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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 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, 3 North, San Francisco, California 94107
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (415) 495-8811
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $114,096,920 based on the closing sale price as
reported by The Nasdaq National Market on March 10, 2000.
Number of shares of Common Stock outstanding as of March 10, 2000: 14,423,342
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Report on Form 10-K incorporates information by reference from
the Registrant's definitive Proxy Statement to be used in conjunction with its
2000 Annual Meeting of Stockholders.
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WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
INDEX
PART I
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ITEM 1. BUSINESS............................................................................. 2
ITEM 2. PROPERTIES........................................................................... 10
ITEM 3. LEGAL PROCEEDINGS.................................................................... 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................. 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS............. 11
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA................................................. 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................... 21
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................. 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................................... 41
ITEM 11. EXECUTIVE COMPENSATION............................................................... 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................... 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................... 41
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...................... 41
SIGNATURES....................................................................................... 45
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PART I
ITEM 1. BUSINESS
The following discussion of results of operations and financial condition of the
Company should be read in conjunction with the Company's financial statements
and notes thereto included elsewhere in this Form 10-K. The report on this Form
10-K contains forward-looking statements, including statements related to
industry trends and demand for mainframe products, expected resolution of legal
proceedings, cash commitments, working capital requirements, and possible
expansion in international markets. Discussions containing such forward-looking
statements may be found in the material set forth under "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", generally and specifically therein under the captions "Liquidity
and Capital Resources," and "Additional Risk Factors" as well as elsewhere in
this Annual Report on Form 10-K. 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 17 through 21, among others, should be considered in evaluating
the Company's prospects and future financial performance.
OVERVIEW
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Introduction
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 enterprise financial, operational and analytical software products that
enable large and medium-sized organizations, higher education institutions, and
federal, state and government agencies to optimize their business processes,
reduce business costs, and improve management information needed to run their
business. The Company derives its revenues primarily from software licenses,
software maintenance and professional consulting services. The Company's
Tamaris, Horizon and IMMPOWER product lines are licensed to large and mid-size
companies and similarly sized governmental organizations worldwide. The
Company's Aptos products are marketed primarily in Europe and are licensed to
mid-sized organizations.
Recent Update
During the second quarter of 1999, Walker changed its strategic direction to
emphasize the Tamaris and Horizon product lines, concentrating on refocusing the
Company as a provider of e-business solutions. In refocusing its resources and
efforts on e-business solutions for the enterprise, the Company incurred
impairment and restructuring charges and commenced the process of divesting its
IMMPOWER and Aptos product lines (see "Management's Discussion and Analysis of
Results of Operations and Financial Condition [MD&A] - Refocusing of Business
and Impairment and Restructuring Charges").
As a part of its strategic redirection, Walker redesigned its software products
specifically for the Internet architecture and business to business ("B2B") e-
business models. During the third quarter of 1999, Walker released a range of e-
business solutions based on the Tamaris and Horizon products (see "Business -
Walker Products and Services"). The Company believes that its architecture is
among the most scalable and adaptable for enterprise-level business software.
The Company's strategy is to offer enterprise financial, operational and
analytical e-business solutions to a variety of industries. Walker's e-business
solutions support and enhance enterprise-wide financial, operational and
analytic processes, including procurement, revenue management, financial
management and insight, business planning, budgeting, forecasting, and financial
consolidation. The Company's software products utilize the Microsoft Windows
operating systems on the desktop, NT, UNIX and S/390 operating systems on the
server and industry-leading On Line Analytical Processing (OLAP), Relational
Database Management Systems (RDBMS) including IBM's DB2, Hyperion Solutions'
Essbase, Microsoft SQL/Server and Oracle Express.
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The e-business solutions line represents the Company's core suite of business
and financial solutions utilizing the power of the enterprise server for highly
scalable transaction processing and reliability/availability, with the thin
client architecture of the browser based interface. This Internet-based
architecture provides an optimized platform for delivery of B2B e-business
solutions. The Company also develops and markets analytical applications, which
provide financial reporting, budgeting and financial consolidation solutions for
large and mid-sized organizations. These analytic applications integrate with
the e-business solutions and also work on a standalone basis with leading
Enterprise Resource Planning ("ERP") applications.
The Company's software products include productivity tools that allow the
Company's applications to be extensively customized to fit the customer's
particular requirements. The Company complements its software products by
providing specialized consulting services to assist customers with customization
and implementation.
The Company derives its revenues primarily from software licenses, software
maintenance and professional consulting services. The Company's e-business
solutions are licensed primarily to Global 2000 companies and similarly sized
business and governmental organizations worldwide. Its solutions and services
are marketed primarily through direct sales forces located in the United States
and the United Kingdom.
INDUSTRY BACKGROUND
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Large, geographically diverse organizations generate enormous amounts of
financial, operational, sales, marketing and other data. The transaction-
oriented information systems used by these organizations are strategic resources
that are critical to their efficiency, productivity and competitiveness,
providing the availability of continuous and simultaneous information to
employees, customers and suppliers. In the day-to-day operations of large
organizations, transactional data needs to be promptly and easily retrieved from
a variety of financial and operational systems, summarized, and organized into
meaningful business information that has a consistent business context. The
process of integrating the data is complex because large organizations employ
multiple accounting systems, operational systems and transactional databases,
spread their business across many different geographies and have different
information requirements by function and across the organization. Furthermore,
the current business climate of deregulation and merger/acquisition activities
in many industries has added additional complications as well as the need for
scalable and adaptable business processes.
Organizations have attempted to collect, summarize, organize and present
information from heterogeneous computer systems and transactional data sources
in various ways. Reports are assembled through entry of data into spreadsheets
and by using data from accounting systems and other operational systems. Many
organizations have tried to automate information systems through the use of
software developed internally or through assistance by outside consultants.
These custom-built systems are becoming increasingly obsolete because they are
rigid in structure, expensive and time consuming to create and maintain, and
difficult to update when business processes and requirements change. Moreover,
growing competition has increased the demand for more timely business
information specific to each function within the organization.
MARKET OPPORTUNITIES
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The following market dynamics are important factors shaping Walker's strategy
moving forward:
B2B e-BUSINESS
The term e-business means many things to many people, but is well defined as the
transformation of key business processes through the use of Internet
technologies. The core processes that are the foundation of business are merged
with the standards, simplicity and connectivity of the Internet. This melding
of Internet technologies with key business processes creates opportunities for
powerful interactive, transaction-intensive solutions that let companies do
business in ever more efficient and effective ways. Innovative companies of all
sizes are using the Web to communicate with their suppliers, their customers and
their partners, to connect with their back-end data-systems, and to transact
commerce. The opportunities presented by this new model of business enables
organizations to collaborate more fully with their suppliers, customers and
partners in a seamless manner. This opportunity has now defined itself as B2B e-
business. The market potential for B2B e-business solutions is significant
according to leading analysts such as IDC, Meta Group and Gartner Group.
Walker's B2B e-business solutions will allow current
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business processes to be streamlined, thereby improving operating efficiencies,
which in turn will strengthen the value to the customer.
ANALYTICAL APPLICATIONS
The need for better business information has created a growing need for analytic
application software to help organizations gain business knowledge from the
large volumes of transactional data available from daily operations. These
software solutions work on a stand-alone basis, or in conjunction with core
financial systems to translate data into business insight and thus to maximize
the value of financial information. Walker's analytical applications, by
integrating financial applications and analytic solutions, deliver a solution
that links business goals to operational data so organizations have deeper
insight into their business operations.
NETWORK COMPUTING and INTERNET ARCHITECTURES
Over the last twelve months the market has seen the rapid adoption of thin
client/large server architecture models, a significant contrast to the
client/server architectures that have been so prevalent since the mid-1990's.
Network computing enables companies to protect their existing information
technology investments while taking advantage of new technologies by dynamically
linking Internet, client/server and legacy systems. The Company believes that
the Internet architecture model has created opportunities for competitive
advantage in its market, and for its customers, through a combination of
business processes optimized for the Internet model, improved collaboration,
browser based interfaces, enhanced services, shared services and lower
transaction costs. Walker e-business solutions are designed to support this
integrated Internet architecture and e-business process model.
SHARED SERVICES
Large organizations can reduce the costs and complexity of information systems
by centralizing many administrative functions. These centralized functions are
now being combined with distributed operational procedures. Walker's high-
volume, e-business solutions support both models for distributing information
when and where it is needed within the extended organization, significantly
enhancing the availability of timely information.
HIGH VOLUME TRANSACTIONS
Large, geographically diverse organizations generate large volumes of
transactions and data. As organizations extend their business beyond traditional
boundaries with B2B e-business, their transaction-oriented systems will require
increasing scalability to handle the increased volume from additional users and
ever-growing transaction volumes. The Company believes that its solutions
provide scalable, cost-effective, high transaction volume capabilities.
WALKER STRATEGY
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The Company's objective is to be a leading provider of e-business solutions for
the enterprise. The Company's strategy is as follows:
ENABLE THE TRANSFORMATION OF KEY BUSINESS PROCESSES THROUGH THE USE OF INTERNET
TECHNOLOGIES
The Company believes that the e-business enablement of key business processes
has created opportunities for competitive advantage in its market through
Internet/intranet-enabled solutions. These e-business solutions allow
organizations to transform core business processes utilizing existing
information technology investments while taking advantage of powerful
interactive, transaction-intensive solutions that let companies do business in
ever more efficient and effective ways. Walker customers now have the ability to
extend the reach of their business applications directly to employees, customers
and suppliers worldwide.
DELIVER SOLUTIONS WHICH PROVIDE MANAGEMENT INSIGHT INTO KEY COMPLEX BUSINESS
PROCESSES IN SELECTED VERTICAL MARKETS
The Company has significant experience in certain vertical markets, and has
begun to customize its application suites for key industries including
utilities, retail, education, and transportation. These large, complex
businesses are best understood in a multidimensional context, by key performance
indicators and across business units, time periods, geographies and product
lines. Walker is able to capture and warehouse key business processes and
business information while retaining the business context of the information
through our analytical solutions. These
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solutions analyze the transactional data within the applications to deliver
information that allow managers to be more informed about their organization's
performance. Empowered by management insight, managers at all levels of the
organization have the opportunity to better run their area of the business,
enhancing competitiveness and bottom-line profitability. The Company's solutions
use OLAP database technology, which was developed specifically for
multidimensional business analysis.
PROVIDE ANALYTIC APPLICATIONS, WHICH COMPLEMENT MULTIPLE TRANSACTION
APPLICATIONS
The Company's focus is on analytic applications for budgeting, consolidation,
and management reporting, which it believes offers the greatest short-term
market potential. These applications provide analytical analysis and reporting
capabilities not available in traditional transaction systems. Most
organizations recognize the need to integrate enterprise-wide financial and
operational data to monitor company-wide performance. To respond to this need,
the Walker series of analytic applications integrate data from both Walker and
non-Walker applications, including leading ERP and best-of-breed applications
vendors.
EXTEND NEW AND EXISTING LONG-TERM RELATIONSHIPS WITH STRATEGIC PARTNERS
The Company has expanded its existing strategic relationships with leading
hardware and software suppliers such as IBM, Microsoft, Hyperion Solutions,
Inc., Commerce One, Inc., Information Builders, Inc., and Showcase Corporation,
as well as with third-party providers including global accounting and consulting
firms. The Company believes that the development of its relationships with these
partners, as well as the expanded scope of the relationships to include e-
business and e-commerce solutions, will contribute to its future revenue growth.
DELIVER LOWER COST/HIGHER PERFORMANCE SOLUTIONS
While many vendors of enterprise software solutions are focusing their
technology efforts on supporting a distributed client/server model, Walker
intends to continue to build and enhance its e-business solutions for the IBM
S/390 as an e-business server. This puts Walker in a position to support a
high-volume network computing environment which the Company believes, with the
growth of B2B collaboration, Internet bandwidth, processes that reflect an e-
business way of working, supporting both shared and distributed service models,
is far more cost effective than other distributed architectures models available
in the market today.
RETAIN AND EXTEND LONG-TERM CUSTOMER RELATIONSHIPS
The Company intends to continue to focus on generating additional revenues from
existing customers through software licenses, the introduction of new e-business
solutions and services, and warranty maintenance. In addition, providing
consulting and support services to existing customers represents a significant
portion of the Company's total revenues. Follow-on revenues create efficiencies
for deployment of sales and marketing resources and strengthen the Company's
relationships with its customers.
WALKER PRODUCTS AND SERVICES
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The Company's e-business solutions for the enterprise are designed to improve
core business processes and to provide the functionality to create competitive
advantage in an ever-changing global marketplace. Walker achieves this by
offering solutions that combine flexible e-business solutions, analytic
applications, deep industry knowledge and best practices expertise.
The Walker family of products and services include:
. e-business solutions for Global 2000 organizations
. Walker Horizon/TM/ Series of analytic applications for better managing
company performance
. Aptos/TM/ suite of client/server financial applications
. IMMPOWER enterprise asset management system
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PRODUCTS
e-Business Solutions for the Enterprise
Walker's e-business solutions assist businesses in mission critical areas:
. By turning massive amounts of transactional data into powerful business
information and intelligence; and
. By allowing organizations to exploit the new business processes that have
changed as a result of greater business collaboration through the use of
Internet technologies and the Web.
These highly scalable applications are designed to adapt quickly and easily to
changing business conditions such as deregulation, technology innovations, and
structural reorganizations including mergers and acquisitions. The Company also
broadens the scope of its e-business offerings with the addition of analytic
solutions that work with transactional data to provide in-depth insight into the
enterprise. This combination of e-business solutions and analytic applications
allows Walker customers the opportunity to better manage company-wide
performance.
Walker's e-business solutions are organized into five key operational areas:
. e-procurement - B2B based procurement, covering all aspects of the
procurement cycle from requisition through payment.
. e-revenue - B2B based revenue, covering all aspects of electronic billing
through collections and cash application.
. e-insight - delivery of management insight on company-wide performance
through a portal.
. e-technology - consists of the architecture, technologies and components that
enable and support e-business. This technology is designed for large-scale,
e-business environments.
. e-services - knowledgeable resources with a tried and proven approach to plan
and implement our e-business solutions efficiently and cost effectively.
Walker Horizon Series of Analytic Applications
The Horizon suite of analytic applications includes the planning, forecasting,
financial consolidation and reporting solutions that organizations need to
better manage company performance. By significantly reducing the time and
effort expended on the budgeting and consolidation process, Horizon allows
companies to focus on the analysis of financial data, instead of the
preparation.
The Horizon suite employs a flexible architecture that leverages a single OLAP
engine for all its applications. This provides companies with a solution that
ensures data integrity and is easy to deploy and maintain. As a result,
organizations can gain the ability to make fast, informed business decisions and
continually monitor performance improvement at all levels of the organization.
Additionally, Horizon's architecture allows companies to be more forward
thinking and to preview the effect of potential business decisions.
Horizon is available for multiple operating systems and OLAP databases. It
allows companies to track performance metrics that are specific to their
organization. Any combination of these applications complements Walker's e-
business solutions as well as non-Walker financial and operational solutions.
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The Horizon suite includes:
. Planning and Forecasting: Automates the planning, forecasting, and budgeting
processes - reducing planning cycles, facilitating continuous planning and
enabling the prediction of company performance.
. Consolidated Reporting: Manages the collection, adjustment and reporting of
consolidated results for enterprise-wide statutory, management and tax
reporting.
. OLAP Reporting & Analysis: A powerful reporting and analysis solution for
enabling financial reports and analysis using any OLAP technology.
Aptos/TM/ suite of client/server financial applications and IMMPOWER enterprise
asset management system
In refocusing its resources and efforts on e-business solutions for the
enterprise, the Company has begun the process of divesting its Aptos/TM/ and
IMMPOWER product lines. Revenues associated with these product lines aggregated
$13.6 million in 1999, $15.7 million in 1998, and $ 4.4 million in 1997. Aptos
is an integrated suite of client/server financial applications developed by
Walker for medium sized companies which uses an advanced architecture to deliver
best practices in finance and procurement. Walker's IMMPOWER solution offers an
enterprise asset management system that combines the latest in advanced asset,
materials and cost management with powerful analytic tools.
PRODUCT DEVELOPMENT
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The Company continually enhances its existing products and develops new products
to meet its customers' ever-changing requirements. The Company's success will
depend in part on its ability to develop product enhancements and new products
that keep pace with technological changes and changes in customers' business
practices. Software development expenditures were 22% of total revenues in
1999, 20% in 1998, and 26% in 1997.
Due to the layered architecture of the Company's e-business solutions, and the
Company's efforts to continually enhance its products to respond to evolving
technologies, the Company believes that its core products have long life cycles.
As operating systems, databases and presentation software technologies evolve,
the Company is able to modify its e-business solutions through an upgrade and by
changing only the corresponding layer of software without having to change the
other components of the system. Therefore, the Company's customers do not have
to completely replace the Company's products in response to technological
change. The Company works closely with its customers and prospective customers
to determine their requirements and to define the functionality of the Company's
new products and enhancements to its existing products.
SERVICES
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PROFESSIONAL SERVICES AND IT CONSULTING SERVICES
Organizations are increasingly leveraging information technology to accomplish
their business objectives. Large, global organizations rely heavily on their
software investments to remain competitive.
Walker provides a full range of services to support these needs. The Company's
professional services organization adds significant incremental value, offering
implementation, customization, migration, training and related services to its
customers. Walker has suites of reusable tools and utilities that enable
customers to complete customizations efficiently and cost effectively.
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Some of the areas addressed by Walker services include:
. Integration - to integrate the customers existing applications into the e-
business solution.
. Performance tuning - to increase computer throughput, reduce processing time
and otherwise improve performance.
. Migration - assistance in making cost-effective migrations to a new release
or from one platform to another.
. Conversion and integration - to integrate third-party applications into the
Walker framework or convert these products to Walker applications through
Walker's re-usable components, methodologies and e-technology.
. IT consulting and outsourcing - shortening time-to-benefit and reducing costs
for large-scale computing environments and applications.
CUSTOMER SUPPORT AND MAINTENANCE
The Company's customer support and maintenance program includes 24-hour hotline
telephone support for problem determination and resolution, account management,
ongoing functional and technical enhancements for installed products, and
membership in the Company's user group, which meets annually and holds periodic
regional conferences throughout the year.
REPORTABLE SEGMENTS
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The Company's products and services are considered a single reportable segment.
Information regarding domestic and international revenues and assets are
contained in Note 11 to the Consolidated Financial Statements.
SALES AND MARKETING
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Walker sells its products primarily through its direct sales force in North
America and the United Kingdom. In support of its sales force, the Company
conducts marketing programs, which include direct mail, public relations,
advertising, seminars, trade shows, and ongoing customer communication programs.
The sales cycle begins with the generation of a sales lead, or often the receipt
of a request for proposal ("RFP") from a prospect, which is followed by
qualification of the lead, an analysis of the customer's needs, response to an
RFP (one or more presentations to the customer), customer internal sign-off
activities and contract negotiation and finalization. While the sales cycle
varies by product and from customer to customer, the sales cycle has
historically required three to twelve months.
Walker markets its products primarily to large or complex organizations with e-
business collaboration requirements, and intensive data processing and
information management requirements. In each of the last three fiscal years, a
substantial portion of the Company's product revenue arose from additional
licensing by existing customers of either new products or products for
additional sites. In 1999, the Company introduced and has increased its
commitments to the development and marketing of its e-business solutions and
analytical applications.
The Company regards its professional services and product development
organizations as integral parts of its marketing strategy because of the length
and technical nature of the sales process. Professional services and product
development employees participate directly in the sales cycle and educate
prospective customers on the advantages of using the Company's solutions rather
than those developed internally or by other third parties.
COMPETITION
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The business and financial applications software market for large complex
organizations is intensely competitive. The Company's principal competitors
with the e-business solutions are SAP AG, Oracle Corporation and PeopleSoft,
Inc. The Company primarily competes with Hyperion Software Corporation, Oracle
Corporation and Comshare, Inc. with its analytical applications.
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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 IBM S/390 e-business server.
Most of Walker's competitors offer UNIX-based applications.
The Company encounters competition from a broader range of firms in the market
for professional services. These competitors include the consulting divisions
of the major accounting firms, which possess greater resources than the Company,
and small independent firms that compete primarily on the basis of price of
services provided.
PROPRIETARY RIGHTS
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The Company regards its products as proprietary and attempts to protect them
with a combination of trade secret, copyright and trademark laws, its license
agreements with customers and its internal security systems, confidentiality
procedures and employee agreements. Although the Company takes steps to protect
its trade secrets, there can be no assurance that misappropriation will not
occur. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to the same extent as do the laws of the United
States.
The Company typically provides its products to users under non-exclusive, non-
transferable perpetual licenses. Under the general terms and conditions of the
Company's standard product license agreement, the licensed software may be used
only for internal operations on designated computers at specific sites. The
Company makes source code for some of its products available to its customers
under agreements which restrict access to and use of the source code.
The Company seeks to protect its software, documentation and other written
materials under copyright laws, which afford only limited protection. It also
asserts trademark rights in its product names. The Company has not sought to
protect its products under patent laws. The Company believes that the rapid
pace of technological change in the computer industry makes patent or copyright
protection of less significance than such factors as the knowledge and
experience of management and personnel, name recognition, maintenance and
support of software products and the Company's ability to develop, enhance,
market and acquire software products and services.
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.
For a description of certain proprietary risks factors, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Additional Risk Factors."
EMPLOYEES
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As of December 31, 1999, the Company had 400 employees, of which 260 were based
in the United States and 140 were based internationally. Of the total, 48 of
such employees were engaged in sales and marketing, 64 were in customer support,
143 were in professional services, 98 were in product development and 47 were in
data processing, administration and finance positions.
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ITEM 2. PROPERTIES
The Company's corporate headquarters are located in San Francisco, California,
in a leased facility consisting of approximately 55,000 square feet of office
space. The Company occupies all 55,000 square feet governed by a lease that
expires in September 2007. Additionally, the Company leases office space
aggregating approximately 91,000 square feet in the metropolitan areas of
Atlanta, Georgia; Birmingham, Alabama; Boston, Massachusetts; Chicago, Illinois;
Aylesbury, England; Singapore, Republic of Singapore; Santon, South Africa; and
Toronto, Canada. The Company believes that it has adequate facilities to
accommodate the Company's operations in the near term and that additional space
will be available at commercially reasonable terms as needed.
Approximately 15,200 square feet of office space in Toronto, Canada; Aylesbury,
England; and Santon, South Africa is considered excess capacity. Of the excess,
approximately 9,150 square feet is sublet. The difference of approximately $2.4
million between the Company's total lease commitments for its excess capacity
and the total expected sublease income is included in accrued liabilities and
other long term obligations at December 31, 1999.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any legal proceedings other than ordinary routine
litigation incidental to the Company's business. The following sentence is a
forward-looking statement. The Company believes that the ultimate resolution of
these matters will not have a material adverse effect on the Company's financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter ended
December 31, 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Walker Interactive Systems, Inc. common stock is traded on The Nasdaq National
Stock Market under the symbol "WALK." As of March 10, 2000, there were
approximately 4,850 stockholders of record of the Company's common stock. The
Company has not paid any cash dividends and does not anticipate paying any cash
dividends in the foreseeable future. Furthermore, the Company has a line of
credit with a financial institution which restricts the Company's ability to pay
dividends if borrowings are outstanding under the line of credit.
The high and low, daily closing prices per share, for the periods set forth
below, are as reported by The Nasdaq National Stock Market System.
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<CAPTION>
QUARTER ENDING
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MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
PRICE RANGE PER COMMON SHARE 1999 1999 1999 1999
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Price range per common share:
High $ 6 25/32 $ 4 1/4 $ 3 3/16 $ 9 1/2
Low 3 27/32 2 5/8 2 5/8 2 1/2
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MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
PRICE RANGE PER COMMON SHARE 1999 1999 1999 1999
- --------------------------------- --------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Price range per common share:
High $20 1/16 $20 $15 5/16 $ 8 1/2
Low 13 13 1/8 6 3 1/2
</TABLE>
11
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table should be read in conjunction with the financial statements
of the Company and notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
WALKER INTERACTIVE SYSTEMS, INC.
(in thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
1999 (1) 1998 1997 (2) 1996 (3) 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Total revenues $ 87,978 $101,413 $ 71,409 $ 62,834 $ 58,566
Income (loss) before income taxes (24,887) 7,266 (2,179) 86 (10,198)
Net income (loss) (37,788) 4,525 (3,477) (116) (9,357)
Per Share Data:
Basic net income (loss) per share (4) ($2.67) $ 0.32 ($0.26) ($0.01) ($0.72)
Diluted net income (loss) per share (4) ($2.67) $ 0.31 ($0.26) ($0.01) ($0.72)
Shares:
Shares utilized to compute basic net
income (loss) per share 14,154 14,012 13,291 13,223 12,998
Shares utilized to compute diluted net
income (loss) per share 14,154 14,688 13,291 13,223 12,998
Balance Sheet Data:
Cash, cash equivalents and investments $ 22,014 $ 22,597 $ 27,690 $ 38,170 $ 42,318
Total assets 57,950 95,097 91,334 82,319 82,498
Stockholders' equity 19,119 57,051 51,689 46,772 48,734
</TABLE>
(1) Includes a $10.4 million charge for the impairment of certain capitalized
software and goodwill and a $4.5 million restructuring charge in connection
with the change in strategic direction of the Company (see Note 3 to the
consolidated financial statements).
(2) Includes a $4.6 million charge for the write-off of in-process research and
development from the acquisition of Revere, Inc. and a $1.3 million charge
for the termination of an exclusive distribution agreement.
(3) Includes a $2.8 million charge for the write-off of in-process research and
development from the acquisition of Hunt Systems, Inc.
(4) The per share amounts for 1996 and 1995 have been restated to conform to
the requirements of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share."
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of results of operations and financial condition of the
Company should be read in conjunction with the Company's financial statements
and notes thereto included elsewhere in this Form 10-K. The report on this Form
10-K contains forward-looking statements, including statements related to
industry trends and demand for mainframe products, expected resolution of legal
proceedings, cash commitments, working capital requirements, and possible
expansion in international markets. Discussions containing such forward-looking
statements may be found in the material set forth under "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", generally and specifically therein under the captions "Liquidity
and Capital Resources," and "Additional Risk Factors" as well as elsewhere in
this Annual Report on Form 10-K. 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 17 through 21, among others, should be considered in evaluating
the Company's prospects and future financial performance.
REFOCUSING BUSINESS
- -------------------
During the second quarter of 1999, Walker changed its strategic direction to
emphasize the Tamaris and Horizon product lines, concentrating on refocusing the
Company as a provider of e-business solutions. In refocusing its resources and
efforts on e-business solutions for the enterprise, the Company incurred
impairment and restructuring charges and commenced the process of divesting its
IMMPOWER and Aptos product lines. Impairment and restructuring charges are
discussed under Results of Operations below. In February 2000, the Company
announced its intention to sell the IMMPOWER and Aptos product lines. Revenues
associated with the IMMPOWER and Aptos product lines were $13.6 million, $15.7
million, and $4.4 million in 1999,1998, and 1997, respectively.
During the third quarter of 1999, Walker released its software products designed
specifically for the Internet architecture and B2B e-business models and
believes that its architecture is among the most scalable and adaptable
available for enterprise-level business software. The Company's strategy is to
offer enterprise financial, operational and analytical e-business solutions to a
variety of industries. Walker's e-business solutions support and enhance
enterprise-wide financial, operational and analytic processes, including
procurement, revenue management, financial management and insight, business
planning, budgeting, forecasting, and financial consolidation. The Company's
software products utilize the Microsoft Windows operating systems on the
desktop, NT, UNIX and S/390 operating systems on the server and industry-leading
On Line Analytical Processing (OLAP), Relational Database Management Systems
(RDBMS) including IBM's DB2, Hyperion Solutions Essbase, Microsoft SQL/Server
and Oracle Express.
ACQUISITION
- -----------
On December 2, 1997, the Company acquired all the outstanding share capital of
Revere, Inc. ("Revere") in exchange for $7.7 million of the Company's common
stock (634,022 shares) and $0.6 million for various transaction-related costs
and fees. The acquisition was accounted for as a purchase transaction. The
Company allocated $4.1 million to goodwill, $4.6 million to in-process research
and development, and the remaining amounts were allocated primarily to working
capital. The amount of the purchase price allocated to in-process research and
development was charged to the Company's 1997 results of operations, as
technological feasibility had not been established and no alternative future
uses existed at the acquisition date. The Company markets the acquired software
products as its IMMPOWER product line.
RESULTS OF OPERATIONS
- ---------------------
1999 compared to 1998
13
<PAGE>
REVENUES
Total revenues in 1999 were $88.0 million, a decrease of $ 13.4 million, or
13.2%, as compared to 1998.
License revenues in 1999 were $14.6 million, a decrease of $7.7 million, or
34.7%, as compared to 1998. The Company believes the decrease in license
revenues is primarily attributable to a continued softness in the enterprise
application software market as potential customers utilized available resources
to ensure existing applications were Year 2000 compatible rather than acquiring
and implementing new software applications.
Maintenance revenues in 1999 were $31.3 million, an increase of $0.1 million, or
0.2%, as compared to 1998 as customers continued to utilize the Company's
support capability.
Consulting revenues in 1999 were $42.1 million, a decrease of $5.8 million, or
12.1%, as compared to 1998. The Company believes the decrease in consulting
revenues is attributable to a reduction in implementation engagements as a
consequence of the decreased license revenues and a decrease in non-
implementation related projects (e.g., Year 2000, migration and best practice
solutions engagements).
COSTS OF LICENSES, MAINTENANCE AND CONSULTING
Costs of licenses, maintenance and consulting were $41.9 million in both 1999
and 1998 and represented 47.6% and 41.4% of total revenues in 1999 and 1998,
respectively.
The costs of licenses as a percentage of license revenues increased in 1999 as
compared to 1998. The increase in 1999 results from a greater proportion of
license revenues generated from the Company's products that utilize technology
licensed from third parties.
The cost of maintenance, as a percentage of related revenue, was relatively
unchanged in 1999 compared to 1998.
The costs of consulting, as a percentage of related revenue, increased in 1999
as compared to 1998. The increase in 1999 is primarily attributable to lower
than expected consulting revenues, lower profit margins associated with fixed
fee consulting engagements and an increase in the use of outside contractors.
SALES AND MARKETING
Sales and marketing costs in 1999 were $21.9 million, a decrease of $1.1
million, or 4.7%, as compared to 1998. As a percentage of total revenues, sales
and marketing expenses were 24.9% and 22.7% in 1999 and 1998, respectively. The
1999 sales and marketing expenses increased as a percentage of revenue because,
while 1999 revenues declined, costs associated with marketing promotions for
existing customers and marketing costs associated with efforts to promote the
Company, its multiple product lines and its consulting services were ongoing.
PRODUCT DEVELOPMENT
Product development related expenses, excluding amortization of capitalized
software, were as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Product development expenditures $19,262 $20,261
Less:
Additions to capitalized software (5,052) (7,391)
------- -------
Product development expense $14,210 $12,870
======= =======
</TABLE>
Product development expenditures decreased $1.0 million, or 5.0%, in 1999 as
compared to 1998 and were 21.6% and 20.0% of total revenues in 1999 and 1998,
respectively. Additions to capitalized software decreased $2.3 million, or 31.6%
in 1999 as compared to 1998 and were 26.2% and 36.5% of product development
expenditures in 1999 and 1998, respectively. The decrease in software costs
capitalized in 1999 is primarily attributable to product development resources
being allocated to projects that did not meet the criteria for capitalization.
AMORTIZATION OF CAPITALIZED SOFTWARE
Capitalized software amortization in 1999 was $5.4 million, an increase of $0.4
million, or 8.6%, as compared to 1998. The increase in 1999 was due to
additional amortization associated with the Company's ongoing practice of
14
<PAGE>
evaluating the useful lives of capitalized software products, offset by a
decrease in software amortization associated with products written off as part
of the Company's restructuring actions during 1999.
GENERAL AND ADMINISTRATIVE
General and administrative expenses in 1999 were $15.6 million, an increase of
$3.1 million, or 25.3%, as compared to 1998. As a percentage of total revenues,
general and administrative expenses were 17.7% and 12.3% in 1999 and 1998,
respectively. The absolute dollar increase in 1999 is due primarily to an
increase of $3.1 million in the allowance for doubtful accounts provision in
1999. In addition, in 1999 the Company had increased compensation costs, in part
resulting from the increased use of outside contractors, partially offset by the
effect on compensation and facilities costs of the Company's restructuring
actions during the second half of 1999.
IMPAIRMENT AND RESTRUCTURING CHARGES
In 1999 the Company recorded charges of $14.9 million in connection with its
change in strategic direction and the related restructuring costs. The charges
include $7.2 million for impairment of IMMPOWER and Aptos capitalized software
costs and $3.2 million of goodwill impairment. In addition, restructuring
charges of $4.5 million include $2.5 million for office consolidations and $2.0
million for workforce reductions. No impairment or restructuring charges were
recorded in 1998.
INCOME TAX EXPENSE
In 1999, the Company provided $12.9 million for income taxes on a pretax loss of
$24.9 million. The 1999 provision for income taxes includes additions of $12.5
million to the deferred tax valuation allowance, fully reserving the Company's
previously recorded net deferred tax assets. The increase in the valuation
allowance is a result of management's assessment of the effect of the change in
strategic direction and the timing of expiration of certain tax operating loss
carryforwards and credits. In 1998, the Company provided income taxes equal to
38% on pretax income of $7.3 million. The Company's tax provisions for both
years include the generation, expiration, and true up of tax credits and net
operating losses.
1998 compared to 1997
REVENUES
Total revenues in 1998 were $101.4 million, an increase of $30.0 million, or
42.0%, as compared to 1997.
License revenues in 1998 were $22.3 million, an increase of $5.8 million, or
35.3%, as compared to 1997. License revenues in 1998 include a full year of
Revere operations, representing $2.1 million of the increase. The remaining
increase in license revenues is attributable to the Horizon and Aptos products,
which the Company believes resulted from increased sales and marketing efforts,
and increased product offerings.
Maintenance revenues in 1998 were $31.2 million, an increase of $3.6 million, or
13.0%, as compared to 1997, of which $1.9 million is attributable to the full
year of Revere operations and the increased license revenues.
Consulting revenues in 1998 were $47.9 million, an increase of $20.6 million, or
75.5%, as compared to 1997. Consulting revenues in 1998 include a full year of
Revere operations, representing $4.1 million of the increase. The Company
believes the remaining increase in consulting revenues can be attributed to non-
implementation related projects (e.g., Year 2000 readiness, migration and best
practice consulting engagements), primarily in North America and Europe.
COSTS OF LICENSES, MAINTENANCE AND CONSULTING
Costs of licenses, maintenance and consulting in 1998 were $41.9 million, an
increase of $13.1 million, or 45.4%, as compared to 1998. The increased costs
primarily related to the increased revenues in 1998 as costs of licenses,
maintenance and consulting represented 41.4% and 40.4% of revenues in 1998 and
1997, respectively.
The costs of licenses and maintenance, as a percentage of related revenue, were
relatively unchanged in 1998 compared to 1997.
The costs of consulting, as a percentage of related revenue, decreased in 1998
as compared to 1997. The decrease in 1998 is primarily attributable to a change
in consulting revenue mix which included a greater proportion of higher
15
<PAGE>
margin consulting engagements during the year, partially offset by certain North
American fixed fee consulting engagements.
SALES AND MARKETING
Sales and marketing costs in 1998 were $23.0 million, an increase of $6.0
million, or 35.7%, as compared to 1997. As a percentage of total revenues,
sales and marketing expenses were 22.7% and 23.7% in 1998 and 1997,
respectively. The absolute dollar increase in the 1998 sales and marketing
expenses reflects the increased revenues while, as a percentage of revenue,
sales and marketing costs decreased slightly as the expenditures were spread
over a larger revenue base.
PRODUCT DEVELOPMENT
Product development related expenses, excluding amortization of capitalized
software, were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Product development expenditures $20,261 $18,259
Less:
Additions to capitalized software (7,391) (7,497)
------- -------
Product development expense $12,870 $10,762
======= =======
</TABLE>
Product development expenditures increased $2.0 million, or 11.0%, in 1998 as
compared to 1997 and were 20.0% and 25.6% of total revenues in 1998 and 1997,
respectively. Additions to capitalized software decreased $0.1 million, or 1.4%,
in 1998 as compared to 1997 and were 36.5% and 41.1% of product development
expenditures in 1998 and 1997, respectively. The increase in product development
expenditures in 1998 is primarily attributable to inclusion of a full year of
Revere operations.
AMORTIZATION OF CAPITALIZED SOFTWARE
Capitalized software amortization in 1998 was $5.0 million, an increase of $0.5
million, or 10.8%, as compared to 1997. The increase in 1998 was due primarily
to inclusion of a full year of Revere operations.
GENERAL AND ADMINISTRATIVE
General and administrative expenses in 1998 were $12.4 million, an increase of
$3.9 million, or 46.2%, as compared to 1997. As a percentage of total revenues,
general and administrative expenses were 12.3% and 11.9% in 1998 and 1997,
respectively. The absolute dollar increase in 1998 is partially due to
inclusion of a full year of Revere operations together with increased
professional fees and facilities costs.
INCOME TAX EXPENSE
In 1998, the Company provided income taxes equal to 38% on pretax income of $7.3
million. In 1997, the Company provided income taxes of $1.3 million on pretax
losses of $2.2 million reflecting the write off of in-process research and
development costs of $4.6 million for which no tax benefit is recorded. The
Company's tax provisions for both years include the generation, expiration, and
true up of tax credits and net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of December 31, 1999, the Company's principal sources of liquidity included
cash, cash equivalents and short- and long-term investments aggregating $22.0
million.
The Company's operating activities provided cash of $6.8 million in 1999, $5.9
million in 1998 and used cash of $1.4 million in 1997. The net loss in 1999 of
$37.8 million includes $22.9 million of non-cash charges related to impairment
of certain capitalized software and goodwill and increases in valuation
allowances for net deferred tax assets. Also, in 1999, improved cash management
and collections contributed to the improvement in cash flows from operations.
In 1998, the Company's net income was the primary reason for the increase in
cash provided for the year as compared to 1997, partially offset by increases in
accounts receivable associated with the increased revenue in 1998. Increases in
accounts receivable balances reduced cash flows from operations in 1997.
16
<PAGE>
Financing activities used cash of $0.2 million and $1.1 million in 1999 and
1998, respectively, and provided $0.3 million in 1997. In 1999, 1998 and 1997,
proceeds from the issuance of stock under the Company's employee stock purchase
plan and proceeds from stock options exercised provided $1.1 million, $2.8
million and $2.3 million in cash, respectively. The Company used cash in the
amount of $1.0 million, $2.4 million and $2.0 million for the purpose of
repurchasing Company stock. All stock repurchases were made pursuant to
resolutions of the Company's Board of Directors in 1995 authorizing the
repurchase of the Company's outstanding shares of common stock, not to exceed a
total cost of $17.5 million. Through December 31, 1999, the Company had acquired
1,059,500 shares of its common stock at an aggregate cost of $11.1 million. As
of December 31, 1999, the Company had reissued 1,048,462 of the repurchased
shares in connection with the Company's employee stock purchase plan, one of its
employee stock option plans, and the acquisition of Revere.
The Company has a line of credit in the amount of $6.0 million, secured by
marketable securities. The line of credit expires on March 31, 2000. The Company
has no outstanding borrowings under this line of credit at December 31, 1999.
In connection with the December 1997 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 believes that its principal sources of liquidity, together with
funds expected from operations, will satisfy the Company's currently anticipated
working capital and capital expenditure requirements for at least the next
twelve months. There can be no assurance that the Company will not need to raise
additional capital to fund operations within this period. The Company may seek
additional funding through public or private equity or debt financing. There can
be no assurance that additional financing can be obtained on acceptable terms,
or at all. If additional funds are raised by issuing equity securities, dilution
to stockholders may result. If adequate funds are not available our business may
be harmed.
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.
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.
17
<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 these negotiations 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) a customer may 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.
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.
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. The Company has provided services that
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, operating results are likely to be adversely affected.
There can be no assurance that the Company will be able to achieve profitability
on a quarterly or annual basis in the future. Any of the foregoing factors could
cause the Company's future operating results to fall 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."
18
<PAGE>
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 that 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 and competitive
pressures. 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 will continue its presence in international markets by marketing its
B2B e-business solutions for the enterprise to Global 2000 organizations. Risks
associated with such pursuits include, but are not limited to, the following:
changing market demands, economic and political conditions in foreign markets,
foreign exchange fluctuations, longer collections cycles, difficulty in managing
a geographically dispersed organization and changes in international tax laws.
The downturn in the Asia Pacific business climate had an adverse effect on some
market opportunities. Operating results are likely to be adversely affected if
the Company's operations in international markets are not successful.
COMPETITION
The business and financial applications software market for large, complex
organizations is intensely competitive. The Company's principal competitors
with Tamaris and e-business 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 consulting firms
Andersen Consulting and IBM Global Services, the consulting divisions of the
major accounting firms, all of which possess greater resources than the Company,
and niche-consulting firms that specialize in the Company's products and compete
primarily on the basis of price of services provided.
The principal competitive factors in the market for business and financial
applications software and services include product functionality, flexibility,
portability, integration, reliability, performance, product availability, speed
of implementation, quality of customer support and user documentation, vendor
reputation, experience, financial stability, cost effectiveness and 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.
19
<PAGE>
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 that
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 that 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.
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.
20
<PAGE>
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. The Company continues to hire a significant
number of sales, marketing, services and technical personnel. Because of the
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.
EXPANSION OF FACILITIES
Commercial building vacancy rates are very low in San Francisco, California,
where the Company has its headquarters. The Company's San Francisco office lease
expires in 2007. However, the Company may experience difficulty obtaining
additional space if the Company's space requirements in San Francisco
significantly exceed the quantity of space the Company currently has under
lease. In addition, the increased demand for office space has caused commercial
rental rates to increase substantially. Failure to either obtain additional
space, or obtain it on reasonably attractive commercial terms, may inhibit the
Company's ability to grow or otherwise adversely affect the Company's operations
and financial results.
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
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 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 7A. 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 into foreign currency
forward contracts.
21
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<S> <C>
Independent Auditors' Report.......................................................................... 23
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998............................ 24
Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997............ 25
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997.. 26
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997............ 27
Notes to Consolidated Financial Statements............................................................ 28
</TABLE>
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Walker Interactive Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Walker
Interactive Systems, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. Our
audit also included the consolidated financial statement schedule listed in item
14(a)2. These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Walker Interactive Systems, Inc.
and subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Also, in our opinion, the consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
February 7, 2000
23
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
ASSETS
Current assets:
<S> <C> <C>
Cash and equivalents $ 9,187 $ 15,556
Short-term investments 6,642 5,135
Accounts receivable, net of allowance for doubtful
accounts of $4,554 in 1999 and $1,378 in 1998 17,368 29,009
Prepaid expenses 2,471 2,347
Other receivables 812 1,448
----------------- ------------------
Total current assets 36,480 53,495
Long-term investments 6,185 1,906
Property and equipment, net 4,169 4,962
Capitalized software, net of accumulated amortization
of $47,379 in 1999 and $34,555 in 1998 10,653 18,186
Deferred tax assets, net - 12,501
Other assets 463 4,047
----------------- ------------------
Total assets $ 57,950 $ 95,097
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,203 $ 5,435
Accrued liabilities 12,788 13,061
Deferred revenue 17,168 14,819
----------------- ------------------
Total current liabilities 34,159 33,315
Deferred revenue 1,697 1,600
Other long-term obligations 2,975 3,131
----------------- ------------------
Total liabilities 38,831 38,046
----------------- ------------------
Commitments and contingencies (see Note 10)
Stockholders' equity:
Common stock, $.001 par value: 50,000 shares authorized;
issued 14,257 shares - December 31, 1999;
14,185 shares - December 31, 1998 14 14
Additional paid-in capital 74,566 74,719
Accumulated other comprehensive income 33 232
Accumulated deficit (55,450) (17,662)
Treasury stock, at cost (26 shares and 49 shares at December 31,
1999 and 1998, respectively) (44) (252)
----------------- ------------------
Total stockholders' equity 19,119 57,051
----------------- ------------------
Total liabilities and stockholders' equity $ 57,950 $ 95,097
================= ==================
</TABLE>
See notes to consolidated financial statements
24
<PAGE>
WALKER INTERACTIVE SYSTEM , INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES:
License $14,565 $22,291 $16,478
Maintenance 31,322 31,248 27,658
Consulting 42,091 47,874 27,273
---------- ---------- -----------
Total revenues 87,978 101,413 71,409
OPERATING EXPENSES:
Costs of revenues:
Costs of licenses, maintenance and consulting 41,864 41,944 28,856
Amortization of capitalized software 5,388 4,963 4,479
Sales and marketing 21,895 22,973 16,929
Product development 14,210 12,870 10,762
General and administrative 15,581 12,439 8,511
Write-off of purchased in-process
research and development - - 4,600
Impairment of capitalized
software and goodwill 10,427 - -
Distributor termination charge - - 1,291
Restructuring charge 4,518 - -
---------- ---------- -----------
Total operating expenses 113,883 95,189 75,428
Operating income(loss) (25,905) 6,224 (4,019)
Interest income, net 1,018 1,042 1,840
---------- ---------- -----------
Income (loss) before income taxes (24,887) 7,266 (2,179)
Provision for income taxes 12,901 2,741 1,298
---------- ---------- -----------
NET INCOME (LOSS) ($37,788) $4,525 ($3,477)
========== ========== ===========
BASIC NET INCOME (LOSS) PER SHARE ($2.67) $0.32 ($0.26)
=========== ========== ===========
Shares utilized to compute basic net income (loss) per share 14,154 14,012 13,291
=========== ========== ===========
DILUTED NET INCOME (LOSS) PER SHARE ($2.67) $0.31 ($0.26)
=========== ========== ===========
Shares utilized to compute diluted net income (loss) per share 14,154 14,688 13,291
=========== ========== ===========
</TABLE>
See notes to consolidated financial statements
25
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except shares)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON STOCK TREASURY STOCK PAID-IN COMPREHENSIVE ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) DEFICIT EQUITY
------ ------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 13,494,487 $13 (397,194) ($4,753) $70,008 $214 ($18,710) $46,772
Common stock issued under
stock option and employee
stock purchase plans 300,442 1 86,700 993 1,335 2,329
Common stock issued for
Revere acquisition 178,528 455,494 5,748 1,979 7,727
Treasury stock acquired (145,000) (1,988) (1,988)
Tax benefit from exercise
of stock options 300 300
Comprehensive income (loss):
Currency translation
adjustment (15)
Unrealized gain on
investments 41
Net loss for 1997 (3,477)
Total comprehensive
(loss) (3,451)
---------- ----- --------- -------- --------- ------------ ---------- ----------
Balance at December 31, 1997 13,973,457 14 - - 73,622 240 (22,187) 51,689
Common stock issued under
stock option and employee
stock purchase plans 211,594 160,703 2,165 626 2,791
Treasury stock acquired (200,000) (2,417) (2,417)
Tax benefit from exercise
of stock options 475 475
Other (366) (9,910) (4) (4)
Comprehensive income (loss):
Currency translation
adjustment (21)
Unrealized gain on
investments 13
Net income for 1998 4,525
Total comprehensive
income 4,517
------------- ----- ---------- -------- ----------- ------------ ---------- ------
Balance at December 31, 1998 14,184,685 14 (49,207) (252) 74,719 232 (17,662) 57,051
Common stock issued under
stock option and employee
stock purchase plans 72,500 245,616 1,260 (153) 1,107
Treasury stock acquired (222,500) (1,052) (1,052)
Comprehensive income (loss):
Currency translation
adjustment (116)
Unrealized (loss) on
investments (83)
Net loss for 1999 (37,788)
Total comprehensive
income (37,987)
------------- ----- ---------- -------- ----------- ------------- ---------- -------
Balance at December 31, 1999 14,257,185 $14 (26,091) ($44) $74,566 $33 ($55,450) $19,119
============= ===== ========== ======== =========== ============= ========== =======
</TABLE>
26
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($37,788) $4,525 ($ 3,477)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 8,282 8,446 6,922
Provision for losses on accounts receivable 3,176 2 (208)
Deferred tax provision 12,501 1,131 557
Impairment of capitalized software and goodwill 10,427 - -
Write-off of purchased in-process research and development - - 4,600
Changes in operating assets and liabilities:
Accounts receivable 9,101 (7,351) (8,358)
Prepaids and other assets (124) (346) (691)
Accounts payable (1,232) (523) 2,129
Accrued liabilities (134) 336 (2,236)
Deferred revenue 2,446 (327) (1,206)
Other 103 32 575
---------- --------- ---------
Net cash provided (used) by operations 6,758 5,925 (1,393)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from employee stock purchase plan
issuances and stock options exercised 1,107 2,787 2,329
Treasury stock acquired (1,052) (2,417) (1,988)
Capital lease payments (295) (74) (2)
Repayment of borrowings - (1,422) -
---------- ------- ---------
Net cash provided (used) by financing activities (240) (1,126) 339
---------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short- and long-term investments (14,771) (4,449) (29,444)
Maturities of short-term investments 7,375 10,950 12,916
Sales of short-term investments 1,507 6,506 21,125
Purchases of property (2,031) (2,533) (2,192)
Additions to capitalized software (5,052) (7,391) (7,497)
Cash acquired from Revere acquisition - - 222
Other 85 28 95
---------- ------- ---------
Net cash provided (used) by investing activities (12,887) 3,111 (4,775)
---------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,369) 7,910 (5,829)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,556 7,646 13,475
---------- -------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 9,187 $ 15,556 $ 7,646
========== ======== =========
- -------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosure:
Cash paid for income taxes $1,334 $ 299 $ 102
Non-cash activities:
Common stock issued for Revere acquisition $ - $ - $7,727
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
DESCRIPTION OF THE COMPANY. 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 enterprise
financial, operational and analytical software products that enable large
and medium-sized organizations, higher education institutions, and federal,
state and government agencies to optimize their business processes, reduce
business costs, and improve management information needed to run their
business. The Company derives its revenues primarily from software
licensing, software maintenance and professional consulting services. The
Company's Tamaris, Horizon and IMMPOWER product lines are licensed to large
and mid-size companies and similarly sized governmental organizations
worldwide. The Company's Aptos products are marketed primarily in Europe
and are licensed to mid-sized organizations. The Company's products and
services are marketed primarily through its direct sales forces located in
the United States and the United Kingdom. The Company licenses software
products directly to customers and occasionally to distributors for resale.
During the second quarter of 1999, Walker changed its strategic direction
to emphasize the Tamaris and Horizon product lines, concentrating on
refocusing the Company as a provider of e-business solutions. In
refocusing its resources and efforts on e-business solutions for the
enterprise, the Company incurred impairment and restructuring charges and
commenced the process of divesting its IMMPOWER and Aptos product lines
(see Note 3: Impairment and Restructuring Charges and Note 4: Acquisitions
and Divestitures). As a part of its strategic redirection , Walker
redesigned its software products specifically for the Internet architecture
and business to business ("B2B") e-business models. During the third
quarter of 1999, Walker released a range of e-business solutions based on
the Tamaris and Horizon products.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Walker Interactive Systems, Inc. and its wholly owned
subsidiaries. All intercompany balances and transactions have been
eliminated.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual amounts could differ from those
estimates.
Significant estimates used in the consolidated financial statements include
the estimates of (i) collectability of accounts receivable, (ii)
anticipated future gross revenues from the products for which development
costs have been capitalized, (iii) expense accruals associated with the
termination of exclusive distributor agreements, office consolidations and
sales and use taxes, (iv) provisions for estimated losses on contracts, (v)
the life of identifiable intangible assets from acquisitions and (vi)
realization of deferred tax assets. The amounts that the Company will
ultimately incur or recover could differ materially from the Company's
current estimates. The underlying estimates and facts supporting these
estimates could change in 2000 and thereafter.
CAPITALIZED SOFTWARE. Capitalized software includes certain costs of
purchased and internally developed software, and is stated at the lower of
cost or net realizable value. Capitalization of internally developed
software begins upon the establishment of technological feasibility.
Amortization of capitalized development costs begins when the products are
available for general release to customers, and is computed as the greater
of (i) the ratio of current gross revenues for a product to the total of
current and anticipated future gross revenues for the product, or (ii) the
straight-line method over the remaining estimated economic life of the
product. It is possible that these estimates of anticipated future gross
revenues, the remaining estimated economic life of the products, or both,
could be reduced significantly due to either competitive factors or the
rate of technological change.
28
<PAGE>
On October 1, 1999, the Company changed its estimated useful life for
capitalized software from three years to two years. The change was
implemented prospectively. This change in estimate did not have a material
impact on the Company's operating results or financial condition for the
year ended December 31, 1999.
PROPERTY AND EQUIPMENT. Property and equipment is stated at cost.
Depreciation is computed primarily utilizing the straight-line method over
the estimated useful lives that range from three to ten years. Leasehold
improvements are amortized utilizing the straight-line method over the
lesser of the estimated useful lives or remaining lease terms.
REVENUE RECOGNITION. The Company licenses software to end users under non-
cancelable license agreements and provides services such as installation,
implementation, training, and software maintenance. Software license
revenue for contracts not requiring significant customization services is
recognized upon meeting each of the following criteria: an executed
agreement has been signed; products have been shipped; the license fee is
fixed and determinable; collection of the resulting receivable is probable;
and vendor-specific objective evidence exists to allocate the total fee to
any undivided elements of the arrangement. Vendor-specific objective
evidence is based on the price generally charged when an element is sold
separately, or if not yet sold separately, is established by authorized
management. Software license revenue from contracts requiring the Company
to perform significant customization services are recognized on the
percentage-of-completion method. Provisions for estimated losses on
contracts are made in the period in which the anticipated losses become
known. Actual costs and gross margins on such contracts could differ from
management's estimates, and such differences could be material to the
financial statements. Maintenance revenue is recognized ratably over the
maintenance period, generally one year. Revenue from consulting and other
services are recognized as the related services are provided.
CONCENTRATION OF CREDIT RISK. The Company's investment portfolio is
diversified and consists of short- and long-term investment grade
securities. The Company's accounts receivable are derived from sales to
customers located in the United States, Canada, Europe and Asia Pacific.
The Company performs ongoing credit evaluations of its customers' financial
condition and maintains reserves for potential losses.
TRANSLATION OF FOREIGN CURRENCIES. The functional currency of the Company's
foreign subsidiaries is the respective local currency. Accordingly, assets
and liabilities of the foreign subsidiaries are translated to U.S. dollars
at the exchange rates in effect as of the balance sheet date and results of
operations for each subsidiary are translated using average rates in effect
for the period presented. Gains and losses from translation of foreign
subsidiaries' financial statements are reported as a separate component of
stockholders' equity. Gains and losses from transactions denominated in
currencies other than the functional currencies of the Company or its
subsidiaries are included in general and administrative expense and have
not been significant.
EARNINGS PER SHARE. Basic EPS is computed by dividing net income (loss) by
the weighted-average number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution that could occur from common
shares issuable through stock options, warrants and other convertible
securities.
29
<PAGE>
CERTAIN SIGNIFICANT RISKS AND UNCERTAINITIES. The Company operates in the
software industry, and accordingly, can be affected by a variety of
factors. For example, management believes that the Company's inability to
appropriately manage any of the following areas could have a significant
negative effect on the Company's future financial position, results of
operations and cash flows: focusing the Company's strategy around the e-
business market; market acceptance of the Company's products developed and
under development for the B2B e-business market; fundamental changes in the
technology underlying software products; development and management of
strategic alliances; and the hiring and retention of key employees.
RECENTLY ISSUED ACCOUNTING STANDARDS. In June 1998 and June 1999, the
Financial Accounting Standards Board issued Statement of Financial
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133". These statements define derivatives, require that all
derivatives be carried at fair value and provide for hedge accounting
when certain conditions are met. SFAS No. 133, as amended, is effective
for the Company for its fiscal year ending 2001. Although the Company has
not fully assessed the implications of SFAS No. 133, the Company does not
believe that adoption of this statement will have a material impact on
the Company's financial position or results of operations.
STOCK-BASED COMPENSATION. The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with APB No. 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation
cost has been recognized for its fixed cost stock option plans or its
associated stock purchase plan. The Company provides additional pro forma
disclosures as required under Statement of Financial Accounting Standards
No.123, "Accounting for Stock Based Compensation" ("SFAS 123").
RECLASSIFICATIONS. Certain reclassifications have been made to prior
years' amounts in order to conform to the 1999 consolidated financial
statement presentation.
2. COMPREHENSIVE INCOME (LOSS)
---------------------------
The components of comprehensive income(loss) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net income (loss) ($37,788) $4,525 ($3,477)
Currency translation adjustment (116) (21) (15)
Unrealized gain/(loss) on investments (83) 13 41
----------------- ----------------- -----------------
Total comprehensive income (loss) ($37,987) $4,517 ($3,451)
================= ================= =================
</TABLE>
3. IMPAIRMENT AND RESTRUCTURING CHARGES
------------------------------------
During the quarter ended June 30, 1999, the Board of Directors approved a
plan to realign Walker's focus on its core financial and analytic
applications. Associated with this change in strategy, the Board of
Directors approved steps to restructure its operations to increase
operating efficiencies. The Company will focus on the Tamaris and Horizon
product lines, specifically investing in Web-enabled functionality. As part
of refocusing its resources and efforts on e-business solutions for the
enterprise, in February 2000 the company announced its intention to begin
the process of divesting its IMMPOWER
30
<PAGE>
and Aptos product lines. During the year ended December 31, 1999, the
Company recorded a pretax charge of $14,945 in connection with this change
in strategic direction and the related costs of restructuring.
The Company evaluates capitalized software carrying amounts and goodwill
against related estimated undiscounted cash flows. During the year ended
December 31, 1999 the evaluation, considering the change of strategic
direction, indicated that the future undiscounted cash flows were not
sufficient to recover the carrying values of certain assets. Capitalized
software costs were adjusted to estimated net realizable value resulting in
a charge of $7,212, of which $5,388 was associated with IMMPOWER and Aptos
capitalized software costs, and an additional $1,824 related to other
capitalized software costs which had no future value. In addition, the
Company wrote off $3,215 of goodwill associated with these products.
Costs associated with office consolidations in Europe, North America and
Asia resulted in a total charge of $4,518 during the year ended December
31,1999. This was required to cover costs of reducing certain areas of the
workforce and facilities to levels more appropriate to current and expected
business requirements. Of this amount, a charge of $2,478 was recognized to
cover costs associated with excess facilities. The Company intends to
continue to search for tenants to sublet any vacant or excess facilities.
The Company also recognized a charge of $2,040 due to the reduction in the
workforce. A total of 79 employees were terminated during the year ended
December 31,1999 as a result of the Company's realignment strategy. Of the
total, 18 were in product development, 14 were in administrative and
finance positions, and 37 were engaged in sales and marketing, and 10 were
in customer support. All terminated employees were informed of their
terminations by December 31, 1999.
Restructuring and impairment charges taken during the year ended December
31,1999 and related charges against respective liabilities as of December
31,1999 are as follows:
<TABLE>
<CAPTION>
Restructuring Expected Expected
and Charges to Balance at charges to balance at
impairment liability December 31, liability December 31,
charges in 1999 1999 in 2000 2000
------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Termination payments to employees $ 2,040 $ (1,198) $ 842 $ (781) $ 61
Facility closures 2,478 (751) 1,727 (372) 1,355
Impairment of capitalized software 7,212 (7,212) -- -- --
Goodwill impairment 3,215 (3,215) -- -- --
------- -------- ------ ------- ------
$14,945 $(12,376) $2,569 $(1,153) $1,416
======= ======== ====== ======= ======
</TABLE>
Subsequent to December 31, 1999, the remaining expected charges against
liabilities are attributable to remaining termination payments to employees
and future lease payments on excess facilities which expire on various
dates through 2009.
In 1997, the Company terminated an exclusive distributorship agreement in
South Africa that resulted in a charge of $1,291.
4. ACQUISITIONS AND DIVESTITURES
-----------------------------
On December 2, 1997, the Company acquired all the outstanding share capital
of Revere, Inc. ("Revere") in exchange for $7,727 of the Company's common
stock (634,022 shares) and $587 for various transaction related costs and
fees. The Company allocated $4,091 to goodwill, $4,600 was allocated to
in-process software development, and the remaining amounts were allocated
primarily to working capital. The amount of the purchase price allocated to
in-process software development was charged to the Company's
31
<PAGE>
1997 results of operations, because technological feasibility had not been
established and no alternative future uses existed at the acquisition date.
The acquisition was accounted for as a purchase transaction.
The following unaudited pro forma information has been presented as if the
Revere acquisition had occurred on January 1997. The unaudited pro forma
information is based on historical results of operations adjusted for
acquisition costs and, in the opinion of management, is not necessarily
indicative of what results would have been if the Company had acquired
Revere, Inc. on January 1, 1997.
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
Total revenues $79,869
Net loss (6,517)
Basic and diluted net loss per share ($0.47)
Shares utilized to compute basic and diluted
net loss per share 13,925
</TABLE>
In February 2000, as part of refocusing its resources and efforts on e-
business solutions for the enterprise, the Company announced its intentions
to begin the process of divesting its IMMPOWER and Aptos product lines.
Revenues associated with the IMMPOWER and Aptos product lines were $13,627,
$15,674, and $4,359 in 1999,1998, and 1997, respectively.
5. CASH AND CASH EQUIVALENTS AND SHORT- AND LONG-TERM INVESTMENTS
--------------------------------------------------------------
All liquid investments with original maturities of three months or less are
considered cash and cash equivalents. Cash equivalents are stated at cost,
which approximates fair value. The Company classifies those investments
that mature in less than one year as short-term investments. The long-term
marketable securities held at December 31, 1999 have contractual maturities
of three years or less. The Company's short- and long-term investments are
classified as available-for-sale and reported at fair value. Net unrealized
gains and losses are excluded from earnings and reported net of income
taxes as accumulated other comprehensive income in stockholders' equity.
Realized gains and losses are computed based on the amortized cost of each
security. There were no material gross realized gains or losses from the
sale of investments during the three year period ended December 31, 1999.
Short- and long-term investments available-for-sale are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
December 31, 1999 Amortized Costs Gains Losses Fair Value
- ----------------------------------------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Short-term investments $ 6,657 $ -- $(15) $ 6,642
Long-term investments 6,235 -- (50) 6,185
------- ---- ---- -------
Total $12,892 $ -- $(65) $12,827
======= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
December 31, 1998 Amortized Costs Gains Losses Fair Value
- ----------------------------------------------- --------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Short-term investments $5,131 $ 5 $(1) $5,135
Long-term investments 1,895 12 (1) 1,906
------ --- --- ------
Total $7,026 $17 $(2) $7,041
====== === === ======
</TABLE>
32
<PAGE>
6. PROPERTY AND EQUIPMENT
----------------------
Property and equipment at December 31, 1999 and 1998 includes the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Equipment $ 21,169 $ 20,032
Furniture and fixtures 2,534 2,580
Leasehold improvements 1,668 1,787
Property under capital leases:
Equipment 2,182 2,189
Furniture 1,760 1,760
-------- --------
29,313 28,348
Less:
Accumulated depreciation (25,144) (23,386)
-------- --------
Property and equipment, net $ 4,169 $ 4,962
======== ========
</TABLE>
Depreciation expense totaled $2,615, $2,552 and $2,444 for 1999, 1998 and
1997, respectively.
7. LIABILITIES
-----------
Accrued liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Salaries, commissions, and other
compensation $ 3,964 $ 5,022
Federal, state, foreign and other taxes 2,297 3,177
Accrued facilities expenses 845 753
Royalties 781 1,272
Current portion of capital leases 156 161
Other accrued expenses 4,745 2,676
------- -------
$12,788 $13,061
======= =======
</TABLE>
Other long-term obligations are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
--------- --------
<S> <C> <C>
Accrued facilities expenses $1,533 $ --
Long term portion of capital leases 146 290
Income taxes -- 591
Other 1,296 2,250
--------- --------
$2,975 $3,131
========= ========
</TABLE>
Deferred revenue (current) is primarily comprised of deferred software
maintenance of $15,428 and $13,470 at December 31, 1999 and 1998,
respectively.
33
<PAGE>
8. INCOME TAXES
------------
The Company's deferred tax balances at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Deferred revenue recognized for tax $ 302 $ 225
Excess book depreciation over tax depreciation 594 784
Accrued liabilities and reserves 3,119 2,606
Research and development credits 2,972 3,290
Alternative minimum tax credit carryforwards 491 488
Net operating loss carryforwards 9,538 4,775
Foreign tax credits carryforwards 3,413 3,176
Foreign losses 2,837 3,588
Other 464 304
-------- --------
23,730 19,236
Valuation allowance (21,896) (2,844)
-------- --------
1,834 16,392
Deferred Tax Liabilities:
Capitalized software development costs expensed for tax purposes (1,834) (3,891)
-------- --------
Deferred Tax Assets - net $ -- $12,501
======== ========
</TABLE>
At December 31, 1999, the Company's valuation allowance was $21,896,
comprised of all deferred tax assets net of deferred liabilities. At
December 31, 1998, the valuation allowance was $2,844, consisting of tax
credits expected to expire unused and losses from which the Company did
not expect to derive any benefit. The Company is required to reduce the
deferred tax assets by a valuation allowance if based on the weight of
evidence, it is more likely than not, that some portion or all of the
deferred tax asset will not be realized. As of December 31, 1999, the
Company's deferred tax assets included approximately $16,913 of items which
will expire with the passage of time. Realization of these assets is
dependent on generating sufficient taxable income prior to the expiration
of such benefits.
At December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $26,045 which expire in varying amounts from
2008 through 2014, federal research tax credits of $1,275 which expire in
varying amounts from 2000 through 2019, California state research tax
credits of $2,611 and alternative minimum tax credits of $497 which have no
expiration date and foreign tax credits of $3,413 which expire in varying
amounts from 2000 through 2004.
34
<PAGE>
Income tax expense consists of:
<TABLE>
<CAPTION>
1999: Current Deferred Total
------- -------- -------
<S> <C> <C> <C>
Federal $ 61 $ 8,654 $ 8,715
State 140 2,466 2,606
Foreign 199 1,381 1,580
------- ------- -------
Total $ 400 $12,501 $12,901
======= ======= =======
1998: Current Deferred Total
------- -------- -------
Federal $ (92) $ 1,048 $ 956
State 137 274 411
Foreign 1,565 (191) 1,374
------- -------- -------
Total $1,610 $ 1,131 $ 2,741
======= ======= =======
1997: Current Deferred Total
------- -------- -------
Federal $ -- $ 1,242 $ 1,242
State 46 (247) (201)
Foreign 451 (194) 257
------- -------- -------
Total $ 497 $ 801 $ 1,298
======= ======= =======
</TABLE>
The effective income tax rate differs from the amount computed by applying
the federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
1999 % 1998 % 1997 %
------- --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit) at statutory rate - Federal $(8,666) (35)% $2,471 34 % $(742) (34)%
State income and capital taxes (1,210) (5)% 358 5 % 97 4 %
Provision at statutory rates of controlled
foreign subsidiaries 259 1 % (35) (1)% 166 7 %
Goodwill 1,173 5 % 232 3 % -- --
Federal research and development credit, net of
expired credits (174) (1)% (164) (2)% $ (217) (10)%
Write-off of purchased in-process research and
development -- -- -- -- 1,564 72 %
Decrease in tax credits resulting from the
true-up of assessments and changes in tax
accounting methods 1,687 7 % 859 12 % 493 22 %
Valuation allowance 19,052 77 % -- -- -- --
Increase in net operating losses resulting from -- -- (828) (11)% -- --
the true-up of assessments
Foreign losses not benefited -- -- -- -- (442) (20)%
Decrease in tax credits carried back as net
operating losses -- -- -- -- 441 20 %
Other, net 780 3 % (152) (2)% (62) (2)%
------- --- ------ --- ------ ---
Total income tax expense $12,901 52 % $2,741 38 % $1,298 59 %
======= === ====== === ====== ===
</TABLE>
35
<PAGE>
9. STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
---------------------------------------------
401(k) Plan
------------
The Company has a 401(k) tax-deferred savings plan covering all of its
eligible, domestic employees. For eligible international employees, the
Company contributes to the employees' personal pension plans. Company
matching contributions, which are not required by either the domestic or
international plans, totaled $1,482, $1,480 and $1,159 in 1999, 1998 and
1997, respectively.
Stock Option Plans
------------------
Under the Company's statutory employee stock option plans, 5,950 shares of
common stock have been reserved for grant to employees, consultants and
directors. For incentive stock options, the exercise price of each option
granted is 100 % of fair market value on the date of the grant. Non-
statutory options may be granted at prices not less than 85 % of fair
market value at the date of grant. To date, all options have been granted
at fair market value at the date of grant. Options granted under the plans
generally vest over a period of four years and expire ten years from the
date of grant. At December 31, 1999, 1,402 shares of common stock were
available for future option grants.
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
-------------------- --------------------- ---------------------
Weighted- Weighted- Weighted-
average average average
exercise exercise exercise
Options price Options price Options price
------- -------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of period 3,827 $8.22 2,902 $ 9.78 2,590 $ 8.00
Granted 2,486 3.08 2,716 9.63 791 13.71
Exercised (73) 5.04 (210) 7.29 (305) 4.95
Canceled or expired (1,648) 7.22 (1,581) 13.65 (174) 9.54
------ ----- ------ ------ ----- ------
Outstanding-end of period 4,592 $5.71 3,827 $ 8.22 2,902 $ 9.78
====== ===== ====== ====== ===== ======
Exercisable-end of period 1,982 1,250 1,014
====== ====== =====
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------- ----------------------------
Weighted-
average Weighted- Weighted-
remaining average average
Range of exercise Outstanding at contractual exercise Exercisable at exercise
price Dec. 31, 1999 life price Dec. 31,1999 price
- ----------------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.35 to $3.19 1,000 9.0 $ 2.65 351 $ 2.51
3.31 to 4.88 1,153 9.9 3.33 6 4.28
4.94 to 7.00 1,525 6.4 6.27 986 5.97
7.12 to 12.88 568 5.7 9.24 401 9.20
13.12 to 16.00 346 7.1 14.20 238 13.87
----- --- ------ ----- ------
4,592 7.7 $ 5.71 1,982 $ 6.95
===== === ====== ===== ======
</TABLE>
36
<PAGE>
Stock Purchase Plan
-------------------
The Company has an Employee Stock Purchase Plan, which provides for the
sale of up to 1,500 shares to eligible employees by means of payroll
deductions. Employees may designate up to 10 percent of their earnings, as
defined, to purchase shares at prices not less than 85 percent of fair
market value. From inception through December 31, 1999, 1,007 shares had
been purchased at prices ranging from $2.23 to $11.53 per share.
The fair value of the employees' purchase rights was estimated using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Dividend yield 0.0% 0.0% 0.0%
Volatility 108.0% 65.3% 45.1%
Risk free interest rate 6.1% 4.5% 5.4%
Expected term, in years 0.5 0.5 0.7
</TABLE>
The weighted average fair value for shares purchased through the Company's
Employee Stock Purchase Plan during 1999, 1998 and 1997 was $5.55, $4.70
and $3.97, respectively.
Additional Stock Plan Information and Pro forma Results
-------------------------------------------------------
Statement of Financial Accounting Standards No. 123, Accounting for Stock-
Based Compensation, (SFAS No. 123) requires the disclosure of pro forma net
income and earnings per share had the Company adopted the fair value method
in 1995. Under SFAS No. 123, the fair value of the stock-based awards to
employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models
also require subjective assumptions, including future stock price
volatility and expected time to exercise, which greatly affect the
calculated values. The Company's calculations were made using the minimum
value method with the following weighted average assumptions for the three
years ended December 31, 1997, 1998 and 1999;
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Dividend yield 0.0% 0.0% 0.0%
Volatility 108.0% 65.3% 45.1%
Risk free interest rate 6.1% 4.6% 5.7%
Expected term, in years 4.3 4.4 4.4
</TABLE>
The weighted average fair value at date of grant for options granted during
1999, 1998 and 1997 was $5.70, $5.25 and $6.02, respectively.
37
<PAGE>
The Company's calculations are based on a multiple option valuation
approach and forfeitures are recognized as they occur. If the computed fair
values of the stock-based awards had been amortized over the vesting period
of the awards, pro forma net income (loss) applicable to common
stockholders would have been approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
--------- ------ --------
<S> <C> <C> <C>
Net income (loss):
As reported ($37,788) $4,525 ($3,477)
Pro forma (40,160) 785 (5,763)
Diluted net income (loss) per share:
As reported ($2.67) $ 0.31 ($0.26)
Pro forma ($2.84) $ 0.05 ($0.43)
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Company has operating leases for office space with varying expiration
dates through 2016, and for computer equipment with varying expiration
dates through 2003. The leases generally provide for minimum annual rentals
and payment of taxes, insurance and maintenance costs. Rental expense for
operating leases was $4,021, $5,340 and $4,694 in 1999, 1998 and 1997,
respectively.
At December 31, 1999, the Company had office space that was considered
excess capacity. The difference between the Company's total lease
commitments for its excess capacity and the total expected sublease income
is $2,378 and is included in short- and long-term accrued liabilities (see
Note 7).
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<S> <C>
2000 $ 4,253
2001 3,386
2002 2,779
2003 2,529
2004 2,279
Thereafter 11,009
-------
Total $26,235
=======
</TABLE>
The Company had a line of credit in the amount of $6,000 secured by
marketable securities. The line of credit expires on March 31, 2000. There
were no outstanding borrowings against this line of credit during 1999 or
1998.
The Company is not party to any legal proceedings other than ordinary
routine litigation incidental to the Company's business. The Company
believes that the ultimate resolution of these matters will not have a
material adverse effect on the Company's consolidated financial statements
taken as a whole.
38
<PAGE>
11. GEOGRAPHIC OPERATIONS
---------------------
The Company's products and services are considered a single reportable
segment. The Company primarily operates in three geographic areas, North
America, Europe and Asia Pacific. Corporate assets consist of cash and cash
equivalents, short- and long-term investments, capitalized software and
deferred tax assets. During the three years ended December 31, 1999, no
customer represented in excess of 10% of total revenues.
Geographical area data are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
Revenues: 1999 1998 1997
- -------------------------- ------- -------- -------
<S> <C> <C> <C>
North America $64,756 $ 71,654 $48,993
Europe 21,048 26,357 18,923
Asia Pacific 2,174 3,402 3,493
------- -------- -------
Total revenues $87,978 $101,413 $71,409
======= ======== =======
<CAPTION>
DECEMBER 31,
Identifiable assets: 1999 1998 1997
- -------------------------- ------- -------- -------
<S> <C> <C> <C>
North America $12,977 $23,156 $19,707
Europe 11,523 12,477 7,146
Asia Pacific 783 2,604 2,973
Corporate 32,667 56,860 61,508
------- ------- -------
Total assets $57,950 $95,097 $91,334
======= ======= =======
</TABLE>
12. TREASURY STOCK ACQUISITIONS
---------------------------
In 1995, the Board of Directors authorized the Company to spend up to
$17,500 for the repurchase of the Company's outstanding common stock. As
of December 31, 1999, the Company had acquired 1,060 shares of its common
stock at a cost of $11,100. As of December 31, 1999 the Company had
reissued 1,048 of the repurchased shares in connection with the Company's
employee stock purchase plan, one of its employee stock option plans and
the purchase acquisition of Revere, Inc.
39
<PAGE>
13. 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. Diluted EPS for 1999 and
1997 excludes any effect of such instruments because their inclusion would
be antidilutive.
The following is a summary of the calculation of the number of shares used
in calculating basic and diluted EPS:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Shares used to compute basic EPS 14,154 14,012 13,291
Add: effect of dilutive securities - 676 -
------ ------ ------
Shares used to compute diluted EPS 14,154 14,688 13,291
====== ====== ======
</TABLE>
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein by reference to the
Company's Proxy Statement in connection with its 2000 Annual Meeting of
Stockholders under the captions "Proposal 1 - Election of Directors,"
"Additional Information - Management" and "Additional Information - Section
16(a) Beneficial Ownership Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference to the
Company's Proxy Statement in connection with its 2000 Annual Meeting of
Stockholders under the caption "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference to the
Company's Proxy Statement in connection with its 2000 Annual Meeting of
Stockholders under the caption "Security Ownership of Certain Beneficial Owners
and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference to the
Company's Proxy Statement in connection with its 2000 Annual Meeting of
Stockholders under the caption "Certain Transactions."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
<TABLE>
<CAPTION>
1. Consolidated Financial Statements Page
----
<S> <C>
Independent Auditors' Report.............................................. 23
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998................................................... 24
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997.................................... 25
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997.............................. 26
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.................................... 27
Notes to Consolidated Financial Statements................................ 28
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
2. Consolidated Financial Statement Schedule Page
----
<S> <C>
Schedule II - Valuation and Qualifying Accounts.......................... 46
</TABLE>
All other financial statement schedules not listed above are omitted
as the required information is not applicable or the information is
presented in the consolidated financial statements or related notes.
3. Exhibits
The following exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated as of October 29,
1997, among the Registrant, Copper Acquisition Sub, and
Revere, Inc.(6)
3.1 The Company's Amended and Restated Certificate of
Incorporation.(2)
3.2 Bylaws of Registrant.(9)
10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.(3)
10.2 * 1992 Employee Stock Purchase Plan, as amended to
date.(11)
10.3 * 1989 Employee Stock Option Plan and related forms of
Incentive Stock Option Grant and Supplemental Stock Option
Grant.(3),(9)
10.4 * 1986 Employee Stock Purchase Plan and related form of
Employee Stock Purchase Agreement.(3)
10.5 Purchase and Sale Agreement between Registrant and Global
Software, Inc., dated as of August 31, 1990.(3)
10.6 Lease between Registrant and Marathon U.S. Realties, Inc.,
dated October 20, 1988 and Amendment No. 1, dated as of
October 31, 1990.(3)
10.7 Lease between Registrant and Chicago Title and Trust Company,
dated as of December 3, 1990.(3)
10.8 Agreement for Lease between Registrant, Walker Interactive
Products International and Alton House Limited, dated as of
March 18, 1991.(3)
10.9 * 1993 Non-Employee Directors' Stock Option Plan, as amended
to date.(12)
10.10 * 1994 Equity Incentive Plan, as amended to date.(13)
10.11 Agreement for the Sale and Purchase of The Solutions Group
Limited by and among Walker Interactive Products
International, and Adrian J. Dixon and Nigel G. Heath,
dated as of June 30, 1995.(1)
10.12 * Form of Executive Employment Agreement entered into between
Registrant and certain of its officers.(5)
10.13 * 1995 Executive Employment Agreement between the Registrant
and Leonard Y. Liu, as amended to date.(4),(7)
10.14 * 1995 Non-Statutory Stock Option Plan for Non-Officer
Employees, as amended to date.
</TABLE>
42
<PAGE>
<TABLE>
<C> <S>
10.15 Lease between Registrant and Equitable Assurance Society of the United
States, dated November 25, 1997.(10)
10.15A Lease between Registrant and Equitable Assurance Society of the United
States as amended October 1,1999.
10.16 * 1998 Executive Employment Agreement between the Registrant and Thomas
W. Hubbs.(8)
10.17 * Form of Executive Severance Benefits Agreement entered into between the
Registrant and certain of its employees.(7)
10.18 * Separation agreement with Barbara M. Hubbard and the Registrant.(13)
10.19 * Agreement with Leonard Y. Liu and the Registrant.(14)
10.20 * Form of Executive Severance Benefits Agreement entered into between the
Registrant and certain of its employees.(15)
10.21 * Executive Employment Agreement entered into between the Registrant and
Frank M. Richardson.
10.22 * Executive Severance Benefits Agreement entered into between the
Registrant and Bruce Dawson.
10.23 * Executive Severance Benefits Agreement entered into between the
Registrant and Paul Lord.
10.24 * Agreement with Leonard Y. Liu and the Registrant.
10.25 * Consulting Services Agreement with Yeun H. Lee and the Registrant.
10.26 * Separation Agreement with Mike Shahbazian and the Registrant
21.1 Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule for fiscal year ended December 31, 1999
</TABLE>
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, the Company did not file any reports
on Form 8-K.
_______________
(1) Incorporated by reference to the corresponding exhibit to the Current
Report on Form 8-K, filed July 13, 1995.
(2) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1992.
(3) Incorporated by reference to the corresponding exhibit to the Registration
Statement on Form S-1, as amended (Registration No. 33-45737).
(4) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30,1995.
(5) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1995.
(6) Incorporated by reference to the corresponding exhibit to the Current
Report on Form 8-K, filed December 11, 1997.
(7) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30, 1998.
43
<PAGE>
(8) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending June 30, 1998.
(9) Incorporated by reference to the attachment of the Company's 1998 Proxy
Statement.
(10) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1997.
(11) Incorporated by reference to the attachment of the Company's 1999 Proxy
Statement.
(12) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1998.
(13) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending March 31, 1999.
(14) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending June 30, 1999.
(15) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30, 1999.
* Indicates a management contract or compensatory plan.
44
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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: March 28, 2000 By: /s/ Frank Richardson
-----------------------------
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank Richardson and Stanley V. Vogler, and each
or any one of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
to this Report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or his or
her substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ -------------------------------------------- --------------
<S> <C> <C>
/s/ DAVID C. WETMORE Chairman of the Board of Directors March 28, 2000
- ------------------------------
David C. Wetmore
/s/ FRANK RICHARDSON Chief Executive Officer, Director March 28, 2000
- ------------------------------
Frank Richardson
/s/ STANLEY V. VOGLER Chief Financial Officer March 28, 2000
- ------------------------------
Stanley V. Vogler (Principal Financial and Accounting Officer)
/s/ RICHARD C. ALBERDING Director March 28, 2000
- ------------------------------
Richard C. Alberding
/s/ TANIA AMOCHAEV Director March 28, 2000
- ------------------------------
Tania Amochaev
/s/ WILLIAM A. HASLER Director March 28, 2000
- ------------------------------
William A. Hasler
/s/ JOHN M. LILLIE Director March 28, 2000
- ------------------------------
John M. Lillie
/s/ LEONARD Y. LIU Director March 28, 2000
- ------------------------------
Leonard Y. Liu
</TABLE>
45
<PAGE>
SCHEDULE II
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning of Costs and Amounts Balance at
Allowance for Doubtful Accounts: Period Expenses Written-Off Other (1) End of Period
- -------------------------------- ------------ ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1999 $1,378 3,605 429 - $4,554
Year Ended December 31, 1998 $1,376 506 504 - $1,378
Year Ended December 31, 1997 $1,584 823 1,381 350 $1,376
</TABLE>
(1) Related to the Company's acquisition of Revere.
46
<PAGE>
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
INDEX TO EXHIBITS
Exhibit
Number Description of Document
------ -----------------------
2.1 Agreement and Plan of Reorganization dated as of October
29, 1997, among the Registrant, Copper Acquisition Sub,
and Revere, Inc.(6)
3.1 The Company's Amended and Restated Certificate of
Incorporation.(2)
3.2 Bylaws of Registrant.(9)
10.1 Form of Indemnity Agreement entered into between the
Registrant and its directors and officers.(3)
10.2 * 1992 Employee Stock Purchase Plan, as amended to
date.(11)
10.3 * 1989 Employee Stock Option Plan and related forms of
Incentive Stock Option Grant and Supplemental Stock
Option Grant.(3),(9)
10.4 * 1986 Employee Stock Purchase Plan and related form of
Employee Stock Purchase Agreement.(3)
10.5 Purchase and Sale Agreement between Registrant and
Global Software, Inc., dated as of August 31, 1990.(3)
10.6 Lease between Registrant and Marathon U.S. Realties,
Inc., dated October 20, 1988 and Amendment No. 1, dated
as of October 31, 1990.(3)
10.7 Lease between Registrant and Chicago Title and Trust
Company, dated as of December 3, 1990.(3)
10.8 Agreement for Lease between Registrant, Walker
Interactive Products International and Alton House
Limited, dated as of March 18, 1991.(3)
10.9 * 1993 Non-Employee Directors' Stock Option Plan, as
amended to date.(12)
10.10 * 1994 Equity Incentive Plan, as amended to date.(13)
10.11 Agreement for the Sale and Purchase of The Solutions
Group Limited by and among Walker Interactive Products
International, and Adrian J. Dixon and Nigel G. Heath,
dated as of June 30, 1995.(1)
10.12 * Form of Executive Employment Agreement entered into
between Registrant and certain of its officers.(5)
10.13 * 1995 Executive Employment Agreement between the
Registrant and Leonard Y. Liu, as amended to
date.(4),(7)
10.14 * 1995 Non-Statutory Stock Option Plan for Non-Officer
Employees, as amended to date.
10.15 Lease between Registrant and Equitable Assurance Society
of the United States, dated November 25, 1997.(10)
10.15A Lease between Registrant and Equitable Assurance
Society of the United States as amended October 1,1999.
10.15A Lease between Registrant and Equitable Assurance Society
of the United States as amended October 1, 1999.
10.16 * 1998 Executive Employment Agreement between the
Registrant and Thomas W. Hubbs.(8)
47
<PAGE>
10.17 * Form of Executive Severance Benefits Agreement entered
into between the Registrant and certain of its
employees.(7)
11.18 * Separation agreement with Barbara M. Hubbard and the
Registrant.(13)
10.19 * Agreement with Leonard Y. Liu and the Registrant.(14)
10.20 * Form of Executive Severance Benefits Agreement entered
into between the Registrant and certain of its
employees.(15)
10.21 * Executive Employment Agreement entered into between the
Registrant and Frank M. Richardson.
10.22 * Executive Severance Benefits Agreement entered into
between the Registrant and Bruce Dawson.
10.23 * Executive Severance Benefits Agreement entered into
between the Registrant and Paul Lord.
10.24 * Agreement with Leonard Y. Liu and the Registrant.
10.25 * Consulting Services Agreement with Yeun H. Lee and the
Registrant.
10.26 * Separation Agreement with Mike Shahbazian and the
Registrant
21.1 Subsidiaries.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney. Reference is made to the signature
page.
27.1 Financial Data Schedule for fiscal year ended December
31, 1999
_______________
(1) Incorporated by reference to the corresponding exhibit to the Current
Report on Form 8-K, filed July 13, 1995.
(2) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1992.
(3) Incorporated by reference to the corresponding exhibit to the Registration
Statement on Form S-1, as amended (Registration No. 33-45737).
(4) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30,1995.
(5) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1995.
(6) Incorporated by reference to the corresponding exhibit to the Current
Report on Form 8-K, filed December 11, 1997.
(7) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30, 1998.
(8) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending June 30, 1998.
(9) Incorporated by reference to the attachment of the Company's 1998 Proxy
Statement.
(10) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1997.
(11) Incorporated by reference to the attachment of the Company's 1999 Proxy
Statement.
(12) Incorporated by reference to the corresponding exhibit to the Annual Report
on Form 10-K for the year ending December 31, 1998.
(13) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending March 31, 1999.
(14) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending June 30, 1999.
48
<PAGE>
(15) Incorporated by reference to the corresponding exhibit to the Quarterly
Report on Form 10-Q for the quarter ending September 30, 1999.
* Indicates a management contract or compensatory plan.
49
<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, APRIL 12, 1999, JUNE 25, 1999 AND NOVEMBER 12, 1999
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates who are not
Officers or Directors may be given an opportunity to purchase stock of the
Company. The Plan is also intended to provide a means by which the Company may
grant options to persons not previously employed by the Company as an inducement
essential to those persons entering employment contracts with the Company. Such
"inducement grants" may be made to any Employee, including persons who
ultimately are employed by the Company as Officers.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Consultants, to secure and retain the services
of new Employees and Consultants, 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.
<PAGE>
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.
2
<PAGE>
(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) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors.
(i) "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. Continuous Status as an Employee, Director or
Consultant shall not be deemed to have terminated merely because of a change in
the capacity in which a person renders service to the Company or an Affiliate,
whether such service is as an Employee, Officer, Director or Consultant, or a
change in the entity for which the person renders such service, provided that
there is no interruption in the person's service relationship with the Company
or an Affiliate.
(j) "Director" means a member of the Board.
(k) "Employee" means any person employed by the Company or any Affiliate
of the Company; provided that except as provided below, Officers and Directors
of the Company shall not be considered Employees for purposes of the Plan. An
Officer shall be considered an Employee for purposes of the grant under this
Plan of an Option to that Officer as an inducement essential to such Officer's
entering into an employment contract with the Company if such
3
<PAGE>
Officer was not an Employee of the Company immediately prior to the date on
which such Option is granted.
(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.
(n) "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
4
<PAGE>
Employee's death or disability will not be deemed to be an Involuntary
Termination Without Cause.
(o) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(p) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(q) "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, or any other employee of the Company or an Affiliate
whom the Board or the Committee classifies as an "Officer."
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "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.
5
<PAGE>
(t) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(u) "Plan" means this Walker Interactive Systems, Inc. 1995 Nonstatutory
Stock Option Plan for Non-Officer Employees.
(v) "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.
(w) "Securities Act" means the Securities Act of 1933, as amended.
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.
6
<PAGE>
(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 may be, in the discretion of the Board, Non-Employee
Directors. 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 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 who are not then subject to Section 16 of the Exchange Act.
(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 three million six hundred thousand (3,600,000) shares of
the Company's common stock. If any
7
<PAGE>
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.
(a) Nonstatutory Stock Options may be granted under the Plan only to
Employees and Consultants.
(b) A Consultant shall not be eligible for the grant of a Nonstatutory
Stock Option if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act ("Form S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
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:
8
<PAGE>
(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
9
<PAGE>
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 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, 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
10
<PAGE>
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.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the
11
<PAGE>
term of the Option set forth in the first paragraph of this subsection 6(g), or
(ii) the expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant during which
the exercise of the Option would not be in violation of such registration
requirements.
(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
12
<PAGE>
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. Notwithstanding the foregoing, the Company shall
not be authorized to withhold shares of common stock at rates in excess of the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes, if such excess withholding would result in a charge to
the Company's earnings for accounting purposes.
13
<PAGE>
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 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
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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 or Consultant 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.
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(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. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the
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Company to the extent stockholder approval is necessary for the Plan to satisfy
the requirements of Rule 16b-3 under the Exchange Act or any Nasdaq or
securities exchange listing requirements. The Board may in its sole discretion
submit any other amendment to the Plan for stockholder approval.
(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 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.
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(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.
Amended by the Board of Directors on June 25, 1999 to increase the aggregate
share reserve to 3,000,000 shares.
Amended by the Board of Directors on November 12, 1999 to increase the aggregate
share reserve to 3,600,000 shares and to permit the grant of options to persons
who will become officers of the Company or an affiliate if such grants are made
in order to induce such persons to enter into employment contracts with the
Company or an affiliate.
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EXHIBIT 10.15A
AMENDMENT NUMBER ONE TO LEASE
-----------------------------
AGREEMENT FOR DELETION OF SPACE
-------------------------------
This Agreement for Deletion of Space ("Agreement") is entered into on this 1st
day of October, 1999 by and between The Equitable Life Assurance Society of the
United States, Inc., a New York Corporation (hereinafter "Landlord") and Walker
Interactive Systems, Inc. a Delaware Corporation (hereinafter "Tenant"):
WITNESSETH
WHEREAS, the parties hereto have entered into a certain Lease (The "Lease")
dated August 25, 1997, demising certain premises in the Building at 303 Second
Street, in San Francisco, California and,
WHEREAS, it is the desire of the parties to amend said Lease,
NOW THEREFORE, effective October 1, 1999, the parties hereto agree as follows:
1. PREMISES: The Premises as defined in said Lease, as amended to eliminate
the space shown by crosshatched lines on Exhibit A attached hereto, shall
be decreased from 72,299 square feet to 54,626 square feet and will
continue to be known as Suite 300 North commencing on October 1, 1999.
2. STORAGE: The Premises known as Suite 304 South containing approximately
1,800 square feet of shell space utilized as storage by Tenant shall
remain. The rent for such storage space shall continue to be $2,250 per
month and $27,000 per year.
3. SUITES: Suites 375 South and 306 South are hereby deleted in all
references in said lease.
4. RENT: Section H of the Basic Lease Information of said lease, is hereby
amended to decrease the Base Rent stipulated therein as stated below.
DATE PER MONTH PER YEAR
- -------------------------------------------------------------------------------
10/01/1999 to 9/30/2002 $119,254.50 $1,431,054
10/01/2002 to 9/30/2004 $132,505.00 $1,590,060
10/01/2004 to 9/30/2007 $145,755.50 $1,749,066
5. PRO RATA SHARE: Tenants pro rata share of the increase in taxes and
operating expenses over the base year, as defined in the lease, shall be
amended from 10.63% to 7.78% based on the new NRA of 700,892. The base
year shall remain 1997.
6. SECURITY DEPOSIT: Landlord shall continue to maintain the existing
deposit of $70,699.34 from the original lease dated October 30, 1988 on
account.
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AMENDMENT NUMBER ONE TO LEASE
-----------------------------
AGREEMENT FOR DELETION OF SPACE
-------------------------------
<TABLE>
<CAPTION>
7. TENANT'S ADDRESS FOR NOTICES:
<S> <C>
Walker
Attention Chief Financial Officer
303 Second Street, Suite 300 North
San Francisco, CA 94107
LANDLORDS ADDRESS FOR NOTICES:
The Equitable Life Assurance Society of the United States
C/O Lend Lease Real Estate Investments, Inc.
One Front Street, Suite 1100
San Francisco, California 94111
Attention: Vice President, Asset Management
With a copy to: The Equitable Life Assurance Society of the United States
(Landlord's Managing Agent) C/O Jones Lang LaSalle Americas, Inc.
303 Second Street, Suite 104 North
San Francisco, California 94107
Attention: General Manager
</TABLE>
8. OPTION TO RENEW: Tenant's option to renew per paragraph 3 of the First
Addendum to lease shall remain in full force and effect.
9. OPTIONS TO EXPAND: Paragraphs 4 - 355S OPTION TO EXPAND and
---------------------
5 - 325S OPTION TO EXPAND of the First Addendum to lease pages 3 and 4 are
---------------
hereby deleted and are no longer in full force and effect.
10. FULL FORCE AND EFFECT: It is understood and agreed between the parties
hereto that said Lease, as amended, shall have the same effect and all
covenants, conditions, remedies and terms of the original lease including
the security payment provision, if any, shall remain in full force and
effect, except as aforesaid.
IN WITNESS WHEREOF, the parties have executed this Lease Termination Agreement
as of the date first hereinabove set forth.
Tenant: Landlord:
Walker Interactive Systems, Inc. a The Equitable Life Assurance Society
Delaware Corporation of the United States, Inc. A New York
Corporation
/s/ Michael Shahbazian
- ------------------------------------ ------------------------------------
By: Michael Shahbazian By: James Piane
- ------------------------------------ ------------------------------------
Its: Chief Financial Officer Its: Investment Officer
- ------------------------------------ ------------------------------------
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EXHIBIT 10.21
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the "Agreement") is entered into by
and between Walker Interactive Systems, Inc. (the "Company"), a Delaware
corporation, and Frank M. Richardson ("Executive"), effective as of September
30,1999 ("Effective Date").
WITNESSETH
WHEREAS, the Company desires to employ Executive and to assure itself of
the continued services of Executive, and Executive desires to be employed by the
Company, under the terms and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company hereby employs Executive to
render full-time services to the Company as its President and Chief Executive
Officer. Executive shall have responsibilities, duties and authorities that are
customarily associated with such position, and such other duties that are
assigned by the Company's Board of Directors (the "Board"). Executive will be
nominated for election to the Board at its first regular meeting following the
Effective Date. Executive's employment by the Company shall commence on the
Effective Date.
2. COMPENSATION. The Company agrees to compensate Executive as follows:
a. Base Salary - The Company shall pay Executive a base salary at the
initial rate of $375,000 per year. Such base salary shall be paid
pursuant to the Company's ordinary business practice, and shall be
subject to ordinary payroll deductions and tax withholdings.
Subsequent changes to the base salary rate, if any, shall be
determined by the Board from time to time.
b. Incentive Bonus Plan - Executive will be eligible for an incentive
bonus. Target bonus will be 60% of base salary for on-plan
performance. Results above plan will have accelerated payout with no
cap. Bonus amounts will be set annually by Compensation Committee of
the Board and paid annually in cash. For the first year of the
executive's employment, the incentive bonus will be guaranteed to be a
minimum of 30% of base salary. The specific terms of the incentive
bonus (e.g., performance targets, payment terms, etc.) will be agreed
upon by the Executive and the Board and will be documented separately.
Changes to the incentive bonus plan for subsequent years will be
determined by the Board.
c. Sign-on, Temporary Living and Relocation Bonus - Walker
Interactive will provide the Executive a one-time "signing bonus" of
$200,000 which can be drawn down by the Executive in total or in
progress payments anytime
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beginning 30 days after the Effective Date. This amount represents
payment in full for all relocation, temporary living, related
commuting and any similar expenses. This amount can be structured in a
flexible and tax-advantaged manner if possible at Executive's option,
but will not be "grossed up" or increased should Executive's actual
expenses exceed this amount. Payments will be subject to withholding
for payroll and income taxes to the extent required by law.
d. Stock Options - The Executive will be granted stock options to
purchase an aggregate total of 750,000 shares of the Company's common
stock at an exercise price equal to the closing market price on the
last trading day prior to the date this grant is approved by the
Board. Options will vest over four years at the rate of 25% at the end
of each year. Options will have a ten-year life. The terms of such
options shall be as set forth in the Company's stock option plans and
standard form stock option agreement, which agreement shall be
modified as necessary to reflect the foregoing terms.
e. Other Benefits - The Company will provide Executive with health
insurance and other benefits consistent with Company policy for senior
executives.
3. OUTSIDE ACTIVITIES. Executive will be able to serve on up to two
Board of Director positions provided these activities do not conflict with or
diminish Executive's ability to conduct his duties as the Company's Chief
Executive Officer. Any renewal of these Board positions, any new Board positions
or any other professional activities unrelated to the Company will require the
prior approval of the Walker Interactive Board of Directors.
4. PROPRIETARY AND CONFIDENTIAL INFORMATION OBLIGATIONS. Executive
agrees to execute the Company's standard Proprietary Information Agreement, a
copy of which is attached as Exhibit A. Executive further acknowledges that
these obligations continue upon termination of Executive's employment with the
Company.
5. EMPLOYEE HANDBOOK. By signing this Agreement, Executive acknowledges
that he has received and read the Company's employee handbook. Executive agrees
to abide by all Company policies and procedures.
6. NONSOLICITATION. While employed by the Company and for two (2) years
thereafter, Executive agrees that in order to protect the Company's confidential
and proprietary information from unauthorized use, Executive will not, either
directly or through others, solicit or attempt to solicit: any employee,
consultant or independent contractor providing services to the Company within
the prior six (6) months at the time of the Executive's termination of
employment, to terminate his or her relationship with the Company in order to
become an employee, consultant or independent contractor to or for any other
person or business entity; or the business of the sort provided by the Company
to any customer, vendor or distributor of the Company which, at the time of
termination or six (6) months immediately prior thereto, was listed on the
Company's customer, vendor or distributor list.
7. TERMINATION OF EMPLOYMENT. Executive and the Company each acknowledge
that either party has the right to terminate Executive's employment with the
Company at any time for any reason whatsoever, with or without advance notice.
This at-will employment relationship cannot be changed except in writing signed
by a duly authorized officer of the Company.
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<PAGE>
7.1 Company-Initiated Termination.
(a) If the Executive's employment terminates due to an Involuntary
Termination Without Cause Executive shall be entitled to receive the following
benefits, as severance: (i) a payment equal to Executive's Base Salary for
twelve (12) months plus Executive's target bonus for the year in which
termination occurs, (ii) COBRA Continuation Benefits; (iii) the portion of
Executive's stock options that would have vested on or before the date twelve
(12) months from the occurrence of the Covered Termination shall accelerate and
immediately become vested and exercisable. (iv) the period during which
Executive may exercise any and all stock options deemed vested as of the date of
Executive's termination shall be extended such that Executive will have twelve
(12) months after the date of such termination to exercise such options
(provided that any such extension shall not extend the maximum term during which
any such option may be exercised beyond ten (10) years).
(b) Notwithstanding section 7.1 (a) above, if the Company (i) merges
or combines with any other company or entity in a manner which produces a change
of control; (ii) sells all or substantially all its assets to any other company
or entity; (iii) has forty percent (40%) or more of its stock acquired by a
person and/or affiliates of such person, the Executive shall receive: (i)
continued payment of base salary for twelve (12) months following Executive's
date of termination for any reason; (ii) continued health care benefits for
twelve (12) months following Executive's termination of employment under the
federal COBRA law; (iii) accelerated vesting of any and all shares, pursuant to
any and all stock options granted to Executive; and (iv) twelve (12) months
after the date of Executive's termination of employment for any reason to
exercise any and all vested shares subject to any and all stock options granted
to Executive (provided that any such extension shall not extend the maximum term
during which any such option may be exercised beyond ten (10) years). For the
purposes of this agreement, "change of control" means a merger or consolidation
in which the Company is not the surviving corporation, or in which the
shareholders of the Company immediately prior to the merger or consolidation do
not hold a majority of the shares of the resulting corporation.
(c) In the event Executive's employment is terminated at any time with
Cause, all of Executive's compensation and benefits will cease immediately, and
Executive shall not be entitled to any severance benefits.
(d) Except as expressly provided herein, Executive will not be
entitled to any other compensation, severance, pay-in-lieu of notice or any
other such compensation. This severance provision does not affect the "at will"
nature of Executive's employment.
(e) Any severance payments to Executive with respect to a Company
Termination or a Covered Termination shall be subject to applicable withholding
for appropriate federal, state, local (and foreign, if applicable) income and
employment taxes, and shall be payable at such time or times as the Company may
elect; provided that Executive shall not receive such severance payments at a
rate slower than the Company's regularly scheduled payment dates for payroll and
bonus, as applicable. If Executive is indebted to the Company at his date of
termination, the Company reserves the right to offset any severance payment
under this Agreement by the amount of such indebtedness. In no event shall
payment of any such severance payment be made prior to Executive's date of
termination or in the absence of an effective release pursuant to Section 7.6.
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<PAGE>
7.2 Executive-Initiated Termination. Executive may voluntarily terminate
his employment with the Company at any time by giving the Board thirty (30) days
written notice. In the event Executive voluntarily terminates his employment
with the Company, all of Executive's compensation and benefits will cease as of
the termination date. Executive acknowledges that he will not receive any
severance pay or benefits upon such voluntary termination. Termination of
Executive's employment due to a Constructive Termination that constitutes a
Covered Termination shall not be treated as a "voluntary termination" covered by
this Section 7.2.
7.3 Accrued Vacation Pay. In addition to any other amount payable under
this Section 7, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
7.4 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the termination of Executive's employment or otherwise.
7.5 Tax Consequences. Executive acknowledges that he has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of this Agreement to his stock option grants.
7.6 Employee Agreement And Release Prior to Receipt of Benefits. Upon the
occurrence of a Company Termination or a Covered Termination, and prior to the
receipt of any benefits under this Agreement on account of such termination,
Executive shall execute the Employee Agreement and Release (the "Release") in
the form attached hereto as Exhibit B. Such Release shall specifically relate to
all of Executive's rights and claims in existence at the time of such execution
and shall confirm Executive's obligations under the Company's standard form of
proprietary information and inventions agreement. It is understood that
Executive has twenty-one (21) calendar days to consider whether to execute such
Release, and Executive may revoke such Release within seven (7) calendar days
after execution. In the event Executive does not execute such Release within the
twenty-one (21)-day period, or if Executive revokes such Release within the
subsequent seven (7)-day period, no benefits shall be payable under this
Agreement, and this Agreement shall be null and void.
7.7 Limitation on Competitive Activities. While employed by the Company
and during the twelve (12) month period after the occurrence of a Company
Termination or a Covered Termination, Executive 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 competitive with the
business of the Company ("Competitive Activity"). For purposes of this
Agreement, "Competitive Activity" shall be deemed to include, without
limitation, obtaining employment, performing work or providing services to SAP,
PeopleSoft, Oracle, Hyperion or QSP (or any related corporation, partnership or
other related entity). These Competitive Activities are prohibited in addition
to any limitations on Executive's activities
4
<PAGE>
set forth in his Proprietary Information Agreement with the Company, and they
are considered by the parties hereto 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 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. If Executive does not comply with any of the foregoing,
no benefits shall be payable under this Agreement, any benefits previously paid
to Executive pursuant to this Agreement shall be repaid or surrendered to the
Company, and this Agreement shall be null and void.
7.8 Certain Reductions in Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that any payment, distribution or other benefit provided by the Company to
or for the benefit of Executive (whether paid or payable or provided or to be
provided pursuant to the terms of this Agreement or otherwise) (a "Payment")
would (i) constitute a "parachute payment" within the meaning of Section 280G of
the Internal Revenue Code of 1986 ("the Code") and (ii) but for this Section
7.7, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then, in accordance with this Section 7.7, such Payments shall be
reduced to the maximum amount that would result in no portion of the Payments
being subject to the Excise Tax, but only if and to the extent that such a
reduction would result in Executive's receipt of Payments that are greater than
the net amount Executive would receive (after application of the Excise Tax) if
no reduction is made. The amount of required reduction, if any, shall be the
smallest amount so that the Executive's net proceeds with respect to the
Payments (after taking into account payment of any Excise Tax and all federal,
state and local income, employment or other taxes) shall be maximized. If,
notwithstanding any reduction described in this Section 7.7 (or in the absence
of any such reduction), the Internal Revenue Service (the "IRS") determines that
a Payment is subject to the Excise Tax (or subject to a different amount of the
Excise Tax than determined by the Company or the Executive), then Section 7.7(c)
shall apply. If the Excise Tax is not eliminated pursuant to this Section 7.7,
Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 7.7
shall be made by the Company's independent auditors. Such auditors shall
provide detailed supporting calculations both to the Company and Executive. Any
such reasonable determination by the Company's independent auditors shall be
binding upon the Company and Executive. The Executive shall determine which and
how much of the Payments, including without limitation any option acceleration
benefits provide under this Agreement or any option ("Option Benefits"), as the
case may be, shall be eliminated or reduced consistent with the requirements of
this Section 7.7, provided that, if Executive does not make such determination
within ten (10) business days of the receipt of the calculations made by the
Company's independent auditors, the Company shall elect which and how much of
the Option Benefits or other Payments, as the case may be, shall be eliminated
or reduced consistent with the requirements of this Section 7.7, and then the
Company shall
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notify Executive promptly of such election. Within five (5) business days
thereafter, the Company shall pay to or distribute to or for the benefit of
Executive such amounts as are then due to Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
7.9 Definitions. For purposes of this Section 7, the following terms are
defined as follows:
(a) "Base Salary" means Executive's base salary (excluding overtime,
bonuses, draws, commissions and other forms of additional compensation and
benefits), at the rate in effect during the last regularly scheduled payroll
period immediately preceding any termination of Executive's employment.
(b) "Cause" means any of the following, as determined in good faith by
the Board: (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 an individual to whom Executive reports (as appropriate); (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.
(c) "Change of Control" means that the Company (i) merges or combines
with any other company or entity and the Company is not the surviving
corporation, or the stockholders of the Company immediately prior to the merger
or consolidation do not hold a majority of the shares of the resulting
corporation; (ii) sells all or substantially all its assets to any other company
or entity; or (iii) has forty percent (40%) or more of its stock acquired by a
person and/or affiliates of such person .
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(d) "COBRA Continuation Benefits" means that Executive shall receive
the following benefits: Executive and Executive's covered dependents who are
enrolled in a health or dental plan sponsored by the Company may be eligible to
continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until: (i) in the case of a Company
Termination, three (3) months after the date of termination; and (ii) in the
case of a Covered Termination, the earlier of twelve (12) months after the date
of termination or such time as the Executive becomes eligible to participate in
another employer's health insurance plan (the "COBRA Period"); provided that
Executive elects to continue coverage under COBRA and timely pays Executive's
portion of the premiums. No provision of this Agreement will affect the
continuation coverage rules under COBRA, except that the Company's payment of
any applicable insurance premiums during the COBRA Period will be credited as
payment by Executive for purposes of Executive's payment required under COBRA.
Therefore, the period during which Executive must elect to continue the
Company's group medical or dental coverage at his or her own expense under
COBRA, the length of time during which COBRA coverage will be made available to
the Executive, and all other rights and obligations of Executive under COBRA
(except the obligation to pay insurance premiums that the Company pays during
the COBRA Period) will be applied in the same manner that such rules would apply
in the absence of this Agreement.
(e) "Constructive Termination" means that Executive voluntarily
terminates employment after any of the following are undertaken without
Executive's express written consent: (A) the assignment to Executive of any
duties or responsibilities which result in a diminution or adverse change of
Executive's position, status or circumstances of employment; provided, however,
that a mere change in Executive's title or reporting relationship shall not
constitute a Constructive Termination; (B) a reduction by the Company in
Executive's Base Salary; (C) a relocation of Executive's business office to a
location more than thirty (30) miles from the location at which Executive
performs duties as of the date of this Agreement, except for required travel by
Executive on the Company's business to an extent substantially consistent with
Executive's business travel obligations; (D) any breach by the Company of any
provision of this Agreement or any other material agreement between Executive
and the Company concerning Executive's employment; or (E) any failure by the
Company to obtain the assumption of this Agreement by any successor or assign of
the Company.
(f) "Involuntary Termination Without Cause" means Executive's
dismissal or discharge other than for Cause. The termination of Executive's
employment as a result of Executive's death or disability will not be deemed to
be an Involuntary Termination Without Cause.
8. INDEMNIFICATION AND DIRECTORS AND OFFICERS INSURANCE. The Company
shall indemnify Executive for all acts or omissions of Executive while Executive
is serving as an officer or director of the Company to the fullest extent not
prohibited either by the Company's Certificate of Incorporation or Bylaws or by
the laws of the State in which the Company is incorporated. If the Company
chooses to insure some or all of this liability or related liabilities through
the purchase of a directors and officers liability insurance policy ("D&O
Insurance Policy"), Executive shall at all times be a
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named insured on such policy while Executive is an officer or director of the
Company and the Company is paying the premiums on any D&O Insurance Policy.
9. NONEXCLUSIVITY. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination or Company Termination shall be payable in accordance with
such plan, policy, practice or program.
10. ATTORNEYS FEES. The Company shall pay reasonable legal fees and costs
incurred by Executive in the negotiation and drafting of this agreement, up to a
maximum of $5,000.
11. NOTICES. All notices, request, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or delivered by
registered or certified mail (return receipt requested), or private overnight
mail (delivery confirmed by such service), to the address listed below (or to
such other address as either party shall designate by notice in writing to the
other in accordance herein):
If to the Company:
Walker Interactive Systems, Inc.
Marathon Plaza Three North
303 Second Street
San Francisco, CA 94107
Attention: Chief Financial Officer
If to the Executive:
Frank M. Richardson
[Home Address]
12. GENERAL.
12.1 Entire Agreement. This Agreement, together with the exhibits
and agreements referred to herein, sets forth the complete, final and exclusive
embodiment of the entire agreement between Executive and the Company with
respect to the subject matter hereof. This Agreement is entered into without
reliance upon any promise, warranty or representation, written or oral, other
than those expressly contained herein, and it supersedes any other such
promises, warranties, representations or agreements.
12.2 Severability. If a court of competent jurisdiction determines
that any term or provision of this Agreement is invalid or unenforceable, then
the remaining terms and provisions shall be unimpaired. Such court shall have
the authority to modify or replace the invalid or unenforceable term or
provision with a valid and enforceable term or provision which most accurately
represents the parties' intention with respect to the invalid or unenforceable
term or provision.
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12.3 Amendment or Termination of Agreement. This Agreement may be
changed or terminated upon the mutual written consent of the Company and
Execuitve. The written consent of the Company to a change or termination of this
Agreement must be signed by an executive officer of the Company after such
change or the Board has approved termination.
12.4 Successors and Assigns. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each party, and inure to the benefit of each party, its heirs, successors and
assigns. However, because of the unique and personal nature of Executive's
duties under this Agreement, Executive agrees not to delegate the performance of
his or her duties under this Agreement.
12.5 Applicable Law. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the State of California as applied to contracts made and to be performed
entirely within California.
12.6 Headings. This section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.7 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument.
In Witness Whereof, the parties have duly authorized and caused this
Agreement to be executed as follows:
EXECUTIVE: Walker Interactive Systems, Inc.
Frank M. Richardson
By:
- -------------------------- -----------------------------------------
Date: , 1999 Title:
-------------- --------------------------------------
Date: , 1999
--------------
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Exhibit B
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Walker Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected her settlement with the
debtor." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) 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 me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
WALKER INTERACTIVE SYSTEMS, INC. FRANK M. RICHARDSON
By:
-------------------------------- --------------------------------------
Title: Date:
----------------------------- --------------------------------
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EXHIBIT 10.22
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
This Executive Severance Benefits Agreement (this "Agreement") is entered
into by and between Walker Interactive Systems, Inc., a Delaware corporation
(the "Company") and Bruce Dawson ("Executive"), effective October 18, 1999.
This Agreement is intended to provide Executive with the compensation and
benefits described herein upon the occurrence of specific events. Certain
capitalized terms used in this Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 The Company currently employs Executive.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS
2.1 Covered Termination Severance Benefits. If following a Change of
Control, Executive's employment terminates due to an Involuntary Termination
Without Cause or a Constructive Termination, such termination of employment will
be deemed a "Covered Termination". A Covered Termination entitles Executive to
receive the following benefits set forth in Sections 2.2 through 2.4 and
Sections 2.9 and 2.10.
2.2 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay plus Bonus, subject to applicable tax
withholding, payable at such time or times as the Company may elect; provided
that Executive shall not receive such severance payments at a rate slower than
the Company's regularly scheduled payment dates for payroll and bonus. If
Executive is indebted to the Company at his or her date of termination, the
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Company reserves the right to offset any severance payment under this Agreement
by the amount of such indebtedness. In no event shall payment of any severance
payment be made prior to Executive's date of termination or in the absence of an
effective release pursuant to Section 3.2
2.3 Acceleration Of Stock Option Vesting. The Executive's stock options
would vest at 100% from the occurrence of the Covered Termination and shall
accelerate and immediately become vested and exercisable. Notwithstanding the
foregoing, if the Change of 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 judgement such acceleration will not adversely affect the pooling of
interests accounting treatment of such Change of Control transaction.
2.4 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until the earlier of: (i) twelve (12)
months after the date of termination, or (ii) such time as the Executive becomes
eligible to participate in another employer's health insurance plan (the "COBRA
Period"); provided that Executive elects to continue coverage under COBRA and
timely pays Executive's portion of the premiums. No provision of this Agreement
will affect the continuation coverage rules under COBRA, except that the
Company's payment of any applicable insurance premiums during the COBRA Period
will be credited as payment by Executive for purposes of Executive's payment
required under COBRA. Therefore, the period during which Executive must elect to
continue the Company's group medical or dental coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Executive, and all other rights and obligations of Executive
under COBRA (except the obligation to pay insurance premiums that the Company
pays during the COBRA Period) will be applied in the same manner that such rules
would apply in the absence of this Agreement.
2.5 Company Termination Severance Benefits. In the event Executive's
employment terminates due to an Involuntary Termination Without Cause (a
"Company Termination"), Executive shall be entitled to receive the following
benefits set forth in Sections 2.6 through 2.10; provided, however, that this
Section 2.5 shall expire and be of no further force or effect with respect to
Executive upon the occurrence of a Change of Control.
2.6 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay, subject to applicable tax withholding,
payable at such time or times as the Company may elect; provided that Executive
shall not receive such severance payments at a rate slower than the Company's
regularly scheduled payment dates for payroll and bonus. If Executive is
indebted to the Company at his or her date of termination, the Company
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reserves the right to offset any severance payment under this Agreement by the
amount of such indebtedness. In no event shall payment of any severance payment
be made prior to Executive's date of termination or in the absence of an
effective release pursuant to Section 3.2
2.7 Stock Option Vesting and Exercise Period. Except for the options
listed on Exhibit A hereto, the portion of Executive's stock options that would
have vested on or before the date twelve (12) months from the occurrence of the
Company Termination shall accelerate and immediately become vested and
exercisable and the period during which Executive may exercise any and all stock
options deemed vested as of the date of Executive's termination shall be
extended such that Executive will have twelve (12) months after the date of such
termination to exercise such options.
2.8 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under COBRA. The Company will notify the individual of any such right to
continue health coverage at the time of termination. The Company will continue
to pay its share of Executive's health insurance premiums for three (3) months
after the date of termination; provided that Executive elects to continue
coverage under COBRA and timely pays Executive's portion of the premiums. No
provision of this Agreement will affect the continuation coverage rules under
COBRA, except that the Company's payment of any applicable insurance premiums
during such three month period will be credited as payment by Executive for
purposes of Executive's payment required under COBRA. Therefore, the period
during which Executive must elect to continue the Company's group medical or
dental coverage at his or her own expense under COBRA, the length of time during
which COBRA coverage will be made available to the Executive, and all other
rights and obligations of Executive under COBRA (except the obligation to pay
insurance premiums that the Company pays during such three month period) will be
applied in the same manner that such rules would apply in the absence of this
Agreement.
2.9 Accrued Vacation Pay. In addition to any other amount payable under
this Article 2, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
2.10 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination, Company Termination or otherwise.
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ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 Tax Consequences. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder. Executive acknowledges that he or 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 his or her stock option grants.
3.2 Employee Agreement And Release Prior To Receipt Of Benefits. Upon the
occurrence of a Covered Termination or Company Termination, and prior to the
receipt of any benefits under this Agreement on account of such Covered
Termination or Company Termination, Executive shall execute the Employee
Agreement and Release (the "Release") in the form attached hereto as Exhibit B.
Such Release shall specifically relate to all of Executive's rights and claims
in existence at the time of such execution and shall confirm Executive's
obligations under the Company's standard form of proprietary information and
inventions agreement. It is understood that Executive has twenty-one (21)
calendar days to consider whether to execute such Release, and Executive may
revoke such Release within seven (7) calendar days after execution. In the event
Executive does not execute such Release within the twenty-one (21)-day period,
or if Executive revokes such Release within the subsequent seven (7)-day period,
no benefits shall be payable under this Agreement, and this Agreement shall be
null and void.
3.3 Limitation on Competitive Activities. During the twelve (12) month
period after the occurrence of a Covered Termination or Company Termination,
Executive 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 competitive with the business of the Company
("Competitive Activity"). For purposes of this Agreement, "Competitive Activity"
shall be deemed to include, without limitation, obtaining employment, performing
work or providing services to SAP, PeopleSoft, Oracle, Hyperion or QSP (or any
related corporation, partnership or other related entity). These Competitive
Activities are prohibited in addition to any limitations on Executive's
activities set forth in his Proprietary Information Agreement with the Company,
and they are considered by the parties hereto 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 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. If Executive does not comply with any of
the foregoing, no benefits shall be payable under this Agreement, any benefits
previously paid to Executive pursuant to this Agreement shall be repaid or
surrendered to the Company, and this Agreement shall be null and void.
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ARTICLE 4
OTHER RIGHTS AND BENEFITS
4.1 Nonexclusivity. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination or Company Termination shall be payable in accordance with
such plan, policy, practice or program.
4.2 Certain Reductions in Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that any payment, distribution or other benefit provided by the
Company to or for the benefit of Executive (whether paid or payable or provided
or to be provided pursuant to the terms of this Agreement or otherwise) (a
"Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for
this Section 4.2, be subject to the excise tax imposed by Section 4999 of the
Code (the "Excise Tax"), then, in accordance with this Section 4.2, such
Payments shall be reduced to the maximum amount that would result in no portion
of the Payments being subject to the Excise Tax, but only if and to the extent
that such a reduction would result in Executive's receipt of Payments that are
greater than the net amount Executive would receive (after application of the
Excise Tax) if no reduction is made. The amount of required reduction, if any,
shall be the smallest amount so that the Executive's net proceeds with respect
to the Payments (after taking into account payment of any Excise Tax and all
federal, state and local income, employment or other taxes) shall be maximized.
If, notwithstanding any reduction described in this Section 4.2 (or in the
absence of any such reduction), the Internal Revenue Service (the "IRS")
determines that a Payment is subject to the Excise Tax (or subject to a
different amount of the Excise Tax than determined by the Company or the
Executive), then Section 4.2(c) shall apply. If the Excise Tax is not eliminated
pursuant to this Section 4.2, Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 4.2
shall be made by the Company's independent auditors. Such auditors shall provide
detailed supporting calculations both to the Company and Executive. Any such
reasonable determination by the Company's independent auditors shall be binding
upon the Company and Executive. The Executive shall determine which and how much
of the Payments, including without limitation any option acceleration benefits
provided under this Agreement or any option ("Option Benefits"), as the case may
be, shall be eliminated or reduced consistent with the requirements of this
Section 4.2, provided that, if Executive does not make such determination within
ten (10) business days of the receipt of the calculations made by the Company's
independent auditors, the Company shall elect which and how much of the Option
Benefits or other Payments, as the case may be, shall be eliminated or reduced
consistent with the requirements of this Section 4.2, and
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then the Company shall notify Executive promptly of such election. Within five
(5) business days thereafter, the Company shall pay to or distribute to or for
the benefit of Executive such amounts as are then due to Executive under this
Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
ARTICLE 5
TRANSFERABILITY of Benefits
5.1 No benefit hereunder shall be subject to sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to do so shall be void.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as follows:
6.1 "Base Pay" means Executive's base pay (excluding overtime, bonuses,
draws, commission, and other forms of additional compensation and benefits), at
the rate in effect during the last regularly scheduled payroll period
immediately preceding any termination of Executive's employment.
6.2 "Board" means the Board of Directors of the Company.
6.3 "Bonus" means the average of the amount of Executive's bonus for the
previous two (2) fiscal years of the Company.
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6.4 "Cause" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Board:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
6.5 "Change of Control" means that the Company (a) merges or combines with
any other company or entity and the Company is not the surviving corporation, or
the stockholders of the Company immediately prior to the merger or consolidation
do not hold a majority of the shares of the resulting corporation; (b) sells all
or substantially all its assets to any other company or entity; or (c) has forty
percent (40%) or more of its stock acquired by a person and/or affiliates of
such person.
6.6 "Constructive Termination" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Pay;
(c) a relocation of Executive's business office to a location more
than thirty (30) miles from the location at which Executive performs duties as
of the date of this Agreement, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(d) any breach by the Company of any provision of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment; or
(e) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
6.7 "Covered Termination" means an Involuntary Termination Without Cause
or a Constructive Termination.
6.8 "Involuntary Termination Without Cause" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of
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Executive's death or disability will not be deemed to be an Involuntary
Termination Without Cause.
ARTICLE 7
GENERAL PROVISIONS
7.1 Employment Status. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
7.2 Notices. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
7.3 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
7.4 Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 Complete Agreement. This Agreement, including Exhibits, constitutes
the entire agreement between Executive and the Company and is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is
entered into without reliance on any promise or representation other than those
expressly contained herein.
7.6 Duration of Agreement. This Agreement shall terminate upon the date of
Executive's termination of employment with the Company. Notwithstanding the
foregoing, this Agreement shall not terminate or expire with respect to
Executive if Executive becomes entitled to receive payments and benefits set
forth in Section 2 until Executive shall have received such payments and
benefits in full.
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7.7 Amendment or Termination of Agreement. Notwithstanding anything in
Section 7.6 to the contrary, this Agreement may be changed or terminated upon
the mutual written consent of the Company and Executive. The written consent of
the Company to a change or termination of this Agreement must be signed by an
executive officer of the Company after such change or the Board has approved
termination.
7.8 Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
7.9 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof or to affect the meaning thereof.
7.10 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.11 Choice of Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 Non-Publication. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
7.13 Construction of Agreement. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
In Witness Whereof, the parties have executed this Agreement on the day and
year written above.
WALKER INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
-------------------------------- -------------------------------------
Name:
------------------------------ -------------------------------------
Title:
-----------------------------
9
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Exhibit A: Excluded Options
Exhibit B: Employee Agreement and Release
10
<PAGE>
Exhibit A
EXCLUDED OPTIONS
<PAGE>
Exhibit B
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Walker Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected her settlement with the
debtor." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) 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 me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
WALKER INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
-------------------------------- -------------------------------------
Title: Date:
----------------------------- -------------------------------
<PAGE>
EXHIBIT 10.23
EXECUTIVE SEVERANCE BENEFITS AGREEMENT
THIS EXECUTIVE SEVERANCE BENEFITS AGREEMENT (this "Agreement") is entered
into by and between WALKER INTERACTIVE SYSTEMS, INC., a Delaware corporation
(the "Company") and Paul Lord ("Executive"), effective December 10, 1999. This
Agreement is intended to provide Executive with the compensation and benefits
described herein upon the occurrence of specific events. Certain capitalized
terms used in this Agreement are defined in Article 6.
The Company and Executive hereby agree as follows:
ARTICLE 1
EMPLOYMENT BY THE COMPANY
1.1 The Company currently employs Executive.
1.2 The Company and Executive wish to set forth the compensation and
benefits which Executive shall be entitled to receive in the event Executive's
employment with the Company is terminated under the circumstances described
herein.
1.3 The duties and obligations of the Company to Executive under this
Agreement shall be in consideration for Executive's past services to the
Company, Executive's continued employment with the Company and Executive's
execution of the general waiver and release described in Section 3.2.
1.4 This Agreement shall supersede any other agreement relating to
Executive's severance from employment with the Company.
ARTICLE 2
SEVERANCE BENEFITS
2.1 Covered Termination Severance Benefits. If following a Change of
Control, Executive's employment terminates due to an Involuntary Termination
Without Cause or a Constructive Termination, such termination of employment will
be deemed a "Covered Termination". A Covered Termination entitles Executive to
receive the following benefits set forth in Sections 2.2 through 2.4 and
Sections 2.9 and 2.10.
2.2 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay plus Bonus, subject to applicable tax
withholding, payable at such time or times as the Company may elect; provided
that Executive shall not receive such severance payments at a rate slower than
the Company's regularly scheduled payment dates for payroll and bonus. If
Executive is indebted to the Company at his or her date of termination, the
Company reserves the right to offset any severance payment under this Agreement
by the
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amount of such indebtedness. In no event shall payment of any severance payment
be made prior to Executive's date of termination or in the absence of an
effective release pursuant to Section 3.2.
2.3 Acceleration Of Stock Option Vesting. The Executive's stock options
that are unvested on or before the date of occurrence of the Covered Termination
shall accelerate and immediately become vested and exercisable. Notwithstanding
the foregoing, if the Change of 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 judgement such acceleration will not adversely affect the pooling of
interests accounting treatment of such Change of Control transaction.
2.4 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The
Company will notify the individual of any such right to continue health coverage
at the time of termination. The Company will continue to pay its share of
Executive's health insurance premiums until the earlier of: (i) twelve (12)
months after the date of termination, or (ii) such time as the Executive becomes
eligible to participate in another employer's health insurance plan (the "COBRA
Period"); provided that Executive elects to continue coverage under COBRA and
timely pays Executive's portion of the premiums. No provision of this Agreement
will affect the continuation coverage rules under COBRA, except that the
Company's payment of any applicable insurance premiums during the COBRA Period
will be credited as payment by Executive for purposes of Executive's payment
required under COBRA. Therefore, the period during which Executive must elect to
continue the Company's group medical or dental coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Executive, and all other rights and obligations of Executive
under COBRA (except the obligation to pay insurance premiums that the Company
pays during the COBRA Period) will be applied in the same manner that such rules
would apply in the absence of this Agreement.
2.5 Company Termination Severance Benefits. In the event Executive's
employment terminates due to an Involuntary Termination Without Cause (a
"Company Termination"), Executive shall be entitled to receive the following
benefits set forth in Sections 2.6 through 2.10; provided, however, that this
Section 2.5 shall expire and be of no further force or effect with respect to
Executive upon the occurrence of a Change of Control.
2.6 Severance Payment. Executive shall receive a severance payment equal
to twelve (12) months of Base Pay, subject to applicable tax withholding,
payable at such time or times as the Company may elect; provided that Executive
shall not receive such severance payments at a rate slower than the Company's
regularly scheduled payment dates for payroll and bonus. If Executive is
indebted to the Company at his or her date of termination, the Company reserves
the right to offset any severance payment under this Agreement by the amount of
such
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indebtedness. In no event shall payment of any severance payment be made prior
to Executive's date of termination or in the absence of an effective release
pursuant to Section 3.2.
2.7 Stock Option Vesting and Exercise Period. Except for the options
listed on Exhibit A hereto, the portion of Executive's stock options that would
have vested on or before the date twelve (12) months from the occurrence of the
Company Termination shall accelerate and immediately become vested and
exercisable and the period during which Executive may exercise any and all stock
options deemed vested as of the date of Executive's termination shall be
extended such that Executive will have twelve (12) months after the date of such
termination to exercise such options.
2.8 COBRA Continuation. Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan (or to convert to an
individual policy), at the time of the Executive's termination of employment
under COBRA. The Company will notify the individual of any such right to
continue health coverage at the time of termination. The Company will continue
to pay its share of Executive's health insurance premiums for three (3) months
after the date of termination; provided that Executive elects to continue
coverage under COBRA and timely pays Executive's portion of the premiums. No
provision of this Agreement will affect the continuation coverage rules under
COBRA, except that the Company's payment of any applicable insurance premiums
during such three-month period will be credited as payment by Executive for
purposes of Executive's payment required under COBRA. Therefore, the period
during which Executive must elect to continue the Company's group medical or
dental coverage at his or her own expense under COBRA, the length of time during
which COBRA coverage will be made available to the Executive, and all other
rights and obligations of Executive under COBRA (except the obligation to pay
insurance premiums that the Company pays during such three month period) will be
applied in the same manner that such rules would apply in the absence of this
Agreement.
2.9 Accrued Vacation Pay. In addition to any other amount payable under
this Article 2, Executive will be entitled to receive any accrued vacation pay
in accordance with the Company's vacation pay policy then in effect for
employees generally.
2.10 Mitigation. Except as otherwise specifically provided herein,
Executive shall not be required to mitigate damages or the amount of any payment
provided under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be reduced by
any compensation earned by Executive as a result of employment by another
employer or by any retirement benefits received by Executive after the date of
the Covered Termination, Company Termination or otherwise.
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ARTICLE 3
LIMITATIONS AND CONDITIONS ON BENEFITS
3.1 Tax Consequences. The Company shall withhold appropriate federal,
state, local (and foreign, if applicable) income and employment taxes from any
payments hereunder. Executive acknowledges that he or 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 his or her stock option grants.
3.2 Employee Agreement And Release Prior To Receipt Of Benefits. Upon the
occurrence of a Covered Termination or Company Termination, and prior to the
receipt of any benefits under this Agreement on account of such Covered
Termination or Company Termination, Executive shall execute the Employee
Agreement and Release (the "Release") in the form attached hereto as Exhibit B.
Such Release shall specifically relate to all of Executive's rights and claims
in existence at the time of such execution and shall confirm Executive's
obligations under the Company's standard form of proprietary information and
inventions agreement. It is understood that Executive has twenty-one (21)
calendar days to consider whether to execute such Release, and Executive may
revoke such Release within seven (7) calendar days after execution. In the event
Executive does not execute such Release within the twenty-one (21)-day period,
or if Executive revokes such Release within the subsequent seven (7)-day period,
no benefits shall be payable under this Agreement, and this Agreement shall be
null and void.
3.3 Limitation on Competitive Activities. During the twelve (12) month
period after the occurrence of a Covered Termination or Company Termination,
Executive 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 competitive with the business of the Company
("Competitive Activity"). For purposes of this Agreement, "Competitive Activity"
shall be deemed to include, without limitation, obtaining employment, performing
work or providing services to SAP, PeopleSoft, Oracle, Hyperion or QSP (or any
related corporation, partnership or other related entity). These Competitive
Activities are prohibited in addition to any limitations on Executive's
activities set forth in his Proprietary Information Agreement with the Company,
and they are considered by the parties hereto 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 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. If Executive does not comply with any of
the foregoing, no benefits shall be payable under this Agreement, any benefits
previously paid to Executive pursuant to this Agreement shall be repaid or
surrendered to the Company, and this Agreement shall be null and void.
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ARTICLE 4
OTHER RIGHTS AND BENEFITS
4.1 Nonexclusivity. Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plans, programs, policies or practices provided by the Company and for
which Executive may otherwise qualify, nor shall anything herein limit or
otherwise affect such rights as Executive may have under other agreements with
the Company. Except as otherwise expressly provided herein, amounts which are
vested benefits or which Executive is otherwise entitled to receive under any
plan, policy, practice or program of the Company at or subsequent to the date of
a Covered Termination or Company Termination shall be payable in accordance with
such plan, policy, practice or program.
4.2 Certain Reductions in Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that any payment, distribution or other benefit provided by the
Company to or for the benefit of Executive (whether paid or payable or provided
or to be provided pursuant to the terms of this Agreement or otherwise) (a
"Payment") would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for
this Section 4.2, be subject to the excise tax imposed by Section 4999 of the
Code (the "Excise Tax"), then, in accordance with this Section 4.2, such
Payments shall be reduced to the maximum amount that would result in no portion
of the Payments being subject to the Excise Tax, but only if and to the extent
that such a reduction would result in Executive's receipt of Payments that are
greater than the net amount Executive would receive (after application of the
Excise Tax) if no reduction is made. The amount of required reduction, if any,
shall be the smallest amount so that the Executive's net proceeds with respect
to the Payments (after taking into account payment of any Excise Tax and all
federal, state and local income, employment or other taxes) shall be maximized.
If, notwithstanding any reduction described in this Section 4.2 (or in the
absence of any such reduction), the Internal Revenue Service (the "IRS")
determines that a Payment is subject to the Excise Tax (or subject to a
different amount of the Excise Tax than determined by the Company or the
Executive), then Section 4.2(c) shall apply. If the Excise Tax is not eliminated
pursuant to this Section 4.2, Executive shall pay the Excise Tax.
(b) All determinations required to be made under this Section 4.2
shall be made by the Company's independent auditors. Such auditors shall provide
detailed supporting calculations both to the Company and Executive. Any such
reasonable determination by the Company's independent auditors shall be binding
upon the Company and Executive. The Executive shall determine which and how much
of the Payments, including without limitation any option acceleration benefits
provide under this Agreement or any option ("Option Benefits"), as the case may
be, shall be eliminated or reduced consistent with the requirements of this
Section 4.2, provided that, if Executive does not make such determination within
ten (10) business days of the receipt of the calculations made by the Company's
independent auditors, the Company shall elect which and how much of the Option
Benefits or other Payments, as the case may be, shall be eliminated or reduced
consistent with the requirements of this Section 4.2, and then the Company shall
notify Executive promptly of such election. Within five (5) business
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days thereafter, the Company shall pay to or distribute to or for the benefit of
Executive such amounts as are then due to Executive under this Agreement.
(c) As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by the Company's
independent auditors hereunder, it is possible that Option Benefits or other
Payments, as the case may be, will have been made by the Company which should
not have been made ("Overpayment") or that additional Option Benefits or other
Payments, as the case may be, which will not have been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the IRS against Executive
or the Company which the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan ab initio to Executive
which Executive shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable by Executive to the Company if and to the extent such
deemed loan and payment would not either reduce the amount on which Executive is
subject to tax under Section 1 and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code.
ARTICLE 5
TRANSFERABILITY OF BENEFITS
5.1 No benefit hereunder shall be subject to sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to do so shall be void.
ARTICLE 6
DEFINITIONS
For purposes of this Agreement, the following terms are defined as follows:
6.1 "Base Pay" means Executive's base pay (excluding overtime, bonuses,
draws, commission, and other forms of additional compensation and benefits), at
the rate in effect during the last regularly scheduled payroll period
immediately preceding any termination of Executive's employment.
6.2 "Board" means the Board of Directors of the Company.
6.3 "Bonus" means the average of the amount of Executive's bonus for the
previous two (2) fiscal years of the Company.
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6.4 "Cause" means termination of Executive's employment with the Company
for any of the following reasons as determined in good faith by the Board:
(a) an intentional act which materially injures the Company;
(b) an intentional refusal or failure to follow lawful and reasonable
directions of the Board or an individual to whom Executive reports (as
appropriate);
(c) a willful and habitual neglect of duties; or
(d) a conviction of a felony involving moral turpitude which is
reasonably likely to inflict or has inflicted material injury on the Company.
6.5 "Change of Control" means that the Company (a) merges or combines with
any other company or entity and the Company is not the surviving corporation, or
the stockholders of the Company immediately prior to the merger or consolidation
do not hold a majority of the shares of the resulting corporation; (b) sells all
or substantially all its assets to any other company or entity; or (c) has forty
percent (40%) or more of its stock acquired by a person and/or affiliates of
such person.
6.6 "Constructive Termination" means that Executive voluntarily terminates
employment after any of the following are undertaken without Executive's express
written consent:
(a) the assignment to Executive of any duties or responsibilities
which result in a diminution or adverse change of Executive's position, status
or circumstances of employment; provided, however, that a mere change in
Executive's title or reporting relationship shall not constitute a Constructive
Termination;
(b) a reduction by the Company in Executive's Base Pay;
(c) a relocation of Executive's business office to a location more
than thirty (30) miles from the location at which Executive performs duties as
of the date of this Agreement, except for required travel by Executive on the
Company's business to an extent substantially consistent with Executive's
business travel obligations;
(d) any breach by the Company of any provision of this Agreement or
any other material agreement between Executive and the Company concerning
Executive's employment; or
(e) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company.
(f) change of control where the company (i) merges or combines with
any other company or entity in a manner which produces a change of control; (ii)
sells all or substantially all its assets to any other company or entity; (iii)
has forty percent (40%) or more of its stock acquired by a person and/or
affiliates of such person.
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6.7 "Covered Termination" means an Involuntary Termination Without Cause
or a Constructive Termination.
6.8 "Involuntary Termination Without Cause" means Executive's dismissal or
discharge other than for Cause. The termination of Executive's employment as a
result of Executive's death or disability will not be deemed to be an
Involuntary Termination Without Cause.
ARTICLE 7
GENERAL PROVISIONS
7.1 Employment Status. This Agreement does not constitute a contract of
employment or impose upon Executive any obligation to remain as an employee, or
impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to
change the Company's policies regarding termination of employment.
7.2 Notices. Any notices provided hereunder must be in writing, and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by facsimile) or the
third day after mailing by first class mail, to the Company at its primary
office location and to Executive at Executive's address as listed in the
Company's payroll records. Any payments made by the Company to Executive under
the terms of this Agreement shall be delivered to Executive either in person or
at the address as listed in the Company's payroll records.
7.3 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
7.4 Waiver. If either party should waive any breach of any provisions of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
7.5 Complete Agreement. This Agreement, including Exhibits, constitutes
the entire agreement between Executive and the Company and is the complete,
final, and exclusive embodiment of their agreement with regard to this subject
matter, wholly superseding all written and oral agreements with respect to
payments and benefits to Executive in the event of employment termination. It is
entered into without reliance on any promise or representation other than those
expressly contained herein.
7.6 Duration of Agreement. This Agreement shall terminate upon the date of
Executive's termination of employment with the Company. Notwithstanding the
foregoing, this
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Agreement shall not terminate or expire with respect to Executive if Executive
becomes entitled to receive payments and benefits set forth in Section 2 until
Executive shall have received such payments and benefits in full.
7.7 Amendment or Termination of Agreement. Notwithstanding anything in
Section 7.6 to the contrary, this Agreement may be changed or terminated upon
the mutual written consent of the Company and Executive. The written consent of
the Company to a change or termination of this Agreement must be signed by an
executive officer of the Company after such change or the Board has approved
termination.
7.8 Counterparts. This Agreement may be executed in separate counterparts,
any one of which need not contain signatures of more than one party, but all of
which taken together will constitute one and the same Agreement.
7.9 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof or to affect the meaning thereof.
7.10 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company, and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any duties hereunder and may not assign any rights
hereunder without the written consent of the Company, which consent shall not be
withheld unreasonably.
7.11 Choice of Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the law of the State of
California, without regard to such state's conflict of laws rules.
7.12 Non-Publication. The parties mutually agree not to disclose publicly
the terms of this Agreement except to the extent that disclosure is mandated by
applicable law or to respective advisors (e.g., attorneys, accountants).
7.13 Construction of Agreement. In the event of a conflict between the text
of the Agreement and any summary, description or other information regarding the
Agreement, the text of the Agreement shall control.
In Witness Whereof, the parties have executed this Agreement on the day and
year written above.
WALKER INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
--------------------------------- ------------------------------------
Name:
-------------------------------
Title:
------------------------------
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Exhibit A: Excluded Options
Exhibit B: Employee Agreement and Release
10
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Exhibit A
EXCLUDED OPTIONS
Grant 950676
Grant 950675
Grant 950876
Grant 950877
<PAGE>
Exhibit B
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the foregoing
agreement.
I hereby confirm my obligations under the Walker Interactive Systems,
Inc.'s (the "Company") proprietary information and inventions agreement.
In granting the release herein, I acknowledge that I understand that I am
waiving the benefit of any provision of law in any jurisdiction to the following
effect: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected her settlement with the
debtor." (California Civil Code section 1542). I hereby expressly waive and
relinquish all rights and benefits under that section and any law or legal
principle of similar effect in any jurisdiction with respect to the release of
unknown and unsuspected claims granted in this Agreement.
Except as otherwise set forth in this Agreement, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and its and
their respective officers, directors, agents, servants, employees, shareholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification I may have as a result of any third party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to the date
I execute this Agreement, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way connected with my
employment with the Company or the termination of that employment, including but
not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; wrongful discharge; harassment; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing; provided, however, that nothing in this paragraph shall be
construed in any way to release the Company from its obligation to indemnify me
pursuant to the Company's indemnification agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Agreement; (B) I have the right to consult with an attorney
prior to executing this Agreement; (C) I have twenty-one (21) days to consider
this Agreement (although I may choose to voluntarily execute this Agreement
earlier); (D) I have seven (7) days following the execution of this Agreement by
the parties to revoke the Agreement; and (E) 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 me, provided that
the Company has also executed this Agreement by that date (the "Effective
Date").
WALKER INTERACTIVE SYSTEMS, INC. [EXECUTIVE]
By:
--------------------------------- -------------------------------------
Title: Date:
------------------------------ ------------------------------
<PAGE>
EXHIBIT 10.24
AGREEMENT
This Agreement (this "Agreement"), is entered into by and between Walker
Interactive Systems, Inc. (the "Company") and Leonard Y. Liu ("Executive"),
effective July 14,1999.
WITNESSETH
WHEREAS, the Company and Executive entered into an Executive Employment
Agreement, effective June 25, 1995, and the Amendment No. 1 to Executive
Employment Agreement (Amended and Restated Version), effective August 5, 1998
(collectively the "Employment Agreement");
WHEREAS, the Company and Executive have mutually agreed that Executive will
terminate his employment with the Company (the "Termination");
WHEREAS, the Company and Executive now desire to enter into this Agreement
regarding the benefits that Executive will receive upon such Termination;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
1. Benefits Upon Termination. Upon the Termination, the Company hereby
agrees that the Executive will receive the benefits set forth in the second
paragraph of Section 7.1(a) of the Employment Agreement; provided, however,
that, subject to Section 2 hereof, Executive shall receive accelerated vesting
of any and all shares pursuant to any and all stock options granted to Executive
such that all shares which otherwise would have vested on or before the end of
the twenty-four (24) months following the date of Termination will be deemed
vested as of the date of Termination and Executive shall have twenty-four (24)
months after the date of Termination to exercise any and all vested shares
subject to any and all stock options granted to Executive (provided that any
such extension shall not extend the maximum term during which any such option
may be exercised beyond ten (10) years). Notwithstanding the foregoing, with
respect to the foregoing provision for accelerated vesting and extended exercise
period for stock options, in the event that Executive continues, after the date
of Termination, to provide services to the Company as a director of or a
consultant to the Company (such that the vesting of Executive's stock options
and exercisability of vested shares thereunder continue until the date that
Executive ceases to provide services in any such capacity (the "Separation
Date"), such accelerated vesting and extended exercise period shall not become
effective until the Separation Date, and all references in such provision to the
"date of Termination" shall be deemed to refer to the Separation Date.
2. Cancellation of Performance Options. Effective upon the date of this
Agreement, the nonstatutory stock option to acquire 300,000 shares of the
Company's common stock under the Company's 1994 Equity Incentive Plan (the "1994
Plan") granted to Executive on August 5, 1998, which option is completely
unvested as of the date hereof, shall be cancelled and shall be of no further
force or effect. The foregoing sentence shall not in any way affect the
effectiveness or the terms and conditions of the nonstatutory stock option to
acquire 100,000
<PAGE>
shares of the Company's common stock under the 1994 Plan granted to Executive on
August 5, 1998.
3. Tax Consequences. Executive acknowledges that he has been advised by
the Company to consult with a tax advisor or attorney with respect to the tax
consequences, if any, of this Agreement.
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as of the date reference above.
LEONARD Y. LIU WALKER INTERACTIVE SYSTEMS, INC.
/s/ Leonard Y. Liu By: /s/ Michael Shabazian
- ------------------------------------- -------------------------------
Date: 7/14/99 Title: Senior VP and CFO
------------------------------- -----------------------------
Dated: 7/14/99
-----------------------------
2.
<PAGE>
EXHIBIT 10.25
CONSULTING SERVICES AGREEMENT BETWEEN
Yuen Lee AND WALKER, INC.
This Consulting Services Agreement is entered into between Yuen Lee (the
"Executive") and Walker, Inc. (the "Company") effective October 21, 1999.
WITNESSETH
WHEREAS, Executive and the Company have initiated the Executive Agreement
that Executive's employment as, Sr.Vice President will terminate effective
October 21, 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 compensation 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 Executive Consultant to the Chief Executive Officer of the
Company for a period up to four months commencing on the Separation Date
("Consulting Engagement"), unless terminated sooner. 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 his
best efforts, skills and talents in the performance of these services; provided,
however, that Executive shall have the right reasonably to decline any
particular request. Executive shall be available to devote necessary time per
month to performing such services, at such times and locations including Asia
Pacific Region as shall be mutually convenient to Executive and the Company.
2. Compensation.
2.1 As compensation for Executive's services as a consultant hereunder for
services rendered between October 21, 1999 and February 21, 2000, the Company
shall pay Executive $10,000 per month on mutually agreeable services rendered.
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 him 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 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 him for reimbursement.
3. Right To Terminate. In the event that (a) Executive breaches any of his
continuing obligations under the Proprietary Agreement he signed or his
Executive Agreement signed October 21, 1999, or (b) Executive commences a
Competitive Activity in violation of this Agreement, the Company may terminate
this Agreement upon written notice to the Consultant. Both the company and the
consultant will have the right to terminate this agreement with a thirty day
written notification to the other for any reason.
4. INDEPENDENT CONTRACTOR STATUS.
4.1 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 himself out as, or give any person reason to
believe that he is, an employee, agent, joint venturer or partner of the
Company; without the explicit consent of the chief executive officer of the
company.
<PAGE>
CONSULTING AGREEMENT
Yuen Lee and WALKER, INC.
Page 2
4.2 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.
4.3 Prohibition Against Use of 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 wit the Company.
4.4 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 he desire to
utilize them.
4.5 Term. Unless previously terminated as set forth above, the Consulting
Engagement shall terminate on February 21, 1999 . If the company requires
additional consultation after the expiration period, Yuen Lee, agrees to
consider extension of the terms of this agreement upon request by the Company
for an additional period. The Consulting Engagement shall terminate
automatically in the event of (i) Executive's death, (ii) a disability that
prevents Executive from performing his obligations hereunder, or (iii)
Executive's revocation of this Agreement prior to the Effective Date.
5. MISCELLANEOUS.
5.1 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 his
immediate family, attorneys, accountants, tax preparers and financial advisers,
provided the person to whom he intends to make such disclosure first agrees to
be bound by this provision, and he may also disclose this agreement insofar as
such disclosure is required by law.
5.2 Binding Effect; Non-Assignability. The rights and obligations of the
parties hereto shall bind and insure 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.
5.3 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.
Yuen Lee WALKER, INC.
- ------------------------------------ -------------------------------------
Date Signed: Date Signed:
----------------------- ------------------------
<PAGE>
EXHIBIT 10.26
SEPARATION AND NON-COMPETE AGREEMENT BETWEEN
MICHAEL SHAHBAZIAN AND WALKER INTERACTIVE SYSTEMS, INC.
This Separation and Non-Compete Agreement ("Agreement") is entered into
between Michael Shahbazian ("Executive") and Walker Interactive Systems, Inc.
(the "Company") to become effective on the Effective Date as defined in Section
[11.2] of this Agreement.
WITNESSETH
WHEREAS, on November 15, 1999 ("Resignation Date") Executive resigned from
the Company effective January 31, 2000 ("Separation Date"); and
WHEREAS, the Company desires that Executive's services to the Company
continue through the Separation Date; and
WHEREAS, the Company wishes to assist Executive in the transition of his
employment, and Executive wishes to provide services and other consideration to
the Company in exchange for transition assistance;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto:
1. RESIGNATION AND SEPARATION. Executive hereby resigns as an employee
and officer of the Company, effective as of the Separation Date.
2. CONTINUED SERVICES. Executive agrees to continue to provide full-
time services as the Company's Chief Financial Officer, and to execute the
responsibilities and duties of that office to the best of his professional
expertise, until the Separation Date.
3. CONTINUED SALARY AND BENEFITS. While Executive continues providing
services in compliance with this Agreement, the Company shall continue
Executive's current compensation and benefits, until the Separation Date.
4. STOCK OPTIONS.
4.1 Accelerated Vesting of Stock Options. Subject to the approval of
the Company's Board of Directors ("Board"), the vesting of Executive's incentive
stock option under Option Grant No. 950671 (the "Option"), totaling one hundred
twenty thousand (120,000) shares, shall be accelerated such that as of the
Separation Date, the portion of the Option that would have vested on or before
January 31, 2001, had Executive remained employed at the Company, shall
accelerate and immediately become vested and exercisable.
1
<PAGE>
4.2 Cease Vesting on Separation Date. Continued vesting of shares
under each of Executive's stock option grants will cease as of the Separation
Date.
4.3 Extended Exercise Period For Vested Stock Options. Subject to the
approval of the Board, the period during which Executive may exercise any and
all stock options deemed vested as of the Separation Date shall be extended such
that Executive will have twelve (12) months after the Separation Date to
exercise such options. All unexercised options will terminate after such twelve
(12)-month period.
4.4 Tax Treatment. Executive acknowledges that any stock options
which Executive has been granted which may originally have been intended to
qualify as incentive stock options under section 422 of the Internal Revenue
Code may lose that status upon Executive's execution of this Agreement because
of the improvements in their terms contained in this Agreement. Executive
further acknowledges that the Company is not making any representation regarding
the tax treatment of any of Executive's stock options and that Executive has
been advised by the Company to seek independent tax advice on that matter.
5. SEVERANCE PAYMENTS. Provided that Executive remains in compliance with
all terms of this Agreement, the Company shall pay severance to Executive by
continuing his base salary from the Separation Date until November 15, 2000.
Severance payments shall be subject to standard payroll deduction and
withholding, and shall be made according to the Company's regular payroll
schedule.
6. COBRA CONTINUATION. As permitted by the federal COBRA law and the
Company's health care plans, Executive and Executive's covered dependents who
are enrolled in a health or dental plan sponsored by the Company may be eligible
to continue coverage under such health or dental plan, at Executive's own
expense. Executive shall receive separate notice of any such right to continue
health coverage. The Company will pay an amount equal to its current share of
Executive's monthly health insurance premium ("COBRA Contribution") for three
(3) months after the Separation Date, provided that Executive elects to continue
coverage under COBRA. The Company's payment of the COBRA Contribution during
such three-month period will be credited as payment by Executive for purposes of
Executive's total payment required under COBRA. No provision of this Agreement
will delay Executive's COBRA qualifying event past the Separation Date.
7. ACCRUED VACATION PAY. In addition to any other amount payable under
this Agreement, Executive will be entitled to receive upon the Separation Date
any accrued vacation pay, in accordance with the Company's vacation pay policy
then in effect for employees generally.
8. NO ADDITIONAL COMPENSATION. Executive acknowledges and agrees that
after the Separation Date he will not be entitled to or receive any
compensation, bonuses, stock, stock options or other benefits as a consequence
of his Employment, except as expressly set forth in this Agreement.
9. PROPRIETARY INFORMATION OBLIGATIONS. Executive acknowledges his
continuing, post-Employment obligations under that certain Proprietary
Information and
2
<PAGE>
Confidentiality Agreement dated April 16, 1999, between Executive and the
Company ("Proprietary Information Agreement"), a copy of which is attached
hereto as Exhibit A.
10. LIMITATION ON ACTIVITIES (NON-COMPETE). In exchange for the stock
option vesting, extension of option exercise period, severance payments, COBRA
Contribution, and other consideration under this Agreement, to which he would
not otherwise be entitled, Executive agrees that, for twelve (12) months
following the "Resignation date", he 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 this
Agreement, "Competitive Activity" shall be limited to (a) obtaining employment,
performing work or providing services directly and specifically to SAP,
PeopleSoft, Oracle, Hyperion, QSP, BAAN, Lawson, CODA (or any related controlled
corporation or majority interest in a partnership). These competitive activities
are in addition to the limitations on Executive's activities set forth in his
Proprietary Information Agreement, and they are considered by the parties to
constitute a reasonable restriction for the purpose of protecting the business
and trade secrets 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.
11. RELEASES. In exchange for the stock option vesting, extension of
option exercise period, severance payments, COBRA Contribution, and other
consideration under this Agreement to which he would not otherwise be entitled,
Executive agrees to provide the Company and its affiliates with the following
releases:
11.1 Executive's General Release. Except as otherwise set forth in
this Agreement, Executive hereby releases, acquits and forever discharges the
Company, its parents and subsidiaries, and its and their respective officers,
directors, employees, shareholders, agents, attorneys, servants, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys' fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
and including the execution date hereof, including but not limited to: any and
all such claims and demands directly or indirectly arising out of or in any way
connected with Executive's employment with the Company or the termination of
that employment; claims or demands related to salary, bonuses, commissions,
stock, stock options, or any other ownership interests in the Company, vacation
pay, fringe benefits, expense reimbursements, sabbatical benefits, severance
benefits, or any other form of compensation; claims arising from that certain
Executive Severance Benefits Agreement between Executive and the Company signed
August __, 1999 ("Severance Agreement"); claims pursuant to any federal, state,
local law, statute or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Americans with
Disabilities Act of 1990; the California Fair
3
<PAGE>
Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; harassment; emotional distress;
and breach of the implied covenant of good faith and fair dealing.
11.2 Acknowledgement of Age Discrimination Waiver Disclosures.
Executive acknowledges that he is knowingly and voluntarily waiving and
releasing any rights he may have under the ADEA, as amended. He also
acknowledges that the consideration given for the waiver and release in the
above paragraph is in addition to anything of value to which he was already
entitled. He further acknowledges that he has been advised by this writing, as
required by the ADEA, that: (a) his waiver and release do not apply to any
rights or claims that may arise after the execution date of this Agreement; (b)
he has been advised hereby that he should consult with an attorney prior to
executing this Agreement; (c) he has twenty-one (21) days to consider this
Agreement (although he may choose to voluntarily execute this Agreement
earlier); (d) he has seven (7) days following execution of this Agreement to
revoke the Agreement; and (e) 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 Executive, provided that the Company has
also signed the Agreement by that date ("Effective Date").
11.3 Executive's Release of Unknown Claims. Executive acknowledges
that he has read and understands Section 1542 of the Civil Code of the State of
California which reads as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
Executive hereby expressly waives and relinquishes all rights and benefits
under that section and any law or legal principle of similar effect in any
jurisdiction with respect to the release of unknown and unsuspected claims
granted in this Agreement.
11.4 Separation Date Release and Waiver. Executive agrees to execute
a second general release and waiver, a form of which is attached hereto as
Exhibit B, upon the Separation Date.
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 his immediate family, attorneys, accountants, tax preparers and financial
advisers, provided the person to whom he intends to make such disclosure first
agrees to be bound by this provision, and he 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.
4
<PAGE>
12.3 Complete Understanding; Modification. This Agreement, including
Exhibits A and B, constitutes the complete, final and exclusive embodiment of
the entire agreement between the parties hereto with respect to the subject
matter hereof, and is entered into without reliance on any promise written or
oral, other than those expressly contained herein, and it supersedes any other
such promises and representations including the Severance Agreement. Any
modification or amendment of this Agreement shall be effective only if in
writing and signed by the Executive and an authorized officer of the Company.
12.4 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction so as to conform to the
intentions of the parties to the greatest extent permitted by law.
12.5 Waiver. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
12.6 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof or to affect the meaning thereof.
In Witness Whereof, the parties have executed this Agreement on the
respective dates written below.
WALKER INTERACTIVE SYSTEMS, INC. MICHAEL SHAHBAZIAN
By:
--------------------------------- ------------------------------------
Title: Date:
------------------------------ ------------------------------
Date:
-------------------------------
5
<PAGE>
EXHIBIT A
PROPRIETARY INFORMATION AND CONFIDENTIALITY AGREEMENT
6
<PAGE>
EXHIBIT B
GENERAL RELEASE AND WAIVER
(To be signed January 31, 2000)
In consideration for stock option vesting, extension of option exercise
period, severance payments, COBRA Contribution, and other consideration to which
Executive would not otherwise be entitled, Executive agrees to execute the
following General Release and Waiver ("Release") on the Separation Date.
Except as otherwise set forth in this Agreement, Executive hereby releases,
acquits and forever discharges the Company, its parents and subsidiaries, its
and their respective officers, directors, employees, shareholders, agents,
attorneys, servants, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed, arising out of or in any way related to agreements, events,
acts, or conduct at any time prior to the execution date hereof, including but
not limited to: any and all such claims and demands directly or indirectly
arising out of or in any way connected with Executive's employment with the
Company or the termination of that employment; claims or demands related to
salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
sabbatical benefits, severance benefits, or any other form of compensation;
claims under the Severance Agreement; claims pursuant to any federal, state or
local law, statute, or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.
Executive acknowledges that he is knowingly and voluntarily waiving and
releasing any rights he may have under the ADEA. Executive also acknowledges
that the consideration given for the release in the preceding paragraph hereof
is in addition to anything of value to which he was already entitled. Executive
further acknowledges that he has been advised by this writing, as required by
the ADEA, that: (a) this Release does not apply to any rights or claims that may
arise after the execution date of this Release; (b) he has been advised hereby
that he should consult with an attorney prior to executing this Release; (c) he
has twenty-one (21) days to consider this Release; (d) he has seven (7) days
following his execution of this Release to revoke the Release; and (e) this
Release shall not be effective until the date upon which the revocation period
has expired, which shall be the eighth day after this Release is executed by
Executive ("Effective Date of this Release").
In giving this Release, which includes claims which may be unknown to
Executive at present, Executive acknowledges that he has read and understands
Section 1542 of the California Civil Code which reads as follows: "A general
release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the release,
7
<PAGE>
which if known by him must have materially affected his settlement with the
debtor." Executive hereby expressly waives and relinquishes all rights and
benefits under that section and any law of any jurisdiction of similar effect
with respect to the release of any claims he may have against the Company.
By:
---------------------------------------
Michael Shahbazian
Date:
-------------------------------------
8
<PAGE>
EXHIBIT 21.1
WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
SUBSIDIARIES
Walker Interactive Products International, Inc. United States
Walker Solutions Group, Limited United Kingdom
Walker Financial Solutions Limited United Kingdom
Global Business Consulting Solutions, Ltd. United Kingdom
Global Business Solutions Holdings, Inc. United States
Business Consulting Solutions, Inc. United States
Global Business Consulting Solutions, Inc. United States
Walker Interactive Systems Pty. Limited Australia
Walker Interactive (Singapore) Pte. Limited Singapore
Walker Interactive Systems (Hong Kong) Limited Hong Kong
Revere, Inc. United States
Walker Canada, Inc. Canada
Revere International PLC United Kingdom
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the following Registration
Statements of Walker Interactive Systems, Inc. of our report dated February 7,
2000, appearing in this Annual Report on Form 10-K of Walker Interactive
Systems, Inc. for the year ended December 31, 1999:
Registration Statement No. 33-46721 on Form S-8
Registration Statement No. 33-64424 on Form S-8
Registration Statement No. 33-64426 on Form S-8
Registration Statement No. 333-02942 on Form S-8
Registration Statement No. 333-08629 on Form S-8
Registration Statement No. 333-39913 on Form S-8
Registration Statement No. 333-42031 on Form S-3
Registration Statement No. 333-57199 on Form S-8
Registration Statement No. 333-85677 on Form S-8
Registration Statement No. 333-95749 on Form S-8
/s/ DELOITTE & TOUCHE LLP
- ----------------------------------
San Jose, California
March 24, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
WALKER INTERACTIVE SYSTEMS, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,187
<SECURITIES> 12,827
<RECEIVABLES> 22,734
<ALLOWANCES> 4,554
<INVENTORY> 0
<CURRENT-ASSETS> 36,480
<PP&E> 29,313
<DEPRECIATION> 25,144
<TOTAL-ASSETS> 57,950
<CURRENT-LIABILITIES> 34,159
<BONDS> 0
0
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<COMMON> 14
<OTHER-SE> 19,105
<TOTAL-LIABILITY-AND-EQUITY> 57,950
<SALES> 87,978
<TOTAL-REVENUES> 87,978
<CGS> 47,864
<TOTAL-COSTS> 113,883
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (24,889)
<INCOME-TAX> 12,901
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (37,788)
<EPS-BASIC> (2.67)
<EPS-DILUTED> (2.67)
</TABLE>
