-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VbE9C+5JvzW+PdK7rw4tn8XWJP2U+NSu53ex850fdixi/n5lOiHN89XMJyRJsFPi mbEr3o8a069hSyP++BiESw== 0000950144-99-006348.txt : 19990518 0000950144-99-006348.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950144-99-006348 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROADWAY & SEYMOUR INC CENTRAL INDEX KEY: 0000885533 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 411522214 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20034 FILM NUMBER: 99627785 BUSINESS ADDRESS: STREET 1: 128 S TRYON STREET CITY: CHARLOTTE STATE: NC ZIP: 28202 BUSINESS PHONE: 7043724281 MAIL ADDRESS: STREET 1: 128 SOUTH TRYON STREET CITY: CHARLOTTE STATE: NC ZIP: 28202 10-Q 1 BROADWAY & SEYMOUR INC 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 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 BROADWAY & SEYMOUR, INC. (Exact name of registrant as specified in its charter) Delaware 41-1522214 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 128 South Tryon Street Charlotte, North Carolina 28202 ------------------------------- ---------- (Address of principal executive (Zip code) offices) (704) 372-4281 ---------------------------------------------------- (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, $.01 par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- As of April 30, 1999 there were 9,238,123 shares of Common Stock, $.01 par value, outstanding. ================================================================================ Page 1 of 18 2 Broadway & Seymour, Inc. Table of Contents Page Number ------ Part I Financial Information: Introduction 3 Item 1. Financial Statements Consolidated Statement of Operations - Three months ended March 31, 1999 and March 31, 1998 4 Consolidated Balance Sheet - March 31, 1999 and December 31, 1998 5 Consolidated Statement of Cash Flows - Three months ended March 31, 1999 and March 31, 1998 6 Notes to Consolidated Financial Statements 7 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 14 Part II Other Information: Item 2. Changes in Securities and Use of Proceeds 15 Item 6. Exhibits and Reports on Form 8-K 15 - 17 Signature 18 ---------------------------- PRODUCTS MENTIONED IN THIS REPORT ARE USED FOR IDENTIFICATION PURPOSES ONLY AND MAY BE TRADE NAMES OR TRADEMARKS OF BROADWAY & SEYMOUR, INC., ITS SUBSIDIARIES OR THIRD PARTIES. ---------------------------- 2 3 Introduction: As more fully discussed in the attached notes to the consolidated financial statements and in management's discussion and analysis, Broadway & Seymour, Inc. (the "Company") has entered into an asset purchase agreement to sell its customer relationship management business (the "CRM business") , based in Charlotte, North Carolina, and as such, the CRM business is reflected in the consolidated financial statements as a discontinued operation for the periods presented. Also, effective March 5, 1999 the Company sold all of the outstanding shares of its wholly owned subsidiary The MiniComputer Company of Maryland, Inc. ("TMC"). Accordingly, as of the closing date of the CRM sale, (expected in May 1999) the Company's wholly owned subsidiary, Elite Information Systems, Inc. ("Elite") will comprise the Company's ongoing operations. Tables in the attached notes to the consolidated financial statements and in the management discussion and analysis sections of this report provide summary details of the results of operations of Elite, TMC (prior to the sale) and the Company's headquarters costs. As a result of the sales of TMC and CRM, the Company's headquarters will relocate to Los Angeles, California and it is anticipated that the headquarters expenses will decrease in future periods as a result of the Company's smaller size, fewer executive and legal department personnel, lower insurance and other corporate related costs. In addition, the amortization of the excess costs over the fair value of assets acquired are also expected to decrease in future periods due to the sale of TMC as well as certain of the Elite intangible assets reaching full amortization during the first quarter of 1999. 3 4 PART I - Financial Information Item 1. Financial Statements. Broadway & Seymour, Inc. Consolidated Statement of Operations (In thousands, except per share data) (Unaudited)
Three Months Ended March 31, 1999 1998 -------- -------- Net revenue $ 12,988 $ 8,343 -------- -------- Operating expenses: Cost of revenue 7,926 5,805 Research and development 1,007 546 Sales and marketing 2,423 1,611 General and administrative 1,374 1,364 -------- -------- Total operating expenses 12,730 9,326 -------- -------- Operating income (loss) 258 (983) Loss on disposition of non-strategic business units (295) -- Interest income 175 272 Interest expense (12) (23) -------- -------- Income (loss) from continuing operations before income taxes 126 (734) Income tax (provision) benefit for continuing operations (59) 51 -------- -------- Income (loss) from continuing operations 67 (683) -------- -------- Discontinued operations: Income (loss) from discontinued operations, net of tax (provision) benefit of $47 and ($51), respectively (49) 684 -------- -------- Net income $ 18 $ 1 ======== ======== Net income (loss) per share - continuing operations: - Basic $ 0.01 ($ 0.07) - Diluted $ 0.01 ($ 0.07) Net income (loss) per share - discontinued operations - Basic ($ 0.01) $ 0.07 - Diluted ($ 0.01) $ 0.07 Net income (loss) per share - Basic $ 0.00 $ 0.00 - Diluted $ 0.00 $ 0.00
The accompanying notes are an integral part of these consolidated financial statements. 4 5 Broadway & Seymour, Inc. Consolidated Balance Sheet (In thousands, except share and per share data)
Mar. 31, Dec. 31, 1999 1998 -------- -------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 14,584 $ 15,273 Receivables 21,601 28,417 Deferred income taxes 6,712 6,131 Other current assets 1,095 1,930 Net assets of discontinued operations 3,083 -- -------- -------- Total current assets 47,075 51,751 Property and equipment 1,613 5,167 Software costs 1,490 3,309 Intangible assets 4,211 4,782 Other assets 256 87 -------- -------- $ 54,645 $ 65,096 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable-trade $ 2,741 $ 5,070 Accrued compensation 1,431 3,974 Other accrued liabilities 3,659 4,758 Deferred revenue 17,577 22,710 Income taxes payable 1,230 1,169 -------- -------- Total current liabilities 26,638 37,681 -------- -------- Deferred income taxes 1,758 1,392 -------- -------- Other liabilities -- 1,004 -------- -------- Stockholders' equity: Common stock, $.01 par value; Authorized 20,000,000 shares; Issued shares were 9,230,123 and 9,228,623, respectively 92 92 Paid-in capital 39,085 38,696 Less treasury stock, at cost, 950,743 shares and 1,038,552 shares, respectively (4,604) (5,427) Accumulated deficit (8,324) (8,342) -------- -------- Total stockholders' equity 26,249 25,019 -------- -------- $ 54,645 $ 65,096 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 5 6 Broadway & Seymour, Inc. Consolidated Statement of Cash Flows (In thousands) (Unaudited)
Three months ended Mar. 31, Mar. 31, 1999 1998 -------- -------- Cash flows from operating activities: Net income $ 18 $ 1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,167 1,330 Deferred income taxes (215) (132) (Gain) loss on disposition of non-strategic business units 295 (1,607) Loss on disposal of assets 2 1 Changes in assets and liabilities excluding effects of disposition of non-strategic business units Receivables 1,142 7,477 Inventories 94 240 Other assets 200 (442) Accounts payable - trade (1,704) (1,829) Accrued compensation (504) (870) Other liabilities (606) (896) Deferred revenue and customer deposits 281 731 Income taxes 61 (765) -------- -------- Net cash provided by operating activities 231 3,239 -------- -------- Cash flows used by investing activities: Purchase of property and equipment (206) (621) Investment in software costs -- (281) Cash used in business acquisitions/dispositions (714) -- -------- -------- Net cash used by investing activities (920) (902) -------- -------- Cash flows used by financing activities: Payments of notes payable and long-term debt -- (73) -------- -------- Net cash used by financing activities -- (73) -------- -------- Net increase (decrease) in cash and cash equivalents (689) 2,264 Cash and cash equivalents, beginning of period 15,273 17,965 -------- -------- Cash and cash equivalents, end of period $ 14,584 $ 20,229 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 6 7 Notes to Consolidated Financial Statements (Unaudited) NOTE 1 - Basis of Presentation: For the periods presented, the Broadway & Seymour, Inc. (the "Company") consolidated financial statements reflect the results of operations and financial position of the Company's wholly owned subsidiaries Elite Information Systems, Inc. ("Elite") and The MiniComputer Company of Maryland, Inc. ("TMC") as well as its corporate headquarters. The Company's customer relationship management business ("CRM" or the "CRM business") , based in Charlotte, NC, is reflected in the consolidated financial statements as a discontinued operation for the periods presented due to the pending sale of this business to Science Applications International Corporation ("SAIC"). Also, effective March 5, 1999 the Company sold all of the outstanding shares of TMC to a holding company owned by TMC management . Accordingly, as of the closing date of the CRM sale (anticipated in May, 1999), Elite will comprise the Company's ongoing operations. Elite is a legal and professional services business based in Los Angeles, California and 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 and practice management solutions as well as consulting services offered to the legal and professional services markets. Elite's software products are often sold with related services to aid the customer in implementation, data conversion, user training, support and related maintenance of those products. The consolidated financial statements of the Company include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair presentation of financial position as of March 31, 1999 and results of operations and cash flows for the interim periods presented. The results of operations for the three months ended March 31, 1999 and 1998 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 - Segment Information The Company has determined that its reportable segments (as defined by Statement of Financial Accounting Standards Number 131 "Disclosure about Segments of an Enterprise and Related Information") are Elite, CRM and TMC based on each business unit having separate management teams that independently review financial and operating performance, differences in products and services offered, distinct geographical locations and the respective markets served. The following table provides key data related to each reportable segment, a summary of non-allocated headquarters costs and a reconciliation to consolidated results for the three months ended March 31, 1999 and 1998. Due to the pending sale of the CRM business (see Note 1) and consistent with the discontinued operations treatment of the CRM business in the consolidated financial statements, the results of operations for the CRM business are excluded from the segment data and the assets of the CRM business are classified as assets held for sale and are included in the Headquarters column as of March 31, 1999. 7 8 Broadway & Seymour, Inc. Segment Data ($ In thousands, unaudited) Three Months Ended March 31, 1999 - --------------------------------- Elite TMC Headquarters Consolidated ------- ------- ------------ ------------ Revenue $12,590 $ 398 $ -- $12,988 Operating income (loss) $ 1,389 $ 77 $(1,208) $ 258 Depreciation and amortization $ 233 $ 5 $ 438 $ 676 Capital expenditures $ 145 $ -- $ 61 $ 206 As of March 31, 1999 - -------------------- Total assets $25,065 $ -- $29,580 (2) $54,645 Three Months Ended March 31, 1998 - --------------------------------- Elite TMC Headquarters Consolidated ------- ------- ------------ ------------ Revenue $ 7,609 $ 584 $ 150 $ 8,343 Operating income (loss) $ 88 $ 99 $(1,170) $ (983) Depreciation and amortization $ 192 $ 38 $ 517 $ 747 Capital expenditures $ 107 $ -- $ 514 $ 621 As of March 31, 1998 - -------------------- Total assets $24,713 $ 1,239 $39,144 (2) $65,096 (1) Headquarters operating loss includes the non-allocated costs such as the amortization expense associated with the excess costs over the fair value of assets acquired in the Elite and TMC purchase transactions as well as professional fees, insurance and the costs of the corporate executive and legal departments. (2) As of March 31, 1999, the total assets of Headquarters include the reclassified net assets of the discontinued CRM operations ($3.1 million) held for sale as well as other unsegregated assets such as substantially all of the cash balances of the Company and the Company's deferred tax assets, liabilities and the net book value of the excess costs over the fair value of assets acquired in the Elite purchase transaction. As of December 31, 1998, the total assets of Headquarters include the assets of the CRM operations as well as other unsegregated assets such as substantially all of the cash balances of the Company and the Company's deferred tax assets, liabilities and the net book value of the excess costs over the fair value of assets acquired in the Elite purchase transaction. NOTE 3 - Subsequent Events On April 12, 1999, the Company entered into a definitive agreement to sell the assets of the CRM business. It is expected that the transaction will result in an after-tax gain upon consummation. On April 13, 1999, the Board of Directors of the Company implemented a shareowner 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 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. 8 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview For the periods presented, the Broadway & Seymour, Inc. (the "Company") consolidated financial statements reflect the results of operations and financial position of its wholly owned subsidiaries Elite Information Systems, Inc. ("Elite") and The MiniComputer Company of Maryland, Inc. ("TMC") as well as its corporate headquarters. The Company's customer relationship management business (the "CRM business") , based in Charlotte, NC, is reflected in the consolidated financial statements as a discontinued operation for the periods presented due to the pending sale of this business to Science Applications International Corporation ("SAIC"). Also, effective March 5, 1999, the Company sold all of the outstanding shares of TMC to a holding company owned by TMC management . Accordingly, as of the closing date of the CRM sale (anticipated in May, 1999), Elite will comprise the Company's ongoing operations. Elite is a legal and professional services business based in Los Angeles, California and 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 and practice management solutions as well as offering consulting services to the legal and 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. 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. 9 10 Quarter Ended March 31, 1999 Compared to Quarter Ended March 31, 1998 Broadway & Seymour, Inc. Consolidating Condensed Statements of Operations Quarter Ended March 31, 1999 (In thousands, unaudited)
Business Elite Headquarters Subtotal Sold (TMC) Consolidated ----- ------------ -------- ---------- ------------ Revenue $12,590 $ - $ 12,590 $ 398 $ 12,988 Cost of revenue 7,196 440 7,636 290 7,926 ------------------------------------------------------------- Gross margin 5,394 (440) 4,954 108 5,062 Research and development 1,007 - 1,007 - 1,007 Sales and marketing 2,423 - 2,423 - 2,423 General and administrative 575 768 1,343 31 1,374 ------------------------------------------------------------- Continuing Operations - Operating Income $ 1,389 $ (1,208) $ 181 $ 77 $ 258 -------------------------------------------------------------
Broadway & Seymour, Inc. Consolidating Condensed Statements of Operations Quarter Ended March 31, 1998 (In thousands, unaudited)
Business Elite Headquarters Subtotal Sold (TMC) Consolidated ----- ------------ -------- ---------- ------------ Revenue $ 7,609 $ 150 $ 7,759 $ 584 $ 8,343 Cost of revenue 4,879 504 5,383 422 5,805 ------------------------------------------------------------- Gross margin 2,730 (354) 2,376 162 2,538 Research and development 546 - 546 - 546 Sales and marketing 1,611 - 1,611 - 1,611 General and administrative 485 816 1,301 63 1,364 ------------------------------------------------------------- Continuing Operations - Operating Income $ 88 $ (1,170) $ (1,082) $ 99 $ (983) -------------------------------------------------------------
Elite revenue increased $5 million (65%) in the first quarter of 1999 over the first quarter of 1998. Revenue growth during the first quarter of 1999 was greatly influenced by higher levels of orders received during 1998, which were 67% above the amount of orders signed during 1997. Most notable was a significant contract signing for a $2.2 million license expansion for a single customer. Elite expects to continue to perform work and recognize revenue under this contract through 1999. Management also believes that the increase in contract signings 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 margins for the first three months of 1999 increased to 43% of revenue (or $5.4 million) from 36% of revenue (or $2.7 million) in the same period of 1998. A substantial part of Elite's costs of revenue are expenses for deployable resources such as implementation personnel and contract labor. The improved margin principally reflects the increase in revenue and a more efficient utilization of these resources in 1999 to deliver products and services. Research and development expenses for 1999 increased $.5 million at Elite to $1 million (or 8% of revenue) from $.5 million (or 7.2% of revenue) in 1998. This 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. 10 11 Sales and marketing expenses at Elite increased $.8 million in 1999 to $2.4 million from $1.6 million in 1998. This overall increase in sales and marketing expenses is principally related to business development efforts, reflecting increased commissions and incentive awards for revenue recognized and contract signings achieved in the period. However, the revenue increases were achieved while decreasing the sales and marketing costs as a percentage of revenue from 21% in the first quarter of 1998 to 19% in the same period of 1999. General and administrative expenses for 1999 remained relatively consistent with 1998, increasing less than $.1 million. However, as a percentage of revenue the Elite's general and administrative expenses decreased to 5% of revenue in 1999 from 6% of revenue in 1998, reflecting growing revenue while maintaining controls over costs in this area. Headquarters expenses include the Company's non-allocated costs such as professional fees, insurance costs, the costs of the corporate executive and legal departments and amortization expense associated with the excess costs over the fair value of assets acquired in the Elite and TMC purchase transactions. The headquarters costs remained relatively consistent from period to period. However, as a result of the relocation of the corporate headquarters to Los Angeles, California and the sale of the CRM business, it is anticipated that the headquarters expenses will decrease in future periods as a result of the Company's smaller size, fewer executive and legal department personnel and their related costs and lower insurance costs. In addition, the amortization of the excess costs over the fair value of assets acquired will also decrease in future periods due to the sale of TMC as well as certain of the Elite intangible assets reaching full amortization during the first quarter of 1999. Income Taxes: The provision for income taxes on continuing operations of $59,000 (47% of the continuing operations pre-tax income) in 1999 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 $51,000 (7 % of the continuing operation pre-tax loss) in 1998 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 associated with the Company's Elite acquisition. 11 12 Year 2000 Issues: 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 could include miscalculations, unpredictable or inconsistent results or complete system failures. Companies in all lines of business face issues in addressing whether their software products, custom developed software and third party software used internally, sold by the company or used by their vendors or customers or other entities upon which the company relies, will be able to process data properly relating to dates subsequent to December 31, 1999 ("Year 2000 compliance"). State of Readiness The Company has recognized the need to address the Year 2000 compliance issues 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 chairman of the committee periodically reports plans, progress and issues to executive management and the audit committee of the Board of Directors. 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, although it is in the process of developing methods to do so for current TouchPoint customers. 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. Many of the Company's former customers and current customers presently use earlier versions of the Company's software products, and/or associated custom or systems integration 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. Changes to custom or systems integration code provided by the Company that is not Year 2000 compliant are not covered by customer maintenance agreements. Customers may perform such changes themselves, engage the Company to perform such changes, or, in some cases, engage third parties to perform such 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 12 13 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 embedded 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 each third party vendor whose products are embedded 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. Currently the Company anticipates having all test plans developed for critical internal use technology systems by mid-1999. The Company also intends to begin testing during that period and will continue testing through 1999. During 1999, the Company will begin 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. The Company will prioritize these systems and develop test plans based on the responses it receives, or does not receive, from its lessors and other providers. This effort is scheduled for completion in the first half of 1999. 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 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 affect 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. Many potential customers may also choose to defer purchasing Year 2000 compliant products until they believe it is absolutely necessary, thus resulting in potentially stalled market sales within the industry. 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. 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. 13 14 Liquidity and Capital Resources: The Company's cash and cash equivalent balance was $14.6 million at March 31, 1999 and working capital was $20.4 million. The Company had positive cash flows from operations of approximately $.2 million and $3.2 million for the three months ended March 31, 1999 and 1998, respectively. The Company has a two-year, $15 million revolving credit facility, against which it has made no borrowings. Based on current operating expectations, the Company does not anticipate drawing on the facility in the near-term. The credit facility expires in July of 1999. The Company currently intends to begin negotiations for a renewal of or a replacement of the credit facility prior to its expiration. Under the current facility, the Company may borrow up to a maximum of 80% of eligible accounts receivable. As of March 31, 1999, the Company had $11.3 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 March 31, 1999, the Company was in compliance with such covenants, as amended. Management believes that cash and cash equivalents, expected cash proceeds from the sale of CRM, projected cash from operations, and availability under the credit facility (or a similar facility) will be sufficient to meet currently anticipated operating needs. 14 15 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 shareowners 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 6. Exhibits and Reports on Form 8-K. Exhibit No. Description ----------- ----------- 3.1 Restated Certificate of Incorporation of Broadway & Seymour, Inc., dated June 16, 1992 (Incorporated by reference to Exhibit 3.1 to the Registrants Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1993) 3.2* Certificate of Designations 3.3 Restated By-laws of the Company (Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1, SEC File No. 33-46672) 4.1* Specimen share certificate 4.2 Articles 4 and 5 of Broadway & Seymour, Inc.'s Restated Certificate of Incorporation (Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1, SEC File No. 33-46672) 4.3 Article II, Section 2.2 of the Company's Restated By-laws (Incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1, SEC File No. 33-46672) 4.4 Rights Agreement, dated April 14, 1999, between Broadway & Seymour, Inc. and EquiServe Trust Company, N.A. as Rights Agent, including the form of Certificate of Designations with respect to the Series A Junior Participating Preferred Stock, included as Exhibit A to the Rights Agreement, the forms of Rights Certificate and of Election to Exercise, included as Exhibit B to the Rights Agreement, and the form of Summary of Rights to Purchase Share of Series A Junior Participating Preferred Stock included as Exhibit C to the Rights Agreement. (Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form 8-A dated April 15, 1999) 10.01+ Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated June 12, 1985 (Incorporated by reference to Exhibit 10.1 to the Registrant's Registration Statement on Form S-1, SEC File No. 33-46672) 10.02+ Amendment No. 1 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated February 25, 1993 (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K for the Fiscal Year Ended January 31, 1993) 10.03+ Amendment No. 2 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated February 17, 1994 (Incorporated by reference to Exhibit 10.16 to the Registrant's Transition Report on Form 10-K for the Eleven Months Ended December 31, 1993) 10.04+ Amendment No. 3 to Restated 1985 Incentive Stock Option Plan of Broadway & Seymour, Inc. dated May 15, 1995 (Incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1995) 15 16 10.05+ Broadway & Seymour, Inc. 1996 Stock Option Plan dated September 16, 1996 (Incorporated by reference to Appendix B to the Registrant's Definitive Proxy Statement on Form DEFS14A dated August 14, 1996) 10.06 Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., Pragmatix Telephony Solutions, Inc., and Fleet National Bank (as agent and lender) for $15,000,000 secured revolving credit loan dated as of July 23, 1997. (Incorporated by reference to Exhibit 10.21 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.07 Security Agreement by and between Broadway & Seymour, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.22 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.08 Security Agreement by and between Elite Information Systems, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.23 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.09 Security Agreement by and between Elite Information Systems International, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.24 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.10 Security Agreement by and between The Minicomputer of Maryland, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.26 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.11 Security Agreement by and between Pragmatix Telephony Solutions, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.26 to the Registrant's Quarterly Report of Form 10-Q for the Quarter Ended June 30, 1997) 10.12 Conditional Trademark Assignment by and between Broadway & Seymour, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.27 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.13 Conditional Trademark Assignment by and between Elite Information Systems, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.28 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.14 Conditional Trademark Assignment by and between Elite Information Systems International, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.15 Conditional Trademark Assignment by and between The Minicomputer of Maryland, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.16 Conditional Trademark Assignment by and between Pragmatix Telephony Solutions, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.31 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.17 Stock Pledge Agreement by and between Broadway & Seymour, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.32 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 16 17 10.19 Stock Pledge Agreement by and between Elite Information Systems, Inc. and Fleet National Bank dated as of July 23, 1997 (Incorporated by reference to Exhibit 10.33 to the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended June 30, 1997) 10.20 First Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., and Fleet National Bank (as agent and lender) dated September 30, 1997 (Incorporated by reference to Exhibit 10.31 to the Registrant's Annual Report on form 10-K for the year ended December 31, 1997) 10.21 Second Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., and Fleet National Bank (as agent and lender) dated February 6, 1998 (Incorporated by reference to Exhibit 10.32 to the Registrant's Annual Report on form 10-K for the year ended December 31, 1997) 10.22 Third Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., and Fleet National Bank (as agent and lender) dated May 6, 1998 10.23 Fourth Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., and Fleet National Bank (as agent and lender) dated August 7, 1998 10.24 Fifth Amendment to Loan Agreement by and among Broadway & Seymour, Inc., Elite Information Systems, Inc., The Minicomputer Company of Maryland, Inc., Elite Information Systems International, Inc., and Fleet National Bank (as agent and lender) dated February 19, 1999 10.25+ Employment Agreement, dated as of May 29, 1997 (executed June 1, 1997), by and between Broadway & Seymour, Inc. and Keith B. Hall (Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997) 10.26+ Amendment No. 1 to Employment Agreement for Keith B. Hall dated February 19, 1998 10.27*+ Letter Agreement dated February 18, 1999 between Broadway & Seymour, Inc. and Keith B. Hall. 10.28*+ Amended and Restated Employment Agreement dated as of January 15, 1999 by and between Broadway & Seymour, Inc. and Alan C. Stanford 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. * Filed herewith. + Management contract or compensatory plan or arrangement required to be filed as an exhibit. (b) Reports on Form 8-K: Form 8-K dated April 13, 1999 regarding the implementation shareowner rights plan. 17 18 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BROADWAY & SEYMOUR, INC. Date: May 13, 1999 By: /s/ Keith B. Hall ------------- ------------------- Keith B. Hall, Vice President and Chief Financial Officer 18 EX-3.2 2 CERTIFICATE OF DESIGNATIONS 1 EXHIBIT 3.2 CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of Broadway & Seymour, Inc. Pursuant to Section 151 of the General Corporation Law of the State of Delaware Broadway & Seymour, Inc. (the "Corporation"), a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: That pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Certificate of Incorporation of the Corporation and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors on April 13, 1999 adopted the following resolution creating a series of Preferred Stock designated as "Series A Junior Participating Preferred Stock": RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of the Certificate of Incorporation, a series of Preferred Stock designated as Series A Junior Participating Preferred Stock, $0.01 par value per share, be, and it hereby is, created, and that the designation and amount thereof and the powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof (in addition to the provisions in the Certificate of Incorporation that are applicable to the Preferred Stock of all classes and series) are as follows: Series A Junior Participating Preferred Stock 1. Designation and Amount. The shares of such series of Preferred Stock shall be designated as "Series A Junior Participating Preferred Stock," par value $0.01 per share, and the number of shares constituting such series shall be 400,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to less than the number of shares then issued and outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. 2 2. Dividends and Distribution. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of shares of the Corporation's Common Stock, par value $0.01 per share ("Common Stock"), and of any other shares of any class or series of stock of the Corporation ranking junior to the Series A Junior Participating Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) the sum of (x) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and (y) the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. The "Adjustment Number" shall initially be one hundred (100). In the event the Corporation shall at any time after April 26, 1999, declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date 2 3 after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof at any time to a number of votes equal to the Adjustment Number (as in effect at such time) on all matters submitted to a vote of the stockholders of the Corporation. (B) Except as otherwise provided herein, in the Certificate of Incorporation as from time to time amended, or by law, the holders of Series A Junior Participating Preferred Stock and the holders of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as otherwise provided herein, in the Certificate of Incorporation as from time to time amended, or by law, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on 3 4 which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating Preferred Stock, or to such holders and holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their retirement and cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein. 6. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $100.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference 4 5 by (ii) the Adjustment Number. Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of (1) Series A Junior Participating Preferred Stock and (2) Common Stock, respectively, (a) holders of Series A Junior Participating Preferred Stock and (b) holders of shares of Common Stock shall, subject to the prior rights of all other series of Preferred Stock, if any, ranking prior thereto, receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to (x) the Series A Junior Participating Preferred Stock and (y) the Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, that rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. 8. No Redemption. Shares of Series A Junior Participating Preferred Stock shall not be subject to redemption by the Company. 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters. 10. Amendment. At any time that any shares of Series A Junior Participating Preferred Stock are outstanding, the Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a single class. 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. 5 6 IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 14th day of April, 1999. BROADWAY & SEYMOUR, INC. By: /s/ Alan C. Stanford ----------------------------------------- Alan C. Stanford, Chief Executive Officer Attest: /s/ Lillian N. Wilson - ---------------------------- Lillian N. Wilson, Secretary 6 EX-4.1 3 SPECIMEN SHARE CERTIFICATE 1 [BROADWAY & SEYMOUR LOGO] BROADWAY & SEYMOUR, INC. Incorporated under the Laws of the State of Delaware NUMBER SHARES BSIS COMMON STOCK CUSIP 111433 10 8 SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the owner of fully paid and non-assessable Shares, par value $.01 each, of the Common Stock of BROADWAY & SEYMOUR, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated: /s/ Lillian N. Wilson (CORPORATE SEAL) /s/ Alan C. Stanford Secretary Chairman of the Board and Chief Executive Officer COUNTERSIGNED AND REGISTERED: EquiServe Trust Company, N.A. TRANSFER AGENT AND REGISTRAR BY: AUTHORIZED SIGNATURE 2 This certificate also evidences and entitles the holder hereof to certain rights as set forth in a Rights Agreement between Broadway & Seymour, Inc. and EquiServe Trust Company, N.A., dated as of April 14, 1999, as the same may be amended from time to time (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of Broadway & Seymour, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Broadway & Seymour, Inc. will mail to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, Rights beneficially owned by or transferred to any Person who is or becomes an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) and certain transferees thereof may become null and void and may no longer by transferable. BROADWAY & SEYMOUR, INC. The Corporation is authorized to issue shares of Preferred Stock, $.01 par value, in series, each such series having the powers, preferences, designations and relative participating, optional or other special rights as may be determined by the Board of Directors. The Corporation will furnish without charge to each stockholder who so requests a statement summarizing the rights of any Preferred Stock or series thereof outstanding from time to time. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - Custodian ---------- ---------- (Cust) (Minor) under Uniform Gifts to Minors Act -------------------------- (State) Additional abbreviations may also be used though not in the above list. For value received, ____________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________________________ ______________________________________ _______________________________________________________________________________ (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________ shares of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint _______________________________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated _________________ ______________________________________________________________ NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. SIGNATURE(S) GUARANTEED: _______________________________________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-10.27 4 LETTER AGREEMENT DATED 2-18-99 1 EXHIBIT 10.27 [BROADWAY & SEYMOUR LOGO] 128 South Tryon Street Charlotte, NC 28202 704-372-4281 800-274-9287 February 18, 1999 Keith B. Hall 19309 Peninsula Shores Drive Cornelius, NC 28031 Dear Keith: As you know, Broadway & Seymour, Inc. ("BSI") is currently considering various strategic alternatives, including the sale of the Charlotte customer relationship management business (the "Proposed Transaction"). This is to confirm our agreement that in the event the Proposed Transaction is consummated, you may elect, at any time within the 90 day period following the closing of the Proposed Transaction, to resign your employment with BSI and receive two times (i) your annual base salary as in effect immediately prior to the date of resignation and (ii) the aggregate amount of cash bonuses paid to you in respect of the most recent fiscal year. At BSI's option, you shall provide consulting services on a part-time or full-time basis for up to 90 days following such resignation for which you shall be paid at a rate no less than the annual base salary as in effect immediately prior to the date of resignation. Very truly yours, BROADWAY & SEYMOUR, INC. By: /s/ Alan C. Stanford - ------------------------------------ Alan C. Stanford Chairman and Chief Executive Officer Acknowledged and agreed to as of the 22nd day of Feb., 1999: /s/ Keith B. Hall - ------------------------------------ Keith B. Hall /Attachment EX-10.28 5 AMENDED & RESTATED EMPLOYMENT AGREEMENT 1 EXHIBIT 10.28 AMENDED AND RESTATED EMPLOYMENT AGREEMENT ALAN C. STANFORD THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into as of the 15th day of January, 1999, by and among BROADWAY & SEYMOUR, INC. ("Employer"), and ALAN C. STANFORD, an individual having an address at 8100 Sycamore Road, Indianapolis, Indiana 46240 ("Employee"), and amends and restates in its entirety the Employment Agreement dated September 1, 1995 by and among Employer and Employee, as previously amended (the "Prior Agreement"). Background Statement Employee is currently the Chairman of the Board, Chief Executive Officer and President of Employer. This Agreement sets forth the parties' agreement with respect to Employee's employment in such capacities. Statement of Agreement NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the mutual duties and obligations set forth herein, and intending to be legally bound, the parties hereto agree as follows: 1. Employment. Employer hereby agrees to employ Employee and Employee hereby agrees to serve Employer upon the terms and conditions set forth in this Employment Agreement in the capacities set forth on Exhibit A attached hereto, with the duties and responsibilities of such positions to be determined from time to time by the Board of Directors of Employer. 2. Term. The term of this Employment Agreement shall begin on January 15, 1999, and end on January 14, 2001, and shall automatically renew for successive two-year terms unless one party notifies the other in writing of its intention to cancel 180 days prior to the expiration of the term. 3. Compensation, Incentives and Employee Benefits. (a) Base Salary. Employer shall pay to the Employee for his performance of services hereunder a base salary ("Base Salary"), which for the first year of employment hereunder shall be at a rate of Three Hundred Thousand and No/100 Dollars ($300,000.00) per year, subject to applicable withholding for taxes. The Employee's Base Salary rate shall be reviewed by Employer annually and may be increased from time to time with the approval of the Compensation Committee of the Board of Directors of Employer. From and after the effective date of any such change the increased rate shall become the Base Salary rate applicable -1- 2 thereafter. Base Salary shall be paid in accordance with Employer's general payroll practices as established from time to time. (b) Annual Bonus Compensation. Each year during the term of this Agreement and the Prior Agreement (commencing with the year beginning January 1, 1997), Employer shall pay to Employee annual bonus compensation with respect to Employee's and Employer's performance during the prior fiscal year as determined by the Compensation Committee of the Board of Directors. The Compensation Committee shall consider the following (and other) factors in determining the amount of annual bonus compensation payable to Employee, though it need not assign any particular weight to such factors or articulate its rational by reference to such factors: Employer's financial performance during the fiscal year, including earnings per share, Employer's operational performance during the fiscal year, Employee's satisfaction or progress toward goals established by the Compensation Committee or the Board of Directors. Bonus compensation payable under this subsection, if any, shall be paid in connection with annual bonus payments generally made to the executive officers of Employer, and in no event later than fifteen (15) days after Employer files its Annual Report on Form 10-K with the Securities and Exchange Commission. (c) Incentive Compensation. In the event that a sale of Employer's Customer Relationship Management business to a third party purchaser (other than Employee or an entity of which Employee owns directly or indirectly more than 10% of the equity interests thereof) (a "CRM Transaction") is consummated (i.e. the transaction is closed) on or prior to December 31, 1999, Employer shall pay to Employee, on the 10th business day following the Measurement Date, a bonus equal to 10% of the amount equal to (i) the excess, if any, of the Fair Market Value of Employer's Common Stock, $.01 par value ("Common Stock"), as of the Measurement Date, over $7.25 (ii) multiplied by the number of shares of Employer's Common Stock outstanding on the Measurement Date. In the event that (A) a CRM Transaction does not occur and (B) a "Change of Control" as defined solely in Sections 5(b)(i) and (iii) of this Agreement (a "Company Transaction") occurs prior to December 31, 1999, Employer shall pay to Employee, on the 10th business day following the effective date of such Company Transaction, a bonus equal to 10% of the amount equal to (i) the excess, if any, of the Fair Market Value of Employer's Common Stock as of the effective date of the Company Transaction over $7.25, (ii) multiplied by the number of shares of Employer's Common Stock outstanding on the effective date of the Company Transaction. For purposes of this Agreement, "Fair Market Value" shall mean (x) in the case of a CRM Transaction, the average of the closing prices per share of Employer's Common Stock for the 10 trading days preceding the Measurement Date as reported by NASDAQ; (y) in the case of a Company Transaction as defined in Section 5(b)(i), the average of the closing prices per share of Employer's Common Stock for the 10 trading days preceding a person becoming a 40% holder, as reported by NASDAQ; and (z) in the case of a Company Transaction as defined in Section 5(b)(iii), the average price per share received by Employer's shareholders in such merger or consolidation. The "Measurement Date" shall be the 10th trading day following the closing of the CRM Transaction. Notwithstanding any provisions of this Agreement to the contrary, if Employee's employment hereunder is terminated for any reason other than for Cause or as a result of Employee's voluntary resignation without Good Reason, then Employee (or his estate or representative, as applicable) shall continue to be entitled to be -2- 3 paid (and Employer shall pay) any bonuses due under this Section 3(c) as a result of the consummation of a CRM Transaction or a Company Transaction, so long as such termination occurred within 120 days prior to consummation of such transaction. (d) Stock Options. Employer shall award to Employee such stock options and other stock-based compensation at times and in amounts as deemed appropriate by the Compensation Committee of the Board of Directors of Employer. (e) Employee Benefit Plans. In addition to the Base Salary and additional compensation provided for above, Employer shall provide to the Employee the opportunity to participate in all life insurance, medical, dental, optical, disability, and other employee benefit plans (collectively, "Employee Benefit Plans") sponsored from time to time by Employer and covering its employees generally or a particular group of its employees of which the Employee is a member (including participation by the Employee's spouse and dependents to the extent they are eligible under the terms of such plans), subject to the terms and conditions of such benefit plans. (f) Reimbursement of Expenses. (i) Employer shall pay or reimburse Employee for all reasonable travel expenses incurred by him in connection with his travel to and from offices established as permitted under Exhibit A to Employer's principal offices in Charlotte, North Carolina; provided that Employer shall not reimburse or pay for Employee's expenses for housing (temporary or permanent) in Charlotte. Employer shall pay or reimburse Employee for all reasonable moving expenses incurred if Employee relocates to facilitate performance of services hereunder. (ii) Employer shall pay or reimburse Employee for dues charged by business clubs (including dining clubs) of which Employee is currently a member, but shall not reimburse Employee for dues or other expenses of country clubs (including golf or tennis clubs) unless Employee is requested to join any such club by the Board of Directors. (iii) Employer shall otherwise pay or reimburse Employee for all reasonable travel and other expenses incurred by him in performing his obligations under this Agreement. (iv) Employer shall reimburse or pay Employee's reasonable legal and accounting expense incurred in connection with the negotiation of this Agreement. (v) All such expenses shall be appropriately submitted to Employer and, with respect to expenses to be paid or reimbursed pursuant to subparagraph (f)(iii), approved in accordance with the policies approved by the Board of Directors of Employer. -3- 4 (g) Vacation. Employee shall be entitled to paid annual vacation of up to 4 weeks per year. 4. Duties. During the term hereof, Employee shall devote all of his business time, attention, skills and efforts to the business of Employer and the faithful performance of his duties hereunder; provided, however, that (i) nothing contained herein shall prevent Employee from making outside investments and relationships not inconsistent with the provisions contained herein, and for that purpose may continue to operate Stanford Associates, LLC, and (ii) with the approval of the Board of Directors of Employer, from time to time Employee may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or organizations which, in the reasonable judgment of the Board of Directors of Employer, will not present any conflict of interest with Employer, or materially affect the performance of Employee's duties pursuant to this Agreement. Except for such incidental matters as may be assigned by Employer from time to time, Employee shall neither be demoted from his position as set forth on Exhibit A, nor shall the duties or responsibilities normally associated with those positions be reduced during the term of this Agreement. 5. Termination. (a) Termination By Employer Without Cause. The parties recognize (i) that the Board of Directors of Employer has the duty to use its judgment in the best interests of Employer in determining whether to remove Employee as an executive officer of Employer even though there may be no legal cause therefor under this Agreement, and (ii) that any action or inaction of the Board of Directors of Employer pursuant to clause (i) shall not prejudice the rights of Employee under this Agreement. Accordingly, the parties agree that, subject to all other provisions of this paragraph 5, Employer shall have the right at any time during the term of this Agreement to terminate Employee's employment hereunder without cause. Such right of termination may be exercised by removal of Employee by the Board of Directors of Employer or the failure of the Board of Directors of Employer to elect or reelect Employee as an executive officer of Employer or otherwise. Termination under this Section 5(a) shall be deemed to occur on the date that Employee is notified thereof. (b) Termination by Employee. Employee may terminate his employment with Employer, for any reason or without reason, during the term of this Agreement. Such termination must be accompanied by the delivery of at least 60 days' written notice delivered to Employer, unless the termination is for "Good Reason" (as defined below), in which case termination shall become effective ten (10) days after delivery to Employer by Employee of a notice of termination. For purposes of this Agreement, "Good Reason" shall mean (x) a "Change of Control" of Employer (as defined below), (y) a Constructive Termination of this Agreement (as defined below) or (z) a failure by Employer to comply with any material provision of this Agreement which has not been cured within ten (10) days after written notice of such noncompliance has been given by Employee to Employer. For the purpose of this Agreement, a "Change of Control," shall mean if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than any underwriter or member of an underwriting syndicate -4- 5 or group with respect to a public offering of securities of Employer registered under the Securities Act of 1933, as amended, Employer or any "person" who on the date hereof is a director or officer of Employer or whose shares of Employer's stock are treated as "beneficially owned" (as defined in Rule 13d-3 under the Exchange Act, as in effect on the date hereof) by any such director or officer), is or becomes the beneficial owner, directly or indirectly, of securities of Employer representing 40% or more of the combined voting power of Employer's then-outstanding securities, (ii) less than a majority of the members of the Board of Directors of Employer are persons who were either nominated for election by the Board of Directors or selected by the Board of Directors of Employer, (iii) a merger or consolidation of Employer with any other corporation is consummated, other than a merger or consolidation which results in the "Voting Securities" (as defined below) of Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into "Voting Securities" of the surviving entity) at least 40% of the total voting power immediately after such merger or consolidation, or (iv) a CRM Transaction is consummated. Notwithstanding the foregoing, as used in this Agreement, "Voting Securities" shall mean any securities of Employer which vote generally in the election of directors. For the purpose of this Agreement, "Constructive Termination" shall mean that after the date hereof (x) the Employee is assigned duties other than or inconsistent with those of Chief Executive Officer of Employer, (y) Employee is required to change his place of residence from Indianapolis, Indiana, or (z) the Employee is required to report other than to the Board of Directors of Employer. (c) Termination Payments. (i) If Employer terminates Employee's employment hereunder pursuant to paragraph 5(a) hereof for any reason other than for "Cause", as defined herein, or if Employee terminates his employment hereunder for "Good Reason," as defined herein, then immediately upon the effectiveness of the termination, Employer shall make a lump sum cash payment to Employee in an amount equal to two times the sum of (A) Employee's annual Base Salary as in effect immediately prior to the date of such event, and (B) the aggregate amount of cash bonuses paid to Employee with respect to the most recent fiscal year, provided, however, that such bonuses shall not include any bonus awarded to Employee pursuant to Section 3(c) above. Notwithstanding anything to the contrary expressed or implied herein, in the event that a sale of the CRM business is consummated prior to December 31, 1999, Employee shall, at the purchaser's election, provide reasonable consulting services on a full-time basis for up to six (6) months following the closing for which Employee shall be paid at a rate no less than the annual Base Salary as in effect immediately prior to the effectiveness of Employee's termination hereunder. Employee agrees further that, notwithstanding anything to the contrary expressed or implied in Section 7 below, during such consulting period Employee shall not violate the provisions of Section 7(c). Employee acknowledges and agrees that any material breach by him of this covenant shall be a material breach of this Agreement and that Employer, in addition to, and without waiving any other remedy, shall have the right to -5- 6 require Employee to return all separation payments and bonus payments made by Employer pursuant to Sections 5(c) or 3(c) of this Agreement. (ii) From and after the termination of Employee's employment for Cause, Employee's voluntary termination of employment other than for Good Reason, or Employee's death, Employer shall not be liable to Employee, his spouse or his personal representative for the payment of salary, benefits, or payments of any kind, except for amounts payable under this Agreement that are attributable to services performed by Employee prior to the termination of his employment and except for amounts payable pursuant to the terms of any Employer benefits, disability, retirement or similar plan in which Employee may be a participant. (iii) In the circumstances described in the last sentence of Section 3(c), Employee shall remain entitled to payment of the bonuses due under such section after termination of Employee's employment by Employer. (d) Termination by Employer for Cause. Employer may terminate Employee's employment hereunder for Cause. "Cause" means (i) the substantial failure of Employee to carry out and perform his duties after written notice from the Board of Directors of Employer; (ii) the repeated refusal by Employee to follow the lawful directions of the Board of Directors; (iii) the commission of an act by Employee constituting financial dishonesty against Employer; (iv) the commission of an act by Employee involving a felony; (v) the commission of an act by Employee involving moral turpitude that brings Employer or any of its affiliates into public disrepute or disgrace or causes material harm to the customer relations, operations or business prospects of Employer or its subsidiaries; or (vi) violation by Employee of any provision of Section 7 hereof. (e) Disability. If the Employee is unable to perform his duties hereunder for a period of six consecutive months due to disability (as defined by the primary disability insurance carrier then providing such insurance coverage for the Employer's executive officers), Employee's employment hereunder may be terminated at Employer's discretion by giving to the Employee written notice specifying a termination date subsequent thereto and also subsequent to the end of said six-month period; provided, however, that for a two-year period following such termination, Employee shall continue as an employee of Employer for all purposes (including without limitation Employer's benefit plans and Employer's 1996 Stock Option Plan) and Employer shall pay to Employee any portion of Employee's Base Salary (as in effect immediately prior to such termination) not paid by the disability insurance carrier(s) then providing coverage for Employer's executive officers. (f) No Mitigation. Employee shall have no obligation to seek other employment in the event of termination of his employment and no compensation or other benefits received by Employee from any other employment shall reduce or limit Employer's obligation to make payment under paragraph 5(c). -6- 7 6. Confidential Information. Employee shall not, at any time during or following his employment by Employer regardless of the reason for such termination of employment, furnish, divulge, communicate, use to the detriment of Employer or for the benefit of any business, firm, person, partnership, trust or corporation, or otherwise, any of Employer's confidential information, data, trade secrets, sales methods, names of customers, advertising methods, financial affairs or methods of procurement, or take with him any document or paper relating to the foregoing, it being acknowledged that Employee received or obtained all of the above in confidence and as a fiduciary of Employer. 7. Non-Competition. Employee agrees that during the term hereof and for a period of two years following termination of Employee's employment hereunder (but the provisions of subsection (c) below shall not apply to Employee after termination of his employment if the termination was by Employer without Cause or by Employee for Good Reason): (a) Employee will not directly or indirectly, individually or as a partner, employee, stockholder, consultant, agent, officer, director, advisor or in any other capacity, solicit any of the customers of Employer or its subsidiaries (collectively, the "Company") for the purpose of selling any service or product similar to those provided by the Company, or in any manner attempt to induce any of the Company's customers or suppliers to withdraw, reduce or divert any of their business from the Company or otherwise interfere or attempt to interfere with any business relationship between the Company and its customers or suppliers; provided, however, that Employer recognizes that Employee possesses general management and management consulting skills and agrees that the exercise of such skills are not proscribed by this paragraph 7(a). For the purposes of this paragraph 7(a), customers shall mean any client, account or customer of the Company that has transacted any business with or been contacted by the Company during the last twenty-four (24) months of the term of Employee's employment. (b) Employee will not in any manner induce or attempt to induce any of the Company's employees to leave the employment of the Company to become associated with any business operation selling any service or product similar to those provided by the Company. (c) Employee will not directly or indirectly, either as principal, agent, manager, employee, owner (if the percentage of ownership exceeds one percent (1%) of the net worth of the business), partner (general or limited), director, officer, consultant or in any other capacity, participate in any business operation engaged in a business selling any service or product similar to those provided by the Company. 8. Limitations on Scope. Because of the current and contemplated future operations of Employer in the geographic areas hereinafter set forth, it is further understood and agreed by the parties hereto that the restriction set forth in paragraph 7(c) shall apply to a business operation engaged in the following geographic areas: (i) The State of North Carolina; (ii) The State of New York; -7- 8 (iii) The State of California; (iv) The State of Illinois; (v) The State of Florida; (vi) The State of Massachusetts; (vii) The State of Texas; (viii) Any State contiguous with the State of North Carolina; (ix) Any State contiguous with the State of New York; (x) Any State east of the Mississippi River; (xi) Any State of the United States of America. The parties intend the above geographical areas to be completely severable and independent, and any invalidity or unenforceability of this Agreement with respect to any one area shall not render this Agreement unenforceable as applied to any one or more of the other areas. 9. Severability. If any provision contained in this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. The parties agree that in the event a court should determine that this Agreement or any of the covenants contained herein is unreasonable, void or invalid, for any reason whatsoever, then in such event, the parties hereto agree that the duration, geographical or other limitation imposed herein should be as the court, or jury, if applicable, should determine to be fair and reasonable, it being the intent of each of the parties hereto to be subject to an agreement that protects the legitimate competitive interests of Employer and does not unreasonably curtail the rights of the Employee. 10. Employee's Representation. Employee represents that his experience and capabilities are such that the provisions of paragraph 7 will not prevent him from earning a livelihood. 11. Employer's Right to Obtain an Injunction. Employee acknowledges that Employer will have no adequate means of protecting its rights under paragraphs 7 and 8 of this Agreement other than securing an injunction. Accordingly, Employee agrees that Employer is entitled to enforce this Agreement by obtaining a preliminary and permanent injunction and any other appropriate equitable relief in a court of competent jurisdiction. Employee acknowledges that the recovery of damages by Employer will not be an adequate means to redress a breach of -8- 9 this Agreement. Nothing contained in this paragraph, however, shall prohibit Employer from pursuing any remedies in addition to injunctive relief, including recovery of damages. 12. General Provisions. (a) Entire Agreement. This Agreement contains the entire understanding between the parties hereto relating to the employment of Employee by Employer and supersedes any and all prior employment or compensation agreements between Employer and Employee. (b) Nonassignability. Neither this Agreement nor any right or interest hereunder shall be assignable by Employee, his beneficiaries or legal representatives, without the prior written consent of Employer; provided, however, that nothing shall preclude (i) Employee from designating a beneficiary to receive any benefit payable hereunder upon his death, or (ii) the executors, administrators or other legal representatives of Employee or his estate from assigning any rights hereunder to the person or persons entitled thereunto. (c) Binding Agreement. This Employment Agreement shall be binding upon, and inure to the benefit of, Employee and Employer and their respective permitted successors and assigns, and in the case of Employer shall also be binding upon any person or entity that shall acquire all or substantially all of the assets of Employer. (d) Amendment or Modification of Employment Agreement. This Employment Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (e) Insurance. Employer, at its discretion, may apply for and procure in its own name and for its own benefit, life insurance on Employee in any amount or amounts considered advisable; and Employee shall have no right, title or interest therein, and further, Employee agrees to submit to any medical or other examination and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain such insurance. (f) Notices. All notices under this Employment Agreement shall be in writing and shall be deemed effective when delivered in person (in the case of Employer, to its General Counsel) or when mailed, if mailed by certified mail, return receipt requested. Notices mailed shall be addressed, in the case of Employee, to him at his residential address currently on file with Employer, and in the case of Employer, to its corporate headquarters, attention of the General Counsel, or to such other address as Employer or Employee may designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by telegram or telex. (g) Waiver. No delay or omission by either party hereto in exercising any right, power or privilege hereunder shall impair such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege. The provisions of this paragraph 13(g) cannot be waived except in writing signed by both parties. -9- 10 (h) Governing Law. This agreement shall be governed and construed in accordance with the laws of the State of North Carolina, exclusive of its choice of law provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. BROADWAY & SEYMOUR, INC. By: /s/ Lillian N. Wilson --------------------------------- Lillian N. Wilson Vice President /s/ Alan C. Stanford (SEAL) ------------------------------- -10- 11 EXHIBIT A Employee shall serve as Chairman, Chief Executive Officer and President of Employer and shall be the principal executive officer of Employer and shall also have day-to-day responsibility for all operational activities of the Company. Employee shall not be required to permanently relocate to Charlotte, North Carolina; provided that he shall retain offices at which he may be regularly contacted and shall generally be available to perform a work-week equivalent at Employer's principal executive offices each work week. Upon expiration of Employee's current term as a director of Employer, the Board of Directors or a nominating committee thereof shall, subject to fiduciary duties, nominate Employee for re-election as a director. -11- EX-11 6 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 Broadway & Seymour, Inc. Computation of Earnings per Share (In thousands, except per share data) (Unaudited)
Three months ended Mar. 31, Mar. 31, 1999 1998 -------- -------- Net income (loss) from continuing operations $ 67 $ (683) Net income (loss) from discontinued operations (49) 684 -------- -------- Net income $ 18 $ 1 ======== ======== Basic earnings per share: Weighted average common shares outstanding 8,261 9,190 ======== ======== Net income (loss) from continuing operations $ 0.01 $ (0.07) Net income (loss) from discontinued operations (0.01) $ 0.07 -------- -------- Net income per common share $ 0.00 $ 0.00 ======== ======== Diluted earnings per share: Weighted average common shares outstanding 8,261 9,190 Addition from assumed exercise of stock options 139 17 -------- -------- Weighted average common and common equivalent shares outstanding 8,400 9,207 ======== ======== Net income (loss) from continuing operations $ 0.01 $ (0.07) Net income (loss) from discontinued operations (0.01) 0.07 -------- -------- Net income per common and common equivalent share $ 0.00 $ 0.00 ======== ========
EX-27 7 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 14,584,000 0 23,521,000 (1,920,000) 0 47,075,000 3,688,000 (2,075,000) 54,645,000 26,638,000 0 0 0 92,000 26,157,000 54,645,000 12,988,000 12,988,000 7,926,000 7,926,000 4,804,000 727,000 (163,000) 126,000 (59,000) 67,000 (49,000) 0 0 18,000 0.00 0.00
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