<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1999
Commission File Number 0-16530
FINANCIAL PERFORMANCE CORPORATION
(Exact name of Registrant as specified in its charter)
New York 13-3236325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
335 Madison Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 557-0401
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 14, 1999
Common Stock 9,471,534 Shares
<PAGE> 2
Financial Performance Corporation
Report on Form 10-QSB for the Quarter ended March 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. Page
<S> <C>
Item 1. Financial Statements (Unaudited).......................................................1
Consolidated Balance Sheets
March 31, 1999 and March 31, 1998.............................................2
Consolidated Statements of Operations
For the Three Months Ended
March 31, 1999 and March 31, 1998.............................................3
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1999 and March 31, 1998.............................................4
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months Ended
March 31, 1999 and March 31, 1998.............................................5
Notes to Consolidated Financial Statements.......................................... . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................14
Part II
Item 6. Exhibits and Reports on Form 8-K......................................................20
</TABLE>
-ii-
<PAGE> 3
PART I
Item 1. Financial Statements
The financial statements of Financial Performance Corporation
(the "Company") begin on page 2.
<PAGE> 4
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Unaudited) (Unaudited)
(Restated)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,560,760 $ 1,627,979
Accounts receivable 1,847,395 1,808,324
Prepaid expenses and other current assets 65,071 99,807
----------- -----------
Total current assets 6,473,226 3,536,110
Property and equipment, net of accumulated depreciation 209,070 197,391
Software development costs -- 135,605
Investment in subsidiary 695,070 513,186
Other assets 306,086 299,694
----------- -----------
$ 7,683,452 $ 4,681,986
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 2,333,948 $ 2,018,079
----------- -----------
Total current liabilities 2,333,948 2,018,079
----------- -----------
Minority interest in consolidated subsidiaries 915,046 516,646
----------- -----------
Stockholders' equity
Common stock - authorized 50,000,000 shares of $.01 par
value per share: issued and outstanding 9,471,534 as of
March 31, 1999; 8,021,534 as of March 31, 1998 94,715 80,215
Additional paid in capital 7,756,261 7,480,761
Accumulated (deficit) (3,416,518) (5,413,715)
----------- -----------
Total stockholders' equity 4,434,458 2,147,261
----------- -----------
$ 7,683,452 $ 4,681,98
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
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<PAGE> 5
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Unaudited) (Unaudited)
(Restated)
<S> <C> <C>
Revenues $ 3,390,389 $ 4,488,550
----------- -----------
Costs and expenses
Cost of revenues 2,257,354 3,362,796
Salaries and related expenses 350,588 347,130
Selling, general and administrative 355,545 218,246
----------- -----------
2,963,487 3,928,172
----------- -----------
Operating income 426,902 560,378
----------- -----------
Other income (expense):
Interest income 25,514 14,198
Minority interest in earnings of subsidiaries (138,000) (148,600)
----------- -----------
(112,486) (134,402)
----------- -----------
Income before income taxes 314,416 425,976
Income taxes 41,784 42,834
----------- -----------
Net income $ 272,632 $ 383,142
=========== ===========
Earnings per common share:
Basic $ .029 $ .048
Diluted $ .026 $ .048
</TABLE>
See the accompanying notes to the financial statements.
-3-
<PAGE> 6
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
(Unaudited) (Unaudited)
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 272,632 $ 383,142
Adjustments to reconcile net cash provided by (used in) operating
activities:
Depreciation and amortization 27,986 21,738
Minority interest in earnings of consolidated subsidiaries 138,000 148,600
Increase (decrease) in cash flows from operating activities resulting from
changes in:
Accounts receivable (1,504,612) (1,087,708)
Prepaid expenses and other current assets (33,796) (20,697)
Other assets 1,999 --
Accounts payable and accrued expenses (507,240) 109,926
----------- -----------
Net cash provided by (used in) operating activities (1,605,031) (444,999)
----------- -----------
Cash flows from investing activities:
Acquisition of equipment (23,326) (16,054)
Investment in subsidiary (98,031) (167,186)
----------- -----------
Net cash used in investing activities (121,357) (183,240)
----------- -----------
Net increase (decrease) in cash (1,726,388) (628,239)
Cash and cash equivalents, beginning of period 6,287,148 2,256,218
----------- -----------
Cash and cash equivalents, end of period $ 4,560,760 $ 1,627,979
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 26,000 $ 23,000
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
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<PAGE> 7
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Accumulated
Shares Par Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1999 9,471,534 $ 94,715 $ 7,756,261 $(3,689,150) $ 4,161,826
Net income -- -- -- 272,632 272,632
----------- ----------- ----------- ----------- -----------
Balance, March 31,1999 9,471,534 $ 94,715 $ 7,756,261 $(3,416,518) $ 4,434,458
=========== =========== =========== =========== ===========
Balance, January 1, 1998 8,021,534 $ 80,215 $ 7,480,761 $(5,796,857) $ 1,764,119
Net income (Restated) -- -- -- 383,142 383,142
----------- ----------- ----------- ----------- -----------
Balance, March 31, 1998 8,021,534 $ 80,215 $ 7,480,761 $(5,413,715) $ 2,147,261
=========== =========== =========== =========== ===========
</TABLE>
See the accompanying notes to the financial statements.
-5-
<PAGE> 8
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND BUSINESS
Financial Performance Corporation (the "Company") through its subsidiaries
currently markets merger communications services and computer software to the
financial services industry. The Company was incorporated in New York on August
14, 1984. The Company ceased operations from February 1990 through November
1992.
During the fiscal year ended September 30, 1995, the Company established
three eighty percent owned subsidiaries, Michaelson Kelbick Partners Inc.
("MKP"), FPC Information Corp. ("FPC Information") and Aspen Capital Management,
LLC ("Aspen").
MKP was formed and commenced operations in October 1994. MKP is engaged in
providing specialized merger communications and marketing services to the
financial services industry (see Note B (1)).
FPC Information was formed in November 1994 for the purpose of marketing the
Company's software products.
In October 1997, the Company's investment in FPC Information was reduced
from eighty percent to fifty percent, as a result of a $225,000 additional
investment by the minority shareholder. The Company has the option to repurchase
a thirty percent equity interest in FPC Information Corp. exercisable at any
time prior to September 30, 1999 at the fair market value of such interest, but
in no event less than $225,000.
Aspen was formed in January 1995 as an international sponsor of cash
management funds and planned to engage in the development, investment management
and administration of such funds. Aspen, which was in the development stage,
ceased operations in September 1996.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Principles of Consolidation
The consolidated financial statements include the accounts of Financial
Performance Corporation and Subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Investments in FPC Information Corp. is
accounted for by the equity method.
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<PAGE> 9
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(1) Principles of Consolidation (continued)
Condensed financial information of its eighty percent owned subsidiary, MKP,
excluding intercompany eliminations, as of March 31, 1999 and 1998 and for the
three months then ended, is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash $3,837,000 $1,610,000
Accounts receivable 1,847,000 1,808,000
Other assets -- 15,000
Accounts payable 1,979,000 1,657,000
Revenues 3,390,000 4,489,000
Operating costs 3,038,000 4,116,000
Net income 336,000 345,000
</TABLE>
Intercompany management fees of $286,000 and $293,000 were included in
operating costs for the three months ended March 31, 1999 and 1998,
respectively. These amounts were eliminated upon consolidation.
Condensed financial information for the Company's other subsidiary, FPC
Information Corp. for the three months ended March 31, 1999 and 1998 has not
been separately disclosed. This entity had no revenues and it's assets and
liabilities are immaterial.
(2) Reclassification of Certain Items
Certain items in the Company's financial statements for the three months
ended March 31, 1998 have been restated to conform the presentation of such
financial statements with the Company's financial statements for the three
months ended March 31, 1999.
(3) Revenue recognition
Revenue from software products is recognized upon delivery to the customer,
provided that no significant vendor obligations remain, and collection of the
resulting receivable is deemed probable.
(4) Software Development Costs and Amortization
Costs associated with software development subsequent to the establishment
of technological feasibility, including enhancements to software products, are
capitalized and amortized as required by Statement of Financial Accounting
Standards No. 86. Costs incurred prior to achieving technological feasibility
are expensed as incurred and classified as research and development costs. There
were no research and development costs incurred for the years ended March 31,
1999 and 1998.
-7-
<PAGE> 10
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(4) Software Development Costs and Amortization (continued)
Amortization of capitalized software development costs is generally provided on
a product-by-product basis at the greater of the amount computed by using the
ratio that current gross revenue bears to the total current and anticipated
gross revenue of the product or on the straight-line method over the sixty-month
estimated useful life of the product commencing when the product is available
for general release to customers.
Software Development Costs are are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Balance, beginning of period $ -- $135,605
Additions -- --
Amortization -- --
---------- --------
Balance, end of period $ -- $135,605
========== ========
</TABLE>
(5) Earnings per common share
Basic earnings per common share was calculated by dividing net income by the
weighted average number of common shares outstanding during the year. Diluted
earnings per share was calculated by dividing net income by the sum of the
weighted average number of common shares outstanding plus all additional common
shares that would have been outstanding if potentially dilutive common shares
had been issued.
(6) Cash and cash equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
(7) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
-8-
<PAGE> 11
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(8) Depreciation and amortization
Property and equipment are stated at cost. Depreciation is computed using
the straight line method over the estimated useful lives of the assets, 5 to 7
years. When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operations for the period. The cost of maintenance and
repairs is charged to operations as incurred. Significant renewals and
betterments are capitalized.
Amortization of an intangible asset, a customer list of $164,000, included
on the balance sheet under the caption, other assets, is being amortized on the
straight line basis, over ten years.
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Computer equipment $192,513 $123,329
Furniture and fixtures 183,305 155,581
Leasehold improvements 33,977 33,977
-------- --------
409,795 312,887
Less: accumulated depreciation and amortization 200,725 115,496
-------- --------
$209,070 $197,391
======== ========
</TABLE>
(9) Income Taxes
Income taxes are computed in accordance with the provisions of Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
-9-
<PAGE> 12
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(9) Income Taxes (continued)
At December 31, 1998, the Company has net operating loss carryforwards of
approximately $3,567,000, which expire in various years through 2012, available
to offset future taxable income. Certain provisions of the tax law may limit the
net operating loss carryforwards available for use in any given year in the
event of a significant change in ownership interest. At December 31, 1998, the
Company had a deferred tax asset amounting to approximately $1,700,000. The
deferred tax asset consists primarily of net operating loss carryforwards and
has been fully offset by a valuation allowance of the same amount.
The income tax expense for the for the three months ended March 31, 1999 and
1998 represents state and local income taxes on the income of MKP.
NOTE C - SIGNIFICANT CUSTOMERS
For the three months ended March 31, 1999, two customers of the Company's
subsidiary, MKP, accounted for 84% of the Company's consolidated revenues in the
following respective percentages:
Customer A 10%
Customer B 74%
--
84%
==
The total accounts receivable from these customers at March 31, 1999
amounted to 86% of the total accounts receivable balance.
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
At March 31, 1999, the Company had outstanding warrants as follows:
Number of Exercise Expiration
Shares Price Date
------ ----- ----
250,000 $ .50 November 30, 1999
550,000 .50 October 31, 2001
725,000 1.00 September 15, 2006
20,000 1.00 September 16, 2006
200,000 .50 September 15, 2010
-10-
<PAGE> 13
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE E - INCENTIVE STOCK OPTION PLAN
In March 1988, the Company adopted a stock option plan. The plan provides
for the granting of options to purchase up to 140,000 shares of common stock to
key employees, officers and directors at an exercise price equal to fair market
value at the date of grant. The right to exercise options granted under the plan
commences one year from the date of the grant and such options are exercisable
in increments of 25% each year provided employment with the Company is
continuous. The plan expired by its terms in October 1998.
Presented below is a summary of the status of the Company's stock options for
the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------------------- ---------------------
Weighted Weighted
Shares Average Shares Average
under Exercise under Exercise
Options Price Options Price
<S> <C> <C> <C>
Balance, beginning of period -- $ -- 70,000 $ 2.31
Granted -- -- -- --
Exercised -- -- -- --
Expired -- -- -- --
------- ------- ------- -------
Balance, end of period -- $ -- 70,000 $ 2.31
======= ======= ======= =======
</TABLE>
NOTE F - EMPLOYEE BENEFIT PLANS
In September 1996, the Company established a non-contributory pension and
profit sharing plan for the benefit of eligible full-time employees. The plan
provides for annual contributions to a trust fund, which are based upon a
percentage of qualifying employees' annual compensation. Total contributions are
limited to the maximum amount deductible for federal income tax purposes.
The plan was terminated in March, 1997.
In January, 1997, the Company established a 401(k) salary deferred benefit
plan covering substantially all employees who have met certain requirements. The
plan requires Company contributions equal to 50% to a maximum of 3% of each
participant's contribution percentage.
In September, 1997, the Company amended its 401(k) plan to provide a
provision for discretionary profit sharing plan contributions. Total
contributions to the plan, (401(k) and profit sharing), were $127,000 and
$82,000 for the years ended December 31, 1998 and 1997, respectively.
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<PAGE> 14
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE G - COMMITMENTS
The Company has commitments under non-cancelable operating leases for office
space and equipment, which expire on October 31, 2006 and September 30, 2000,
respectively. The office lease includes provisions requiring the Company to pay
a proportionate share of increases in real estate taxes and operating expenses
over base period amounts.
Minimum payments for the leased properties for subsequent years are as
follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
- ------------
<S> <C>
1999 $ 281,000
2000 281,000
2001 374,000
2002 415,000
2003 419,000
Thereafter 1,292,000
-----------
$ 3,062,000
===========
</TABLE>
Rent and equipment leasing expense was $88,000 for the three months ended March
31, 1999 and 1998.
NOTE H - RESTRICTED CASH AND CONTINGENCIES
At March 31, 1999, $180,000 was invested in a Certificate of Deposit and is
pledged as security for a letter of credit issued in connection with the lease
for office space (see Note G). The $180,000 Certificate of Deposit is included
on the balance sheet under the caption, other assets. This exceeds the federally
insured limit.
NOTE I - CONCENTRATION OF CREDIT RISK
The Company maintains its cash and cash equivalents with a major financial
institution. The balance at times may exceed federally insured limits. The
company performs periodic evaluations of the relative credit standing of this
financial institution and limits the amount of credit exposure.
NOTE J - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value amounts of cash and cash equivalents, prepaid expenses
and accrued expenses approximate fair value because of the short maturity of
these items.
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<PAGE> 15
FINANCIAL PERFORMANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE K - EARNINGS PER SHARE INFORMATION
The calculation of basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net income available to
Common share owners $ 272,632 $ 383,142
=========== ===========
Average shares outstanding (a) 9,471,534 8,021,532
Dilutive securities
Stock options and warrants (c) 903,000 --
----------- -----------
Average shares outstanding assuming dilution (b) 10,374,534 8,021,532
=========== ===========
</TABLE>
(a) Used to compute basic earnings per share.
(b) Used to compute diluted earnings per share.
(c) Excluded for 1998 because exercise price exceeded market value.
NOTE L - CHANGE IN FISCAL YEAR
In February 1998, the Company changed the Company's fiscal year end from
September 30 to December 31.
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<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
History. The Company was incorporated in New York in 1984 under the
name Performance Services Group, Inc. and at that time was primarily engaged in
offering banking institutions a range of proprietary sales and marketing
products, strategic planning and product consulting services and financial
software products. In July 1989, the Company's Common Stock was delisted from
the Nasdaq over-the-counter market and from February 1990 to November 1992 the
Company was inactive.
In January 1993, the Company recommenced its operations and raised
working capital through private debt and equity issuances, including issuances
to one of the Company's principal stockholders. In 1994, the Company began
implementing a business strategy of establishing subsidiary companies to engage
in related or complementary areas of the financial services industry. As a
result, the Company, together with other parties, formed three subsidiaries
(Michaelson Kelbick Partners Inc. ("MKP"), Aspen Capital Management, LLC
("Aspen") and FPC Information Corp. ("FPC Information")). MKP is engaged in
providing merger communications and marketing services to the financial services
industry. FPC Information was formed to market the Company's software and Aspen
was formed to operate as an international sponsor of cash management funds.
Aspen is currently inactive and MKP accounts for 100% of the Company's revenues.
Although the Company generated revenues for each of the last four fiscal years
ended September 30, 1997 and for the fiscal year ended December 31, 1998, it
incurred losses of $146,036, $801,296, $235,049 and $544,848 for the fiscal
years ended September 30, 1994, 1995, 1996 and 1997, respectively. The Company
had net income of $2,107,707 for the fiscal year ended December 31, 1998. In
February 1998, the Company changed its fiscal year end from September 30 to
December 31.
Revenues. The Company's revenues historically have been derived from a
limited number of customers, due principally to the nature of the merger
communications business which has generally required concentration of the
Company's personnel and resources on a limited number of large projects from
different merger clients during any particular period. For the fiscal year ended
September 30, 1997, two customers of MKP accounted for approximately 72% for the
Company's revenues, with one customer accounting for approximately 56% of its
revenues. For the fiscal year ended December 31, 1998, three customers of MKP
accounted for approximately 82% of the Company's revenues, with one customer of
MKP accounting for approximately 55% of its revenues. The Company anticipates
that a substantial amount of its revenues will continue to be derived from a
limited number of customers. As a result, the Company's sales and operating
results are subject to substantial variations in any given year and from quarter
to quarter. In addition, sales and net income (if any) of the Company in any
particular quarter may not necessarily reflect the results of operations for the
Company for the full year.
Restatement. Certain items in the Company's financial statements for
the quarter ended March 31, 1998 have been restated to reflect the quarterly
accrual of bonus payments for the fiscal year ended December 31, 1998, in order
to conform the presentation of such financial statements with the Company's
financial statements for the quarter ended March 31, 1999.
-14-
<PAGE> 17
Subsidiaries. The Company's consolidated financial statements include
the accounts of Financial Performance Corporation and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Summary financial information concerning MKP, excluding intercompany
eliminations, as of March 31, 1999 and 1998 and for the three months then ended,
is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash......................................................... $ 3,837,000 $ 1,610,000
Accounts receivable.......................................... $ 1,847,000 $ 1,808,000
Other assets................................................. $ -- $ 15,000
Accounts payable............................................. $ 1,979,000 $ 1,657,000
Revenues..................................................... $ 3,390,000 $ 4,489,000
Operating costs.............................................. $ 3,038,000 $ 4,116,000
Net income .................................................. $ 336,000 $ 345,000
</TABLE>
Summary financial information concerning the Company's other two
subsidiaries, Aspen and FPC Information, as of March 31, 1999 and for the three
months then ended, is not separately set forth as these entities had no revenues
for such periods and their assets and liabilities during such periods were
immaterial to the Company.
Aspen, whose operations commenced in March 1995, suspended its
operations in September 1996. Aspen was reported as a discontinued operation at
September 30, 1996.
Change in Fiscal Year. On February 23, 1998, the Company's Board of
Directors unanimously approved a resolution to change the Company's fiscal year
end from September 30 to December 31.
Year 2000 . The Company recognizes the potential business impact
relating to the Year 2000 computer system issue and has implemented a plan to
assess and improve the Company's state of readiness with respect to such issue.
The Year 2000 issue is one where computer systems recognize the designation "00"
as 1900 instead of 2000, potentially resulting in system failure or
miscalculations.
In recognition of the Year 2000 issue, commencing in 1998, the Company
initiated a comprehensive review of its information technology systems, which
the Company is dependent upon for the conduct of its business operations, as
well as the computer hardware and software products, components and other
equipment supplied to the Company by third parties, in order to determine the
adequacy of those systems in light of the Company's future business
requirements. Year 2000 readiness was one of the factors considered in the
review of the Company's systems. Such review included testing and analysis of
the Company's systems and inquiries of third parties
-15-
<PAGE> 18
supplying information technology systems, computer hardware and software
products and components, and other equipment to the Company in order to receive
assurances from such third parties that these systems, products and components
are Year 2000 compliant. The Company completed its review in January 1999.
As a result of its review, the Company has determined that its internal
financial software systems are adequate for the Company's future business needs,
including Year 2000 compliance, and do not need to be replaced. Also, the
Company has completed all necessary Year 2000 modifications with regard to the
MARS(TM) computer software product developed by the Company's subsidiary, FPC
Information Corp. The Company believes that the MARS(TM) computer software
product is Year 2000 compliant.
The Company has not developed a "worst case" scenario with respect to
Year 2000 issues, but instead has focused its resources on identifying any
material, remediable problems and reducing uncertainties generally, through the
review procedures described above.
At this time, the Company has not developed Year 2000 contingency
plans, other than the review described above, and the Company does not believe
such plans are merited by the results of the Company's Year 2000 review. The
Company maintains and deploys contingency plans designed to address various
other potential business interruptions. These plans may be applicable to address
the possible interruption of support provided by third parties resulting from
their failure to be Year 2000 compliant.
If the Company or the third parties with which it has relationships
were to not successfully meet its or their Year 2000 compliance requirements,
the Company would likely encounter disruptions to its business that could have a
material adverse effect on its business, financial position and results of
operations. The Company could be materially and adversely impacted by widespread
economic or financial market disruption or by Year 2000 computer system failures
of third parties with which it has relationships.
Other. Income taxes are computed in accordance with the provisions of
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which requires, among other things, a liability approach to
calculating deferred income taxes. SFAS 109 requires a company to recognize
deferred tax liabilities and assets for the expected future tax consequences of
events that have been recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse.
At December 31, 1998, the Company had net operating loss carryforwards
of approximately $3,567,000, which will expire in various years through and
including 2012. Certain provisions of the tax law may limit the net operating
loss carryforwards available for use by the Company in the event of a
significant change in the ownership interest of the Company. At December 31,
1998, the Company had a deferred tax asset of approximately $1,700,000. The
deferred tax asset consisted primarily of net operating loss carryforwards and
was fully offset by a valuation allowance of the same amount.
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<PAGE> 19
The income tax expense for the three months ended March 31, 1999 and
March 31, 1998 of $41,784 and $42,834, respectively, represents state and local
income taxes on the income of MKP.
Costs associated with software development subsequent to the
establishment of technological feasibility, including enhancements to software
products, are capitalized and amortized as required by Statement of Financial
Accounting Standards No. 86. Costs incurred prior to achieving technological
feasibility are expensed as incurred and classified as research and development
costs. There were no research and development costs incurred by the Company for
the three months ended March 31, 1999 and 1998.
Amortization of capitalized software development costs is generally
provided on a product-by-product basis at the greater of the amount computed by
using the ratio of current gross revenue to total current and anticipated gross
revenue of the product or on the straight-line method over the sixty-month
estimated useful life of the product, commencing when the product is available
for general release to customers.
Forward-Looking Statements. Certain statements contained in this Report
on Form 10-QSB, including without limitation, statements containing the words
"believes," "anticipates," "may," "intends," "expects" and words of similar
import, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company or
industry results to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which the Company operates;
competition; changes in business strategy or development plans; the development,
testing and market acceptance of the Company's software; the continued services
of key employees of the Company and its subsidiaries; technological,
engineering, manufacturing, quality control or other problems which could delay
the sale of the Company's software; the Company's ability to obtain appropriate
licenses from third parties, protect its trade secrets, operate without
infringing upon the proprietary rights of others and prevent others from
infringing on the proprietary rights of the Company; and the Company's ability
to obtain sufficient financing to continue operations. Certain of these factors
are discussed in more detail elsewhere in this Quarterly Report on Form 10-QSB
and in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998. Given the risks, uncertainties and unknown factors referred
to above, undue reliance should not be placed on such forward-looking
statements. The Company disclaims any obligation to update any such factors or
to publicly announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998
Revenues. Total revenues decreased by $1,098,161 or approximately 24.5%
to $3,390,389 for the three months ended March 31, 1999 from $4,488,550 for the
three months ended March 31, 1998. This decrease was attributable to a decrease
in billings by MKP during this period. The Company believes the decrease in
MKP's billings was primarily attributable to quarterly variations arising from
the nature of MKP's business, based upon the different stages of
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<PAGE> 20
merger communications projects for which MKP was engaged in during the three
months ended March 31, 1999. MKP generated 100% of the consolidated revenues of
the Company for the three months ended March 31, 1999 and for the three months
ended March 31, 1998.
Cost of Revenues. Cost of revenues decreased by $1,105,442 or
approximately 32.9% to $2,257,354 for the three months ended March 31, 1999 from
$3,362,796 for the three months ended March 31, 1998. This decrease was
primarily attributable to the decreased level of business of MKP during this
period.
Salaries and Related Expenses. Payroll expenses increased by $3,458 or
approximately 1.0% to $350,588 for the three months ended March 31, 1999 from
$347,130 for the three months ended March 31, 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $137,299 or approximately 62.9% to $355,545
for the three months ended March 31, 1999 from $218,246 for the three months
ended March 31, 1998. This increase was attributable principally to increases in
a number of general overhead expenses, including consulting fees, insurance
costs, professional fees and other administrative expenses.
Other Income (Expense). Other expense decreased by $21,916 or
approximately 16.3% to other expense of $112,486 for the three months ended
March 31, 1999 from other expense of $134,402 for the three months ended March
31, 1998. This decrease was attributable to a decrease in the deduction
attributable to the Company's minority interest in income of consolidated
subsidiaries and an increase in the amount of interest income earned by the
Company.
Operating Profit. The Company's operating profit decreased by $133,476
or approximately 23.8% to $426,902 for the three months ended March 31, 1999
compared to an operating profit of $560,378 for the three months ended March 31,
1998.
Net Income. The Company's net income decreased by $110,510 or
approximately 28.8% to $272,632 for the three months ended March 31, 1999
compared to net income of $383,142 for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In the past, the Company required continuous capital to fund its
operating losses which were primarily attributable to expenses in connection
with marketing activities, research and development costs and other expenses
including salaries and related expenses and selling, general and administrative
expenses. The Company has financed its operations to date primarily through
public and private sales of its debt and equity securities, including
significant sales to one of its principal stockholders, and more recently
revenues generated by the Company's subsidiary, MKP. In October 1997, the
Company sold an additional 30% equity interest in FPC Information to a principal
shareholder for a purchase price of $225,000.
As of March 31, 1999, the Company had working capital of $4,139,278,
stockholders' equity of $4,434,458 and a working capital ratio (current assets
to current liabilities) of approximately 2.8:1. As of March 31, 1999 and March
31, 1998, the Company had cash and cash equivalents of $4,560,760 and
$1,627,979, respectively.
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<PAGE> 21
For the three months ended March 31, 1999, net cash used in the
Company's operating activities was $1,605,031 compared to net cash used in
operating activities of $444,999 for the three months ended March 31, 1998. For
the three months ended March 31, 1999 and March 31, 1998, the Company utilized
$121,357 and $183,240 for investing activities, respectively. There was no net
cash provided by the Company's financing activities for the three months ended
March 31, 1999 and March 31, 1998, respectively.
Based on the Company's current plan of operations, it is anticipated
that the Company's existing working capital and expected operating revenues will
provide sufficient working capital for operations through March 31, 2000.
However, there can be no assurance that the Company will not require additional
financing prior to that time. The Company anticipates that it will require
additional capital to fund its operations. The Company's capital requirements
depend on, among other things, whether the Company is successful in generating
revenues and income from its marketing efforts, the ability of the Company to
successfully market its services and software and the effect of such efforts on
the Company's operations, competing technological and market developments, the
costs involved in protecting and enforcing its proprietary rights and any
litigation related thereto and the cost and availability of third-party
financing.
For the years ending December 31, 1999, 2000, 2001 and 2002, the
Company's minimum payments in connection with non-cancelable operating cases for
office space and equipment will be approximately $281,000, $281,000, $374,000
and $415,000 per year, respectively.
The Company may also seek additional financing in connection with the
acquisition of one or more products (or rights related thereto) or entities or
the consummation of other business combinations. Although the Company has
engaged in discussions with third parties from time to time concerning potential
acquisitions and other business combinations and anticipates continuing such
activities in the future, the Company has no current commitments regarding such
acquisitions or other business combinations.
Financing may be raised by the Company through additional equity
offerings, joint ventures or other collaborative relationships, borrowings and
other transactions. The Company may seek additional funding through any such
transaction or a combination thereof. There can be no assurance that additional
financing will be available to the Company or, if available, that such financing
will be available on acceptable terms.
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<PAGE> 22
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.87 Amended and Restated Employment Agreement
by and among the Company, FPC Information
Corp. and William F. Finley dated as of
April 21, 1999.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
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<PAGE> 23
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.
Dated: May 17, 1999
FINANCIAL PERFORMANCE CORPORATION
By: /s/ William F. Finley
William F. Finley
Chief Executive Officer and
President
(Principal Executive Officer and
Principal Financial and Accounting
Officer and Officer Duly Authorized
to Sign on Behalf of Registrant)
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<PAGE> 24
EXHIBIT INDEX
Exhibit No. Description
- ----------- -------------------------------------------------
10.87 Amendment to Executive Employment Agreement by and
among the Company, FPC Information Corp. and William
F. Finley dated as of April 21, 1999.
27 Financial Data Schedule
<PAGE> 1
RESTATED AND AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
Agreement made as of April 21, 1999, by and between Financial Performance
Corporation, a New York corporation with offices at 335 Madison Avenue, 8th
Floor, New York, New York ("FPC"), FPC Information Corp., a New York corporation
with offices at 335 Madison Avenue, 8th Floor, New York, New York ("FPC
Information Corp.") and William F. Finley, an individual residing at 684 Hill
Farm Road, Fairfield, Connecticut 06430 ("Finley"). FPC and FPC Information
Corp. are hereinafter jointly and severally referred to as the "Corporation".
W I T N E S S E T H:
Whereas, the Corporation desires to continue to engage the services of Finley as
Chairman, President, Chief Executive Officer and Principal Financial Officer of
the Corporation; and
Whereas, Finley is willing to continue such employment by the Corporation on the
terms and conditions set forth herein.
Now, therefore, in consideration of the premises, the mutual covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Employment. The Corporation hereby employs Finley and Finley hereby
accepts such employment upon the terms and conditions hereinafter set forth.
2. Term.
(a) The term of this agreement is three (3) years, commencing on
October 1, 1997 and ending on September 30, 2000 (the "Initial Term"), unless
earlier terminated by the Corporation or by Finley in accordance with the
provisions hereof. This agreement shall be automatically renewed for periods of
one (1) year each (the "Renewal Term") unless either party shall give the other
notice of his or its desire to terminate this agreement no later than on the
June 1st immediately preceding the expiration of the then current term, in which
event Finley's employment shall terminate at the end of the Initial Term or the
applicable Renewal Term, as the case may be. The Initial Term and the Renewal
Term are hereinafter collectively referred to as the Term.
(b) If Finley has not given notice to the Corporation on or before June
1, 2000 that he elects not to renew this agreement at the expiration of the Term
and the Corporation gives notice to Finley that it elects not to renew this
agreement at the expiration of the Term, then and only in such event, provided
that Finley's employment is not properly terminated by the Corporation for cause
pursuant to and in accordance with the provisions of Section 7 below, in
addition to and without limitation of any other compensation, severance payments
or employment benefits which may be or become due from the Corporation to Finley
pursuant to this agreement, (but not in addition to any severance payment which
may be due pursuant to the provisions of subparagraph (c) of this Section 2, it
being understood that such severance payment and the
<PAGE> 2
severance payment payable pursuant to this subparagraph (b) are mutually
exclusive), (i) the Corporation shall pay to Finley within ten (10) days
following the expiration of the Term, a severance payment in the amount of Three
Hundred Fifty Thousand ($350,000.00) Dollars and (ii) the Corporation shall
issue to Finley within ten (10) days following the expiration of the Term, the
Termination Stock (hereinafter defined) as set forth in Section 8(d) below.
(c) If Finley elects not to renew this Agreement at the expiration of
the Term and Finley's employment is not properly terminated by the Corporation
for cause pursuant to and in accordance with the provisions of Section 7 below,
then and only in such event, in addition to and without limitation of any other
compensation, severance payments or employment benefits which may be or become
due from the Corporation to Finley pursuant to this agreement (but not in
addition to any severance payment which may be due pursuant to the provisions of
subparagraph (b) of this Section 2, it being understood that such severance
payment and the severance payment payable pursuant to this subparagraph (c) are
mutually exclusive), the Corporation shall pay to Finley, within ten (10) days
following the expiration of the Term, a severance payment in the amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars.
(d) For purposes of this agreement, the term "employment benefits"
shall be deemed to include Finley's Annual Bonus (as such term is hereinafter
defined).
3. Duties. Finley is engaged for the term hereof as President, Chief
Executive Officer and Principal Financial Officer of the Corporation and shall
perform and discharge well and faithfully the duties which may be undertaken by
Finley in such capacity from time to time, such duties to be substantially
similar to the duties hereto undertaken by Finley as President, Chief Executive
Officer and Principal Financial Officer of the Corporation. The duties of Finley
shall include managing the Corporation's day-to-day operations, including,
without limitation, hiring, training, supervising and terminating employees,
determining employee compensation (including incentives) and employment policy,
including assignment of employees' duties and how same are to be performed, all
aspects of client relationships, maintaining the Corporation's books and
records, serving as a member of the Board of Directors and any other duties as
may be determined by the Board of Directors; it being the intent of the parties
that Finley shall exercise full management control of the day-to-day operations
of the Corporation for so long as Finley is employed by the Corporation.
4. Extent of Services. During the period in which Finley is employed by
the Corporation, Finley shall devote Finley's entire active business time, best
efforts, attention, skill and energies to the business of the Corporation and
shall not during such period be engaged in any other business activity pursued
for gain, profit or other pecuniary advantage; but this shall not be construed
as preventing Finley from investing Finley's personal assets in businesses which
do not compete with the Corporation in such form or manner as will not require
any active business services on the part of Finley in the operation of the
affairs of the companies in which such investments are made and in which
Finley's participation is solely that of a passive investor.
5. Compensation. For all services rendered by Finley pursuant to this
agreement, the Corporation shall pay Finley an annual salary twice monthly on
the 15th and 30th of each month, in arrears, as follows: (i) One Hundred Fifty
Thousand ($150,000.00) Dollars per annum during the period commencing on October
1, 1997 through September 30, 1998; and (ii) Two Hundred Fifty Thousand
($250,000.00) Dollars during the period commencing on October 1, 1998
2
<PAGE> 3
through the balance of the Term. Such salary shall be subject to periodic
increases as shall be determined by the Board of Directors of the Corporation.
6. Employment Benefits.
(a) Finley shall be entitled to four (4) weeks vacation during each one
(1) year of Finley's employment pursuant to this agreement, during which
Finley's salary shall be paid in full. Finley shall be entitled to reimbursement
of reasonable out-of-pocket business expenses incurred on behalf of the
Corporation, provided that such expenses are reasonably necessary and are
properly documented. Finley shall be entitled to privileges under any
retirement, pension, long-term or short-term disability insurance plan which may
hereafter be adopted by the Corporation for the benefit of its employees. The
Corporation shall provide Finley with and shall pay all premiums for family
coverage under a group health insurance plan. The Corporation shall also provide
Finley with a leased automobile of Finley's choice throughout the term of this
agreement, including payment or reimbursement for all insurance, maintenance and
repair costs. The Corporation shall register, at the Corporation's sole cost and
expense, all of the shares of stock of the Corporation now or hereafter owned by
Finley at such time as the Corporation may elect to file a registration
statement covering shares of stock of the Corporation.
(b) The Corporation shall obtain and pay all premiums for a term life
insurance policy covering Finley's life. Such policy shall be in an amount of
not less than $250,000.00 and not more than $500,000.00, as shall be determined
by the Corporation's Board of Directors. The Corporation shall be the owner of
the policy and Finley (or Finley's designee(s)) shall be the beneficiary of such
policy.
7. Termination.
(a) The Corporation may, at its election in accordance with the
procedures more particularly set forth below, terminate this agreement for
cause. For purposes of this agreement, "cause" shall be defined as and limited
to the following: (i) a material breach by Finley of any material term of this
agreement that has not been cured within thirty (30) days of receipt by Finley
of written notice of such breach and which causes substantial damage to the
reputation, business or property of the Corporation, any of the Corporation's
affiliates or any of the Corporation's (or any affiliate's) customers; (ii) a
continued failure of Finley after thirty (30) days notice of a prior failure to
devote Finley's full active business time (as more particularly described in
Section 4 above) to the performance of Finley's duties hereunder; (iii) an act
of willful misconduct in the performance of Finley's duties hereunder which
causes substantial damage to the reputation, business or property of the
Corporation, any of the Corporation's affiliates or any of the Corporation's
customers including, without limitation, any oral or written material
misrepresentation relating to the Corporation (or any affiliate) or any of its
(or any affiliate's) customers which causes substantial damage to the reputation
of the Corporation (or any affiliate); (iv) conviction of a felony; and (v)
substantial, continuing and willful improper performance or non-performance of
any of Finley's material duties hereunder after thirty (30) days written notice
to cure as aforesaid. For purposes of this subsection (a), no act, or failure to
act, on Finley's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith or without reasonable belief that his action
or omission was in the best interests of the Corporation. Notwithstanding the
foregoing, Finley shall not be deemed to have been terminated for cause without
(i) thirty (30) days' notice to Finley setting forth the reasons for the
Corporation's intention to terminate for cause as set forth above in this
subsection (a), (ii) an
3
<PAGE> 4
opportunity for Finley, together with his counsel, to be heard before the
Corporation's board of directors, and (iii) delivery to Finley of a Notice of
Termination as defined in subsection (d) below from an executive officer of the
Corporation finding that, in the good faith opinion of the Board of Directors of
FPC, Finley was guilty of conduct set forth or described above in justifying the
Corporation's termination of Finley's employment for cause and specifying the
particulars thereof in detail.
(b) Finley may terminate his employment under this agreement for Good
Reason (as hereinafter defined). For purposes of this agreement, "Good Reason"
shall mean (i) the occurrence of a Change in Control (as defined below) of FPC
or of FPC's subsidiary, Michaelson Kelbick Partners Inc. ("MKP"), (ii) a failure
by the Corporation to comply with any material provision of this agreement,
which noncompliance shall have a material adverse effect upon Finley and which
shall not have been cured within thirty (30) days after notice of such
noncompliance has been given by Finley to the Corporation pursuant to this
agreement, (iii) if Finley's management functions, duties or responsibilities or
any other material aspect of Finley's employment shall have been materially and
adversely changed by the Corporation notwithstanding Finley's written objection
thereto, (iv) if Finley shall cease to be chairman of the board of directors and
the chief executive officer of FPC (other than by reason of death, incapacity or
resignation), (v) any purported termination of Finley's employment which is not
properly effected pursuant to a Notice of Termination satisfying the
requirements of subsection (d) below (and for purposes of this agreement no such
purported termination shall be effective), or (vi) the failure of FPC, on or
prior to the date of any merger, consolidation or any similar transaction, to
obtain the written assumption by any successor to the business of FPC of FPC's
obligations hereunder.
(c) For the purpose of this agreement, a "Change of Control" shall be
deemed to have taken place if: (i) a third person, including a "group" as such
term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
becomes (other than as a result of a purchase from FPC) the beneficial owner of
shares of stock of FPC or of MKP having more than thirty percent (30%) of the
total number of votes that may be cast for the election of directors of FPC or
of MKP and such beneficial ownership continues for thirty (30) consecutive days,
(ii) as a result of, or in connection with, any cash tender or exchange offer,
merger or other business combination of the foregoing transactions relating to
FPC or to MKP (hereinafter referred to as a "Transaction") the persons who were
directors of FPC or of MKP before the Transaction shall cease for any reason to
constitute at least a majority of the Board of Directors of FPC or of MKP, as
the case may be, or any successor(s) of either of such entities, (iii) the sale
of all or substantially all of the assets of FPC or of MKP, (iv) a change in the
composition of the board of directors of FPC (the "FPC Board") such that the
individuals who, as of the date hereof, constitute the FPC Board (the FPC Board
as of the date hereof shall be hereinafter referred to as the "Incumbent FPC
Board") cease for any reason to constitute at least a majority of the FPC Board;
provided, however, that any individual who becomes a member of the FPC Board
subsequent to the date hereof whose election, or nomination for election, was
approved by a vote of at least a majority of those individuals who are members
of the FPC Board and who were also members of the Incumbent FPC Board (or deemed
to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent FPC Board, or (v) a change in the
composition of the board of directors of MKP (the "MKP Board") such that the
individuals who, as of the date hereof, constitute the MKP Board (the MKP Board
as of the date hereof shall be hereinafter referred to as the "Incumbent MKP
Board") cease for any reason to constitute at least a majority of the MKP Board;
provided, however, that any individual who becomes a member of the MKP
4
<PAGE> 5
Board subsequent to the date hereof whose election, or nomination for election,
was approved by a vote of at least a majority of those individuals who are
members of the MKP Board and who were also members of the Incumbent MKP Board
(or deemed to be such pursuant to this proviso) shall be considered as though
such individual were a member of the Incumbent MKP Board.
(d) Any termination of Finley's employment by the Corporation or by
Finley (other than termination by reason of Finley's death or disability as set
forth in Section 15 below) shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Finley's employment under the provision so indicated.
(e) "Date of Termination" shall mean (i) if Finley's employment is
terminated by his death, the date of his death, (ii) if Finley's employment is
terminated pursuant to subsection (c) above, the date specified in the Notice of
Termination, and (iii) if Finley's employment is terminated for any other
reason, the date on which a Notice of Termination is given; provided that if
within thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
8. Compensation Upon Termination or During Disability.
(a) During any period that Finley fails to perform his duties hereunder
as a result of incapacity due to physical or mental illness ("disability
period"), Finley shall continue to receive his full salary at the rate then in
effect for such period and all employment benefits due to Finley until his
employment is terminated pursuant to Section 7 above and Section 15 below,
provided that payments so made to Finley during the disability period shall be
reduced by the sum of the amounts, if any, payable to Finley at or prior to the
time of any such payment under disability benefit plans of the Corporation and
which were not previously applied to reduce any such payment. Within thirty (30)
days of the termination of Finley's employment due to disability, the
Corporation shall pay to Finley all salary and employment benefits due to him
accrued through the date of such termination, plus an amount equal to one year's
salary at the rate in effect immediately prior to such termination (determined
without regard to any payments under disability benefit plans of the
Corporation).
(b) If Finley's employment is terminated by his death, the Corporation
shall pay to Finley's spouse, or if he leaves no spouse, to his estate, within
thirty (30) days of Finley's death, all salary and employment benefits due to
Finley accrued through the date of his death, plus an amount equal to one year's
salary at the rate in effect immediately prior to Finley's death.
(c) If Finley's employment shall be properly terminated for cause
pursuant to all of the applicable provisions of this agreement, the Corporation
shall pay Finley his full salary only through the Date of Termination at the
rate in effect at the time Notice of Termination is given and the Corporation
shall have no further obligations to Finley under or pursuant to this Agreement.
5
<PAGE> 6
(d) If (i) in breach of this agreement, the Corporation shall terminate
Finley's employment other than pursuant to subsection 7 (a) above (termination
for cause) or Section 15 below (termination by reason of death or disability)(it
being understood that a purported termination by the Corporation pursuant to
subsection 7 (a) above or Section 15 below which is disputed and finally
determined not to have been proper shall be deemed a termination by the
Corporation in breach of this agreement) or (ii) Finley shall terminate his
employment for Good Reason, then
(I) the Corporation shall pay Finley his full salary and all
employment benefits due to Finley through the Date of Termination at the rate in
effect at the time the Notice of Termination is given;
(II) in lieu of any further salary payments to Finley for
periods subsequent to the Date of Termination, the Corporation shall pay to
Finley, as severance pay (and not as a penalty to the Corporation), an amount
equal to the product of (A) Finley's annual base salary rate in effect as of the
Date of Termination, multiplied by (B) the number two (2), such payment to be
made in a lump sum on or before the thirtieth (30th) day following the Date of
Termination;
(III) in addition to all other salary, employment benefits and
other payments due to Finley pursuant to the provisions of this subsection 8(d),
the Corporation shall issue to Finley, within ten (10) days after the Date of
Termination, such number of shares of the Corporation's common stock (such
shares of common stock are hereinafter referred to as the "Termination Stock")
as shall have an aggregate fair market value as of the Date of Termination equal
to one million ($1,000,000.00) dollars less the aggregate fair market value of
all of the shares of the Corporation's common stock and all of the warrants,
options and other derivative securities to purchase shares of the Corporation's
common stock which are owned of record by Finley on the Date of Termination. For
purposes of this clause (III), (x) the fair market value of each share of the
Corporation's common stock as of the Date of Termination shall be the average of
the bid and ask prices for the Corporation's common stock for the ten (10)
trading days immediately preceding the Date of Termination and (y) the fair
market value of each warrant, option or other derivative security to purchase
one (1) share of the Corporation's common stock as of the Date of Termination
shall be equal to the fair market value of one (1) share of the Corporation's
common stock as of the Date of Termination less the per share exercise price of
such warrant, option or other derivative security (but in no event shall such
fair market value of any warrant, option or other derivative security be less
than zero). If the Corporation's common stock shall not be publicly traded on
the Date of Termination, then the fair market value of the Corporation's common
stock shall be mutually determined by two investment banking firms with
experience related to the business of the Corporation and its subsidiaries. In
such event, one such firm shall be designated by Finley and the other firm shall
be designated by the Corporation. The fair market value of the Corporation's
common stock and the fair market value of the warrants, options and other
derivative securities to purchase shares of the Corporation's common stock as
determined pursuant to this clause (III) of this subsection 8(d) shall be final,
conclusive and binding upon the parties hereto. The Corporation shall be
obligated to register the Termination Stock, at the Corporation's sole cost and
expense, pursuant to a registration statement filed within sixty (60) days after
the Date of Termination and declared effective as soon thereafter as is
reasonably practicable. Further, if from and after the Date of Termination, the
shares of the Corporation's common stock underlying the warrants, options and
other
6
<PAGE> 7
derivative securities owned of record by Finley on the Date of Termination (such
underlying shares of common stock hereinafter referred to as "Underlying
Shares") shall not be freely tradeable by Finley pursuant to an effective
registration statement, then the Corporation shall also be obligated to register
all of the Underlying Shares together with the Termination Stock, at the
Corporation's sole cost and expense, pursuant to the aforementioned registration
statement. The Corporation shall be obligated to use its best efforts to cause
such registration statement to be declared effective as soon as possible after
filing and to maintain such effectiveness until all of the Termination Stock and
all of the Underlying Shares shall have been sold by Finley; and
(IV) in addition to the payments referred to in clauses (I),
(II) and (III) above, if termination of Finley's employment arises out of a
breach by the Corporation of this agreement, the Corporation shall pay all other
damages to which Finley may be entitled as a result of such breach, including
damages for any and all loss of benefits to Finley under the Corporation's
employee benefit plans which Finley would have received if the Corporation had
not breached this agreement and had Finley's employment continued for the full
term provided in Section 2 hereof.
In addition to the occurrences specified in clauses (i) and (ii) of the preamble
to this subsection 8(d), the Termination Stock shall also be issued to Finley as
provided in subsection 2(b) above.
(e) Unless Finley's employment is properly terminated by the
Corporation for cause, the Corporation shall maintain in full force and effect,
for the continued benefit of Finley for the greater of the number of years
(including partial years) remaining in the term of employment hereunder or the
number two (2), all employee benefit plans and programs in which Finley was
entitled to participate immediately prior to the Date of Termination, provided
that Finley continued participation is possible under the general terms and
provisions of such plans and programs. In the event that Finley's participation
in any such plan or program is barred, the Corporation shall arrange to provide
Finley with benefits substantially similar to those which Finley would otherwise
have been entitled to receive under such plans and programs from which his
continued participation is barred.
(f) The Corporation may withhold from any payments or other benefits
payable to Finley pursuant to this Section 8 or any other provision of this
agreement all federal, state, city or other taxes as shall be required pursuant
to any law, government regulation or ruling.
9. Excise Taxes. In the event that any payments made to Finley under this
Agreement or otherwise (the "Payments") are subject to any excise taxes,
including, without limitation, excises taxes imposed by section 4999 of the
Internal Revenue Code of 1986, as amended (the "Excise Taxes"), the Corporation
shall pay Finley an additional amount such that the net amount retained by him
after deduction and/or payment of any Excise Taxes on the Payments, and any
interest and/or penalties assessed by the Internal Revenue Service with respect
to the Excise Taxes, shall be equal to the Payments. The determination of
whether such Excise Taxes are payable and the amount thereof shall be based upon
the opinion of counsel selected by the Corporation and acceptable to Finley. If
such opinion is not accepted by the Internal Revenue Service, then appropriate
adjustments shall be computed and paid hereunder based upon the final amount of
the Excise Taxes, interest and/or penalties (if any) so determined. Any such
adjustments shall be paid by the Corporation to Finley in one lump sum cash
payment within thirty (30) days following such computation.
7
<PAGE> 8
10. Disclosure of Information. Finley recognizes and acknowledges that the
trade secrets and know how of FPC and its subsidiaries as they may exist from
time to time are a valuable, special and unique asset of the businesses of such
companies, access to and knowledge of which are essential to the performance of
Finley's duties hereunder. For the purposes of this agreement, Confidential
Information includes any and all information disclosed or made available to
Finley in consequence of or through his employment by the Corporation and not
generally known in the industries in which FPC and its subsidiaries or any of
the customers of FPC and its subsidiaries is or may be engaged, or which is
beneficial to FPC or its subsidiaries, or any of the customers of FPC or its
subsidiaries, in the promotion or operation of their respective businesses, (ii)
relating to the business, business practices, operation, affairs, practices,
procedures, policies or methods of FPC or its subsidiaries, (iii) customer
lists, (iv) marketing information and (v) training materials. Since the services
of Finley are unique, extraordinary and of a specialized character which will
require Finley to handle Confidential Information of FPC and FPC's subsidiaries
and of such companies' suppliers and customers, Finley shall not, at any time
during the term of this agreement or thereafter, make use of any Confidential
Information for the benefit of any person or entity (other than FPC or its
subsidiaries) nor shall Finley disclose any Confidential Information to any
person or entity for any reason or purpose whatsoever.
11. Covenants Not to Solicit. For the six (6) month-period immediately
following the earlier of the termination of Finley's employment hereunder or the
date of expiration of this agreement, Finley, whether as a proprietor, partner,
employee, agent, consultant, director, officer, controlling stockholder or in
any other capacity whatsoever, shall not, without the consent of FPC or of any
of its subsidiaries, (a) solicit any Business Associate (as hereinafter defined)
for the purpose of interfering with, disrupting or attempting to disrupt the
relationship, contractual or otherwise between FPC and/or any of its
subsidiaries and such Business Associate, or (b) request any Business Associate
to cancel, curtail or divert his, her or its business with FPC and/or any of its
subsidiaries. For purposes hereof, the term "Business Associate" means any
person or entity that, to Finley's knowledge, is, at the time of any such
solicitation or request, a customer, client, or employee of FPC and/or any of
its subsidiaries with whom Finley had any direct or indirect contact during his
employment hereunder. However, notwithstanding the foregoing provisions of this
Section 11, it is understood that Finley may, in good faith, contact all
customers and clients of FPC and/or any of its subsidiaries originated by or
otherwise brought to FPC and/or any of its subsidiaries by Finley during the
term of Finley's employment by the Corporation in connection with establishing
any other business enterprises subsequent to the expiration or termination of
this agreement.
12. Return of Documents. Upon termination of employment with the
Corporation, Finley shall promptly return to the Corporation all documents,
notes, records and other materials of FPC and/or any of its subsidiaries in
Finley's possession, whether prepared by Finley or others. However, Finley shall
be entitled to retain copies of all such documents, notes, records and other
materials and may use same subject only to Finley's covenants set forth in
Section 10 ("Disclosure of Information") and Section 11 ("Covenants Not to
Interfere").
13. Enforcement of Non-Disclosure and Non-Solicitation Provisions. It is
the desire and intent of the parties that the provisions of Sections 10, 11 and
12 shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any portion or portions of such Sections 10, 11 or 12 shall be
adjudicated to be invalid or unenforceable, such Sections shall be deemed
amended to delete therefrom the portion or portions thus adjudicated to be
invalid or unenforceable, such
8
<PAGE> 9
deletion to apply only with respect to the operation of such Sections in the
particular jurisdiction in which such adjudication is made. The provisions of
Sections 10, 11, 12 and 14 shall survive the expiration or earlier termination
of this agreement.
14. Injunctive Relief. If there is a breach or threatened breach of any of
the provisions of Sections 10, 11 or 12 of this agreement, the Corporation shall
be entitled to an injunction restraining Finley from such breach. Nothing herein
shall be construed as prohibiting the Corporation from pursuing any other
remedies for such breach or threatened breach.
15. Disability/Death. Finley's employment under this agreement shall
terminate upon the death or, at the election of the Corporation, the physical or
mental disability of Finley. For purposes of this agreement, Finley shall be
deemed to be disabled if he is unable to perform his services for twelve (12)
consecutive months. If the Corporation elects to terminate this agreement
pursuant to this Section 15, the Corporation shall notify Finley of the
Corporation's decision to terminate Finley's employment hereunder by means of a
Notice of Termination pursuant to the provisions of subsection (d) of Section 7
above. From and after such termination of employment of Finley pursuant to this
Section 15, Finley's compensation and rights thereto and all of Finley's other
rights under this agreement shall terminate except as otherwise specifically set
forth in Sections 8 and 9 above.
16. Notices. Any notice required or permitted to be given under this
agreement shall be sufficient if in writing and if sent by certified mail,
return receipt requested, to Finley's mailing address set forth above, or by
personal delivery to Finley, in the case of Finley, or to its office address set
forth above, in the case of the Corporation, with a copy sent in like manner to
Kaufman Friedman Plotnicki & Grun, LLP, 300 East 42nd Street, New York, New York
10017, Attention: Gary S. Friedman, Esq. Notices shall be deemed given two (2)
business days after mailing, or on the date personal delivery is effected, as
the case may be.
17. Waiver of Breach. The waiver by a party of a breach of any provision of
this agreement by another party shall not operate or be construed as a waiver of
any subsequent or other breach by such other party. Any waiver must be in
writing.
18. Entire Agreement. This instrument contains the entire agreement of the
parties. It may not be waived, changed, modified or extended orally but only by
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or extension is sought.
19. Applicable Law. This agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the application of conflict of laws.
20. Severability. If any provision of this agreement is found to be void or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this agreement shall nevertheless be binding upon the Corporation and Finley
with the same effect as though the void or unenforceable provision had been
severed and deleted.
21. Conflict. If any provision of this agreement is found to be in conflict
with any provision of any other agreement to which the Corporation and Finley
are parties, the provision of such other agreement shall control.
9
<PAGE> 10
22. Arbitration. If any dispute shall arise between the Corporation and
Finley with regard to this agreement, such dispute shall be promptly submitted
to and decided by arbitration by the American Arbitration Association in the
City and County of New York in accordance with the Expedited Procedures of the
Commercial Arbitration Rules of the American Arbitration Association. The award
rendered by the arbitrators shall be final, shall include an award of reasonable
legal fees and costs to the prevailing party as determined by the arbitrator(s)
and judgment may be entered upon the award in accordance with applicable law in
any court having jurisdiction.
23. Non-Assignment. This Agreement and all rights hereunder are personal to
Finley and shall not be assignable; provided, however, all of Finley's rights to
compensation following his death shall inure to the benefit of his surviving
spouse, his estate or other legal representatives as the case may be. Any
person, firm, corporation or entity succeeding to the business of FPC and/or FPC
Information Corp. by merger, purchase, consolidation or otherwise shall assume
by contract or operation of law all obligations of the Corporation hereunder;
provided, however, the Corporation shall, notwithstanding such assumption or
assignment, remain liable and responsible for the fulfillment of its obligations
under this Agreement.
24. Prior Executive Employment Agreement. Notwithstanding anything herein
contained to the contrary, the prior Executive Employment Agreement between the
Corporation and Finley dated as of September 1, 1995 and the prior Restated
Executive Employment Agreement between the Corporation and Finley dated as of
September 11, 1997, as amended, are hereby deemed terminated and are superseded
in all respects by this agreement.
In witness whereof, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
Financial Performance Corporation
By: /s/ DUNCAN BURKE
---------------------------------
Duncan Burke, Vice President
FPC Information Corp.
By: /s/ DUNCAN BURKE
---------------------------------
Duncan Burke, Vice President
/s/ WILLIAM F. FINLEY
---------------------------------
William F. Finley, individually
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,560,760
<SECURITIES> 0
<RECEIVABLES> 1,847,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,473,226
<PP&E> 409,795
<DEPRECIATION> 200,725
<TOTAL-ASSETS> 7,683,452
<CURRENT-LIABILITIES> 2,333,948
<BONDS> 0
0
0
<COMMON> 94,715
<OTHER-SE> 4,339,743
<TOTAL-LIABILITY-AND-EQUITY> 7,683,452
<SALES> 3,390,389
<TOTAL-REVENUES> 3,390,389
<CGS> 2,257,354
<TOTAL-COSTS> 2,257,354
<OTHER-EXPENSES> 706,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 314,416
<INCOME-TAX> 41,784
<INCOME-CONTINUING> 272,632
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,632
<EPS-PRIMARY> 0.029<F1>
<EPS-DILUTED> 0.026
<FN>
<F1>AMOUNT REPORTED IS ACTUALLY EPS-BASIC.
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