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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to _______________.
Commission file number 0-20034
ELITE INFORMATION GROUP, INC.
(Formerly Broadway & Seymour, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE 41-1522214
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5100 WEST GOLDLEAF CIRCLE
LOS ANGELES, CALIFORNIA 90056
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(Address of principal executive offices) (Zip code)
(323) 642-5200
(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 [ ] .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ].
The aggregate market value of voting stock held by non-affiliates of
the registrant as of February 29, 2000 computed by reference to the closing sale
price on such date, was $71,022,545. As of the same date, 9,376,373 shares of
Common Stock, $.01 par value, were outstanding. For purposes of this
calculation, Solution 6 Holdings Limited and its affiliates, which are
conducting a pending tender offer for all the issued and outstanding shares of
Common Stock of the registrant, were not considered affiliates of the Company.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1999 Annual Report (the "Annual Report"),
filed as an Exhibit hereto, are incorporated herein by reference into Parts II
and IV.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Elite Information Group, Inc. ("Elite" or the "Company") is the parent
company to Elite Information Systems, Inc. and Elite.com, Inc. Elite Information
Systems is an international software product and services company that provides
a comprehensive suite of financial and practice management software applications
for law firms and other professional service organizations of all sizes. Elite
Information Systems' software products are often sold with related services to
aid the customer in implementation, data conversion and user training efforts.
The Company's new Elite.com subsidiary provides Internet-based time tracking and
billing services to smaller professional services companies including legal,
management consulting, computer systems consulting and integration, accounting
and engineering. Elite.com utilizes hosted, Internet-based applications and
services delivered through its various partners and alliances.
GENERAL DEVELOPMENT OF THE BUSINESS
The Company was incorporated in 1985 in connection with the acquisition
of Broadway & Seymour, Inc., a North Carolina corporation that had been doing
business since 1981. The Company followed a strategy of growth through the
acquisition of products and businesses through mid-1995. Operations were
reorganized to integrate independent business units, and certain non-core
business units were disposed of in 1995, 1996 and 1997.
On May 19, 1999 the Company sold its Customer Relationship Management
business ("CRM"), based in Charlotte, NC, to Science Applications International
Corporation ("SAIC"). Following the CRM business sale, the Company changed its
name from Broadway & Seymour, Inc. to Elite Information Group, Inc., to reflect
the Company's new single-purpose business. The Company also changed its NASDAQ
trading symbol to ELTE and continues to be traded as a National Market Issue on
the NASDAQ.
During the third quarter of 1999 the Company began start up operations
of its new Elite.com subsidiary. Elite.com provides Internet-based time tracking
and billing services to smaller professional services firms. These services
became available to customers in January 2000, offered through the Elite.com Web
site.
On December 14, 1999 the Company entered into a merger agreement to be
acquired by Solution 6 Holdings Limited ("Solution 6") (ASX:SOH), which is based
in Sydney, Australia. As contemplated in the merger agreement, on December 21,
1999 Solution 6 initiated an all cash tender offer to purchase 100% of the
outstanding shares of Elite common stock. The tender offer is conditioned upon,
among other things, Solution 6 acquiring a majority of the fully diluted share
capital of Elite and obtaining necessary regulatory approvals. The merger
agreement may be terminated by either party without cause if the tender offer
has not been consummated by May 1, 2000. On January 6, 2000, the Company
announced that the Federal Trade Commission ("FTC") had requested additional
information and documentary material in connection with its review of the
proposed merger. The FTC request has resulted in an extension of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act and, accordingly,
the tender offer has been extended to permit the FTC to complete its review of
the proposed merger. The Company can give no assurance as to the timing or
outcome of the FTC's review or as to the timing or completion of the tender
offer and merger.
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BUSINESS STRATEGY
The Company's strategy is to develop and market industry-leading
practice management solutions for the professional service automation (PSA)
market. The company currently offers software and internet-based services to
assist in timekeeping, billing and related business management functions for
legal, accounting, consulting, public relations and other professional services
firms.
Through its Elite Information Systems subsidiary, the Company continues
to develop and market its client-server Windows and internet/intranet based
financial and practice management products (see "Product and Services Based
Solutions" below), while also focusing efforts on the planned release of its
32-bit system with enhanced query capabilities and object-oriented architecture.
The Company markets its financial and practice management tools principally to
law firms in the United States, Canada, the United Kingdom and Europe. However,
the Company continues to focus on expanding its market presence in other
segments of the services industry, including accounting, actuarial, consulting,
advertising, public relations and other services firms.
Elite Information Systems has an extensive field operations unit that
performs services including installation, implementation, data conversion,
training and consulting on its products. The Company's Professional Services
unit also provides follow-on consulting and technical services to its client
base on a fee for services basis. Principally all Elite customers contract with
the Company for maintenance and telephone support services on an annual basis.
Expanding on its efforts to develop and market web-based products, in
the third quarter of 1999 the Company began start up operations of its new
Elite.com subsidiary. Elite.com's strategy is to provide smaller professional
service firms with efficient, low cost, time and billing applications via the
Internet. Elite.com focuses its hosted Internet-based services on the solo
practitioner and small firms in the legal, accounting, management and computer
consulting, and engineering markets. These services became available to
customers in January 2000, offered through the Elite.com Web site.
PRODUCT AND SERVICES BASED SOLUTIONS
Software products mentioned in this document are for
identification purposes only and may be trademarks of Elite Information Group,
Inc., its subsidiaries or third parties.
SOFTWARE PRODUCTS
The Company's software solutions incorporate client-server and
open systems architecture using either a Windows or internet browser
interface and can be run on multiple operating systems and major
databases including Unix, Windows NT Server, Microsoft SQL Server and
Informix.
Elite Professional Billing System is a comprehensive accounting
and information management software product serving legal and
professional service firms. The Professional Billing System responds to
clients' billing requirements with on-line management information and
processes.
Elite Financial Management System is a general ledger and
accounts payable software product that supports multi-currency and
simultaneous cash and accrual-based accounting as well as budgeting
features.
Elite Case Management System is a case tracking software system
and conflicts/related-party database. This system also includes calendar
and docket functions, a case database, a
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related-party tracking system, on-line viewing of case information and
personal calendars and a user-defined reporting system.
Elite Marketing System is a comprehensive marketing and practice
development tool that tracks relationships, manages mailings and
monitors the effectiveness of client development efforts.
Elite Conflict of Interest Module is an integrated software tool
for checking conflicts of interest, based on a full-text search engine.
Elite Records Management Module is a software tool for managing
both internal and external records, with bar code support and
integration with the Elite Conflict of Interest System.
Elite WebView is a software tool that summarizes key information
from all Elite applications in a simple and concise manner within a
web-browser. By using built in HTML hyperlinks, a user can quickly move
from application to application.
Elite TimeTrax is an integrated software tool for time and
expense entry and tracking.
Elite Profitability System is a software tool developed to help
companies track the profitability of their firm by client, engagement,
office, department and timekeeper.
WorkFlow is a software application designed to automate
paper-intensive processes by using electronic forms, pre-defined routing
of these forms, and password-based approval of the transactions
represented by these forms.
Event Driven Reporting is an integrated software tool that
delivers critical information to managers, administrators, firm
committees, internal staff and clients, in an efficient and timely
manner, electronically.
SUPPORT SERVICES
The Company views its customer support services as a significant
part of its strategy to establish and maintain strong customer
relationships. The Company offers system maintenance and support at
fixed prices under renewable contracts as well as conversion and
installation services as needed by its customers. The degree of
maintenance service provided to customers differs depending on the
system being supported. Generally, support contracts entitle users to
telephone support and regular upgraded product releases. In addition,
the Company offers certain training classes and multi-media based
instruction to customers that aid in the implementation and effective
use of the Company's solutions.
ELITE.COM SERVICES
Through its Elite.com subsidiary the Company provides
Internet-based time tracking and invoicing solutions that are designed
to address the specific needs of smaller fee-based businesses including
legal, accounting, management and computer consulting, and engineering
firms. Using a standard Web browser and Internet connection, customers
can track time and expenses, produce invoices, generate information
reports, manage accounts receivable and streamline a variety of other
practice management functions.
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RESEARCH AND DEVELOPMENT
To meet the changing needs of the professional services
industry, the Company expends resources to continually develop and
enhance its proprietary software products. The Company believes that
ongoing commitment to research and development is important to the
long-term success of the business.
For the years ended December 31, 1999, 1998 and 1997, the
Company's total research and development expenditures from continuing
operations (including capitalized costs) were $4.4 million, $3.3 million
and $1.7 million, respectively.
There are inherent risks in the development and introduction of
a new product. For example, new products may have quality or other
defects in the early stages of introduction that were not anticipated in
the design of those products. The Company cannot determine the effects
on operating results of unanticipated complications in product
introductions or transitions.
SALES AND MARKETING
New customer contacts are generated by a variety of methods,
including customer referrals, personal sales calls, attendance at trade
shows and seminars, advertising in trade publications, direct mailings
to targeted customers and telemarketing.
The Company maintains a direct sales force where sales personnel
are given sales responsibility within their targeted regional and
customer markets. Additionally, senior management and technical subject
matter experts within the Company are directly involved in obtaining and
supporting relationships.
The Company's business strategy also emphasizes sales to
existing customers. Follow-on sales to existing customers include system
upgrades, expansion of license rights, migration to new products and
maintenance and support services.
CUSTOMERS
The Company serves a client base in the legal and other
professional services markets. Elite's customers include over one-third
of the top 1,000 law firms in the United States, several large firms in
the United Kingdom and the largest law firm in the world. Other
professional services markets include accounting, consulting, public
relations, financial services, actuarial, government, software,
security, insurance, market research and systems integration. In
addition, through Elite.com, the Company serves small and sole
practitioner firms in similar professional services markets.
The Company provides software solutions under a variety of
financial arrangements, including fixed fee contracts and billings on a
time and materials basis.
The majority of the Company's revenue is concentrated in the
legal services industry. However, no single customer accounts for 10% or
more of the Company's consolidated revenue.
GEOGRAPHIC INFORMATION
The Company's assets are principally located in North America.
The Company's revenue is principally generated in the United States,
however for the years ending December 31, 1999, 1998 and 1997 the
Company's revenue generated outside the United States represented 16%,
17% and 22% of the consolidated revenue, respectively. For those same
periods, revenue generated in Europe represented approximately 13%, 13%
and 20% of consolidated revenue, respectively. Since the Company's
contracts
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with non-U.S. customers generally denominate the amount of payments to
be received by the Company in local currencies, exchange rate
fluctuations between such local currencies and the U.S. dollar will
subject the Company to currency translation risks. Also, the Company may
be subject to currency transaction risks when the Company's contracts
are denominated in a currency other than the currency in which the
Company incurs expenses related to such contracts.
COMPETITION
The Company's markets are very competitive, due in part to the
rapidly changing technology underlying the Company's products and
services. The Company produces a number of different software modules
and applies those modules across the professional services markets. The
Company has a number of competitors for each module and in each market.
Some of these competitors compete with the Company with regard to a
number of modules or markets. Some of these competitors have greater
financial, technical and marketing resources than the Company. The
Company believes that no one single competitor is dominant across all
markets in which the Company participates.
The Company believes that competitive factors for engagements in
the professional services markets include knowledge of the industry,
capabilities of resources, technologies utilized, ease of use and
ability to customize solutions, breadth of functionality of solutions
and price.
BACKLOG
A significant portion of the Company's revenue is derived from
work to be performed under long-term contracts entered into in the
ordinary course of business. At December 31, 1999 and 1998, the Company
had unearned revenue from signed customer contracts (continuing
operations) of approximately $11.6 million and $26.4 million,
respectively. The reduction in backlog can be attributed to lower levels
of signed contracts in 1999.
EMPLOYEES AND RECRUITMENT
The Company believes that its future success will depend in part
on its continued ability to hire and retain qualified employees. The
Company believes its relations with employees are good. Competition for
personnel in the Company's industry is intense. Although it actively
recruits personnel and provides professional employees with career path
opportunities, there can be no assurance that the Company will be
successful in attracting and retaining sufficient numbers of qualified
personnel to conduct its business in the future. The Company actively
recruits at college campuses and also seeks employees with expertise and
experience in its chosen markets.
At February 29, 2000, the Company had 277 full-time employees.
None of the Company's employees are represented by a labor union.
COPYRIGHTS, TRADEMARKS, PATENTS AND LICENSES
The Company currently markets several proprietary software
products. Apart from a limited number of third party components, the
bulk of the Company's products consist of software, and related
documentation, developed by the Company for which the Company holds the
copyright. The Company distributes its software only subject to
licenses, which restrict the licensee's rights to use and disclose the
software so as to protect the Company's rights. The Company believes
that, due to the rapid pace of innovation within its industry, factors
such as the technological and creative skills of its personnel are more
important in establishing and maintaining a leadership position within
the industry than are the various
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legal protections of its technology. The Company believes that the
nature of its customers, the importance of the Company's products to
them and their need for continuing product support reduce the risk of
unauthorized reproduction. However, there can be no assurance that any
such steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary rights or independent third-party
development of functionally equivalent products.
The Company believes that its services and products do not
infringe on the intellectual property rights of its customers or other
third parties. However, particularly given the rapid changes in patent
law, there can be no assurance that an infringement claim will not be
asserted against the Company in the future. Any such claim, if resolved
against the Company, could adversely affect the Company's reputation,
preclude it from offering certain products and services, and subject it
to substantial liability.
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. As a
software vendor, the so-called "Year 2000 compliance" issue is an issue
that the Company must address with respect to its products as well as
software and systems provided by others that the Company uses
internally.
During the Year 2000 date transition, the Company did not
experience any failure of mission critical systems nor has it
experienced any significant problem with regard to third party
suppliers. Similarly, to management's knowledge, the Company's customers
have not experienced any significant Year 2000 problems with the
Company's software products and services. The Company does not
anticipate any material adverse effect to its business or its customers
in the future as a result of Year 2000 related problems with the
Company's products; however, it is possible that such problems might
still arise.
State of Readiness
The Company recognized the need to address the Year 2000
compliance issue and in 1997 established a Year 2000 compliance
committee to supervise and monitor the planning, performance and
assessment of the Company's Year 2000 compliance efforts. 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. 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
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 believes that its current versions
of proprietary software products are Year 2000 compliant; however, no
assurance can be given that additional modifications for Year 2000
compliance will not be necessary. The Company's software products are
integrated with its customers' software and hardware systems and have,
in many cases, been uniquely customized to the customers'
specifications. The Company has generally not tested its products as
integrated in its customers' operating environments. The
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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.
Some of the Company's former customers and current customers
presently use earlier versions of the Company's software products and/or
associated custom code that are not Year 2000 compliant. The Company has
made efforts to communicate with these customers to advise them that
they will need to upgrade to a Year 2000 compliant version of the
Company's software product, revise custom code or implement other
alternatives to meet their business needs.
Third Party Products: Third party products integrated within the
Company's products are included in the test plans and compliance efforts
that the Company has for its own products. In addition, the Company has
obtained certification of Year 2000 compliance from most third party
vendors whose products are integrated in the Company's products or that
are resold by the Company.
Infrastructure and Third Party Products Used Internally: The
Company has obtained certification of Year 2000 compliance from each of
the vendors of its internal use information technology systems. The
Company has developed test plans for these internal use systems
following the same guidelines and standards that it has used for its own
products. The Company has developed test plans for all critical internal
use technology systems and the testing of these was completed in 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;
customers of divested businesses where the Company retained potential
product liabilities, including the CRM business; or other parties. Many
customers may have incurred significant costs in making their
information processing systems Year 2000 compliant and may seek to
transfer such costs through litigation to information processing
industry vendors such as the Company. Although the ultimate outcome of
any litigation is uncertain, the Company does not believe that the
ultimate amount of liability, if any, from such actions would have a
material adverse effect on the Company. To date, the Company has not
been subject to any such claims or litigation.
The Company did not specifically hire additional personnel or
make material purchases of products to address Year 2000 compliance
issues. The expenditures made to date have principally related to salary
costs of existing personnel assigned to participate at various levels in
the Company's compliance efforts and costs associated with upgrading
certain business systems. All costs related to achieving Year 2000
compliance are being expensed as incurred. The Company estimates that
the costs incurred to date related to Year 2000 compliance efforts range
between $.5 and $1.0 million.
As the Company did not, nor does it expect to, experience any
significant Year 2000 problems at or after the turn of the millennium,
the Company does not currently expect to incur any significant
additional costs related to its Year 2000 compliance efforts. All
incremental costs associated with the Year 2000 compliance issue will
continue to be expensed as incurred.
EURO CURRENCY
In January 1999, a new currency called the ECU or the "euro" was
introduced in certain Economic and Monetary Union (the "EMU") countries.
During 2002, all EMU countries are expected to be operating with the
euro as their single currency. As a result, in less than two years all
organizations headquartered or maintaining a subsidiary in an EMU
country are expected to need to be euro currency enabled and computer
software used by these organizations will need to be euro currency
enabled. The transition to the euro currency involves the handling of
parallel currencies and conversion of legacy data. Uncertainty exists as
to the effects the euro currency will have on the marketplace.
Additionally, all of the final rules and regulations have not yet been
defined and finalized by the European Commission with regard to the euro
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currency. The Company is monitoring the rules and regulations as they
become known in order to make any changes to the software that the
Company deems necessary to comply with such rules and regulations.
Although the Company currently offers certain software products that are
designed to be multi-currency enabled and the Company believes that it
will be able to accommodate any required euro currency changes in its
software products, there can be no assurance that once the final rules
and regulations are completed that the Company's software will contain
all of the necessary changes or meet all of the euro currency
requirements.
ITEM 2. PROPERTIES
The Company's business offices are located at 5100 West Goldleaf
Circle in Los Angeles, California. The Company's lease of those premises
(approximately 40,000 square feet) expires July 2008. The Company also
leases additional facilities, as needed, principally as sales offices in
other cities in North America and the United Kingdom. The Company
believes that its facilities are adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS
On December 22, 1999, a putative class action, Brooke Howie, et
al. vs. Elite Information Group, Inc., et al., Case No. BC222117, was
commenced in Los Angeles Superior Court against the Company, the
Company's directors, and Solution 6. The complaint, filed on behalf of
the plaintiff by the law firm of Milberg Weiss Bershad Hynes & Lerach
LLP, alleges that Elite's directors violated their fiduciary duties to
the Company's stockholders by entering into the merger agreement with
Solution 6, and seeks to enjoin the proposed merger. On February 3,
2000, the Los Angeles Superior Court denied the plaintiff's request for
a temporary order halting the proposed merger. The plaintiff
subsequently amended the complaint to add certain affiliates of Solution
6 as defendants, assert additional claims for breach of the duty of
candor and for alleged violations of various provisions of the Delaware
Corporations Code and to add a claim for unspecified damages. On March
15, 2000, the Company, joined by the other defendants, removed the
action to federal court in Los Angeles. The Company currently has
pending before the federal court a motion to dismiss the case. The
Company believes that the plaintiff's legal claims are without merit,
and intends to defend the action vigorously.
The Company is involved in litigation from time to time that is
routine in nature and incidental to the conduct of its business. The
Company believes that the outcome of any such litigation would not have
a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's
stockholders during the fourth quarter of the fiscal year ended December
31, 1999.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS'
MATTERS
MARKET FOR COMMON STOCK
There is hereby incorporated by reference the information
appearing under the caption "Market for Common Stock" in the Company's
Annual Report to Shareholders for the year ended December 31, 1999.
HOLDERS OF RECORD
As of February 29, 2000, there were approximately 101 holders of
record of the Company's Common Stock.
DIVIDENDS
The Company has never declared or paid any cash dividends on its
Common Stock. The Company currently intends to retain any earnings for
use in its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information
appearing under the caption "Selected Financial Data" in the Company's
Annual Report to Shareholders for the year ended December 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
There is hereby incorporated by reference the information
appearing under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's Annual
Report to Shareholders for the year ended December 31, 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
A portion of the Company's business is transacted in foreign
currencies and the Company may be exposed to financial market risk
resulting from fluctuations in foreign currency exchange rates. The
Company monitors the volatility of foreign currencies and may utilize
hedging programs or other derivative financial instruments commonly used
to reduce financial market risks if deemed appropriate.
The Company has limited exposure to market risk for changes in
interest rates related to the Company's cash and cash equivalents. The
Company maintains an investment policy designed to ensure the safety and
preservation of its cash and cash equivalents by limiting default risk,
market risk and reinvestment risk by investing in shorter-term high
quality financial instruments and depositing its excess cash and cash
equivalents in major financial institutions.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements:
There is hereby incorporated by reference the information
appearing in the consolidated financial statements, "Notes to
Consolidated Financial Statements" and "Results by Quarter and Capital
Stock Information" in the Company's Annual Report to Shareholders for
the year ended December 31, 1999.
Financial Statement Schedules:
Item 14 includes an index to the financial statement schedules.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth with respect to each director and
executive officer of the Company, his name and age, business experience,
including principal occupation, and all positions and offices with the
Company, term of service and, with respect to directors, directorships
in other publicly held companies, if any.
DIRECTOR EXECUTIVE
NAME AND AGE PRINCIPAL OCCUPATION SINCE OFFICER SINCE
------------ -------------------- ----- -------------
Arthur G. Epker III Vice President, PAR Capital Management, -- Inc.(1) 1999 n/a
Age 37
David A. Finley President, Investment Management Partners II, Inc.(2) 1990 n/a
Age 67 Director: Intelligroup, Inc. and Hungarian Telephone & Cable
Corp.
Roger Noall Consultant(3) 1996 n/a
Age 64 Director: Alleghany Corp. and The Victory Funds
Christopher K. Poole Chairman of the Board and Chief Executive Officer, 1999 1999
Age 42 Elite Information Group, Inc.(4)
Alan Rich Co-Founder and non-employee Chairman, Elite Information Systems, 1999 n/a
Age 44 Inc.(5)
William G. Seymour President, PRIMax Properties, LLC(6) 1981 n/a
Age 58 Director: First Trust Bank
Barry D. Emerson Vice President and Chief Financial Officer, Elite Information n/a 1999
Age 42 Group, Inc.(7)
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(1) Mr. Epker has been a Vice President of PAR Capital, an investment
management firm, since July 1992.
(2) Mr. Finley served as Executive Vice President and Chief Financial
Officer of the Company from January 1996 to July 1997 and again served
as Executive Vice President on a temporary basis from mid-September 1997
to mid-November 1997. Prior to joining the Company, Mr. Finley worked as
a consultant and was a private investor and the President, since 1992,
of Investment Management Partners II, Inc., an investment management
firm. Since leaving the Company, Mr. Finley has resumed his work as a
consultant, private investor and President of Investment Management
Partners, Inc. From September 1986 until his retirement in August 1989,
Mr. Finley served as Treasurer of International Business Machines
Corporation.
(3) Mr. Noall was an Executive of KeyCorp since January 1, 1997 until
his retirement on February 29, 2000. Mr. Noall served as Senior
Executive Vice President and Chief Administrative Officer of KeyCorp
from March 1, 1994 to December 31, 1996 and served in the additional
positions of General Counsel and Secretary of KeyCorp from September 1,
1995 to June 14, 1996. Prior to March 1, 1994, Mr. Noall served as Vice
Chairman of the Board and Chief Administrative Officer of Society
Corporation (banking). Mr. Noall joined KeyCorp on that date upon the
merger of Society Corporation and KeyCorp.
(4) Mr. Poole has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since May 1999. Since May 1995, Mr.
Poole has served as Chief Operating Officer of Elite Information
Systems, Inc., the wholly owned operating subsidiary of the Company
("EIS"), and since January 1998 as the President of EIS. From November
1989 to May 1995, Mr. Poole was the Director of Technology and Executive
Director of Latham & Watkins, a law firm based in Los Angeles,
California.
(5) Mr. Rich is the co-founder of EIS and served as President of EIS
from January 1982 until his retirement in December 1997. Since that
time, Mr. Rich has continued to provide services as a consultant to EIS
and as a director and non-employee Chairman of EIS.
(6) Mr. Seymour has served as President of PRIMax Properties, LLC, a
real estate investment company, since his retirement from the Company in
January 1995. Mr. Seymour, a co-founder of the Company, has served as
Vice Chairman of the Board from June 1993 to May 1999 and from September
1985 to November 1989 and as Secretary of the Company from June 1993 to
May 1996. Mr. Seymour also served as Senior Vice President of the
Company from November 1989 to June 1993.
(7) Mr. Emerson has served as Vice President, Treasurer, Chief Financial
Officer of the Company since May 1999. Prior to joining the Company, Mr.
Emerson served as Vice President and Controller for Wyle Electronics, an
Irvine, California based electronics distributor, from 1983 to 1998.
The classes in which the directors serve are as follows:
CLASS I CLASS II CLASS III
------------------------------------- ----------------------------------- -----------------------------------
Christopher K. Poole David A. Finley Alan Rich
Roger Noall William G. Seymour Arthur G. Epker III
The term of office of each of the Class I directors expires at
the 2000 annual meeting of stockholders; the term of office of each of
the Class II directors expires at the 2001 annual meeting of
stockholders; and the term of office of each of the Class III directors
expires at the 2002 annual meeting of
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stockholders or in each case until their respective successors shall be
duly elected and qualified to serve. There are no family relationships
among the executive officers or directors of the Company.
In December 1999, Solution 6 Holdings Limited ("Parent") and its
wholly owned subsidiary, EIG Acquisition Corp. ("Purchaser"), entered
into an Agreement and Plan of Merger with the Company (the "Merger
Agreement"), and commenced a tender offer (the "Offer") for all shares
of the Company's common stock, $.01 par value per share (the "Common
Stock"). The Merger Agreement contemplates that the Offer, if
consummated, will be followed by a second-step merger (the "Merger") of
Purchaser with and into the Company. The Merger Agreement provides that,
promptly upon the acceptance for payment of any shares of Common Stock
by the Purchaser pursuant to the Offer, the Purchaser shall be entitled
to designate such number of directors, rounded up to the next whole
director, on the Board of Directors of the Company as will give the
Purchaser representation on the Board of Directors equal to at least
that number of directors that equals the product of the total number of
directors on the Board multiplied by the percentage that the aggregate
number of shares of Common Stock accepted for payment pursuant to the
Offer bears to the number of shares of Common Stock then outstanding,
except that until the effective time of the Merger, the Board of
Directors shall include at least two directors (the "Independent
Directors") who served as directors of the Company on the date of the
Merger Agreement. The Merger Agreement provides that if one of the
Independent Directors ceases to serve as a director for any reason prior
to the effective time of the Merger, the Board of Directors shall
appoint as his replacement an individual designated by the remaining
Independent Director. The Company has agreed at such time to take any
and all action needed to cause the Purchaser's designees to be appointed
to the Board of Directors. Certain information concerning those persons
designated for appointment to the Company's Board of Directors upon
consummation of the Offer is set forth in Annex I to the Company's
Schedule 14D-9 filed with the Securities and Exchange Commission and
mailed to the Company's stockholders on or about December 21, 1999 (the
"Schedule 14D-9"). The information set forth in Annex I to the Schedule
14D-9 under "Board of Directors; Right to Designate Directors;
Purchaser's Designees; Board of Directors of the Company" is
incorporated herein by reference.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who own more
than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a)
forms they file. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year
ended December 31, 1999, all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten
percent beneficial owners were complied with, except that one initial
ownership report, and one report with respect to one transaction, were
filed late by Mr. Poole.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS
Messrs. Poole and Emerson are the only current executive
officers of the Company. The following table sets forth a summary, for
fiscal years ended December 31, 1999, December 31, 1998 and December 31,
1997, of the compensation of Messrs. Poole and Emerson, and former
executive officers Alan C. Stanford and Keith B. Hall, who ceased to be
employed by the Company in May 1999.
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SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION SECURITIES
------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ------------------------------------- ---- -------- -------- ------- -------
Alan C. Stanford 1999 125,675 0 0 821,410(1)
Former Chairman and Chief 1998 300,000 100,000(2) 0 2,639(3)
Executive Officer 1997 300,000 100,000(2) 0 4,750(3)
Keith B. Hall(4) 1999 93,750 0 0 552,048(5)
Former Vice President and 1998 200,000 25,000 0 5,000(3)
Chief Financial Officer 1997 100,000 25,000 20,000 147,022(6)
Christopher K. Poole 1999 300,000 65,000 150,000 5,000(3)
Chairman and 1998 270,000 50,000 0 5,000(3)
Chief Executive Officer 1997 240,000 77,500 0 4,750(3)
Barry D. Emerson(7) 1999 93,333 0 25,000 2,100(3)
Vice President, Treasurer and
Chief Financial Officer
----------------
(1) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan ($1,795), payments by the Company
for unused vacation ($19,615) and a severance payment made upon
termination of employment ($800,000).
(2) A portion of Mr. Stanford's 1997 and 1998 bonus was in lieu of
reimbursement of certain travel expenses incurred by Mr. Stanford.
(3) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan.
(4) Mr. Hall's employment with the Company commenced July 1, 1997.
(5) Represents matching contributions made by the Company under the
Company's 401(k) retirement plan ($3,875), payments by the Company
for unused vacation ($16,875), a severance payment made upon
termination of employment ($500,000) and post-employment consulting
fees and expense reimbursement ($31,298).
(6) Includes $80,000, adjusted for potential tax liability to $144,772,
paid to Mr. Hall for relocation expenses, and matching contributions
made by the Company under the Company's 401(k) retirement plan.
(7) Mr. Emerson's employment with the Company commenced in May 1999.
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The following table sets forth certain information concerning
grants of stock options during the year ended December 31, 1999 to the
executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED PRICE APPRECIATION FOR
OPTIONS TO EMPLOYEES EXERCISE OR OPTION TERM
GRANTED IN BASE PRICE EXPIRATION -------------------------
NAME (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- -------------------- -------- -------- -------- -------- -------- --------
Alan C. Stanford -- -- -- --
Keith B. Hall -- -- -- --
Christopher K. Poole 50,000(1) 100% $ 2.34 1/19/09 $ 73,500 $186,500
100,000(2) 100% $ 5.50 5/26/09 $346,000 $877,000
Barry D. Emerson 25,000(2) 100% $ 5.50 5/26/09 $ 86,500 $219,250
----------------
(1) The options were 100% vested as of January 19, 2000.
(2) These options are currently 100% unvested, and will vest over 3
years in annual installments of 33.33% beginning on May 26, 2000.
The following table sets forth certain information with regard
to stock options held at December 31, 1999 by each of the executive
officers named in the Summary Compensation Table. No options were
exercised by any of the executive officers named in the Summary
Compensation Table in the year ended December 31, 1999.
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FY-END OPTION VALUES
VALUE OF SECURITIES UNDERLYING
NUMBER OF SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
Alan C. Stanford 0/0(2) 0/0
Keith B. Hall 0/0 0/0
Christopher K. Poole 57,668/133,332 208,750/727,750
Barry D. Emerson 0/25,000 0/129,750
-----------------
(1) The fair market value used for computations in this column was
$10.69, which was the closing market price of the Company's
Common Stock on December 31, 1999.
(2) On January 15, 1999, Mr. Stanford voluntarily forfeited all
400,000 of his stock options.
COMPENSATION OF DIRECTORS
Upon adoption of the 1996 Stock Option Plan on June 25, 1996,
each director who was not also an officer or employee of the Company on
that date (i.e., Mr. Seymour) was granted options to purchase 5,000
shares of Common Stock at the fair market value of the shares on that
date. In addition, under the 1996 Stock Option Plan, any individual who
is not an employee or officer of the Company and who is first elected to
the Board after June 25, 1996 (i.e., Messrs. Epker, Noall, Rich) shall
receive upon the date of such election an option to purchase 5,000
shares of Common Stock at an exercise price per share equal to the fair
market value of a share of Common Stock on such date. The 1996 Stock
Option Plan further provides for awards of options to purchase 5,000
shares of Common Stock on each January 5 after the adoption of the 1996
Stock Option Plan if the average daily value of a share of Common Stock
for the immediately preceding month of December is ten percent greater
than the average daily value of a share for the month of December of the
immediately prior year. In the event that the total exercise price of
such options for 5,000 shares exceeds $100,000, the number of shares
purchasable under such option are to be reduced so that the total
exercise price of the options granted equals $100,000, and in the event
that the number of shares authorized under the 1996 Stock Option Plan
are not sufficient to make an award to outside directors, options for
the remaining authorized shares shall be awarded pro rata to the outside
directors then entitled to receive such options. Notwithstanding the
fact that awards would have been payable based on the increase in the
average daily value of the Company's Common Stock for December 1999 over
December 1998, the Company has agreed in the Merger Agreement not to
grant any additional options without Parent's written consent, and to
date, no options have been awarded pursuant to such formula grant. Such
grants will be made for 1999 in the event that the Merger Agreement is
terminated. All such options awarded to non-employee directors under the
1996 Stock Option Plan become exercisable over a period of four years,
with 20% of the total award being exercisable on the date of grant and
an additional 20% becoming exercisable on each of the next four
anniversaries. Pursuant to the 1996 Stock Option Plan, all options
awarded under the plan, including the options granted to non-employee
directors, will vest upon a change of control of the Company as defined
in the plan.
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The Company pays its non-employee directors a fee of $2,500 for
each directors' meeting attended and pays an additional $500 fee to each
member of the Audit Committee and Compensation Committee for each
committee meeting attended. Additional committees are established from
time to time and in 1999 members of such committees were paid a total of
approximately $8,100 in fees and expenses. No fee is paid for telephonic
meetings. Directors are reimbursed for travel and lodging expenses in
connection with meetings of the Board of Directors.
EMPLOYMENT, SEVERANCE AND CONSULTING AGREEMENTS
Christopher K. Poole. On June 1, 1999, the Company entered into
an employment agreement with Christopher K. Poole with respect to his
service as the Chief Executive Officer of the Company. The employment
agreement has an initial term of one year and renews automatically for
successive one-year terms. The Company may terminate Mr. Poole's
employment under the agreement at any time. If the Company terminates
Mr. Poole's employment other than for "cause" (as defined in the
agreement) or as the result of his permanent disability, the Company is
obligated to pay to him (following receipt of a general release from Mr.
Poole) a lump-sum amount equal to twice his then-current annual salary
(less applicable tax withholding). If such termination occurs as a
result of a change in control of the Company or within two years after a
change in control, the Company is also obligated to pay to Mr. Poole the
larger of the proportionate amount of any incentive bonus that would
otherwise be payable to Mr. Poole for the year in which his employment
is terminated (based on the number of days elapsed in the year) or the
amount of his incentive bonus paid for the prior year. Consummation of
the Offer pursuant to the Merger Agreement would constitute a change in
control under the employment agreement.
If the Company terminates Mr. Poole's employment as the result
of his permanent disability, the Company is obligated to pay to him
(following receipt of a general release from Mr. Poole) a lump-sum
amount equal to his then-current annual salary (less applicable tax
withholding) plus the proportionate amount of any incentive bonus that
would otherwise be payable to Mr. Poole for the year in which his
employment is terminated (based on the number of days elapsed in the
year). In addition, the Company would be obligated to pay for continued
health insurance coverage for Mr. Poole and his dependents for 18 months
following a termination of his employment for disability.
The agreement provides that if Mr. Poole resigns due to a
failure of the Company to comply with a material term of the agreement
that is not cured within 30 days after written notice of the failure is
given to the Company, the Company is obligated to pay to him (following
receipt of a general release from Mr. Poole) a lump-sum amount equal to
twice his then-current annual salary (less applicable tax withholding).
In addition, if Mr. Poole resigns following a change in control of the
Company accompanied by a termination of his authority equivalent to that
of the senior executive of the Company, the Company is obligated to pay
to him (following receipt of a general release from Mr. Poole) a
lump-sum amount equal to twice his then-current annual salary (less
applicable tax withholding) plus the larger of the proportionate amount
of any incentive bonus that would otherwise be payable to him for the
year in which his employment is terminated (based on the number of days
elapsed in the year) or the amount of his incentive bonus paid for the
prior year. Mr. Poole shall be considered to be the senior executive of
the Company if the Company is acquired and becomes part of another
entity if Mr. Poole remains the senior executive of the division,
subsidiary or entity carrying on the business conducted by the Company
prior to the acquisition. In addition, if Mr. Poole resigns for any
reason after the first anniversary of a change in control but before the
second anniversary of a change in control, the Company is obligated to
pay to him (following receipt of a general release from Mr. Poole) a
lump-sum amount equal to one and one-half times his then-current annual
salary (less applicable tax withholding).
The agreement provides that Mr. Poole's annual salary will be
$300,000, which may be increased with the approval of the Compensation
Committee of the Company's Board of Directors. In addition, Mr. Poole is
to be eligible to participate in incentive bonuses and other
compensation plans approved by the Board of Directors or the
Compensation Committee. Mr. Poole is also eligible to participate in
other
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benefit plans made available to employees and to receive perquisites as
agreed upon from time to time. Mr. Poole is also entitled to four weeks
paid vacation. If he elects to purchase long-term care or personal
disability insurance coverage, the Company shall pay one half of the
premiums, up to $2,500 per year, and the Company will continue to pay
such amount following termination of Mr. Poole's employment due to
permanent disability so long as he continues COBRA insurance coverage.
The agreement contains a covenant restricting Mr. Poole from
engaging in certain activities in competition with the Company for a
period of one year following the termination of his employment for any
reason. The covenant applies to competitive activities in the United
States, Canada and the United Kingdom. In addition, Mr. Poole agreed not
to disclose confidential and proprietary information of the Company
without the Company's consent and to return copies of any such
information in his possession upon the termination of his employment.
Barry D. Emerson. On May 10, 1999, the Company entered into a
severance agreement with Barry D. Emerson in connection with Mr. Emerson
accepting employment as the Company's Chief Financial Officer. Pursuant
to the agreement, Mr. Emerson is employed "at will" by the Company and
may be terminated at any time for any reason. If the Company terminates
Mr. Emerson's employment other than for "cause" (as defined in the
agreement), the Company is obligated to pay to him (following receipt of
a general release from Mr. Emerson) a lump-sum amount equal to his
then-current annual salary (currently $140,000), (less applicable tax
withholding). In addition, the Company would be obligated to pay for
continued health insurance coverage for Mr. Emerson for 12 months
following a termination of his employment.
Alan C. Stanford. Mr. Stanford's employment as Chief Executive
Officer of the Company was terminated in May 1999. Prior to that time,
Mr. Stanford was employed pursuant to an amended and restated employment
agreement dated January 15, 1999. Under the terms of the employment
agreement, upon Mr. Stanford's resignation for "good reason" (as
defined), which resignation occurred in connection with the sale of the
Company's CRM business in May 1999, Mr. Stanford became entitled to a
severance payment equal to two times his most recent annual base salary
and bonus. Pursuant to this provision, Mr. Stanford received a lump sum
severance payment of $800,000, plus reimbursement of $19,615 for unused
vacation time. The employment agreement requires Mr. Stanford to refrain
from certain activities in competition with the Company for a period of
two years following the termination of his employment.
Keith B. Hall. Mr. Hall's employment as Chief Financial Officer
of the Company was terminated in May 1999. Prior to that time, Mr. Hall
was employed pursuant to an employment agreement dated May 29, 1997, as
supplemented by a letter agreement dated February 18, 1999. Under the
terms of the letter agreement, upon the sale of the CRM business in May
1999, Mr. Hall exercised an option to resign his employment in exchange
for a severance payment equal to two times his most recent annual base
salary and bonus. Pursuant to this provision, Mr. Hall received a lump
sum severance payment of $500,000, plus reimbursement of $16,875 for
unused vacation time. Mr. Hall's employment agreement requires him to
refrain from certain activities in competition with the Company for a
period of two years following the termination of his employment.
Following the termination of his employment in May 1999, Mr. Hall
performed certain consulting services for the Company for which he was
paid a total of $31,298 in fees and expense reimbursement.
Alan Rich. Since his retirement as President of EIS on December
31, 1997, Mr. Rich has provided EIS with consulting services as an
independent contractor pursuant to a Retirement and Post-Employment
Agreement dated May 20, 1997 between Mr. Rich and EIS. Pursuant to this
agreement, Mr. Rich is obligated to provide such consulting services as
requested by EIS from time to time through December 31, 2000, unless Mr.
Rich terminates the agreement upon 30 days written notice. EIS pays Mr.
Rich an annual fee of $100,000 in consideration of such services. In
addition, the agreement contains covenants restricting Mr. Rich from
engaging in certain activities in competition with EIS from the date of
the agreement until December 31, 2000. In exchange for these covenants
not to compete, EIS is obligated to pay Mr. Rich a total of $300,000,
payable in 6 equal installments bi-annually. Under the agreement, Mr.
Rich also has
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agreed not to disclose confidential and proprietary information of EIS.
Pursuant to the agreement, EIS paid Mr. Rich a total of $200,000 in
1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following table sets forth the names and addresses of, and
the number and percentage of shares beneficially owned by, the persons
known to the Company to beneficially own five percent or more of the
Company's outstanding Common Stock as of March 15, 2000:
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- -------------------- -----------
Solution 6 Holdings Limited 7,349,248(2) 78.1%
EIG Acquisition Corp.
Town Hall House, Level 21
456 Kent Street
Sydney, New South Wales
Australia 2000
PAR Investment Partners, L.P. 1,220,300(3) 13.0%
One Financial Center
Suite 1600
Boston, Massachusetts 02111
Dimensional Fund Advisors Inc. 729,100(4) 7.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Tudor Investment Corporation, et al. 578,150(5) 6.1%
600 Steamboat Road
Greenwich, Connecticut 06830
---------------------
(1) Based on the shares of Common Stock outstanding as of March 15,
2000.
(2) Based upon a Schedule 14D-1/A of Purchaser and Parent dated
March 24, 2000. This amount includes (i) approximately 5,200,460
shares that, as of March 23, 2000, had been tendered and not
withdrawn pursuant to the Offer, (ii) 2,001,588 shares
(including 317,666 option shares) that Purchaser can cause to be
tendered pursuant to certain Stockholder Agreements entered in
connection with the Merger Agreement and (iii) 147,200 shares
beneficially owned by Parent. The 7,349,248 shares reported as
being beneficially owned by Solution 6 Holdings Limited may
include certain shares listed in the table above as beneficially
owned by other parties to the extent that such shares have been
tendered, or could be required to be tendered, in the Offer and
not withdrawn.
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20
(3) Based upon a Schedule 13D of PAR Capital Management, Inc. ("PAR
Capital"), PAR Group, L.P. ("PAR Group") and PAR Investment Partners,
L.P. ("PIP"), dated July 6, 1998. Arthur G. Epker III, a director of the
Company, is a Vice President of PAR Capital and may be deemed to be a
controlling stockholder of PAR Capital. PAR Capital is a Delaware S
Corporation and the sole general partner of PAR Group. The principal
business of PAR Capital is to act as the general partner of PAR Group.
PAR Group is a Delaware limited partnership and the sole general partner
of PIP. The principal business of PAR Group is that of a private
investment partnership engaging in the purchase and sale of securities
for its own account. PIP is a Delaware limited partnership and its
principal business is that of a private investment partnership engaging
in the purchase and sale of securities for its own account. Mr. Epker
disclaims beneficial ownership of such shares. In addition, Mr. Epker's
wife owns 10,000 shares of the Company's Common Stock through an
Individual Retirement Account. Mr. Epker also disclaims beneficial
ownership of such shares.
(4) Based upon a Schedule 13G or amendment thereto of Dimensional Fund
Advisors Inc. dated February 4, 2000 filed by Dimensional Fund Advisors
Inc. on behalf of certain clients for which it is the investment
manager.
(5) Based upon Amendment No. 2 to Schedule 13G of Tudor Investment
Corporation, Paul Tudor Jones II, Tudor BVI Futures, Ltd., Tudor
Proprietary Trading, L.L.C., The Altar Rock Fund L.P., The Raptor Global
Portfolio Ltd., The Raptor Global Fund L.P., The Raptor Global Fund Ltd.
and The Upper Mill Capital Appreciation Fund Ltd. dated February 11,
2000. These parties report shared voting and dispositive power over
various numbers of shares up to 578,150. Tudor Investment Corporation
disclaims beneficial ownership of certain shares it may be deemed to own
by virtue of its position as general partner of, or investment advisor
to, certain entities listed above. Mr. Jones disclaims beneficial
ownership of certain shares he may be deemed to beneficially own by
virtue of his position as controlling shareholder or equity holder of
certain entities listed above.
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth as of March 15, 2000 the
beneficial ownership of Common Stock by each director and executive
officer named in the Summary Compensation Table below, and by all
directors and executive officers as a group.
SHARES BENEFICIALLY OWNED (2)
-----------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
- --------------------------- -------- ----------
Arthur G. Epker III 1,221,300(3) 13.0%
David A. Finley 80,334 *
Roger Noall 24,000 *
Christopher K. Poole 90,171 *
Alan Rich 40,168 *
William G. Seymour 436,622 4.7%
Barry D. Emerson 0 *
All directors and executive officers as a group
(7 in number) 1,892,595 21.7%
----------------
* Less than one percent.
(1) In connection with the Merger Agreement, each person named in the
table below has entered into a Stockholders Agreement with Parent
whereby they have granted Purchaser certain purchase rights, options
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21
and voting proxies with respect to all such shares beneficially owned by
such persons. See footnote (1) to the table above under "Security
Ownership of Certain Beneficial Owners and Management; Holders of More
than Five Percent Beneficial Ownership."
(2) Included in the calculation of the number of shares of Common Stock
owned beneficially are the following shares subject to options
exercisable on March 15, 2000 or within 60 days thereafter by the
directors and executive officers indicated and by all the directors and
executive officers as a group: Mr. Epker - 1,000 shares; Mr. Finley -
80,000 shares; Mr. Rich - 22,667 shares; Mr. Noall - 4,000 shares; Mr.
Poole - 82,668; Mr. Seymour - 4,000 shares; and members of the group
(including the foregoing) - 194,335 shares.
(3) Mr. Epker is a Vice President of PAR Capital Management, Inc. ("PAR
Capital") and may be deemed to be a controlling stockholder of PAR
Capital. Accordingly, Mr. Epker may be deemed to beneficially own shares
of Common Stock owned by Par Capital, PAR Group, L.P. ("PAR Group") and
PAR Investment Partners, L.P. ("PIP"). See footnote (3) to the table
under "Security Ownership of Certain Beneficial Owners and Management;
Holders of More than Five Percent Beneficial Ownership." PAR Capital is
a Delaware S Corporation and the sole general partner of PAR Group. The
principal business of PAR Capital is to act as the general partner of
PAR Group. PAR Group is a Delaware limited partnership and the sole
general partner of PIP. The principal business of PAR Group is that of a
private investment partnership engaging in the purchase and sale of
securities for its own account. PIP is a Delaware limited partnership
and its principal business is that of a private investment partnership
engaging in the purchase and sale of securities for its own account. Mr.
Epker disclaims beneficial ownership of such shares. In addition, Mr.
Epker's wife owns 10,000 shares of the Company's Common Stock through an
Individual Retirement Account. Mr. Epker also disclaims beneficial
ownership of such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under Part III, Item 11 under the caption
"Executive Compensation--Employment, Severance and Consulting
Agreements" is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)(1) Financial Statements.
The following consolidated financial statements and financial
information are included in the Company's Annual Report to Shareholders
for the year ended December 3l, 1999 and are hereby incorporated by
reference:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Stockholders' Equity
Notes to Consolidated Financial Statements
Report of Independent Accountants
(a)(2) Financial Statement Schedules.
The following schedules are filed as a part of this report:
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Page
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Schedule II - Valuation and Qualifying Accounts and Reserves 27
Report of Independent Accountants on the Financial Statement Schedule 28
All other schedules for which provision is made in the
applicable regulation of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the
required information is included elsewhere in the financial statements.
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(a)(3) Exhibits:
Exhibit No. Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of Elite Information Group, Inc.
(formerly Broadway & Seymour, Inc.), dated June 16, 1992 (Incorporated
by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the Quarter Ended June 30, 1999)
3.2 Restated By-laws of Elite Information Group, Inc. (formerly Broadway &
Seymour, Inc.), (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1, SEC File No. 33-46672)
3.3 Certificate of Designations (Incorporated by reference to Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
March 31, 1999)
3.4 Certificate of Amendment of Certificate of Incorporation of Elite
Information Group, Inc. (formerly Broadway & Seymour, Inc.), dated May
27, 1999 (Incorporated by reference to Exhibit 99.3 to the Registrant's
Current Report on Form 8-K, filed June 3, 1999)
4.1 Restated Specimen share certificate (Incorporated by reference to
Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the
Quarter Ended March 31, 1999)
4.2 Articles 4 and 5 of Elite Information Group, Inc. (formerly Broadway &
Seymour, Inc.), 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 Elite Information Group, Inc. (formerly
Broadway & Seymour, Inc.), 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 Elite Information Group,
Inc. (formerly 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)
4.5 First Amendment to Rights Agreement, dated April 14, 1999 between Elite
Information Group, Inc. (formerly Broadway & Seymour, Inc.), and
EquiServe Trust Company, N.A. as Rights Agent (Incorporated by reference
to Exhibit 8 to the Registrant's Solicitation/Recommendation Statement
on Schedule 14D-9 filed December 21, 1999)
10.01+ Restated 1985 Incentive Stock Option Plan 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 Elite
Information Group, Inc. (formerly 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)
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10.03+ Amendment No. 2 to Restated 1985 Incentive Stock Option Plan of
Elite Information Group, Inc. (formerly 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
Elite Information Group, Inc. (formerly 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)
10.05+ Elite Information Group, Inc. (formerly 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 Asset Purchase Agreement between Unisys Corporation and Elite
Information Group, Inc. (formerly Broadway & Seymour, Inc.) dated
as of July 24, 1997. (Incorporated by reference to Exhibit 10.35
to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1997)
10.07 Amendment to Asset Purchase Agreement between Unisys Corporation
and Elite Information Group, Inc. (formerly Broadway & Seymour,
Inc.) dated September 17, 1997. (Incorporated by reference to
Exhibit 10.36 to the Registrant's Quarterly Report on Form 10-Q
for the Quarter Ended September 30, 1997)
10.08+ Employment Agreement, dated as of May 29, 1997 (executed June 1,
1997), by and between Elite Information Group, Inc. (formerly
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)
10.09+ Amendment No. 1 to Employment Agreement for Keith B. Hall dated
February 19, 1998 (Incorporated by reference to Exhibit 10.35 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998)
10.10+ Letter Agreement dated February 18, 1999 between Elite Information
Group, Inc. (formerly Broadway & Seymour, Inc.) and Keith B. Hall
(Incorporated by reference to Exhibit 10.27 to the Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31,
1999)
10.11+ Employment Agreement dated as of September 1, 1995 by and between
Elite Information Group, Inc. (formerly Broadway & Seymour, Inc.)
and Alan C. Stanford (Incorporated by reference to Exhibit 10.28
to the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended September 30, 1995)
10.12+ Amendment No. 1 to Employment Agreement for Alan C. Stanford dated
February 19, 1998 (Incorporated by reference to Exhibit 10.37 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998)
10.13+ Amended and Restated Employment Agreement dated as of January 15,
1999 by and between Elite Information Group, Inc. (formerly
Broadway & Seymour, Inc.) and Alan C. Stanford (Incorporated by
reference to Exhibit 10.28 to the Registrant's Quarterly Report on
Form 10-Q for the Quarter Ended March 31, 1999)
10.14 Stock Purchase Agreement among TMC Holding Corporation and Elite
Information Group, Inc. (formerly Broadway & Seymour, Inc.) dated
March 5, 1999. (Incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on form 10-K for the year ended
December 31, 1998)
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10.15 Asset Purchase Agreement by and between Elite Information Group,
Inc. (formerly Broadway & Seymour, Inc.) and Science Applications
International Corporation dated April 14, 1999. (Incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, filed June 3, 1999)
10.16+ Severance Agreement by and between Elite Information Group, Inc.
(formerly Broadway & Seymour, Inc.) and Barry D. Emerson, dated
May 10, 1999 (Incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
June 30, 1999)
10.17+ Employment Agreement by and between Elite Information Group, Inc.
(formerly Broadway & Seymour, Inc.) and Christopher K. Poole,
dated June 1, 1999 (Incorporated by reference to Exhibit 10.2 to
the Registrant's Quarterly Report on Form 10-Q for the Quarter
Ended June 30, 1999)
10.18 Agreement and Plan of Merger dated December 14, 1999 among
Solution 6 Holdings Limited, EIG Acquisition Corp. and Elite
Information Group, Inc. (Incorporated by reference to Exhibit 1 to
the Registrant's Solicitation/Recommendation Statement on Schedule
14D-9 filed December 21, 1999)
10.19 Stockholders Agreement dated as of December 14, 1999 among
Solution 6 Holdings Limited, EIG Acquisition Corp., Elite
Information Group Inc., Christopher K. Poole, Barry D. Emerson,
Roger Noall, William G. Seymour, Arthur G. Epker III, Alan Rich
and David A. Finley (Incorporated by reference to Exhibit 2 to the
Registrant's Solicitation/Recommendation Statement on Schedule
14D-9 filed December 21, 1999)
10.20*+ Retirement and Post-Employment Agreement dated as of May 20, 1997
between Alan Rich and Elite Information Systems, Inc.
10.21*+ Elite.com, Inc. 1999 Stock Option Plan dated August 27, 1999
11* Computation of earnings per share
13* Portions of the Elite Information Group, Inc. 1999 Annual Report
21* Subsidiaries of Registrant
23* Consent of Independent Accountants dated March 27, 2000.
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 arrangements required to be
filed as an exhibit.
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ELITE INFORMATION GROUP, INC.
Date: March 22, 2000 By: /s/ Barry D. Emerson
--------------------------------------
Barry D. Emerson
Vice President, Treasurer,
Chief Financial Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, this report has been signed by the following
persons on behalf of the Registrant and in the capacities set forth
below and on the 22nd day of March 2000.
Signature Title
--------- -----
/s/ Christopher K. Poole
- ----------------------------
Christopher K. Poole Chairman, Chief Executive Officer
and Director
/s/ Arthur G. Epker III
- ----------------------------
Arthur G. Epker III Director
/s/ David A. Finley
- ----------------------------
David A. Finley Director
/s/ Roger Noall
- ----------------------------
Roger Noall Director
/s/ Alan Rich
- ----------------------------
Alan Rich Director
/s/ William G. Seymour
- ----------------------------
William G. Seymour Director
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ITEM 14a(2) SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES:
Elite Information Group, Inc.
Schedule II - Valuation and Qualifying
Accounts and Reserves For the Years
ended December 31, 1999, 1998 and 1997
($ in thousands)
Balance at Additions Balance at
beginning charged to end
of period expense Deductions Other of period
------- ------- ------- ------- -------
Allowance for doubtful accounts
December 31, 1999 $ 1,638 $ 1,751 $(1,026) $ (336)(1) $ 2,027
December 31, 1998 922 1,400 (684) 1,638
December 31, 1997 892 1,046 (1,016) 922
(1) Relates to reserve balance of the CRM business, sold on May 19,
1999.
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REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Elite Information Group, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 14, 2000, appearing in the 1999 Annual Report to Shareholders of
Elite Information Group, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Los Angeles, California
February 14, 2000
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