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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 June 30, 1999
[ ] 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
ELITE INFORMATION GROUP, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
DELAWARE 41-1522214
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<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 WEST GOLDLEAF CIRCLE
LOS ANGELES, CALIFORNIA 90056
-------------------------------------- --------
(Address of principal executive offices) (Zip code)
</TABLE>
(323) 642-5200
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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)
Stock Purchase Rights
(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 July 31, 1999 there were 9,263,873 shares of Common Stock, $.01 par
value, outstanding.
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ELITE INFORMATION GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statement of Operations --
Three and six months ended June 30, 1999
and June 30, 1998 3
Consolidated Balance Sheet --
June 30, 1999 and December 31, 1998 4
Consolidated Statement of Cash Flows --
Six months ended June 30, 1999 and
June 30, 1998 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II OTHER INFORMATION:
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
</TABLE>
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PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND
MAY BE TRADE NAMES OR TRADEMARKS OF ELITE INFORMATION GROUP, INC., ITS
SUBSIDIARY OR THIRD PARTIES.
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PART I -- Financial Information
Item 1. Financial Statements.
ELITE INFORMATION GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 15,401 $ 10,850 $ 28,389 $ 19,193
-------- -------- -------- --------
Operating expenses:
Cost of revenue 8,430 7,192 16,356 12,997
Research and development 1,008 628 2,015 1,174
Sales and marketing 2,407 2,003 4,830 3,614
General and administrative 2,386 1,833 3,760 3,197
-------- -------- -------- --------
Total operating expenses 14,231 11,656 26,961 20,982
-------- -------- -------- --------
Operating income (loss) 1,170 (806) 1,428 (1,789)
Loss on disposition of non-strategic
business unit -- -- (295) --
Interest income 270 247 445 519
Interest expense (10) (12) (22) (35)
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes 1,430 (571) 1,556 (1,305)
Income tax (provision) benefit for
continuing operations (710) 40 (769) 91
-------- -------- -------- --------
Income (loss) from continuing operations 720 (531) 787 (1,214)
-------- -------- -------- --------
Discontinued Operations:
Income (loss) from discontinued operations,
net of tax (provision) benefit (333) (2,135) (382) (1,451)
Gain on sale of discontinued operations,
net of tax provision 4,919 -- $ 4,919 --
-------- -------- -------- --------
Net income (loss) $ 5,306 $ (2,666) $ 5,324 $ (2,665)
======== ======== ======== ========
Net income (loss) per share -- continuing
operations
- Basic $ 0.09 $ (0.06) $ 0.10 $ (0.13)
- Diluted $ 0.08 $ (0.06) $ 0.09 $ (0.13)
Net income (loss) per share -- discontinued
operations
- Basic $ (0.04) $ (0.23) $ (0.05) $ (0.16)
- Diluted $ (0.04) $ (0.23) $ (0.04) $ (0.16)
Net income per share -- gain on sale of
discontinued operations
- Basic $ 0.59 $ -- $ 0.60 $ --
- Diluted $ 0.57 $ -- $ 0.58 $ --
Net income (loss) per share
- Basic $ 0.64 $ (0.29) $ 0.64 $ (0.29)
- Diluted $ 0.62 $ (0.29) $ 0.63 $ (0.29)
Weighted average shares outstanding
- Basic 8,289 9,190 8,263 9,190
- Diluted 8,595 9,190 8,496 9,190
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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ELITE INFORMATION GROUP, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------- -----------
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 28,265 $ 15,273
Receivables 22,493 28,417
Deferred income taxes 5,429 6,131
Other current assets 887 1,930
-------- --------
Total current assets 57,074 51,751
Property and equipment 1,615 5,167
Software costs 1,232 3,309
Intangible assets 3,993 4,782
Other assets 249 87
-------- --------
$ 64,163 $ 65,096
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 4,591 $ 5,070
Accrued compensation 2,213 3,974
Other accrued liabilities 5,030 4,758
Deferred revenue 15,485 22,710
Income taxes payable 3,394 1,169
-------- --------
Total current liabilities 30,713 37,681
-------- --------
Deferred income taxes 1,350 1,392
-------- --------
Other liabilities 488 1,004
-------- --------
Stockholders' equity:
Common stock, $.01 par value; Authorized 20,000,000 shares;
Issued shares were 9,254,873 and 9,228,623, respectively 92 92
Paid-in capital 39,142 38,696
Less treasury stock, at cost, 950,743 shares and 1,038,552
shares, respectively (4,604) (5,427)
Accumulated deficit (3,018) (8,342)
-------- --------
Total stockholders' equity 31,612 25,019
-------- --------
$ 64,163 $ 65,096
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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ELITE INFORMATION GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, June 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,324 ($ 2,665)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,125 2,665
Deferred income taxes 660 (1,539)
(Gain) loss on disposition of non-strategic business units 295 (1,607)
Gain on sale of discontinued operations (4,919) --
Changes in assets and liabilities excluding effects of
disposition of non-strategic business units
Receivables 539 10,326
Accounts payable -- trade 989 (2,698)
Accrued compensation (16) (299)
Deferred revenue and customer deposits (2,350) 2,425
Income taxes (632) (866)
Other, net 365 58
-------- --------
Net cash provided by operating activities 2,380 5,800
-------- --------
Cash flows provided (used) by investing activities:
Purchase of property and equipment (391) (2,105)
Investment in software costs -- (584)
Net proceeds from sale of discontinued operations 11,717 --
Cash used in disposition of non-strategic business units (714) --
-------- --------
Net cash provided (used) by investing activities 10,612 (2,689)
-------- --------
Cash flows used by financing activities:
Payments of notes payable and long-term debt -- (130)
-------- --------
Net cash used by financing activities -- (130)
-------- --------
Net increase in cash and cash equivalents 12,992 2,981
Cash and cash equivalents, beginning of period 15,273 17,965
-------- --------
Cash and cash equivalents, end of period $ 28,265 $ 20,946
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION:
For the second quarter ended June 30, 1999, the consolidated financial
statements of Elite Information Group, Inc. ("Elite" or the "Company"), formerly
Broadway & Seymour, Inc., reflect as continuing operations the results of
operations and financial position of the Company's wholly owned subsidiary Elite
Information Systems, Inc. During the second quarter of 1999 the Company sold its
Customer Relationship Management business ("CRM") (see Note 3). The operating
results for CRM are presented in the Consolidated Statement of Operations as
discontinued operations and prior periods have been restated to reflect the
Company's continuing operations. Also, effective March 5, 1999 the Company sold
all of the outstanding shares of The MiniComputer Company of Maryland, Inc.
("TMC") to a holding company owned by TMC management.
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 June 30, 1999
and results of operations and cash flows for the interim periods presented. The
results of operations for the three months and six months ended June 30, 1999
are not necessarily indicative of the results to be expected for the entire
year.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, certain information and footnotes required by
generally accepted accounting principles are not included herein. These interim
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1998 as
reported by the Company in its Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2 -- CORPORATE NAME CHANGE:
On May 27, 1999, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to change its name to Elite Information
Group, Inc., from Broadway & Seymour, Inc. The name change became effective on
May 27, 1999. The Company also changed its NASDAQ trading symbol to ELTE and
will continue to trade as a National Market Issue on the NASDAQ under ELTE.
NOTE 3 -- DISCONTINUED OPERATIONS:
On May 19, 1999 the Company sold its Customer Relationship Management
business, based in Charlotte, NC, to Science Applications International
Corporation ("SAIC"). During the second quarter ended June 30, 1999, the Company
recorded a gain on sale of discontinued operations of $4.9 million, after an
income tax provision of $2.9 million, related to this disposition. The gain on
sale included certain transaction costs and reserve provisions associated with
the sale. The Company received approximately $14.3 million in cash proceeds from
the transaction.
Operating results for CRM are classified as discontinued operations on the
Company's Consolidated Statement of Operations. Revenue applicable to
discontinued operations was $4,203,000 and $10,911,000 for the second quarter
and six months ended June 30, 1999, respectively. Revenue totaled $4,495,000 for
the second quarter and $13,992,000 for the six months ended June 30, 1998.
Income (loss) from discontinued operations is net of an income tax benefit of
$(175,000) for the second quarter and $(222,000) for the six months ended June
30, 1999. Income (loss) from discontinued operations is net of income tax
benefits of $(1,372,000) and $(1,321,000) for the three and six months ended
June 30, 1998, respectively. The reduced losses for CRM in 1999 from 1998 can be
attributed primarily to the effect of a cost reduction program implemented in
the third quarter of 1998.
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NOTE 4 -- SHAREHOLDER RIGHTS PLAN:
On April 13, 1999, the Board of Directors of the Company implemented a
shareholder rights plan and declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.01 per
share, of the Company. The dividend was paid on April 26, 1999, the record date,
to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Stock") at a price of $22.00 per one one-hundredth of a share of
Preferred Stock, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement, dated as of April 14, 1999, as the same may
be amended from time to time, between the Company and EquiServe Trust Company,
N.A., as Rights Agent.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS:
For the second quarter ended June 30, 1999, the consolidated financial
statements of Elite Information Group, Inc. ("Elite" or the "Company"), formerly
Broadway & Seymour, Inc., reflect as continuing operations the results of
operations and financial position of the Company's wholly owned subsidiary Elite
Information Systems, Inc. During the second quarter of 1999 the Company sold its
Customer Relationship Management business ("CRM") (see Note 3 of Notes to
Consolidated Financial Statements included in Item 1.). The operating results
for CRM are presented on the Consolidated Statement of Operations as
discontinued operations and prior periods have been restated to reflect the
Company's continuing operations. Also, effective March 5, 1999 the Company sold
all of the outstanding shares of The MiniComputer Company of Maryland, Inc.
("TMC") to a holding company owned by TMC management.
On May 19, 1999 the Company sold its Customer Relationship Management
business, based in Charlotte, NC, to Science Applications International
Corporation ("SAIC"). During the second quarter ended June 30, 1999, the Company
recorded a gain on sale of discontinued operations of $4.9 million, after an
income tax provision of $2.9 million, related to this disposition. The gain on
sale included certain transaction costs and reserve provisions associated with
the sale. The Company received approximately $14.3 million in cash proceeds from
the transaction.
Elite is a legal and professional services business based in Los Angeles,
California that provides a comprehensive suite of financial and practice
management software applications for law firms and other professional service
organizations of all sizes. Elite's applications include integrated time and
billing systems, general ledger, accounts payable and practice management
solutions such as marketing and contact management, records management and case
management. Elite also offers consulting services to the professional services
markets. Elite's software products are often sold with related services to aid
the customer in implementation, data conversion and user training efforts.
The Company's revenue increased $4.6 million (42%) to $15.4 million in the
second quarter of 1999 from $10.9 million in the second quarter of 1998. Revenue
for this year's second quarter included $1.5 million related to one large
customer contract. Revenue for the first six months of 1999 increased $9.2
million (48%) to $28.4 million compared to $19.2 million for the same period of
1998. Revenue growth during the second quarter and first six months of 1999 was
greatly influenced by higher levels of orders received during 1998, which were
67% above the amount of orders signed during 1997. Management believes that the
increase in contract signings in 1998 was due in part to Elite's introduction of
products utilizing a wider variety of database platforms and enhancements to
existing product functionality. The Year 2000 issue may have also focused an
increasing number of professional service firms on replacing their existing
systems by the end of 1999. The expansion of Elite's customer base has also
increased customer support, training and maintenance revenue.
Gross profit, which represents net revenue less cost of revenue, for the three
months ended June 30, 1999 was $7.0 million, an increase of 90% over the $3.7
million in the same period of 1998. The Company's gross margin percent was 45.3%
for this year's second quarter compared to 33.7% for the same period last year.
For the six months ended June 30, 1999, gross profit was $12.0 million (or 42.4%
of revenue), an increase of 94% from $6.2 million (or 32.3% of revenue) for the
same period of 1998. The Company's cost of revenue consists primarily of
expenses for deployable resources such as implementation personnel and contract
labor, and amounts paid to third party software vendors. Elite's higher 1999
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gross margin percent principally reflects improvements in the Company's revenue
mix combined with the effect of added efficiency in its contract implementation
function.
Research and development expenses for this year's second quarter increased
$.4 million to $1.0 million (or 6.5% of revenue) from $.6 million (or 5.8% of
revenue) in 1998. For the six months ended June 30, 1999, research and
development expenses increased $.8 million to $2.0 million (or 7.1% of revenue)
from $1.2 million (or 6.1% of revenue) in the same period of 1998. Research and
development expenses consist primarily of salaries and expenses of the Company's
development personnel and outside consultants. The 1999 increase was principally
related to ongoing efforts to develop the next version of the Elite suite of
products, based on an advanced object-oriented architecture with enhanced
usability features. The Company is committed to maintaining its research and
development efforts so it can continue to provide marketable software solutions
as the needs of its customer base and target markets change. For the first six
months of 1999 no software development costs were capitalized. During the second
quarter and first six months of 1998, $.3 million and $.6 million of costs were
capitalized, respectively.
Sales and marketing expenses increased $.4 million in the second quarter to
$2.4 million (or 15.6% of revenue) from $2.0 million (or 18.5% of revenue) in
same period of 1998. For the first six months of 1999, sales and marketing
expenses increased $1.2 million to $4.8 million (or 17.0% of revenue) from $3.6
million (or 18.8% of revenue) in the same period last year. Sales and marketing
expenses consist primarily of salaries, commission, travel and promotional
expense. The overall increase in sales and marketing expenses is principally
related to added headcount and increased commissions and incentive awards
related to the growth in revenue.
General and administrative expenses increased $.6 million to $2.4 million
(or 15.5% of revenue) in the second quarter of 1999 from $1.8 million (or 16.9%
of revenue) in second quarter of last year. For the six months ended June 30,
1999, general and administrative expenses increased $.6 million to $3.8 million
(or 13.2% of revenue) from $3.2 million (or 16.7% of revenue) in the first six
months of 1998. General and administrative expenses consist primarily of
salaries of corporate executive, legal, financial and human resources personnel
as well as professional fees and insurance costs. Expenses for the second
quarter of 1999 include one-time pretax charges totaling approximately $350,000
related to transferring the corporate functions from the Company's former
corporate headquarters in Charlotte, NC, to its Los Angeles office, as well as
costs related with changing the Company's name (see Note 2 of Notes to
Consolidated Financial Statements included in Item 1.). It is anticipated that
general and administrative expenses will decrease in future periods as a result
of certain cost reductions following the sale of the Company's CRM business.
The Company reported a loss from discontinued operations of $.3 million and
$.4 million for the three and six months ended June 30, 1999, respectively. This
compares to losses of $2.1 million and $1.5 million for the same periods of
1998. The reduced losses for CRM in 1999 from 1998 can be attributed primarily
to the effect of a cost reduction program implemented in the third quarter of
1998.
The provision for income taxes on continuing operations for the three and
six months ended June 30, 1999 of $.7 million and $.8 million, respectively (50%
of the continuing operations pre-tax income) exceeds the income tax expense at
the statutory rates for this period primarily due to the permanent difference of
non-deductible goodwill amortization, stock compensation expense, and state
income taxes. The income tax benefit on continuing operations of $40,000 and
$91,000 (7% of the continuing operations pre-tax loss) in the three and six
months ended June 30, 1998, respectively, is a direct result of the pre-tax
loss, offset, in part, by the permanent difference of non-deductible goodwill
amortization, stock compensation expense, and state income taxes. The Company
believes that the effective tax rate in 1999 will remain higher than the
statutory rate due to the ongoing non-deductible goodwill amortization.
YEAR 2000 COMPLIANCE:
Overview
Many software products, custom-developed software, and products embedded
with microprocessor chips were designed to store, process or perform
calculations using only the last two digits of a four-digit year date, for
example, "98" rather than "1998". These software systems and embedded products
may assume the first two digits of the year date to be "19" and as such they may
not be able to process dates with years following 1999. For example, "00" may be
treated by certain software systems as the year 1900 rather than the year 2000.
Results of this failure to process the date correctly
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could include miscalculations, unpredictable or inconsistent results or complete
system failures. As a software vendor, the so-called "Year 2000 compliance"
issue is an issue that the Company must address with respect to its products as
well as software and systems provided by others that the Company uses
internally.
State of Readiness
The Company has recognized the need to address the Year 2000 compliance
issue and in 1997 established a Year 2000 compliance committee to supervise and
monitor the planning, performance and assessment of the Company's Year 2000
compliance efforts. This committee has involved members of senior management,
product development leaders, information systems management, facilities
management and corporate finance management in efforts to develop a
comprehensive and coordinated Year 2000 compliance effort. The Company's Year
2000 Project Manager periodically reports plans, progress and issues to
executive management.
Beginning in the second half of 1997, the Company began developing an
inventory list of all its proprietary software products, third party products it
incorporates in its products or resells, infrastructure and internal use
products, facilities and office service systems and hardware products upon which
it relies. Upon completion of the inventory list, the Company's Year 2000
committee appointed individual team leaders from various functional areas to be
responsible for the efforts of assessing Year 2000 compliance for each of the
inventory list items.
Proprietary Software Products and Custom Developed Software: In 1997, the
Company adopted the widely accepted definition for Year 2000 readiness set out
in the "Compliance with British Standards Institution DISC PD2000-1 for Year
2000". In May 1998, following a period of assessment and testing, the Company
issued its Year 2000 readiness statement which specifically identified the
current versions of each of the Company's proprietary products that met the
adopted standard. The Company continues to test new versions of its products for
compliance with this standard on an ongoing basis. The Company believes that its
current versions of proprietary software products are Year 2000 compliant;
however, no assurance can be given that additional modifications for Year 2000
compliance will not be necessary. The Company's software products are integrated
with its customers' software and hardware systems and have, in many cases, been
uniquely customized to the customers' specifications. The Company has generally
not tested its products as integrated in its customers' operating environments.
The customers' systems with which the Company's products interoperate may not be
Year 2000 compliant which may affect the operation of the Company's products. As
a result the Company, in the course of providing its software maintenance
services, may incur costs in ascertaining the cause(s) of system failures not
caused by its own products. Such costs, if any, that the Company may incur are
not estimable, but will generally be charged to customers.
Some of the Company's former customers and current customers presently use
earlier versions of the Company's software products and/or associated custom
code, that are not Year 2000 compliant. The Company has made efforts to
communicate with these customers to advise them that they will need to upgrade
to a Year 2000 compliant version of the Company's software product, revise
custom code or implement other alternatives to meet their business needs.
Customers paying support fees are entitled to receive software product upgrades
as part of their regular maintenance contracts. Customers who have not
maintained support agreements with the Company may purchase such upgrades after
purchasing maintenance contracts. Changes to custom code provided by the Company
that is not Year 2000 compliant are not covered by customer maintenance
agreements. Customers may perform necessary Year 2000 changes to such code
themselves or engage third parties to perform the changes. Customers may need to
upgrade third party products and their host software and hardware systems that
share data or interoperate with the Company's products in order to utilize the
Company's software upgrades or modified custom or systems integration code. Such
costs could impact customer purchasing decisions and may lead customers to
choose alternatives to the Company's products or services.
Third Party Products: Third party products integrated within the Company's
products are included in the test plans and compliance efforts that the Company
already has underway for its own products. In addition, the Company has obtained
certification of Year 2000 compliance from most third party vendors whose
products are integrated in the Company's products or that are resold by the
Company.
Infrastructure and Third Party Products Used Internally: The Company has
obtained certification of Year 2000 compliance from each of the vendors of its
internal use information technology systems. The Company is developing test
plans for these internal use systems following the same guidelines and standards
that it has used for its own products. The
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Company has developed test plans for all critical internal use technology
systems and the testing of these systems will continue through 1999.
The Company is in the process of developing a contingency plan against Year
2000 failure for its mission critical software applications, hardware and other
systems.
The majority of non-information technology systems on which the Company
relies in its operations are owned and managed by the lessors of the buildings
in which the Company's offices are located. The Company has developed checklists
of critical systems upon which it relies and certification documents are being
sought from its lessors and other appropriate providers as applicable regarding
Year 2000 compliance of their systems.
Risks and Costs
Because of the nature of the Company's business, the Company may be subject
to Year 2000 claims or litigation by its customers, including customers of
divested businesses where the Company retained potential product liabilities, or
other parties. Many customers will incur significant costs in making their
information processing systems Year 2000 compliant and may seek to transfer such
costs through litigation to information processing industry vendors such as the
Company. Although the ultimate outcome of any litigation is uncertain, the
Company does not believe that the ultimate amount of liability, if any, from
such actions would have a material adverse effect on the Company.
The Company believes that Year 2000 issues may affect the purchasing
patterns of its customers and potential customers in a variety of ways. Many
companies are expending significant amounts and rededicating personnel to
correct or patch their current software systems for Year 2000 compliance. These
expenditures may result in reduced funds available to purchase software products
such as those offered by the Company. It is possible that certain of the
Company's customers are purchasing support contracts with the intent of
discontinuing such support after January 1, 2000 when they have satisfied
themselves that the supported product is Year 2000 compliant. Additionally, Year
2000 compliance issues could cause a significant number of companies, including
current Company customers, to reevaluate their current system needs and as a
result to consider switching to other systems or suppliers.
The Company has not specifically hired additional personnel or made
material purchases of products to address Year 2000 compliance issues, nor does
the Company expect it will be necessary to do so. The expenditures made to date
have principally related to salary costs of existing personnel assigned to
participate at various levels in the Company's compliance efforts and costs
associated with upgrading certain business systems. All costs related to
achieving Year 2000 compliance are being expensed as incurred. The Company
estimates that the costs incurred to date related to Year 2000 compliance
efforts range between $.5 and $1.0 million. The Company expects to continue to
test current and new versions of its proprietary software, work with vendors of
third party software that the Company uses or resells, update and test its
inventory of potentially affected internal systems and communicate with vendors
and customers regarding the Year 2000 compliance issue. The Company estimates
the costs of these efforts will be below $.5 million.
FINANCIAL POSITION:
The Company's cash and cash equivalents totaled $28.3 million at June 30,
1999 which included approximately $14.3 million cash proceeds ($11.7 million
after transaction related payments) from the sale of the CRM business. Working
capital at June 30, 1999 was $26.4 million compared to $14.1 million at December
31, 1998.
The Company has a two-year, $15 million revolving credit facility, against
which it has made no borrowings. The credit facility, which was originally to
expire in July of 1999, has been extended until September 1999. The Company is
currently in negotiations for a renewal or replacement of the credit facility
prior to its September expiration. Under the current facility, the Company may
borrow up to a maximum of 80% of eligible accounts receivable. As of June 30,
1999, the Company had $8.4 million available for borrowing under this facility.
The credit facility is secured by substantially all of the Company's tangible
and intangible assets. Additionally, the loan agreement contains customary
covenants that require compliance with certain financial ratios and targets and
restricts the incurrence of additional indebtedness, payment of dividends and
acquisitions or dispositions of assets, among other things. As of June 30, 1999,
the Company was in compliance with such covenants, as amended.
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FORWARD LOOKING STATEMENTS:
This Quarterly Report on Form 10-Q may contain certain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended,
that represent the Company's expectations or beliefs concerning future events or
projected financial results. Such forward-looking statements are about matters
that are inherently subject to risks and uncertainties. Factors that could
influence the matters discussed in certain forward-looking statements include
the timing and amount of revenue that may be recognized by the Company,
continuation of current expense trends, absence of unforeseen changes in the
Company's markets, continued acceptance of the Company's services and products
and general changes in the economy, as well as matters discussed in "Risks and
Uncertainties" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998. There can be no assurance that such future events or
projected results will be achieved and actual results could differ materially.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has limited exposure to market risk for changes in interest
rates related to the Company's cash and cash equivalents. The Company maintains
an investment policy designed to ensure the safety and preservation of its cash
and cash equivalents by limiting default risk, market risk and reinvestment risk
by depositing its cash and cash equivalents in major financial institutions.
11
<PAGE> 12
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On April 13, 1999, the Board of Directors of the Company implemented a
shareholder rights plan and declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.01 per
share, of the Company. The dividend was paid on April 26, 1999, the record date,
to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Stock") at a price of $22.00 per one one-hundredth of a share of
Preferred Stock, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement, dated as of April 14, 1999, as the same may
be amended from time to time, between the Company and EquiServe Trust Company,
N.A., as Rights Agent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of Elite Information Group, Inc. was
held on May 27, 1999. The matters voted on and the number of votes cast for,
against or withheld, as well as the number of abstentions and broker non-votes
as to each such matter, were as follows:
1. With respect to the proposal to elect two individuals as directors of
the Company, 7,479,286 shares were voted for and 45,283 shares against
the motion or to withhold authority with respect to one or more
nominees, with no broker non-votes.
Alan Rich and Arthur G. Epker III were elected at the annual meeting
as Class III directors. Listed below are the names of the two nominees
elected to serve as directors and the four other continuing directors:
<TABLE>
<CAPTION>
Class I Class II Class III
------- -------- ---------
<S> <C> <C>
Christopher K. Poole David A. Finley Alan Rich
Roger Noall William G. Seymour Arthur G. Epker III
</TABLE>
The following is a separate tabulation with respect to each nominee
elected:
<TABLE>
<CAPTION>
Against or Broker
For Withheld Non-Votes
--------- ---------- ---------
<S> <C> <C> <C>
Alan Rich 7,479,886 45,823 0
Arthur G. Epker III 7,479,286 46,423 0
</TABLE>
2. With respect to the proposal to amend the Company's Certificate of
Incorporation to change the Company's name to Elite Information Group,
Inc., 4,597,771 shares were voted for and 42,754 were voted against,
with 15,757 abstaining, and 2,869,427 broker non-votes.
3. With respect to the proposal to ratify the appointment of independent
public accountants, 7,490,506 shares were voted for and 26,681 were
voted against, with 8,522 abstaining, and no broker non-votes.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of Elite Information Group, Inc. (formerly
Broadway & Seymour, Inc.), dated June 16, 1992
3.2 Certificate of Amendment of Certificate of Incorporation of Elite Information Group,
Inc. (formerly Broadway & Seymour, Inc.), dated May 27, 1999 (Incorporated by
reference to Exhibit 99.3 to the Registrant's Current Report on Form 8-K, filed June
3, 1999)
10.1 Severance Agreement by and between Elite Information Group, Inc. (formerly Broadway
& Seymour, Inc.) and Barry D. Emerson, dated May 10, 1999
10.2 Employment Agreement by and between Elite Information Group, Inc. (formerly Broadway
& Seymour, Inc.) and Christopher K. Poole, dated June 1, 1999
10.3 Allonge to Promissory Note by and between Elite Information Group, Inc. (formerly
Broadway & Seymour, Inc.) and Fleet National Bank dated July 23, 1999
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>
(b) REPORTS ON FORM 8-K:
Form 8-K dated April 13, 1999 regarding the implementation of a shareholder
rights plan
Form 8-K dated May 19, 1999 regarding:
a) The sale of the Company's Customer Relationship Management business
b) Amendment to the Company's Certificate of Incorporation to change its
name to Elite Information Group, Inc.
13
<PAGE> 14
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.
ELITE INFORMATION GROUP, INC.
Date: August 12, 1999 By: /s/ Barry D. Emerson
------------------------------------
Barry D. Emerson, Vice President,
Treasurer, Chief Financial Officer
14
<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
BROADWAY & SEYMOUR, INC.
Broadway & Seymour, Inc. (the "Corporation"), is a corporation
organized and existing under and by virtue of the Delaware General Corporation
Law. The Corporation was originally incorporated under the name "NC Systems,
Inc." The date on which its original Certificate of Incorporation was filed with
the Secretary of State of Delaware is May 9, 1985. This Restated Certificate of
Incorporation, which restates and further amends the Certificate of
Incorporation as heretofore amended and restated, has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law. The provisions of the original Certificate of Incorporation,
and any and all amendments thereto or restatements thereof, are hereby further
amended and restated so as to read, in their entirety, as follows:
1. The name of the Corporation is Broadway & Seymour, Inc.
2. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the Delaware General Corporation Law.
The Corporation shall possess and exercise all the powers and
privileges granted by the Delaware General Corporation Law or by any other law
of Delaware or by this Certificate of Incorporation together with any powers
incidental thereto, so far as such powers are necessary or convenient to the
conduct, promotion or attainment of the business or purposes of the Corporation.
4. The aggregate number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 22,000,000 shares,
consisting of 2,000,000 shares of Preferred Stock, $0.01 par value ("Preferred
Stock") and 20,000,000 shares of Common Stock, $0.01 par value ("Common Stock").
The following is a statement of the voting powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock of the Corpora-tion and the qualifications, limitations or
restrictions of such preferences and rights:
<PAGE> 2
I.
COMMON STOCK
1. Dividends. The holders of shares of Common Stock shall be
entitled to receive such dividends as from time to time may be declared by the
Board of Directors of the Corpora-tion, subject to the rights of holders of any
Preferred Stock.
2. Liquidation. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after payment
shall have been made to holders of Preferred Stock, if any, of the full amounts
to which they shall be entitled as may be stated and expressed pursuant hereto,
the holders of Common Stock shall be entitled, to the exclusion of the holders
of Preferred Stock, if any, to share ratably according to the number of shares
of Common Stock held by them in all remaining assets of the Corporation
available for distribution to its stockholders.
3. Voting. Except as otherwise provided by law, each holder of
Common Stock shall be entitled to one vote per share.
II.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series. The designations, powers, preferences and relative, participating and
other special rights, and the qualifications, limitations and restrictions
thereof, of each series of Preferred Stock shall be such as may be fixed by the
Board of Directors (authority so to do being hereby expressly granted) and
stated in the resolution or resolutions providing for the issuance, or affecting
the terms, of the Preferred Stock of such series adopted by the Board of
Directors and filed in accordance with the provisions of the Delaware General
Corporation Law. Such resolution or resolutions, with respect to each series,
shall specify the series designation and the number of shares issuable in such
series, and each series, as stated or specified in such resolution or
resolutions, may:
(1) have no voting powers or have full or limited voting
powers;
(2) be subject to redemption at the option of the Corporation
or the respective holder thereof, or upon the occurrence of certain
specified events, for cash, property, or rights, including without
limitation securities of the Corporation or another corporation, at
certain specified times and at certain specified prices or rates (which
may be subject to adjustment);
(3) provide for a sinking fund or purchase fund;
2
<PAGE> 3
(4) be entitled to receive cumulative or noncumulative
dividends at certain specified times, at certain specified rates, and
on certain specified conditions, and payable in preference to, or in
any other relation to, the dividends payable on any other class or
classes or series of stock;
(5) have certain specified rights upon the dissolution of, or
upon distribution of the assets of, the Corporation, including without
limitation rights in preference to, or in any other relation to, the
rights attributable to any other class or classes or series of stock;
(6) be made convertible into, or exchangeable for, at the
option of the Corporation or the holder thereof or upon the occurrence
of certain specified events, shares of any other class or classes or of
any other series of the same or any other class or classes of the stock
of the Corporation, at certain specified prices or rates of exchange
(which may be subject to adjustment);
(7) impose conditions or restrictions upon the creation of
indebtedness of the Corporation or upon the issuance of any other class
or classes or series of stock;
(8) impose conditions or restrictions upon the payment of
dividends or the making of other distributions upon, or the redemption,
purchase or acquisition of, any other class or classes or series of
stock; and
(9) have such other powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof, as are not inconsistent with the
provisions of the Delaware General Corporation Law.
Unless otherwise fixed for a series, the number of authorized shares of the
Preferred Stock or of any particular series may be increased or decreased by the
affirmative vote of the holders of a majority of the shares of Common Stock.
5. Cumulative voting is prohibited.
6. The Corporation is to have perpetual existence.
7. To the fullest extent permitted by law, all of the powers of
the management of the business and affairs of the Corporation are hereby
conferred upon the Board of Directors of the Corporation. In furtherance and not
in limitation thereof, the Board of Directors shall have the power to make,
adopt, alter, amend and repeal the Bylaws of the Corporation, subject to the
right of the stockholders to adopt, alter, amend and repeal bylaws made by the
Board of Directors.
8. To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or to any of its stockholders
for monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this Article 8 shall not increase the personal liability of any
director of the Corporation for any act or occurrence taking place before such
repeal or modification, or otherwise adversely affect any right or protection of
a director of the
3
<PAGE> 4
Corporation existing at the time of such repeal or modification. The provisions
of this Article 8 shall not be deemed to limit or preclude indemnification of a
director by the Corporation of any liability of a director which has not been
eliminated by the provisions of this Article 8.
9. (a) Each person who was or is made a party or is threatened to
be made a party to or is involved (including, without limitation, as a witness)
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative and whether or not by or in the
right of the Corporation (a "proceeding"), by reason of the fact that he or she
is or was a director or officer of the Corporation or, being or having been such
a director or officer, he or she, or a person of whom he or she is a legal
representative, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action or inaction in an official capacity as a director, officer,
partner, trustee, employee or agent or in any other capacity while serving as a
director, officer, partner, trustee, employee or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent not prohibited by the
Delaware General Corporation Law, public policy or other applicable law as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred or suffered by such person in connection therewith. The
right to indemnification granted in this Article 9(a) shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of a proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined (including the final resolution
of any suit which may be brought by such director or officer pursuant to the
Bylaws of the Corporation seeking to enforce rights of indemnification) that
such director or officer is not entitled to be indemnified under this Article
9(a) or otherwise. The indemnification granted in this Article 9(a) shall
continue as to a person who has ceased to be a director, officer, partner,
trustee, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as may be provided
in the Bylaws of the Corporation with respect to proceedings seeking to enforce
rights of indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) If a claim under Article 9(a) is not paid in full by the
Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for expenses incurred in defending a
proceeding in advance of its final disposition, in which case the applicable
period shall be twenty days, the claimant may at any time thereafter bring an
action against the Corporation to recover the unpaid amount of the claim and, to
the extent successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. The claimant shall be presumed
to be entitled to indemnification under Article 9(a) upon submission of a
written claim (and, in an action brought to enforce a claim for expenses
incurred
4
<PAGE> 5
in defending any proceeding in advance of its final disposition, upon tender of
any required undertaking), and thereafter the Corporation shall have the burden
of proof to overcome the presumption that the claimant is so entitled. Neither
the failure of the Corporation (including its Board of Directors, independent
legal counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant is not entitled to indemnification shall be a defense to the action or
create a presumption that the claimant is not so entitled. If an action is
brought pursuant to Article 9(a), a final nonappealable order in such action
shall constitute the ultimate determination of the claimant's right to
indemnification.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition granted
in Article 9(a) shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Certificate of
Incorporation or the Bylaws of the Corporation, agreement, vote of stockholders
or disinterested directors or otherwise. The Corporation shall have the express
right to grant additional indemnity without seeking further approval by the
stockholders. All applicable indemnity provisions and any applicable law shall
be interpreted and applied so as to provide a claimant with the broadest
nonduplicative indemnity legally possible.
(d) Any repeal or amendment of this Article 9 or any portion
hereof by the stockholders of the Corporation or by changes in applicable law
shall, to the extent permitted by applicable law, be prospective only, and shall
not adversely affect any right of any person to indemnification and advancement
of expenses existing at the time of such repeal or amendment.
(e) In the event that any provision of this Article 9 is
determined by a court to require the Corporation to do or to fail to do an act
which is in violation of applicable law, such provision shall be limited or
modified in its application to the minimum extent necessary to avoid a violation
of law, and, as so limited or modified, such provision and the balance of this
Article 10 shall remain in full force and effect.
10. No action required to be taken or which may be taken at any
annual or special meeting of shareholders of the Corporation may be taken
without a meeting, and the power of the shareholders to consent in writing,
without a meeting, to the taking of any action is hereby specifically denied.
11. The Corporation reserves the right to amend, alter, change, or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders of the Corporation herein are granted subject to this reservation.
IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be duly executed by its authorized officers this
16th day of June, 1992.
5
<PAGE> 6
BROADWAY & SEYMOUR, INC.
By: /s/ W. W. Neal
-----------------------
Chairman of the Board
of Directors
ATTEST:
/s/ Willam G. Seymour
- -------------------------
Secretary
6
<PAGE> 1
EXHIBIT 10.1
May 10, 1999
Mr. Barry D. Emerson
307 Manhattan Avenue
Manhattan Beach, CA 90266
Dear Barry:
Elite Information Systems, Inc. ("Elite") is pleased to offer you
employment as Chief Financial Officer, reporting to Chris Poole, at a salary of
$140,000.00 per year (exempt). Additionally, in accordance with the attached
compensation plan, you will be eligible for an annual "target bonus" of up to
$40,000.00 per year payable on the last day of the month following the end of
the fiscal year for which the bonus is due.
I will recommend to the Compensation Committee of the Broadway &
Seymour, Inc. Board of Directors that you be granted an option to purchase
25,000 shares pursuant to the 1996 Broadway & Seymour, Inc. Stock Option Plan
(the "Plan"). Subject to approval of the Compensation Committee, these options
will be granted as soon as they become available under the Plan. In the event of
a change of control, as defined in the Plan (a copy of which is attached), you
will immediately vest in all options granted under the Plan that have not yet
vested at the time of any such change of control, which options may be exercised
in accordance with the terms of the Plan.
Your employment is "at will". The terms and conditions of your
employment with Elite may be changed with or without cause and with or without
notice, including but not limited to termination, demotion, promotion, transfer,
compensation, benefits, duties and location of work. Your status as an "at will"
employee cannot be changed except through a written agreement signed by the
President of Elite. Elite acknowledges that you may terminate your employment
with the company at any time for any reason with or without notice.
If your employment is terminated without "cause" at any time Elite
shall, upon such termination, in exchange for a general release of any and all
claims relating to your employment by Elite and its affiliates: (i) pay you in a
lump sum an amount equal to your then current base salary for twelve (12)
months, less required state and federal tax withholdings and any other
applicable deductions; and (ii) at your election, continue your medical coverage
pursuant to 29 U.S.C. ss161 et seq. ("COBRA") and bear the entire expense of
such coverage without contribution by you for twelve (12) months following your
termination.
For purposes of this agreement, "cause" shall mean (i) your substantial
failure to carry out and perform your duties after written notice from the Chief
Executive Officer; (ii) your repeated refusal to follow the lawful directives of
the Chief Executive Officer; (iii) your commission of a felony (other than a
traffic violation); (iv) your commission of an act of fraud, embezzlement, theft
or other act of material financial dishonesty against Elite or its affiliates;
(v) your commission of an act involving moral turpitude that brings Elite or any
of its affiliates into public disrepute or disgrace or causes material harm to
customer relations, operations or business prospects of Elite or its affiliates;
(vi) your misrepresentation to Elite of academic or professional qualifications
or prior work experience; or (vii) your violation of the provisions in the
Proprietary Information and Inventions Agreement signed by you upon the
commencement of your employment with Elite, including, but not limited to, the
provisions relating to the use and disclosure of Elite's confidential
information. In addition, you shall be deemed to have been terminated without
cause and shall be entitled to receive such severance in the event of a
reduction in your base salary below current levels or a requirement that you
relocate outside the Los Angeles area.
<PAGE> 2
Mr. Barry Emerson
May 7, 1999
Page Two
You are eligible to participate in Elite's health plans (which will
begin on the first date of month following your employment) and life insurance
programs as well as all other benefits available to regular employees. Enclosed
is a summary of benefits that Elite offers. As a condition of your employment
you will be required to show proof of your legal right to work in the United
States and you will be required to execute the standard Elite Employee
Proprietary Information and Inventions Agreement.
Except for the above-referenced Elite Employee Proprietary Information
and Inventions Agreement, this letter contains the complete agreement between
you and Elite. All other offers and conditions previously discussed and/or
agreed to are superseded by this letter. If you have any questions regarding
this offer, please do not hesitate to call me, otherwise, if everything is
acceptable, please sign and return one copy of this letter to me. The other copy
is for your files.
We are very excited about your joining Elite. I am confident that you
will bring the right experience, drive and intellect to add substantial strength
to our team.
/s/ Barry D. Emerson /s/ Christopher K. Poole
- -------------------------------- -------------------------------
Barry D. Emerson Christopher K. Poole
President
Elite Information Systems, Inc.
May 10, 1999 May 10, 1999
- -------------------------------- -------------------------------
Date Date
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 1st day of June, 1999, by and
between ELITE INFORMATION GROUP, INC., a Delaware corporation (the "Company"),
and CHRISTOPHER K. POOLE (the "Executive").
WITNESSETH
WHEREAS, the Company wishes to engage the long-term services of
Executive to serve as Chief Executive Officer; and
WHEREAS, the Executive and the Company wish to evidence such engagement
by the terms hereof.
NOW, THEREFORE, in consideration of the mutual premises herein
contained, and intending to be legally bound, the parties hereto hereby agree as
follows:
1. EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts employment from the Company upon the terms and
conditions hereinafter set forth.
2. TERM.
(a) The term of employment under this Agreement shall commence
as of the date hereof and shall extend for one (1) year from the date of
execution (the "Full Term"), and shall automatically renew for successive
one-year terms unless terminated sooner by either the Company or Executive as
hereinafter provided in this Section 2.
(b) The Company may, at its election, terminate the employment
of Executive and related obligations of the Company under this Agreement as
follows:
(1) FOR DISABILITY. For purposes of this
Agreement, Executive shall be deemed to be permanently disabled when Executive
has become unable, by reason of physical or mental disability, to perform the
majority of Executive's duties for a period of at least 180 consecutive days, as
determined by the Company's Board of Directors exercising reasonable judgment.
If Executive shall disagree with a determination by the Company that Executive
has become permanently disabled, the question of Executive's disability shall be
submitted to an impartial and reputable physician for determination, such
physician to be selected by mutual agreement of Executive and the Company or,
failing such agreement, selected by two physicians (one of which shall be
selected by the Company and the other by Executive), and the determination of
the question of Executive's permanent disability by such physician shall be
final and binding on Executive and the Company. The Company shall pay the
reasonable fees and expenses of such physician or physicians.
<PAGE> 2
In the event of the termination of this Agreement by
the Company because of Executive's permanent disability as determined in
accordance with the immediately preceding paragraph, the Company will promptly
pay to Executive, seven (7) days following execution of a general release of
claims against the Company (in the form attached hereto as Exhibit A), cash
termination compensation in a lump sum amount equal to Executive's annual gross
salary in effect on the date of such determination of permanent disability. The
Company shall also pay a Proportionate Amount of any incentive bonus which would
otherwise have been received by Executive with respect to the year in which such
determination is made within seven (7) days from such date as such amount may be
finally determined in accordance with the bonus plan set by the Board of
Directors for Executive (the "Determination Date"). The "Proportionate Amount"
shall be determined by multiplying (i) the total amount of such bonus that the
Executive would have received if he had worked throughout the year to which such
bonus applied times (ii) an amount equal to the total number of calendar days in
the year up to and including the date of termination divided by 365. In
addition, if the Company terminates Executive's employment pursuant to this
Section 2(b)(1), the Executive, and his eligible dependents, will be eligible
for continuation coverage pursuant to 29 U.S.C. ss161 et seq. ("COBRA"), and,
should he elect such coverage, the Company agrees to bear the entire expense of
such coverage without contribution by Executive for the period ending eighteen
(18) months following such termination (or such longer period as may
subsequently be provided by amendment to COBRA, if any). .
(2) FOR CAUSE. Should the Board of Directors
find that there is Cause (as defined below) to terminate Executive's employment,
the Board shall provide written notice to Executive setting forth with
reasonable specificity such event or events of Cause. Executive shall have
thirty (30) days following receipt of such notice to cure such event. If
Executive fails to cure such event within such time period, the Company may
terminate Executive's employment as provided below. The Company's termination of
Executive's employment for Cause must be made by giving a Notice of Termination
(as defined in Section 2(f) hereof) to Executive specifying which of the
following events constitutes Cause. For the purpose of this Agreement, Cause
shall mean the occurrence of any of the following events:
(i) Executive's substantial failure to carry
out and perform his material duties after written notice from the Board of
Directors;
(ii) Executive's repeated refusal to follow
the lawful directives of the Board of Directors;
(iii) Executive's commission of a felony
(other than a traffic violation);
(iv) Executive's commission of an act of
fraud, embezzlement, theft or other act of material financial dishonesty against
the Company;
(v) Executive's commission of an act
involving moral turpitude that brings the Company or any of its affiliates into
public disrepute or disgrace or causes material harm to customer relations,
operations or business prospects of the Company or its affiliates; or,
2
<PAGE> 3
(vi) Executive's material breach of the
material provisions of this Agreement or the Proprietary Information and
Inventions Agreement signed by Executive upon the commencement of his employment
with the Company (attached hereto as Exhibit B), including, but not limited to,
the provisions relating to the use and disclosure of the Company's confidential
information.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause without (i) written notice to Executive, as provided above,
setting forth the reasons for the Company's intention to terminate for Cause,
(ii) an opportunity for Executive, together with Executive's counsel, to be
heard before the Board of Directors of the Company, and (iii) delivery to
Executive of a Notice of Termination from the Board of Directors of the Company
finding that, in the good faith opinion of the Board of Directors, Executive was
guilty of conduct set forth above in clause (i), (ii), (iii) or (iv) above, and
specifying the particulars thereof in detail. In making the determinations
described in clauses (i), (ii), (iii) and (iv) of this subsection (b) of this
Section 2, the Company shall act reasonably and in good faith. If Executive is
terminated for Cause as provided in this Section 2(b)(2), Executive shall only
be entitled to receive his base compensation through the date of termination
plus any accrued but unused vacation.
(3) WITHOUT CAUSE. If Executive's employment is
involuntarily terminated for any reason other than "Cause" as discussed in
Section 2(b)(2) hereof the Company will promptly pay to Executive, seven (7)
days following execution of a general release of claims against the Company (in
the form attached hereto as Exhibit A), in cash and in a lump sum an amount
equal to the product of two multiplied by Executive's annual gross salary in
effect on the date of such involuntary termination. If such termination occurs
pursuant to a Change of Control, or within two (2) years of a Change of Control
(as defined below), the Company shall also pay Executive the larger of (i) the
Proportionate Amount of any incentive bonus which would otherwise have been
received by Executive with respect to the year in which such termination occurs
(payable seven (7) days after the Determination Date) or (ii) the incentive
bonus the Executive received in the year prior to the year of the termination
(such amount payable seven (7) days after the Determination Date of the
Proportionate Amount referenced in clause (i) above).
(c1) Executive may terminate his employment hereunder for
"Good Reason" (as defined below), which termination shall become effective ten
(10) days after delivery to the Company by Executive of a "Notice of
Termination" (as defined in Section 2 (f) hereof). In the event Executive
terminates this Agreement for "Good Reason," the Company will pay to Executive,
seven (7) days following execution of a general release of claims against the
Company (in the form attached hereto as Exhibit A), in cash and in a lump sum an
amount equal to the product of two multiplied by Executive's annual gross salary
in effect at the time of delivery of Executive's "Notice of Termination." If
such termination occurs for "Good Reason" as defined in clause (x) below (and
excluding "Good Reason" as defined in clause (y) below), the Company shall also
pay Executive the larger of (i) the Proportionate Amount of any incentive bonus
which would otherwise have been received by Executive with respect to the year
in which such notice is given within seven (7) days of its Determination Date or
(ii) the incentive bonus the Executive received in the year prior to the year in
which such notice is given (such amount
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<PAGE> 4
payable seven (7) days after the Determination Date of the Proportionate Amount
referenced in clause (i) above). For purposes of this Agreement, "Good Reason"
shall mean (x) a "Change of Control" (as defined below) accompanied by a
Constructive Termination of this Agreement (as defined below) or (y) a failure
by the Company to comply with any material provision of this Agreement which has
not been cured within thirty (30) days after written notice of such
noncompliance has been given by Executive to the Company. For the purpose of
this Agreement, a "Change of Control," shall mean (1) less than a majority of
the members of the Board of Directors of the Company are persons who were either
nominated for election by the Board of Directors or selected by the Board of
Directors of the Company, (2) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the "Voting Securities" (as defined
below) of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into "Voting
Securities" of the surviving entity) at least 50.1 percent of the total voting
power represented by the "Voting Securities" of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or (3) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets. As used in this Agreement, "Voting
Securities" shall mean any securities of the Company which vote generally in the
election of directors. If there is more than one event causing a Change of
Control, the date the last such event occurs shall be the date the Change of
Control occurs for purposes of this subsection and subsections 2(b)(3) and
2(c)(2) hereof. For the purpose of this Agreement, "Constructive Termination"
shall mean that after the date hereof the Executive's position is altered such
that he ceases to have authority equivalent to that of the senior executive
officer of the Company or a successor in interest carrying on substantially all
of the business of the Company; provided, however, that Constructive Termination
shall not include (q) the naming of a non-employee director as Chairman of the
Board of the Company, or (r) a Change of Control or other corporate transaction
whereby the Company becomes part of another entity if the Executive remains the
senior executive officer of the division, subsidiary or other entity carrying on
the business currently conducted by the Company.
(c2) Executive may terminate his employment hereunder
effective at any time following the first anniversary, and before the second
anniversary, of a Change of Control (as defined above), which termination shall
become effective sixty (60) days after delivery to the Company by Executive of a
"Notice of Termination" (as defined in Section 2 (f) hereof). In the event
Executive terminates this Agreement as provided in this subsection (c2), the
Company will pay to Executive, seven (7) days following execution of a general
release of claims against the Company (in the form attached hereto as Exhibit
A), in cash and in a lump sum an amount equal to the product of one and one half
(1.5) multiplied by Executive's annual gross salary in effect at the time of
delivery of Executive's "Notice of Termination."
(d) Executive may terminate this Agreement without cause
upon ninety (90) days written notice provided in accordance with Section 2(f),
below. In such event, Executive shall be entitled to receive his base
compensation during such notice period, and any accrued but unused vacation upon
such termination, but shall not be otherwise entitled to any compensation from
the Company except to the extent that he has any vested rights under any of the
Company's
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<PAGE> 5
employee benefits plans as of the termination date. In the event that Executive
dies during the term of this Agreement, the Company will pay to Executive's
estate the Proportionate Amount of Executive's bonus, if any, for the period
during which such death occurs within seven (7) days of the Determination Date.
(e) In the event of any termination of employment
pursuant to Section 2(b)(3) or Section 2(c) hereof, the Executive shall have no
obligation to seek employment.
(f) Any termination of Executive's employment by the
Company or by Executive shall be communicated by written Notice of Termination
to the other party hereto. For purposes of this Agreement, Notice of Termination
shall mean a notice which (i) shall indicate the specific termination provision
in this Agreement relied upon, (ii) shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated, and (iii) shall, in the
event of termination for Cause, set forth the date that notice of Cause to
terminate was provided to Executive and that Executive has failed to cure such
event within the period provided in Section 2(b)(2). For purposes of this
Agreement, any purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination which complies with this subsection
(e) shall not be effective. Whenever in this Agreement reference is made to a
"termination of employment," unless specifically stated otherwise or the context
otherwise requires, such references are to be understood to refer to a
termination pursuant to Section 2(b) or 2(c) and not to an expiration of the
Full Term or an expiration or termination of employment during any extension or
renewal of the Full Term.
3. COMPENSATION.
(a) SALARY AND BONUS. For all services rendered by the
Executive to the Company, the Company shall pay the Executive a salary of
$300,000 per year payable in such installments and at such times as conform to
the Company's normal payroll procedures. Executive's base salary rate shall be
reviewed by the Company annually and may be adjusted from time to time only with
the approval of the Compensation Committee of the Board of Directors.
Executive's salary shall not, during the term of this Agreement, be less than
such amount. Salary and other applicable compensation payments shall be subject
to withholding and other applicable taxes. Executive shall receive such
compensation increases, incentive bonuses and other compensation as may be
determined by the Board of Directors of the Company or any committee thereof, in
accordance with the Company's then existing salary, incentive bonus and other
compensation plans.
(b) PERQUISITES. Executive shall be eligible for such
fringe benefits (such as insurance and vacations) and perquisites (such as
office size and location, secretarial and clerical staff) normally provided to
employees of the Company generally having responsibility commensurate to that of
the Executive and such additional benefits as may be from time to time agreed
upon in writing between Executive and the Company. Executive shall be entitled
to paid annual vacation of up to 4 weeks per year.
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<PAGE> 6
(c) BENEFIT PLANS. Executive shall be entitled to
continue to participate in all of its employee benefit plans and arrangements in
effect on the date hereof in which Executive participates and for which
Executive is eligible. The Company shall not make any changes in such plans or
arrangements, except as required by law, which would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable to all executives of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to Executive as
compared with any other executive of the Company. Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company in the future to its executives and
key management employees (including, without limitation, any incentive or other
bonus plans or arrangements), subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Nothing paid to Executive under any plan or arrangement presently in effect or
made available in the future shall be deemed to be in lieu of the salary or
incentive bonus or other compensation payable to Executive pursuant to any
provision of this Section 3. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire such year shall, unless otherwise provided
in the applicable plan or arrangement, be prorated in accordance with the number
of days in such calendar year during which Executive is so employed.
(d) INDEMNIFICATION. Executive shall be entitled to
indemnification by the Company from liability to third parties or threatened or
pending actions, suits or proceedings by or in the right of the Company, by
reason of the fact that Executive is or was serving as an officer or director of
the Company (or is or was serving at the Company's request as an officer or
director of some other enterprise), which is at least as favorable to Executive
as the indemnification provided by the Company to its other senior executive
officers, including any indemnification provided pursuant to a written agreement
between the Company and its other executive officers, with respect to such
matters.
(e) EXPENSES. The Company shall promptly reimburse
Executive for all ordinary and necessary expenses incurred and paid by Executive
in the course of the performance of Executive's duties pursuant to this
Agreement and consistent with the Company's policies in effect from time to time
with respect to travel, entertainment and other business expenses, and subject
to the Company's requirements with respect to the manner of reporting such
expenses.
(f) OTHER BENEFITS. Executive may elect to purchase a
long-term care or personal disability policy in his name and Company will pay
one-half of the premiums for such policy, with the Company's portion not to
exceed $2500 per year, during the term of this Agreement. Should Executive's
employment be terminated pursuant to Section 2(b)(1) hereof, the Company shall
continue to make such payments following such termination during the period, if
any, in which Executive elects COBRA coverage.
(g) LEGAL FEES. The Company will reimburse Executive, up
to $2500, for any legal fees and costs incurred by Executive in the negotiation
of this Agreement.
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<PAGE> 7
4. DUTIES. Executive is engaged as the Chairman and Chief
Executive Officer of the Company and hereby promises to perform and discharge
well and faithfully the duties commensurate with such positions which may be
assigned to him from time to time by the Company in connection with the conduct
of its business. The Company shall use its best efforts to elect Executive to,
and maintain him on, the Board of Directors of the Company during the term
hereof. If Executive is elected or appointed a director or officer of the
Company or any subsidiary thereof during the term of this Agreement, Executive
will serve in such capacity without further additional compensation.
5. EXTENT OF SERVICES. The Executive shall devote his entire
time, attention and energies to the businesses of the Company and shall not
during the term of this Agreement be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage; provided, however, this shall not be construed as
preventing the Executive from investing his personal assets in businesses which
do not compete with the Company in such form or manner as will not require any
significant services on the part of the Executive in the operation of the
affairs of the companies in which such investments are made and in which his
participation is solely that of an investor, except that the Executive may serve
as a director of a company having businesses which do not compete with the
Company or as otherwise authorized by the Board of Directors, so long as such
service does not interfere with his duties and services hereunder, and except
that the Executive may purchase securities in any corporation whose securities
are regularly traded, provided that such purchases shall not result in his
collectively owning beneficially at any time 1% or more of the equity securities
of any corporation engaged in a business competitive to that of the Company. As
used in this Section 5, a business shall be deemed to compete with the Company
if it is described in Section 7(a)(i) of this Agreement.
6. COVENANT NOT TO DISCLOSE. Executive acknowledges that during
the course of his employment with the Company he has or will have access to and
knowledge of certain information and data which the Company considers
confidential, and that the release of such information or data to unauthorized
persons would be extremely detrimental to the Company. As a consequence,
Executive hereby agrees and acknowledges that he owes a duty to the Company not
to disclose, and agrees that, during or after the term of his employment,
without the prior written consent of the Company he will not communicate,
publish or disclose, to any person anywhere or use any Confidential Information
(as hereinafter defined) for any purpose except where necessary or appropriate
to carry out his duties as contemplated by this Agreement or as required by law
or legal process. Executive will use his best efforts at all times to hold in
confidence and to safeguard any Confidential Information from falling into the
hands of any unauthorized person and, in particular, will not permit any
Confidential Information to be read, duplicated or copied except where necessary
or appropriate to carry out his duties as contemplated by this Agreement or as
may be required by law or legal process. Executive will return to the Company
all Confidential Information in Executive's possession or under Executive's
control when the duties of Executive no longer require Executive's possession
thereof, or whenever the Company shall so request, and in any event will
promptly return all such Confidential Information if Executive's relationship
with the Company is terminated and will not retain any copies thereof. For
purposes hereof the term "Confidential Information" shall mean any information
or data used by or belonging or relating to the Company that is not known
generally to the industry in which the Company is or may be engaged, including
without
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<PAGE> 8
limitation any and all trade secrets, proprietary data and information relating
to the Company's past, present or future business, price lists, customer lists,
names of Company employees, performance assessments of Company employees,
processes, procedures or standards, know-how, manuals, business strategies,
records, drawings, specifications, designs, financial information, whether or
not reduced to writing, or information or data which the Company advises
Executive should be treated as confidential information.
7. COVENANT NOT TO COMPETE.
(a) Executive agrees that during the term of his
employment by the Company and for a period of one (1) year from and after the
voluntary or involuntary termination of such employment (such term of employment
and one year period thereafter are referred to collectively herein as the
"Noncompetition Period"), he will not, directly or indirectly, without the
express written consent of the Company:
(i) own or have any interest in or act as an
officer, director, partner, principal, employee, agent, representative,
consultant or independent contractor of, be retained by, render consulting or
advisory services regarding designing, developing, producing, selling or
marketing to, or in any way assist, any person, firm, corporation, partnership,
business trust, limited liability company or any other entity or business
located in or doing business anywhere in the United States which is engaged in
competition in any manner with any business at any time during the
Noncompetition Period then engaged in by the Company or by any subsidiary,
parent or affiliate of the Company, including, without limitation, any such
person, entity or business that is then in the business of developing or
marketing software to law firms;
(ii) divert or attempt to divert clients, customers
(whether or not such persons have done business with the Company once or more
than once) or accounts of the Company; or
(iii) entice, induce or in any manner influence any
person who is or shall be in the employ or service of the Company to leave such
employ or service.
(b) With respect to Executive's obligations under this
Section 7, Executive acknowledges that the Company's geographic market is in the
United States, Canada and the United Kingdom.
(c) The restrictions contained in this Section 7 are
considered by the parties hereto to be fair, reasonable and necessary for the
protection of the legitimate business interests of the Company.
8. CERTAIN REMEDIES.
(a) Recognizing that irreparable injury will result to
the Company in the event of the breach or threatened breach of any of the
foregoing covenants and assurances by Executive contained in Sections 6 and 7
hereof, and that the Company's remedies at law for any such breach or threatened
breach will be inadequate, the Company and its successors and assigns, in
addition to such other rights or remedies which may be available to them
(including, without limitation, recovery of monetary damages from Executive),
shall be entitled to an
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<PAGE> 9
injunction, including a mandatory injunction, to be issued by any court of
competent jurisdiction ordering compliance with this Agreement or enjoining and
restraining Executive, and each and every person, firm or company acting in
concert or participation with Executive, from the continuation of such breach
and, in addition thereto, Executive shall pay to the Company all ascertainable
damages, including costs and reasonable attorneys' fees, sustained by the
Company by reason of the breach or threatened breach of said covenants and
assurances.
(b) In addition to the remedies described in subsection
(a) of this Section 8, the Company shall no longer be obligated to make any
payments otherwise due or to provide any benefits under Section 2 or 3 of this
Agreement in the event of any breach of Section 6 or 7 of this Agreement.
(c) The obligations and rights of Executive, the Company,
and their successors and assigns under the last sentence of Section 2(b)(1) and
Sections 6, 7 and 8 of this Agreement shall survive the termination of this
Agreement.
(d) The covenants and obligations of Executive set forth
in Sections 6 and 7 of this Agreement are each independent covenants and are in
addition to and not in lieu of or exclusive of any other obligations and duties
of Executive to the Company, whether express or implied in fact or in law.
(e) Except as provided in Section 8(a) above, in the
event that Executive asserts any claim arising out of or relating to Executive's
employment relationship with the Company, or in the event that the parties have
any dispute under this Agreement, Executive and the Company agree to submit any
such matter to final and binding arbitration, upon a request submitted by
Executive in writing to the Company within sixty (60) days from the date the
claim arose. If the Company does not receive a written request for arbitration
from Executive within sixty (60) days from the date the claim arose, or within
such other time period provided herein, Executive will have waived any right to
raise the claim, in any forum, arising out of Executive's employment
relationship with the Company. Statutory claims can be raised within the
limitations period provided by the applicable statute.
(1) IN CONSIDERATION FOR AND AS A MATERIAL CONDITION OF
EMPLOYMENT AND CONTINUATION OF EMPLOYMENT WITH THE COMPANY,
EXECUTIVE AGREES THAT FINAL AND BINDING ARBITRATION IS THE
EXCLUSIVE MEANS FOR RESOLVING COVERED DISPUTES; NO OTHER
ACTION MAY BE BROUGHT IN COURT OR IN ANY OTHER FORUM. THIS
AGREEMENT IS A WAIVER OF ALL RIGHTS TO A CIVIL COURT ACTION
FOR A COVERED CLAIM; ONLY AN ARBITRATOR, NOT A JUDGE OR JURY,
WILL DECIDE THE CLAIM.
(2) Claims covered by this Section 8(e) include, but are
not limited to, the following: (i) alleged violations of
federal, state and/or local constitutions, statutes or
regulations, including, but not limited to, laws dealing with
unlawful discrimination and harassment; (ii) claims based on
any purported breach of contractual obligation, including but
not limited to breach of the covenant of good faith and fair
dealing, wrongful termination or constructive termination;
(iii)
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<PAGE> 10
violations of public policy; (iv) claims based on contract or
tort; and (v) claims arising under any provision of this
Agreement, including the formation, validity, interpretation,
effect or alleged breach of this Agreement. THIS INCLUDES, BUT
IS NOT LIMITED TO, CLAIMS BROUGHT UNDER TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964; CALIFORNIA GOVERNMENT CODE SECTION 12960,
et seq.; AND ANY OTHER FEDERAL, STATE OR LOCAL
ANTI-DISCRIMINATION LAWS RELATING TO DISCRIMINATION INCLUDING
BUT NOT LIMITED TO THOSE BASED ON THE FOLLOWING PROTECTED
CATEGORIES: SEX AND GENDER; RACE; RELIGION; NATIONAL ORIGIN;
MENTAL OR PHYSICAL DISABILITY (INCLUDING CLAIMS UNDER THE
AMERICAN WITH DISABILITIES ACT); MEDICAL CONDITION (CANCER);
VETERAN OR MILITARY STATUS; AGE; PREGNANCY; AND RETALIATION
FOR ALLEGING OR FILING ANY GRIEVANCE RELATING TO THE
AFOREMENTIONED CATEGORIES.
(3) The following claims are expressly excluded and not
covered by this agreement for final and binding arbitration:
(i) claims related to workers' compensation and unemployment
insurance; (ii) claims which relate to or arise out of an
alleged breach of Sections 6 and 7 of this Agreement; (iii)
administrative filings with governmental agencies such as the
Equal Employment Opportunity Commission or National Labor
Relations Board; and (iv) claims that are expressly excluded
by statute or are expressly required to be arbitrated under a
different procedure pursuant to the terms of an Executive
benefit plan.
(4) Any claim arising between Executive and the Company
covered by the arbitration provisions of this Agreement will
be submitted to final and binding arbitration in the State of
California pursuant to the employment dispute resolution rules
of the American Arbitration Association in effect upon the
date the claim is submitted in writing to the Company, to
which rules the parties hereby expressly agree. In making his
or her award, the Arbitrator shall have no power to add to,
delete from or modify the terms of this Agreement, or to
construe implied terms or covenants herein, the parties being
in agreement that no such implied terms or covenants are
intended. The Arbitrator shall have the authority to make any
finding congruent with applicable law. In reaching his or her
decision, the Arbitrator shall adhere to relevant law and
applicable legal precedent, and shall have no power to vary
therefrom. At the time of issuing his or her award, the
Arbitrator shall, in the award or separately, make specific
findings of fact, and set forth such facts in support of his
or her decision, as well as the reasons and basis for his or
her opinion. Should the Arbitrator exceed the jurisdiction or
authority here conferred, any party aggrieved thereby may file
a petition to vacate, amend or correct the Arbitrator's award
in a court of competent jurisdiction. Should Executive pursue
any dispute covered by the arbitration provisions of this
Agreement by any method other than said arbitration, the
Company shall be entitled to recover from Executive all
damages, costs, expenses, and attorneys' fees incurred as a
result of such action.
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(5) The Company will pay two-thirds and Executive will
pay one-third of the arbitrator's fees and costs. Each party
shall be responsible for payment of its attorneys' fees.
9. POTENTIAL UNENFORCEABILITY OF ANY PROVISION. If a final
judicial determination is made that any provision of this Agreement is an
illegal, invalid or unenforceable restriction against Executive, the provisions
hereof shall be rendered void only to the extent that such judicial
determination finds such provision or provisions illegal, invalid or
unenforceable, and such illegal, invalid or unenforceable provision or
provisions shall automatically be reconstituted and become a part of this
Agreement, effective as of the date first written above, to the maximum extent
in favor of the Company that is lawful, valid and enforceable, as the case may
be. A judicial determination that any provision of this Agreement is illegal,
invalid or unenforceable shall in no instance render the entire Agreement
illegal, invalid or unenforceable, as the case may be, but rather the Agreement
will continue in full force and effect absent any illegal, invalid or
unenforceable provision or portion thereof to the maximum extent permitted by
law and as contemplated by the immediately preceding sentence.
10. WAIVER OF BREACH. Failure of the Company to demand strict
compliance with any of the terms, covenants or conditions hereof shall not be
deemed a waiver of that term, covenant or condition, nor shall any waiver or
relinquishment by the Company of any right or power hereunder at any one time or
more times be deemed a waiver or relinquishment of that right or power at any
other time or times.
11. ENTIRE AGREEMENT; AMENDMENT. This Agreement, and the
Proprietary Information and Inventions Agreement executed by and between
Executive and Elite Information Systems, Inc., cancel and supersede all previous
agreements relating to the subject matter hereof and thereof, written or oral,
between the parties hereto and contain the entire understanding of the parties
hereto and shall not be amended, modified or supplemented in any manner
whatsoever except as otherwise provided herein or in writing signed by each of
the parties hereto.
12. CAPTIONS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
13. GOVERNING LAW. This Agreement and all rights and obligations
of the parties hereunder shall be governed by, and construed and interpreted in
accordance with, the laws of the State of California.
14. NOTICE. All notices, requests, demands and other
communications hereunder shall be deemed duly given if delivered by hand or if
mailed by certified or registered mail with postage prepaid as follows:
If to the Company:
Broadway & Seymour, Inc.
c/o Elite Information Systems, Inc.
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5100 West Goldleaf Circle, Suite 100
Los Angeles, CA 90056
Attn: Chief Financial Officer
If to Executive:
Christopher K. Poole
1819 Fairmount Avenue
La Canada, CA 91011
or to any other address as either party may provide to the other in writing.
15. ASSIGNMENT. This Agreement is personal and not assignable by
Executive, but it may be assigned by the Company without notice to or consent of
Executive, and shall thereafter be binding upon and enforceable by any person
which shall acquire or succeed to substantially all of the business or assets of
the Company (and such person shall be deemed included in the definition of the
Company for all purposes of this Agreement), but is not otherwise assignable by
the Company. This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder had Executive continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legatee, or other designee or, if there
be no such designee, to Employer's estate.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed in duplicate, and Executive has hereunto set his hand, on the day and
year first above written.
COMPANY: EXECUTIVE
ELITE INFORMATION GROUP, INC.
By: /s/ Steven O. Todd /s/ Christopher K. Poole
------------------------- ---------------------------
Christopher K. Poole
Name: Steven O. Todd
Title: Vice President
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EXHIBIT A
FORM OF GENERAL RELEASE
NO INFORMATION FILED
EXHIBIT B
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
NO INFORMATION FILED
13
<PAGE> 1
EXHIBIT 10.3
ALLONGE TO PROMISSORY NOTE
The maturity date of the attached Promissory Note dated July 23, 1997 for
$15,000,000.00 is hereby extended to September 21, 1999 from July 23, 1999. In
addition, the $3,000,000 ACH line and the $1,000,000 daylight overdraft line
will be extended to 9/21/99.
This Allonge will be governed by the terms and conditions of the Revolving
Credit Agreement dated July 23, 1997 by and between Fleet National Bank and
Elite Information Group, formerly known as Broadway & Seymour, Inc. Nothing
herein shall be deemed to constitute a waiver, release or amendment of any
terms of the Revolving Credit Agreement.
/s/ DANIEL D. FOY /s/ BARRY EMERSON
- ----------------------- -----------------------
Witness Name: Barry Emerson
Daniel D. Foy Title: VP, CFO
ELITE INFORMATION GROUP
Date: 7-15-99
/s/ MICHAEL S. BARCLAY
- ----------------------- -----------------------
Witness Michael S. Barclay
Vice President
FLEET NATIONAL BANK
Date: 7-15-99
<PAGE> 2
REVOLVING CREDIT NOTE
$15,000,000.00 July 23, 1997
FOR VALUE RECEIVED, Broadway & Seymour, Inc., a Delaware corporation
("Broadway"), Elite Information Systems, Inc., a California corporation
("Elite"), The MiniComputer Company of Maryland, Inc., a Maryland corporation
("TMC"), Elite Information Systems International, Inc., a California corporation
("Elite International"), Pragmatix Telephony Solutions, Inc., a North Carolina
corporation ("PRAGMATIX") each with a principal place of business at 128 South
Tryon Street, Charlotte, North Carolina 28202-5050 (Broadway, Elite, TMC, Elite
International and PRAGMATIX are hereinafter jointly and severally referred to as
the "Borrower"), promise to pay to the order of Fleet National Bank, a national
banking association organized and existing under the laws of the United States
of America (the "Lender"), at the Lender's office located at 75 State Street,
Boston, Massachusetts 02109 or to Fleet National Bank or any successor agent
under the Loan Agreement (defined below)(the "Agent") in accordance with the
Loan Agreement (defined below), the lesser of (i) the principal sum of Fifteen
Million and 00/100 Dollars ($15,000,000.00), or (ii) the aggregate unpaid
principal amount of all advances of funds under the Revolving Credit Loan made
by the Lender to the Borrower or by the Lender through the Agent to the Borrower
pursuant to that certain Loan Agreement dated as of the date hereof by and among
the Borrower, the Agent, the other Lenders party thereto and the Lender, as the
same may be amended (the "Loan Agreement").
The Borrower shall pay in full all unpaid principal, interest, fees and
other amounts due under this Note on the Revolving Credit Repayment Date.
The Borrower promises to pay to the order of the Lender interest before
and after maturity on the principal amount of this Note outstanding from time
to time from the date hereof until payment in full of all principal, interest,
fees and other sums due under this Note in accordance with the Loan Agreement.
Upon the occurrence and during the continuance of any Event of Default,
each Loan evidenced by this Note shall bear interest, payable on demand, at a
floating interest rate per annum equal to two percent (2.0%) above Effective
Prime and no Interest Rate Election electing the Libor Rate shall be effective.
In addition, in the event that the Borrower fails to pay any amount of
principal or interest hereof within ten (10) days after such payment is due,
the Borrower shall pay to the Lender upon demand by the Agent or the Lender, a
late charge in an amount equal to five percent (5%) of such amount of principal
or interest.
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement
or as otherwise directed in writing from the Agent to the Borrower.
<PAGE> 1
EXHIBIT 11
ELITE INFORMATION GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
------ ------- ------ -------
<S> <C> <C> <C> <C>
Net income (loss) from continuing operations $ 720 $ (531) $ 787 $(1,214)
Net income (loss) from discontinued operations (333) (2,135) (382) (1,451)
Gain on sale of discontinued operations 4,919 4,919
------ ------- ------ -------
Net income (loss) $5,306 ($2,666) $5,324 ($2,665)
====== ======= ====== =======
BASIC EARNINGS PER SHARE:
Weighted average common shares outstanding 8,289 9,190 8,263 9,190
====== ======= ====== =======
Net income (loss) from continuing operations $ 0.09 $ (0.06) $ 0.10 $ (0.13)
Net income (loss) from discontinued operations (0.04) (0.23) (0.05) (0.16)
Gain on sale of discontinued operations 0.59 0.60
------ ------- ------ -------
Net income (loss) per common share $ 0.64 $ (0.29) $ 0.64 $ (0.29)
====== ======= ====== =======
DILUTED EARNINGS PER SHARE:
Weighted average common shares outstanding 8,289 9,190 8,263 9,190
Addition from assumed exercise of stock options 306 233
------ ------- ------ -------
Weighted average common and common equivalent
shares outstanding 8,595 9,190 8,496 9,190
====== ======= ====== =======
Net income (loss) from continuing operations $ 0.08 $ (0.06) $ 0.09 $ (0.13)
Net income (loss) from discontinued operations (0.04) (0.23) (0.04) (0.16)
Gain on sale of discontinued operations 0.57 0.58
------ ------- ------ -------
Net income (loss) per common and common
equivalent share $ 0.62 $ (0.29) $ 0.63 $ (0.29)
====== ======= ====== =======
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 28,265,000
<SECURITIES> 0
<RECEIVABLES> 24,471,000
<ALLOWANCES> (1,978,00)
<INVENTORY> 0
<CURRENT-ASSETS> 57,074,000
<PP&E> 3,839,000
<DEPRECIATION> (2,224,000)
<TOTAL-ASSETS> 64,163,000
<CURRENT-LIABILITIES> 30,713,000
<BONDS> 0
0
0
<COMMON> 92,000
<OTHER-SE> 31,520,000
<TOTAL-LIABILITY-AND-EQUITY> 64,163,000
<SALES> 28,389,000
<TOTAL-REVENUES> 28,389,000
<CGS> 16,356,000
<TOTAL-COSTS> 16,356,000
<OTHER-EXPENSES> 10,605,000
<LOSS-PROVISION> 1,034,000
<INTEREST-EXPENSE> (423,000)
<INCOME-PRETAX> 1,556,000
<INCOME-TAX> (769,000)
<INCOME-CONTINUING> 787,000
<DISCONTINUED> 4,537,000<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,324,000
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
<FN>
<F1>ON MAY 19, 1999, THE COMPANY COMPLETED THE SALE OF ITS CUSTOMER RELATIONSHIP
MANAGEMENT BUSINESS. THE COMPANY RECORDED A GAIN ON SALE OF DISCONTINUED
OPERATIONS OF $4,919,000, NET OF TAXES.
</FN>
</TABLE>
