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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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
------------------------- -----
(Address of principal executive offices) (Zip code)
(704) 372-4281
--------------
(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 October 31, 1996, 8,942,391 shares of Common Stock, $.01 par value,
were outstanding.
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Page 1 of 16
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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 -
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Operations -
Three and nine months ended September 30, 1996 and
September 30, 1995 4
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1996 and
September 30, 1995 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 15
SIGNATURE 16
</TABLE>
____________________________
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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BROADWAY & SEYMOUR, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,613 $ 2,053
Receivables 21,363 28,233
Income tax refund receivable 2,100
Inventories 2,144 417
Deferred income taxes 5,697 4,934
Other current assets 922 1,381
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Total current assets 32,739 39,118
Property and equipment 7,651 9,299
Software costs 7,029 9,865
Intangible assets 19,756 24,578
Other assets 301 385
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$67,476 $83,245
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current portion of long-term debt $ 306 $ 6,263
Accounts payable-trade 7,412 6,408
Accrued compensation 2,030 2,796
Estimated liabilities for contract losses 3,347 5,246
Other accrued liabilities 5,593 5,079
Deferred revenue 8,127 12,561
Income taxes payable 1,830 275
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Total current liabilities 28,645 38,628
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Long-term debt 306 1,327
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Deferred income taxes 7,096 7,096
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Deferred revenue and other liabilities 467 3,757
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Stockholders' equity:
Common stock, $.01 par value; Authorized 20,000,000 shares;
Issued 8,976,276 shares and 8,801,016 shares, respectively 90 88
Paid-in capital 36,198 34,277
Accumulated deficit (4,834) (1,436)
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31,454 32,929
Less treasury stock, at cost, 38,552 shares (492) (492)
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30,962 32,437
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$67,476 $83,245
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 4
BROADWAY & SEYMOUR, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept 30, Sept 30, Sept 30, Sept 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Revenue $19,479 $33,151 $67,836 $98,353
------- ------- ------- -------
Operating Expenses:
Cost of Revenue 17,641 20,020 54,608 63,972
Research and development 1,376 1,860 4,849 4,622
Sales and marketing 2,514 3,400 9,022 11,919
General and administrative 2,351 3,070 7,475 7,667
Restructuring and impairment charges 2,350 2,145
------- ------- ------- -------
Total operating expenses 26,232 28,350 78,099 88,180
------- ------- ------- -------
Operating income (loss) (6,753) 4,801 (10,263) 10,173
Gain (loss) on disposition of
non-strategic business units (430) 7,843
Interest income 57 26 117 78
Interest expense (22) (115) (334) (395)
------- ------- ------- -------
Income (loss) before provision for income taxes (7,148) 4,712 (2,637) 9,856
Income tax benefit (provision) 2,343 (2,205) (761) (4,535)
------- ------- ------- -------
Net income (loss) ($ 4,805) $ 2,507 ($ 3,398) $ 5,321
======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 8,937 9,226 8,903 9,026
Income (loss) per common and common
equivalent share ($ 0.54) $ 0.27 ($ 0.38) $ 0.59
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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BROADWAY & SEYMOUR, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
Sept. 30, Sept. 30,
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($3,398) $5,321
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 7,310 7,666
Deferred income taxes (763) (8)
Restructuring and impairment charges 2,145
Gain on disposition of non-strategic business units (7,843)
Loss on disposal of fixed assets 58
Change in assets and liabilities excluding effects of
businesses acquired and divestitures:
Receivables 2,903 (6,559)
Inventories (1,757) 220
Other assets 459 (727)
Accounts payable - trade 1,141 (4,693)
Accrued compensation (587) (748)
Estimated liabilities for contract losses (1,899)
Other liabilities (4,742) 66
Deferred revenue and customer deposits (1,838) (1,420)
Income taxes 3,726 (844)
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Net cash used by operating activities (5,085) (1,726)
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Cash flows from investing activities:
Purchase of property and equipment (2,538) (5,365)
Investment in software costs (1,110) (1,907)
Net proceeds from sale of property and equipment and other dispositions 16,476 2,000
Cash used in business acquisitions (864) (1,586)
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Net cash provided (used) by investing activities 11,964 (6,858)
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Cash flows from financing activities:
Net borrowings (payments) under credit facility (5,217) 4,506
Proceeds from issuance of notes 864 314
Payments of notes payable and long-term debt (2,625) (644)
Proceeds from issuance of common stock 659 3,702
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Net cash provided (used) by financing activities (6,319) 7,878
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Net increase (decrease) in cash and cash equivalents 560 (706)
Cash and cash equivalents, beginning of period 2,053 1,639
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Cash and cash equivalents, end of period $2,613 $933
======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
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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 September 30,
1996 and results of operations and cash flows for the interim periods
presented. The results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the entire year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated 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.
Management makes estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates. The more significant estimates affecting the Company's
financial statements relate to revenue recognition and loss accruals for
long-term contracts, allowance for uncollectible receivables and useful lives
used in depreciating property and equipment and amortizing capitalized software
products and intangible assets.
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 asset 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:
During the second half of 1995, the Company implemented a new operating
model called Futures '96 and refocused its strategic direction on core
operations and internal product development rather than growth through product
acquisitions. As a part of its focus on core operations, the Company initiated
a plan to sell or discontinue certain non-strategic business units.
On May 15, 1996, the Company sold substantially all the assets, subject
to certain related liabilities, of its asset management business, including the
Company's AMtrust and TrustProcessor software products, to Fidelity Investments
Institutional Services Company, Inc. ("Fidelity"), pursuant to an Asset
Purchase Agreement. In connection therewith, the Company and Fidelity entered
into various 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 the closing. The aggregate consideration to be paid to the Company
in connection with these transactions is approximately $29.0 million, of which
approximately $23.5 million was paid at closing for the net assets and
licensing of certain software and approximately $5.5 million is scheduled to be
paid over the twenty-four months following the closing for certain software
maintenance, training, transition services and professional services.
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<PAGE> 7
On September 1, 1995, the Company transferred a contract for services
provided to International Business Machines Corporation ("IBM") to another
services provider. Prior to transfer, services provided under this contract
contributed approximately $1.9 million of revenue and incurred costs of $1.6
million.
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 connection with the sale, the Company agreed to provide
certain services and license certain software to Liberty. For the three month
and nine month periods ended September 30, 1995, Liberty contributed revenue of
$5.5 million and $14.1 million, respectively. All of the $5.5 million of
revenue contributed in the third quarter of 1995 and $4.0 million of revenue
contributed in the first half of 1995 is software license revenue against which
the Company incurred no significant expense. During the first six months of
1996, the Company recognized approximately $.5 million of revenue related to
the completion of support and maintenance services against which the Company
incurred no significant expense.
Under the maintenance provisions of a Software License Agreement executed
with Medaphis Corporation ("Medaphis") on December 30, 1994, Medaphis paid $6.8
million to the Company. The Company recognized $3.0 million and $3.8 million
received under this agreement as services revenue for the three months ended
March 31, 1995 and June 30, 1995, respectively. The Company incurred no
significant expenses associated with such maintenance services.
NOTE 3 - RECEIVABLES:
Receivables at September 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Trade $ 18,409 $ 24,752
Unbilled 2,314 3,809
Other 1,565 613
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22,288 29,174
Less - Allowance for doubtful accounts (925) (941)
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$ 21,363 $ 28,233
========= ========
</TABLE>
NOTE 4 - SOFTWARE COSTS:
The Company capitalizes the costs of developing software to be sold or
leased, including costs of product enhancements that improve the marketability
of the original product or extend its life. These costs are incurred after
technological feasibility is established and prior to the availability of the
software for general release. During the three months ended September 30, 1996
and September 30, 1995, approximately $.5 million and $.2 million of software
development costs were capitalized, respectively, and during the nine months
ended September 30, 1996 and September 30, 1995, $1.1 million and $1.7 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.
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Software costs $ 14,951 $ 17,360
Less - Accumulated amortization (7,922) (7,495)
-------- --------
$ 7,029 $ 9,865
======== ========
</TABLE>
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<PAGE> 8
NOTE 5 - INTANGIBLE ASSETS:
Intangible assets at September 30, 1996 and December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
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(In thousands)
<S> <C> <C>
Excess of cost over fair value of assets acquired $15,358 $18,334
Customer lists and maintenance contracts 9,921 10,170
Assembled workforce 3,900 4,400
Non-competition agreements 313 313
Trade names and other 200 228
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29,692 33,445
Less - Accumulated amortization (9,936) (8,867)
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$19,756 $24,578
======= =======
</TABLE>
Intangible assets are amortized using the straight-line method over their
estimated useful lives ranging from 5 to 10 years.
NOTE 6 - DEBT:
The Company's credit facility was repaid during the second quarter of 1996
and expired on May 31, 1996. The Company is in negotiation for a bank line of
credit.
NOTE 7 - RESTRUCTURING CHARGES:
During the fourth quarter of 1995, the Company recorded a restructuring
accrual of approximately $1.5 million that consisted of approximately $1.0
million for the consolidation of certain facilities expected to be subleased
and approximately $.5 million for employee severance costs. During the first
quarter of 1996, the Company revised its estimate of the remaining costs to
complete the restructuring downward by $.2 million. During the nine months
ended September 30, 1996, the Company utilized cash of approximately $.8
million to satisfy obligations related to these reserves. The reserve balance
was approximately $.5 million at September 30, 1996.
In August 1996, the Company developed a plan to close National Pension
Alliance ("NPA"), a joint venture partnership of which Corbel/NPA, Inc.
("Corbel/NPA"), a wholly owned subsidiary of Corbel, is a 75% general partner.
Following a transition period for NPA customers, the operations of NPA will
cease. For the quarter ended September 30, 1996 and 1995, Corbel/NPA had
revenues of $.2 million and $.1 million, respectively, and a loss before
restructuring charges of $.7 million and $.7 million, respectively. For the
nine months ended September 30, 1996 and 1995, Corbel/NPA had revenues of $.4
million and $.7 million, respectively, and a loss before restructuring charges
of $1.9 million and $1.3 million, respectively. In the third quarter of 1996,
the Company reserved approximately $2.4 million related to the exit costs of
NPA, including $1.3 million for customer refunds and $1.1 million related to
asset write-offs, terminations of 3 employees and other exit costs. The
expense related to this reserve is reflected in the Company's statement of
operations as a restructuring and impairment charge. The reserve balance was
approximately $2.0 million at September 30, 1996.
NOTE 8 - SUBSEQUENT EVENTS:
On October 18, 1996, the Company signed a letter of intent to sell Corbel
& Co., a wholly owned subsidiary ("Corbel"), subject to satisfactory
completion of due diligence, regulatory approval, board approval from both
companies and negotiation of a definitive stock purchase agreement. Corbel's
revenues (excluding its subsidiary Corbel/NPA) for the nine months ended
September 30, 1996 were $15.1 million, generating income before taxes of $2.5
million. The sale is expected to be completed in November 1996.
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BROADWAY & SEYMOUR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
During the second half of 1995, the Company implemented a new operating
model called Futures '96. 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. Operations were
reorganized to integrate independent business units into a competency-based
matrix model with team delivery of both products and services which enables
employees at all skill levels to be rapidly deployed as required to meet client
needs and the Company's internal productivity goals. The Company's strategic
direction was refocused on core operations and internal product development
rather than growth through product acquisitions. As a part of its focus on
core operations, the Company initiated a plan to sell or discontiue certain
non-strategic business units.
On October 18, 1996, the Company signed a letter of intent to sell Corbel
& Co., a wholly owned subsidiary ("Corbel"), subject to satisfactory
completion of due diligence, regulatory approval, board approval from both
companies and negotiation of a definitive stock purchase agreement. Excluding
Corbel/NPA, as discussed below, Corbel's revenues for the nine months ended
September 30, 1996 were $15.1 million, generating income before taxes of $2.5
million.
In August 1996, the Company developed a plan to close National Pension
Alliance ("NPA"), a joint venture partnership of which Corbel/NPA, Inc.
("Corbel/NPA"), a wholly owned subsidiary of Corbel, is a 75% general partner.
Following a transition period for NPA customers, the operations of NPA will
cease. For the quarter ended September 30, 1996 and 1995, Corbel/NPA had
revenues of $.2 million and $.1million, respectively, and a net loss before
taxes of $.7 million and $.7 million, respectively. For the nine months ended
September 30, 1996 and 1995, Corbel/NPA had revenues of $.4 million and $.7
million, respectively, and a loss before restructuring charges of $1.9 million
and $1.3 million, respectively. In the third quarter of 1996, the Company
reserved approximately $2.4 million related to the exit costs of NPA, including
$1.3 million for customer refunds and $1.1 million related to asset
write-offs, terminations of 3 employees and other costs. The expense related
to this reserve is reflected in the Company's statement of operations as a
restructuring and impairment charge. The reserve balance was approximately
$2.0 million at September 30, 1996.
On May 15, 1996, the Company sold substantially all the assets, subject
to certain related liabilities, of its asset management business, including the
Company's AMtrust and TrustProcessor software products, to Fidelity Investments
Institutional Services Company, Inc. ("Fidelity"), pursuant to an Asset
Purchase Agreement. In connection therewith, the Company and Fidelity entered
into various 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 the closing. The aggregate consideration to be paid to the Company
in connection with these transactions is approximately $29.0 million, of which
approximately $23.5 million was paid at closing for the net assets and
licensing of certain software and approximately $5.5 million is scheduled to be
paid over the twenty-four months following the closing for certain software
maintenance, training, and transition services and professional services. The
Company's asset management business contributed approximately $5.8 million and
$12.6 million of revenue for the year to date period ended on the date of sale
and the nine months ended September 30, 1995, respectively. Losses before
income taxes from the asset management business were $2.8 million and $2.2
million for the year to date period ended on the date of sale and the nine
months ended September 30, 1995, respectively. For the nine months ended
September 30, 1996, the gain on the sale of the business was $7.8 million.
On September 1, 1995, the Company transferred a contract for services
provided to International Business Machines Corporation ("IBM") to another
services provider. Prior to transfer, services provided under this contract
contributed approximately $1.9 million of revenue and incurred costs of $1.6
million.
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<PAGE> 10
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 connection with the sale, the Company agreed to provide
certain services and license certain software to Liberty. For the three month
and nine month periods ended September 30, 1995, Liberty contributed revenue of
$5.5 million and $19.6 million, respectively. All of the $5.5 million of
revenue contributed in the third quarter of 1995 and $4.0 million of revenue
contributed in the first half of 1995 is software license revenue as part of
the sale to Jack Henry against which the Company incurred no significant
expense. During the first six months of 1996, the Company recognized
approximately $.5 million of revenue related to the completion of support and
maintenance of software services against which the Company incurred no
significant expense.
Under the maintenance provisions of a Software License Agreement executed
with Medaphis Corporation ("Medaphis"), on December 30, 1994, Medaphis paid
$6.8 million to the Company. The Company recognized $3.0 million and $3.8
million received under this agreement as revenue for the three months ended
March 31, 1995 and June 30, 1995, respectively. The Company incurred no
significant expenses associated with such maintenance services.
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO
QUARTER ENDED SEPTEMBER 30, 1995
The results of operations for the third quarter of 1996 and 1995 include
revenue and expenses from operations which have been sold as described above.
CONSOLIDATED REVENUE AND COST OF REVENUE
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
09/30/96 09/30/95
-------- --------
<S> <C> <C>
Revenue:
Services $14,034 $18,036
Products
Software licenses 3,806 13,115
Hardware and other 1,639 1,098
Sale of Services Contract - 902
------- -------
Net Revenue $19,479 $33,151
------- -------
Cost of revenue:
Services $14,768 $17,530
Products
Software licenses 1,369 1,826
Hardware and other 1,504 664
------- -------
Total cost of revenue $17,641 $20,020
------- -------
</TABLE>
Each of the comparative revenue and cost of revenue amounts discussed
below excludes the effect of non-recurring revenue and expenses associated with
Liberty and the IBM services contract that were sold during 1995.
Services revenue decreased from $17.7 million to $14.0 million, or 21%, in
the third quarter of 1996 compared to the same period last year. Services
revenue for the third quarter of 1995 includes $5.4 million of revenue
associated with the
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<PAGE> 11
Company's AMtrust product subsequently sold to Fidelity on May 15, 1996.
Excluding the effect of AMtrust's operations, services revenue increased $1.7
million, or 14%, in the third quarter of 1996 compared to the same period last
year. This increase relates principally to $1.9 million of temporary
professional services provided to Fidelity. Other significant changes include
$2.0 million in increased integration service revenue related to the Company's
Millennium, call center, VisualImpact and BANCStar products. There was no
significant Millennium or VisualImpact related revenue in the third quarter of
1995. Due to delays in completing necessary product modifications, revenue
from integration services related to the Company's Crisp product decreased
approximately $.7 million in the third quarter of 1996 as compared to the same
period of 1995. In addition, lower pension document processing volumes at
Corbel and the sale of the Company's educational training group in the third
quarter of 1996 resulted in decreased revenue of $.5 million and $.4 million,
respectively.
Product revenue decreased from $8.9 million to $5.4 million, or 39%, in
the third quarter of 1996 compared to the same period last year. Software
license revenue in connection with sales of the Company's Elite legal product
suite decreased $3.0 million due to lower volume resulting from competitive
pressures in the marketplace. The Company's product revenue related to its
banking products and third-party software and hardware sales decreased
approximately $1.0 million. Also contributing to the decrease is a $1.0
million decrease in software license revenue due to the sale of the Company's
AMtrust product to Fidelity. Offsetting these decreases is a $.4 million
increase in Corbel's software license revenue, a $.3 million increase in
Millennium hardware revenue and a $.5 million increase in hardware revenue
associated with the Company's Elite legal product suite.
Cost of revenue related to services decreased $2.4 million, or 14%, in the
third quarter of 1996 to $14.8 million compared to $17.2 million in the third
quarter of 1995. A $4.4 million decrease in salaries, contract labor and
other costs relates to the Company's AMtrust product that was sold to Fidelity
on May 15, 1996. This decrease was offset, in part, by $1.3 million of costs
of transition services billed to Fidelity in the third quarter of 1996.
Excluding costs related to AMtrust and the Fidelity transition services, cost
of revenue related to services increased $.9 million. This increase
principally relates to a $1.1 million increase in cost of services at Elite,
due primarily to increased contract-specific installation and implementation
requirements.
Cost of revenue related to products increased 16%, or $.4 million, to $2.9
million in the third quarter of 1996 compared to $2.5 million in the same
period last year. This increase is primarily due to a $1.0 million increase in
costs related to third party hardware. This increase was offset by a $.2
million decrease due to the sale of the AMtrust product to Fidelity on May 15,
1996, a $.2 million decrease in amortization as a result of the write-down of
certain software in December 1995 and a $.2 million decrease in purchased
software costs related to a call center project.
Research and development expenses decreased slightly when comparing the
third quarter of 1996 with the same period in the prior year. Research and
development expenses in the third quarter of 1996 and 1995 were net of $.5
million and $.2 million of capitalized software development costs,
respectively. Including capitalized costs, research and development
expenditures were $1.9 million in the third quarter of 1996 compared to $2.1
million in the third quarter of 1995. Research and development expenditures
were attributable to development and enhancement of Millennium, CRISP, Elite,
Quantech, AutoDoc, NPA, VisualImpact and BANCStar software. Research and
development costs capitalized in the third quarter of 1996 related to
development and enhancement of Millennium, Quantech and Elite software.
Sales and marketing expenses decreased $.9 million to $2.5 million in the
third quarter of 1996 from $3.4 million in 1995. Of this decrease, $.7
million is due to the sale of the asset management business to Fidelity in May
1996 and the remainder of the decrease is due principally to lower payroll and
commissions that resulted from lower sales of the Company's Elite legal product
suite.
General and administrative expenses decreased to $2.4 million in the third
quarter of 1996 from $3.1 million in the same period last year. This decrease
is principally due to a $.3 million decline in professional fees.
- 11 -
<PAGE> 12
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
The results of operations for the nine months ended September 30, 1996 and
1995 include revenue and expenses from operations that have been sold as
described above.
CONSOLIDATED REVENUE AND COST OF REVENUE
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
09/30/96 09/30/95
----------- -----------
<S> <C> <C>
Revenue:
Services $46,434 $60,860
Products
Software licenses 18,072 29,730
Hardware and other 3,330 6,861
Sale of Services Contract - 902
------- -------
Net Revenue $67,836 $98,353
------- -------
Cost of revenue:
Services $47,002 $53,016
Products
Software licenses 4,610 5,912
Hardware and other 2,996 5,044
------- -------
Total cost of revenue $54,608 $63,972
------- -------
</TABLE>
Each of the comparative revenue and cost of revenue amounts discussed
below excludes the effect of non-recurring revenue and expenses associated with
Liberty and the IBM services contract which were sold during 1995.
Services revenue decreased from $52.9 million to $45.9 million, or 13%, in
the nine months ended September 30, 1996 compared to the same period last year.
Services revenue for the 1995 nine months period includes $6.8 million of
non-recurring software maintenance revenue related to a 1994 contract with
Medaphis Corporation. The Company incurred no significant expenses associated
with such maintenance services. Excluding the effect of AMtrust's operations
and the Medaphis contract, services revenue increased $5.4 million, or 13%, in
the nine months ended September 30, 1996 compared to the same period last year.
Services revenue related to certain of the Company's products, including
VisualImpact, BANCStar, Millennium and call center, contributed approximately
$5.3 million of the increase. Approximately $1.6 million of the increase is
due to revenue from temporary services provided to Fidelity as part of the sale
on May 15, 1996. Approximately $1.2 million of the increase is related to the
acquisition of The MiniComputer Company of Maryland, Inc. ("TMC") in June 1995.
Also contributing to the increase in service revenue is $1.3 million of
incremental software maintenance revenue from the Company's Elite legal product
suite, related to an increase in client installations, and $.8 million of the
increase is due to services revenue from transitional services related to the
Fidelity transaction. Corbel's services revenue declined $2.1 million due to
increased revenue in the first nine months of 1995 related to a first quarter
1995 legal deadline for restatement of certain pension plan documents. Due to
necessary product modifications, revenue from systems integration services
related to the Company's Crisp product decreased approximately
- 12 -
<PAGE> 13
$1.4 million for the nine months ended 1996 as compared to the same period of
1995. The educational training group contributed approximately $.9 million of
the decrease in services revenue. The educational group was sold during the
third quarter of 1996.
Product revenue decreased $1.6 million, or 7%, during the nine months
ended September 30, 1996 compared to 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 associated expense. During the first nine months of 1996,
the Company recorded $4.0 million in product revenue from a software license
agreement with Fidelity for Corbel's Quantech pension administration software,
against which the Company recorded substantially no expense. The Company had a
$5.4 million decrease in product revenue in connection with decreased
installations of the Elite legal product suite. Excluding the $4.0 million
software license contract, the Company's product revenue related to its banking
products and third-party software and hardware sales, decreased approximately
$4.8 million, offset by $1.5 million in product revenue related to the
Company's Millennium product. Excluding the $4.0 million in product revenue
from the Fidelity contract for Quantech, Corbel's product revenue declined $.5
million due to a decline in new product sales and conversions.
Cost of revenue related to services decreased $.7 million to $46.9
million for the nine months ended September 30, 1996, compared to $47.6 million
for the same period in 1995. A decrease of $4.1 million in cost of services
revenue was due to the sale of the AMtrust product to Fidelity in May 1996 and
a $.8 million decrease in costs of services at Corbel, related principally to a
first quarter 1995 legal deadline for restatement of certain pension plan
documents, which increased revenue and expenses in that period. These
decreases were offset, in part, by $1.2 million of incremental cost of services
related to TMC, acquired in June 1995. Also, a $3.2 million increase in
contract labor and payroll costs is attributable to the Company's Elite legal
product suite. This increase was due to more contract-specific installation
and implementation requirements as well as incremental costs associated with
increased staffing levels.
Overall, cost of revenue related to products remained relatively flat,
decreasing $.1 million to $7.8 million, or 37% of product revenue, in the nine
months ended September 30, 1996 compared to $7.9 million, or 33% of product
revenue for the same period last year. Software license cost of revenue
decreased $.8 million, offset by a $.7 million increase in hardware and other
cost of revenue in thenine months ended September 30, 1996 compared to 1995.
Software license costs increased $.5 million as a result of third party
software purchased for a Millennium project. This increase in software
license costs was offset by a $.5 million decrease in amortization of developed
software, principally due to the write-down of certain software in December
1995, and a $.7 million decrease in developed software royalties at Elite as a
result of decreased sales.
The $.7 million increase in hardware and other cost of revenue is due to
increased volume of hardware installations for the Company's Elite legal
product suite, representing a $1 million increase in hardware costs from 1995
to 1996, a $1 million decrease in third party hardware costs related to call
center projects and a $.7 million increase in hardware costs related to
VisualImpact projects.
Research and development expenses for the 1996 and 1995 nine month periods
were net of $1.1 million and $1.7 million of capitalized software development
costs, respectively. Including capitalized costs, research and development
expenditures increased to $6 million for the nine months ended September 30,
1996 compared to $5.8 million for the same period in 1995. Research and
development expenditures were attributable to development and enhancement of
Millennium, CRISP, Elite, Quantech, AutoDoc, NPA, VisualImpact and BANCStar
software. Research and development costs capitalized in 1996 related to
development and enhancement of Millennium, Quantech and Elite software.
Sales and marketing expenses for the nine month period ended September 30,
1996 decreased $1.1 million from $10.1 million for the nine months ended
September 30, 1995 to $9 million for the same period in the current year. Of
this decrease, $.2 million is due to the sale of the Company's AMtrust product
in May 1996. Additionally, sales and marketing expenses at Elite decreased $.8
million, principally due to lower payroll and commission costs caused by lower
product sales.
General and administrative expenses for the nine month period decreased
2.9% to $7.5 million for 1996 from $7.7 million in 1995, due principally to
decreased professional fees in the period.
Restructuring and impairment charges for the nine months ended September
30, 1996 include a $2.4 million charge related to the Company's planned
shut-down of NPA described above. Further, during the fourth quarter of 1995,
the
- 13 -
<PAGE> 14
Company had recorded a restructuring accrual of approximately $1.5 million that
consisted of approximately $1.0 million for consolidation of certain facilities
expected to be subleased and approximately $.5 million for employee severance
costs. During the first quarter of 1996, the Company revised its estimate of
the remaining costs to complete the restructuring downward by $.2 million. In
1996, the Company utilized cash of approximately $.9 million to satisfy
obligations related to the 1995 restructuring reserve. The 1995 restructuring
reserve balance was approximately $.5 million at September 30, 1996.
Income for the nine months ended September 30, 1996 includes a $7.8
million gain, principally from the sale of the Company's asset management
business to Fidelity.
INCOME TAXES
The Company's effective tax rate for the nine months ended September 30, 1996
and 1995 was 28.8% and 46%, respectively. The 1996 effective rate reflects the
difference between book and tax basis for the net assets sold as part of the
Fidelity transaction and other differences between book and taxable income.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1996 the Company had cash and cash equivalents of
approximately $2.6 million and working capital of approximately $4.1 million.
The Company currently has invested available cash in various overnight deposits
earning between 5% and 5.5% per annum in interest.
As part of Futures '96, the Company focused on core operations and
evaluatee opportunities for divesting non-strategic lines of business. On
October 18, 1996, the Company announced that it had signed a letter of intent
to sell Corbel & Co., a wholly owned subsidiary, subject to satisfactory
completion of due diligence, regulatory approval, board approval from both
companies and negotiation of a definitive stock purchase agreement. Proceeds
from the sale of this subsidiary or other sources of capital will be necessary
to fund future growth and working capital requirements.
The Company used a portion of the proceeds from the Fidelity transaction
to pay off its revolving credit facility, which expired in May 1996, and
certain other debt. The Company has reviewed its liquidity and capital
requirements for the remainder of 1996 and the near term and is in negotiation
for a bank line of credit.
The Company believes that the remaining proceeds from the Fidelity
transaction, cash flow from operations and the issuance of stock pursuant to
its employee stock purchase and stock option plans, combined with proceeds from
the sale of Corbel and/or a line of credit will be sufficient to fund its
working capital requirements through 1996 and the near term.
OTHER
The Company's revenue derives primarily from the performance of consulting
services related to information technology solutions and the sale of related
products under specific engagements with its customers. In addition, the
Company's historic, acquisition-oriented growth strategy broadened its product
and service offerings and enabled the Company to successfully compete for
large-scale projects. However, such projects have typically had a longer sales
cycle and inherent volatility in the rate that revenue and related cost was
generated and recognized which has produced significant variations in quarterly
and 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-
- 14 -
<PAGE> 15
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.
- 15 -
<PAGE> 16
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: December 12, 1996 By: /s/ David A. Finley
----------------- ---------------------------------------------
David A. Finley, Executive Vice President and
Chief Financial Officer
- 16 -
<PAGE> 1
EXHIBIT 10.19
[LETTERHEAD OF SUNGARD DATA SYSTEMS INC.]
LETTER OF INTENT
October 17, 1996
Mr. David A. Finley
Broadway & Seymour, Inc.
128 South Tryon Street
Charlotte, NC 28202
Ladies and Gentlemen:
This letter of intent summarizes our discussions and represents our
mutual intent to pursue the proposed acquisition of the outstanding shares of
stock of Corbel & Co. ("Corbel") from Broadway & Seymour, Inc. ("BSI") by
SunGard Data Systems Inc. or its subsidiary ("SunGard"). Of course, a definitive
acquisition agreement ("Agreement"), which will contain many terms in addition
to those contained in this letter of intent, will have to be negotiated and
agreed upon by BSI and SunGard. Our discussions have been as follows:
1. Transaction. SunGard will acquire from BSI all of the issued and
outstanding shares of capital stock of Corbel free and clear of all liens,
claims and encumbrances. Promptly after this letter of intent is signed, the
parties will proceed with the necessary filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR Act").
2. Purchase Price. The total purchase price will consist of (a) a cash
payment at closing in the amount of $14,250,000, which is subject to adjustment
and possible holdback as provided below, and (b) a contingent cash payment, of
up to a maximum amount of $3,500,000, equal to 1.15 times the amount by which
Corbel's revenues during the one-year period beginning January 1, 1997 exceed
$18,200,000.
3. Restrictive Covenants. BSI will be bound by appropriate nondisclosure
and noncompetition covenants. The noncompetition covenants, which will have a
term of five years after closing, will include prohibitions against the
solicitation of employees and customers. No additional consideration is being
paid for the noncompetition covenants.
4. Certain Other Matters.
(a) At or before closing, Corbel will transfer to BSI all of the issued
and outstanding shares of Corbel's wholly owned subsidiary, Corbel/NPA, Inc.,
which is the general partner of National Pension Alliance, a Florida limited
partnership (such subsidiary and partnership
<PAGE> 2
Mr. David A. Finley
October 17, 1996
Page -2-
are referred to together as "NPA"). NPA's business will be discontinued at
BSI's expense and under BSI's control in accordance with a reasonable plan
developed by BSI and Corbel and reasonably acceptable to SunGard. At closing,
BSI and Corbel will enter into an agreement under which (a) Corbel will
cooperate with BSI in implementing such plan (which may include, without
limitation, refunding license fees at BSI's expense and/or offering discounts
to NPA customers on Corbel software at no charge to BSI), (b) BSI will pay
Corbel for all employees, facilities, services and similar items provided by
Corbel to NPA or in connection with NPA's business or the discontinuance
thereof, and (c) BSI will reimburse Corbel for the cost of leased space used by
NPA's business (as of this date unless the space is reconfigured as provided
below) until Corbel can use the space or until the lease expires net of any
sublease revenues, provided that Corbel shall use reasonable efforts to
reconfigure the space so that the NPA space can be subleased.
(b) At or before closing, BSI and Corbel will enter into an agreement
under which Corbel agrees to comply with the requirements of Section 7.13 of
the Guarantee and Indemnity Agreement dated as of April 10, 1996 between BSI
and Fidelity Investments Institutional Services, Inc. ("FIIS"), as amended by
Amendment No. 1 thereto dated as of May 15, 1996. Corbel will assign to BSI the
$1,000,000 payment due to Corbel from FIIS.
5. Closing. The parties will use reasonable efforts to close the proposed
transaction by November 30, 1996. Closing will take place at a mutually
agreeable time and location. The effective date of the acquisition ("Effective
Date") will be the calendar month-end closest to the date of closing or another
mutually agreeable date. The Agreement, which must be acceptable to BSI and
SunGard, will contain detailed representations, warranties, indemnifications
and other terms appropriate for a transaction of the size and complexity of the
proposed transaction. A mutually agreeable portion of the cash payment due at
closing may be held back for a mutually agreed period of time to cover
potential indemnification obligations. SunGard has already reviewed a BSI
prepared draft of a definitive agreement, provided BSI with a proposed redraft
thereof and discussed areas of disagreement.
6. Financial Statements. In the Agreement, BSI will represent its 1995
audited financial statements and both its and Corbel's unaudited financial
statements as of September 30, 1996 and for the nine-month period then ending.
As soon as possible after closing, BSI will provide to SunGard a balance sheet
of Corbel as of the Effective Date and a statement of earnings of Corbel for
the period from January 1, 1996 to the Effective Date, certified by BSI's chief
financial officer.
7. Potential TNW Adjustment. The purchase price shall be increased or
decreased by the amount by which Corbel's tangible net worth as of the
Effective Date is greater than or
<PAGE> 3
Mr. David A. Finley
October 17, 1996
Page -3-
less than $975,000. For this purpose, all impact of NPA and its business shall
be excluded from Corbel's tangible net worth.
8. SunGard's Conditions. BSI acknowledges that SunGard's interest in the
proposed transaction is based, in part, upon the business, product and
financial information that BSI has furnished as well as certain assumptions
that SunGard has made regarding Corbel and the proposed transaction.
Accordingly, SunGard's interest in the proposed transaction is subject to the
following conditions:
a. Due Diligence. SunGard must complete a thorough "due diligence"
review of Corbel, and SunGard must determine that there are no material
inaccuracies in the business and financial information that BSI has furnished
or in the assumptions SunGard has made regarding Corbel's business and the
financial, tax and accounting treatment of the proposed transaction. BSI will
make available to SunGard all of Corbel's contracts, leases, insurance
policies, tax returns, customer, prospect and other business files, books and
records, software documentation and other materials and information reasonably
requested. BSI also will furnish SunGard with Corbel's historical and interim
financial statements and such other financial information as SunGard reasonably
may request in order to complete its due diligence.
b. Board Approval. The Board of Directors of SunGard Data Systems
Inc. must approve the transaction and the Agreement.
c. HSR. All applicable waiting periods under the HSR Act must expire
or terminate.
9. BSI's Conditions. BSI's interest in the proposed transaction is subject
to the following conditions:
a. Board Approval. The Board of Directors of BSI must approve the
transaction and the Agreement.
b. HSR. All applicable waiting periods under the HSR Act must expire
or terminate.
10. BSI's Interim Obligations. BSI acknowledges that SunGard will incur
expenses in connection with the proposed transaction, including the costs of
conducting its due diligence review and drafting the acquisition documents. In
consideration of SunGard's incurring these
<PAGE> 4
Mr. David A. Finley
October 17, 1996
Page -4-
expenses, between the date of this letter of intent and the Termination Date
(as defined in paragraph 13):
a. No Other Discussions. BSI will not discuss, negotiate or
consummate with anyone any transaction involving the issuance, redemption,
sale, exchange or other disposition of any of the equity interest or other
securities of Corbel or the sale, exchange or other disposition of all or any
material assets of Corbel.
b. Business Operations. BSI will cause Corbel to conduct its
business in a diligent manner, consistent with past practices, without making
any material change in its business operations and policies. Except in the
ordinary course of business consistent with past practices, Corbel will not
incur any material liability, create any material encumbrance upon any of its
assets, loan any material amount of money to anyone, make or commit for any
material capital expenditure, enter into any material contract, or increase or
authorize an increase in any employee compensation or benefits. Even in the
ordinary course of business consistent with past practices, Corbel will not make
or commit for any capital expenditure greater than $100,000 without first
consulting with SunGard.
11. Expenses. BSI and SunGard will be responsible for all expenses each
respectively incurs in connection with the proposed transaction, whether or not
the transaction is completed.
12. Confidentiality and Publicity. SunGard shall continue to be bound by the
terms of the confidentiality letter agreement previously signed with BSI. Other
than as may be required by law, in which case the other party will be
consulted, neither party will make any public announcement regarding the
proposed transaction without the other party's written approval.
13. Termination. If the Agreement has not been signed by November 30, 1996,
or if SunGard earlier decides not to pursue the proposed transaction, then this
letter of intent may be terminated by BSI or SunGard at any time thereafter by
giving written notice of termination to the other. The date of any such
termination is referred to above as the "Termination Date."
Although this letter of intent summarizes certain major terms of the proposed
transaction, until the Agreement is finalized and signed and the conditions
stated in paragraphs 8 and 9 are satisfied, the provisions of the first 7
paragraphs of this letter are not intended to be, and shall not be, legally
binding upon the parties, nor shall they constitute a contract between the
parties. The parties do not intend to be bound by the first 7 paragraphs of
this letter of intent until both agree to and sign the Agreement, and neither
party may reasonably rely upon any
<PAGE> 5
Mr. David A. Finley
October 17, 1996
Page -5-
promises inconsistent with this paragraph. This paragraph supersedes any other
conflicting provisions in this letter.
The provisions of paragraphs 8 and 13 of this letter of intent are intended to
be, and shall be, legally binding upon the parties, and shall constitute a
contract between the parties. This letter of intent shall be governed by
Pennsylvania law.
If this letter accurately reflects our discussions and is acceptable to you,
please sign the two original copies of this letter of intent where indicated
below and return one executed copy to me. We look forward to working with you.
Sincerely,
/s/ Richard C. Tarbox
- ------------------------------------
RICHARD C. TARBOX
Vice President - Corporate Development
ACCEPTED AND AGREED TO:
BROADWAY & SEYMOUR, INC.
By: /s/ David A. Finley
------------------------------
David A. Finley
Executive Vice President & CFO
<PAGE> 1
EXHIBIT 10.22
RETIREMENT AND POST-EMPLOYMENT AGREEMENT
THIS RETIREMENT AND POST-EMPLOYMENT AGREEMENT (the "Agreement") is
made, effective as of the close of business on the 15th day of July, 1996 (the
"Effective Date"), by and between WILLIAM W. NEAL, III, a citizen and resident
of North Carolina (hereinafter "Neal"), and BROADWAY & SEYMOUR, INC., a North
Carolina corporation having its principal place of business in Charlotte, North
Carolina (hereinafter "BSI"). The parties hereto acknowledge as follows:
W I T N E S S E T H:
WHEREAS, Neal has been employed by BSI as Chairman of the Board of
Directors; and
WHEREAS, Neal intends to retire from employment as of April 30, 1997
(the "Retirement Date"); and
WHEREAS, Neal intends to continue as a member of the Board of
Directors of BSI through December 31, 1996; and
WHEREAS, the parties have voluntarily entered into this Agreement for
the purpose of eliminating and resolving all matters arising out of Neal's
employment with BSI, effecting the termination of Neal's employment, providing
certain specified benefits for Neal, memorializing the parties' agreement
concerning Neal's post-employment relationship with BSI, and finally, fully and
completely resolving amicably any and all matters actually or potentially in
controversy between them.
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter made by Neal and BSI, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby expressly
acknowledged by the parties hereto, the parties agree as follows:
ARTICLE I
OBLIGATIONS OF BSI
Section 1.1 Payment through December 31, 1996. BSI shall pay Neal his
current salary, payable in semi-monthly installments of
$10,416.67, less required state and federal tax withholding
deductions, from the Effective Date through December 31, 1996.
<PAGE> 2
Section 1.2 Payment from January 1, 1997 through April 30, 1997. BSI
shall pay Neal one-half (1/2) of his current salary, payable
in semi-monthly installments of $5,208.33, less required state
and federal tax withholding deductions, from January 1, 1997
through April 30, 1997.
Section 1.3 Unemployment Compensation. BSI shall not contest any
application for unemployment compensation that Neal may elect
to file with the North Carolina Employment Security Commission
after the Retirement Date, but Neal understands and agrees
that the payments made under Sections 1.1 and 1.2 above are
wages in lieu of notice of discharge, and for the time period
during which such payments are made, Neal will not seek
unemployment compensation benefits.
Section 1.4 401(k) Profit Sharing. BSI shall distribute all sums which
Neal is entitled to receive under BSI's 401(k) Profit Sharing
Plan in accordance with Sections 5.1(a), 5.1(c), 5.4(a) and
5.4(c) of that Plan consistent with Neal's employment
hereunder until the Retirement Date.
Section 1.5 Employee Stock Purchase Plan. BSI agrees that it shall
distribute all sums which Neal is entitled to receive under
the Broadway & Seymour, Inc. Employee Stock Purchase Plan, if
any, in accordance with Section 7.1(a) of that Plan consistent
with Neal's employment hereunder until the Retirement Date.
Section 1.6 Restated 1985 Incentive Stock Option Plan. For the purposes
of the Broadway & Seymour, Inc. Restated 1985 Incentive Stock
Option Plan, pursuant to the terms hereof Neal shall continue
as an employee of the Company through the Retirement Date, and
Neal shall continue to vest in options and be permitted to
exercise any vested stock options during such period and
thereafter in accordance with, and in the manner set forth in,
such plan. If such stock options are not exercised within the
period set forth in such plan, they shall be terminated.
Unvested stock options shall, in any event, lapse as of the
April 30, 1997 to the extent set forth in such plan.
Section 1.7 Business Expenses Reimbursement. BSI shall not be responsible
for any business expenses incurred by Neal prior to the
Retirement Date, except those expenses for which properly
documented reimbursement requests have been made prior to the
Retirement Date. BSI shall not be responsible for any
business expenses incurred by Neal on or after the Retirement
Date except as specified in this Agreement or as otherwise
approved in advance by BSI.
-2-
<PAGE> 3
Section 1.8 City Club Membership. Effective January 1, 1997, BSI shall,
at its own expense, assign and transfer to Neal ownership of
the Charlotte City Club Executive Resident Membership
currently assigned to and used by Neal. Thereafter, Neal
shall be responsible for all charges (except for those
properly reimbursable by BSI as provided in Section 1.7 above)
and dues associated with such membership.
Section 1.9 Continued Indemnification. BSI shall take no action to amend
its Certificate of Incorporation or by-laws to reduce its
current obligations thereunder to defend and indemnify Neal.
BSI shall take no action to exclude Neal from coverage under
its existing insurance policy covering directors and officers
of BSI and any renewal thereof and shall renew coverage
thereof on substantially similar terms as now in force (to
include coverage of Neal on terms no less favorable than
currently provided under existing policies) to the extent such
renewal coverage is available on substantially similar terms,
including premiums therefor; provided, however, that in no
event shall the terms of such renewal coverage applicable to
Neal be less favorable than those applicable to the other
current officers and directors of BSI.
Section 1.10 Accrued Vacation Pay. On the Effective Date, BSI shall pay
Neal $10,416.67, less applicable withholding, in payment of
all unused vacation time accrued through the Effective Date.
Section 1.10 No Other Benefits. Other than what may be provided herein,
Neal acknowledges that Neal is not entitled to any employment
benefits from BSI after the Retirement Date.
ARTICLE II
OBLIGATIONS OF NEAL
Section 2.1 Retirement. Neal hereby resigns as an officer of BSI and as
an officer and director of any of its subsidiaries, effective
immediately, and as an employee of BSI and of any of its
subsidiaries as of the Retirement Date. Neal shall, from the
Effective Date through the Retirement Date, provide services
to BSI as requested by BSI in an amount not to exceed ten (10)
hours per month at such place and time as mutually agreed,
provided that Neal may provide such services by telephone and
entirely outside normal business hours. Neal may engage in
any other employment or business prior to the Retirement Date
not otherwise prohibited hereunder. Except as otherwise
provided herein, as of the Retirement Date, Neal shall not
have the right to participate in or receive any benefit under
any employee benefit plan of BSI, any fringe benefit plan
-3-
<PAGE> 4
of BSI, or any other plan, policy or arrangement of BSI
providing benefits or perquisites to employees of the Company
generally or individually.
Section 2.2 Service as Director. Neal hereby resigns as of the Effective
Date as Chairman of the Board of Directors. Neal agrees to
resign as a member of the Board of Directors effective
December 31, 1996; provided, however that Neal may resign his
Board membership at his option at any time and provided
further that Neal may be removed from the Board as provided in
BSI's by-laws.
Section 2.3 Release. In exchange for the payments set forth in Article I
above, and except as otherwise specifically provided to the
contrary in this Agreement, Neal, for himself and for his
heirs, executors, administrators, agents, and assigns for and
in consideration of the agreements contained in this
Agreement, hereby forever releases, acquits, remises,
quitclaims, and discharges BSI and its affiliated entities,
parents, subsidiaries, successors, assigns, and benefit plans
(except with respect to any vested benefit), and the officers,
directors, employees and agents thereof, of and from any and
all actions, causes of action, claims, demands, damages,
costs, expenses, attorney's fees and all other obligations of
any type and nature whatsoever, from, on account of, or in any
way arising out of any claims, matters, contracts,
relationships, or employment, whether existing now or at any
time in the past or future, other than (a) claims arising from
or relating to the enforcement of the Agreement, (b) rights of
ownership of any capital stock of BSI now or hereafter held by
Neal, (c) rights under any option agreement between BSI and
Neal, (d) rights with respect to BSI's obligation to defend
and indemnify him in accordance with the provisions of the
BSI's Certificate of Incorporation and by-laws, or any other
indemnification agreement, and (e) rights, if any, as an
insured party under any policy of insurance covering BSI's
directors or officers.
Except as otherwise specifically provided to the contrary in
the Agreement, it is agreed and covenanted that this Release
covers all claims which Neal may have had, may now have or
could hereafter have relating to any matter, cause or thing
whatsoever, specifically including, but not limited to, all
claims or demands arising out of or relating to the
relationships between Neal and BSI as employee, officer,
director and shareholder, including, but not limited to, all
claims which Neal has had or now has and which could have been
asserted under state or federal statute or law with respect to
all matters concerning or arising out of Neal's relationships
with BSI as employee, officer, director or shareholder, and
including specifically, but not limited to, any and all claims
under or for breach of fiduciary duty, breach of contract,
fraud, negligent misrepresentation, negligence, breach of
criminal law, violation of federal or state unfair trade
practices law, violation of state or federal human
-4-
<PAGE> 5
rights, equal employment, wage hour, workers compensation,
pension or labor laws, rules or regulations, including the
Fair Labor Standards Act, the Age Discrimination in Employment
Act of 1967, as amended, 29 U.S.C. Section 621 et seq., Title
VII of the Civil Rights Act of 1964, as amended, the Family
and Medical Leave Act, ERISA, and the Americans with
Disabilities Act, and violation of any and all other federal,
state and local laws and regulations.
Section 2.4 Covenant Not To Sue. Neal hereby waives his right to file,
and hereby agrees not to accept any relief or recovery from,
any lawsuit, charge, claim, complaint, or other proceeding,
whether an individual, joint or class action (collectively
"Legal Action") before any federal, state or local
administrative agency, court or other forum against BSI or any
of its parent, subsidiary or affiliated entities; provided,
however, that this Agreement shall not apply to preclude
Neal's participation in legal action relating to any rights or
duties arising under this Agreement or under documents to be
executed or action to be taken pursuant to this Agreement.
Except as provided above and as prohibited by statute, in the
event that Neal institutes, is a party to, or joins
voluntarily as a member of a class any Legal Action against
BSI or any of its affiliated entities, he shall join in the
dismissal of the Legal Action or termination of his class
membership immediately upon presentation of this Agreement and
Neal shall reimburse BSI for all legal fees and expenses
incurred in defending Neal's involvement in the Legal Action
and obtaining the dismissal of Neal therefrom except those
fees and expenses incurred by BSI where Neal is not a
voluntary party to the Legal Action.
Section 2.5 Agreement Not to Assist Litigation. Neal hereby agrees not to
in any way voluntarily assist any individual or entity in
commencing or prosecuting any action or proceeding, including
but not limited to, any administrative agency claims, charges
or complaints and/or any lawsuits against BSI, its officers or
directors, or its subsidiaries or affiliated entities, or
their officers or directors, or in any way voluntarily
participate or cooperate in any such actions or proceedings,
except (a) as this waiver is prohibited by statute, (b) in
accordance with lawful process issued by a court of competent
jurisdiction or other lawful authority, and (c) upon request
of a governmental entity or agency.
Section 2.6 Agreement to Provide Litigation Assistance. Neal agrees to
cooperate with and provide assistance to BSI and its legal
counsel in connection with any litigation (including
arbitration or administrative hearings) or investigation
affecting BSI, in which--in the reasonable judgment of BSI's
counsel--Neal's assistance or cooperation is needed. Neal
shall, when requested by BSI, provide testimony or other
assistance and shall travel at BSI's request in order
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<PAGE> 6
to fulfill this obligation; provided, however, that, in
connection with such litigation or investigation after the
Retirement Date, BSI shall attempt to accommodate Neal's
schedule, shall provide him with reasonable notice in advance
of the times in which his cooperation or assistance is needed,
and shall reimburse Neal for any reasonable expenses incurred
in connection with such matters, as well as for any actual
lost wages suffered as a result from absence from employment.
Section 2.7 COBRA Continuation Coverage. Neal acknowledges and agrees
that continuation coverage under 26 U.S.C. Section 4980B
("COBRA") shall begin on the date hereof and that thereafter
Neal shall be eligible, upon his timely election and at his
own expense, to obtain health insurance coverage in accordance
with COBRA, provided, however, that BSI shall pay for Neal's
health insurance coverage under COBRA commencing on the
Effective Date through and including the Retirement Date.
Neal hereby acknowledges that he has received the information
and forms necessary to obtain such coverage.
Section 2.8 Acknowledgement Concerning Vacation Pay. Neal agrees that he
shall waive all vacation time to which he is entitled under
BSI's policies through the Retirement Date such that Neal
agrees that, upon the Retirement Date and subject to receipt
of the payment set forth in Section 1.10 hereof, he shall not
have accrued any unused vacation time for which payment is due
from BSI.
Section 2.9 Acknowledgment Concerning All Compensation. Neal agrees and
acknowledges that, except as provided in this Agreement, Neal
is not entitled to any compensation or employment benefits
whatsoever, including, but not limited to, any bonus,
severance pay, accrued vacation pay or other compensation
under any BSI incentive plan, employee benefit plan or
agreement.
Section 2.10 Binding Nature. Neal's signature on this Agreement reflects
his willingness to enter into and abide by the terms of this
Agreement. Neal acknowledges that he has been afforded an
opportunity to consider this Agreement and Neal further
acknowledges that he has been advised by BSI of his right to
consult with counsel concerning the effect of this Agreement,
and that he has carefully read the provisions of this
Agreement. Neal further represents that he knows and
understands the contents of this Agreement, that he intends to
be legally bound by this Agreement, and the release contained
herein, and that he is signing this Agreement, including the
release, of his own free will and without coercion.
Section 2.11 Further Acknowledgments. Neal acknowledges that:
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<PAGE> 7
(a) he has received separate consideration under this
Agreement which is in addition to any other
compensation or other thing of value which Neal is
otherwise entitled to receive from BSI under any
agreement, Company policy or practice, or under
applicable law.
(b) he was given a period of twenty-one (21) days within
which to consider the terms of this Agreement;
(c) if he has executed this Agreement prior to the
expiration of such 21-day period, then he has done so
voluntarily and that he has waived the remainder of
such review period;
(d) he will have a period of seven (7) days following the
execution of this Agreement in which to revoke this
Agreement by giving written notice to BSI's President
of such revocation; provided, however, that if Neal
revokes this Agreement within this revocation period,
Neal agrees and acknowledges that he will have no
right to receive the payments or benefits set forth
in paragraph 1 above; and
(e) except as set forth in the immediately preceding
clause, this Agreement shall not become effective or
enforceable until the seven (7) day revocation period
described above has expired.
(f) he acknowledges and agrees that Neal does not believe
that BSI has discriminated against him in any manner
because of his race, sex, creed, color, religion,
national origin, age, marital status, sexual
preference, physical or mental disabilities or status
as a disabled or Vietnam- era veteran.
Section 2.12 Non-Disclosure of Confidential Information. Neal agrees that
he will maintain in confidence and will not, directly or
indirectly, use, publish or otherwise disclose to any
competitor or other third party, except as required by law,
any trade secrets, confidential, proprietary, and other
non-public information of a similar nature belonging to BSI or
any of its related or affiliated entities or to which BSI or
any of its related or affiliated entities has any rights,
except to the extent, if any, that any such information is or
becomes generally known or readily ascertainable by proper
means ("Confidential Information"), whether or not such
Confidential Information is in written or permanent form.
Such Confidential Information includes, but is not limited to,
proprietary technical and business information relating to any
non-public financial information, business plans or costs,
customers or customer lists, pricing data or other terms of
sales, customer requirements or buying history, customer
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<PAGE> 8
contacts or prospective customers, formulas, patterns,
compilations, programs, devices, methods, techniques and
processes of BSI, or any of its related or affiliated
entities, subject to the same exception stated in the
preceding sentence. Neal's obligations under this Agreement
with respect to Confidential Information shall extend to
information belonging to any client, vendor or customer of
BSI, or any of its related or affiliated entities, and their
agents and employees. Since BSI's business is national in
scope, there is no geographic limitation on Neal's obligations
under this section. All duties and obligations set forth
herein shall be in addition to those which exist by common law
or statute.
Section 2.13 Return of Confidential Information. Neal agrees that he shall
return to BSI any and all documents containing Confidential
Information, whether in hard copy or electronic form,
including any copies thereof, which are in his possession or
under his control as of the Retirement Date.
Section 2.14 Return of Property. Neal agrees, upon the Retirement Date, to
the extent Neal has not done so previously, to immediately
return all documents, files, whether or not he was solely
responsible for same, keys, credit cards, keycards, programs,
software and discs, including, but not by way of limitation,
those programs, software and discs generated during his
employment with BSI, and all other items and equipment which
are the property of BSI.
Section 2.15 Noncompetition Clause. For the period commencing on the
Effective Date and continuing until the date two years after
the Retirement Date, Neal agrees not to, directly or
indirectly:
(a) solicit or attempt to solicit business from any
client or prospective client of BSI with whom Neal
has had direct or indirect association or otherwise
induce such clients or prospective clients to reduce,
terminate, restrict or otherwise alter their business
relationship with BSI in any fashion;
(b) become associated either as an owner, principal,
agent, manager, employee, partner, shareholder
(except for ownership of less than five percent of
the shares of a publicly traded company), director,
officer, consultant, or representative with any
business operation or any enterprise if such
operation competes with BSI in applying computer
systems and services to business, industry and
government;
(c) induce or attempt to induce any employee of BSI to
leave BSI for the purpose of engaging in a business
competitive with BSI;
-8-
<PAGE> 9
provided, however, that clauses (a) and (b) above shall not
restrict Neal from being employed by or associating or
affiliating with a venture capital investment firm that makes
investments in any enterprise that competes with BSI in
applying computer systems and services to business, industry
and government or provides services to or attempts to provide
services to clients or prospective clients of BSI which
activity has the result of causing such clients or prospective
clients to reduce, terminate, restrict or otherwise alter
their business relationship with BSI in any fashion so long as
Neal does not directly participate in the management of such
enterprise.
ARTICLE III
ADDITIONAL PROVISIONS
Section 3.1 Confidentiality. As an integral part of this Agreement, Neal
agrees that the terms of this Agreement and the circumstances
surrounding the execution of this Agreement shall be held
absolutely confidential and that he shall not disclose the
substance or terms of this Agreement to anyone other than his
immediate family, his tax adviser and his counsel.
Notwithstanding the above, Neal may answer truthfully any
inquiry about this Agreement which he is legally required to
answer whether by subpoena, court order or other lawful
process or as mutually agreed upon by the parties. Neal will
directly and fully inform BSI, however, concerning any
disclosures requested under this Agreement, along with the
entity making such request for disclosure, at the time of the
disclosure, and Neal shall specifically inform BSI of any
subpoena or other process which may require him to disclose
any matters in contravention of this provision.
Section 3.2 Non-Disparagement. Neal agrees that any time after the
execution of this Agreement and continuing after the
Retirement Date, he shall not in any way criticize or
disparage the performance, competency or ability of BSI or any
of its subsidiary or affiliated entities, or the officers,
directors, employees or agents of any of them to any other
person. In particular, Neal will not criticize or disparage
BSI's financial accounting or reporting policies or practices
nor allege or claim that he was discriminated against or
otherwise mistreated by BSI or any of its subsidiary or
affiliated entities at any time, except to the extent, if at
all, as may be required by legal process. Neal understands
and agrees that any breach by him of this provision shall be a
material breach of this Agreement and that BSI, in addition
to, and without waiving any other remedy, including injunctive
relief, shall have the right immediately to terminate all
payments under paragraph 1 of this Agreement and to require
Neal to return all payments made pursuant to this Agreement to
BSI.
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<PAGE> 10
Section 3.3 No Admission of Liability. Neal understands and agrees that
the entry into this Agreement by BSI is solely for the purpose
of eliminating and resolving all matters arising out of Neal's
employment with BSI, effecting the termination of Neal's
employment, providing certain specified benefits for Neal,
memorializing the parties' agreement concerning Neal's
post-employment relationship with BSI, and finally, fully and
completely resolving amicably any and all matters actually or
potentially in controversy between them and shall not be
construed as an admission by BSI of non-compliance with any
law or any other wrongdoing whatsoever.
Section 3.4 Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the parties and their respective
personal representatives, agents, attorneys, executors,
administrators, heirs, successors and assigns.
Section 3.5 Modification. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto.
Section 3.6 Governing Law. This Agreement has been executed and delivered
in the State of North Carolina, and its validity,
interpretation, performance and enforcement shall be governed
by the laws and judicial decisions of the State of North
Carolina.
Section 3.7 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto. No representation,
agreement, guaranty, warranty, waiver or change in this
Agreement not included herein shall be binding upon either
party unless in writing and separately signed by both parties.
Section 3.8 Severability. If any provision contained in this Agreement
shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein.
Section 3.9 Consent to Jurisdiction. Any action for breach of this
agreement shall be brought in the federal or state courts of
and for the County of Mecklenburg, State of North Carolina,
and the parties hereby consent to the personal jurisdiction of
such courts.
Section 3.10 Counterparts. This Agreement may be executed in counterparts,
each of which may be signed separately and may be enforceable
as an original, but all of which together shall constitute but
one agreement.
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<PAGE> 11
Section 3.11 Authorization. Each person executing this Agreement in a
representative capacity hereby represents and warrants that he
is fully authorized to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date and year first indicated above.
/s/ William W. Neal, III (SEAL)
----------------------------
WILLIAM W. NEAL, III
Sworn to and subscribed
before me, this 9th day of
July, 1996.
/s/ Jean M. Musa
- -----------------------------
Notary Public
My commission expires:
May 5, 1998
- -----------------------------
(Official Seal)
BROADWAY & SEYMOUR, INC.
By: /s/ David A. Finley
------------------------
David A. Finley
Executive Vice President
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<PAGE> 1
EXHIBIT 11
BROADWAY & SEYMOUR, INC.
COMPUTATION of EARNINGS PER SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) ($4,805) $ 2,507 ($3,398) $ 5,321
======= ======= ======= =======
PRIMARY EARNINGS PER SHARE:
Weighted average common shares outstanding 8,976 8,728 8,942 8,595
Reduction from effect of treasury stock (39) (39) (39) (39)
Addition from assumed exercise of stock options - 537 - 466
Addition from assumed stock bonus award - - - 4
Addition from assumed participation in employee
stock purchase plan - - - -
------- ------- ------- -------
Weighted average common and common equivalent
shares outstanding 8,937 9,226 8,903 9,026
======= ======= ======= =======
Net income (loss) per common and common
equivalent share ($ 0.54) $ 0.27 ($ 0.38) $ 0.59
======= ======= ======= =======
FULLY DILUTED EARNINGS PER SHARE:
Weighted average common shares outstanding 8,976 8,728 8,942 8,595
Reduction from effect of treasury stock (39) (39) (39) (39)
Addition from assumed exercise of stock options - 541 - 488
Addition from assumed stock bonus award - - - 4
Addition from assumed participation in employee
stock purchase plan - - - 1
------- ------- ------- -------
Weighted average common and common equivalent
shares outstanding 8,937 9,230 8,903 9,049
======= ======= ======= =======
Net income (loss) per common and common
equivalent share ($ 0.54) $ 0.27 ($ 0.38) $ 0.59
======= ======= ======= =======
</TABLE>
- 24 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND 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 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,613,000
<SECURITIES> 0
<RECEIVABLES> 21,363,000
<ALLOWANCES> 0
<INVENTORY> 2,144,000
<CURRENT-ASSETS> 32,739,000
<PP&E> 7,651,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,476,000
<CURRENT-LIABILITIES> 28,645,000
<BONDS> 0
0
0
<COMMON> 90,000
<OTHER-SE> 36,198,000
<TOTAL-LIABILITY-AND-EQUITY> 67,476,000
<SALES> 67,836,000
<TOTAL-REVENUES> 67,836,000
<CGS> 54,608,000
<TOTAL-COSTS> 54,608,000
<OTHER-EXPENSES> 23,491,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 334,000
<INCOME-PRETAX> (2,637,000)
<INCOME-TAX> 761,000
<INCOME-CONTINUING> (3,398,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,398,000)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> 0
</TABLE>
