acquiror in a written opinion letter (satisfactory in form and content
to Acquiror), upon which Acquiror may rely, that such sale, transfer or other
disposition will be exempt from registration under the Act; or
(iv) an authorized representative of the SEC shall have rendered
written advice to Shareholder to the effect that the SEC would take no action,
or that the staff of the SEC would not recommend that the SEC take action, with
respect to such sale, transfer or other disposition, and a copy of such written
advice and all other related communications with the SEC shall have been
delivered to Acquiror.
4. Stop Transfer Instructions; Legend. Shareholder acknowledges and
agrees that (a) stop transfer instructions will be given to Acquiror's transfer
agent with respect to the Acquiror Shares, and (b) each certificate representing
any of such shares shall bear a legend identical or similar in effect to the
following legend (together with any other legend or legends required by
applicable state securities laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145(d) OF THE SECURITIES ACT OF
1933 AND "POOLING OF INTERESTS" ACCOUNTING TREATMENT APPLY
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT IN ACCORDANCE WITH
THE PROVISIONS OF SUCH RULE, IN ACCORDANCE WITH THE
REQUIREMENTS FOR "POOLING OF INTERESTS" ACCOUNTING TREATMENT
AND IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AS OF
MAY 6, 1999, BETWEEN THE REGISTERED HOLDER HEREOF AND THE
ISSUER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES
OF THE ISSUER."
5. Miscellaneous Provisions.
(a) Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made by Shareholder in this Agreement
shall survive (i) the consummation of the Merger and the other Transactions and
any termination of the Reorganization Agreement.
(b) Notices. All notices, consents or other communications required
or permitted to be given under this Agreement shall be in writing and shall be
deemed to have
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<PAGE>
been duly given when delivered personally or one (1) business day after being
sent by a nationally recognized overnight delivery service, postage or delivery
charges prepaid or five (5) business days after being sent by registered or
certified mail, return receipt requested, postage charges prepaid. Notices also
may be given by prepaid facsimile and shall be effective on the date transmitted
if confirmed within 48 hours thereafter by a signed original sent in one of the
manners provided in the preceding sentence. Notices to Acquiror shall be sent to
its address as stated on page one of this Agreement to the attention of
Acquiror's General Counsel, with a copy sent simultaneously to the attention of
Acquiror's Chief Financial Officer. Notices to Shareholder shall be sent to
Shareholder's address as stated on page one to this Agreement, with a copy sent
simultaneously to Fredric C. Jacobs, Esquire, 214 Bushkill Street, Easton, PA
18042-1886. Any party may change its address for notice and the address to which
copies must be sent by giving notice of the new addresses to the other parties
in accordance with this Section 5(b), provided that any such change of address
notice shall not be effective unless and until received.
(c) Entire Understanding. This Agreement and the other agreements
referred to herein, state the entire understanding among the parties with
respect to the subject matter hereof, and supersede all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
(d) Waivers. Except as otherwise expressly provided herein, no waiver
with respect to this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising, or single or
partial exercise of any right, power or remedy by any party, and no course of
dealing between or among any of the parties, shall constitute a waiver of or
shall preclude any other for further exercise of, any right, power or remedy.
(e) Severability. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (i) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to the
fullest possible extent, (ii) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (iii)
the invalidity or unenforceability of such provision or part thereof shall not
affect the validity or enforceability of the remainder of such provision or the
validity or enforceability of any other provision of this Agreement. Each
provision of this Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is separable from
every other part of such provision.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original
hereof, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart hereof.
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<PAGE>
(g) Section Headings. Section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
(h) References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
(i) CONTROLLING LAW. THIS AGREEMENT IS MADE UNDER, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
(j) Jurisdiction and Process. In any action between or among any of
the parties, whether arising out of this Agreement or otherwise, (a) each of the
parties irrevocably consents to the exclusive jurisdiction and venue of the
federal and state courts located in the Commonwealth of Pennsylvania, (b) if any
such action is commenced in a state court, then, subject to applicable law, no
party shall object to the removal of such action to any federal court located in
the Commonwealth of Pennsylvania, (c) each of the parties irrevocably waives the
right to trial by jury, (d) each of the parties irrevocably consents to service
of process by first class certified mail, return receipt requested, postage
prepaid, to the address at which such party is to receive notice in accordance
with Section 5(b), and (e) the prevailing parties shall be entitled to recover
their reasonable attorneys' fees and court costs from the other parties.
(k) Non-exclusivity. The rights and remedies of Acquiror hereunder
are not exclusive of or limited by any other rights or remedies which Acquiror
may have, whether at law, in equity, by contract or otherwise, all of which
shall be cumulative (and not alternative).
(l) Bankruptcy Qualification. Each representation or warranty made in
or pursuant to this Agreement regarding the enforceability of any Contract shall
be qualified to the extent that such enforceability may be effected by
bankruptcy, insolvency and other similar Laws or equitable principles (but not
those concerning fraudulent conveyance) generally affecting creditors' rights
and remedies.
(m) Construction. The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement. As used in this Agreement, the words "include" and "including"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation".
(n) Assignment; Binding Effect. Acquiror may freely assign any or all
of its rights under this Agreement, in whole or in part, to any other person or
entity without obtaining the consent or approval of Shareholder. This Agreement
and all obligations of Shareholder hereunder are personal to Shareholder and may
not be transferred or delegated by Shareholder at any time. Subject to the
preceding sentence, this Agreement will inure to the benefit of Acquiror and its
successors and assigns and will be binding upon Shareholder
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<PAGE>
and Shareholder's representatives, executors, administrators, estate, heirs,
successors and assigns.
(o) Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that Acquiror shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of proper jurisdiction, this being
in addition to any other remedy to which Acquiror is entitled at law or in
equity.
(p) Other Agreements and Independence of Obligations. Nothing in this
Agreement shall limit any of the rights or remedies of Acquiror or any of the
obligations of Shareholder under any other agreement. The covenants and
obligations of Shareholder set forth in this Agreement shall be construed as
independent of any other agreement or arrangement between the Shareholder, on
the one hand, and the Company or Acquiror, on the other. The existence of any
claim or cause of action by Shareholder against the Acquiror shall not
constitute a defense to the enforcement of any of such covenants or obligations
against Shareholder.
IN WITNESS WHEREOF, each of the undersigned has caused this Affiliate
Agreement to be executed as of the date first stated above.
SHAREHOLDER:
_____________________________________________
Print name: David P. Bloys
Number of shares of common stock of
the Company (including shares underlying
options) _____________
SUNGARD DATA SYSTEMS INC.
By:__________________________________________
Print name:
Print title:
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<PAGE>
EXHIBIT 99.3
PROXY
PENTAMATION ENTERPRISES, INC.
SPECIAL MEETING OF SHAREHOLDERS - JULY [ ], 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PENTAMATION ENTERPRISES, INC.
The undersigned hereby constitutes and appoints and
, and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, for and in the name, place and stead of the undersigned, to
appear at the Special Meeting of Shareholders of Pentamation Enterprises, Inc.
(the "Company") to be held on July , 1999, and at any postponement or
adjournment thereof, and to vote all of the shares of the Company which the
undersigned is entitled to vote, with all the powers and authority the
undersigned would possess if personally present.
BOTH PROXY AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES (OR,
IF ONLY ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS
CONFERRED BY THIS PROXY. DISCRETIONARY AUTHORITY IS CONFERRED BY THIS PROXY AS
TO CERTAIN MATTERS DESCRIBED IN THE COMPANY'S PROXY STATEMENT.
(continued and to be signed on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS TO THE CONTRARY ARE
INDICATED, THE PROXY AGENTS INTEND TO VOTE FOR APPROVAL OF THE PROPOSAL.
Please mark your votes as indicated in this example [X]
PROPOSAL: To consider and vote upon a proposal to (i) approve the Agreement and
Plan of Reorganization and related Agreement and Plan of Merger, dated
as of May 6, 1999, among Pentamation, the principal shareholders of
Pentamation, SunGard Data Systems Inc., a Delaware corporation, and
PEI Acquisition, Inc., a Pennsylvania corporation and wholly-owned
subsidiary of SunGard, and (ii) approve the merger of PEI Acquisition,
Inc. with and into Pentamation pursuant to which Pentamation will
become a wholly-owned subsidiary of SunGard and each outstanding share
of Pentamation common stock will be converted into the right to
receive a number of shares of SunGard common stock determined pursuant
to the share exchange formulas in the Agreement and Plan of Merger;
all on and subject to the terms and conditions contained in the Merger
Documents.
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby acknowledges receipt of the Company's Notice of the
Company's Special Meeting of Shareholders and the Proxy Statement/Prospectus
relating thereto.
DATE:___________________________, 1999
(Please date this Proxy)
______________________________________
______________________________________
Signature(s)
It would be helpful if you signed your name exactly as
it appears on your stock certificate(s), indicating any
official position or representative capacity. If shares
are registered in more than one name, all owners should
sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
