<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________.
Commission file number 0-20034
BROADWAY & SEYMOUR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 41-1522214
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
128 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202
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(Address of principal executive offices) (Zip code)
(704) 372-4281
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 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 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 .
----- -----
As of April 30, 1996, 8,951,842 shares of Common Stock, $.01 par value,
were outstanding.
Page 1 of 20
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Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 3
Consolidated Statement of Operations -
Three months ended March 31, 1996 and
March 31, 1995 4
Consolidated Statement of Cash Flows -
Three months ended March 31, 1996 and
March 31, 1995 5
Notes to Consolidated Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 13
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 14 - 16
SIGNATURE 17
</TABLE>
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PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND
MAY BE TRADE NAMES OR TRADEMARKS OF BROADWAY & SEYMOUR, INC., ITS SUBSIDIARIES
OR THIRD PARTIES.
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<PAGE> 3
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 459 $ 2,053
Receivables 27,644 28,233
Income tax refund receivable 145 2,100
Inventories 257 417
Deferred income taxes 4,507 4,934
Other current assets 1,464 1,381
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Total current assets 34,476 39,118
Property and equipment 9,284 9,299
Software costs 9,286 9,865
Intangible assets 23,678 24,578
Other assets 371 385
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$ 77,095 $ 83,245
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 11,588 $ 6,263
Accounts payable-trade 4,090 6,408
Accrued compensation 1,998 2,796
Estimated liabilities for contract losses 4,517 5,246
Other accrued liabilities 2,847 5,079
Deferred revenue 11,439 12,561
Income taxes payable 275
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Total current liabilities 36,479 38,628
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Long-term debt 443 1,327
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Deferred income taxes 6,769 7,096
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Deferred revenue and other liabilities 458 3,757
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Stockholders' equity:
Common stock, $.01 par value; Authorized 20,000,000 shares;
Issued 8,933,251 shares and 8,801,016 shares, respectively 89 88
Paid-in capital 35,620 34,277
Accumulated deficit (2,271) (1,436)
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33,438 32,929
Less treasury stock, at cost, 38,552 shares (492) (492)
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32,946 32,437
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$ 77,095 $ 83,245
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
Broadway & Seymour, Inc.
Consolidated Statement of Operations
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
-------------------
Mar. 31, Mar. 31,
1996 1995
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<S> <C> <C>
Revenue:
Services $16,914 $20,745
Products
Software licenses 7,382 5,762
Hardware 314 2,556
Other 123 465
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Total revenue 24,733 29,528
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Cost of revenue:
Services 16,109 16,985
Products
Software licenses 1,601 1,531
Hardware 328 2,146
Other 23 253
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Total cost of revenue 18,061 20,915
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Research and development 1,825 1,079
Sales and marketing 3,270 4,010
General and administrative 2,762 2,251
Restructuring charge (credit) (205) 0
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Total expenses 7,652 7,340
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Operating income (loss) (980) 1,273
Interest income 10 10
Interest expense (185) (89)
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Income (loss) before provision for income taxes (1,155) 1,194
Provision (benefit) for income taxes (320) 526
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Net income (loss) ($835) $668
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Weighted average common and common
equivalent shares outstanding 8,856 8,886
Income (loss) per common and common
equivalent share ($0.09) $0.08
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 5
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
Mar. 31, Mar. 31,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 835) $ 668
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 2,511 2,291
Deferred income taxes 100
Loss on disposal of assets 2
Change in assets and liabilities excluding effects of
businesses acquired and divestitures:
Receivables 589 1,567
Inventories 160 (238)
Other assets (69) (130)
Accounts payable - trade (2,318) (4,406)
Accrued compensation (798) (1,049)
Estimated liabilities for contract losses (729) (14)
Other liabilities (2,251) (328)
Deferred revenue and customer deposits (4,402) (1,619)
Income taxes 1,711 (2,087)
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Net cash provided (used) by operating activities (6,329) (5,345)
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Cash flows from investing activities:
Purchase of property and equipment (866) (2,040)
Investment in software costs (153) (1,017)
Proceeds from sale of property and equipment and other dispositions 19
Cash used in business acquisitions (256)
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Net cash used by investing activities (1,019) (3,294)
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Cash flows from financing activities:
Net borrowings (payments) under credit facility 5,261 6,840
Payments of notes payable and long-term debt (820) (827)
Proceeds from issuance of common stock 1,313 2,071
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Net cash provided by financing activities 5,754 8,084
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Net decrease in cash and cash equivalents (1,594) (555)
Cash and cash equivalents, beginning of period 2,053 1,639
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Cash and cash equivalents, end of period $ 459 $ 1,084
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 6
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
The consolidated financial statements of the Company include all adjustments
of a normal recurring nature which, in the opinion of management, are necessary
for a fair presentation of financial position as of March 31, 1996 and results
of operations and cash flows for the interim periods presented. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the entire year.
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles.
These interim financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1995 as reported by the Company in its Annual Report on Form 10-K.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-lived assets and for Long-lived Assets to be Disposed of." This statement
addresses the accounting for the impairment, if any, of the Company's
long-lived assets, identifiable intangibles and goodwill relating to those
assets. SFAS 121 requires that the Company review such assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable. In such instances, the Company will
perform a test of impairment which compares the carrying amount of the asset
with the estimated undiscounted future cash flows to be generated from use of
the asset, including its ultimate disposition. If the estimated future cash
flows are less than the carrying amount of the asset, the asset is considered
to be impaired and the carrying amount of the assets will be reduced to its
fair value through the recognition of an impairment loss. The asset, at its
new carrying value, will be depreciated or amortized over its remaining useful
life. Adoption of this standard did not have a material impact on the
consolidated financial statements of the Company.
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2 - SIGNIFICANT TRANSACTIONS:
On June 30, 1995, the Company transferred certain assets, subject to certain
related liabilities, of its community banking business, to a newly formed
subsidiary, Liberty Software, Inc. ("Liberty"), and simultaneously therewith
sold the common stock of Liberty to Jack Henry & Associates, Inc. ("Jack
Henry") pursuant to a Stock Purchase Agreement (the "Purchase Agreement"). In
connection therewith, the Company and Jack Henry entered into various ancillary
agreements which relate to the Company's licensing to Jack Henry certain
software and the Company's provision to Jack Henry of certain software
maintenance, marketing and transition services. At closing the Company
received $2 million for the stock of Liberty and recognized no gain or loss on
such sale. In addition, during the second and third quarters of 1995 the
Company received approximately $9.1 million related to certain software license
fees, software maintenance and transition services provided to Jack Henry,
against which the Company incurred substantially no expense. The Company
received a final payment of $.5 million in March 1996.
Under the maintenance provisions of a Software License Agreement executed
with Medaphis Corporation ("Medaphis") on December 30, 1994, Medaphis was
scheduled to pay $6.9 million to the Company over an 18 month period. The
Company recognized $3.0 million received under this agreement as services
revenue for the three months ended March 31, 1995. The Company incurred no
significant expenses associated with such maintenance services.
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<PAGE> 7
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
NOTE 3 - RECEIVABLES:
Receivables at March 31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Trade $ 25,068 $ 24,752
Unbilled 2,816 3,809
Other 571 613
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28,455 29,174
Less - Allowance for doubtful accounts (811) (941)
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$ 27,644 $ 28,233
========== ==========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT:
Property and equipment at March 31, 1996 and December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Equipment $ 15,501 $ 14,682
Furniture and fixtures 2,446 2,411
Leasehold improvements 1,237 1,235
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19,184 18,328
Less - Accumulated depreciation and amortization (9,900) (9,029)
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$ 9,284 $ 9,299
=========== ===========
</TABLE>
NOTE 5 - SOFTWARE COSTS:
The Company capitalizes the costs of developing software to be sold or
leased, including costs of product enhancements which improve the marketability
of the original product or extend its life. These costs are incurred after the
establishment of technological feasibility and prior to the availability of the
software for general release. During the three months ended March 31, 1996 and
March 31, 1995, approximately $.1 million and $1.0 million of software
development costs were capitalized, respectively. Software costs in the
accompanying balance sheet also include the cost of purchased software.
Software costs are generally amortized over the estimated economic lives of the
products, up to a maximum of six years. Accumulated amortization was $8.2
million and $7.5 million at March 31, 1996 and December 31, 1995, respectively.
Amortization expense was approximately $.7 million for the each of the three
months ended March 31, 1996 and March 31, 1995.
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<PAGE> 8
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
NOTE 6 - INTANGIBLE ASSETS:
Intangible assets at March 31, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Useful Mar. 31, Dec. 31,
lives 1996 1995
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(Years) (In thousands)
<S> <C> <C> <C>
Excess of cost over fair value of assets acquired 10 $ 18,334 $ 18,334
Customer lists and maintenance contracts 9 - 10 10,170 10,170
Assembled workforce 10 4,400 4,400
Non-competition agreements 1.5 - 5 313 313
Trade names and other 5 - 10 228 228
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33,445 33,445
Less - Accumulated amortization (9,767) (8,867)
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$ 23,678 $ 24,578
========== ==========
</TABLE>
Intangible assets are amortized using the straight-line method over their
estimated useful lives. Amortization expense was approximately $.9 million for
each of the three months ended March 31, 1996 and March 31, 1995.
NOTE 7 - NOTES PAYABLE AND LONG-TERM DEBT:
The Company's credit facility is secured by substantially all of the tangible
and intangible assets of the Company. Under the credit facility, which expires
May 31, 1996, the Company may borrow up to a maximum of the lesser of $15
million or 80% of eligible accounts receivable plus 33% of net fixed assets,
not to exceed $2.8 million, less other bank extensions of credit. As of March
31, 1996, the available borrowing base under the Company's credit facility
exceeded the maximum of $15 million. The average interest rate on the credit
facility for the first quarter of 1996 was 6.71%. The credit facility also
provides for a commitment fee of .25% per annum on the unused portion of the
credit facility. At March 31, 1996, $10.5 million was outstanding under the
credit facility.
The agreement governing the credit facility contains covenants which require
the Company to meet certain operating ratios and levels of tangible net worth.
On April 12, 1996, the Company executed a modification agreement to its credit
facility. Under the modification agreement, violation of certain of the
covenants as of December 31, 1995 was waived and certain of the financial
covenants were revised as of January 1, 1996. The modification agreement also
provided for an increase in the applicable interest rate to the bank's prime
rate plus 1%, or 9.25% on April 30, 1996.
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<PAGE> 9
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
Long-term debt at March 31, 1996 and December 31, 1995 was as follows:
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Unsecured promissory note due January 1997, with interest
at 8.5% payable every three months $ 825 $ 825
Unsecured, non-interest bearing promissory note due in annual
installments of $667,000 through January 1996 667
Unsecured promissory note due in quarterly installments plus
interest at 7.7% through May 1998 300 333
Subordinated promissory note due in quarterly installments plus
interest at the greater of the prime rate plus 2% (as defined in
the agreement) or 10% through June 2000, secured by Corbel
software and support materials 172 183
Unsecured promissory notes due through September 1998,
obligations under capital leases and other 256 365
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1,553 2,373
Less - Portion due within one year (1,110) (1,046)
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$ 443 $ 1,327
======= =======
</TABLE>
NOTE 8 - RESTRUCTURING CHARGES:
During the fourth quarter of 1995, the Company recorded a restructuring
reserve of approximately $1.5 million which consisted of approximately $1.0
million for the consolidation of certain facilities that were expected to be
subleased and approximately $.5 million for employee severance costs. During
the first quarter of 1996, the Company utilized cash of approximately $.3
million to satisfy obligations related to these reserves and revised its
estimate of the remaining costs to complete the restructuring downward by $.2
million.
NOTE 9 - SUBSEQUENT EVENT:
On April 10, 1996, the Company entered into a definitive asset purchase
agreement with Fidelity Investments Institutional Services Company, Inc.
("Fidelity") whereby the Company agreed to sell to Fidelity certain assets, net
of certain liabilities, including the Company's AMtrust and TrustProcessor
software products. In connection therewith, the Company and Fidelity will enter
into certain ancillary agreements which relate to the Company licensing to
Fidelity certain other software, the Company providing to Fidelity certain
software maintenance and transition services and Fidelity contracting with the
Company for certain minimum systems integration work in the twenty-four months
following execution of the agreements. The total consideration related to
these agreements is approximately $30 million. Consummation of the sale is
subject to a number of conditions including the clearance by appropriate
governmental agencies and the completion of due diligence of certain matters
to the satisfaction of Fidelity. The Company anticipates closing this
transaction by May 30, 1996. During the first quarter of 1996 and 1995, these
operations contributed approximately $4.4 million and $3.5 million of revenue,
respectively.
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<PAGE> 10
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The financial statements included herein reflect the Company's unaudited
results of operations for the three months ended March 31, 1996 and March 31,
1995.
During the third quarter of 1995 the Company developed a new strategic plan
and operating model called Futures '96, which it began to implement
immediately. As part of Futures '96, the Company made significant changes in
senior management, re-engineered its internal project management and accounting
processes and revamped its compensation program. Implementation of Futures '96
changed the Company's strategic direction to focus on achieving predictable
performance of core operations while refraining from growth through product
acquisitions and instead relying on growth through business alliances and
internal product development. Operations were reorganized to integrate
independent business units into a competency-based matrix model focused on
delivering technology-enabled solutions that require team delivery of both
products and services. The competency-based matrix was adopted in order to
relieve the pressures of internal profit and loss centers and enable employees
at all skill levels throughout the Company to be rapidly deployed as needed to
meet client needs and the Company's internal productivity goals.
The Company's revenues derive primarily from the performance of consulting
services and the sale of related products under specific engagements with
customers. In addition, the Company's growth strategy broadened its product
and service offerings and enabled the Company to successfully compete for large
scale projects. However, such projects typically have a longer sales cycle and
inherent volatility in the rate that revenues and related costs are generated
and recognized which could produce significant variations in quarterly or
annual results.
The Company continually monitors conditions that may affect the carrying
value of its software costs and intangible assets. Under the principles of
Statement of Financial Accounting Standards No. 86 ("SFAS 86"), "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" and,
effective January 1, 1996, Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-lived Assets and
Long-lived Assets to be Disposed Of", the Company records impairment losses
and/or accelerated amortization of software costs and intangible assets when
analysis indicates that an asset is not recoverable. The Company operates in
markets characterized by innovation and rapid technological advances and no
assurance can be given that future changes in the marketplace would not impair
the value of the Company's software costs and other intangible assets.
QUARTER ENDED MARCH 31, 1996 COMPARED TO
QUARTER ENDED MARCH 31, 1995
The Company's operating results reflect a loss from operations of $1.0
million for the first quarter of 1996 compared with $1.3 million of income from
operations for the same period of 1995. The results of operations for the
first quarter of 1995 include products and operations which were subsequently
sold during 1995. Certain significant transactions of the Company are
discussed below.
On April 10, 1996, the Company entered into a definitive asset purchase
agreement with Fidelity Investments Institutional Services Company, Inc.
("Fidelity") whereby the Company agreed to sell to Fidelity certain assets, net
of certain liabilities, including the Company's AMtrust and TrustProcessor
software products. These software products and their associated operations
contributed approximately $4.4 million and $3.5 million in revenue during the
first quarter of 1996 and 1995, respectively. The Company anticipates closing
this transaction by May 30, 1996. (See Note 9).
On June 30, 1995, the Company transferred certain assets, subject to certain
related liabilities, of its community banking business, to a newly formed
subsidiary, Liberty Software, Inc. ("Liberty"), and simultaneously therewith
sold the common stock of Liberty to Jack Henry & Associates, Inc. ("Jack
Henry"). In the first quarter of 1995, Liberty contributed approximately $5.0
million in revenue. During the first quarter of 1996, the Company recognized
approximately $.3
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Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
million of revenue related to ongoing support and maintenance of software,
licensed to Jack Henry in conjunction with the sale, against which the Company
incurred no significant associated expense.
On September 1, 1995, the Company transferred a contract for services
provided to International Business Machines Corporation ("IBM") to another
service provider. Services provided under this contract contributed
approximately $.8 million of revenue during the first quarter of 1995.
Excluding the results of Liberty and the IBM service contract, the Company's
revenue for the first quarters of 1996 and 1995 were $24.4 million and $23.7
million, respectively, an increase of $.7 million, or 3%. Excluding the
results of Liberty and IBM, the Company would have reported a loss from
operations of $1.4 million for the first quarter of 1996 and operating income
of $.9 million for the first quarter of 1995.
Each of the comparative amounts discussed below exclude the effect of
nonrecurring revenue and expenses associated with Liberty and the IBM services
contract that were sold during 1995.
Service revenue decreased 3%, from $17.0 million to $16.6 million, when
comparing the first quarter of 1996 with the same period last year. Service
revenue for the first quarter of 1995 includes $3.0 million of nonrecurring
software maintenance revenue related to a 1994 contract with Medaphis
Corporation (See Note 2). Excluding the impact of this nonrecurring revenue,
service revenue increased from $14.0 million to $16.6 million, or 18%.
Approximately $.6 million of this increase is related to the acquisition of The
MiniComputer Company of Maryland, Inc. ("TMC") in June 1995. Services revenue
related to the Company's banking and mortgage products, including VisualImpact
which was introduced to the market in 1995, contributed approximately $1.2
million of the increase in 1996. In addition, the Company's call center
professional services, a market in which the Company has capitalized on its
expertise, contributed increased revenue of approximately $.2 million. Also
contributing to the increase in service revenue is $.3 million of incremental
software maintenance revenue for the Company's Elite Legal product suite,
related to an increased installed client base. Service revenue for the
Company's AMtrust products increased by approximately $1.0 million in the first
quarter of 1996, all of which is related to two significant contracts that were
executed during 1995. Offsetting these increases is a $.6 million decrease in
the Company's pension document service revenue, reflecting increased revenue
during the first quarter of 1995 related to activity triggered by a legal
deadline for restatement of certain pension plan documents.
Product revenue increased 17%, from $6.7 million to $7.8 million, when
comparing the first quarter of 1996 with the same period last year. During the
first quarter of 1996, the Company recorded software license revenue of $4.0
million in connection with a single contract against which the Company recorded
substantially no expense. Offsetting this increase was a decrease of
approximately $.6 million in software license revenue in connection with
decreased installations of the Company's Elite Legal product suite resulting
from competitive pressures in the marketplace. In addition, software license
revenue for the Company's banking and mortgage products decreased approximately
$1.7 million for the first quarter of 1996 compared to the same period of last
year. Hardware revenue decreased 69%, or $.7 million, in the first quarter of
1996 when compared to the first quarter of 1995. The majority of this decrease
reflects the decrease in software license sales, which require hardware
installation, for the Company's banking and mortgage products.
Cost of services revenue increased 23%, or $3.0 million, when comparing the
first quarter of 1996 with the first quarter of 1995. Cost of services revenue
was $16.1 million, or 95% of services revenue, and $13.9 million, or 82% of
services revenue, for the first quarter of 1996 and 1995, respectively.
Approximately $.8 million of this increase reflects higher contract labor costs
related to the Company's Elite Legal product suite due to more complex
contract-specific installations and implementation requirements. In addition,
TMC contributed incremental cost of services revenue of approximately $.6
million in the first quarter of 1996. Also contributing to the increase was
approximately $1.3 million of costs for the Company's AMtrust products, related
primarily to two contracts executed during 1995.
Overall, cost of product revenue decreased 10%, or $.2 million, to $2.2
million, or 28% of product revenue, when comparing the first quarter of 1996
with the same period last year. When comparing the first quarters of 1996 and
1995, hardware cost of product revenue decreased approximately $.7 million and
software license cost of product revenue increased approximately $.5 million.
Contributing to the decrease in hardware cost of product revenue is
approximately $.9 million related to the Company's banking and mortgage
products, which corresponds to decreased licenses and installations, offset by
increased hardware costs for the Company's Elite Legal product suite and
incremental costs contributed by TMC which total approximately $.2 million.
The increase in software license cost of product revenue is
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<PAGE> 12
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
related to amortization of internally developed software products and
enhancements to existing products capitalized and introduced during 1995 for
the Company's banking, mortgage, asset management and pension administration
operations. Also contributing to the increase were additional personnel and
support costs related to these recent introductions.
Research and development expenses in the first quarter of 1996 and 1995 were
net of $.2 million and $.8 million of capitalized software development costs,
respectively. Including capitalized costs, research and development costs
increased to $2.0 million, or 8% of total revenue, in the first quarter of 1996
compared to $1.7 million, or 7% of total revenue, in the first quarter of 1995.
This increase in research and development expenditures is due to development and
enhancement efforts related to the Company's Millennium, CRISP, Elite Legal
Billing, Quantech, AutoDoc and NPA software. Research and development costs
capitalized in the first quarter of 1996 related to development of and
enhancements to the Company's NPA and Elite Legal Billing software.
General and administrative expenses increased 23% to $2.8 million, or 11% of
revenue for the first quarter of 1996 from $2.3 million, or 9% of revenue for
the first quarter of 1995. Approximately $.1 million of the increase is
attributable to incremental costs contributed by TMC. In addition, the Company
incurred higher overhead related to personnel changes in senior management and
related costs of approximately $.4 million.
During the fourth quarter of 1995, the Company recorded a restructuring
reserve of approximately $1.5 million which consisted of approximately $1.0
million for the consolidation of certain facilities that were expected to be
subleased and approximately $.5 million for employee severance costs. During
the first quarter of 1996, the company utilized cash of approximately $.3
million to satisfy obligations related to these reserves and revised its
estimate of the remaining costs to complete the restructuring downward by $.2
million.
INCOME TAXES
The Company's effective income tax rate for the three months ended March 31,
1996 was 28% compared to 44% for the three months ended March 31, 1995. The
effective income tax rate differs from the statutory rate due to the loss
incurred in the first quarter of 1996 as adjusted for permanent differences
such as goodwill amortization.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1996, the Company had cash and cash equivalents of approximately
$.5 million and a working capital deficit of approximately $2.0 million.
The Company's credit facility is secured by substantially all of the tangible
and intangible assets of the Company. Under the credit facility, which expires
May 31, 1996, the Company may borrow up to a maximum of the lesser of $15
million or 80% of eligible accounts receivable plus 33% of net fixed assets,
not to exceed $2.8 million, less other bank extensions of credit. As of March
31, 1996, the available borrowing base under the Company's credit facility
exceeded the maximum of $15 million. The average interest rate on the credit
facility for the first quarter of 1996 was 6.71%. The credit facility also
provides for a commitment fee of .25% per annum on the unused portion of the
credit facility. At March 31, 1996, $10.5 million was outstanding under the
credit facility.
The agreement governing the credit facility contains covenants which require
the Company meet certain operating ratios and levels of tangible net worth. On
April 12, 1996, the Company executed a modification agreement to its credit
facility. Under the modification agreement, violation of certain of the
covenants at December 31, 1995 was waived and certain of the financial
covenants contained in the agreement were revised as of January 1, 1996. The
modification agreement also provided for an increase in the applicable interest
rate to the bank's prime rate plus 1%, or 9.25% on April 30, 1996.
It is the Company's intent to utilize a portion of the proceeds from the
Fidelity transaction to repay the bank credit facility at or prior to maturity.
The Company is reviewing its capital requirements for the remainder of 1996 and
is evaluating financing alternatives in order to have a readily available
source of capital. Current trends in liquidity demands are expected to
continue as funds will be needed to support planned business growth, to satisfy
existing contractual obligations, to purchase property and equipment and to
develop software.
- 12 -
<PAGE> 13
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
The Company anticipates that the remaining proceeds from the Fidelity
transaction combined with cash flow from operations, borrowings from banks and
the issuance of stock pursuant to its employee stock purchase and stock option
plans will be sufficient to fund its working capital requirements through 1996.
Principal sources of liquidity for the three months ended March 1996 were
borrowings under the credit facility and proceeds from the issuance of stock
pursuant to the Company's employee stock purchase and stock option plans.
- 13 -
<PAGE> 14
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
(a)(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.1 Specimen share certificate (Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, SEC File No. 33-46672)
4.2 Articles 4 and 5 of Broadway & Seymour, Inc.'s Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-1, SEC File No. 33-46672)
4.3 Article II, Section 2.2 of the Company's Restated By-laws (Incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, SEC File No. 33-46672)
10.1** Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated June 12, 1985
(Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form
S-1, SEC File No. 33-46672)
10.2** Amendment No. 1 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
February 25, 1993 (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the Fiscal Year Ended January 31, 1993)
10.3** Amendment No. 2 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
February 17, 1994 (Incorporated by reference to Exhibit 10.16 to the Registrant's Transition
Report on Form 10-K for the Eleven Months Ended December 31, 1993)
10.4** Amendment No. 3 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
May 15, 1995 (Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1995)
10.5** Broadway & Seymour, Inc. 1995 Stock Option Plan dated September 1, 1995 (Incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1995)
10.6 Registration Rights Agreement dated as of May 7, 1993 by and between Broadway & Seymour, Inc.
and certain shareholders of Corbel & Co. (Incorporated by reference to Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1993)
10.7 Limited Partnership Agreement of National Pension Alliance dated April 8, 1994 by and among
Corbel/NPA Inc., Stuart Hack Corp. and Michael E. Callahan, Inc. (Incorporated by reference to
Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1995)
10.8 Stock Purchase Agreement dated January 10, 1994 by and among Broadway & Seymour, Inc., certain
shareholders of Elite Data Processing, Inc. and Harvey Rich (Incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated February 1, 1994)
10.9 Stock Pledge Agreement dated as of February 1, 1994 by and among Broadway & Seymour, Inc.,
Alan Richeimer (a/k/a Alan Rich) and Harvey Rich and Eva Rich, as trustees of the Harvey and
Eva Rich Family Trust created by that Trust Agreement dated September 19,1988 (Incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated February 1,
1994)
</TABLE>
- 14 -
<PAGE> 15
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
<TABLE>
<S> <C>
10.10 Consent and Assignment Agreement dated January 28, 1994 among Trust Systems, Broadway &
Seymour, Inc., and First Fidelity Bank, N.A., NationsBank of North Carolina, First Tennessee
Bank National Association and PNC Bank National Association providing assignment of all right,
title and interest in AMtrust to Trust Systems (Incorporated by reference to Exhibit 10.14 to
the Registrant's Transition Report on Form 10-K for the Eleven Months Ended December 31, 1993)
10.11 Agreement and Plan of Merger dated January 23, 1995 of EBG & Associates, Inc. into Broadway
& Seymour, Inc. (Incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter Ended March 31, 1995)
10.12 Agreement and Plan of Merger dated January 27, 1995 of BancCorp Systems, Inc. with and into
BCS Acquisition, Inc. (Incorporated by reference to Exhibit 10.14 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1995)
10.13 Asset Purchase Agreement dated as of June 9, 1995 by and among Broadway & Seymour Inc.,
The MiniComputer Company of Maryland, Inc., Robert W. Johnson, Michael W. Matthai and
Robert A. Erich, Jr. (Incorporated by reference to Exhibit 10.18 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1995)
10.14 Bill of Sale and Assignment and Assumption Agreement dated as of June 30, 1995 by and
between Liberty Software, Inc. and Broadway & Seymour, Inc. (Incorporated by reference to
Exhibit 1 to the Registrant's Current Report on Form 8-K dated June 30, 1995)
10.15 Stock Purchase Agreement dated June 30, 1995 by and between Broadway & Seymour, Inc. and
Jack Henry & Associates, Inc. (Incorporated by reference to Exhibit 2 to the Registrant's
Current Report on Form 8-K dated June 30, 1995)
10.16 Master Agreement dated June 30, 1995 by and between Broadway & Seymour, Inc. and Jack Henry
& Associates, Inc. (Incorporated by reference to Exhibit 3 to the Registrant's Current
Report on Form 8-K dated June 30, 1995)
10.17 Addendum to Master Agreement dated September 29, 1995 by and between Broadway & Seymour,
Inc. and Jack Henry & Associates, Inc. (Incorporated by reference to Exhibit 10.25 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995)
10.18** Employment Agreement dated as of September 1, 1995 by and between Broadway & Seymour, Inc.
and Alan C. Stanford (Incorporated by reference to Exhibit 10.28 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995)
10.19** Employment Agreement dated as of January 19, 1995 by and between Broadway & Seymour, Inc.
and David A. Finley (Incorporated by reference to Exhibit 10.26 to the Registrant's Annual
Report on Form 10-K for the Year Ended December 31, 1995)
10.20** Termination Agreement dated as of March 1, 1996 by and between Broadway & Seymour, Inc. and
David Durham (Incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report
on Form 10-K for the Year Ended December 31, 1995)
10.21 Credit Agreement dated October 14, 1994 between Broadway & Seymour, Inc. and NationsBank of
North Carolina, N.A. (Incorporated by reference to Exhibit 10.13 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1994)
</TABLE>
- 15 -
<PAGE> 16
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
<TABLE>
<S> <C>
10.22 Modification Agreement dated as of March 17, 1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the Fiscal Year Ended December 31, 1994)
10.23 Modification Agreement dated as of April 28,1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.19 to the Registrant's Quarterly
Report on 10-Q for the Quarter Ended March 31, 1995)
10.24 Modification Agreement dated as of May 31, 1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.29 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 1995)
10.25* Modification Agreement dated as of April 12, 1996 between Broadway & Seymour, Inc. and
NationsBank, N. A.
10.26* Modification, Waiver and Forbearance Agreement dated as of April 12, 1996 between
Broadway & Seymour, Inc. and NationsBank, N. A.
11* Computation of earnings per share
27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange
Commission for information only and not filed.
- - --------------------
</TABLE>
* Filed herewith.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit.
- 16 -
<PAGE> 17
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BROADWAY & SEYMOUR, INC.
Date: May 14, 1996 By: /s/ David A. Finley
------------ ---------------------------------------------
David A. Finley, Executive Vice President and
Chief Financial Officer
- 17 -
<PAGE> 18
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description Page Number
----------- ----------- -----------
<S> <C> <C>
4.1 Specimen share certificate (Incorporated by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1, SEC File No. 33-46672)
4.2 Articles 4 and 5 of Broadway & Seymour, Inc.'s Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on
Form S-1, SEC File No. 33-46672)
4.3 Article II, Section 2.2 of the Company's Restated By-laws (Incorporated by reference to
Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, SEC File No. 33-46672)
10.1** Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated June 12, 1985
(Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form
S-1, SEC File No. 33-46672)
10.2** Amendment No. 1 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
February 25, 1993 (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report
on Form 10-K for the Fiscal Year Ended January 31, 1993)
10.3** Amendment No. 2 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
February 17, 1994 (Incorporated by reference to Exhibit 10.16 to the Registrant's Transition
Report on Form 10-K for the Eleven Months Ended December 31, 1993)
10.4** Amendment No. 3 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated
May 15, 1995 (Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1995)
10.5** Broadway & Seymour, Inc. 1995 Stock Option Plan dated September 1, 1995 (Incorporated by
reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1995)
10.6 Registration Rights Agreement dated as of May 7, 1993 by and between Broadway & Seymour, Inc.
and certain shareholders of Corbel & Co. (Incorporated by reference to Exhibit 10.9 to the
Registrant's Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1993)
10.7 Limited Partnership Agreement of National Pension Alliance dated April 8, 1994 by and among
Corbel/NPA Inc., Stuart Hack Corp. and Michael E. Callahan, Inc. (Incorporated by reference to
Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30,
1995)
10.8 Stock Purchase Agreement dated January 10, 1994 by and among Broadway & Seymour, Inc., certain
shareholders of Elite Data Processing, Inc. and Harvey Rich (Incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated February 1, 1994)
10.9 Stock Pledge Agreement dated as of February 1, 1994 by and among Broadway & Seymour, Inc.,
Alan Richeimer (a/k/a Alan Rich) and Harvey Rich and Eva Rich, as trustees of the Harvey and
Eva Rich Family Trust created by that Trust Agreement dated September 19,1988 (Incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated February 1,
1994)
</TABLE>
- 18 -
<PAGE> 19
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
----------- ----------- -----------
<S> <C> <C>
10.10 Consent and Assignment Agreement dated January 28, 1994 among Trust Systems, Broadway &
Seymour, Inc., and First Fidelity Bank, N.A., NationsBank of North Carolina, First Tennessee
Bank National Association and PNC Bank National Association providing assignment of all right,
title and interest in AMtrust to Trust Systems (Incorporated by reference to Exhibit 10.14 to
the Registrant's Transition Report on Form 10-K for the Eleven Months Ended December 31, 1993)
10.11 Agreement and Plan of Merger dated January 23, 1995 of EBG & Associates, Inc. into Broadway
& Seymour, Inc. (Incorporated by reference to Exhibit 10.13 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter Ended March 31, 1995)
10.12 Agreement and Plan of Merger dated January 27, 1995 of BancCorp Systems, Inc. with and into
BCS Acquisition, Inc. (Incorporated by reference to Exhibit 10.14 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1995)
10.13 Asset Purchase Agreement dated as of June 9, 1995 by and among Broadway & Seymour Inc.,
The MiniComputer Company of Maryland, Inc., Robert W. Johnson, Michael W. Matthai and
Robert A. Erich, Jr. (Incorporated by reference to Exhibit 10.18 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1995)
10.14 Bill of Sale and Assignment and Assumption Agreement dated as of June 30, 1995 by and
between Liberty Software, Inc. and Broadway & Seymour, Inc. (Incorporated by reference to
Exhibit 1 to the Registrant's Current Report on Form 8-K dated June 30, 1995)
10.15 Stock Purchase Agreement dated June 30, 1995 by and between Broadway & Seymour, Inc. and
Jack Henry & Associates, Inc. (Incorporated by reference to Exhibit 2 to the Registrant's
Current Report on Form 8-K dated June 30, 1995)
10.16 Master Agreement dated June 30, 1995 by and between Broadway & Seymour, Inc. and Jack Henry
& Associates, Inc. (Incorporated by reference to Exhibit 3 to the Registrant's Current
Report on Form 8-K dated June 30, 1995)
10.17 Addendum to Master Agreement dated September 29, 1995 by and between Broadway & Seymour,
Inc. and Jack Henry & Associates, Inc. (Incorporated by reference to Exhibit 10.25 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995)
10.18** Employment Agreement dated as of September 1, 1995 by and between Broadway & Seymour, Inc.
and Alan C. Stanford (Incorporated by reference to Exhibit 10.28 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995)
10.19** Employment Agreement dated as of January 19, 1995 by and between Broadway & Seymour, Inc.
and David A. Finley (Incorporated by reference to Exhibit 10.26 to the Registrant's Annual
Report on Form 10-K for the Year Ended December 31, 1995)
10.20** Termination Agreement dated as of March 1, 1996 by and between Broadway & Seymour, Inc. and
David Durham (Incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report
on Form 10-K for the Year Ended December 31, 1995)
10.21 Credit Agreement dated October 14, 1994 between Broadway & Seymour, Inc. and NationsBank of
North Carolina, N.A. (Incorporated by reference to Exhibit 10.13 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1994)
</TABLE>
- 19 -
<PAGE> 20
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
<TABLE>
<CAPTION>
Exhibit No. Description Page Number
----------- ----------- -----------
<S> <C> <C>
10.22 Modification Agreement dated as of March 17, 1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.16 to the Registrant's Annual
Report on Form 10-K for the Fiscal Year Ended December 31, 1994)
10.23 Modification Agreement dated as of April 28,1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.19 to the Registrant's Quarterly
Report on 10-Q for the Quarter Ended March 31, 1995)
10.24 Modification Agreement dated as of May 31, 1995 between Broadway & Seymour, Inc. and
NationsBank, N.A. (Incorporated by reference to Exhibit 10.29 to the Registrant's Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 1995)
10.25* Modification Agreement dated as of April 12, 1996 between Broadway & Seymour, Inc. and
NationsBank, N. A. 22
10.26* Modification, Waiver and Forbearance Agreement dated as of April 12, 1996 between
Broadway & Seymour, Inc. and NationsBank, N. A. 25
11* Computation of earnings per share 21
27 Financial Data Schedule, which is submitted electronically to the Securities and Exchange
Commission for information only and not filed.
- - --------------------
</TABLE>
* Filed herewith.
** Management contract or compensatory plan or arrangement required to be filed
as an exhibit.
- 20 -
<PAGE> 1
EXHIBIT 10.25
MODIFICATION AGREEMENT
THIS MODIFICATION AGREEMENT (the "Agreement") is made as of the 12th day
of April, 1996 between BROADWAY & SEYMOUR, INC., a Delaware corporation (the
"Borrower"), and NATIONSBANK, N.A. (the "Bank").
INTRODUCTORY STATEMENT
Borrower and the Bank are parties to a Pledge Agreement dated October 14,
1994 (the "Pledge Agreement"). The Bank and the Borrower have entered into a
Modification, Forbearance and Waiver Agreement of even date herewith (the
"Forbearance Agreement") pursuant to the terms of which the Borrower has
agreed, inter alia, to grant to the Bank a security interest in the capital
stock of Elite Information Systems, Inc. (formerly, Elite Data Processing,
Inc.) ("Elite").
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained and as described in the Pledge Agreement between the Borrower
and the Bank dated October 14, 1994 (the "Pledge Agreement") and in the
Forbearance Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties hereto, each to
the other, the parties do hereby agree as follows:
1. Effect of Agreement. This Agreement shall modify and amend the Pledge
Agreement as set forth herein. Except as expressly modified hereby, the Pledge
Agreement, including without limitation each representation, warranty and
covenant contained therein, shall be and remain in full force and effect.
2. Defined Terms. Except as otherwise provided herein, all capitalized,
undefined terms used herein shall have the meanings assigned thereto in the
Pledge Agreement.
3. Amendment of Pledge Agreement. The Pledge Agreement is hereby amended
as follows:
(a) To provide that the term "Pledged Shares" shall include all of the
shares of stock of Elite described on Schedule 1 hereto (the "Elite
Shares"), and the Borrower does hereby pledge to the Bank and grant to the
Bank a security interest in all of the Borrower's right, title and
interest in and to the following, whether now owned or hereafter acquired:
(i) The Elite Shares and the certificates representing such
shares, and all dividends, cash, instruments and other property from
time received, receivable or otherwise distributed in respect of or in
exchange for any and all of such shares;
<PAGE> 2
(ii) All additional shares of stock of Elite from time to time
acquired by the Borrower in any manner, and the certificates
representing such additional shares, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such additional shares; and
(iii) All proceeds of any and all of the foregoing (including,
without limitation, proceeds that constitute property of the types
described above).
(b) To provide that the Elite Shares, together with all of the other
property interests described in subparagraphs 3(a) (i) - (iii) shall
constitute part of the Pledge Collateral (as defined in the Pledge
Agreement).
(c) To provide that the pledge of the Elite Shares shall secure the
payment of all of the Obligations (as defined in the Pledge Agreement).
4. Representations and Warranties. The Borrower represents and warrants
as follows:
(a) The Elite Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) The Borrower is the legal and beneficial owner of the Elite
Shares free and clear of any lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement.
(c) The pledge of the Elite Shares pursuant to this Agreement
creates a valid and perfected first priority lien on and security interest
in such shares, enforceable against all third parties and securing the
payment of the Obligations.
(d) No consent of any other Person or entity and no authorization,
approval, or other action by, and no notice to or filing with, any
governmental, administrative or judicial authority or regulatory body and
no payment of any stamp or similar tax on, or in respect of, this
Agreement is necessary or advisable (i) for the pledge by the Borrower of
the Elite Shares pursuant to this Agreement or for the execution, delivery
or performance of this Agreement by the Borrower, (ii) for the perfection
or maintenance of the security interest created hereby (including the
first priority nature of such security interest) or (iii) for the exercise
by the Bank of the voting or other rights provided for in this Agreement
or the remedies in respect of the Elite Shares pursuant to this Agreement
(except as may be required in connection with any disposition of any
portion of the Elite Shares by
-2-
<PAGE> 3
laws affecting the offering and sale of securities generally).
5. Conditions Precedent. The effectiveness of this Agreement is
subject to the Borrower's having delivered to the Bank all certificates or
instruments representing or evidencing the Elite Shares, together with duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Bank.
6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of North Carolina, without reference
to the conflicts or choice of law principles thereof.
7. Counterparts. This Agreement may be executed in separate
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
8. Conflicting Terms. In the event of any conflict or inconsistency
between the terms of this Agreement and the Pledge Agreement, this Agreement
shall control.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
BROADWAY & SEYMOUR, INC.
By: /s/ David A. Finley
------------------------------------
Name: David A. Finley
Title: Executive Vice President
and Chief Financial Officer
NATIONSBANK, N.A.
By: /s/ P.J. Phillippi
------------------------------------
Name: P.J. Phillippi
Title: Sr VP
- 3 -
<PAGE> 4
SCHEDULE 1
----------
Class of Certificate Name
Issuer Stock No.(s). of Shares
- - ------ ------- ----------- --------
Elite Data Non-Voting 2 10,000
Processing, Inc. Preferred
Elite Data Common 21 10,600
Processing, Inc.
<PAGE> 1
EXHIBIT 10.26
MODIFICATION, WAIVER AND FORBEARANCE AGREEMENT
THIS MODIFICATION, WAIVER AND FORBEARANCE AGREEMENT (the "Agreement")
is made and entered into this 12th day of April, 1996, between BROADWAY &
SEYMOUR, INC., a Delaware corporation (the "Borrower"), and NATIONSBANK, N.A.
successor to NationsBank, N.A. (Carolinas)), a national banking association
(the "Bank");
STATEMENT OF PURPOSE
The Borrower and the Bank are parties to a Credit Agreement dated
October 14, 1994, as heretofore amended and modified (as so amended, the
"Credit Agreement"). The Borrower is in default under the Credit Agreement and
has requested the Bank to waive such existing defaults and to restructure the
credit facility provided for under the Credit Agreement in the respects
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, each to the other, the parties do hereby
agree as follows:
1. Effect of Agreement. This Agreement shall modify and amend
the Credit Agreement as set forth herein. Except as expressly modified hereby,
the Credit Agreement, including without limitation each representation, warranty
and covenant contained therein, shall be and remain in full force and effect.
The Line of Credit Termination Date is May 31, 1996.
2. Definitions. All capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to them in the
Credit Agreement.
3. Waiver of Defaults. The Bank hereby waives each of the
existing Events of Default under the Credit Agreement caused by the Borrower's
failure to perform and observe its covenants set forth in Sections 7.8 and 7.9
of the Credit Agreement as of fiscal year end December 31, 1995 and the right
of the Bank to accelerate the maturity of the Borrower's obligations under the
Credit Agreement by reason of such Events of Default. This Agreement shall not
be construed as a waiver of the breach of any covenant by the Borrower
occurring on or after January 1, 1996 or of the Bank's right to accelerate the
maturity of the Borrower's obligations under the Credit Agreement by reason of
any such breach.
<PAGE> 2
4. Modification of Credit Agreement. The Credit Agreement is
hereby amended and modified as follows:
(a) To provide that the outstanding principal balance of
all Line of Credit Loans shall hereafter bear interest at a
fluctuating rate of interest equal to the Prime Rate plus 1%. Each
change in the interest rate shall take effect on the effective date of
any change in the Prime Rate.
(b) By deleting Section 7.3(d) in its entirety and
substituting in lieu thereof the following:
(d) Promptly upon receipt thereof any management
report submitted to the Borrower by its independent public
accountants in connection with their auditing function,
including, without limitation, any management report and any
management responses thereto, together with such additional
financial and other information, which is publicly available,
as the Bank may from time to time reasonably request.
(c) By deleting Section 7.7 in its entirety and inserting
in lieu thereof the following:
7.7 Current Ratio. Maintain a Current Ratio of
at least .75 to 1.0 as of March 31, 1996.
(d) By deleting Section 7.8 in its entirety and inserting
in lieu thereof the following:
7.8 Tangible Net Worth. Maintain a Tangible Net
Worth of not less than $6,800,000 as of March 31, 1996 and at
all times thereafter.
(e) By deleting Section 7.9 in its entirety and inserting
in lieu thereof the following:
7.9 Cash Flow Coverage. Maintain a Cash Flow
Coverage Ratio equal to or greater than 1.0 to 1 as of March
31, 1996.
(f) By deleting Section 7.10 in its entirety and
inserting in lieu thereof the following:
7.10 Debt to Cash Flow. Maintain a ratio of Debt
to Cash Flow less than or equal to 6.5 to 1 as of March 31,
1996.
-2-
<PAGE> 3
(g) By adding a new Section 8.7 as follows:
8.7 Limitation on Debt. Incur additional Debt
exceeding an aggregate of $250,000 during any fiscal year,
other than:
(a) Debt to the Bank;
(b) Accounts payable arising in the
ordinary course of business and not more than ninety
(90) days past due unless being contested in good
faith and by appropriate proceedings; and
(c) Surety bonds and appeals bonds in
connection with the enforcement of rights or claims
of the Borrower or of any Subsidiary or in connection
with judgments that do not result in an Event of
Default.
(h) By adding a new Section 8.8 as follows:
8.8 Limitation on Investments and Acquisitions.
Except as otherwise permitted under Section 8.5 and under
clause (i) of Section 8.3, purchase, invest in or otherwise
acquire, directly or indirectly, any capital stock, interests
in any partnership or joint venture or all or substantially
all of the business or assets of any other Person without the
prior written consent of the Bank.
(i) To provide that the Bank shall have the right to
continue to perform periodic audits of the collateral, the cost of
which (including the audit performed prior to the date of this
Agreement) shall be reasonable and shall be borne by the Borrower.
The Borrower shall also pay the monthly service fee of $2,500 (which
fee shall not be prorated for a partial month) associated with the
collateral monitoring program administered by NationsBank Business
Credit Services.
5. Conditions Precedent. The obligation of the Bank to enter
into this Agreement is subject to the satisfaction of each of the following
conditions precedent:
(a) Documents. The Bank shall have received all of the
following, each in form and substance satisfactory to the Bank:
-3-
<PAGE> 4
(i) This Agreement (duly executed);
(ii) Evidence of the power and authority of
the Borrower to execute, deliver and perform this Agreement;
(iii) An amendment, acceptable to the Bank in
form and substance, of the Pledge Agreement sufficient to
grant to the Bank a first Lien on all of the shares of stock
of Elite Information Services, Inc. ("Elite") (duly executed);
and
(iv) A favorable opinion of counsel to the
Borrower, addressed to the Bank with respect to such matters
as the Bank may require.
(b) No Default or Event of Default. No Default or
Event of Default shall have occurred on or after January 1, 1996 and
be continuing after giving effect to this Agreement.
(c) Commitment Fee. The Borrower shall have paid the
Bank's commitment fee of $25,000.
(d) Financial Information. (i) The receipt and
satisfactory review by the Bank of the audited financial statements of
the Borrower and its Subsidiaries as of fiscal year end 1995, which
statements shall be certified by and contain an unqualified opinion of
the independent certified public accountants who prepare such
statements, and (ii) the consolidated and consolidating balance sheet
and consolidated and consolidating statement of operations of the
Borrower and its Subsidiaries as of March 31, 1996, unaudited but
certified by the Chief Financial Officer of the Borrower to be
correct, each of which financial statements shall present no material
adverse change from previously provided information.
6. Condition Subsequent. On or before April 26, 1996, the
Borrower shall cause a collateral assignment of the interest of Elite in the
lockbox account of Elite with First Business Bank or another bank acceptable to
the Bank, in form and substance satisfactory to the Bank, to be executed and
delivered to the Bank, together with UCC Financing Statements in recordable
form sufficient to perfect the Bank's security interest in such lockbox and the
proceeds thereof. The Borrower shall further deliver to the Bank on or before
such date a favorable opinion of counsel to the Borrower confirming the Bank's
perfected security interest in such lockbox and its proceeds.
-4-
<PAGE> 5
7. Reaffirmation of Loan Documents. Except as modified herein,
the Loan Documents remain in full force and effect and the Borrower hereby
expressly represents and warrants that all covenants, representations and
warranties specified in the Loan Documents, as amended and modified, are true
and correct as of this date.
8. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Bank as follows:
(a) All of the Loan Documents, as modified by this Agreement,
are in full force and effect and no Default or Event of Default
occurring after January 1, 1996 exists under any of the Loan Documents;
(b) The Borrower has no defenses, offsets or counterclaims
against the Bank relating to the Loan Documents, as modified by this
Agreement, or against the indebtedness arising under, evidenced and/or
secured thereby; and
(c) The Borrower has full power and lawful authority to
execute and perform this Agreement.
9. Conflict of Terms. In the event of a conflict between the
terms of this Agreement and the Loan Documents, the terms of this Agreement
shall govern.
10. Costs. The Borrower agrees to pay all reasonable costs and
expenses of the Bank in connection with the preparation, execution and delivery
of this Agreement, including, without limitation, the reasonable fees and
out-of-pocket expenses of special counsel to the Bank, and agrees to save the
Bank harmless from any and all such costs, expenses and liabilities.
11. Counterparts. This Agreement may be executed in separate
counterparts, and said counterparts taken together shall be deemed to
constitute one and the same instrument. An executed copy of this Agreement
delivered by telecopier shall be intended to have the same effect as an
originally executed copy of this Agreement.
12. Consent of Guarantors. The Guarantors join in the execution
of this Agreement for the purpose of evidencing the consent of the Guarantors
to the terms hereof and that all of the Borrower's obligations and liabilities
under the Credit Agreement, as amended by this Agreement, shall constitute
guaranteed Obligations under each of the Guaranty Agreements.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this instrument to be executed
and delivered by their duly authorized officers on the day and year first above
written.
BORROWER:
BROADWAY & SEYMOUR, INC.
By /s/ DAVID A FINLEY
-----------------------------
Name: David A. Finley
Title: Executive Vice President
and Chief Financial
Officer
BANK:
NATIONSBANK, N.A.
By: /s/ P.J. PHILLIPPI
-----------------------------
Name: P.J. Phillippi
Title: Senior Vice President
-6-
<PAGE> 7
CONFIRMATION OF GUARANTY AGREEMENTS
By execution of this Agreement, the undersigned hereby expressly
consent to the modifications and amendments set forth herein, and hereby
acknowledge, represent and agree that the Guaranty Agreements remain in full
force and effect.
BSI NORTH CAROLINA, INC.
By: /s/ WILLIAM W. NEAL, III
---------------------------
Name: William W. Neal, III
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------------
Lillian Gudzy
Assistant Secretary
NATIONAL FINANCIAL
COMPUTER SYSTEMS, INC.
By: /s/ WILLIAM W. NEAL, III
--------------------------
Name: William W. Neal, III
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - ----------------------
Lillian Gudzy
Assistant Secretary
NATIONAL SYSTEMS GROUP, INC.
By: /s/ WILLIAM W. NEAL, III
---------------------------
Name: William W. Neal, III
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - ---------------------
Lillian Gudzy
Assistant Secretary
-7-
<PAGE> 8
RELATIONAL TEAM CONCEPTS, INC.
By: /s/ WILLIAM W. NEAL III
--------------------------
Name: William W. Neal III
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
THE HEEBINK GROUP, INCORPORATED
By: /s/ WILLIAM W. NEAL III
--------------------------
Name: William W. Neal III
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
CORBEL & CO.
By: /s/ L. JAMES THOMPSON
------------------------
Name: L. James Thompson
Title: Vice President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
-8-
<PAGE> 9
ELITE INFORMATION SYSTEMS, INC.
By:
------------------------------
Name:
-----------------------
Title:
----------------------
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
MICRO/RESOURCES, INC.
By: /s/ ALAN S. STANFORD
----------------------------
Name: Alan S. Stanford
Title: Senior Vice President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
-9-
<PAGE> 10
ELITE INFORMATION SYSTEMS, INC.
By: /s/ ALAN RICH
---------------------------
Name: Alan Rich
Title: President
(CORPORATE SEAL)
ATTEST:
/s/ LILLIAN GUDZY
- - -------------------
Lillian Gudzy
Assistant Secretary
MICRO/RESOURCES, INC.
By:
------------------------------
Name: Alan S. Stanford
Title: Senior Vice President
(CORPORATE SEAL)
ATTEST:
- - ----------------------
Assistant Secretary
-10-
<PAGE> 1
Broadway & Seymour, Inc.
Form 10-Q for the Three Months Ended March 31, 1996
BROADWAY & SEYMOUR, INC. EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
---------------------------
Mar. 31, Mar. 31,
1996 1995
----------- ------------
<S> <C> <C>
Net income (loss) ($ 835) $ 668
=========== ============
PRIMARY EARNINGS PER SHARE:
Weighted average common shares outstanding 8,895 8,428
Reduction from effect of treasury stock (39) (39)
Addition from assumed exercise of stock options 483
Addition from assumed stock bonus awards 14
----------- ------------
Weighted average common and common equivalent
shares outstanding 8,856 8,886
=========== ============
Net income (loss) per common and common
equivalent share ($ 0.09) $ 0.08
=========== ============
FULLY DILUTED EARNINGS PER SHARE:
Weighted average common shares outstanding 8,895 8,428
Reduction from effect of treasury stock (39) (39)
Addition from assumed exercise of stock options 483
Addition from assumed stock bonus awards 14
Addition from assumed participation in employee
stock purchase plan 3
----------- ------------
Weighted average common and common equivalent
shares outstanding 8,856 8,889
=========== ============
Net income (loss) per common and common
equivalent share ($ 0.09) $ 0.08
=========== ============
</TABLE>
- 21 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF OPERATIONS FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 459
<SECURITIES> 0
<RECEIVABLES> 27,644
<ALLOWANCES> 0
<INVENTORY> 257
<CURRENT-ASSETS> 34,476
<PP&E> 9,284
<DEPRECIATION> 0
<TOTAL-ASSETS> 77,095
<CURRENT-LIABILITIES> 36,479
<BONDS> 0
89
0
<COMMON> 0
<OTHER-SE> 32,857
<TOTAL-LIABILITY-AND-EQUITY> 77,095
<SALES> 24,733
<TOTAL-REVENUES> 24,733
<CGS> 18,061
<TOTAL-COSTS> 18,061
<OTHER-EXPENSES> 7,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175
<INCOME-PRETAX> (1,155)
<INCOME-TAX> 320
<INCOME-CONTINUING> (835)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (835)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
</TABLE>
