<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1997 Commission File Number 1-5620
SAFEGUARD SCIENTIFICS, INC.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1609753
- ------------------------------------------------------------------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
800 The Safeguard Building, 435 Devon Park Drive Wayne, PA 19087
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 293-0600
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares outstanding as of May 12, 1997
Common Stock 31,268,183
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
QUARTERLY REPORT FORM 10-Q
INDEX
PART I-FINANCIAL INFORMATION Page
---------------------------- ----
Item 1-Financial Statements:
Consolidated Balance Sheets-
March 31, 1997 (unaudited) and December 31, 1996.......................... 3
Consolidated Statements of Operations (unaudited)-
Three Months Ended March 31, 1997 and 1996................................ 4
Consolidated Statements of Cash Flows (unaudited)-
Three Months Ended March 31, 1997 and 1996................................ 5
Notes to Consolidated Financial Statements................................ 6
Item 2-Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 9
PART II-OTHER INFORMATION
-------------------------
Item 4-Submission of Matters to a Vote of Security Holders..................15
Item 5-Other Information....................................................16
Item 6-Exhibits and Reports on Form 8-K.....................................17
Signatures..................................................................18
2
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS March 31 December 31
1997 1996
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 5,399 $ 12,881
Receivables less allowances ($3,105-1997; $3,088-1996) 341,728 399,403
Inventories 193,253 234,543
Other current assets 8,926 7,239
-------- --------
Total current assets 549,306 654,066
Property, Plant and Equipment 122,858 118,394
Less accumulated depreciation and amortization (40,780) (39,525)
-------- --------
82,078 78,869
Other Assets
Investments 148,804 134,844
Notes and other receivables 11,034 9,038
Excess of cost over net assets of business acquired 29,661 30,286
Other 30,263 28,967
-------- --------
219,762 203,135
-------- --------
$851,146 $936,070
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current debt obligations $ 9,207 $ 8,640
Accounts payable 144,878 221,992
Accrued expenses 76,129 77,904
-------- --------
Total current liabilities 230,214 308,536
Long Term Debt 235,492 252,725
Deferred Taxes 19,393 18,311
Minority Interest and Other 87,684 85,356
Convertible Subordinated Notes 90,881 102,131
Shareholders' Equity
Common stock 3,280 3,280
Additional paid-in capital 45,440 35,566
Retained earnings 134,462 129,970
Treasury stock, at cost (5,084) (7,165)
Net unrealized appreciation on investments 9,384 7,360
-------- --------
187,482 169,011
-------- --------
$851,146 $936,070
-------- --------
-------- --------
</TABLE>
3
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
1997 1996
--------------------------
(UNAUDITED)
<S> <C> <C>
Revenues
Net Sales
Product $385,405 $390,087
Services 62,171 40,010
-------- --------
Total net sales 447,576 430,097
Gains on sales of securities, net 7,201 5,680
Other income 2,686 1,888
-------- --------
Total revenues 457,463 437,665
Costs and Expenses
Cost of sales-product 342,068 346,292
Cost of sales-services 40,262 25,477
Selling 33,616 27,954
General and administrative 19,723 17,665
Depreciation and amortization 5,234 4,616
Interest 5,198 5,355
Income from equity investments (104) (887)
-------- --------
Total costs and expenses 445,997 426,472
-------- --------
Earnings Before Minority Interest and Taxes 11,466 11,193
Minority interest (3,979) (4,559)
-------- --------
Earnings Before Taxes On Income 7,487 6,634
Provision for taxes on income 2,995 2,654
-------- --------
Net Earnings $4,492 $3,980
-------- --------
-------- --------
Earnings Per Share
Primary $ .14 $ .12
Fully diluted $ .14 $ .12
Average Common Shares Outstanding
Primary 32,032 31,056
Fully diluted 32,032 31,172
</TABLE>
4
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
1997 1996
--------------------------
(UNAUDITED)
<S> <C> <C>
Operating Activities
Net earnings $ 4,492 $ 3,980
Adjustments to reconcile net earnings to cash from operating
activities
Depreciation and amortization 5,234 4,616
Deferred income taxes (179) (71)
Income from equity investments (104) (887)
Gains on sales of securities, net (7,201) (5,680)
Minority interest, net 2,387 2,669
Cash provided (used) by changes in working capital items
Receivables 66,514 1,872
Inventories 41,290 (34,567)
Accounts payable, accrued expenses and other (80,648) 17,305
--------- -------
Cash provided (used) by operating activities 31,785 (10,763)
Proceeds from sales of securities, net 987 6,848
-------- --------
Cash provided (used) by operating activities and sales of
securities, net 32,772 (3,915)
Other Investing Activities
Investments and notes acquired, net (19,247) (6,230)
Capital expenditures (6,395) (2,135)
Business acquisitions, net of cash acquired (5,372)
Other, net (591) (2,492)
-------- --------
Cash (used) by other investing activities (26,233) (16,229)
Financing Activities
Issuance of subordinated notes, net 112,413
Net repayments on revolving credit facilities (15,869) (45,271)
Net repayments on term debt (797) (7,182)
Issuance of Company and subsidiary stock 2,645 1,647
--------- --------
Cash provided (used) by financing activities (14,021) 61,607
--------- --------
Increase (Decrease) in Cash and Cash Equivalents (7,482) 41,463
Cash and Cash Equivalents - beginning of year 12,881 7,267
--------- --------
Cash and Cash Equivalents - End of Period $ 5,399 $ 48,730
--------- --------
--------- --------
</TABLE>
5
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
Notes to Consolidated Financial Statements
March 31, 1997
1. General
_______
The accompanying unaudited interim consolidated financial statements were
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The Summary of Accounting
Policies and Notes to Consolidated Financial Statements included in the
1996 Form 10-K should be read in conjunction with the accompanying
statements. These statements include all adjustments (consisting only of
normal recurring adjustments) which the Company believes are necessary for
a fair presentation of the statements. The interim operating results are
not necessarily indicative of the results for a full year.
2. Stock Split
___________
All share and per share data and related data have been retroactively
adjusted to reflect the two-for-one split of the Company's common shares
effective July 17, 1996.
3. Reclassifications
_________________
Certain amounts in the 1996 consolidated financial statements have been
reclassified to conform with the 1997 presentation.
4. Debt
____
The following summarizes (in thousands) long-term debt at March 31,
1997 and December 31, 1996:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------------
(UNAUDITED)
<S> <C> <C>
Parent Company and Other Recourse Debt
Revolving credit facility $ 14,700
Other 15,930 $ 16,151
------------- --------------------
30,630 16,151
------------- --------------------
Subsidiary Debt (Non-Recourse to Parent)
CompuCom 208,104 239,946
Other 5,965 5,268
------------ --------------------
214,069 245,214
------------- --------------------
244,699 261,365
Current debt obligations (9,207) (8,640)
------------- --------------------
Long-term debt $235,492 $252,725
------------- --------------------
------------- --------------------
</TABLE>
6
<PAGE>
5. Convertible Subordinated Notes
______________________________
In February 1997, approximately $11.3 million of Notes were converted
into 388,131 shares of the Company's Common Stock.
6. Investments
___________
The following summarizes (in thousands) the Company's investments as of
March 31, 1997 and December 31, 1996. Market value reflects the price of
minority-owned publicly-traded securities at the close of business at the
respective date. Unrealized appreciation reflects the net excess of market
value over carrying value of publicly-traded securities classified as
available-for-sale.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
---------------------- -------------------------
Carrying Market Carrying Market
Value Value Value Value
---------- --------- ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Equity Investees
Cambridge $17,363 $212,971 $ 15,340 $316,620
Coherent 11,107 83,548 10,206 94,445
Sanchez 4,607 14,109 4,346 22,799
USDATA 6,422 8,571 6,664 14,410
Non-public companies 44,763 40,333
------------ -------------
84,262 76,889
Brandywine Realty Trust 8,519 10,251 8,519 9,695
Diamond 1,549 5,753
Integrated Systems Consulting Group 1,891 6,274 1,891 9,770
National Media 2,035 11,465 2,035 7,790
Sybase 13,733 7,600 13,733 9,059
Other public companies 679 1,500 989 2,005
Unrealized appreciation 14,437 11,152
Non-public companies 21,699 19,636
------------ -------------
$148,804 $134,844
------------ --------------
------------ --------------
</TABLE>
The following summarized financial information for investees accounted for
on the equity method of accounting at March 31, 1997 and 1996 has been
compiled from the financial statements of the respective investees and
reflects historical data for the period during which each respective
investee was accounted for on the equity method (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Net sales:
Public companies $102,302 $69,389
Non-public companies 72,486 28,665
------------ ------------
$174,788 $98,054
------------ ------------
------------ ------------
</TABLE>
7
<PAGE>
7. Recently Issued Pronouncements
______________________________
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, Earnings Per Share (Statement
128). Statement 128 supersedes APB Opinion No. 15, Earnings Per Share, and
specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. Statement 128 replaces the presentation of primary
EPS and fully diluted EPS with a presentation of basic EPS and diluted EPS.
Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Adoption of Statement 128
during the first quarter of 1997 would have resulted in basic and diluted
EPS of $.14 and $.14 per share, respectively, compared to $.13 and $.12 per
share, respectively, for the same period in 1996.
8
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
GENERAL
_______
The Company's business strategy is the development of advanced
technology-oriented, entrepreneurially-driven partnership companies to achieve
maximum returns for its shareholders. The Company provides to its partnership
companies and associated venture funds active strategic management, operating
guidance, acquisition and disposition assistance, board and management
recruitment and innovative financing. The Company offers its shareholders,
through the rights offering process, the opportunity to acquire direct ownership
in selected partnership companies which it believes are ready for public
ownership.
If the Company significantly increases or reduces its investment in any of
the partnership companies, the Company's consolidated net sales and earnings may
fluctuate primarily due to the applicable accounting method used for recognizing
its participation in the operating results of that company.
The net sales and related costs and expenses of a partnership company are
included in the Company's consolidated operating results if the Company owns
more than 50% of the outstanding voting securities of the partnership
company. Participation of shareholders other than the Company in the earnings
or losses of a more than 50% owned partnership company is reflected in the
caption "Minority interest" in the Consolidated Statement of Operations which
adjusts consolidated earnings to reflect only the Company's share of the
earnings or losses of the partnership company. The partnership companies
that are consolidated in the first quarter of 1997 are CompuCom Systems,
Inc., Tangram Enterprise Solutions, Inc., Premier Solutions Ltd. and Pioneer
Metal Finishing. Premier was sold in April 1997 and therefore will not be
consolidated beginning in the second quarter.
Investments in companies in which the Company owns 50% or less of the
outstanding voting securities, in which significant influence is exercised,
are accounted for on the equity method of accounting. Significant influence
is presumed at a 20% ownership level; however, the Company applies the equity
method for certain companies in which it owns less than 20% because it exerts
significant influence through representation on those companies' Boards of
Directors and other means. Under the equity method of accounting, a
partnership company's net sales and related costs and expenses are not
included in the Company's consolidated operating results; however, the
Company's share of the earnings or losses of the partnership company is
reflected in the caption "Income from equity investments" in the Consolidated
Statement of Operations. The number of partnership companies accounted for in
the equity method has increased significantly over the last several years. In
addition, the Company's current strategy is to invest in larger more mature
companies. As a result, total revenues from the Company's equity investments,
which are not included in the Consolidated Statements of Operations, have
increased significantly (see Note 6 to the Consolidated Financial Statements).
9
<PAGE>
Under either consolidation accounting or the equity method of
accounting, only the Company's share of the earnings or losses of a
partnership company is included in the Consolidated Statement of Operations.
Operations Overview
___________________
Net sales by industry segment were (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Information Technology
Microcomputer Systems and Services $431,889 $413,334
Information Solutions 7,970 9,444
-------- --------
439,859 422,778
Metal Finishing 7,717 6,739
Commercial Real Estate 580
-------- --------
$447,576 $430,097
-------- --------
-------- --------
</TABLE>
Microcomputer Systems and Services sales increased due to CompuCom's
services sales increasing 63% while its product sales were essentially flat.
The increase in services sales reflects CompuCom's continued focus on
expanding its network and technology services at competitive prices to meet
increased customer demand for its value-added desktop network services. This
increase in services sales was achieved despite the lack of growth in product
sales which CompuCom believes is due to an overall industry-wide demand
softness caused by smaller than anticipated manufacturers' price reductions,
the delay in corporate customers upgrading to Pentium Pro technology, and
increased market share gain by direct marketers. CompuCom anticipates
product demand softness will continue into the second quarter of 1997.
Information Solutions sales decreased due to lower sales at Premier. In
the second quarter of 1997, all of the assets of Premier were sold and the
Company will record a gain from the sale in the second quarter. Tangram's
sales were up modestly over 1996. However, losses increased as a result of
the company's substantial investment in marketing its Asset Insight product
and personnel increases to support the Asset Insight product rollout. Tangram
expects to continue to devote substantial resources to developing sales.
Net earnings were $4.49 million, or $.14 a share in 1997, compared to $3.98
million, or $.12 a share, for the same period in 1996. The Company's increased
net earnings in the first quarter of 1997 resulted primarily from higher
securities gains, improved Metal Finishing results and elimination of losses
from the Company's real estate operations due to the second half 1996 sale of
such operations, partially offset by decreased earnings at CompuCom and lower
income from equity investments. Although CompuCom grew its services sales
significantly, the lack of
10
<PAGE>
growth in product sales and CompuCom's continued investment in the service
business and overall infrastructure of the company caused CompuCom's net
earnings to decrease 15%. Future improved profitability at CompuCom will
depend on its ability to retain and hire quality service personnel while
effectively managing the utilization of such personnel, increased focus on
providing technical service and support to customers, product demand,
competition, manufacturer product availability and pricing changes, effective
utilization of vendor programs, and control of operating expenses.
Securities gains in the first quarter of 1997 resulted primarily from the
open market sales of a portion of the Company's interest in Cambridge
Technology Partners and the sale of shares in the Diamond Technology Partners
rights offering to the Company's shareholders. Partially offsetting these
gains were charges incurred in the disposition of investments and provisions
for other investments and notes. The Company continually evaluates
investments for indications of impairment based on the market value of each
investment relative to cost, the financial condition and near-term prospects
of the investment and other relative factors. The market value of the
Company's holdings in Sybase was significantly below carrying value at
December 31, 1996 and March 31, 1997 which is reflected at the end of each
period as a component of Net Unrealized Appreciation on Investments in the
shareholders' equity section of the Consolidated Balance Sheet. The Company
is continuing to evaluate its holdings in Sybase in the second quarter to
determine if the decline in the market value of Sybase is deemed to be other
than temporary. Securities gains of varying magnitude have been realized in
recent years; prior gains are not necessarily indicative of gains which may
be realized in the future.
Income from equity investments fluctuates with the Company's ownership
percentage and the operating results of investees accounted for on the equity
method. Increased equity income from the Company's public equity investments
in 1997 was more than offset by the Company's share of losses at certain
private, early-stage equity investments and increased amortization of the
excess of carrying value over the Company's share of underlying net assets of
equity investments. The Company's public investments accounted for on the
equity method in the first quarter of 1997 include Cambridge, Coherent
Communications, Diamond, Sanchez Computer Associates and USDATA Corporation.
Cambridge's earnings increased 55% on a 50% revenue increase, as it
continues to see increased demand for its services worldwide. Its expanded
service line has been very favorably received and includes developing
Internet-enabled and mission critical client/server applications, deploying
package solutions, particularly enterprise resource solutions, and providing
management consulting services. Safeguard owns approximately 17% of Cambridge's
common stock at March 31, 1997.
Coherent reported increased earnings of 37% on a 44% sales increase as
all of its sales regions reported double digit sales increases in the
quarter. Asian sales were particularly strong with growth in excess of 200%,
as the company opened offices in Singapore, Tokyo, and Beijing, all of which
contributed to the growth. Safeguard owns approximately 32% of Coherent's
common stock at March 31, 1997.
11
<PAGE>
Diamond reported increased earnings of 165% on a 49% sales increase.
Diamond has grown revenues sequentially every quarter since its inception eleven
quarters ago, when the company started with the goal of helping clients develop
and deploy digital business strategies. During the first quarter of 1997, the
Company completed the rights offering of Diamond common stock to the Company's
shareholders. As a result of the rights offering, the Company owns less than 9%
of Diamond's common stock at March 31, 1997. Accordingly, the Company
will discontinue accounting for its investment in Diamond on the equity method
of accounting subsequent to the first quarter.
Sanchez's revenues increased 48% with strong earnings, compared to 1996.
The increased revenue was primarily attributable to significant growth in the
number of active implementations of its PROFILE product, in particular the rapid
installation and initial conversion during the quarter of ING Direct in Canada,
its first Direct Bank contract and its first contract performed in partnership
with IBM. Also contributing to the first quarter results was the signing of an
agreement with CitiBank Canada, implementation-related revenues from the
company's first project in the Asia-Pacific Rim, as well as increased activity
relative to client projects in Central Europe. Safeguard owns approximately 24%
of Sanchez's common stock at March 31, 1997.
USDATA reported lower sales and earnings compared to the first quarter of
1996 primarily as a result of weak international software sales. During the
quarter, Bill Newell, a Safeguard Vice President, replaced the former CEO and
President. In addition, a new managing director of European operations was
hired. Safeguard owns approximately 20% of USDATA's common stock at March 31,
1997.
The Company's overall gross margin was 14.6% and 13.6% in the first
quarter of 1997 and 1996, respectively. CompuCom's product gross margin for
the first quarter of 1997 was 10.4% compared to 10.1% for the same period in
1996. The higher margin at CompuCom is principally due to the reduction in
product sales to some of the company's larger customers, which typically have
lower product margins. Future product margins at CompuCom will be influenced
by manufacturers' pricing strategies together with competitive pressures from
other resellers in the industry, as well as the level of sales to some of
CompuCom's larger customers. CompuCom's services gross margin for the first
quarter decreased to 36.0% in 1997 from 37.2% in 1996. The slight decrease
was primarily caused by a change in the mix of services provided during the
periods. CompuCom participates in certain manufacturer-sponsored programs
designed to increase sales of specific products. These programs, excluding
volume incentive programs and specific product rebates, are not material when
compared to CompuCom's overall financial results.
Selling and general and administrative expense as a percentage of net sales
increased to 11.9% in 1997 from 10.6% in 1996 largely as a result of costs
incurred by CompuCom to expand the services business and the growth in service
sales, as services typically carry a higher commission rate than product sales.
CompuCom's general and administrative expenses are reported net of
reimbursements by certain manufacturers for specific training, promotional and
marketing programs. These reimbursements offset the expenses incurred by
CompuCom.
12
<PAGE>
Interest expense decreased in the first quarter of l997 compared to the
same period in 1996 primarily as a result of the elimination of interest related
to the Company's real estate operations, partially offset by an increase in
interest at CompuCom due to increased borrowings resulting from their overall
growth.
Liquidity and Capital Resources
_______________________________
The Company maintains a $100 million revolving credit facility which
matures in May 2000. Outstanding borrowings at March 31, 1997 were $14.7
million. The credit facility is secured by the equity securities the Company
holds of its publicly traded partnership companies, including CompuCom. The
value of these securities significantly exceeds the total availability under the
bank credit facility. The Company is presently negotiating with its banks to
increase the availability under the credit facility to $150 million.
Existing cash resources, availability under the Company's revolving credit
facility, proceeds from the sales from time to time of selected minority-owned
publicly traded securities and other internal sources of cash flow should be
sufficient to fund the Company's cash requirements through 1997, including
investments in new or existing partnership companies and general corporate
requirements, as well as the repurchase of up to $20 million of the Company's
Common Stock from time to time in the open market as authorized by the Company's
Board of Directors in March 1997.
CompuCom and Premier maintain separate, independent bank credit
facilities which are nonrecourse to the Company and are secured by
substantially all of the assets of the applicable borrower. During recent
years, CompuCom has utilized operating earnings, bank facilities, equity
financing and long-term subordinated notes to fund its significant sales
growth and related operating asset requirements. CompuCom has $325 million
of financing capacity through bank facilities consisting of a $225 million
credit facility and a $100 million receivables securitization agreement.
CompuCom's credit facility prohibits the payment of common stock dividends by
CompuCom while its credit line remains outstanding. At March 31, 1997,
approximately $202.4 million was outstanding under CompuCom's bank
facilities. Premier had $4.4 million outstanding on its master demand note
at March 31, 1997 which was repaid in the second quarter in connection with
the sale of Premier's assets.
Cash flows related to operating activities increased primarily due to a
decrease in working capital at CompuCom. The Company's operations are not
capital intensive, and capital expenditures in any year normally would not be
significant in relation to the overall financial position of the Company.
Capital asset requirements are generally funded through bank credit
facilities, internally generated funds or other financing sources. CompuCom
has begun to refurbish and update its new headquarters and operations campus
and currently anticipates the consolidation of its existing Dallas
headquarters and operations from two leased facilities to the new site by the
third quarter of 1997. After that consolidation is complete, CompuCom
expects to sell the headquarters facility it currently owns and occupies.
Capital expenditures during the first quarter of 1997 were primarily related
to getting CompuCom's new headquarters and
13
<PAGE>
operations campus ready for full occupancy and costs incurred in the
construction of the Monroe, Michagan Metal Finishing Facility. The Company
expects capital expenditures to decline after these construction projects
have been significantly completed. There were no material asset purchase
commitments at March 31, 1997.
14
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
___________________________________________________
The Company held its Annual Meeting of Shareholders on May 8, 1997. At the
meeting, the shareholders voted in favor of electing as directors the twelve
nominees named in the Proxy Statement dated April 3, 1997 and in favor of
amending the Company's 1990 Stock Option Plan. The number of votes cast were as
follows:
I. ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
FOR WITHHELD
------------ ----------------
<S> <C> <C>
Warren V. Musser 28,494,611 172,419
Vincent G. Bell, Jr. 28,494,681 172,349
Donald R. Caldwell 28,467,929 199,101
Robert A. Fox 28,502,716 166,114
Delbert W. Johnson 28,503,741 163,289
Robert E. Keith, Jr. 27,341,641 1,397,389
Peter Likins, Ph.D. 28,495,116 171,914
Jack L. Messman 28,497,916 169,114
Russell E. Palmer 28,502,866 164,164
John W. Poduska, Sr., Ph.D. 28,469,839 197,191
Heinz Schimmelbusch, Ph.D. 28,500,767 166,263
Hubert J.P. Schoemaker, Ph.D. 27,277,298 1,389,732
</TABLE>
II. PROPOSAL TO AMEND THE COMPANY'S 1990 STOCK OPTION PLAN
FOR AGAINST ABSTAIN
------------ ---------- -------------
25,388,743 2,095,996 211,368
15
<PAGE>
Item 5. Other Information
_________________
In the second quarter of 1997, substantially all of the assets of Premier
Solutions Ltd. were sold for approximately $30 million.
On April 30, 1997, it was announced that one of the Company's partnership
companies, ChromaVision Medical Systems, Inc. (formerly known as MicroVision
Medical Systems, Inc.), had filed a registration statement with the
Securities and Exchange Commission for a rights offering to the Company's
shareholders of approximately 6,400,000 shares of ChromaVision common stock.
ChromaVision has developed an automated intelligent microscope system that
uses proprietary imaging technologies for a wide variety of diagnostic and
research applications. It is anticipated that the rights will have an
exercise price of $5.00 per share and that the rights offering will commence
in mid-1997. The Company's shareholders will receive rights, exercisable for
approximately 35 days after issuance, to purchase one share of ChromaVision
common stock for every five shares of the Company's common stock owned.
Rights holders will be able to exercise rights for as few as 20 shares of
ChromaVision common stock. The offering will be made only by means of a
prospectus, subject to the effectiveness of the registration statement.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
Number Description
10.1 Asset Acquisition Agreement dated April 15, 1997 for the
sale of certain assets of Premier Solutions Ltd. to a
subsidiary of Sungard Data Systems Inc. (exhibits omitted)
10.2 Amendment to Safeguard Scientifics, Inc. 1990 Stock Option
Plan dated October 25, 1996
10.3 Amendment No. 3 to Transfer and Administration Agreement,
dated as of February 1, 1997, among CSI Funding, Inc.,
CompuCom Systems, Inc., Enterprise Funding Corporation and
NationsBank N.A.
11 Computation of Per Share Earnings
27 Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K have been filed by the Registrant during the
quarter ended March 31, 1997.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAFEGUARD SCIENTIFICS, INC.
(Registrant)
Date: May 15, 1997 /s/ Warren V. Musser
------------------------------------------
Warren V. Musser
Chairman and Chief Executive Officer
Date: May 15, 1997 /s/ Michael W. Miles
------------------------------------------
Michael W. Miles
Vice President and Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
18
<PAGE>
ASSET ACQUISITION AGREEMENT
dated April 15, 1997
FOR THE ACQUISITION OF
CERTAIN ASSETS OF
PREMIER SOLUTIONS LTD.
BY
A SUBSIDIARY OF
SUNGARD DATA SYSTEMS INC.
<PAGE>
TABLE OF CONTENTS
Page
Background -1-
1. DEFINED TERMS -2-
1.1. "Accounts Receivable" -2-
1.2. "Asset" -2-
1.3. "Cash Asset" -2-
1.4. "Consent" -2-
1.5. "Contract" -2-
1.6. "Contract Right" -2-
1.7. "Employee Benefit Plan" -2-
1.8. "Encumbrance" -3-
1.9. "Excluded Assets" -3-
1.10. "Executive Officers of Seller" -3-
1.11. "GAAP" -3-
1.12. "Hazardous Substances" -3-
1.13. "Insurance Policy" -3-
1.14. "Intangible" -3-
1.15. "Judgment" -3-
1.16. "Law" -3-
1.17. "Maximis" -4-
1.18. "Obligation" -4-
1.19. "Permit" -4-
1.20. "Person" -4-
1.21. "Proceeding" -4-
1.22. "Real Property" -4-
1.23. "Software" -4-
1.24. "Tangible Property" -4-
1.25. "Tax" -4-
2. THE TRANSACTION -4-
2.1. Sale and Purchase of Specified Assets -4-
2.1.1 Specified Assets of Seller -5-
2.1.2 Specified Liabilities of Seller -6-
2.2. No Other Liabilities -7-
2.2.1 Affiliates -7-
2.2.2 Taxes -7-
2.2.3 Excluded Liabilities -7-
2.2.4 Post-Closing -7-
2.2.5 Transaction Related -8-
2.2.6 Defaults -8-
2.2.7 Employees -8-
2.2.8 Infringement -8-
2.2.9 Encumbrances -8-
2.2.10 Maximis -8-
2.2.11 Excluded Contracts -8-
2.3. Seller's Employees -8-
(i)
<PAGE>
Page
3. PURCHASE PRICE AND CLOSING FINANCIAL STATEMENTS -9-
3.1. Purchase Price and Allocation -9-
3.2. Closing Financial Statements -9-
3.2.1 Type of Statements -9-
3.2.2 Audit Requirements -10-
3.2.3 Delivery of Documents -10-
3.3. Purchase Price Adjustments -11-
3.3.1 Net Assets Adjustment -11-
3.3.2 Net Assets Statement -11-
3.3.3 Payment of Net Asset Adjustment
and First Holdback -12-
3.4. Accounts Receivable Adjustment -12-
3.4.1 Collections by Buyer -12-
3.4.2 Unpaid Receivables -12-
3.4.3 Adjustment to Purchase Price
and Payment of the Second
Holdback -13-
3.4.4 Collections by Seller -13-
3.6. Earnout Payment -14-
3.6.1 1997 Payment -14-
3.6.2 1998 Payment -14-
3.6.3 1999 Payment -14-
3.6.4 Revenue Recognition -14-
3.6.5 PSL's Operations -15-
3.6.6 Calculation and Payment -15-
3.7. Currency and Method of Payment -15-
3.8. Imputed Interest -16-
4. REPRESENTATIONS OF THE SELLING COMPANIES -16-
4.1. Organization -16-
4.2. Effect of Agreement -16-
4.3. Financial and Corporate Records -17-
4.4. Compliance with Law -17-
4.5. Financial Statements -17-
4.6. Assets -18-
4.7. Seller's Obligations -18-
4.8. Operations Since January 31, 1997 -18-
4.9. Accounts Receivable -19-
4.10. Tangible Property -19-
4.11. Real Property -19-
4.12. Software and Intangibles -19-
4.13. Contracts -20-
4.14. Employees and Independent Contractors -21-
4.15. Employee Benefit Plans -22-
4.16. Customers, Prospects and Suppliers -23-
4.17. Taxes -23-
4.18. Proceedings and Judgments -24-
4.19. Insurance -24-
4.20. Questionable Payments -24-
4.21. Related Party Transactions -24-
(ii)
<PAGE>
Page
4.22. Brokerage Fees -25-
4.23. Full Disclosure -25-
5. REPRESENTATIONS OF THE BUYING COMPANIES -25-
5.1. Organization -25-
5.2. Effect of Agreement -25-
5.3. Brokerage Fees -26-
5.4. Full Disclosure -26-
5.5. Access to Information -26-
6. CONDITIONS TO CLOSING FOR SELLING COMPANIES -26-
6.1. Buying Companies' Representations -26-
6.2. Buying Companies' Performance -26-
6.3. Absence of Proceedings -26-
6.4. Hart-Scott-Rodino -26-
7. CONDITIONS TO CLOSING FOR BUYING COMPANIES -27-
7.1. Selling Companies' Representations -27-
7.2. Selling Companies' Performance -27-
7.3. Absence of Proceedings -27-
7.4. Absence of Adverse Changes -27-
7.5. Hart-Scott-Rodino -27-
7.6. Consents -27-
8. CLOSING -27-
8.1. Closing -27-
8.2. Obligations of Seller at Closing -27-
8.2.1 Specified Assets -28-
8.2.2 Documents of Transfer -28-
8.2.3 Name Change -28-
8.2.4 Incumbency Certificate -28-
8.2.5 Resolutions -28-
8.2.6 Good Standing -28-
8.2.7 Closing Certificate -28-
8.2.8 Opinion of Counsel -28-
8.2.9 Consents -29-
8.2.10 Debt Payoff -29-
8.2.11 Non-Compete Agreements -29-
8.2.12 Restructuring Documents -29-
8.2.13 Other Documents -29-
8.3. Obligations of Buying Companies at
Closing -29-
8.3.1 Closing Payments -29-
8.3.2 Assumption of Liabilities -29-
8.3.3 Closing Certificate -29-
8.3.4 Incumbency Certificate -30-
8.3.5 Resolutions -30-
8.3.6 Good Standing -30-
8.3.7 Opinion of Counsel -30-
(iii)
<PAGE>
Page
8.3.8 Other Documents -30-
9. CERTAIN POST-CLOSING OBLIGATIONS -30-
9.1. Transition and Cooperation -30-
9.2. Use of Names -30-
9.3. Contract Matters -31-
9.3.1 Consent -31-
9.3.2 Subcontracting -31-
9.3.3 Buyer's Instructions -31-
9.3.4 Collateral Assignment -31-
9.5. PSL's Operations during Earnout Period -32-
9.6. NIDS Twenty-First Century Operation -32-
9.7. Further Assurances -32-
9.8. Books and Records of Seller -33-
9.9. Books and Records of Buyer -33-
9.10. Cash Reconciliation -33-
10. RESTRICTIVE COVENANTS OF THE SELLING
COMPANIES -33-
10.1. Certain Acknowledgements -33-
10.1.1 Competitive Nature of
Business -33-
10.1.2 Access to Information -33-
10.1.3 Basis for Covenants -34-
10.2. Nondisclosure Covenants -34-
10.2.1 General Restrictions -34-
10.2.2 Software Restrictions -34-
10.3. Nondisclosure Covenants of the
Buying Companies -34-
10.4. Noncompetition Covenants -35-
10.4.1 Solicitation Restrictions -35-
10.4.2 Software Restrictions -35-
10.4.3 Competing Business
Restrictions -35-
10.5. Certain Exclusions -35-
10.6. Enforcement of Covenants -36-
10.7. Scope of Covenants -36-
11. INDEMNIFICATION -36-
11.1. Selling Companies' Indemnification -36-
11.1.1 Misrepresentation -36-
11.1.2 Nonperformance -36-
11.1.3 Non-Assumed Obligations -36-
11.1.4 Unasserted Claims -37-
11.1.5 Proceedings by Employees
and Related Matters -37-
11.1.6 Other Proceedings -37-
11.1.7 NIDS Twenty-First Century
Operation -37-
11.2. Buying Companies' Indemnification -37-
11.2.1 Misrepresentation -37-
11.2.2 Nonperformance -37-
11.2.3 Specified Liabilities -38-
11.2.4 Proceedings by Employees
and Related Matters -38-
(iv)
<PAGE>
Page
11.3. Indemnification Procedures -38-
11.3.1 Notice -38-
11.3.2 Defense -38-
11.3.3 Payments -38-
11.3.4 Sole Remedy -39-
11.4. Limits on Indemnification -39-
11.4.1 Deductible -39-
11.4.2 Ceiling -39-
11.4.3 Time Period -39-
11.4.4 Exceptions -39-
11.5. Setoff and Holdback -39-
12. OTHER PROVISIONS -39-
12.1. Fees and Expenses -39-
12.2. Notice -40-
12.3. Survival of Representations and
Covenants -40-
12.4. Interpretation of Representations -40-
12.5. Reliance by the Buying Companies -40-
12.6. Entire Understanding -40-
12.7. Publicity -41-
12.8. Parties in Interest -41-
12.9. Waivers -41-
12.10. Severability -41-
12.11. Counterparts -41-
12.12. Section Headings -41-
12.13. References -41-
12.14. Controlling Law -41-
12.15. Dispute Resolution -42-
12.16. Jurisdiction and Process -42-
12.17. No Third-Party Beneficiaries -42-
(v)
<PAGE>
ASSET ACQUISITION AGREEMENT
Parties: Premier Solutions Ltd.
a Pennsylvania corporation ("Premier")
333 Technology Drive
Malvern, PA 19355
Global Software, Inc.
a Nevada corporation ("Premier's Subsidiary")
Bank of America Plaza, Suite 1100
300 South Fourth Street
Las Vegas, NV 89101
Safeguard Scientifics, Inc.
a Pennsylvania corporation ("Seller's Parent")
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
PSL Acquisition Inc.
a Delaware corporation ("Buyer")
103 Springer Building, 3411 Silverside Road
Wilmington, DE 19810
SunGard Data Systems Inc.
a Delaware corporation ("Buyer's Parent")
1285 Drummers Lane
Wayne, PA 19087
Date: April 15, 1997
Background: Premier is in the business of providing data processing and
related services using proprietary software systems, and designing,
developing, selling, licensing maintaining and enhancing a variety of
proprietary software systems and products, which proprietary software systems
are used for multicurrency trust accounting and global custody, portfolio
management, shareholder accounting, investment accounting and management,
data warehousing for trust and custody and other support functions, to banks
and other financial institutions ("Business"). Premier is approximately
eight-five percent (85%) beneficially owned by Seller's Parent and Premier's
Subsidiary is one hundred percent (100%) owned by Premier (Premier, Premier's
Subsidiary and Seller's Parent are sometimes collectively referred to herein
as "Selling Companies"). Buyer is a wholly owned subsidiary of Buyer's
Parent. (Buyer and Buyer's Parent are sometimes collectively referred to
herein as "Buying Companies"). As used hereinafter, the term "Seller" means,
collectively, Premier and Premier's Subsidiary, and the term "Seller's
Business" means all of the Business of Seller other than that related to the
Maximis product line. The parties desire that Seller sells and Buyer buys
substantially all of Premier's business and assets, all on and subject to the
terms and conditions of this Agreement.
1
<PAGE>
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 agree as follows:
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 1.5); (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, but not limited to, Cash Assets
(as defined in Section 1.3), prepayments, deposits, escrows, Accounts
Receivable (as defined in Section 1.1), Tangible Property (as defined in
Section 1.24), Real Property (as defined in Section 1.22), Software (as
defined in Section 1.23), Contract Rights (as defined in Section 1.6),
Intangibles (as defined in Section 1.14) and good will, 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. "Consent" means any consent, approval, order or
authorization of, or any declaration, filing or registration with, or any
application 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 1.20), which is necessary in order to take a specified
action or actions in a specified manner and/or to achieve a specified result.
1.5. "Contract" means any written or oral contract, agreement,
instrument, order, arrangement, commitment or understanding of any nature,
including, but not limited to, 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 or
purchase options.
1.6. "Contract Right" means any right, power or remedy of any
nature under any Contract (as defined in Section 1.5) including, but not
limited to, 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 1.18), rights to demand that another party
accept property or services or take any other actions, and rights to pursue
or exercise remedies or options.
1.7. "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,
2
<PAGE>
stock ownership, phantom stock, stock appreciation rights, medical/dental
expense payment or reimbursement, 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.
1.8. "Encumbrance" means any lien, security interest, pledge,
mortgage, easement, covenant, restriction, reservation, conditional sale,
prior assignment, or other encumbrance, claim, burden or charge of any
nature, other than the permitted encumbrances" which are set forth on Exhibit
1.8 and hereinafter referred to as the "Permitted Encumbrances".
1.9. "Excluded Assets" means the Assets of Seller identified
on Exhibit 1.9A, "Excluded Liabilities" means the liabilities of Seller
identified on Exhibit 1.9B, "Excluded Contracts" means the Contracts
identified on Exhibit 1.9C, in each case other than those related to Maximis.
1.10. "Executive Officers of Seller" means G.A. Mossman, III,
William J. Tobia and James E. Ashton, III.
1.11. "GAAP" means generally accepted accounting principles
under United States accounting rules and regulations, consistently applied.
In no event shall the consistent application of the historical accounting
policies used by the Selling Companies have priority over GAAP, regardless of
materiality.
1.12. "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 Seller's Real Property, to be capable of
posing a risk of injury or damage to health, safety, property or the
environment, including, but not limited to, (a) all substances, wastes,
contaminants, pollutants and materials defined or designated as hazardous,
dangerous or toxic pursuant to any Law of any state in which any of Seller's
leased or owned Real Property is located or any United States Law, and (b)
asbestos, polychlorinated biphenyls ("PCB's") and petroleum.
1.13. "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.
1.14. "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 or other intangible asset of
any nature, whether in use, under development or design, or inactive.
1.15. "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.
1.16. "Law" means any provision of any foreign, federal, state
or local law, statute, ordinance, charter, constitution, treaty, rule or
regulation.
3
<PAGE>
1.17. "Maximis" means any Asset (as defined in Section 1.2),
Contract (as defined in Section 1.5) or Obligation (as defined in Section
1.18) related in any manner to the portfolio management/investment accounting
Software with the trade name of "MAXIMIS" that is marketed and maintained by
Premier.
1.18. "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.
1.19. "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.
1.20. "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other
entity of any nature.
1.21. "Proceeding" means any demand, claim, suit, action,
litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature.
1.22. "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 interest through which interests in
real estate may be held, and all appurtenant and ancillary rights thereto,
including, but not limited to, easements, covenants, water rights, sewer rights
and utility rights.
1.23. "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.
1.24. "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.
1.25. "Tax" means (a) any foreign, federal, state or local
income, earnings, profits, gross receipts, franchise, capital stock, net
worth, sales, use, occupancy, general property, real property, personal
property, intangible property, transfer, fuel, excise, payroll, withholding,
unemployment compensation, social security 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.
2. THE TRANSACTION
2.1. Sale and Purchase of Specified Assets. On the Closing
Date (as defined in Section 8.1), effective to the fullest extent possible at
5:00 p.m. EDT on the Effective Date
4
<PAGE>
(as defined in Section 8.1), and subject to the other terms and conditions of
this Agreement, the Seller hereby sells, transfers, assigns and conveys to
Buyer, and Buyer hereby purchases, all right, title and interest in and to
all of the Specified Assets (as defined in Section 2.1.1), and Seller hereby
assigns to Buyer, and Buyer hereby assumes, the Specified Liabilities of
Seller (as defined in Section 2.1.2).
2.1.1 Specified Assets of Seller. The "Specified Assets of
Seller" means all Assets (as defined in Section 1.2) of Seller as of the
Effective Date, wherever located and whether or not reflected on Seller's
books and records used in or pertaining to Seller's Business, including, but
not limited to, the following Assets, but excluding the Excluded Assets (as
defined in Section 1.9) and excluding the Assets specifically excepted below:
(A) All Software (as defined in Section 1.23) owned by
Seller or under development by Seller, but excluding the Maximis Software.
(B) All Intangibles (as defined in Section 1.14) owned by
Seller or under development by Seller, but excluding all Maximis
Intangibles.
(C) All of Seller's Accounts Receivable (as defined in
Section 1.1) and other current assets including, but not limited to, prepaid
expenses, security deposits, rent escrows, and other prepayments, deposits
and escrows, but excluding (1) all Cash Assets (as defined in Section 1.3);
(2) all prepayments and rights to refunds or credits of any Taxes (as defined
in Section 1.25) other than those related to real estate taxes for Seller's
leased Real Property to be transferred to Buyer hereunder for the period
beginning on the Effective Date; (3) all intercompany receivables and all
note receivables from officers, directors and employees of Seller; (4) all
prepayments and deposits with respect to Seller's leased Real Property not
being transferred to Buyer hereunder; (5) all prepaid premiums and other
prepayments and deposits with respect to Seller's Insurance Policies; (6) all
prepayments and deposits with respect to Seller's Group Insurance Plans (as
defined in Section 2.1.1(F)) and Seller's Retirement Plans (as defined in
Section 2.1.1,); and (7) any Accounts Receivable or other current Assets
relating to Maximis.
(D) All of Seller's Tangible Property (as defined in
Section 1.24) excluding Tangible Property relating solely to Maximis and
excluding the furniture and fixtures in the leased Real Property not being
transferred to Buyer hereunder.
(E) All of Seller's Contract Rights (as defined in
Section 1.6) under the Specified Contracts (as defined in Section 4.13) and,
including without limitation, all rights of Seller with respect to all
noncompetition, nondisclosure and other restrictive covenants made for the
benefit of Seller or its affiliates in any agreements between Seller and its
current and former employees; but excluding Contract Rights under (1) this
Agreement and any other Contracts entered into by any of the Selling
Companies with any of the Buying Companies in connection with the
transactions contemplated by this Agreement; (2) Contracts that constitute or
evidence Employee Benefit Plans (as defined in Section 1.7) of Seller, except
for Seller's health and dental insurance contract with Prudential Health Care
that is attached to Schedule 4.15 and shall be deemed a Specified Contract
for the purpose of this Agreement; (3) all Contracts relating to the
acquisition of Seller or any of Seller's predecessors, provided that the
Specified Assets shall include the rights of Seller with respect to all
noncompetition, nondisclosure and other restrictive covenants made for the
benefit of Seller or its affiliates in any such Contract; (4) any Specified
Contracts requiring a Consent
5
<PAGE>
that is not obtained or waived on or before the Closing Date ("Non-Assigned
Contracts"), provided that, once such Consent is obtained or waived, the
Contract Rights under such Specified Contract shall be deemed, automatically
and without further action by the parties, to be included in the Specified
Assets as of the date such Consent is delivered to Buyer; (5) all Contract
Rights under any license, distribution, maintenance, customer, vendor
Contract or other Contract relating to Maximis; and (6) all Contract Rights
under the Excluded Contracts (as defined in Section 1.9).
(F) All transferable rights under all Permits (as defined
in Section 1.19) related to Seller's Business granted or issued to Seller or
otherwise held by Seller.
(G) All of Seller's rights with respect to telephone
numbers, telephone directory listings and advertisements, and all of Seller's
goodwill, in each case to the extent related to Seller's Business.
(H) All of Seller's customer lists, prospect lists,
supplier lists, data bases, computer media, sales and marketing materials,
invoices, correspondence, files, books and records, but excluding (1)
Seller's minute books, stock books, articles of incorporation, seals, tax
returns or other records relating to the organization of Seller; and (2)
Seller's files, books and records relating exclusively to Seller's Assets not
included in the Specified Assets or to Seller's liabilities not included in
the Specified Liabilities.
(I) All of Seller's claims, causes of action and other
legal rights and remedies, whether or not known as of the Effective Date,
relating to Seller's ownership of the Specified Assets and/or the operation
of Seller's Business, but excluding causes of action and other legal rights
and remedies of Seller (1) against any of the Buying Companies with respect
to the transactions contemplated by this Agreement; (2) relating exclusively
to Seller's Assets not included in the Specified Assets or to Seller's
liabilities not included in the Specified Liabilities; or (3) relating to
income Tax refunds, credits or deductions relating to the period ending on or
before the Effective Date.
2.1.2 Specified Liabilities of Seller. The "Specified
Liabilities of Seller" means the following specifically described liabilities
of Seller as of the Effective Date:
(A) The current and long-term liabilities of Seller which
shall be reflected on the Closing Balance Sheet (as defined in, and to be
prepared in accordance with, Section 3.2.1), but only to the extent that the
incurrence or existence of any such liability does not constitute a breach or
failure of, or a default under, any representation, warranty, covenant or
other provision of this Agreement (including, but not limited to, those of
Section 4.8). Notwithstanding the foregoing, the Specified Liabilities shall
not include (1) the Excluded Liabilities (as defined in Section 1.9) or any
reserves pertaining to any of the Excluded Assets or the Excluded Contracts;
(2) any current or long-term notes payable and all accrued interest with
respect thereto, other than any current or long-term notes payable or
capitalized leases for any of the Specified Assets; (3) any liabilities for
overdrafts or any other liabilities with respect to bank accounts; (4) any
intercompany payables or any guarantees of indebtedness of the Seller's
Parent or any subsidiary or affiliate of Seller or Seller's Parent; (5) any
liabilities related to Maximis; (6) any accrued expenses with respect to
Seller's Insurance Policies; and (7) any accrued expenses, liabilities or
reserves pertaining
6
<PAGE>
to Seller's leased Real Property relating to the period ending on or before
the Effective Date.
(B) The liabilities of Seller under those Specified
Contracts (as defined in Section 4.13) to which Seller is a party, but only
to the extent that such liabilities are not due to any breach or default by
any of the Selling Companies under any such Specified Contract occurring
prior to or on the Closing Date. Notwithstanding the foregoing, the Specified
Liabilities of Seller shall not include the liabilities of the Selling
Companies under (1) this Agreement or any other Contracts entered into by any
of the Selling Companies with any of the Buying Companies in connection with
the transactions contemplated by this Agreement; (2) any Contracts that
constitute or evidence Employee Benefit Plans of Seller, other than Seller's
health and dental insurance contract with Prudential Health Care which is
being assigned to Buyer hereunder, but only to the extent that such
liabilities accrue to Buyer after the Effective Date and are not due to a
breach or default by any of the Selling Companies occurring prior to or on
the Closing Date; and (3) any Contracts relating to the formation or
acquisition of Seller or any of Seller's predecessors.
(C) The liabilities of Seller for any Tax incurred and
payable with respect to Seller's Business and/or the ownership, possession,
purchase, lease, sale, disposition or use of any of the Specified Assets of
Seller, at any time after the Effective Date, including payroll and sales tax
liability.
2.2. No Other Liabilities. Notwithstanding any other
provisions of this Agreement, Buyer shall not purchase the Specified Assets
subject to, and Buyer shall not in any manner assume or be liable or
responsible for any Obligations (as defined in Section 1.18) of Seller other
than the Specified Liabilities, and all Obligations of Seller other than the
Specified Liabilities shall remain the sole responsibility of Seller. Without
limiting the generality of the foregoing, and in addition to the liabilities
excluded from the Specified Liabilities under Section 2.1.2, Buyer shall not
in any manner assume or be liable or responsible for, or acquire any Assets
of Seller subject to, any of the following Obligations of Seller, whether or
not reflected on the Closing Balance Sheet:
2.2.1 Affiliates. Any Obligation to Seller's Parent or any
current or former shareholder, partner, director or controlling Person (as
defined in Section 1.20) of Seller, or to any other Person affiliated with
Seller, its affiliates and predecessors, including, but not limited to
Obligations for dividends declared but not paid.
2.2.2 Taxes. Any Obligation for any Tax arising at any time on
or before the Effective Date, including but not limited to, (a) any Tax
payable by the Selling Companies with respect to Seller's business
operations; (b) any Tax payable by the Selling Companies with respect to the
ownership, possession, purchase, lease, sale, disposition or use of any of
Seller's Assets at any time on or before the Effective Date; and (c) any Tax
resulting from the sale of the Specified Assets to Buyer or otherwise
resulting from the transactions contemplated by this Agreement.
2.2.3 Excluded Liabilities. Any of the Excluded Liabilities (as
defined in Section 1.9).
2.2.4 Post-Closing. Any Obligation that is incurred or arises
after the Effective Date, or that relates to any Proceeding (as defined in
Section 1.21) or other event
7
<PAGE>
that occurs or circumstances that exist after the Effective Date
other than the Specified Liabilities and Obligations of Buyer with respect
to the Non-Assigned Contracts.
2.2.5 Transaction Related. Any Obligation that was or is
incurred in connection with the negotiation, execution or performance of this
Agreement and any other Contracts entered into between any of the Buying
Companies and any of the Selling Companies, or among Selling Companies and
the Buying Companies in connection with the transactions contemplated by this
Agreement.
2.2.6 Defaults. Any Obligation, the incurrence or existence of
which constitutes or will constitute a breach or failure of Seller, or a
default by Seller under, any representation, warranty, covenant or other
provision of this Agreement, including, but not limited to, any Obligation,
whether or not known to the Selling Companies, that has not been disclosed to
the Buyer in writing in this Agreement or the Schedules and Exhibits hereto.
2.2.7 Employees. Any Obligation to any or all employees of
Seller, including, but not limited to, Obligations under Seller's payroll
savings, profit sharing and/or other retirement plans which are employee
pension benefit plans as defined in Section 3(2) of ERISA ("Seller's
Retirement Plans"'), Obligations under Seller's Group Insurance Plans (as
defined in Section 2.1.1, other than Seller's health and dental insurance
contract), and Obligations for severance pay and other termination benefits
except for the Obligations for severance pay and other termination benefits
described on Exhibit 2.2.7, and except that the Specified Liabilities shall
include, with respect to any employees listed on Exhibit 2.3 and to the
extent consistent with Buyer's policies and practices, any properly accrued
but unpaid regular compensation and sales commissions due in the normal
course for the current payroll period as of the Effective Date and any
properly accrued vacation pay and other regular benefits as of the Effective
Date (but excluding benefits under Seller's Retirement Plans and Group
Insurance Plans, and excluding severance and termination benefits except as
otherwise provided on Exhibit 2.2.7), all of which accruals shall be properly
reflected as liabilities on the Closing Balance Sheet.
2.2.8 Infringement. Any Obligation of Seller arising in
connection with or related to Seller's infringement or alleged infringement
of any Software or Intangible of any Person.
2.2.9 Encumbrances. Any Encumbrance on or affecting Seller's
Assets including, without limitation, the Specified Assets, other than those
Encumbrances included in the Specified Liabilities of Seller and the
Permitted Encumbrances (as defined in Section 1.8).
2.2.10 Maximis. Any Obligation related to Maximis.
2.2.11 Excluded Contracts. Any Obligation related to any
Excluded Contract (as defined in Section 1.9).
2.3. Seller's Employees. Subject to the condition that the Closing
hereunder occurs, Buyer shall offer to employ, as of the Effective Date, the
employees of Seller listed on Exhibit 2.3. Such employment will be on an "at
will" basis for salaries or wages determined by Buyer with recognition of
their original hire date by Seller for purposes of Buyer's benefit plans.
Buyer shall make available to employees of Seller that accept
8
<PAGE>
employment with Buyer all employee benefit plans available to Buyer's other
employees. Any such employment by Buyer may, at some time, require relocation
by the employee to Buyer's currently occupied facilities. In the event of a
termination of employment without cause during the twelve (12) month period
after the Effective Date of any employees listed on Exhibit 2.3 that are
hired by Buyer, Buyer will provide any such terminated employee severance
consistent with Seller's severance policy described on Exhibit 2.2.7. Buyer
does not assume, and Seller shall be fully responsible for the payment of,
any severance or other benefits related to or payable upon the termination of
any of its employees, including, without limitation, any employees not
offered employment by Buyer (except to the extent otherwise provided on
Exhibit 2.2.7) and any employees offered employment by Buyer who fail to
accept such employment offer. Seller shall cooperate with Buyer's efforts to
employ and retain any such employees. Within at least ten (10) days prior to
the Closing Date, Seller shall make available to Buyer accurate and complete
copies of the personnel records of Seller's employees. Seller shall be
responsible for compliance with all Laws related to the termination by Seller
of Seller's employees and Buyer shall be responsible for compliance with all
Laws related to offering employment to, and employing the employees of Seller
listed on Exhibit 2.3.
3. PURCHASE PRICE AND CLOSING FINANCIAL STATEMENTS
3.1. Purchase Price and Allocation. The total purchase price for the
Specified Assets ("Purchase Price") shall consist of: (a) subject to the
adjustments described in Sections 3.3, 3.4 and 3.5, a cash payment ("Closing
Payment") in the amount of Twenty-Nine Million, Three Hundred Thousand
Dollars ($29,300,000) payable at Closing by the Buying Companies to Seller;
(b) a cash payment ("First Holdback") in the amount of Five Hundred Thousand
Dollars ($500,000) payable in accordance with Section 3.3.3; (c) a cash
payment ("Second Holdback") in the amount of Two Hundred Thousand Dollars
($200,000) payable in accordance with Section 3.4.3; (d) the assumption of
the Specified Liabilities by Buyer in accordance with Section 2.1; and (e)
the Earnout Payment (as defined in Section 3.6) payable in accordance with
Section 3.6.6. The Purchase Price shall be allocated among the Specified
Assets, Specified Liabilities and the noncompetition covenants set forth in
Section 10.4 in the manner set forth on Exhibit 3.1.
3.2. Closing Financial Statements. The Selling Companies shall
prepare or cause to be prepared certain financial statements of Seller ("Closing
Financial Statements"), and shall engage the Philadelphia office of KPMG Peat
Marwick LLP ("Seller's Accountants") to conduct an audit ("Closing Audit") of
the Closing Financial Statements, in accordance with the following provisions:
3.2.1 Type of Statements. The Closing Financial Statements
shall include a balance sheet of Seller as of the Effective Date ("Closing
Balance Sheet") and a statement of operations, a statement of changes in
stockholders' equity and statement of cash flows of Seller for the period
from January 1, 1997 to the Effective Date, and shall (a) be prepared in
accordance with GAAP (as defined in Section 1.11), (b) fairly present the
financial condition and results of operations of Seller as of the date and
for the period indicated, and (c) be audited by Seller's Accountants whose
reports thereon shall be without qualification or explanatory paragraphs. In
addition, the Selling Companies shall provide to the Buying Companies, with
the delivery of the Closing Financial Statements, supplemental financial
information consisting of a combining balance sheet as of the Effective Date
and a combining statement of operations for the period from January 1, 1997
to the Effective Date,
9
<PAGE>
each segregated by product line, consistent with the information contained in
the Closing Financial Statements.
3.2.2 Audit Requirements. All of the Closing Financial
Statements shall be prepared and audited in accordance with GAAP (as defined
in Section 1.11), provided that the schedule of unadjusted differences
prepared in connection with the Closing Audit ("Audit SUD") shall not contain
any individual item exceeding Twenty-Five Thousand Dollars ($25,000), nor
shall the net aggregate of all items on the Audit SUD exceed One Hundred
Thousand Dollars ($100,000). The Selling Companies shall fully cooperate with
Seller's Accountants in connection with the Closing Audit including, but not
limited to, agreeing to any required adjustments and taking any other
necessary actions to enable the audit report issued by Seller's Accountants
with respect to the Closing Financial Statements ("Audit Report") to be
completely unqualified without any explanatory paragraphs. The Selling
Companies shall instruct Seller's Accountants to review with the Buying
Companies and the Philadelphia office of Coopers & Lybrand ("Buyer's
Accountants") the workpapers prepared by Seller's Accountants in connection
with the Closing Audit ("Audit Workpapers") before Seller's Accountants
finalize the Closing Financial Statements and Audit Report.
3.2.3 Delivery of Documents. The Selling Companies shall
instruct Seller's Accountants to deliver to the Buying Companies, within
sixty (60) days after the Effective Date, the Closing Financial Statements,
including at least one original signed copy of the Audit Report, and a copy
of the Audit SUD, and to allow the Buying Companies to examine and copy the
Audit Workpapers. On or before the date that Seller's Accountants deliver the
Closing Financial Statements and accompanying documents to the Buying
Companies, the Selling Companies shall deliver to the Buying Companies
detailed lists ("Closing Balance Sheet Lists") of all of the Assets (as
defined in Section 1.2) and Obligations (as defined in Section 1.18) of
Seller related to Seller's Business reflected on the Closing Balance Sheet
(including fully depreciated and fully amortized Assets, and the related,
accumulated depreciation and amortization), by balance sheet account and
segregated by product line, and with aggregate net balances equal to the
balances on the Closing Balance Sheet; provided, that the obligation of the
Selling Companies to deliver the Closing Balance Sheet lists shall be
contingent upon the Buying Companies permitting the Selling Companies and
their representative to have sufficient access to the necessary books,
records and personnel upon the reasonable request of the Selling Companies.
The Closing Balance Sheet Lists shall include, but not necessarily be limited
to, lists of the following items related to Seller's Business (a) Accounts
Receivable (as defined in Section 1.1), 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
("Receivables Lists"); (b) other current assets, itemized by category and
with appropriate explanation; (c) Tangible Property (as defined in Section
1.24), grouped as to type, showing cost, accumulated depreciation and net
book value; (d) Software (as defined in Section 1.23) and Intangibles (as
defined in Section 1.14), showing cost or amount capitalized, accumulated
amortization and net book value; (e) accounts payable, itemized by payee; (f)
accrued expenses and reserves, itemized by category and with appropriate
explanation; (g) deferred revenues, itemized by customer and time periods;
and (h) other current and long-term liabilities, itemized by payee. The
Closing Financial Statements shall be accompanied by a certificate ("Audit
Certificate") signed by the Chief Financial Officer of Seller's Parent in
which Seller's Parent represents and warrants to the Buying Companies that
(w) the Closing Balance Sheet Lists are accurate and complete in all material
respects; (x) Seller had no Obligations as of the Effective Date other than
the
10
<PAGE>
Obligations reflected on the Closing Financial Statements and Obligations
under Contracts listed or not required to be listed on Schedule 4.13 that
were not, as of the Effective Date, required by GAAP to be reflected on the
Closing Financial Statements; (y) all Accounts Receivable listed on the
Closing Balance Sheet Lists arose in the ordinary course of business and, as
of the Effective Date, represented legally enforceable claims against
third-parties for goods sold, leased or licensed or to be sold, leased or
licensed or for services rendered or to be rendered; and (z) as of the
Effective Date, there were no refunds, discounts, unissued credits, rights of
setoff or assignments affecting any such Accounts Receivable except to the
extent that applicable reserves established in accordance with GAAP were
reflected on the Closing Balance Sheet.
3.3. Purchase Price Adjustments. The Purchase Price shall be subject to
adjustment as follows:
3.3.1 Net Assets Adjustment. The Purchase Price shall be
subject to adjustment based upon Seller's net assets as of the Effective
Date, as follows:
(A) Definition. Seller's net assets as of the Effective
Date shall equal (a) the aggregate net book value of all Specified Assets of
Seller reflected on the Closing Balance Sheet (it being understood that the
net book value of Assets that are reflected on the Closing Balance Sheet, but
are not included in the Specified Assets, shall not be included in Seller's
net assets); minus (b) all Intangibles on the Closing Balance Sheet,
including but not limited to, purchase price intangibles arising from the
acquisition of any parts of Seller's Business, or from intangibles, such as
capitalized software, resulting from the capitalization of internal costs;
and minus (c) the aggregate full face amount of all Specified Liabilities
reflected on the Closing Balance Sheet (it being understood that the face
amount of liabilities that are reflected on the Closing Balance Sheet, but
are not included in the Specified Liabilities, shall not be deducted from
Seller's net assets).
3.3.2 Net Assets Statement. The Selling Companies shall
instruct Seller's Accountants to (a) prepare a statement ("Net Assets
Statement") which shall include a detailed calculation showing each separate
component identified in Section 3.3.1(A) segregated by product line; and (b)
deliver the Net Assets Statement to the Buying Companies at the same time as
the Closing Financial Statements and related documents are delivered to the
Buying Companies under Section 3.2.3. The Buying Companies shall notify the
Seller, in reasonable detail, of any objections to the Net Assets Statement
(which may include objections to the Closing Financial Statements) within
thirty (30) days after the Buying Companies receive the Net Assets Statement
and all of the documents required to be delivered to the Buying Companies
under Section 3.2.3. If the Buying Companies do not notify the Seller of any
such objections by the end of that thirty-day period, then the Net Assets
Statement, as prepared by Seller's Accountants, shall be considered final on
the last day of that thirty-day period. If the Buying Companies do notify the
Selling Companies of any such objections by the end of that thirty-day
period, and the Buying Companies and the Selling Companies are unable to
resolve their differences within fifteen (15) days thereafter, then the
disputed items on the Net Assets Statement shall be reviewed, as soon as
possible, at the Buying Companies' expense, by the Buyer's Accountants. The
Selling Companies and Buying Companies shall instruct their respective
Accountants to, in good faith, use their best efforts to resolve such disputed
11
<PAGE>
items to their mutual satisfaction and to deliver a final Net Assets
Statement to the Selling Companies and Buying Companies as soon as possible.
If Seller's Accountants and the Buyer's Accountants are unable to resolve any
such disputed items within thirty (30) days after receiving such
instructions, then the remaining disputed items shall be submitted to Arthur
Andersen & Co., Philadelphia, Pennsylvania ("Arbiter"), for resolution, with
the costs thereof paid fifty percent (50%) by the Selling Companies and fifty
percent (50%) by the Buying Companies, and the Arbiter shall be instructed to
deliver a final Net Assets Statement to the Selling Companies and the Buying
Companies as soon as possible.
3.3.3 Payment of Net Asset Adjustment and First Holdback.
Exhibit 3.3.1 sets forth a summary of the calculation of Seller's net assets
by Seller as of December 31, 1996, which equals Two Million, Six Hundred
Ninety-Two Thousand Dollars $2,692,000, and also indicates the manner in
which the calculation of Seller's net assets as of the Effective Date will be
summarized. The Purchase Price shall be adjusted by the amount that Seller's
net assets on the Effective Date, as finally determined in accordance with
Section 3.3.1 ("Final Net Assets"), are (i) less than Two Million, Two
Hundred Thousand Dollars ($2,200,000) resulting in a decrease in the Purchase
Price, or (ii) greater than Three Million, Two Hundred Thousand Dollars
($3,200,000) resulting in an increase in the Purchase Price, (in either case,
such difference referred to as the "Net Asset Adjustment"). If the Net Asset
Adjustment constitutes a decrease in the Purchase Price of an amount less
than the amount of the First Holdback, then the Buying Companies shall pay to
Seller the amount of the First Holdback minus the amount of the Net Asset
Adjustment, subject to setoff and holdback under Section 11.5. If the Net
Asset Adjustment constitutes a decrease in the Purchase Price of an amount
exceeding the amount of the First Holdback, then the Selling Companies shall
pay to the Buying Companies an amount equal to the difference between the Net
Asset Adjustment and the First Holdback. If the Net Asset Adjustment
constitutes an increase in the Purchase price, then the Buying Companies
shall pay to Seller the amount of the Net Asset Adjustment plus the amount of
the First Holdback. Any payment under this Section 3.3.3 shall be made within
fifteen (15) business days after the Net Assets Statement is finalized in
accordance with Section 3.3.2.
3.4. Accounts Receivable Adjustment. In addition to the
Purchase Price Adjustment described in Section 3.3, the Purchase Price shall
be subject to downward adjustment based upon collections of Seller's Accounts
Receivable, as follows:
3.4.1 Collections by Buyer. After Closing, Buyer shall,
in the ordinary course of business, use reasonable and normal efforts to
collect all of Seller's Accounts Receivables reflected on the Closing Balance
Sheet, as listed on the Receivables List delivered by Seller to Buyer in
accordance with Section 3.2.3 ("Purchased Receivables"). The Buyer shall
apply collections from each customer to the earliest open receivable due from
that customer, unless otherwise specified by the customer or unless the
payment clearly applies to a specific invoice. Buyer shall have no obligation
to institute legal action or otherwise take unusual steps to collect any of
Purchased Receivables. If, after the Closing Date but before the A/R Cutoff
Date (as defined in Section 3.4.2), Seller receives any payments on account
of Purchased Receivables, then Seller shall promptly remit the amount thereof
to Buyer.
3.4.2 Unpaid Receivables. Buyer shall maintain complete
and accurate records of all customer payments received by the Buyer and
customer credits issued by the Buyer from the Closing Date until 90 days
after the Closing Date ("A/R Cutoff Date"), which records shall show the
individual amounts of such payments and credits that were applied to
Purchased Receivables. Within 120 days after the Closing Date, Buyer shall
deliver to the Selling Companies copies of such records, together with a
statement as to which of the
12
<PAGE>
Purchased Receivables (if any) were not collected by the A/R Cutoff Date
("Unpaid Receivables") provided that such nonpayment is not attributable to
Buyer's failure to perform under a Specified Contract after the Effective
Date (unless any of the Selling Companies involved in PSL's Operations (as
defined in Section 3.6.5) directly or indirectly contributed to such failure
to perform), which shall include unpaid Purchased Receivables that were
earned but not billed as of the Closing Date whether designated as "A/R
earned, not billed" or included as part of "A/R, work-in-progress" on the
Seller's books and records. For the purposes of this Section 3.4, Unpaid
Receivables shall not include the receivables set forth on Exhibit 3.4.2
which are not expected to be collected by the A/R Cutoff Date, provided that
the amount of such receivables shall not include any portion that should have
been collected in accordance with the underlying agreement prior to the A/R
Cutoff Date. The Selling Companies shall notify the Buying Companies of any
objections to such statement of Unpaid Receivables within 30 days after the
Seller receives such documents. If the Selling Companies do not notify the
Buying Companies of any objections by the end of such 30-day period, then the
amount of Unpaid Receivables shown on the Buyer's statement shall be
considered final on the last day of such 30-day period. If the Selling
Companies do notify the Buying Companies of any objections by the end of such
30-day period, and the Selling Companies and the Buying Companies are unable
to resolve their differences within 15 days thereafter, then the disputed
amount of Unpaid Receivables shall be submitted to the Arbiter for
resolution, with the costs thereof paid 50% by the Selling Companies and 50%
by the Buying Companies, and the Arbiter shall be instructed to deliver a
final statement of Unpaid Receivables to the Selling Companies and the Buying
Companies as soon as possible.
3.4.3 Adjustment to Purchase Price and Payment of the Second
Holdback. The Purchase Price shall be reduced by the full aggregate amount of
the Unpaid Receivables, if any, less an allowance for specific doubtful
accounts properly accrued and fully reserved on the Closing Financial
Statements, as finally determined in accordance with Section 3.4.2 ("A/R
Adjustment") as set forth in Schedule 3.4.3 which will be delivered in
conjunction with the Closing Financial Statements. If the A/R Adjustment is
less than the amount of the Second Holdback, then the Buying Companies shall,
jointly and severally, pay to the Selling Companies the amount by which the
Second Holdback exceeds the A/R Adjustment. If the A/R Adjustment is more
than the amount of the Second Holdback, then the Selling Companies shall,
jointly and severally, pay to the Buying Companies the amount by which the
A/R Adjustment exceeds the amount of the Second Holdback. At the time of such
payment ("A/R Adjustment Payment Date"), Buyer shall assign the Unpaid
Receivables to Seller without recourse. If, between the A/R Cutoff Date but
before the A/R Adjustment Payment Date, Buyer receives any payments on
account of the Unpaid Receivables, then the Buying Companies shall promptly
notify the Selling Companies, and the amount of such payments shall be
applied to reduce the A/R Adjustment. If, after the A/R Adjustment Payment
Date, the Buying Companies receive any payments on account of the Unpaid
Receivables, then the Buying Companies shall promptly remit the amount
thereof to the Selling Companies. Notwithstanding the foregoing provisions of
this Section 3.4.3, Buyer may elect to retain any Unpaid Receivables it
wishes to retain, in which case such retained receivables shall not be
included in the A/R Adjustment, and the Selling Companies shall have no
further responsibility with respect thereto.
3.4.4 Collections by Seller. Before the A/R Adjustment Payment
Date, none of the Selling Companies shall take any action to collect any of
Seller's Unpaid Receivables without the Buyer's prior written consent. After
the A/R Adjustment Date, Seller may attempt to directly collect the Unpaid
Receivables, provided that, before initiating legal
13
<PAGE>
action against any customer of Buyer, Seller shall notify Buyer and afford
Buyer a reasonable opportunity to persuade the customer to pay or, at Buyer's
sole option, to purchase the Unpaid Receivable in question from Seller.
3.5. Sales Tax Adjustment. In addition to the Purchase Price
Adjustments set forth in Sections 3.3 and 3.4, the Purchase Price shall be
subject to an upward adjustment by the full aggregate amount of the accrued,
current sales tax liability which is reflected on the Closing Balance Sheet
("Sales Tax Adjustment"). Payment of the Sales Tax Adjustment shall be made
at the same time as the Net Asset Adjustment and First Holdback as set forth
in Section 3.3.3. Seller shall pay and Seller's Parent shall cause to be
paid, such accrued current sales tax liability with the appropriate tax
authorities in a proper and timely manner.
3.6. Earnout Payment. The Buying Companies, jointly and severally,
shall pay to Seller certain payments aggregating not more than Two Million,
Five Hundred Thousand Dollars ($2,500,000) (collectively, "Earnout Payment")
based upon Revenue of PSL's Operations (as defined in Section 3.6.5)
calculated in accordance with GAAP (as defined in Section 1.11) and Section
3.6.4 during (i) the twelve (12) month period beginning April 1, 1997 ("1997
Revenue"), (ii) the twelve (12) month period beginning April 1, 1998 ("1998
Revenue") and (iii) the twelve (12) month period beginning April 1, 1999
("1999 Revenue"), (all such periods collectively referred to herein as the
"Earnout Period") as follows:
3.6.1 1997 Payment. If the 1997 Revenue is at least Twenty-One
Million, Five Hundred Thousand Dollars ($21,500,000) ("First Threshold"),
then there shall be an Earnout Payment equal to five percent (5%) of the
amount by which the 1997 Revenue exceeds the First Threshold ("First Earnout
Payment").
3.6.2 1998 Payment. If the aggregate of the 1997 Revenue and
the 1998 Revenue is at least Forty-Two Million Dollars ($42,000,000) ("Second
Threshold") then there shall be an Earnout Payment equal to five percent (5%)
of the amount by which the aggregate of the 1997 Revenue and 1998 Revenue
exceeds the Second Threshold, minus the amount of the First Earnout Payment
("Second Earnout Payment").
3.6.3 1999 Payment. If the aggregate of the 1997 Revenue, the
1998 Revenue and the 1999 Revenue is at least Sixty Million, Five Hundred
Thousand Dollars ($60,500,000) ("Third Threshold") then there shall be an
Earnout Payment equal to percent (5%) of the amount by which the aggregate of
the 1997 Revenue, the 1998 Revenue and the 1999 Revenue exceeds the Third
Threshold, minus the amount of the First Earnout Payment and the amount of
the Second Earnout Payment ("Third Earnout Payment").
3.6.4 Revenue Recognition. Revenues from software licenses and
other customer Contracts of PSL's Operations will be recognized in accordance
with the standard accounting practices and policies of Buyer's Parent
(sometimes referred to hereinafter as "SunGard") in effect for the relevant
period. For the purpose of revenue recognition with respect to any Earnout
Payments, the amount of revenue for any period will be equal to the amount of
revenue recognized by Buyer for which cash has been collected by Buyer within
three (3) months after the end of the relevant period ("grace period"),
provided that with respect to the 1997 Revenue and the 1998 Revenue, any
revenue generated in a prior period and collected beyond the end of that
period and the grace period will be counted as revenue in the next cumulative
period.
14
<PAGE>
3.6.5 PSL's Operations. "PSL's Operations" means the operations
of Seller's Business (as defined under the "Background" caption on page one
of this Agreement) with respect to the Global Plus and InfoHarbour products
and services, as conducted by Seller just before Closing, and as conducted
after Closing by the Buying Companies and their successors, assigns and
affiliates, as such business operations may be expanded, contracted or
otherwise changed after Closing as a result of (a) expansion or contraction
of customer base; (b) development of product enhancements or improvements;
(c) development of new releases or new versions of products having
substantially similar functional capabilities and market scopes; (d)
discontinuance of unsuccessful products, product enhancements, product
releases or other projects, including, without limitation, any product
development or enhancements related to large volume account processing as
currently under discussion with State Street Bank and Trust and other
customers and potential customers; and (e) other factors generally affecting
Buyer's and/or SunGard's overall business or the computer services industry,
in all cases subject to the applicable provisions of Section 9.5. For the
purpose of the Earnout Payment, the revenues of PSL's Operations shall
include: license fees, remote processing fees, data center fees, pricing
service fees and other third party resales including but not limited to
hardware and software resales, and professional services for implementation,
customizations, maintenance and training with respect to the Global Plus and
InfoHarbour Software systems, whether or not provided under the trade name
"CogniSource". For the purposes of the Earnout Payment, the revenue of PSL's
Operations shall not include any other professional services of Buyer or any
affiliated company of Buyer, including but not limited to, any such
professional services provided in conjunction with the trade name
"CogniSource".
3.6.6 Calculation and Payment. The Buying Companies shall
deliver to the Selling Companies a report detailing the Earnout Payment
("Earnout Report") within one hundred twenty (120) days after the Earnout
Period. The Buying Companies and the Selling Companies shall in good faith
attempt to agree upon the amount of the Earnout Payment within one hundred
thirty-five (135) days after the end of the Earnout Period, and the
undisputed portion of the Earnout Payment, if any, shall be paid to Seller
within fifteen (15) business days after such agreement is reached.
Thereafter, if any disputes exist with respect to the Earnout Payment, the
Selling Companies and the Buying Companies shall instruct their respective
Accountants to, in good faith, use their best efforts to resolve such
disputed items to their mutual satisfaction and to deliver a report on the
Earnout Payment to the Selling Companies and the Buying Companies as soon as
possible. If Seller's Accountants and Buyer's Accountants are unable to
resolve any such disputed items within thirty (30) days after receiving such
instructions, then the remaining disputed items shall be submitted to the
Arbiter for resolution, with the costs thereof paid fifty percent (50%) by
the Selling Companies and fifty percent (50%) by the Buying Companies, and
the Arbiter shall be instructed to deliver a final Earnout Report to the
Selling Companies and the Buying Companies as soon as possible. Within
fifteen (15) business days after the Earnout Report is finalized in
accordance with this Section 3.6.6, any unpaid portion of the Earnout Payment
shall be paid to the Selling Companies.
3.7. Currency and Method of Payment. All dollar amounts stated in this
Agreement are stated in United States currency, and all payments required
under this Agreement shall be paid in United States currency. All payments
required under this Agreement shall be made as follows: (a) any payment may
be made by wire transfer of immediately available United States federal
funds; (b) any payment exceeding $100,000 shall be made by wire transfer of
immediately available United States federal funds; (c) any
15
<PAGE>
payment exceeding $10,000, but not exceeding $100,000, may be made by bank
certified, treasurer's or cashier's check; and (d) any payment not exceeding
$10,000 may be made by ordinary check.
3.8. Imputed Interest. Any cash portion of the Purchase Price that is
paid after the end of the six-month period beginning on the Closing Date
shall be deemed to include interest from the Closing Date, calculated at the
required, applicable rate for imputed interest under federal income tax law.
4. REPRESENTATIONS OF THE SELLING COMPANIES
Knowing that the Buying Companies rely thereon, the Selling Companies,
jointly and severally, represent and warrant to the Buying Companies, and
covenant with the Buying Companies as follows:
4.1. Organization. Premier and Seller's Parent are corporations duly
organized, validly existing and in good standing under the Laws of the
Commonwealth of Pennsylvania. Premier's Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada. Each of Premier, Premier's Subsidiary and Seller's Parent
possesses the full corporate power and authority to own its Assets, conduct
its business as and where presently conducted, and enter into and perform
this Agreement. Premier is duly qualified to do business in each jurisdiction
listed on Schedule 4.1, and Premier is not required to be qualified in any
other jurisdiction, except where the failure to so qualify would not have a
material adverse effect on Seller's Business. Premier does not have any
predecessors other than as set forth on Schedule 4.1. Schedule 4.1 states, as
to each of Premier and Premier's Subsidiary (a) its exact legal name; (b) its
jurisdiction and date of formation; (c) its federal employer identification
number; (d) its headquarters address, telephone number and facsimile number;
and (e) its directors and officers, indicating all current title(s) of each
individual. Accurate and complete copies of articles or certificate of
incorporation, bylaws and other organization and related documents, each as
amended to date, and all Contracts relating to the acquisition of Premier (or
its affiliates or predecessors) have been made available to the Buying
Companies.
4.2. Effect of Agreement. The execution, delivery and performance of
this Agreement by each of the Selling Companies and the consummation by each
of the Selling Companies of the transactions contemplated hereby, (a) have
been, or shall have been by the Closing Date, duly authorized by all
necessary actions by their respective shareholders and boards of directors,
or other governing bodies; (b) do not constitute a violation of, a default
under, or termination of the articles or certificate of incorporation or
other organizational documents or; (c) do not constitute a default or breach
of (immediately after the giving of notice, passage of time or both), or
termination of any Contract to which Seller is a party or by which any of
Seller is bound; (d) do not constitute a violation of any Law applicable to
any of the Selling Companies or to Seller's Business or the Specified
Assets; (e) except as listed on Schedule 4.2, do not require the Consent (as
defined in Section 1.4) of any Person (as defined in Section 1.20); (f) do
not accelerate or otherwise modify any Obligation (as defined in Section
1.18) of Seller (other than obligations of Seller to repurchase the preferred
stock held by its preferred stockholders to be satisfied on or after the
Effective Date, and Obligations under loans from CoreStates and Seller's
Parent to be satisfied on the Effective Date); and (g) do not result in the
creation of any Encumbrance (as defined in Section 1.8) upon, or give to any
other Person any interest in, any of Seller's Business or the Specified
16
<PAGE>
Assets. There exists no rights of first refusal or other preemptive rights
with respect to Seller's Business or the Specified Assets, that have not been
waived by the Person entitled to such right. This Agreement constitutes the
valid and legally binding agreement of each of the Selling Companies,
enforceable against each of the Selling Companies in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratoriums,
fraudulent conveyance, reorganization or other similar laws affecting
creditors' rights generally and except that enforceability of the obligations
under this Agreement is subject to the application of equitable principles or
the availability of equitable remedies in any proceeding, whether at law or
in equity.
4.3. Financial and Corporate Records. Seller's books and records are
and have been properly prepared and maintained in form and substance adequate
for preparing audited financial statements in accordance with GAAP (as
defined in Section 1.11), and fairly and accurately reflect all of Seller's
Assets and Obligations and all Contracts and transactions to which Seller is
or was a party or by which Seller or any of business or Assets is or were
affected. Seller's corporate minute books have been made available to Buyer.
4.4. Compliance with Law. Seller's operations, the conduct of Seller's
Business as and where such business has been or presently is conducted, and
the ownership, possession and use of the Assets comply in all material
respects with all Laws (as defined in Section 1.16) applicable to Seller, its
operations, business, Assets or Obligations. Except as set forth on Schedule
4.4, Seller has obtained and holds all Permits (as defined in Section 1.19)
required for the lawful operation of its business as and where such business
is presently conducted. All Permits related to Seller's Business held by
Seller are listed on Schedule 4.4, and copies of such Permits have been
delivered or made available to Buyer. Seller has taken all steps necessary or
appropriate to comply with the Workers' Adjustment and Retraining
Notification Act ("WARN Act").
4.5. Financial Statements. Seller's fiscal year ends on December 31.
Schedule 4.5A includes accurate and complete copies of the following
financial statements ("Audited Financial Statements"): (a) a balance sheet of
Seller as of December 31, 1996 and December 31, 1995; and (b) statements of
operations, stockholders' equity and cash flows for the periods from January
1, 1996 to December 31, 1996, and January 1, 1995 to December 31, 1995, and
notes thereto. Schedule 4.5B includes accurate and complete copies of all
unaudited financial statements ("Unaudited Financial Statements") prepared by
the management of the Seller on an ongoing basis since the Audited Financial
Statements. All of the Audited Financial Statements were (a) prepared in
accordance with GAAP; (b) fairly present the financial condition and results
of operations of Seller as of the dates and for the periods indicated; and
(c) audited by Seller's Accountants, whose reports thereon are without
qualification or explanatory paragraphs. All of the Unaudited Financial
Statements were prepared in accordance with GAAP, and all adjustments that
are necessary for a fair presentation thereof (consisting only of normal
recurring adjustments) have been made. Schedule 4.5C includes supplemental
financial information of Seller consisting of combining balance sheets as of
February 28, 1997, January 31, 1997, December 31, 1996 and December 31, 1995,
and combining statements of operations for the periods from January 1, 1996
to December 31, 1996 and January 1, 1995 to December 31, 1995, each
segregated by product line, consistent with the information contained in the
Audited Financial Statements.
17
<PAGE>
4.6. Assets. Schedule 4.6 includes detailed lists of all the Assets of
Seller as of January 31, 1997 itemized by balance sheet account, segregated
by product line and designated as to ownership by Premier or Premier's
Subsidiary, including (a) 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;
(b) other current Assets, itemized by category and with appropriate
explanation; (c) Tangible Property, grouped as to type, showing cost,
accumulated depreciation and net book value; and (d) Software and
Intangibles, showing cost or amount capitalized, accumulated amortization and
net book value. Except as set forth in Schedule 4.6A, Seller has good and
marketable title to all of the Specified Assets and has the right to transfer
all rights, title and interest in such Assets to Buyer, free and clear of any
Encumbrance other than the Permitted Encumbrances (as defined in Section
1.8). Except for the Specified Assets included on Schedule 4.6 and the
Contract Rights set forth in Section 4.13, no other Assets are necessary to
operate the Seller's Business.
4.7. Seller's Obligations. Schedule 4.7 is a list, as of January 31,
1997, of all of Seller's accounts payable, accrued expenses, deferred income,
and other current and long-term liabilities, grouped by balance sheet account
and segregated by product line, excluding liabilities for Taxes other than
real estate taxes, intercompany liabilities and notes payable. Seller has no
Obligations other than (a) the Excluded Liabilities listed on Schedule 1.9B,
(b) the Obligations listed on Schedule 4.7; (c) Obligations under the
Specified Contracts, any Contracts not required to be listed on Schedule
4.13, Employee Benefit Plans listed on Schedule 4.15, and Insurance Policies
listed on Schedule 4.19; and (d) Obligations incurred since January 31, 1997
and not in breach or violation of any of the representations, warranties or
covenants of Section 4.8. Except as set forth on Schedule 4.7, none of
Seller's Obligations relating to the Seller's Business is guaranteed by any
Person.
4.8. Operations Since January 31, 1997. Except as set forth on
Schedule 4.8 and excluding any operations with respect to Maximis, from
January 31, 1997 to the date of this Agreement:
4.8.1 Except in the ordinary course of its business consistent
with its past practices, Seller has not (a) created or assumed any
Encumbrance, other than the Permitted Encumbrances, upon any of Seller's
Business or the Specified Assets, (b) incurred any material Obligation, (c)
made any loan or advance to any Person; (d) assumed, guaranteed or otherwise
become liable for any Obligation of any Person; (e) committed for any capital
expenditure; (f) purchased, leased, sold, abandoned or otherwise acquired or
disposed of any business or Specified Assets; (g) waived any right or
canceled any material debt or claim; (h) assumed or entered into any material
Contract other than this Agreement; (i) increased, or authorized an increase
in, the compensation or benefits paid or provided to any of its directors,
officers, employees, salesmen, agents or representatives; or (j) done
anything else outside the ordinary course of business, whether or not
specifically described in any of the foregoing clauses.
4.8.2 Even in the ordinary course of its business consistent
with its past practices, Seller has not incurred any Obligation related to
Seller's Business, made any loan to any Person, acquired or disposed of any
business or Specified Assets, entered into any Contract related to Seller's
Business (other than customer contracts) or other transaction, or done any of
the other things described in Section 4.8.1, involving an amount exceeding
18
<PAGE>
$100,000 in any single case or $500,000 (excluding
all amounts due Corestates or Seller's Parent) in the aggregate.
4.8.3 There has been no material adverse change or material
casualty loss affecting Seller, its Business, Assets or financial condition,
and there has been no material adverse change in the financial performance of
Seller.
4.9. Accounts Receivable. All Accounts Receivable listed in Schedule
4.6 arose in the ordinary course of business and are proper and valid
accounts receivable. Except as set forth in Schedule 4.9, there are no
refunds, discounts, rights of setoff or assignment affecting any such
Accounts Receivable. Proper amounts of deferred revenues appear on Seller's
books and records, in accordance with generally accepted accounting
principles, with respect to all of Seller's (a) billed but unearned Accounts
Receivable; (b) previously billed and collected Accounts Receivable still
unearned; and (c) unearned customer deposits.
4.10. Tangible Property. Except as set forth on Schedule 4.10 and
excluding any Tangible Property related solely to Maximis, Premier has good
and marketable title to all of Seller's Tangible Property, free and clear of
any Encumbrances, other than the Permitted Encumbrances. All of Seller's
Tangible Property is located at Seller's offices or facilities. All Tangible
Property used by Seller is in reasonable operating condition, ordinary wear
and tear excepted, and is sufficient for Seller's Business as presently
conducted.
4.11. Real Property. Seller does not own any Real Property (as defined
in Section 1.22). Schedule 4.11 is a detailed list of all Real Property
leased by Premier, showing location, rental cost and landlord. All Real
Property under lease to or otherwise used by Seller which is being assigned
to Buyer hereunder is in reasonable condition, ordinary wear and tear
excepted, and is sufficient for the current operations of Seller. No such
Real Property which is being assigned to Buyer hereunder, nor the occupancy,
maintenance or use thereof, is in violation of, or breach or default under,
any Contract or Law, and no notice from any lessor, governmental body or
other Person has been received by any of the Selling Companies or served upon
any such Real Property claiming any violation of, or breach or default under,
any Contract or Law, or requiring or calling attention to the need for any
work, repairs, construction, alternation or installations. Seller has not
placed or caused to be placed and Seller has no knowledge or belief that
there were or are any Hazardous Substances on or under any of Seller's Real
Property.
4.12. Software and Intangibles. Schedule 4.12 is an accurate and
complete list and description of all Software (as defined in Section 1.23),
other than the Maximis Software, and Intangibles (as defined in Section
1.14), other than Intangibles related to Maximis, owned (designated as to
ownership between Premier and Premier's Subsidiary), marketed, licensed, used
or under development by Seller, 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. Except as set forth on Schedule 4.12, no other
Software is required to operate Seller's Business. Except as explained on
Schedule 4.12, Seller has good and marketable title to, and has the full
right to use and transfer to Buyer, all of the Software and Intangibles,
other than those related to Maximis, listed on Schedule 4.12, free and clear
of any Encumbrance (as defined in Section 1.8), other than the Permitted
Encumbrances. Except as set forth on Schedule 4.12, no rights of any third
party are necessary to market, license, sell, modify, update, and/or create
derivative works for the Software listed on Schedule 4.12. With respect to
the Software listed on Schedule 4.12, (a) Seller maintains machine-readable
master-reproducible
19
<PAGE>
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 Seller; (b) in each case, the
machine-readable copy substantially conforms to the corresponding source code
listing; (c) such Software is written in the language set forth on Schedule
4.12, for use on the hardware set forth on Schedule 4.12 with the operating
systems described on Schedule 4.12; (d) such Software can be maintained and
modified by reasonably competent programmers familiar with such language,
hardware and operating systems; (e) in each case, the Software operates
substantially in accordance with the user manual therefor without material
operating defects; and (f) except for the NIDS and Global Plus Software, in
each case, each component of such Software that creates, accepts, displays,
stores, retrieves, accesses, recognizes, distinguishes, compares, sorts,
manipulates, processes, calculates or otherwise uses dates or date-related
data will do so accurately, without material operating defects, 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 (collectively, "Year 2000 Compliant"). The
"Year 2000 Plan" included in Schedule 4.12 reasonably sets forth the steps to
make the Global Plus Software Year 2000 Compliant in a sufficient time period
to not materially adversely affect the current customers or the marketing to
prospective customers, and the cost associated with making Global Plus Year
2000 Compliant in accordance with the "Year 2000 Plan" will not be material
to Seller's Business. None of the Software or Intangibles listed on Schedule
4.12, or their respective past or current uses, has violated or infringed
upon, or is violating or infringing upon, any Software, patent, copyright,
trade secret or other Intangible of any Person. To the best knowledge of each
of the Selling Companies, 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 4.12. Except as set forth on Exhibit 4.12, none of the
Software or Intangibles listed on Schedule 4.12 is owned by or registered in
the name of any current or former shareholder, partner, director, executive,
officer, employee, salesman, agent, customer, representative or contractor of
any of the Selling Companies nor does any such Person have any interest
therein or right thereto, including but not limited to the right to royalty
payments. The representations and warranties set forth in this Section 4.12
apply only to Seller's Business and not to Maximis.
4.13. Contracts. Schedule 4.13 is an accurate and complete list of all
of the following types of Contracts to which Seller is a party or by which
Seller is bound, excluding any Contracts relating to Maximis and the Excluded
Contracts, (collectively, the "Specified Contracts"), grouped into the
following categories and, where applicable, subdivided by product line or
division: (a) customer Contracts; (b) Contracts for the purchase or lease of
Real Property or otherwise concerning Real Property owned or used by Seller
including a description of the Real Property; (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 Seller is the purchaser, licensee, lessee or user, and other
supplier Contracts providing for payments in excess of $1000 per month; (e)
employment, consulting and sales representative Contracts (excluding
Contracts which constitute Employee Benefit Plans listed on Schedule 4.15,
and excluding oral Contracts with employees for "at will" employment); (f)
Contracts under which any rights in and/or ownership of any Software product
of Seller, any prior version thereof, or any part of the customer base or
business of Seller was acquired; and (g) other Contracts (excluding Contracts
which constitute Insurance Policies listed on Schedule 4.19, excluding this
Agreement and all other
20
<PAGE>
Contracts entered into between Seller and Buyer, or among Seller, Buyer and
other parties in connection herewith). A description of each oral Specified
Contract is included on Schedule 4.13, and copies of each written Specified
Contract have been delivered or made available to Buyer. Schedule 4.13
indicates which Specified Contracts have been assigned to Premier's
Subsidiary and which Specified Contracts remain with Premier. With respect to
each applicable customer Specified Contract, whereby Seller is currently
performing customization work pursuant to such Specified Contract or a letter
agreement and the amount to be paid for such customization project exceeds
$50,000, Schedule 4.13 includes, as of March 31, 1997, the name of the
customer, a brief description of the work, the amount to be paid for such
project, the commencement date and the estimated completion date of each
customization project and the percentage of complete of each such
customization project, and all credits granted to, or other adjustments made
for, the customer to be applied against future payments or purchases; and
except as set forth in Schedule 4.13, Seller has no unfunded contractual
obligations to provide customization work or implementation under any
customer Specified Contract in amount greater than $100,000 per customer
Specified Contract or greater than $500,000 in the aggregate. Except as
provided on Schedule 4.13, all customers have accepted the Software described
in their respective customer Specified Contracts. Except as set forth on
Schedule 4.13, with respect to each of the Specified Contracts, Seller
neither is in default thereunder nor would be in default thereunder with the
passage of time, the giving of notice of both. Except as set forth on
Schedule 4.13, to the best knowledge and belief of each of the Selling
Companies, 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 4.13, Seller has
not 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 to operate Seller's Business. Except as set forth
on Schedule 4.13 or with respect to Maximis or the Excluded Contracts, there
are no currently outstanding proposals or offers submitted by Seller to any
customer, prospect, supplier or other Person which, if accepted, would result
in a legally binding Contract of Seller involving an amount or commitment
exceeding $25,000 in any single case or an aggregate amount or commitment
exceeding $100,000 in the aggregate.
4.14. Employees and Independent Contractors. Schedule 4.14A is a list of
all of Seller's employees excluding Maximis employees 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; (e)
any specific bonus, commission or incentive plans or agreements for or with
them; and (f) any outstanding loans or advances made to them. Seller has
delivered to Buyer an accurate and complete list of all bonuses, commissions
and incentives paid to the employees listed on Schedule 4.14A at any time
during the past period from January 1, 1996 through February 28, 1997.
Schedule 4.14B is a list of all sales representatives and independent
contractors engaged by Seller, their tax identification numbers and states of
residence, their payment arrangements (if not set forth in a Contract listed
or described on Schedule 4.13), and a brief description of their jobs or
projects currently in progress. Except as limited by any employment Contracts
listed on Schedule 4.13 and except for any limitations of general application
which may be imposed under applicable employment Laws, Seller 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 Seller's disclosed severance
pay policy. Seller is in compliance in all material respects
21
<PAGE>
with all Laws respecting employment practices. Seller has never 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 Seller.
Since January 1, 1994, Seller has not experienced any labor problem that was
or is material to Seller. Except as set forth on Schedule 4.14, since April
1, 1996, each of Seller's employees have signed an employee agreement which
contains certain restrictive covenants substantially in the form attached to
Schedule 4.14. Except as set forth on Schedule 4.14, since April 1, 1996,
each of Seller's contractors have signed agreements with Seller containing
appropriate restrictions with respect to the protection of proprietary and
confidential information and the ownership of items developed by such
contractor. Except as indicated on Schedule 4.14A, since January 1, 1997, no
employee of Seller having an annual salary of $80,000 or more has given
notice to terminate his or her employment with Seller.
4.15. Employee Benefit Plans. Except as set forth on Schedule 4.15,
Seller has not established, maintained or contributed to any Employee Benefit
Plans and Seller has not proposed any Employee Benefit Plans which it will
establish, maintain, or to which it will contribute, and it has not proposed
any changes to any Employee Benefit Plans now in effect (all of the preceding
referred to collectively hereinafter as "Seller's Employee Benefit Plans").
The Seller does not maintain and has never maintained or been obligated to
contribute to an Employee Pension Benefit Plan (as such term is defined by
Section 3(2) of ERISA) that is subject to the funding requirements of Section
412 of the Internal Revenue Code of 1986, as amended ("Code") or of Section
302 of ERISA or to the requirements of Title IV of ERISA. The Seller does not
maintain and has never maintained or been obligated to contribute to a
"Multiemployer Plan" (as such term is defined by Section 4001(a)(3) of ERISA
or Section 414(f) of the Code). True and correct copies and descriptions of
all of Seller's Employee Benefit Plans, all employees listed on Exhibit 2.3
that are affected or covered by Seller's Employee Benefit Plans and all
Liabilities and Obligations thereunder have been made available to Buyer; and
a complete copy of Seller's health and dental insurance contracts and plans
are attached to Schedule 4.15. If permitted and/or required by applicable
Law, Seller has properly submitted all of Seller's Retirement Plans in good
faith to the IRS for a determination as to each Plan's qualified status
within the time prescribed therefor under applicable federal regulations. The
most recent favorable letters of determination of such tax-qualified status
from the IRS with respect to such Plans have been made available to Buyer.
With respect to Seller's Retirement Plans, Seller will have made, on or prior
to the Closing Date, all payments required to be made by it on or prior to
the Closing Date and will have accrued (in accordance with GAAP consistently
applied) as of the Closing Date all payments due but not yet payable as of
the Closing Date. Seller has furnished Buyer with a true and correct 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 Seller's
Retirement Plans. To the best of Seller's knowledge, all of Seller's Employee
Benefit Plans are, and have been, operated in full compliance with their
provisions and with all applicable Laws including, without limitation, ERISA
and the Code and the regulations and rulings thereunder. Seller and all
fiduciaries of Seller's Employee Benefit Plans have complied with the
provisions of Seller's Employee Benefit Plans and with all applicable Laws
including, without limitation, ERISA and the Code and the regulations and
rulings thereunder. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in
any payment (including, without limitation, unemployment compensation, golden
parachute or otherwise) becoming due from Seller under any of Seller's
Employee Benefit Plans, except under Seller's severance pay plan as described
on Exhibit 2.2.7 for which Seller maintains responsibility as set forth in
Section 2.3, (ii) increase any benefits otherwise payable under any of
Seller's
22
<PAGE>
Employee Benefit Plans, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits to any extent. There are no pending
actions, claims or lawsuits which have been asserted or instituted against
any of Seller's Employee Benefit Plans, the assets of any of the trusts under
such plans, the plan sponsor, the plan administrator or against any fiduciary
of Seller's Employee Benefit Plans (other than routine benefit claims) nor
does Seller or Seller's Parent have knowledge of facts which could form the
basis for any such action, claim or lawsuit. There are no investigations or
audits of any of Seller's Employee Benefit Plans, any trusts under such
plans, the plan sponsor, the plan administrator or any fiduciary of Seller's
Employee Benefit Plans which have been threatened or instituted nor does
Seller or Seller's Parent have knowledge of facts which could form the basis
for any such investigation or audit. To the best of the Seller's knowledge,
except as disclosed in Schedule 4.15, no event has occurred or will occur
which will result in Liability to Seller in connection with any Employee
Benefit Plan established, maintained, or contributed to (currently or
previously) by it or by any other entity which, together with Seller,
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.
4.16. Customers, Prospects and Suppliers. All customers of Seller have
signed a Contract and are listed in the list of customers included as part of
Schedule 4.13. Schedule 4.16 is a complete list of all current prospects and
suppliers of Seller. Except as set forth on Schedule 4.16, since January 1,
1994, none of Seller's current customers or suppliers has given notice or
otherwise indicated to Seller that it will or intends to terminate or not
renew its Contract with Seller before the scheduled expiration date or
otherwise terminate its relationship with Seller. The relationship of Seller
with each of its current customers is currently on a good and normal basis
and Seller has not experienced any problems with current customers or current
suppliers since January 1, 1994. None of the Selling Companies has any
knowledge or belief that the transactions contemplated by this Agreement will
adversely affect relations with any of Seller's customers or suppliers. The
representations and warranties set forth in this Section 4.16 apply only to
Seller's Business and not to Maximis.
4.17. Taxes. Schedule 4.17 is an accurate and complete list of all
federal, state, local, foreign and other jurisdictions where Seller has filed
Tax (as defined in Section 1.25) returns since January 1, 1994. Except as
explained on Schedule 4.17, (a) Seller has properly and timely filed all Tax
Returns required to be filed by it, all of which were accurately prepared and
completed; (b) Seller has properly withheld and paid all Taxes with respect
to payments to its employees, agents, representatives, contractors and
suppliers all amounts required by Law to be withheld for Taxes; (c) Seller
has paid all amounts for Taxes required to be paid by it except for current
Taxes which are not yet due or Taxes which are being contested in good faith
(as disclosed on Schedule 4.17) by appropriate proceedings diligently
prosecuted; (d) no audit of Seller by any governmental taxing authority is
currently pending or, to the knowledge of Seller or Seller's Parent
threatened; (e) since January 1, 1994, no notice of any proposed Tax audit,
or of any Tax deficiency or adjustment, has been received by Seller, and
there is no reasonable basis for any Tax deficiency or adjustment to be
assessed against Seller; 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 Seller, except for routine extensions of time which have been filed
or are going to be filed with respect to federal and state income taxes.
23
<PAGE>
4.18. Proceedings and Judgments. Except as described on Schedule 4.18,
(a) no Proceeding (as defined in Section 1.21) is currently pending or
threatened in writing, nor has any Proceeding occurred at any time since
January 1, 1992, to which Seller is or was a party, or by which Seller or any
of its Assets or business is or was affected; (b) no Judgment (as defined in
Section 1.15) is currently outstanding, nor has any Judgment been outstanding
at any time since January 1, 1992, against Seller, or by which Seller or any
of its Assets or business 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 threatened in writing by or against Seller at any time since
January 1, 1992, and there is no basis for any such claim. As to each matter
described on Schedule 4.18, accurate and complete copies of all pertinent
pleadings, judgments, orders, correspondence and other legal documents have
been delivered or made available to Buyer.
4.19. Insurance. Schedule 4.19 is an accurate and complete list and
description of all Insurance Policies (as defined in Section 1.13) currently
owned or maintained by Seller (excluding Insurance Policies that constitute
Employee Benefit Plans described on Schedule 4.15) and all liability and
errors and omissions Insurance Policies owned or maintained by Seller and/or
any of its predecessors at any time since January 1, 1994. Seller has not
received notice of cancellation with respect to any such current Insurance
Policy, and to the best of Seller's knowledge there is no basis for the
insurer thereunder to terminate any such current Insurance Policy. Except as
indicated on Schedule 4.19, accurate and complete copies of all Insurance
Policies described on Schedule 4.19 have been delivered or made available to
Buyer. Each such Insurance Policy is or was in full force and effect during
the relevant period(s) of coverage. Except as described on Schedule 4.19,
there are no claims that are pending under any of the Insurance Policies
described on Schedule 4.19.
4.20. Questionable Payments. None of the Selling Companies, nor to the
best of Seller's knowledge, any of Seller's current or former partners,
shareholders, directors, executives, officers, representatives, agents or
employees (when acting in such capacity or otherwise on behalf of Seller or
any of its 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, except where such
violation was not, is not and will not be material to Seller; (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, 1992, any false or fictitious entries on the books and records of
Seller; (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 Selling 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 Selling Companies.
4.21. Related Party Transactions. Except with respect to Seller's
Parent's guarantee of three equipment leases, with respect to the Specified
Assets or the Specified Liabilities, there are no real estate leases,
personal property leases, loans, guarantees, Contracts, transactions,
understandings or other arrangements of any nature between Seller and any
current or former partners, shareholder, director, executive, officer or
controlling Person of Seller (or any of their respective predecessors) or any
other Person affiliated with Seller (or any of their respective predecessors).
24
<PAGE>
4.22. Brokerage Fees. Except as set forth on Schedule 4.22, no Person
acting on behalf of any of the Selling Companies is or shall be entitled to
any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement.
4.23. Full Disclosure. No representation or warranty made in writing by
the Selling Companies in this Agreement or pursuant hereto (a) contains any
untrue statement of any material 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 material respect. The copies of documents attached
as Schedules to this Agreement or otherwise referenced on a schedule to this
Agreement or otherwise in this Agreement in connection with the transactions
contemplated by this Agreement, are accurate and complete in all material
respects, and are not missing any amendments, modifications, correspondence
or other related papers which would be pertinent to Buyer's understanding
thereof in any respect. There is no fact known to any management employees of
the Selling Companies that has not been disclosed to Buyer in the Schedules
to this Agreement or otherwise in writing that has, or so far as any of
management employees of the Selling Companies can reasonably foresee will
have, a material adverse effect on Seller, the business of Seller, the Assets
or financial condition of Seller or the ability of any of the Selling
Companies to perform its obligations under this Agreement; provided, that the
Selling Companies make no representations or warranties with respect to (a)
the future scope of the market for, or the future market acceptance of,
Seller's services and products, or (b) the budgets and forecasts for future
periods that have been delivered to the Buying Companies.
5. REPRESENTATIONS OF THE BUYING COMPANIES
Knowing that the Selling Companies rely thereon, the Buying Companies,
jointly and severally, represent and warrant to the Selling Companies, and
covenant with the Selling Companies, as follows:
5.1. Organization. Buyer is a corporation that is duly organized,
validly existing and in good standing under the Law (as defined in Section
1.16) of the State of Delaware. Buyer's Parent is a corporation that is duly
organized, validly existing and in good standing under the Law of the State
of Delaware. Buyer is a wholly owned subsidiary of Buyer's Parent. Each of
Buyer and Buyer's Parent has 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.
5.2. Effect of Agreement. Each of the Buying Companies' execution,
delivery and performance of this Agreement, and its consummation of the
transactions contemplated by this Agreement, (a) have been duly authorized by
all necessary corporate actions by its board of directors; (b) do not
constitute a violation of or default under its charter 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 it is a party or by
which it is bound; (d) do not constitute a violation of any Law (as defined
in Section 1.16) or Judgment (as defined in Section 1.15) that is applicable
to it or to its business or Assets, or to the transactions contemplated by
this Agreement; and (e) except as stated on Schedule 5.2, do not require the
Consent (as defined in Section 1.4) of any Person (as defined in Section
1.20). This Agreement constitutes the valid and legally binding agreement of
each of the Buying Companies, enforceable against each of them in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
moratoriums, fraudulent conveyance, reorganization or
25
<PAGE>
other similar laws affecting creditors' rights generally and except that
enforceability of the obligations under this Agreement is subject to the
application of equitable principles or the availability of equitable remedies
in any proceeding, whether at law or in equity.
5.3. Brokerage Fees. No Person acting on behalf of any of the Buying
Companies is entitled to any brokerage, finder's or investment banking fee in
connection with the transactions contemplated by this Agreement.
5.4. Full Disclosure. No representation or warranty made in writing by
either of the Buying Companies in this Agreement or pursuant hereto (a)
contains any untrue statement of any material 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 material respect.
5.5. Access to Information. Each of the Buying Companies or such
company's representative has had the opportunity to ask questions of, and
receive answers from, management of each of the Selling Companies concerning
the assets, financial condition and other aspects of Seller's Business and to
review and ask questions about the documents, contracts, records and books of
the Seller's Business which were made available or delivered to such company
or representative by the Selling Companies. Each of the Buying Companies or
such company's representative has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the purchase of the Seller's Business, it being understood that in making
such evaluation the Buying Companies have also relied upon the
representations and warranties of the Selling Companies in this Agreement.
6. CONDITIONS TO CLOSING FOR SELLING COMPANIES
Each obligation of Seller and Seller's Parent to be performed on the
Closing Date shall be subject to the satisfaction of each of the conditions
stated in this Section 6, except to the extent that such satisfaction is
waived by the Selling Companies in writing.
6.1. Buying Companies' Representations. All representations, warranties
and certifications made by the Buying Companies in this Agreement or pursuant
hereto shall not have been false or misleading in any material respect.
6.2. Buying Companies' Performance. All of the terms and conditions of
this Agreement to be satisfied or performed by the Buying Companies on or
before the Closing Date shall have been substantially satisfied or performed.
6.3. Absence of Proceedings. No Proceeding (as defined in Section 1.21)
shall have been instituted (excluding any Proceeding instituted by or on
behalf Seller or Seller's Parent), no Judgment (as defined in Section 1.15)
shall have been issued, and no new Law (as defined in Section 1.16) 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 or any of the transactions contemplated by this Agreement.
6.4. Hart-Scott-Rodino. All applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with
respect to the transactions contemplated by this Agreement shall have
expired, and neither the Federal Trade Commission nor Department of Justice
shall have taken any action to prohibit the consummation of the
26
<PAGE>
transactions contemplated by this Agreement or to impose any divestiture
requirement as a condition thereto.
7. CONDITIONS TO CLOSING FOR BUYING COMPANIES
Each obligation of the Buying Companies to be performed on the Closing
Date shall be subject to the satisfaction of each of the conditions stated in
this Section 7, except to the extent that such satisfaction is waived by the
Buying Companies in writing.
7.1. Selling Companies' Representations. All representations,
warranties and certifications made by the Selling Companies in this Agreement
or pursuant hereto shall not have been false or misleading in any material
respect.
7.2. Selling Companies' Performance. All of the terms and conditions of
this Agreement to be satisfied or performed by the Selling Companies on or
before the Closing Date shall have been substantially satisfied or performed.
7.3. Absence of Proceedings. No Proceeding (as defined in Section 1.21)
shall have been instituted (excluding any Proceeding instituted by or on
behalf of the Buying Companies ) no Judgment (as defined in Section 1.15)
shall have been issued, and no new Law (as defined in Section 1.16) 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 or any of the transactions contemplated by this Agreement.
7.4. Absence of Adverse Changes. There shall not have been any material
adverse change or material casualty loss affecting Seller or its business,
Assets or financial condition, and there shall not have been any material
adverse change in the financial performance of Seller.
7.5. Hart-Scott-Rodino. All applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with
respect to the transactions contemplated by this Agreement shall have expired
before the Closing Date, and neither the Federal Trade Commission nor
Department of Justice shall have taken any action to prohibit the
consummation of the transactions contemplated by this Agreement or to impose
any divestiture requirement as a condition thereto.
7.6. Consents. All of the Consents described in Schedule 4.2 shall have
been obtained, unless waived by the Buying Companies.
8. CLOSING
8.1. Closing. The transactions contemplated by this Agreement (the
"Closing") shall be held on at a mutually agreeable time on April 8, 1997
(the "Closing Date"), at the law offices of Drinker Biddle & Reath in Berwyn,
Pennsylvania and simultaneously at the headquarters of Premier's Subsidiary
in Las Vegas, Nevada. Except to the extent prohibited by Law, the Closing
shall be considered to have been effective on March 31, 1997 ("Effective
Date").
8.2. Obligations of Seller at Closing. At the Closing, the Selling
Companies shall deliver to the Buying Companies the following:
27
<PAGE>
8.2.1 Specified Assets. Possession and control of Seller's
Business and Seller's Premises (as defined in the "Background" section on
page one of this Agreement and Section 8.2.9, respectively), all of the
Specified Assets, and all of Seller's leased Real Property and Tangible
Property (except such property included in the Excluded Assets or Excluded
Contracts), including, but not limited to, all applicable keys, access cards
and other entry devices.
8.2.2 Documents of Transfer. Such bills of sale, assignments,
endorsements, affidavits, and other instruments and documents of sale,
transfer, assignment and conveyance as Buyer may reasonably require, in order
to lawfully and effectively sell, transfer, assign and convey to Buyer all
right, title and interest in and to all of the Specified Assets, in each case
in form acceptable to Seller and Buyer, dated as of the Effective Date, and
duly executed and, if necessary, acknowledged by the Selling Companies.
8.2.3 Name Change. A proper Amendment to the Premier's Articles
of Incorporation, dated the Closing date and duly executed by the appropriate
officers, in form acceptable for immediate filing with the appropriate office
changing Seller's corporate name to a name that is not similar to Premier's
current corporate name or any product or other name used by Seller and
included in the Specified Assets. After the Effective Date, Premier's
corporate name shall be GPMC, Inc.
8.2.4 Incumbency Certificate. A certificate of Secretary of
each of the Selling Companies as to the incumbency and signatures of their
respective officers executing this Agreement.
8.2.5 Resolutions. Copies of the resolutions duly adopted by
the shareholders and board of directors of Seller, and board of directors of
each of the Selling Companies authorizing them to enter into and perform this
Agreement, certified by proper officers as in full force and effect on and as
of the Closing Date.
8.2.6 Good Standing. Good standing certificates for (i) Premier
from the Commonwealth of Pennsylvania, the States of New York and California,
(ii) Premier's Subsidiary from the State of Nevada, and (iii) Seller's Parent
from the Commonwealth of Pennsylvania; all dated no earlier than 20 days
before the Closing Date.
8.2.7 Closing Certificate. A certificate, in form and substance
satisfactory to the Buying Companies, dated the Closing Date and duly
executed by Premier, Premier's Subsidiary and Seller's Parent, certifying,
jointly and severally, that (a) all representations and warranties made by
Seller and Seller's Parent 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; (b) all of
the terms and conditions of this Agreement to be satisfied or performed by
Seller and/or Seller's Parent on or before the Closing Date have been
substantially satisfied or performed; and (c) there has not been any material
adverse change or material casualty loss affecting Seller, or its 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
financial performance of Seller between the date of this Agreement and the
Closing Date.
28
<PAGE>
8.2.8 Opinion of Counsel. An opinion of counsel to the Selling
Companies addressed to the Buying Companies and dated the Closing Date, in
form reasonably acceptable to the Buying Companies.
8.2.9 Consents. A Consent to Assignment to Buyer of the Lease
for Seller's leased premises located at 333 Technology Drive, Malvern,
Pennsylvania ("Seller's Premises"), dated as of the Effective Date and duly
executed by Seller's landlord, and consents to assignment to Buyer for of
each of the Specified Contracts (as defined in Section 4.13) listed on
Schedule 4.2.
8.2.10 Debt Payoff. Except for the Permitted Encumbrances,
proper documentary evidence of the full payment and satisfaction of all debt
of Seller with respect to which there are any Encumbrances upon any of the
Specified Assets; together with all documents reasonably requested by Buyer
to remove all such Encumbrances on the Specified Assets, including, but not
limited to, UCC-3 termination forms duly executed by the secured parties and
mortgage satisfaction and release forms duly executed by the mortgagees, and
UCC-3 termination forms duly executed by former secured parties for which
UCC-1 financing statements remain of record, in each case in form acceptable
for immediate filing with the appropriate state or local governmental office.
8.2.11 Non-Compete Agreements. Non-compete agreements duly
executed by the Executive Officers of Seller substantially in the form
attached to this Agreement as Exhibit 8.2.11.
8.2.12 Restructuring Documents. All assignments and other
related documents transferring any right, title or interest in any of the
Specified Assets from Premier to Premier's Subsidiary.
8.2.13 Other Documents. All other agreements, certificates,
instruments and documents reasonably requested by the Buying Companies in
order to fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
8.3. Obligations of Buying Companies at Closing. At the Closing, the
Buying Companies shall deliver to the Selling Companies the following:
8.3.1 Closing Payments. A wire transfer in the amount of the
Closing Payment (as defined in Section 3.1), in accordance with Selling the
Companies' proper instructions as to payment.
8.3.2 Assumption of Liabilities. An assumption of the Specified
Liabilities, in form acceptable to Buyer and Seller, dated as of the
Effective Date, and duly executed by Buyer, and if necessary acknowledged by
Buyer's Parent.
8.3.3 Closing Certificate. A certificate, in form and substance
satisfactory to the Sellers, dated the Closing Date and duly executed by each
of the Buying Companies, certifying, jointly and severally, that (a) all
representations and warranties made by each of the Buying Companies 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 (b) all of the terms and conditions of this
Agreement to
29
<PAGE>
be satisfied or performed by the Buying Companies on or before the Closing
Date have been substantially satisfied or performed.
8.3.4 Incumbency Certificate. A certificate of Secretary of
each of the Buying Companies as to the incumbency and signatures of their
respective officers executing this Agreement.
8.3.5 Resolutions. Copies of the resolutions duly adopted by
the board of directors of each of the Buying Companies authorizing them to
enter into and perform this Agreement, certified by proper officers as in
full force and effect on and as of the Closing Date.
8.3.6 Good Standing. Good standing certificates for each of
Buyer and Buyer's Parent from the State of Delaware, dated no earlier than 20
days before the Closing Date.
8.3.7 Opinion of Counsel. An opinion of counsel to the Buying
Companies, addressed to the Selling Companies and dated the Closing Date, in
form acceptable to the Selling Companies.
8.3.8 Other Documents. All other agreements, certificates,
instruments and documents reasonably requested by the Selling Companies in
order to fully consummate the transactions contemplated by this Agreement and
carry out the purposes and intent of this Agreement.
9. CERTAIN POST-CLOSING OBLIGATIONS
9.1. Transition and Cooperation. From and after the Closing Date, (a)
the Selling Companies shall fully cooperate to transfer to the Buyer the
control and enjoyment of Seller's Business and the Specified Assets; (b) the
Selling Companies shall not take any action, directly or indirectly, alone or
together with others, which obstructs or impairs the smooth assumption by
Buyer of Seller's Business and the Specified Assets; and (c) the Selling
Companies shall promptly deliver to Buyer all correspondence, papers,
documents and other items and materials received by any of the Selling
Companies or found to be in the possession of any of the Selling Companies
which pertain to Seller's Business or the Specified Assets.
9.2. Use of Names. Beginning immediately after the Closing Date, the
Selling Companies shall cease all use of all corporate names, fictitious
names, product names and other names used by Premier and all product names
used by Premier's Subsidiary at any time on or before the Closing Date and
included in the Specified Assets (it being understood that the names
"Maximis" and "Imis" are not included in the Specified Assets), except as may
be necessary to perform their obligations hereunder. Upon Buyer's request,
Seller shall promptly sign all Consents and other documents that may be
necessary to allow Buyer to use or appropriate the use of any name used by
Premier or product names used by Seller at any time on or before the Closing
Date. Premier shall retain the right to use its name for the purposes of (i)
collecting the accounts receivable of Seller's Business recorded prior to the
Closing, (ii) pay the accounts payable outstanding as of the Closing, (iii)
defend or institute any legal proceeding where the cause of action arose
prior to the Closing, and (iv) on-going corporate matters including but not
limited to tax payments.
30
<PAGE>
9.3. Contract Matters. After the Closing, each Non-Assigned Contract
shall be handled in accordance with the following provisions:
9.3.1 Consent. The Selling Companies shall fully cooperate with
Buyer in the Buyer's efforts to obtain Consent to the assignment of such
Non-Assigned Contract. If and when Consent to assignment of such Non-Assigned
Contract is obtained, such Non-Assigned Contract shall no longer be subject
to the provisions of this Section 9.3.
9.3.2 Subcontracting. Seller shall make available to Buyer all
Contract Rights and other benefits of such Non-Assigned Contract, on a
subcontract or sublease basis or in some other appropriate manner to the
fullest extent possible, and Buyer shall be considered an independent
subcontractor or sublessee of Seller, or an agent of Seller, with respect to
all matters concerning such Non-Assigned Contract. As a subcontractor, Buyer
shall pay, perform and fully satisfy when due Seller's Obligations set forth
in such Non-Assigned Contract. Without limiting the foregoing, Buyer shall be
considered Seller's agent for purposes of (a) collecting all amounts that may
be due from the other party or parties to such Non-Assigned Contract; and (b)
negotiating or otherwise handling all disputes and issues that may arise in
connection with such Non-Assigned Contract. Buyer shall be entitled to retain
all payments due from the other party or parties under the Non-Assigned
Contracts. Without Buyer's prior written consent, Seller shall not agree to
any amendment, modification, extension, renewal, termination or other change
in the terms of such Non-Assigned Contract, nor shall Seller exercise any
Contract Right under such Non-Assigned Contract.
9.3.3 Buyer's Instructions. At Buyer's direction, Seller shall
(a) notify the other party or parties to such Non-Assigned Contract that
Buyer is Seller's subcontractor, sublessee or agent with respect thereto and
that all further payments, notices and other communications with respect
thereto shall be directed to Buyer; (b) agree to such amendments,
modifications, extensions, renewals, terminations or other changes in the
terms of such Non-Assigned Contract as Buyer determines, in its sole
discretion, are advisable; and (c) exercise any Contract Right under such
Non-Assigned Contract at such time and in such manner as Buyer determines, in
its sole discretion, to be advisable.
9.3.4 Collateral Assignment. Effective as of the Closing Date,
Seller hereby collaterally assigns to Buyer (except and only to the extent
that such collateral assignment is expressly prohibited by the terms of such
Non-Assigned Contract), and grants to Buyer a security interest in, all of
Seller's contract rights under such Non-Assigned Contract and all cash and
non-cash proceeds thereof, as security for the prompt and timely satisfaction
and performance of Seller's obligations under this Section 9.3. Buyer shall
have, and Seller shall deliver to Buyer at the Closing, possession of the
original executed copy of such Non-Assigned Contract. Effective as of the
Closing Date, Seller hereby appoints Buyer as Seller's attorney to take such
actions, in Seller's name and on its behalf, as such attorney reasonably
determines, in its sole discretion, to be necessary or advisable to protect,
perfect and continue perfected the security interest granted hereunder,
including, but not limited to, the execution and filing of such financing
statements and other instruments and documents as such attorney reasonably
determines, in its sole discretion, to be necessary or advisable for such
purposes. Upon the reasonable request of the Selling Companies and provided
that (i) consents have been received by Buyer for the assignment of the
Non-Assigned Contracts, (ii) Buyer has entered into new Contracts with the
customers which replace the Non-Assigned Contracts, or (iii) the Non-Assigned
Contracts have expired or been terminated in accordance with their
31
<PAGE>
terms, Buyer shall execute and deliver to Seller UCC-3 financing statements
terminating its security interest under this Section 9.3.4.
9.4. Certain Benefit Plans. Seller will assign its current health and
dental insurance contract with Prudential Health Care to Buyer in accordance
with the terms and conditions of this Section 9.4. As of the Effective Date,
the Prudential Health Care contract will consist of (i) a main contract
covering all of Seller's employees hired by Buyer and the COBRA benefits of
the individuals listed in Sections II and IV of Schedule 9.4 ("Main
Contract") and (ii) an associated contract covering the individuals listed in
Section III of Schedule 9.4 ("Associated Contract"). Buyer will be
responsible for paying the premiums under the Main Contract and the Selling
Companies will be responsible for paying an amount equal to the premiums
under the Associated Contract. Buyer shall continue to maintain the Main
Contract and the Associated Contract until their expiration dates for the
benefit of Seller's employees who are hired by Buyer and for those
individuals who are entitled to COBRA coverage as of the Closing Date under
such contracts pursuant to Section 4980B of the Code and Sections 601 through
609 of ERISA. Buyer assumes responsibility for COBRA coverage obligations
that arise with respect to any qualifying event occurring on or after the
Closing Date with respect to any of Seller's employees hired by Buyer and any
individual listed in Sections II, III and IV of Schedule 9.4. With respect to
each individual listed in Section III of Schedule 9.4, the coverage set forth
in this Section 9.4, other than COBRA coverage with respect to any qualifying
event, shall only extend until the first date of employment by such
individual with the buyer of the Maximis business. Seller shall provide Buyer
with all reasonable assistance necessary for Buyer to satisfy its obligations
under this Section 9.4. The Seller shall terminate all Seller's Retirement
Plans as soon as possible after the Closing Date. Participants in the
Seller's Retirement Plans shall receive distributions from the Seller's
Retirement Plans in accordance with the terms of each individual plan and the
requirements of applicable law.
9.5. PSL's Operations during Earnout Period. During the Earnout Period
(as defined in Section 3.6), PSL's Operations (as defined in Section 3.6.5)
shall be conducted in the ordinary course of business consistent with
SunGard's standard business and financial procedures.
9.6. NIDS Twenty-First Century Operation. Following the Closing, Buyer
shall, and Buyer's Parent shall cause Buyer to, use commercially reasonable
efforts to (i) market or otherwise make available to customers of the NIDS
Software that have Specified Contracts with terms extending into the
twenty-first century or which contain a warranty or representation with
respect to the operation of the NIDS Software in the twenty-first century,
other appropriate SunGard products as a replacement for the NIDS Software, or
(ii) to make the NIDS Software compliant for twenty-first century operation.
In connection with such commercially reasonable efforts, the Buying Companies
acknowledge it is in their best interests to maintain such customers or to
provide a Year 2000 solution.
9.7. Further Assurances. At any time and from time to time after the
Closing Date, at the Buying Companies' request and expense, and without
further consideration, the Selling Companies shall promptly execute and
deliver all such further agreements, certificates, instruments and documents,
and perform such further actions, as the Buying Companies may reasonably
request in order to fully consummate the transactions contemplated hereby and
carry out the purposes and intent of this Agreement.
32
<PAGE>
9.8. Books and Records of Seller. Following the Closing, Seller and
Seller's Parent agrees to permit the Buying Companies and its representatives
to inspect the books and records of Seller which are not included in the
Specified Assets insofar as they related to the Specified Assets and
Specified Liabilities, during regular hours and at no expense to Seller in
order for the Buying Companies and such representative to obtain information
relevant to the Closing Financial Statements and to the Buying Companies' tax
returns, third party claims or litigation involving the Buying Companies, or
as otherwise reasonably required for the conduct of the Buying Companies'
business. The Selling Companies agree to maintain such books and records
insofar as they related to the Specified Assets and the Specified Liabilities
for a period of five (5) years after the Closing Date.
9.9. Books and Records of Buyer. Following the Closing, the Buying
Companies agree to permit the Selling Companies and their representatives to
inspect the books and records of Seller which are included in the Specified
Assets or insofar as they are related to the Specified Assets or the
Specified Liabilities, during regular hours and at no expense to the Buying
Companies in order for the Selling Companies and such representative to
obtain information relevant to the Closing Financial Statements and to
Seller's tax returns, third party claims or litigation involving the Selling
Companies, or as otherwise reasonably required for the conduct of Seller's
business. Buyer agrees to maintain such books and records insofar as they
related to the Specified Assets and the Specified Liabilities for a period of
five (5) years after the Closing Date.
9.10. Cash Reconciliation. Beginning on the Effective Date, (a) all
payments received by Seller on account of accounts receivable arising after
the Effective Date under any Specified Contracts or Non-Assigned Contracts,
and all other payments received by Seller which are properly allocable to the
conduct of Seller's Business with respect to periods after the Effective
Date, shall be held in trust for Buyer and shall be promptly paid to Buyer,
and (b) all payments received by Buyer which are properly allocable to the
conduct of Seller's Business with respect to periods before the Effective
Date shall be held in trust for Seller and shall be promptly paid to Seller.
10. RESTRICTIVE COVENANTS OF THE SELLING COMPANIES
10.1. Certain Acknowledgements. Each of the Selling Companies expressly
acknowledges that:
10.1.1 Competitive Nature of Business. Seller's Business, as
conducted by Seller before Closing, and as conducted by Buyer and other
existing and future subsidiaries of Buyer's Parent after Closing (Buyer's
Parent, Buyer, and such other direct and indirect subsidiaries of Buyer's
Parent are referred to collectively as the "SunGard Group") 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. 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 and services.
10.1.2 Access to Information. During its tenure as an owner of
Seller or Seller's Assets, it has had access to proprietary and confidential
property, knowledge and information of Seller's operations in connection with
Seller's Business which, after Closing, shall be proprietary and confidential
property, knowledge and information of the SunGard
33
<PAGE>
Group; such property, knowledge and information must be kept in strict
confidence to protect Seller's Business and maintain the SunGard Group's
competitive positions in the marketplace; and such property, knowledge and
information would be useful to competitors of the SunGard Group for
indefinite periods of time.
10.1.3 Basis for Covenants. The covenants of Sections 10.2, 10.3
and 10.4 (the "Covenants") and the assignment of the employment agreements of
the Executive Officers of Seller are a material part of this Agreement. The
Covenants of Sections 10.2 and 10.4 are an integral part of the obligations
of the Selling Companies hereunder and the Covenants of Section 10.3 are an
integral part of the obligations of the Buying Companies 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 and the Selling Companies, as applicable.
10.2. Nondisclosure Covenants. At all times after the date of this
Agreement, for an indefinite period of time, except with SunGard's prior
written consent, none of the Selling Companies shall, directly or indirectly,
in any capacity:
10.2.1 General Restrictions. With respect to Seller's Business,
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 obtained, including without limitation (a) any information
concerning the Specified Assets, or the conduct and details of Seller's
Business; (b) the identity of customers and prospects, their specific
requirements, and the names, addresses and telephone numbers of individual
contacts at customers and prospects; (c) prices, renewal dates and other
detailed terms of customer and supplier Contracts and proposals; (d) pricing
policies, marketing and sales strategies, methods of delivering Software and
services, and Software and service development projects and strategies; (e)
source code, object code, user manuals, technical manuals and other
documentation for Software products; (f) screen designs, report designs and
other designs, concepts and visual expressions for Software products; (g)
employment and payroll records; (h) forecasts, budgets and other nonpublic
financial information; and (i) expansion plans, management policies, methods
of operation, and other business strategies and policies.
10.2.2 Software Restrictions. With respect to the Software
conveyed to Buyer pursuant to this Agreement, disclose, use or refer to any
proprietary software or other confidential or proprietary property, knowledge
or information of the SunGard Group, no matter when or how acquired, for any
purpose not in furtherance of the business and interests of the SunGard
Group, including without limitation the purposes of designing, developing,
marketing and/or selling any Software that is similar to, visually or
functionally, or competitive with Seller's Software as it exists on, and as
developed after the Effective Date by, the SunGard Group.
10.3. Nondisclosure Covenants of the Buying Companies. At all times
after the date of this Agreement, for an indefinite period of time, except
with Seller's Parent's prior written consent, the Buying Companies shall not,
directly or indirectly, in any capacity 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 Seller's
Parent or relating to any assets of Seller not included in the Specified
Assets or any obligations of
34
<PAGE>
Seller not included in the Specified Liabilities, no matter when or how such
knowledge or information was obtained. For the purposes of Sections 10.5,
10.6 and 10.7, the covenants set forth in this Section 10.2 shall be deemed a
Covenant.
10.4. Noncompetition Covenants. During the period beginning on the date
of this Agreement and ending on the third (3rd) anniversary of the date of
this Agreement, except with SunGard's prior written consent, none of the
Selling Companies shall, directly or indirectly, in any capacity, at any
location worldwide:
10.4.1 Solicitation Restrictions. 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, with respect to Seller's Business in any manner which
interferes or might interfere with such Person's relationship with the
SunGard Group with respect to Seller's Business, or in an effort to obtain
any such Person as a customer, employee, 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 Seller's Business.
10.4.2 Software Restrictions. Market or sell, in any manner
other than in furtherance of the business and interests of the SunGard Group,
any Software that is similar to, visually or functionally, or competitive
with any proprietary Software developed, marketed or licensed in the Seller's
Business, as it exists on the Effective Date.
10.4.3 Competing Business Restrictions. 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 Seller's Business. Notwithstanding the foregoing, the provisions of
this Section 10.4.3 shall not prevent or restrict the ability of Seller's
Parent to (i) make non-controlling investments in a Person that conducts a
business that is competitive with or similar to part of Seller's Business,
(ii) participate as either a general partner and/or limited partner in
venture funds or other funds which make investments in a Person that conducts
a business that is competitive with or similar to part of Seller's Business.
For the purpose of this Section 10.4.3, the term "non-controlling" means the
ownership of less than fifty percent (50%) of the voting securities of an
entity or the lack of control over a majority of the board of directors.
10.5. Certain Exclusions. Confidential and proprietary property,
knowledge and information of the SunGard Group or of the Selling Companies
Parent, as the case may be, shall not include any information that is (i) now
known by or readily available to the general public, nor shall it include any
information that in the future becomes known by or readily available to the
general public other than as a result of any breach of the Covenants of this
Agreement or (ii) now known or which becomes known to one party on a
non-confidential basis from a third party (other than the other party or its
agents or representatives) which is not prohibited from so disclosing such
information because of a legal, contractual or fiduciary obligation to the
other party. The ownership by any of the Selling Companies of not more than
five percent (5%) of the outstanding securities of any public company shall
not, by itself, constitute a breach of the Covenants of Section 10.4, even if
such public company competes with the SunGard Group. The operation of the
Maximis business by Seller shall not constitute a breach of the Covenants of
Section 10.4.
35
<PAGE>
10.6. Enforcement of Covenants. Each of the parties hereto 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 other party for which
money damages could not adequately compensate. If a breach of the Covenants
occurs, then the non-breaching party shall be entitled, in addition to all
other rights and remedies that it may have at law or in equity, to have an
injunction issued by any competent court enjoining and restraining the
breaching party, all other Persons involved therein from continuing such
breach. The existence of any claim or cause of action that one party or any
such other Person may have against the other party shall not constitute a
defense or bar to the enforcement of any of the Covenants. If either the
SunGard Group or the Selling Companies 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.
10.7. 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.
11. INDEMNIFICATION
11.1. Selling Companies' Indemnification. From and after the Closing
Date, the Selling Companies jointly and severally, shall indemnify and hold
harmless 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
without limitation reasonable attorney's fees and court costs, arising out of
or caused by, directly or indirectly, any or all of the following:
11.1.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by any of the Selling
Companies, in writing, in or pursuant to this Agreement, except for any
warranty or representation of the Selling Companies regarding the validity of
assignment of, or the enforceability of any of the covenants with respect to
non-competition and non-solicitation, in any of Seller's agreements with its
current or former employees.
11.1.2 Nonperformance. Any failure or refusal by any of the
Selling Companies to satisfy or perform any covenant, term or condition of
this Agreement required to be satisfied or performed by any or all of them.
11.1.3 Non-Assumed Obligations. Any Obligation (as defined in
Section 1.18) of Seller other than those expressly included in the Specified
Liabilities including, but not limited to, (a) any of the types of
Obligations specifically excluded from the Specified
36
<PAGE>
Liabilities under Section 2.2; (b) any such Obligation that may be imposed
upon the Buying Companies as a result of the failure by Seller to comply with
any bulk sales, bulk transfer, fraudulent conveyance or similar Law of any
jurisdiction that may be applicable to some or all of the transactions
contemplated by this Agreement; (c) any such Obligation of Seller that may be
imposed upon the Buying Companies or their affiliates as a result of any Law
under which the Buying Companies or their affiliates may have successor
liability for any Tax or other Obligations of Seller, (d) any Obligations of
Seller related to Maximis, (e) the Excluded Liabilities and (f) any
Obligation related to any of the Excluded Assets or Excluded Contracts.
11.1.4 Unasserted Claims. Any action, suit or claim arising out
of, caused by or based upon any act or omission of any of the Selling
Companies or any of their respective shareholders, partners, directors,
executives, officers, employees, agents or representatives at any time before
the Closing with respect to Seller's Business, except actions, suits or
claims which are disclosed in the Schedules to this Agreement.
11.1.5 Proceedings by Employees and Related Matters. Any
Proceeding against either of the Buying Companies by or on behalf of any
employee of Seller who is not hired by Buyer, and any obligation arising
under the WARN Act. This indemnity shall not include liability for any
violation of Law by Buyer in connection with the offering of employment to
such employee.
11.1.6 Other Proceedings. Any Proceeding against either of the
Buying Companies by or on behalf of any Person who, after the Closing
hereunder, purchases or receives any of the stock of Seller, any of the
Excluded Assets or Excluded Contracts, or any the Assets or Contracts related
to Maximis which Proceeding relates to Seller, its business, Assets or
ownership.
11.1.7 NIDS Twenty-First Century Operation. Any action, suit or
claim arising out of, caused by or based upon the failure of the NIDS
software to operate properly in conjunction with the transition to
twenty-first century with respect to Specified Contracts that have terms
extending into the twenty-first century or that contain a warranty or
representation with respect to operation of the software in the twenty-first
century, provided that Buyer has fulfilled its obligations set forth in
Section 9.6. The indemnity set forth in this Section 11.1.7 shall be limited
to a maximum aggregate amount of Three Hundred Thousand Dollars ($300,000)
and shall not be subject to the limitations set forth in Section 11.4.
11.2. Buying Companies' Indemnification. From and after the Closing
Date, the Buying Companies, jointly and severally, shall indemnify and hold
harmless Seller and Seller's Parent and its direct and indirect subsidiary,
and their respective successors and assigns, and their respective directors,
officers, employees, shareholders, 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 all of the following:
11.2.1 Misrepresentation. Any misrepresentation, breach or
failure of any warranty or representation made by any of the Buying
Companies, in writing, in or pursuant to this Agreement.
11.2.2 Nonperformance. Any failure or refusal by any of the
Buying Companies to satisfy or perform any covenant, term or condition of
this Agreement required
37
<PAGE>
to be satisfied or performed by any or all of them, including but not limited
to the subcontracted Obligations set forth in Section 9.3.
11.2.3 Specified Liabilities. Any Obligation of the Buying
Companies included in the Specified Liabilities as set forth in Section 2.1.2.
11.2.4 Proceedings by Employees and Related Matters. Any
Proceeding against any of the Selling Companies by or on behalf of any former
employee of Seller that is offered employment by Buyer with respect the
hiring or employment of such employee.
11.3. Indemnification Procedures. With respect to each event, occurrence
or matter ("Indemnification Matter") as to which any member of the SunGard
Group or any of the Selling Companies, as the case may be, (the "Indemnitee")
is entitled to indemnification from the Selling Companies (the "Indemnitor")
under this Section 11:
11.3.1 Notice. 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 of
the nature of the Indemnification Matter and the amount demanded or claimed
in connection therewith ("Indemnification Notice"), together with copies of
any such written documents.
11.3.2 Defense. 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 (a) the Indemnitee may, at its
option and expense and through counsel of its choice, participate in (but not
control) the Defense; (b) if the Indemnitee reasonably believes that the
handling of the Defense by the Indemnitor may have a material adverse affect
on the Indemnitee, its business or financial condition, or its relationship
with any customer, prospect, supplier, employee, salesman, consultant, agent
or representative, then the Defense shall be jointly controlled by the
Indemnitee and the Indemnitor, with each party paying its expenses and
participating through counsel of its choice; (c) the Indemnitor shall not
consent to any Judgment, or agree to any settlement, without the Indemnitee's
prior written consent, which such approval shall not be unreasonably withheld
except that it shall not be unreasonable to withhold approval if, pursuant to
or as a result of such settlement or cessation, injunctive or other equitable
relief would be imposed against the Indemnitee; and (d) 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 and after reasonable notice to
Indemnitor, 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 without limitation by
furnishing all available documentary or other evidence as is reasonably
requested by the other.
11.3.3 Payments. All amounts owed by the Indemnitor to the
Indemnitee (if any) shall be paid in full within fifteen (15) business days
after a final Judgment (without further right of appeal) determining the
amount owed is rendered, or after a final settlement or agreement as to the
amount owed is executed.
38
<PAGE>
11.3.4 Sole Remedy. Neither party shall have any liability to
the other party for misrepresentation, breach of warranty or failure to
fulfill any covenant or agreement to be performed at or prior to the Closing
Date except pursuant to this Section 11.
11.4. Limits on Indemnification. The Indemnitor's liability under this
Section 11 shall be limited as follows:
11.4.1 Deductible. No amount shall be payable by the Indemnitor
under this Section 11 unless and until the aggregate amount otherwise payable
by the Indemnitor under this Section 11 exceeds Two Hundred Thousand Dollars
($200,000), in which event the Indemnitor shall pay such aggregate amount and
all future amounts payable by the Indemnitor under this Section 11.
11.4.2 Ceiling. The Indemnitor's total liability under this
Section 11 shall not exceed the Purchase Price.
11.4.3 Time Period. With respect to any Indemnification Matter,
the Indemnitor shall have no liability unless the Indemnitee gives an
Indemnification Notice with respect thereto within eighteen (18) months after
the Closing Date.
11.4.4 Exceptions. None of the foregoing limitations shall apply
in the case of any Indemnification Matter involving: (i) intentional
misrepresentation, fraud or criminal matters, (ii) with respect to the
Selling Companies, title to or infringement (occurring before Closing) caused
by any Software product which, at any time before Closing, was marketed,
licensed, used, owned or claimed to have been owned by Seller, (iii) Taxes,
(iv) covenants to be performed after Closing, and (v) with respect to the
Selling Companies, any unasserted claims as referenced Section 11.1.4, (vii)
with respect to the Selling Companies any non-assumed Obligations, (viii)
with respect to the Buying Companies, Obligations under the Specified
Liabilities and subcontracted Obligations set forth in Section 9.3, and (ix)
with respect to the Buying Companies, infringement to the extent caused by
modifications, enhancements and changes after the Closing Date with respect
to the Software conveyed to Buyer pursuant to this Agreement.
11.5. 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 amounts due to the Indemnitor, whether due under this Agreement,
any of the other Contracts contemplated by this Agreement or otherwise, any
sums for which the Indemnitee is entitled to indemnification under this
Section 11. The Indemnitee's rights to indemnification under this Section 11
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 any amount due to the Indemnitor, then the Indemnitee shall have the
right, upon notice to the Indemnitor, to withhold from such payment, 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.
12. OTHER PROVISIONS
12.1. Fees and Expenses. The Buying Companies shall pay all of the fees
and expenses incurred by them, the Selling Companies shall pay all of the
fees and expenses incurred by them, in negotiating and preparing this
Agreement (and all other Contracts
39
<PAGE>
executed in connection herewith or therewith) and in
consummating the transactions contemplated by this Agreement.
12.2. Notice. 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 (a) when delivered personally, (b) three
business days after being mailed by first class certified mail, return
receipt requested, postage prepaid, or (c) one business day after being sent
by a reputable overnight delivery service, postage or delivery charges
prepaid, to the parties at their respective addresses stated on the first
page of this Agreement. Notices may also be given by prepaid telegram or
facsimile and shall be effective on the date transmitted if confirmed within
24 hours thereafter by a signed original sent in the manner provided in the
preceding sentence. Notice to Seller's Parent at the address specified on
page one of this Agreement, attention General Counsel, shall suffice as
notice to all of the Selling Companies. Notice to the Buying Companies shall
be at the address specified on page one of this Agreement with a copy to
SunGard Data Systems Inc., attention of the General Counsel at 1285 Drummers
Lane, Wayne, PA 19087. 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 12.2, except that any such
change of address notice shall not be effective unless and until received.
12.3. Survival of Representations and Covenants. All representations and
warranties and covenants made in this Agreement or pursuant hereto shall
survive the date of this Agreement, the Effective Date, the Closing Date and
the consummation of the transactions contemplated by this Agreement for the
time period set forth in Section 11.4.3 or as otherwise provided in this
Agreement.
12.4. 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.
12.5. Reliance by the Buying Companies . Notwithstanding the right of
the Buying Companies to investigate the business, Assets and financial
condition of Seller, and notwithstanding any knowledge determined or
determinable by the Buying Companies as a result of such investigation, the
Buying Companies have the unqualified right to rely upon, and have relied
upon, each of the representations and warranties made by the Selling
Companies in this Agreement or pursuant hereto.
12.6. Entire Understanding. This Agreement, together with the Exhibits
and Schedules hereto, and related agreements referenced in this Agreement,
states the entire understanding among the parties 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, including without limitation 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.
40
<PAGE>
12.7. Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to
both the Buying Companies and the Selling Companies. Unless required by Law,
none of the Selling Companies or the Buying Companies shall make any public
announcement or issue any press release concerning the transactions
contemplated by this Agreement without the prior written consent of the other
parties. With respect to any announcement that any of the parties is required
by Law or stock exchange regulation to issue, or on the reasonable advice of
counsel is advised to disclose, such party shall, to the extent possible
under the circumstances, review the necessity for and the contents of the
announcement with the other parties before issuing the announcement.
Notwithstanding the foregoing, Seller's Parent may file a Current Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on
Form 8-K with respect to this transaction without such review by the other
parties.
12.8. Parties in Interest. None of the parties may assign this Agreement
or any rights or obligations under this Agreement without the prior written
consent of the other parties, provided that either Seller or Buyer may assign
or otherwise transfer, including by operation of law, this Agreement to an
affiliate as part of an internal corporate reorganization without such
consent. This Agreement shall bind, benefit, and be enforceable by and
against the parties hereto, and their respective successors and permitted
assigns.
12.9. 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.
12.10. 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.
12.11. 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.
12.12. Section Headings. The section and subsection headings in this
Agreement are used solely for convenience of reference, do not constitute a
part of this Agreement, and shall not affect its interpretation.
12.13. References. All words used in this Agreement shall be construed to
be of such number and gender as the context requires or permits. Unless a
particular context clearly requires otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety
and not to any specific section or subsection of this Agreement.
12.14. 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
41
<PAGE>
PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW.
12.15. Dispute Resolution. If any dispute arises under this Agreement
(other than a dispute under Sections 3.3, 3.4, and 3.6) that is not settled
promptly in the ordinary course of business, the parties shall seek to
resolve any such dispute between them, first by negotiating promptly with
each other in good faith in face-to-face negotiations. These face-to-face
negotiations shall be conducted by the respective designated senior
management representative of each party. If the parties are unable to resolve
the dispute between them through these face-to-face negotiations within
twenty (20) business days (or such other period as the parties shall
otherwise agree) following the date of notification ("Notice Date") by one
party to the other(s) of the existence of such dispute, then the parties
shall be entitled to pursue their legal remedies. For the purposes of this
Section 12.15, the Selling Companies and the Buying Companies, respectively,
shall be deemed a single party.
12.16. 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 12.2; and (e) the prevailing
parties shall be entitled to recover their reasonable attorney's fees
(including, if applicable, charges for in-house counsel) and court costs from
the other parties.
12.17. 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 and their successors and permitted
assigns, including, but not limited to, any customer, prospect, supplier,
employee, contractor, salesman, agent or representative of the Selling
Companies or the Buying Companies.
(THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
42
<PAGE>
EACH PARTY HAS CAUSED THIS AGREEMENT TO BE EXECUTED ON ITS BEHALF BY A DULY
AUTHORIZED OFFICER, AS OF THE DATE FIRST STATED ABOVE.
SELLING COMPANIES:
SELLER: SELLER'S PARENT:
Premier Solutions Ltd. Safeguard Scientifics, Inc.
By: /s/ G. A. Mossman III By: /s/ Glenn T. Reiger
------------------------------ ----------------------------
Title: President and CEO Title: Vice President
------------------------------ ----------------------------
Date: April 15, 1997 Date: April 15, 1997
------------------------------ ----------------------------
Global Software, Inc.
By: /s/ Monte L. Miller
------------------------------
Title: Secretary
------------------------------
Date: April 15, 1997
------------------------------
BUYING COMPANIES:
BUYER:
PSL Acquisition Inc.
By: /s/ Richard Tarbox
------------------------------
Title: Vice President
------------------------------
Date: April 15, 1997
------------------------------
BUYER'S PARENT:
SunGard Data Systems Inc.
By: /s/ Richard Tarbox
------------------------------
Title: Vice President - Corporate Development
-------------------------------------------
Date: April 15, 1997
------------------------------
43
<PAGE>
SAFEGUARD SCIENTIFICS, INC.
1990 STOCK OPTION PLAN
As adopted by the Board of Directors on August 8, 1990, as amended by the
Board of Directors on February 25, 1991, and as approved by the shareholders
on May 1, 1991; as amended by the Board of Directors on December 16, 1992,
and as approved by the shareholders on May 11, 1993; as amended by the Board
of Directors on October 25, 1996 and as approved by the shareholders on May
8, 1997. (Adjusted for 9/7/94 [2-for-1], 8/31/95 [3-for-2]and 7/17/96
[2-for-1] stock splits)
1. Purpose. The purpose of this Stock Option Plan (the
"Plan") is to provide additional incentive, in the form of stock options
which may be either incentive stock options or non-qualified stock options,
to employees (including employees who are also officers or directors),
non-employee directors and Eligible Independent Contractors (as hereinafter
defined) of Safeguard Scientifics, Inc., a Pennsylvania corporation (the
"Corporation"), and its subsidiaries whose judgment, initiative and efforts
contribute significantly to the successful operation of the Corporation's
business, and to increase their proprietary interest in the success of the
enterprise to the benefit of the Corporation and its shareholders.
2. Definitions. When used in this Plan, unless the
context otherwise requires:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Cause" shall mean, except to the extent otherwise
specified by the Committee, a finding by the Committee that the
Optionee has breached his or her employment or service contract,
non-competition agreement, or other obligation with the
Corporation, or has been engaged in disloyalty to the
Corporation, including without limitation, fraud, embezzlement,
theft, commission of a felony or proven dishonesty in the course
of his or her employment or service, or has disclosed trade
secrets or confidential information of the Corporation to persons
not entitled to receive such information.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time, and any successor thereto.
(d) "Committee" shall mean the Committee designated by
the Board to administer the Plan.
(e) "Eligible Independent Contractor" shall mean an
independent consultant or advisor hired by the Corporation to
provide bona fide services for the Corporation that are not in
connection with the offer or sale of securities in a
capital-raising transaction.
(f) "Employed by the Corporation" shall mean
employment as an employee or Eligible Independent Contractor or
member of the Board so that for
1
<PAGE>
purposes of exercising Stock Options, an Optionee shall not be
considered to have terminated employment until the Optionee
ceases to be an employee, Eligible Independent Contractor or
member of the Board, unless the Committee determines otherwise.
(g) "ISO" shall mean a stock option which, at the time
such option is granted, qualifies as an incentive stock option,
as defined in Section 422 of the Code.
(h) "NQSO" shall mean a stock option which, at the
time such option is granted, does not qualify as an ISO as
defined in the Code.
(i) "Optionee" shall mean an employee, non-employee
director or Eligible Independent Contractor to whom an award is
granted pursuant to the Plan.
(j) "Options" shall mean all ISOs and NQSOs which from
time to time may be granted under this Plan.
(k) "Share" shall mean a share of the common stock,
$.10 par value, of the Corporation.
(l) "Parent" shall mean any corporate parent of the
Corporation, as defined in Section 424(e) of the Code.
(m) "Plan" shall mean the Safeguard Scientifics, Inc.
1990 Stock Option Plan, as amended from time to time.
(n) "Subsidiary" shall mean any corporate subsidiary
of the Corporation, as defined in Section 424(f) of the Code.
3. Administration. The Plan shall be administered by
a Committee of the Board of Directors, which shall consist of not less than
two members of the Board of the Corporation, who shall be appointed by, and
shall serve at the pleasure of, the Board. Each member of such Committee,
while serving as such, shall be deemed to be acting in his capacity as a
director of the Corporation.
The Committee shall have full authority, subject to the
terms of the Plan, to select the persons to whom ISOs or NQSOs
may be granted under the Plan, to grant Options on behalf of the
Corporation, and to set the number of Shares to be covered by
such Options, the times and dates at which such Options shall be
granted and exercisable and the other terms of such Options. The
Committee also shall have the authority to establish such rules
and regulations, not inconsistent with the provisions of the
Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make
such determinations and interpretations under, or in connection
with, the Plan, as it deems necessary or advisable. All such
rules, regulations, determinations and interpretations shall be
binding and conclusive upon the Corporation, its shareholders and
all employees, and
2
<PAGE>
upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under
or through any of them.
No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect
to the Plan or any Option granted under it. Nothing herein shall
be deemed to expand the personal liability of a member of the
Board or Committee beyond that which may arise under any
applicable standards set forth in the Corporation's by-laws and
Pennsylvania law, nor shall anything herein limit any rights to
indemnification or advancement of expenses to which any member of
the Board or the Committee may be entitled under any by-law,
agreement, vote of the shareholders or directors, or otherwise.
4. Eligibility. The class of persons who shall be
eligible to receive Options under the Plan shall be the employees
(including any employees who are also officers or directors ),
non-employee directors and Eligible Independent Contractors of
the Corporation or of any Subsidiary. More than one Option may
be granted to an Optionee under the Plan.
The Committee may require that the exercise of the
Option shall be subject to the satisfaction of conditions
relating to the Optionee's position and duties with the
Corporation and the performance thereof.
5. Amount of Stock. The stock to be offered for
purchase pursuant to Options granted under this Plan shall be treasury or
authorized but unissued Shares, and the total number of such Shares which may
be issued pursuant to Options under this Plan shall not exceed 4,750,000
Shares, subject to adjustment as provided in Section 16 hereof. The maximum
aggregate number of shares of Stock that shall be subject to Options granted
under the Plan to any Optionee shall not exceed 1,000,000. If any
unexercised Options lapse or terminate for any reason, the Shares covered
thereby may again be optioned.
6. Stock Option Agreement. Each Option
granted under this Plan shall be evidenced by an appropriate stock option
agreement ("Agreement"), which Agreement shall expressly specify whether such
Option is an ISO or NQSO and shall be executed by the Corporation and by the
Optionee. The Agreement shall contain such terms and provisions, not
inconsistent with the Plan, as shall be determined by the Committee. Such
terms and provisions may vary between Optionees or as to the same Optionee to
whom more than one Option may be granted.
7. Option Price. The exercise price under each Option
granted hereunder shall be determined by the Committee in its discretion,
provided, however, that the exercise price of an ISO shall in no event be
less than an amount equal to the fair market value of the Shares subject to
the ISO on the date of grant.
8. Ten Percent Shareholders. If an
Optionee owns more than ten percent of the total combined voting power of all
shares of stock of the Corporation or of a Parent or Subsidiary at the time
an ISO is granted to him, the Option price for the ISO shall
3
<PAGE>
be not less than 110% of the fair market value of the Shares
subject to the ISO on the date the ISO is granted, and such ISO,
by its terms, shall not be exercisable after the expiration of
five years from the date the ISO is granted. The conditions set
forth in this Section 8 shall not apply to NQSOs.
9. Term and Exercise of Option.
(a) Term. Each Option shall expire on such date as
may be determined by the Committee with respect to such Option,
but in no event shall any Option expire more than ten years from
the date it is granted. The date on which an Option shall be
granted shall be the date of the Committee's authorization of the
Option or such later date as may be determined by the Committee
at the time the Option is authorized.
(b) Exercise. Options shall be exercisable in such
installments and on such dates, and/or upon the occurrence of
such events, as the Committee may specify. The Committee may
accelerate the exercise date of any outstanding Options, in its
discretion, if it deems such acceleration to be desirable.
Except as provided in Section 11, no Option shall be exercised
unless at the time of such exercise the Optionee is then employed
by the Corporation or any Subsidiary. Exercisable Options may be
exercised, in whole or in part, from time to time, by giving
written notice of exercise to the Corporation at its principal
office, specifying the number of Shares to be purchased and
accompanied by payment in full of the aggregate Option price for
such Shares. Only full Shares shall be issued under the Plan,
and any fractional Share which might otherwise be issuable upon
exercise of an Option granted hereunder shall be forfeited.
(c) Payment of Option Price. The Option price shall
be payable (i) in cash or its equivalent; (ii) in the discretion
of the Committee, in Shares previously acquired by the Optionee
(including Shares acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems
appropriate), provided that, if such Shares were acquired through
exercise of an ISO, such Shares have been held by the Optionee
for a period of not less than the holding period described in
section 422(a)(1) of the Code on the date of exercise, and that,
in any case, such Shares have been held by the Optionee for the
requisite period of time necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
adverse accounting consequences to the Corporation with respect
to the Option; (iii) in the discretion of the Committee, in any
combination of (i) and (ii) above; or (iv) in the discretion of
the Committee, by delivering a properly executed notice of
exercise of the Option to the Corporation and a broker, with
irrevocable instructions to the broker to deliver to the
Corporation on the settlement date the amount of sale proceeds
necessary to pay the exercise price of the Option.
(d) Replacement Options. The Committee may, in its
sole discretion and at the time of the original option grant,
authorize the Optionee to receive automatically replacement
Options pursuant to this part of the Plan. Any such replacement
Option shall be granted upon such terms and subject to such
conditions
4
<PAGE>
and limitations as the Committee may deem appropriate. Any
replacement Option shall cover a number of shares determined by
the Committee, but in no event more than the number of shares of
the original Option exercised. The per share exercise price of
any replacement Option shall equal the then current Fair Market
Value of a Share, and shall have a term as determined by the
Committee at the time of grant of the original Option.
The Committee shall have the right, and may reserve the
right in any Option grant, in its sole discretion and at any
time, to discontinue the automatic grant of replacement Options
if it determines the continuance of such grants to no longer be
in the best interest of the Corporation.
10. Maximum Value of ISOs. The aggregate fair
market value of the Shares, determined as of the date of grant, with respect
to which ISOs first become exercisable during any calendar year by an
Optionee (under this Plan and any other plan of the Corporation or any parent
or Subsidiary) shall not exceed $100,000.
11. Termination of Employment.
(a) Except as set forth below, and unless otherwise
determined by the Committee at or after grant, in the event of
termination (voluntary or involuntary) for any reason of an
Optionee's employment by the Corporation or any subsidiary, all
Options granted hereunder to such Optionee, to the extent
exercisable on the date of termination, or to any greater extent
permitted by the Committee, may be exercised by the Optionee at
any time within ninety days after the date of such termination,
provided, however, that in no event shall any Option be
exercisable after the expiration of its term.
(b) Unless otherwise determined by the Committee at or
after grant, if the termination of employment is due to
disability (as defined in Section 22(e)(3) of the Code), the
Optionee shall have the privilege of exercising the unexercised
Option to the extent such Option was exercisable on the date of
such termination due to disability, or to any greater extent
permitted by the Committee, within one year of such date,
provided, however, that in no event shall any Option be
exercisable after the expiration of its term.
(c) Unless otherwise determined by the Committee at or
after grant, if the Optionee dies within three months of
termination of employment or the termination of employment is due
to the death of the Optionee while in the employ of the
Corporation or a subsidiary, the estate of the holder or the
person or persons who acquired the right to exercise such Option
by bequest or inheritance, shall have the privilege of exercising
the unexercised Option to the extent such Option was exercisable
on the date of such termination, or to any greater extent
permitted by the Committee, within one year of the earlier of the
date of termination or the date of death, but in no event shall
any Option be exercisable after the expiration of its term.
5
<PAGE>
(d) Unless otherwise determined by the Committee at or
after grant, if the Corporation terminates the employment of the
Optionee for Cause, any Option held by such Optionee shall
terminate as of the date the Optionee ceases to be employed by
the Corporation, and the Optionee shall automatically forfeit all
Shares underlying any exercised portion of an Option for which
the Corporation has not yet delivered the share certificates upon
refund by the Corporation of the exercise price paid by the
Optionee for such Shares.
(e) Notwithstanding the provisions of subparagraphs
11(a), 11(b), 11(c) and 11(d) above, the Committee may determine
with respect to any NQSO that such NQSO shall terminate at a time
later than the expiration of such three-month or one-year
periods, as set forth in the Agreement.
12. Withholding and Use of Shares to Satisfy Tax Obligations.
(a) Required Withholding. The obligation of the
Corporation to deliver Shares upon the exercise of any Option
shall be subject to applicable federal (including FICA), state
and local tax withholding requirements. The Corporation may
require the Optionee or other person receiving such Shares to pay
to the Corporation the amount of any such taxes that the
Corporation is required to withhold with respect to such Options,
or the Corporation may deduct from other wages paid by the
Corporation the amount of any withholding taxes due with respect
to such Options.
(b) Election to Withhold Shares. If the Committee so
permits, an Optionee may elect to satisfy the Corporation's
income tax withholding obligation with respect to an Option by
having shares withheld up to an amount that does not exceed the
Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form
and manner prescribed by the Committee and shall be subject to
the prior approval of the Committee.
13. Non-Assignability. Each Option granted under
the Plan shall be non-transferable by the Optionee except by will or the laws
of descent and distribution, and each Option shall be exercisable during the
Optionee's lifetime only by him. Notwithstanding the foregoing, the Committee
may provide, at or after grant, that an Optionee may transfer NQSOs pursuant
to a domestic relations order or to family members or other persons or
entities on such terms as the Committee may determine.
14. Issuance of Shares and Compliance with Securities Acts. Within a
reasonable time after exercise of an Option, the Corporation shall cause to
be delivered to the Optionee a certificate for the Shares purchased pursuant
to the exercise of the Option. At the time of any exercise of any Option,
the Corporation may, if it shall deem it necessary and desirable for any
reason connected with any law or regulation of any governmental authority
relative to the regulation of securities, require the Optionee to represent
in writing to the Corporation that it is his then intention to acquire the
Common Stock for investment and not with a view to distribution thereof and
that such Optionee will not dispose of such shares in any
6
<PAGE>
manner that would involve a violation of applicable securities
laws. In such event, no shares shall be issued to such holder
unless and until the Corporation is satisfied with such
representation. Certificates for Shares issued pursuant to the
exercise of Options may bear an appropriate securities law
legend.
15. Rights as a Shareholder. An Optionee
shall have no rights as a shareholder with respect to Shares covered by his
Option until the date of the issuance or transfer of the Shares to him and
only after such Shares are fully paid. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date of
such issuance or transfer.
16. Stock Adjustments. In the event of a
reorganization, recapitalization, change of shares, stock split, or spinoff,
stock dividend, reclassification, subdivision or combination of shares,
merger, consolidation, rights offering, or any other change in the corporate
structure or shares of the Corporation, the Committee shall make such
adjustment as it, in its sole discretion, deems appropriate in the number and
kind of shares authorized by the Plan, in the number and kind of shares
covered by grants made under the Plan or in the purchase prices of
outstanding Options, and such adjustments shall be effective and binding on
the Optionee and the Corporation for all purposes of the Plan, provided,
however, that no such adjustments shall be made to any ISO without the
Optionee's consent if such adjustment would cause such ISO to fail to qualify
as such under Section 422 of the Code.
In the event of a corporate transaction (as that term
is described in Section 424(a) of the Code and the Treasury
Regulations issued thereunder as, for example, a merger,
consolidation, acquisition of property or stock, separation,
reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation, provided,
however, that in the event of a proposed corporate transaction,
the Committee may terminate all or a portion of the outstanding
Options if it determines that such termination is in the best
interests of the Corporation. If the Committee decides to
terminate outstanding Options, the Committee shall give each
Optionee holding an Option to be terminated not less than seven
days' notice prior to any such termination by reason of such a
corporate transaction, and any such outstanding Option which is
to be so terminated may be exercised (if and only to the extent
that it is then exercisable) up to and including the date
immediately preceding such termination. Notwithstanding the
preceding sentence, as provided in Section 9 hereof, the
Committee, in its discretion, may accelerate, in whole or in
part, the date on which any or all Options become exercisable.
17. Adoption by Board and Approval by Shareholders. This Plan becomes
effective on August 8, 1990 (the date the Plan was adopted by the Board),
provided, however, that if the Plan is not approved by a majority of the
votes cast at a duly held meeting at which a quorum representing a majority
of all outstanding voting stock of the Corporation is, either in person or by
proxy, present and voting on the Plan, within 12 months after said date, the
Plan and all Options granted hereunder shall be null and void and no
additional Options shall be granted hereunder.
7
<PAGE>
18. Termination and Amendment of the Plan. Subject to the right of the
Board to terminate the Plan prior thereto, the Plan shall terminate on, and
no Options shall be granted hereunder after, August 8, 2000. The Board shall
have power at any time, in its discretion, to amend, abandon or terminate the
Plan, in whole or in part, provided that no such action shall affect any
Options theretofore granted and then outstanding under the Plan. Nothing
contained in this Section 18, however, shall terminate or affect the
continued existence of rights created under Options issued hereunder and
outstanding on August 8, 2000, which by their terms extend beyond such date.
The Board may amend or terminate the Plan at any time
or from time to time, but no amendment or termination shall be
made which would impair the rights of an Optionee under an Option
theretofore granted without the Optionee's consent; and provided,
further that the Board shall not amend the Plan without
shareholder approval if such approval is required pursuant to the
Code or the rules of any national securities exchange or
over-the-counter market on which the Corporation's Shares are
then listed or included.
19. Interpretation. A determination of the Committee
as to any question which may arise with respect to the interpretation of the
provisions of this Plan or any Options shall be final and conclusive, and
nothing in this Plan, or in any regulation hereunder, shall be deemed to give
any Optionee, his legal representatives, assigns or any other person any
right to participate herein except to such extent, if any, as the Committee
may have determined or approved pursuant to this Plan. The Committee may
consult with legal counsel who may be counsel to the Corporation and shall
not incur any liability for any action taken in good faith in reliance upon
the advice of such counsel.
20. Governing Law. With respect to any ISOs granted
pursuant to the Plan and the Agreements thereunder, the Plan,
such Agreements and any ISOs granted pursuant thereto shall be
governed by the applicable Code provisions to the maximum extent
possible. Otherwise, the laws of the Commonwealth of
Pennsylvania shall govern the operation of, and the rights of
Optionees under, the Plan, the Agreements and any Options granted
thereunder.
21. Rule 16b-3 Compliance. Unless an Optionee could
otherwise transfer Shares issued hereunder without incurring
liability under Section 16(b) of the Exchange Act, at least six
months must elapse from the date of grant of an Option to the
date of disposition of the Shares issued upon exercise of the
Option.
8
<PAGE>
AMENDMENT NO. 3 TO TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT NO. 3 (this "Amendment"), dated as of
February 1, 1997, TO TRANSFER AND ADMINISTRATION AGREEMENT
dated as of April 1, 1996, as amended as of September 25,
1996 and as of December 5, 1996, by and among CSI FUNDING
INC., a Delaware corporation, as transferor (hereinafter,
together with its successors and assigns in such capacity,
called the "Transferor"), COMPUCOM SYSTEMS, INC., a Delaware
corporation, as collection agent (hereinafter, together with
its successors and assigns in such capacity, called the
"Collection Agent"), ENTERPRISE FUNDING CORPORATION, a
Delaware corporation (hereinafter, together with its
successors and assigns, called the "Company") and
NATIONSBANK, N.A., a national banking association, as agent
for the benefit of the Company and the Bank Investors
(hereinafter, together with its successors and assigns in
such capacity, called the "Agent").
W I T N E S S E T H :
WHEREAS, the Transferor, the Collection Agent, the
Company and the Agent have entered into a Transfer and
Administration Agreement, dated as of April 1, 1996 (such
agreement, as amended to the date hereof, the "Agreement");
and
WHEREAS, the parties hereto wish to amend the
Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing
and of the mutual covenants herein contained, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
<PAGE>
SECTION 1. Defined Terms. Unless otherwise
defined herein, the terms used herein shall have the
meanings assigned to such terms in, or incorporated by
reference into, the Agreement.
SECTION 2. Amendments to Agreement. The
definition of "Delinquency Ratio" set forth in Section 1.1
of the Agreement is hereby amended, effective on the
Effective Date, to read as follows (solely for conve-
nience, language added to such definition is italicized):
""Delinquency Ratio" means, with respect to any
date of determination, the ratio (expressed as
a percentage) computed by dividing (i) the
aggregate Outstanding Balance of all Delinquent
Receivables as of such date by (ii) the aggre-
gate Outstanding balance of all Receivables as
of such date less Defaulted Receivables as of
such date; provided, however, that at any time
prior to March 31, 1997 Receivables with re-
spect to which "AT&T Corporation" is the Obli-
gor shall be excluded from the calculation of
clauses (i) and (ii) above."
SECTION 3. Effectiveness. This Amendment shall
become effective on the first date on which the parties
hereto shall have executed and delivered one or more
counterparts to this Amendment and each shall have received
one or more counterparts of this amendment executed by the
others.
SECTION 4. Execution in Counterparts. This
Amendment may be executed in any number of counterparts and
by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same
Amendment.
<PAGE>
SECTION 5. Consents; Binding Effect. The
execution and delivery by the Seller and the Purchaser of
this Amendment shall constitute the written consent of each
of them to this Amendment. This Amendment shall be binding
upon, and inure to the benefit of, the parties hereto and
their respective successors and assigns.
SECTION 6. Governing Law. This Amendment shall
be governed by and construed in accordance with the laws of
the State of New York.
SECTION 7. Severability of Provisions. Any
provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 8. Captions. The captions in this
Amendment are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.
SECTION 9. Agreement to Remain in Full Force and
Effect. Except as amended hereby, the Agreement shall
remain in full force and effect and is hereby ratified,
adopted and confirmed in all respects. This Amendment shall
be deemed to be an amendment to the Agreement. All
references in the Agreement to "this Agreement",
"hereunder", "hereof", "herein", or words of like import,
and all references to the Agreement in any other agreement
or document shall hereafter be deemed to refer to the
Agreement as amended hereby.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment No. 3 to Transfer and Administration
Agreement to be executed as of the date and year first above
written.
ENTERPRISE FUNDING CORPORATION,
as Company
By: /s/ Stewart L. Cutler
Name: Stewart L. Cutler
Title: Vice President
CSI FUNDING INC., as Transferor
By: /s/ Patrick D. Lane
Name: Patrick D. Lane
Title: Vice President
COMPUCOM SYSTEMS, INC.,
as Collection Agent
By: /s/ Daniel L. Celoni
Name: Daniel L. Celoni
Title: Treasurer
NATIONSBANK, N.A., as Agent
and as Bank Investor
Commitment: By: /s/ Michele M. Heath
$100,000,000 Name: Michele M. Heath
Title: Vice President
<PAGE>
Safeguard Scientifics, Inc. and Subsidiaries
Exhibit 11 - Computation of Per Share Earnings
(In thousands except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31
1997 1996
----------- -----------
<S> <C> <C>
Primary earnings per common share
Net earnings $ 4,492 $ 3,980
Adjustment (1) (72) (144)
----------- -----------
$ 4,420 $ 3,836
----------- -----------
----------- -----------
Average common shares outstanding 31,122 29,504
Average common share equivalents 910 1,552
----------- -----------
Average number of common shares and
common share equivalents outstanding 32,032 31,056
----------- ------------
----------- ------------
Primary earnings per common share $ .14 $ .12
----------- -----------
----------- -----------
Fully diluted earnings per common share
Primary net earnings $ 4,492 $ 3,980
Adjustment (1) (84) (146)
----------- -----------
$ 4,408 $ 3,834
----------- -----------
----------- -----------
Average common shares outstanding 31,122 29,504
Average common share equivalents 910 1,668
----------- -----------
Average number of common shares
assuming full dilution 32,032 31,172
----------- -----------
----------- -----------
Fully diluted earnings per common share $ .14 $ .12
----------- -----------
----------- -----------
</TABLE>
(1) Net earnings are adjusted for the dilutive effect of public subsidiary
common stock equivalents (primary) and convertible securities (fully
diluted).
Share and per share data have been retroactively adjusted to reflect the
two-for-one split of the Company's common shares effective July 17, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of March 31, 1997 and the consolidated
statement of operations for the three months ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,399
<SECURITIES> 0
<RECEIVABLES> 344,833
<ALLOWANCES> 3,105
<INVENTORY> 193,253
<CURRENT-ASSETS> 549,306
<PP&E> 122,858
<DEPRECIATION> 40,780
<TOTAL-ASSETS> 851,146
<CURRENT-LIABILITIES> 230,214
<BONDS> 326,373
0
0
<COMMON> 3,280
<OTHER-SE> 184,202
<TOTAL-LIABILITY-AND-EQUITY> 851,146
<SALES> 385,405
<TOTAL-REVENUES> 457,463
<CGS> 342,068
<TOTAL-COSTS> 382,330
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,198
<INCOME-PRETAX> 11,362
<INCOME-TAX> 2,995
<INCOME-CONTINUING> 4,492
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,492
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
