<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19872
WALKER INTERACTIVE SYSTEMS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-2862954
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
303 SECOND STREET, SAN FRANCISCO, CA 94107
------------------------------------------
(Address of principal executive offices including zip code)
(415) 495-8811
--------------
(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) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
-----
There were 13,949,833 Shares of $.001 Par Value Common Stock outstanding as
of May 11, 1999.
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
----
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1999 and December
31, 1998.................................................... 3
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998............................... 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998............................... 5
Notes to Consolidated Financial Statements.................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 15
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................. 16
SIGNATURES.............................................................. 17
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
MARCH DECEMBER
ASSETS 31, 1999 31, 1998
----------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,539 $ 15,556
Short-term investments 3,843 5,135
Accounts receivable, net 32,560 30,457
Prepaid expenses 4,463 2,347
----------- ----------
Total current assets 48,405 53,495
Long-term investments 2,714 1,906
Property and equipment, net 4,889 4,962
Capitalized software, net 18,800 18,186
Deferred tax assets, net 13,138 12,501
Other assets 2,595 4,047
----------- ----------
TOTAL ASSETS $ 90,541 $ 95,097
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 17,056 $ 18,496
Deferred revenue 14,030 14,819
----------- ----------
Total current liabilities 31,086 33,315
Deferred revenue 1,949 1,600
Accrued rent 980 954
Other long-term obligations 1,530 2,177
----------- ----------
Total liabilities 35,545 38,046
----------- ----------
Commitments and Contingencies - -
Stockholders' equity:
Common stock, $.001 par value: 50,000,000 shares
authorized; issued 14,184,685 shares - March 31,
1999; 14,184,685 shares - December 31, 1998 14 14
Additional paid-in capital 74,719 74,719
Accumulated other comprehensive income 121 232
Accumulated deficit (18,700) (17,662)
Treasury stock at cost (234,852 shares - March 31, 1999;
49,207 shares - December 31, 1998) (1,158) (252)
----------- ----------
Total stockholders' equity 54,996 57,051
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 90,541 $ 95,097
=========== ==========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
---------- ----------
<S> <C> <C>
REVENUES:
License $ 3,390 $ 6,407
Maintenance 7,909 7,725
Consulting 12,608 9,530
---------- ----------
Total revenues 23,907 23,662
OPERATING EXPENSES:
Costs of revenues:
Costs of licenses, maintenance and consulting 11,444 9,736
Amortization of capitalized software 1,489 1,033
Sales and marketing 5,936 5,639
Product development 3,350 3,201
General and administrative 3,601 2,723
---------- ----------
Total operating expenses 25,820 22,332
Operating income (loss) (1,913) 1,330
Interest income, net 239 308
---------- ----------
Income (loss) before income taxes (1,674) 1,638
Income tax expense (benefit) (636) 589
---------- ----------
NET INCOME (LOSS) ($1,038) $ 1,049
========== ==========
BASIC NET INCOME (LOSS) PER SHARE ($0.07) $ 0.08
========== ==========
Shares used in computing
basic net income (loss) per share 14,081 13,974
========== ==========
DILUTED NET INCOME (LOSS) PER SHARE ($0.07) $ 0.07
========== ==========
Shares used in computing
diluted net income (loss) per share 14,081 15,100
========== ==========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,038) $ 1,049
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 2,389 1,628
Tax benefit of nonqualified stock options - 76
Changes in operating assets and liabilities:
Accounts receivable, net (2,068) (2,094)
Prepaids & other assets (876) (199)
Accounts payable & accrued liabilities (2,029) (1,397)
Deferred tax asset (637) 589
Deferred revenue (477) (1,059)
Other (70) 216
-------- --------
Net cash used by operations (4,806) (1,191)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan
issuances and stock options exercised - 218
Treasury stock acquired (906) (823)
Capital lease payments (32) (18)
Repayment of borrowings - (1,422)
-------- --------
Net cash used by financing activities (938) (2,045)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short- and long-term investments (3,287) (2,513)
Maturities of short-term investments 2,250 5,650
Sales of short-term investments 1,508 642
Purchases of property (636) (438)
Additions to capitalized software (2,098) (1,935)
Other (10) 2
-------- --------
Net cash provided (used) by investing activities (2,273) 1,408
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (8,017) (1,828)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,556 7,646
-------- --------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 7,539 $ 5,818
======== ========
</TABLE>
See notes to consolidated financial statements
WALKER INTERACTIVE SYSTEMS, INC.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and include all adjustments (consisting only
of normal recurring adjustments) which the Company considers necessary for
a fair presentation of the financial position, operating results and cash
flows for those periods. Results for the interim periods are not
necessarily indicative of the results for the entire year. These
consolidated financial statements and any notes thereto, should be read in
conjunction with the audited consolidated financial statements included in
the Walker Interactive Systems, Inc. Annual Report on Form 10-K for the
year ended December 31, 1998.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to confirm with
the current presentation format.
2. EARNINGS PER SHARE
------------------
The Company calculates basic earnings per share ("EPS") and diluted EPS in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share". Basic EPS is computed by dividing net income
(loss) by the weighted average number of common shares outstanding for that
period. Diluted EPS takes into account the effect of dilutive instruments,
such as stock options, and uses the average share price for the period in
determining the number of incremental shares that are to be added to the
weighted average number of shares outstanding.
The following is a summary of the calculation of the number of shares used
in calculating basic and diluted EPS (in thousands):
THREE MONTHS
ENDED MARCH 31,
1999 1998
--------- ----------
Shares used to compute basic EPS 14,081 13,974
Add: effect of dilutive securities - 1,126
--------- ----------
Shares used to compute diluted EPS 14,081 15,100
========= ==========
6
<PAGE>
3. COMPREHENSIVE INCOME
--------------------
SFAS No. 130 requires disclosure of total non-stockholder changes in
equity, which include unrealized gains and losses on securities classified
as available-for-sale under SFAS No. 115, foreign currency translation
adjustments accounted for under SFAS No. 52, and minimum pension liability
adjustments made pursuant to SFAS No. 87.
The reconciliation of net income (loss) to comprehensive income (loss) for
the three months ended March 31, 1999 and 1998 is as follows (in
thousands):
THREE MONTHS
ENDED MARCH 31,
1999 1998
---------- ----------
Net income (loss) ($1,038) $1,049
Other comprehensive income (loss) (111) 3
---------- ----------
Total comprehensive income (loss) ($1,149) $1,052
========== ==========
7
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The report on this Form 10-Q contains forward-looking statements, including
statements related to working capital requirements and Year 2000 related issues.
Discussions containing such forward-looking statements may be found in the
material set forth in this section, generally and specifically herein under the
captions "Liquidity and Capital Resources", "Year 2000 Readiness" and
"Additional Risk Factors." Actual events or results may differ materially from
those discussed herein. The Company disclaims any obligation to update these
forward-looking statements as a result of subsequent events. The risk factors on
pages 11 through 15, among others, should be considered in evaluating the
Company's prospects and future financial performance.
Walker Interactive Systems, Inc. (hereinafter "Walker" or the "Company") was
incorporated in California in 1973 and reincorporated in Delaware in March 1992.
Walker designs, develops, markets and supports, on a worldwide basis, a family
of client-server/network computing-enabled enterprise financial, operational and
analytic application software products that enable large and medium-sized
organizations, higher education institutions, and federal, state and government
agencies to accelerate time-to-benefit, lower cost of ownership and reduce
information systems risks stemming from changes in information technology and/or
business processes or structure.
Walker designs its software products specifically for the client/server and
network computing models and believes that its architecture is among the most
scalable and adaptable available for enterprise-level financial applications
software. The Company's strategy is to offer enterprise financial, operational
and analytical application software solutions to a variety of industries with
best-of-breed software products utilized in a wide variety of cross-industry
solutions. The Walker applications support and enhance enterprise-wide
financial, operational and analytic processes, including planning, budgeting,
forecasting, consolidation, financial, performance, work, materials and
procurement management. The Company's software products utilize the Microsoft
Windows operating systems on the desktop, NT, UNIX and OS/390 operating systems
on the server and industry-leading On Line Analytical Processing ("OLAP"),
Relational Database Management Systems ("RDBMS") including Hyperion Solutions
Essbase, IBM's DB2, Oracle Express and Microsoft SQL/Server.
The Tamaris product line represents the Company's core suite of business and
financial solutions utilizing the power of the enterprise server, while the
Aptos suite of financial applications runs on UNIX and Windows NT servers. The
Company also develops and markets Horizon best-of-breed analytic applications
which provide financial reporting, budgeting and financial consolidation
solutions for large and mid-sized organizations. The Horizon analytic
applications products integrate with Tamaris and Aptos solutions and also work
standalone with leading Enterprise Resource Planning ("ERP") applications. In
addition, Walker's IMMPOWER product line provides best-of-breed Enterprise Asset
Management solutions for capital intensive industries.
The Company's software products include productivity tools that allow the
Company's applications to be customized to fit the customer's particular
requirements. The Company complements its software products by providing
specialized professional consulting services to assist customers with
customization and implementation of financial, analytical and operational
solutions to fuel business advantage.
The Company derives its revenues primarily from software licenses, software
maintenance and professional consulting services. The Company's products and
services are marketed primarily to Fortune 1000 companies and similarly-sized
business and governmental organizations utilizing direct sales forces located in
the Company's three geographic regions of North America, Europe and Asia
Pacific.
RESULTS OF OPERATIONS
- ---------------------
REVENUES. The Company recorded total revenues of $23.9 million and $23.7 million
for the three months ended March 31, 1999 and 1998, respectively. Although total
revenues were relatively unchanged from 1998 to 1999, the Company's revenue mix
had increases in consulting revenues offset by a decrease in license revenues.
Maintenance revenues have remained relatively flat in 1999 from 1998.
License revenues in the first quarter of 1999 decreased $3.0 million or 47
percent from the three months ended March 31, 1998 primarily as a result of a
decrease in license revenues generated from North American operations. Further
8
<PAGE>
contributing to the change were slight decreases in license revenues generated
in Europe and the Asia Pacific region. The Company believes that the decrease in
license revenues is primarily attributable to a general softness in the
enterprise financial application software industry as a whole. The Company
believes that potential customers are utilizing resources to ensure that current
software applications are Year 2000 compatible instead of immediately purchasing
and implementing new software applications. The ongoing downturn in the Asia
Pacific economy continues to negatively impact license revenues generated in
that region.
Consulting revenues of $12.6 million for the three months ended March 31, 1999
increased $3.1 million or 32 percent compared to $9.5 million for the comparable
prior year period. Consulting revenues are generated from new and existing
customers for services related to training, implementation, customization,
migration, enhancement, Year 2000 readiness engagements, best practice
consulting engagements and other special projects. The Company generates a
majority of its consulting revenues from implementation-related projects. The
increase in consulting revenues during the first quarter of 1999 is attributable
to revenues generated from Year 2000 readiness engagements, best practice
consulting engagements, and implementation-related projects associated with the
Company's Tamaris, Aptos and Horizon product lines.
COSTS OF LICENSES, MAINTENANCE AND CONSULTING. Costs of licenses, maintenance
and consulting represented 48 percent and 41 percent of total revenues for the
three months ended March 31, 1999 and 1998, respectively. The increase is partly
attributable to a decrease in license revenue which has a lower cost of revenue
than consulting revenue. Further contributing to the increase in 1999 were lower
profit margins in Europe associated with fixed-fee consulting engagements,
partially offset by relatively higher profit margins recognized on Year 2000
readiness and best practice consulting engagements.
AMORTIZATION OF CAPITALIZED SOFTWARE. Amortization of capitalized software
increased $0.5 million or 44 percent in 1999 compared to the same period in
1998. The increase is due to additional amortization associated with the
Company's ongoing practice of evaluating the lives of capitalized software
products and additional amortization resulting from recent product releases.
SALES AND MARKETING. In absolute dollars, sales and marketing expenses of $5.9
million for the three months ended March 31, 1999 increased $0.3 million or 5
percent compared to $5.6 million for the comparable prior year period. The
increase is attributable to higher sales and marketing expenses in Europe and
the Asia Pacific region as the Company opened sales offices during the first
quarter of 1999. Partially offsetting the increase in international expenses was
a reduction in sales and marketing expenses in North America as the Company
reduced marketing and promotions in 1999 compared to 1998. As a percent of total
revenues, sales and marketing expense increased to 25 percent in 1999 from 24
percent in 1998. The increase is attributable to higher sales and marketing
expenses for 1999 coupled with relatively unchanged total revenues in 1999 when
compared to the prior year.
PRODUCT DEVELOPMENT. Product development-related expenses, excluding
amortization of capitalized software, are detailed as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1999 1998
------------ ------------
<S> <C> <C>
Product development costs including additions
to capitalized software (gross) $ 5,448 $ 5,136
Less: additions to capitalized software 2,098 1,935
------------ ------------
Product development expenses $ 3,350 $ 3,201
============ ============
</TABLE>
During the first quarter of 1999, the Company acquired $0.2 million in software
technology which complemented internally developed products and related
technology. Excluding the acquired software, gross product development expenses
remained relatively unchanged. The decrease in additions to capitalized software
in absolute dollars and as a percentage of gross product development costs is
attributable to product development resources which were allocated to non-
capitalizable projects. Historical additions to capitalized software, in
absolute dollars and as a percentage of gross product development costs, are not
a reliable indicator of additions to capitalized software that will be incurred
in the future.
9
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $3.6
million and $2.7 million for the three months ended March 31, 1999 and 1998,
respectively. The increase of $0.9 million or 32 percent is attributable to
increased usage of outside contractors and increased labor and facility
expenses.
INCOME TAX EXPENSE (BENEFIT). Income tax expense (benefit) is recorded each
quarter based on the Company's estimated effective income tax rate for the year.
The Company estimates that the 1999 effective income tax rate will be 38
percent.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's operating activities used cash of $4.8 million in the first
quarter of 1999 and $1.2 million during the comparable 1998 period. The
Company's net loss of $1.0 million in the first quarter of 1999 compared to net
income of $1.0 million in the same period of 1998 was the primary reason for the
increase.
Financing activities used $0.9 million in cash during the first quarter of 1999
and $2.0 million during the same period in 1998. There were no proceeds from
employee stock purchase plan issuances and stock options exercises in the first
quarter of 1999 compared to $0.2 million in the same 1998 period. The Company
used $0.9 million in cash in the first quarter of 1999 and $0.8 million in cash
in the same 1998 period for the acquisition of common stock from the open
market. All stock repurchases were made pursuant to resolutions of the Company's
Board of Directors authorizing the repurchase of the Company's outstanding
shares of common stock, which in aggregate is not to exceed a total cost of
$17.5 million. As of March 31, 1999, the Company had acquired 1,007,000 shares
of its common stock at a cost of $10.9 million. As of March 31, 1999, the
Company had reissued 803,000 of the repurchased shares in connection with the
Company's employee stock purchase plan, one of its employee stock option plans
and the December 1997 acquisition of Revere.
In connection with the acquisition of Revere, the Company assumed a line of
credit with an outstanding balance of $1.5 million. The outstanding balance on
the assumed line of credit was subsequently paid in full in January 1998.
The Company has a line of credit in the amount of $6.0 million, secured by
marketable securities. The line of credit expires on August 1, 1999. The Company
has never borrowed against this line of credit.
Investing activities used cash of $2.3 million in the first quarter of 1999
compared to providing cash of $1.4 million for the same period in 1998. The
increase in cash used is primarily attributable to a decrease in short-term
maturities and an increase of investment purchases in 1999.
As of March 31, 1999, the Company's principal sources of liquidity included
cash, cash equivalents and short- and long-term investments aggregating $14.1
million. The following sentence is a forward looking statement. The Company
believes that its principal sources of liquidity, together with funds expected
to be generated from operations, will satisfy the Company's currently
anticipated working capital and capital expenditure requirements for at least
the next twelve months.
YEAR 2000 READINESS
- -------------------
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. The Company's computer
equipment and software and devices with imbedded technology that are time-
sensitive may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices or engage in normal business activities.
The Company has completed an assessment to determine the effect that the Year
2000 issue will have on it. The Company believes that its current commercial
application software products generally offered for license by the Company to
end-user customers are Year 2000 ready. However, certain versions of these
products currently installed at customers' sites will require upgrading or other
modifications to become Year 2000 ready. The Company has identified those
affected customers who are on the Company's warranty maintenance program, has
contacted those customers and is assisting those customers to assess their
readiness. The Company is making available to those customers a Year 2000 ready
release of its software and will assist such customers to become Year 2000
ready. The following sentence is a forward-looking statement. The Company
believes that the costs associated with making
10
<PAGE>
certain versions of the Company's products Year 2000 ready will not be material
to the Company's business, results of operations or financial condition.
The Company has completed an assessment of its computer equipment and software,
including information technology systems, such as accounting, data processing
and telephone/PBX systems, and non-information technology systems, such as fax
machines and alarm systems, to determine if they are Year 2000 ready. The
following three sentences are forward-looking statements. The Company believes
that certain of its non-critical computer equipment and software will require
replacement or modification, at a total cost which is not material to the
Company's results of operations or financial condition. The Company believes
that even if such replacements or modifications were not completed, the Year
2000 issue would not have a material adverse effect on the Company's business,
results of operations or financial condition. In addition, even if the Company's
vendors or suppliers fail to become Year 2000 ready in a timely manner, the
Company believes that such failure would not have a material adverse effect on
the Company's business, results of operations or financial condition.
The costs and impact of the Year 2000 issue are based upon management's best
estimates, which were derived using numerous assumptions regarding future
events, including the continued availability of certain resources, the
functioning of its products in accordance with specifications and other factors.
There can be no assurance that these estimates will prove to be accurate and
actual results could differ from those currently anticipated. Specific factors
that could cause such material differences include, but are not limited to, the
availability and cost of personnel trained in Year 2000 issues and the
functioning of the Company's products in accordance with specifications. In
addition, variability of definitions of "Year 2000 ready" and the number of
products that the Company has sold, may lead to claims for which the impact on
the Company is not currently estimable. No assurance can be given that the
aggregate cost of defending and resolving such claims, if any, would not
materially adversely affect the Company's business, results of operations or
financial condition.
ADDITIONAL RISK FACTORS
- -----------------------
The Company operates in a rapidly changing environment that involves numerous
risks and uncertainties which could have a material adverse effect on the
Company. The following discussion details some, but not all, of these risks and
uncertainties.
LIQUIDITY AND CAPITAL RESOURCES.
There can be no assurance that the Company will not need to raise substantial
additional capital to fund its operations in the future. There can be no
assurance that additional financing will be available on acceptable terms or
will be available at all.
FLUCTUATION IN OPERATING RESULTS.
The Company's operating results fluctuate as a result of a variety of factors
including:
(i) the execution of new license agreements;
(ii) the shipment of software products;
(iii) customer acceptance criteria for services performed;
(iv) completion of milestone or other significant development
requirements pursuant to the Company's license agreements;
(v) the financial terms of consulting agreements and the inclusion
of fixed as opposed to variable pricing;
(vi) third-party royalty payments for licensed software;
(vii) the demand for the Company's products and services;
(viii) changes in the Company's product mix;
(ix) the development and launch of new products, and the life cycles
of the Company's existing products;
(x) research and development expenditures required to update and
expand the Company's product portfolio and related third-party
consulting costs;
(xi) sales and marketing expenses generally related to the entry
into new markets with new or existing products and maintenance
of market share in existing markets;
(xii) acquisitions and the integration and development of acquired
entities or products;
(xiii) competitive conditions in the industry; and
(xiv) general economic conditions.
11
<PAGE>
As a result, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and should not be relied upon
as indications of future performance.
The Company's quarterly operating results are particularly dependent on the
number of license agreement bookings executed in each quarter. The amount of
quarterly bookings has varied substantially from quarter to quarter due to a
variety of reasons including:
(i) a high proportion of license agreements are negotiated during
the latter part of each quarter and may not be completed before
the quarter end;
(ii) the sales cycles for some of the Company's products are
relatively long due to the Company's focus on "enterprise
solutions" as opposed to individual products, which adds
complexity to the customer's selection, negotiation and
approval process;
(iii) the amount related to each booking may vary significantly due
to the need for different solutions for different customers;
(iv) procurement procedures may vary from customer to customer,
which may affect the timing of the bookings;
(v) customers may continue to forego or delay software purchases
due to increased attention and spending on Year 2000 related
projects;
(vi) the period for a customer to complete product evaluations and
to complete any subsequent purchase approval may be delayed due
to resource limitations; and
(vii) economic, political and industrial conditions can adversely
affect business opportunities without notice.
In addition, bookings that are executed during a particular quarter may not be
recognized as revenue during such quarter because such bookings may not have met
the Company's revenue recognition criteria. No assurance can be given that the
Company will be able to effect new bookings in accordance with historical
results or management's expectations, and the inability of the Company to do so
could have a material adverse effect on the Company's operating results.
The Company believes that Year 2000 pressures have caused customers to forego or
delay the licensing of new software as they utilize resources to ensure that
their existing software products are Year 2000 ready. Continuation of this trend
will have an adverse impact on Company revenues and results of operations. There
can be no assurance that revenues will return to historical levels or obtain
historical growth rates in the Year 2000 or beyond.
While the Company typically sells its software under a standard license
agreement, license agreements associated with large enterprise solutions often
require the negotiation of terms and conditions that differ substantially from
the Company's standard license agreement terms. The negotiation of these
agreements may extend the sales cycle. The Company may not always obtain terms
and conditions that permit the recognition of revenue upon shipment of the
licensed product or under the percentage of completion method of contract
accounting rules. Accordingly, revenue may not be recognized after shipment of a
product because specified milestones have not been met or because applicable
services have not been completed or cash is secured.
The Company has and expects to enter into fixed-price consulting agreements,
particularly in response to increased competition in the industry. The Company
has recognized lower profit margins on certain fixed-price service agreements
when compared to variable agreements. No assurance can be given that the Company
will be able to conclude fixed-price agreements on terms that will allow the
Company to retain its historical operating margins.
The Company has historically generated a majority of its consulting revenue from
pre- and post-implementation services. Recently, the Company has provided
services which include, but are not limited to, Year 2000 readiness engagements,
best practice solution engagements and other hardware and software solutions.
The Company intends to continue its pursuit of consulting engagements for which
the Company believes it is qualified. There can be no assurances that these
engagements will result in profit margins equal to or greater than those
engagements that are specific to a customer's product implementation. Also,
there can be no assurances that consulting revenue generated from non-
implementation-related projects will continue in the future.
Employee- and facility-related expenditures comprise a significant portion of
the Company's operating costs and expenses, and are therefore relatively fixed
over the short term. In addition, the Company's expense levels are based, in
significant part, on the Company's forecasted revenue. If revenue levels fall
below expectations, net income is likely to be adversely affected. There can be
no assurance that the Company will be profitable on a quarterly or annual basis
in the future. Any of the foregoing factors could cause the Company's future
operating results to fall
12
<PAGE>
below the expectations of public securities market analysts, which could have an
adverse effect on the trading price of the Company's common stock. See
"Volatility of Stock Price."
RELIANCE ON THIRD PARTY TECHNOLOGY.
The Company generates revenue from internally developed software products, some
of which utilize technology licensed from third parties. The Company expects to
continue utilizing third party technology and may enter into agreements with
additional business partners. If sales of software utilizing third party
technology increase disproportionately, gross margins may be below historical
levels due to third party royalty obligations. There can be no assurances that
the third parties will renew existing agreements with the Company or will not
require financial conditions which are unfavorable to the Company. In addition,
there can be no assurances that existing third party agreements will not be
terminated.
INDUSTRY.
Certain software companies, including the Company, have experienced significant
economic downturns as a result of technological shifts, competitive pressures
and uncertainties caused by the Year 2000 transition. These downturns are
characterized by decreased product demand, price erosion, work slowdowns and
layoffs. The Company's operations may, in the future, experience substantial
fluctuations from period to period because of such industry patterns and general
economic and political conditions which could affect the timing of orders from
customers. There can be no assurance that such factors will not have a
materially adverse effect on the Company's business, operating results or
financial condition.
INTERNATIONAL.
The Company plans to increase its presence in international markets by marketing
its product lines in additional countries. Risks associated with such pursuits
include, but are not limited to, the following:
(i) changing market demands,
(ii) economic and political conditions in foreign markets,
(iii) foreign exchange fluctuations, longer collections cycles,
(iv) difficulty in managing a geographically dispersed organization
and
(v) changes in international tax laws.
The downturn in the Asia Pacific business climate has had and may continue to
have an adverse effect on some market opportunities. Operating results are
likely to be adversely affected if the Company's expansion into international
markets is not successful.
COMPETITION.
The business and financial applications software market for large complex
organizations is intensely competitive. The Company's principal competitors with
Tamaris solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. With Aptos
solutions, the Company principally competes with Oracle Corporation, Lawson
Software, Inc., Platinum Software, Inc., Systems Union Group Ltd and Agresso AS.
With the Horizon suite of products, the Company principally competes with
Hyperion Solutions Corporation, Oracle Corporation and Comshare, Inc. With the
IMMPOWER suite of products, the Company principally competes with
Datastream/SQL, Indus International, Marcam, Mincom, PSDI and SAP AG.
The Company also competes to a lesser extent with other independent software
application vendors. Some of the Company's current and potential competitors
have substantially greater financial, technical, marketing and sales resources
than the Company. Some of these competitors also offer business application
products not offered by the Company, primarily in the areas of human resources
and manufacturing. However, Walker remains one of the few companies committed to
providing and enhancing applications for the mainframe environment. Most of the
competitors listed above compete with Walker by offering UNIX-based
applications.
The Company encounters competition from a broader range of firms in the market
for professional services. Principal competitors include Andersen Consulting,
IBM Global Services and the consulting divisions of the major accounting firms.
These competitors possess greater resources than the Company. Niche consulting
firms which specialize in the Company's products also compete with the Company
primarily on the basis of price.
The principal competitive factors in the market for business and financial
applications software and services include:
(i) product functionality,
(ii) flexibility,
(iii) portability,
13
<PAGE>
(iv) integration,
(v) reliability,
(vi) performance,
(vii) product availability,
(viii) speed of implementation,
(ix) quality of customer support and user documentation,
(x) vendor reputation,
(xi) experience,
(xii) financial stability,
(xiii) cost effectiveness and
(xiv) price.
The Company believes that it competes favorably with respect to these factors.
There can be no assurance, however, that the Company will be able to compete
successfully in the future.
RAPID TECHNOLOGICAL CHANGE.
The software industry is characterized by rapid technological change. The pace
of change has accelerated due to advances in mainframe and client/server
technology and the growth in Internet, Intranet and extranet utilization. The
Company expects to evaluate potential opportunities and may invest in those
which are compatible with the Company's strategic direction. However, there can
be no assurance that any such investments will be profitable. The Company's
products are also designed primarily for use with certain mainframe and
client/server systems. The introduction of products embodying new technologies
and the emergence of new industry standards can render existing products
obsolete. Accordingly, the Company's future success depends in part upon its
ability to continue to enhance its current products and to develop and introduce
new products that respond to evolving customer requirements and keep pace with
technological development and emerging industry standards, such as new operating
systems, hardware platforms, interfaces and third party applications software.
There can be no assurances that:
(i) the Company will be successful in developing and marketing
product enhancements or new products that respond to
technological change, changes in customer requirements or
emerging industry standards;
(ii) the Company will not experience difficulties that could delay or
prevent the successful development, introduction and marketing
of such products and enhancements; or
(iii) any new products or enhancements that it may introduce will
achieve market acceptance.
PRODUCT DEVELOPMENT.
The Company's continued success is dependent on its continued ability to
introduce, develop and market new and enhanced versions of its software
products, although there can be no assurance that such ability can be
maintained. The Company plans to continue its investment in product development
in future periods. However, there can be no assurance that revenues will be
sufficient to support the future product development which is required for the
Company to be competitive. Although the Company may be able to release new
products in addition to enhancements to existing products, there can be no
assurance that the Company's new or upgraded products will be accepted, will not
be delayed or canceled, or will not contain errors or "bugs" that could affect
the performance of the product or cause damage to users' data.
PROPRIETARY RIGHTS.
The Company regards its products as proprietary. Through its license agreements
with customers and its internal security systems, confidentiality procedures and
employee agreements, the Company has taken steps to maintain the trade secrecy
of its products. However, there can be no assurances that misappropriation will
not occur. In addition, the laws of some countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. There
can be no assurance that the confidentiality of any proprietary information will
provide any meaningful competitive advantage. The Company has no patents
relating to its products. The Company believes that, because of the rapid pace
of technological change in the computer software industry, that patents and
copyrights are less significant than factors such as the knowledge, ability and
experience of the Company's employees, frequent product enhancements and the
timeliness and quality of support services. There can be no assurance that the
Company's current efforts to retain its products as proprietary will be
adequate.
Although the Company believes that its products do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company in the future
with respect to current or future products or that any such assertions will not
require the Company to enter into royalty arrangements or result in costly
litigation.
14
<PAGE>
PRODUCT LIABILITY.
The Company's license agreements with its customers contain provisions designed
to limit the Company's exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in such
license agreements may not be enforced as a result of international, federal,
state and local laws or ordinances or unfavorable judicial decisions. The
license and support of the Company's software for use in mission critical
applications creates the risk of product liability claims against the Company.
Damage liability or injunctive relief resulting from such a claim could cause a
materially adverse impact on the Company's business, operating results and
financial condition.
EMPLOYEES.
The Company believes that its continued success will depend in large part upon
its ability to attract, train and retain highly-skilled technical, sales,
marketing and managerial personnel. Because of a high level of demand,
competition for such personnel is intense and the Company sometimes experiences
difficulty in locating candidates with appropriate qualifications or within
desired geographic locations. Revenue growth is dependent on the Company's
ability to attract, train, retain and productively manage such personnel.
ACQUISITION-RELATED RISKS.
The Company has acquired and may continue to acquire complimentary businesses,
products or technology. The process of integrating an acquired company's
business into the Company's operations may result in unforeseen operating
difficulties and expenditures and may require significant management attention
that would otherwise be available for the ongoing development of the Company's
business. There can be no assurance that any anticipated benefits of an
acquisition will be realized. Future acquisitions by the Company could result in
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities and amortization related to goodwill and other intangible
assets, which could materially affect the Company's operating results and
financial condition. Acquisitions involve numerous risks, including difficulties
in the assimilation of operations, technologies and products of the acquired
company, risks associated with entering markets in which the Company has no or
limited direct prior experience and the potential loss of key employees of the
acquired company.
VOLATILITY OF STOCK PRICE.
High technology companies, including the Company, frequently experience
volatility in their common stock prices. Factors such as quarterly fluctuations
in results of operations, announcements of technological innovations by the
Company or its competitors or the introduction of new products by the Company or
its competitors and macroeconomic conditions in the computer hardware and
software industries generally may have a significant adverse impact on the
market price of the Company's stock. If revenues or earnings in any quarter fail
to meet the expectations of the investment community, there could be an
immediate impact on the Company's stock price. In addition, the Company has
issued shares and stock options which if sold directly or exercised and sold on
the open market in large concentrations, could cause the Company's stock price
to decline in the short term. Furthermore, the stock market has from time to
time experienced extreme price and volume fluctuations which have particularly
affected the market price for many high technology companies, in some cases
unrelated to the operating performance of those companies. These broad market
fluctuations may materially adversely affect the market price of the stock of
the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has U.S. dollar interest-bearing investments that are subject to
interest rate risk. The Company analyzed its investments at year-end to
determine the sensitivity to interest rate changes. The fair values of these
instruments were determined by net present values. The Company's sensitivity
analysis used the same change in interest rates for all maturities. All other
factors were held constant. If interest rates increased by 10 percent the
expected effect on net income related to the Company's investments would be
immaterial.
The majority of the Company's revenues are denominated in the U.S. dollar. The
Company does not engage in interest rate swaps or enter in foreign currency
forward contracts.
No material changes have occurred since December 31, 1998.
15
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.2 1992 Employee Stock Purchase Plan, as amended to date
10.9 1993 Non-Employee Directors' Stock Option Plan, as
amended to date
10.14 1995 Non-Statutory Stock Option Plan for Non-Officer
Employees , as amended to date
10.18 Separation Agreement between Barbara M. Hubbard and the
Registrant.
27.1 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended
March 31, 1999.
16
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
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.
WALKER INTERACTIVE SYSTEMS, INC.
--------------------------------
(REGISTRANT)
Date: May 14, 1999 By: /s/ Michael B. Shahbazian
------------ --------------------------
Michael B. Shahbazian
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
17
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-Q
INDEX TO EXHIBITS
10.2 1992 Employee Stock Purchase Plan, as amended to date (1)
10.9 1993 Non-Employee Directors' Stock Option Plan, as amended to date (1)
10.14 1995 Non-Statutory Stock Option Plan for Non-Officer Employees, as
amended to date
10.18 Separation Agreement between Barbara M. Hubbard and the Registrant
27.1 Financial Data Schedule (electronic filing only)
(1) Incorporated by reference to the attachment to the Company's 1999 Proxy
Statement.
18
<PAGE>
EXHIBIT 10.14
WALKER INTERACTIVE SYSTEMS, INC.
1995 NONSTATUTORY STOCK OPTION PLAN
FOR NON-OFFICER EMPLOYEES
ADOPTED AUGUST 28, 1995
RATIFIED AND AMENDED SEPTEMBER 20, 1995
AMENDED MAY 9, 1996, OCTOBER 20, 1997, AUGUST 5, 1998,
NOVEMBER 9, 1998 AND APRIL 12, 1999
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of the Company, and its Affiliates, may be given an opportunity to
purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now non-officer Employees of the Company or its Affiliates, to
secure and retain the services of new Employees in such positions, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall be
only Nonstatutory Stock Options.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" means termination of an Employee's employment with the Company
for any of the following reasons as determined in good faith by the Company:
(i) an intentional act which materially injures the Company;
(ii) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or the individual to whom the Employee reports;
(iii) a willful and habitual neglect of duties; or
(iv) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
(d) "CHANGE IN CONTROL" means:
(i) a dissolution, liquidation or sale of substantially all of the
assets of the Company;
(ii) a merger or consolidation in which the Company is not the
surviving corporation; or
(iii) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(g) "COMPANY" means Walker Interactive Systems, Inc., a Delaware
corporation.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means the
employment relationship, or service as a member of the Board or Consultant, is
not interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(i) "DIRECTOR" means a member of the Board.
(j) "DISINTERESTED PERSON" means a Director who either (i) was not during
the one year prior to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of the Company or any
Affiliate entitling the participants therein to acquire equity securities of the
Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or (ii) is
otherwise considered to be a "disinterested person" in accordance with Rule 16b-
3(c)(2)(i), or any other applicable rules, regulations or interpretations of the
Securities and Exchange Commission.
(k) "EMPLOYEE" means any person employed by the Company or any Affiliate of
the Company.
<PAGE>
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market, the Fair Market Value of a share of common stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in common stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(2) If the common stock is quoted on the Nasdaq System (but not on the
Nasdaq National Market) or is regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a share of common
stock shall be the mean between the bid and asked prices for the common stock on
the last market trading day prior to the day of determination, as reported in
the Wall Street Journal or such other source as the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(m) "INVOLUNTARY TERMINATION WITHOUT CAUSE" means an Employee's dismissal
or discharge other than for Cause. The termination of an Employee's employment
as a result of the Employee's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(o) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "OPTION" means a stock option granted pursuant to the Plan.
(q) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(r) "OPTIONEE" means an Employee who holds an outstanding Option.
(s) "PLAN" means this Walker Interactive Systems, Inc. 1995 Nonstatutory
Stock Option Plan for Non-Officer Employees.
(t) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by Compensation Committee of the Board
unless and until the Compensation Committee or the Board delegates
administration to a Committee, as provided in subsection 3(c).
(b) The Compensation Committee shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
the provisions of each Option granted (which need not be identical), including
the time or times such Option may be exercised in whole or in part; and the
number of shares for which an Option shall be granted to each such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Compensation Committee, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 11 of the
Plan.
(4) Generally, to exercise such powers and to perform such acts as the
Compensation Committee deems necessary or expedient to promote the best
interests of the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Compensation
Committee (and references in this Plan to the Compensation Committee shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Compensation Committee. The Compensation Committee may abolish the
Committee at any time and revest in the Compensation Committee the
<PAGE>
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Compensation Committee may delegate to a committee of
one or more members of the Board the authority to grant Options to persons
eligible to receive Options as provided in Section 5 of the Plan.
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply if the Board or the Compensation Committee expressly
declares that such requirement shall not apply. Any Disinterested Person shall
otherwise comply with the requirements of Rule 16b-3.
(e) The Board shall at all times have the authority to arrogate to itself
any or all of the powers and responsibilities allocated to the Compensation
Committee or to the Committee under the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate two million five hundred thousand (2,500,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
Nonstatutory Stock Options may be granted under the Plan only to Employees
who (i) hold positions below the level of Officer, and (ii) are not then subject
to Section 16 of the Exchange Act.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Compensation Committee shall deem appropriate. The provisions
of separate Options need not be identical, but each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, in one or more of the following forms: (i) in cash at the time the
Option is exercised, (ii) at the discretion of the Compensation Committee or the
Committee, by delivery to the Company of other common stock of the Company, or
(iii) pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board which results in the receipt of cash (or check) by the
Company prior to the issuance of the stock.
(d) TRANSFERABILITY. A Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order satisfying the requirements of Rule 16b-3 and
the rules thereunder (a "QDRO"), and shall be exercisable during the lifetime of
the person to whom the Option is granted only by such person or any transferee
pursuant to a QDRO. The person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's
<PAGE>
own account and not with any present intention of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(g) TERMINATION OF SERVICE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or her Option (to
the extent that the Optionee was entitled to exercise it at the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months after the termination of the Optionee's Continuous
Status as an Employee, Director or Consultant or such longer or shorter period
specified in the Option Agreement, or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state, local or foreign tax
withholding obligation relating to the exercise of such Option by any of the
following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the shares of the
common stock otherwise issuable to the participant as a result of the exercise
of the Option; or (3) delivering to the Company owned and unencumbered shares of
the common stock of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the
<PAGE>
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Options
unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Compensation Committee shall have the power to accelerate the time
at which an Option may first be exercised or the time during which an Option or
any part thereof will vest pursuant to subsection 6(e), notwithstanding the
provisions in the Option stating the time at which it may first be exercised or
the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee any right to continue in the
employ of the Company or any Affiliate, or to continue to serve as a member of
the Board or as a consultant, or shall affect the right of the Company or any
Affiliate to terminate the employment relationship of any Employee with or
without cause, to remove a member of the Board pursuant to the terms of the
Company's Bylaws, or to terminate a consultant in accordance with the terms of
this agreement with the Company or Affiliate.
(d) The Compensation Committee shall have the authority to effect, at any
time and from time to time (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options and the grant in substitution therefor
of new Options under the Plan covering the same or different numbers of shares
of Common Stock, but having an exercise price per share not less than eighty-
five percent (85%) of the Fair Market Value per share of Common Stock on the new
grant date.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in
the class(es) and number of shares and price per share of stock subject to such
outstanding Options.
(b) In the event of a Change in Control, then, to the extent permitted by
applicable law: (i) any surviving corporation shall assume any Options
outstanding under the Plan or shall substitute similar Options for those
outstanding under the Plan; or (ii) such Options shall continue in full force
and effect. In the event any surviving corporation refuses to assume or
continue such options, or to substitute similar options for those outstanding
under the Plan, then, with respect to options held by persons then performing
services as employees, consultants or directors for the Company, the time during
which such Options become vested or may be exercised shall be accelerated and
any outstanding unexercised rights under any Options terminated if not exercised
prior to such event.
(c) In the event an Employee's employment is terminated due to an
Involuntary Termination Without Cause within twenty-four (24) months after the
effective date of a Change in Control, then all Options issued and outstanding
under the Plan and held by the Employee shall accelerate and become immediately
vested and exercisable. Notwithstanding the foregoing, if the Change in Control
was a transaction that was accounted for as a pooling of interests for financial
reporting purposes, then the unvested portion of such stock options shall not
accelerate unless the Company receives reasonable assurances from the Company's
independent public accountants (and from the acquiring party's independent
public accountants) that in their good faith judgment such acceleration will not
adversely affect the pooling of interests accounting treatment of such Change in
Control transaction.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board or the Compensation Committee at any time, and from time to
time, may amend the Plan.
(b) The Compensation Committee may, in its sole discretion, submit the Plan
or any amendment to the Plan for stockholder approval.
(c) It is expressly contemplated that the Board or the Compensation
Committee may amend the Plan in any respect the Board or the Compensation
Committee deems necessary or advisable to provide Optionees with the
<PAGE>
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
(e) The Board or the Compensation Committee at any time, and from time to
time, may amend the terms of any one or more Options; provided, however, that
the rights and obligations under any Option shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person to whom the
Option was granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board or the Compensation Committee may suspend or terminate the
Plan at any time. Unless sooner terminated, the Plan shall terminate on the
date when all the shares of the Company's common stock reserved for issuance
under the Plan have been issued. No Options may be granted under the Plan while
the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on August 28, 1995.
Adopted by the Compensation Committee on August 28, 1995 with an aggregate share
reserve of 140,000 shares.
Ratified and amended by the Board of Directors on September 20, 1995 to increase
the aggregate share reserve to 600,000 shares.
Amended by the Board of Directors on May 9, 1996 to increase the aggregate share
reserve to 1,100,000 shares.
Amended by the Board of Directors on October 20, 1997 to increase the aggregate
share reserve to 1,600,000 shares.
Amended by the Board of Directors on August 5, 1998 to remove the discretion of
the Board to determine whether acceleration of vesting shall occur in the event
of a Change in Control if the successor entity does not assume or continue
outstanding options or substitute similar options and to provide for
acceleration of vesting upon an employee's Involuntary Termination Without Cause
within twenty-four months after a Change in Control.
Amended by the Board of Directors on November 9, 1998 to increase the aggregate
share reserve to 2,000,000 shares.
Amended by the Board of Directors on April 12, 1999 to increase the aggregate
share reserve to 2,500,000 shares.
<PAGE>
Exhibit 10.18
SEPARATION AGREEMENT BETWEEN
BARBARA M. HUBBARD AND WALKER INTERACTIVE SYSTEMS, INC.
This Agreement is entered into between Barbara M. Hubbard (the
"Executive") and Walker Interactive Systems, Inc. (the "Company") effective
February 15, 1999.
WITNESSETH
WHEREAS, the Executive and the Company have mutually agreed to terminate
the Executive's employment as Vice President of Finance and an Officer of the
Company, effective May 1, 1999;
WHEREAS, the Company believes that Executive has made significant
contributions to the Company and its success during her tenure as an employee;
WHEREAS, the Company wishes to express its appreciation to Executive for
the significant contributions she has made to the Company's success during the
three years she served with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto:
1. SEPARATION. Executive's employment relationship with the Company will
terminate on May 1, 1999 ("Separation Date").
2. CONSULTING AGREEMENT. In order to facilitate the provision of future
services by Executive to the Company, the Executive and the Company agree to
enter into a Consulting Services Agreement (the "Consulting Agreement") in the
form attached as Exhibit I.
3. SALARY CONTINUATION. If Executive has not obtained new regular, full-time
employment as of the Separation Date, Executive will receive, on a month-to-
month basis, her regular base salary, paid on the Company's regular payroll
dates, subject to standard deductions and withholdings for taxes and social
security, for a period of time not to exceed eight (8) months, ending on
December 31, 1999. Executive shall certify in writing not less than two weeks
prior to the beginning of each month following the Separation Date that she has
not obtained regular full-time employment in order to trigger the salary
continuation payment. Salary continuation payments shall cease in the month
following the date Executive has obtained regular full-time employment.
4. EXERCISE OF OPTIONS.
4.1 The Company shall extend the ability of Executive to exercise the
30,000 options vested as of the Separation Date pursuant to Option Agreement No.
950088, dated April 1, 1996, and to exercise the 2,500 options vested as of the
Separation Date pursuant to Option Agreement No. 890814, dated November 13,
1997, (the "Option Agreements"), such that Executive shall have twelve (12)
months from the Separation Date to exercise these options and purchase these
shares. Thereafter, these options will no longer be exercisable with respect to
these 30,000 shares and 2,500 shares.
4.2 If a "change of control event" occurs during the period of time that
Executive is able to exercise her vested options, Executive will be covered
fully by provisions of Paragraph 11(b) of the Walker Interactive Systems, Inc.,
1994 Equity Incentive Plan and Paragraph 10(b) of the Walker Interactive
Systems, Inc., 1995 NonStatutory Stock Option Plan for Non-Officer Employees.
4.3 Except as expressly provided in this Agreement (including Exhibit 1,
attached) , vesting of all options will cease at the close of business on the
Separation Date.
5. CONTINUED HEALTH BENEFITS. The Company will continue to pay Executive's
monthly health insurance premiums for her current health insurance through the
end of the last month in which Executive receives salary continuation payments,
said Company paid health insurance premiums to cease effective December 31,
1999, at the latest. Effective January 1, 2000, to the extent permitted by the
federal COBRA law and by the Company's current group health insurance policies,
Executive shall be eligible to continue her health insurance benefits at her own
expense and, later, to convert to an individual policy if she wishes.
<PAGE>
6. BONUSES. Executive shall be eligible to receive the following bonuses, if
such are paid to the executive management of Walker:
a) The Quarter 2, 1999, bonus, for the period of service from April 1,
1999, through May 1, 1999.
7. NO ADDITIONAL COMPENSATION. Executive acknowledges and agrees that after
the Separation Date she will not be entitled to or receive any compensation,
bonuses, stock, stock options or other benefits as a consequence of her
Employment, except as expressly set forth in this agreement and the Consulting
Agreement.
8. TAX CONSEQUENCES. Executive acknowledges that she has been advised by the
Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of these amendments to her stock options grants.
9. LIMITATION ON ACTIVITIES (NON-COMPETE). In consideration for the benefits
provided in Paragraphs 2 and 3, above, Executive agrees that, for the twelve
month period beginning May 1, 1999, and ending April 30, 2000, she will not
directly or indirectly (whether for compensation or without compensation), as an
individual proprietor, partner, stockholder, officer, employee, consultant,
director, joint venturer, investor, lender, or in any other capacity whatsoever
(other than as the holder of not more than one percent (1%) of the total
outstanding stock of a publicly held company), engage in any business activity
that is directly competitive with the business of the Company, ("Competitive
Activity"). For purposes of the Agreement, "Competitive Activity" shall be
defined as obtaining employment, performing work or providing services directly
and specifically to SAP, PeopleSoft, Oracle, Hyperion, QSP, BAAN, Lawson, CODA
(or any related corporation or partnership). These Competitive Activities are in
addition to the limitations on Executive's activities set forth in her
Proprietary Information Agreement (Exhibit A hereto), and they are considered by
the parties to constitute a reasonable restriction for the purpose of protecting
the business of the Company. However, if any such limitation is found by a
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic area as to which it may be
enforceable.
10. RELEASE. In exchange for the consideration under this Agreement to which
she would not otherwise be entitled:
10.1 Executive hereby forever releases and discharges the Company, its
parent corporation, subsidiaries and affiliates, and its and their officers,
directors, employees and agents, and all others, of and from any and all claims
and demands of every kind and nature, known and unknown, suspected and
unsuspected, disclosed and undisclosed, for damages actual and consequential,
past, present and future, arising out of or in any way connected with the
termination of her Employment, including (without limitation) all claims and
demands under the Age Discrimination in Employment Act of 1967, as amended
("ADEA"), and other federal and state employment laws, or for breach of
contract; provided however, that Executive is not releasing any claims against
the Company that may arise from events that occur after she signs this
Agreement.
10.2 Executive acknowledges that she is knowingly and voluntarily waiving
and releasing any rights she may have under the ADEA. She also acknowledges that
the consideration given for the waiver in this Paragraph is in addition to
anything of value to which she was already entitled. She further acknowledges
that she has been advised by this writing that: (i) her waiver and release do
not apply to any claims that may arise after she signs this Agreement; (ii) she
has the right to consult with an attorney prior to executing this Agreement;
(iii) she has twenty-one (21) days within which to consider this Agreement
(although she may choose to voluntarily execute this Agreement earlier); (iv)
she has seven (7) days following the execution of this Agreement to revoke the
Agreement; and (v) this Agreement shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Agreement is executed by her ("Effective Date").
<PAGE>
11. PROPRIETARY INFORMATION OBLIGATIONS. Executive acknowledges her
continuing, post-Employment obligations under that certain Proprietary
Information and Confidentiality Agreement dated April 5, 1996, between Executive
and the Company ("Proprietary Information Agreement"), a copy of which is
attached hereto as Exhibit A.
12. MISCELLANEOUS.
12.1 Confidentiality. Executive shall hold the provisions of this
Agreement in strictest confidence and not publicize or disclose them in any
manner whatsoever; provided, however, that Executive may disclose this Agreement
to her immediate family, attorneys, accountants, tax preparers and financial
advisers, provided the person to whom she intends to make such disclosure first
agrees to be bound by this provision, and she may also disclose this Agreement
insofar as such disclosure is required by law.
12.2 Binding Effect; Non-Assignability. The rights and obligations of the
parties hereto shall bind and inure to the benefit of their respective
successors, assigns, heirs, executors and administrators, as the case may be.
12.3 Complete Understanding; Modification. This Agreement, including
Exhibit A, constitutes the complete, final and exclusive embodiment of the
entire agreement between the parties hereto with respect to the subject matter
hereof. This Agreement is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises and representations. Any modification
or amendment of this Agreement shall be effective only if in writing and signed
by Executive and an authorized officer of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BARBARA M. HUBBARD WALKER INTERACTIVE SYSTEMS, INC.
/s/ BARBARA M. HUBBARD By: /s/ WALLACE E. BREITMAN
- ------------------------------- -------------------------------------
Date Signed: February 4, 1999 Date Signed: February 4, 1999
------------------ ------------------------
<PAGE>
EXHIBIT I
CONSULTING SERVICES AGREEMENT BETWEEN
BARBARA HUBBARD AND WALKER INTERACTIVE SYSTEMS, INC.
This Consulting Services Agreement is entered into between Barbara Hubbard
(the "Executive") and Walker Interactive Systems, Inc. (the "Company") effective
February 15, 1999.
WITNESSETH
WHEREAS, Executive and the Company have mutually agreed that Executive's
employment as Vice President of Finance and Officer of the Company will
terminate effective May 1, 1999 ("Separation Date");
WHEREAS, the Company believes Executive possesses significant skills and
knowledge which can assist the Company in its ongoing business endeavors;
WHEREAS, the Company wishes to provide Executive with several benefits in
return for Executive's assisting the Company in various business development and
customer relationship situations;
WHEREAS, Executive wishes to provide Company with such assistance;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties agree as follows:
1. CONSULTING ENGAGEMENT.
1.1 Engagement of Services. Executive is hereby engaged by the Company in
the capacity of Consultant to the Chief Executive Officer of the Company for a
period of six months commencing on the Separation Date ("Consulting
Engagement"), unless terminated sooner pursuant to Section 4, below. During
the Consulting Engagement, Executive shall render such services in connection
with the business of the Company as may reasonably be requested from time to
time by the Chief Executive Officer of the Company or his designee and Executive
shall utilize her best efforts, skills and talents in the performance of those
services; provided, however, that Executive shall have the right reasonably to
decline any particular request. Executive shall be available to devote a
minimum equivalent of one day per month to performing such services, at such
times and locations as shall be mutually convenient to Executive and the
Company.
1.2 Limitations On Other Activities. During the Consulting Engagement,
Executive agrees to abide fully by the provisions of Paragraph 7, "Limitations
on On Other Activities (Non-Compete)," of the Separation Agreement between
Barbara Hubbard and Walker Interactive Systems, Inc., dated February 15, 1999.
2. Compensation.
2.1 As compensation for Executive's services as a consultant hereunder for
services rendered between May 2, 1999 and October 31, 1999, the Company shall
pay Executive a reasonable and mutually agreeable fee for services rendered in
excess of one day per month. Executive will provide Company with an invoice for
services rendered on a monthly basis.
2.2 In addition to such compensation, the Company will reimburse Executive
for travel and other out-of-pocket costs reasonably incurred by her in the
course of performing services under this Agreement; provided, however, that the
Company shall not be obligated hereunder unless (i) the Company has agreed in
advance to reimburse such costs, and (ii) Executive provides the Company with
appropriate receipts or other relevant documentation for all such costs as part
of any submission by her for reimbursement.
2.3 Executive acknowledges and agrees that she is not entitled to and will
not receive any fees or other items of value in connection with either his
Consulting Engagement or any of her other obligations under Section 1 of this
Agreement, except as expressly set forth above.
3. BENEFITS. Provided this Agreement is not terminated by Company pursuant to
Paragraph 4 below prior to October 31, 1999, Executive's option to purchase
2,500 shares of Company stock pursuant to Option Agreement No. 950449, October
23, 1998, will vest and become exercisable. Executive shall have a period of
six (6) months
<PAGE>
after the vesting of such option, through April 30, 1999, to exercise and
purchase these 2,500 shares. Thereafter, such option will no longer be
exercisable.
4. RIGHT TO TERMINATE. In the event that (a) Executive breaches any of her
continuing obligations under the Proprietary Agreement she signed on April 5,
1996, or (b) Executive commences a Competitive Activity in violation of this
Agreement, the Company may terminate this Agreement upon written notice to the
Consultant.
5. INDEPENDENT CONTRACTOR STATUS.
5.1 It is understood and agreed that Executive is an independent contractor
and not an employee, agent, joint venturer or partner of the Company, and
Executive agrees not to hold herself out as, or give any person reason to
believe that she is, an employee, agent, joint venturer or partner of the
Company;
5.2 As an independent contractor, Executive is responsible for paying all
required state and federal taxes and insurance. In particular, the Company will
not withhold FICA (Medicare and Social Security) from Executive's payments, make
state or federal unemployment insurance contributions on behalf of Executive,
withhold state and federal income tax from Executive's payments, make disability
insurance contributions on behalf of Executive, or obtain workers' compensation
insurance on behalf of Executive. Executive will indemnify the Company against
any liability for any of the payments or withholdings described in this
Paragraph.
<PAGE>
5.3 Prohibition Against Use Or Disclosure Of Proprietary And Confidential
Information. Executive's Proprietary Information Agreement with the Company
(Exhibit A hereto) is hereby incorporated into this Agreement and made a part
hereof, and it shall impose the same obligations on Executive, and have the same
force and effect, during the Consulting Engagement and thereafter as was the
case as a consequence of Executive's Employment with the Company.
5.4 Office Space; Support Services. The Company shall provide Executive
with office space and secretarial support if and when Executive is performing
services under this Agreement on the Company's premises, should she desire to
utilize them.
5.5 Term. Unless previously terminated as set forth above, the
Consulting Engagement shall terminate six months from the Separation Date. The
Consulting Engagement shall terminate automatically in the event of (i)
Executive's death, (ii) a disability that prevents Executive from performing her
obligations hereunder, or (iii) Executive's revocation of this Agreement prior
to the Effective Date.
6. MISCELLANEOUS.
6.1 Confidentiality. Executive shall hold the provisions of this Agreement
in strictest confidence and not publicize or disclose them in any manner
whatsoever; provided, however, that Executive may disclose this Agreement to her
immediate family, attorneys, accountants, tax preparers and financial advisers,
provided the person to whom she intends to make such disclosure first agrees to
be bound by this provision, and she may also disclose this Agreement insofar as
such disclosure is required by law.
6.2 Binding Effect; Non-Assignability. The rights and obligations of the
parties hereto shall bind and inure to the benefit of their respective
successors, assigns, heirs, executors and administrators, as the case may be;
provided that, as the Company has specifically contracted for Executive's
services, Executive may not assign or delegate his consulting obligations under
this Agreement either in whole or in part without the prior express written
consent of an authorized officer of the Company.
6.3 Complete Understanding; Modification. This Agreement, including
Exhibit A, constitutes the complete, final and exclusive embodiment of the
entire agreement between the parties hereto with respect to the subject matter
hereof. This Agreement is entered into without reliance on any promise or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises and representations. Any modification
or amendment of this Agreement shall be effective only if in writing and signed
by Executive and an authorized officer of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
BARBARA M. HUBBARD WALKER INTERACTIVE SYSTEMS, INC.
/s/ BARBARA M. HUBBARD By: /s/ WALLACE E. BREITMAN
- ------------------------------- -------------------------------------
Date Signed: February 4, 1999 Date Signed: February 4, 1999
------------------ ------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
WALKER INTERACTIVE SYSTEMS, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE THREE
MONTHS ENDED MARCH 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7,539
<SECURITIES> 6,557
<RECEIVABLES> 33,844
<ALLOWANCES> 1,284
<INVENTORY> 0
<CURRENT-ASSETS> 47,164
<PP&E> 28,799
<DEPRECIATION> 23,910
<TOTAL-ASSETS> 90,541
<CURRENT-LIABILITIES> 31,086
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 54,982
<TOTAL-LIABILITY-AND-EQUITY> 90,541
<SALES> 23,907
<TOTAL-REVENUES> 23,907
<CGS> 12,933
<TOTAL-COSTS> 25,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,674)
<INCOME-TAX> (636)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,038)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
