<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ___________
COMMISSION FILE NUMBER: 33-45417
THE BISYS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3532663
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY
07424
(Address of principal executive offices)
(Zip Code)
973-812-8600
(Registrant's telephone number, including area code)
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 REPORT(S), 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 Shares Outstanding at November 2, 1999
- ------------------------------------- --------------------------------------
Common Stock, par value $.02 per share 27,272,751
-------------
This document contains 16 pages.
--
================================================================================
<PAGE> 2
THE BISYS GROUP, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet as of September 30, 1999
and June 30, 1999 3
Condensed Consolidated Statement of Operations for the three months
ended September 30, 1999 and 1998 4
Condensed Consolidated Statement of Cash Flows for the three months
ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations and 8
Financial Condition
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
------------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 40,832 $ 49,589
Accounts receivable, net 101,301 104,608
Deferred tax asset 9,241 9,241
Other current assets 15,308 14,243
--------- ---------
Total current assets 166,682 177,681
Property and equipment, net 56,157 54,855
Intangible assets, net 197,537 194,852
Other assets 33,237 32,273
--------- ---------
Total assets $ 453,613 $ 459,661
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 54,000 $ 52,000
Accounts payable 15,491 21,303
Other current liabilities 82,484 82,294
--------- ---------
Total current liabilities 151,975 155,597
Deferred tax liability 9,202 9,774
Other liabilities 5,515 5,784
--------- ---------
Total liabilities 166,692 171,155
--------- ---------
Stockholders' equity:
Common stock, $.02 par value, 80,000,000 shares authorized,
27,261,626 and 27,091,270 shares issued, respectively 545 542
Additional paid-in capital 202,745 193,500
Retained earnings 95,173 94,550
Less notes receivable from stockholders (11,347) --
Less treasury stock at cost, 4,270 and 1,575 shares, respectively
(195) (86)
--------- ---------
Total stockholders' equity 286,921 288,506
--------- ---------
Total liabilities and stockholders' equity $ 453,613 $ 459,661
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
--------- ---------
<S> <C> <C>
Revenues $ 132,313 $ 101,924
--------- ---------
Operating costs and expenses:
Service and operating 79,998 59,872
General and administrative 19,537 16,385
Selling and conversion 6,417 5,039
Research and development 2,990 3,181
Amortization of intangible assets 2,650 1,508
Merger expenses and other charges -- 400
Acquired in-process research and development -- 19,000
--------- ---------
Operating earnings (loss) 20,721 (3,461)
Interest income (expense), net (250) 797
--------- ---------
Income (loss) before income taxes 20,471 (2,664)
Income taxes 8,188 6,535
--------- ---------
Net income (loss) $ 12,283 $ (9,199)
========= =========
Basic earnings (loss) per share $ 0.45 $ (0.35)
========= =========
Diluted earnings (loss) per share $ 0.44 $ (0.35)
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
THE BISYS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 12,283 $ (9,199)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 7,345 4,903
Write-off of acquired in-process research and development -- 19,000
Deferred income tax provision (252) --
Change in operating assets and liabilities, net of effects from acquisitions (4,537) (11,284)
-------- --------
Net cash provided by operating activities 14,839 3,420
-------- --------
Cash flows from investing activities:
Acquisition of businesses -- (20,340)
Net cash acquired in acquisitions -- 4,554
Capital expenditures, net (6,716) (7,468)
Purchase of investments -- (1,067)
Purchase of intangible assets (4,900) --
Other (36) 285
-------- --------
Net cash used in investing activities (11,652) (24,036)
-------- --------
Cash flows from financing activities:
Proceeds from short-term borrowings 17,000 10,000
Repayment of short-term borrowings (15,000) --
Repayment of debt -- (40)
Proceeds from exercise of stock options 3,781 2,327
Repurchases of common stock (17,725) (45,783)
-------- --------
Net cash used in financing activities (11,944) (33,496)
-------- --------
Net decrease in cash and cash equivalents (8,757) (54,112)
Cash and cash equivalents at beginning of period 49,589 93,403
-------- --------
Cash and cash equivalents at end of period $ 40,832 $ 39,291
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
THE BISYS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY
The BISYS(R) Group, Inc. and subsidiaries (the "Company") is a leading
national provider of outsourcing solutions to and through financial
organizations.
The condensed consolidated financial statements include the accounts of
The BISYS Group, Inc. and its subsidiaries and have been prepared
consistent with the accounting policies reflected in the 1999 Annual
Report on Form 10-K filed with the Securities and Exchange Commission
and should be read in conjunction therewith. The condensed consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management,
necessary to present fairly this information.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
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. The most significant
estimates are related to the allowance for doubtful accounts,
intangible assets, acquired in-process research and development, income
taxes and contingencies. Actual results could differ from these
estimates in the near term.
3. EARNINGS PER SHARE
Basic and diluted EPS computations for the three months ended September
30, 1999 and 1998 are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Basic EPS
---------
Net income (loss) $ 12,283 $ (9,199)
======== ========
Weighted average common shares outstanding 27,080 26,351
======== ========
Basic earnings (loss) per share $ 0.45 $ (0.35)
======== ========
Diluted EPS
-----------
Net income (loss) $ 12,283 $ (9,199)
======== ========
Weighted average common shares outstanding 27,080 26,351
Assumed conversion of common shares issuable under stock option
plans 1,090 --
-------- --------
Weighted average common and common equivalent shares outstanding 28,170 26,351
======== ========
Diluted earnings (loss) per share $ 0.44 $ (0.35)
======== ========
</TABLE>
Options to purchase 374,279 shares of common stock at various prices
ranging from $52.17 to $58.94 were outstanding at September 30, 1999,
but were not included in the computation of diluted EPS because the
option's exercise price was greater than the average market price of
common shares. As of September 30, 1998, options to purchase 4,552,920
shares of common stock at various prices ranging from $0.03 to $44.50
were outstanding but were not included in the computation of diluted
EPS because of the net loss for the period.
6
<PAGE> 7
4. NOTES RECEIVABLE FROM STOCKHOLDERS
The Board of Directors has approved and the Company has made loans to
certain executive officers to assist them in exercising non-qualified
stock options, retaining the underlying shares and paying the
applicable taxes resulting from such exercises. These loans bear
interest at rates ranging from 5.98% to 6.25%, are full recourse, and
are secured by shares of the Company's Common Stock acquired pursuant
to the exercise of the options representing up to 120% of the principal
amount of the loan. The principal is repayable the later of five years
from the date of the loan or the expiration date of the options
exercised using such loan proceeds. The principal is also repayable
within one year of the employee's death or termination of employment
due to disability and within 30 days of voluntary resignation.
Interest is payable annually on the anniversary date of each loan.
The notes receivable of $11.3 million are reflected on the accompanying
condensed consolidated balance sheet as a reduction in stockholders'
equity at September 30, 1999.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company provides outsourcing solutions to and through financial
organizations. The following table presents the percentage of revenues
represented by each item in the Company's condensed consolidated statement of
operations for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------
1999 1998
------ ------
<S> <C> <C>
Revenues 100.0% 100.0%
------ ------
Operating costs and expenses:
Service and operating 60.4 58.7
General and administrative 14.8 16.1
Selling and conversion 4.8 4.9
Research and development 2.3 3.1
Amortization of intangible assets 2.0 1.5
Merger expenses and other charges -- 0.4
Acquired in-process research and development -- 18.7
------ ------
Operating earnings (loss) 15.7 (3.4)
Interest income (expense) (0.2) 0.8
------ ------
Income (loss) before income taxes 15.5 (2.6)
Income taxes 6.2 6.4
------ ------
Net income 9.3% (9.0)%
====== ======
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999 WITH THE THREE MONTHS
ENDED SEPTEMBER 30, 1998.
Revenues increased 29.8% from $101.9 million for the three months ended
September 30, 1998 to $132.3 million for the three months ended
September 30, 1999. This growth was derived from sales to new clients,
existing client growth, cross sales to existing clients and revenues
from acquired businesses, partially offset by lost business.
Service and operating expenses increased 33.6% from $59.9 million during
the three months ended September 30, 1998 to $80.0 million for the three
months ended September 30, 1999, and increased as a percentage of
revenues from 58.7% to 60.4%. The increases resulted from additional
costs associated with greater revenues.
General and administrative expenses increased 19.2% from $16.4 million
during the three months ended September 30, 1998, to $19.5 million for
the three months ended September 30, 1999, and decreased as a percentage
of revenues from 16.1% to 14.8%. The dollar increase primarily resulted
from additional costs associated with greater revenues. The decrease as
a percentage of revenues resulted from further utilization of existing
general and administrative support resources.
Amortization of intangible assets increased $1.1 million for the three
months ended September 30, 1999, over the same three months last year
due to a higher level of intangible assets associated with acquisitions.
Interest income was $1.0 million less for the three months ended
September 30, 1999 compared to the same period last year due to the
lower levels of invested cash and cash equivalents and higher interest
expense associated with short-term borrowings.
The income tax provision of $8.2 million for the three months ended
September 30, 1999 increased from $6.5 million for the three months
ended September 30, 1998 due to higher taxable income. The provision
represents an effective tax rate of 40% for both periods, exclusive of
the nondeductible, non-recurring charge of $19.0 million related to
acquired in-process research and development for the three months ended
September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had cash and cash equivalents of
$40.8 million and working capital of approximately $14.7 million. At
September 30, 1999, the Company had outstanding borrowings of $54.0
8
<PAGE> 9
million against its revolving credit facility to support working
capital requirements. The credit facility bears interest at LIBOR plus
a margin of 0.55%. The weighted average interest rate on outstanding
borrowings at September 30, 1999 was 5.96%. At September 30, 1999, the
Company had $0.7 million outstanding in letters of credit.
Other current assets included in the accompanying balance sheet consist
primarily of prepaid expenses, inventory, and customer funds required
to be segregated that are held by the Company's Brokerage Services
division that was acquired in July 1998. Customer funds required to be
segregated may vary significantly from period to period.
For the three months ended September 30, 1999, operating activities
provided cash of $14.8 million. Investing activities used cash of $11.7
million, primarily for the acquisition of intangibles of $4.9 million
and capital expenditures of $6.7 million. Financing activities used
cash of $11.9 million, primarily for the repurchase of common stock of
$17.7 million offset by net borrowings of $2.0 million and
approximately $3.8 million of proceeds from the exercise of stock
options.
In January 1999, the Company's Board of Directors authorized a stock
buy-back program of up to $100 million of its outstanding common stock.
Purchases have occurred and are expected to continue to occur from
time-to-time in the open market to offset the possible dilutive effect
of shares issued under employee benefit plans, for possible use in
future acquisitions and for general and other corporate purposes.
Since January 1999, the Company has purchased 711,000 shares of its
common stock under the stock buy-back program for approximately $37.2
million in order to effect the acquisitions of EXAMCO, Inc. and Dover
International and for the issuance of stock in connection with the
exercise of stock options.
SEGMENT INFORMATION
The following table sets forth operating revenue and operating income
by business segment and for corporate operations for the three months
ended September 30, 1999 and 1998. Merger expenses and other charges
and acquired in-process research and development are separated from the
operating results of the segment for a better understanding of the
underlying performance of each segment.
<TABLE>
<CAPTION>
(in Thousands)
Three Months Ended
September 30,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating Revenue:
Information Services $ 40,884 $ 39,706
Investment Services 72,815 53,090
Insurance and Education Services 18,614 9,128
--------- ---------
Total Operating Revenue 132,313 101,924
========= =========
Operating Income:
Information Services $ 7,578 $ 6,751
Investment Services 11,263 9,694
Insurance and Education Services 4,716 1,868
Corporate (2,836) (2,374)
--------- ---------
Total Operating Income 20,721 15,939
========= =========
</TABLE>
Revenue in the Information Services business segment increased $1.2
million, or 3.0%, during the three months ended September 30, 1999,
compared to the same period last year. The revenue increase was due to
internal growth and the acquisitions of Greenway Corporation and
Retained Asset Account Services, offset by the June 1999 sale of the
Marketing Solutions business and softness in Document Solutions
software sales due to Year 2000 related to delays in software
purchases. Operating income in the Information Services business
segment increased $0.8 million, or 12.2%, during the fiscal first
quarter, resulting in operating margins of 18.5% and 17.0% for the
three months ended September 30, 1999 and 1998, respectively. Margins
improved in the fiscal first quarter primarily due to accelerated
growth within the Information Solutions division and the sale of the
Marketing Solutions business.
9
<PAGE> 10
Revenue in the Investment Services business segment increased $19.7
million, or 37.2%, during the three months ended September 30, 1999,
compared to the same period last year. The revenue increase was due to
strong internal growth, including the acquisition of several new
clients. Operating income in the Investment Services business segment
increased $1.6 million, or 16.2%, during the fiscal first quarter,
resulting in operating margins of 15.5% and 18.3% for the three months
ended September 30, 1999 and 1998, respectively. Margins declined in
the fiscal first quarter primarily due to conversion activities
associated with a significant new client in the Brokerage Services
division and costs incurred in the Fund Services division for the
international expansion of outsourcing services and expansion of the
business development sales force.
Revenue in the Insurance and Education Services business segment
increased $9.5 million, or 104%, during the three months ended
September 30, 1999, compared to the same period last year. The revenue
increase was due to strong internal growth and the acquisitions of
EXAMCO, Inc., Poage Insurance Services, and Dover International.
Operating income in the Insurance and Education Services business
segment increased $2.8 million, or 152%, during the fiscal first
quarter, resulting in operating margins of 25.3% and 20.5% for the
three months ended September 30, 1999 and 1998, respectively. Margins
improved in the fiscal first quarter primarily due to strong internal
growth and reduced integration costs.
Corporate operations represent charges for the Company's human
resources, legal, accounting and finance functions, and various other
unallocated overhead charges. Increased expenses of $0.5 million in the
fiscal first quarter were in line with the Company's overall growth.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT
In September 1998, the Company acquired Greenway Corporation through
the issuance of common stock valued at approximately $43.8 million. Of
the total purchase price, $19.0 million was allocated to acquired
in-process research and development, which was charged to operations at
the time of acquisition.
The amount allocated to acquired in-process research and development
was based on an independent appraisal, employing a discounted cash flow
approach, and relates to the development of enhanced check imaging
software. At the acquisition date, the products were estimated to be
between 50% and 75% complete and were determined to have no future
alternative uses.
Significant assumptions used in the valuation of the acquired
in-process research and development were as follows:
<TABLE>
<S> <C>
Estimated costs to complete $2.1 million
Anticipated completion date January 2000
Projected annual revenues $30 million
Discount rate 20%
Discount period 9 years
</TABLE>
Technological feasibility was attained in the third quarter of fiscal
1999. Development efforts were substantially completed in the first
quarter of fiscal 2000, and sales of the enhanced check imaging
software are anticipated to begin in the second quarter of fiscal 2000.
YEAR 2000
The Company is addressing the Year 2000 issues associated with its
existing computer systems and software applications utilizing both
internal and external resources to identify and remediate these matters
throughout the organization. The Company has completed its risk
assessment and testing plans for internal mission critical information
systems and continues to remediate other systems that are not currently
Year 2000 ready. The Company has tested substantially all of its
mission critical information systems and believes such systems are Year
2000 ready. In the event such systems are not Year 2000 ready by
December 31, 1999, it could have a material adverse impact on the
Company's business and results of operations.
The Company uses third party provided software and systems in certain
of its businesses for such tasks as account and information statement
processing, fund accounting, and 401(k) plan record keeping. If third
parties upon which the Company depends, including telecommunications
and electrical power providers, are unable to address their Year 2000
issues in a timely manner, it could result in a material adverse
financial risk to the Company. In order to minimize this risk, the
Company has devoted resources necessary to develop appropriate
10
<PAGE> 11
business continuity plans. These contingency plans include alternative
systems and vendors, disaster recovery hot sites, alternative power
sources, and manual processes. Such contingency plans have been
substantially completed.
The Company's Year 2000 progress, the testing of remediated software,
and contingency plans have been and will continue to be the subject of
independent verification and validation by the Company's Internal Audit
function. Internal Audit reports on Year 2000 are reviewed by senior
management and the Company's Board of Directors.
The Company believes it has developed an effective plan to address the
Year 2000 issues and that, based on available information, its Year
2000 transition will not have a material effect on its business,
operations, or financial results. The Company has incurred expenditures
for Year 2000 testing and remediation of approximately $0.4 million and
$0.8 million for the three months ended September 30, 1999 and 1998,
respectively. The Company anticipates additional expenditures for Year
2000 of approximately $0.6 million for the remainder of fiscal 2000.
RECENT LEGISLATION
The recent adoption of the Financial Services Modernization Act of 1999
lifts many restrictions limiting banks from the underwriting and
distribution of securities. The Company expects that some of its bank
customers with proprietary mutual funds may, over time, internalize
certain distribution functions currently provided by the Company. At
the same time, the Company believes this change may result in
additional demand for its outsourcing services as financial
institutions provide new services to their customers. The near-term and
long-term impact of this legislative change on the Company's business
and results of operations are uncertain. Although there can be no
assurance, at this time the Company does not expect a material adverse
impact on its business or results of operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements which
involve risks and uncertainties, including but not limited to economic,
competitive, governmental and technological factors affecting the
Company's operations, markets, services and related products, prices,
and other factors discussed in the Company's prior filings with the
Securities and Exchange Commission. Although the Company believes that
the assumptions underlying the forward-looking statements contained
herein are reasonable, any of the assumptions could be inaccurate.
Therefore, there can be no assurance that the forward-looking
statements included in this quarterly report will prove to be accurate.
In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company
or any other person that the objectives and plans of the Company will
be achieved.
11
<PAGE> 12
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Form of Executive Loan Agreement dated September 9, 1999,
between the Company and Messrs. Mangum, Sheehan, Jones,
Rybarczyk, and Dell.
(b) REPORTS ON FORM 8-K
None.
12
<PAGE> 13
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.
THE BISYS GROUP, INC.
Date: November 15, 1999 By: /s/ Dennis R. Sheehan
-------------------- ------------------------------------
Dennis R. Sheehan
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
13
<PAGE> 14
THE BISYS GROUP, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE
<S> <C>
(10.1) Executive Loan Agreement..............................................15
(27) Financial Data Schedule...............................................(electronic only)
</TABLE>
14
<PAGE> 1
EXHIBIT 10.1
THE BISYS GROUP, INC.
EXECUTIVE LOAN AGREEMENT
This Executive Loan Agreement is entered into between
_________________________ (the "Borrower") and The BISYS Group, Inc. (the
"Company") as of September 9, 1999.
1. I hereby acknowledge receipt from the Company of loan(s) in the
principal amount(s) set forth on SCHEDULE A hereto under the heading "PRINCIPAL
AMOUNT," the proceeds of which were applied to pay to the Company the exercise
price of certain vested non-qualified stock options previously granted to me by
the Company and to pay the applicable withholding taxes resulting from such
exercise, all as more fully set forth on SCHEDULE A hereto. In consideration of
such loans, as Borrower, I hereby agree and promise to pay to the order of the
Company, or its assigns, each Principal Amount in accordance with the terms set
forth in this Agreement.
2. Each Principal Amount is fully payable by me not later than the date
set forth on SCHEDULE A under the heading "PAYMENT DATE" and in the following
circumstances is payable sooner. Each Principal Amount is fully payable the
earlier of the Payment Date or one year from the date of my death or the
termination of my employment with BISYS or with any of its subsidiaries due to
my mental or physical disability. In addition, each Principal Amount is fully
payable the earlier of the Payment Date or thirty days from the occurrence of
any of the following:
(a) A receiver or trustee is appointed for me or my
property, or I file a petition in bankruptcy or for
reorganization, make a general assignment for the benefit of
creditors or I am adjudicated as bankrupt or a debtor under
any insolvency law;
(b) My employment with the Company is terminated
under either of the following circumstances:
(i) My voluntary resignation or equivalent
departure from the Company, other than by reason
of a material detrimental change by the Company in
the terms and conditions of my employment; or
(ii) Termination by the Company for gross
negligence or wrongful conduct on my part in the
performance of my duties or in my personal
conduct, which I should have reasonably expected
to result in detriment to the Company.
(c) Failure to deliver a certificate or certificates
representing the number of shares of Common Stock of the
Company set forth on SCHEDULE A under the heading "PLEDGED
SHARES" (the "Pledged Shares") as collateral for the repayment
of the applicable Principal Amount and any interest accrued
thereon, along with a duly-executed stock power, as provided
in Section 8 of this Agreement.
3. I may prepay the Principal Amount shown for each line item on
SCHEDULE A in full or in part at any time, provided that any such partial
payment is not less than $25,000 or, if less, the remaining balance of the
applicable Principal Amount.
4. I understand and agree that each Principal Amount owed by me
pursuant to this Agreement is with full recourse against me and accordingly, if,
following my default in the repayment of any Principal Amount (a "Default"), the
Pledged Shares in respect of such Principal Amount are insufficient to satisfy
the impaired Principal Amount, I shall be liable for any deficiency, and I
further agree that the Company may apply any and all amounts otherwise payable
to me by or on behalf of the Company in connection with my employment with the
Company or any of its subsidiaries to satisfy any such deficiency.
5. Each Principal Amount will bear interest at the annual rate set
forth on SCHEDULE A for such Principal Amount under the heading "ANNUAL INTEREST
RATE." Interest on each Principal Amount will be payable on each anniversary
date of the date hereof.
6. In the event of a Default, I shall owe interest from the date of
Default at the rate of 9% per annum computed on the basis of a 365/366 day year
for the actual number of days accruing from the date of Default until my
repayment.
7. As part of this Agreement, I pledge, deliver and grant as collateral
for each Principal Amount the Pledged Shares set forth on SCHEDULE A in respect
of such Principal Amount. The Pledged Shares represent, as of the date hereof,
the lesser of (i) the total number of shares of Common Stock to be issued to me
in respect of the exercise of the underlying stock option, or (ii) that number
of shares of Common Stock with a "fair market value" (as defined herein below)
representing 120% of the applicable Principal Amount. Such collateral shall
include all proceeds of such Pledged Shares, and in all distributions of stock
or property made with respect thereto by reason of any stock dividend, stock
split, spin-off, merger or other recapitalization or similar event. I agree to
deliver promptly to the Company any shares, stock or other property received by
me as a result of such an event. Other than as set forth in the preceding
sentence, I shall have no obligation to deliver additional shares of Common
Stock or any other property to the Company as collateral for the repayment of
any Principal Amount even in the event the fair market value of the Pledged
Shares collateralizing such Principal Amount is, from time to time, less than
such Principal Amount. In the event of a Default, the Company is authorized and
empowered to apply such Pledged Shares as may be necessary, based on the
then-
1
<PAGE> 2
current fair market value, as a reduction in any unpaid Principal Amount and any
unpaid interest. In accordance with this collateral pledge, I have delivered to
the Company one or more stock certificates evidencing the Pledged Shares of
Common Stock, as well as a duly executed stock power. I retain all cash dividend
and voting rights on the Pledged Shares unless there is a Default, in which case
all such rights automatically shall transfer to the Company. Upon repayment in
full of each Principal Amount and any outstanding interest thereon, the Company
shall release to me all stock certificates, stock powers and other evidence
representing my ownership of the Pledged Shares in respect of such Principal
Amount. To the extent that I pre-pay any Principal Amount, the Company shall
release to me that whole number of Pledged Shares (rounded down) in respect of
such Principal Amount representing the fair market value of such Shares in
excess of 120% of the remaining Principal Amount. For purposes hereof, the "fair
market value" of a share of Common Stock shall be the closing price of a share
of Common Stock as quoted on Nasdaq (or such other stock exchange or system on
which the Common Stock may be listed or quoted for trading) on the last trading
day preceding such repayment or pre-payment. The Board of Directors of the
Company shall determine the fair market value of a share of Common Stock in the
event the Common Stock is not listed or quoted on any public stock exchange or
quotation system.
9. Upon written request to the Company (attention Secretary), not more
frequently than once per calendar quarter, the Company shall release from the
collateral pledge for each Principal Amount and deliver to me one or more stock
certificate(s) representing, as of the date of receipt of such request, that
whole number of Pledged Shares (rounded down) representing the fair market value
of the Pledged Shares in respect of each Principal Amount on an individual basis
in excess of 120% of the remaining applicable Principal Amount(s).
10. I shall reimburse the Company for any reasonable attorneys' fees
and all other reasonable costs and expenses incurred by the Company in
collecting any amounts owed by me under this Agreement.
This Agreement shall be construed and enforced in accordance with the
laws of the State of Delaware, without reference to the principle of conflict of
laws.
Borrower:
----------------------------
The BISYS Group, Inc.
By:
----------------------------
Name/title:
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE BISYS GROUP, INC. AND SUBSIDIARIES FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 40,832
<SECURITIES> 0
<RECEIVABLES> 104,692
<ALLOWANCES> 3,391
<INVENTORY> 0
<CURRENT-ASSETS> 166,682
<PP&E> 108,927
<DEPRECIATION> 52,770
<TOTAL-ASSETS> 453,613
<CURRENT-LIABILITIES> 151,975
<BONDS> 0
0
0
<COMMON> 545
<OTHER-SE> 286,376
<TOTAL-LIABILITY-AND-EQUITY> 453,613
<SALES> 0
<TOTAL-REVENUES> 132,313
<CGS> 0
<TOTAL-COSTS> 79,998
<OTHER-EXPENSES> 9,407
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 1,039
<INCOME-PRETAX> 20,471
<INCOME-TAX> 8,188
<INCOME-CONTINUING> 12,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,283
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.44
</TABLE>
