10-Q

UNITED STATES
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, 2000

OR

[  ] 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 0-19872

WALKER INTERACTIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its Charter)

 

Delaware	95-2862954
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

303 Second Street
San Francisco, California    94107
(Address of Principal Executive Offices including Zip Code)

(415) 495-8811
(Registrant's Telephone Number, Including Area Code)

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 for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.    YES [X]    NO [  ]

There were 14,502,842 Shares of $.001 Par Value Common Stock outstanding as of May 5, 2000.

WALKER INTERACTIVE SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page No.
Item 1. Interim Consolidated Financial Statements (unaudited):
Condensed Balance Sheets at March 31, 2000 and December 31, 1999	**
Condensed Statements of Operations for the            three months ended March 31, 2000 and 1999	**
Condensed Statements of Cash Flows for the            three months ended March 31, 2000 and 1999	**
Notes to Financial Statements	**
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	**
Item 3. Quantitative and Qualitative Disclosures About Market Risk	**
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K	**
Signatures	**

PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

WALKER INTERACTIVE SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

                                                          March 31,    December 31,
                                                            2000           1999
                                                        ------------  ------------
                                                         (unaudited)
ASSETS                                                                            
Current assets:
   Cash and cash equivalents...........................      $6,983        $9,187
   Short-term investments..............................       8,164         6,642
   Accounts receivable, net of allowance for doubtful
     accounts of $3,690 - March 31, 2000 and $4,554 -
     December 31, 1999.................................      16,338        17,368
   Prepaid expenses....................................       2,531         2,471
   Other receivables...................................         430           812
                                                        ------------  ------------
       Total current assets............................      34,446        36,480
Long-term investments..................................       3,452         6,185
Property and equipment, net                                   3,609         4,169
Capitalized software, net of accumulated amortization
  of $48,706 - March 31, 2000 and $47,379 -
  December 31, 1999....................................      10,432        10,653
Other assets...........................................         114           463
                                                        ------------  ------------
Total assets...........................................     $52,053       $57,950
                                                        ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY                                              
Current liabilities:
   Accounts payable....................................      $3,482        $4,203
   Accrued liabilities.................................      11,525        12,788
   Deferred revenue....................................      17,660        17,168
                                                        ------------  ------------
       Total current liabilities.......................      32,667        34,159
Deferred revenue.......................................       1,696         1,697
Other long-term obligations............................       3,020         2,975
                                                        ------------  ------------
       Total liabilities...............................      37,383        38,831
                                                        ------------  ------------

Commitments and contingencies

Stockholders' equity
   Common stock, $.001 par value: 50,000,000 shares
    authorized; issued 14,494,392 shares - March 31,
    2000; 14,257,185 shares - December 31, 1999........          14            14
   Additional paid-in capital..........................      75,560        74,566
   Accumulated other comprehensive income..............          (3)           33
   Accumulated deficit.................................     (60,857)      (55,450)
   Treasury stock at cost (26,091 shares - March 31,
    2000 and December 31, 1999)........................         (44)          (44)
                                                        ------------  ------------
       Total stockholders' equity......................      14,670        19,119
                                                        ------------  ------------
Total liabilities and stockholders' equity.............     $52,053       $57,950
                                                        ============  ============

See notes to consolidated financial statements

WALKER INTERACTIVE SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)

                                              Three Months Ended
                                                   March 31,
                                            ---------------------
                                               2000       1999
                                            ---------- ----------
REVENUES:                                                                              
  License..................................      $826     $3,390
  Maintenance..............................     7,612      7,909
  Consulting...............................     6,012     12,608
                                            ---------- ----------
     Total revenues........................    14,450     23,907

OPERATING EXPENSES:                                                                    
  Costs of revenues:
     Costs of licenses,
      maintenance and consulting...........     7,858     11,444
     Amortization of
      capitalized software.................     1,327      1,489
  Sales and marketing......................     4,573      5,936
  Product development......................     3,023      3,350
  General and administrative...............     3,325      3,601
                                            ---------- ----------
     Total operating expenses..............    20,106     25,820
                                            ---------- ----------
Operating loss.............................    (5,656)    (1,913)
     Interest income, net..................       297        239
                                            ---------- ----------
Loss before income taxes...................    (5,359)    (1,674)
     Provision (benefit) for income taxes..        48       (636)
                                            ---------- ----------

NET LOSS...................................    (5,407)    (1,038)                      
                                            ========== ==========

BASIC NET LOSS PER SHARE...................    ($0.38)    ($0.07)                      
                                            ========== ==========
Shares used to compute basic
     net loss per share....................    14,360     14,081
                                            ========== ==========

DILUTED NET LOSS PER SHARE.................    ($0.38)    ($0.07)                      
                                            ========== ==========
Shares used to compute diluted
     net loss per share....................    14,360     14,081
                                            ========== ==========

See notes to consolidated financial statements

WALKER INTERACTIVE SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)
(in thousands)

                                                           Three Months Ended
                                                                March 31,
                                                        ------------------------
                                                             2000         1999
                                                        -----------  -----------
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
     Net loss..........................................    ($5,407)     ($1,038)
     Adjustments to reconcile net loss to
       net cash provided by operating activities:
       Depreciation and amortization...................      1,898        2,389
       Change in allowance for doubtful accounts.......       (864)         (94)
       Deferred tax asset, net.........................         --         (637)
     Changes in operating assets and liabilities:
       Accounts receivable.............................      2,276       (1,974)
       Prepaids and other assets.......................        (60)        (876)
       Accounts payable & accrued liabilities..........     (1,938)      (2,029)
       Deferred revenue................................        491         (477)
       Other...........................................        625          (70)
                                                        -----------  -----------
           Net cash used by operations.................     (2,979)      (4,806)
                                                        -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:                                           
     Proceeds from employee stock purchase plan
       issuances and stock options exercised...........        994           --
     Treasury stock acquired...........................         --         (906)
     Capital lease payments............................         (1)         (32)
                                                        -----------  -----------
           Net cash provided (used) by financing
               activities..............................        993         (938)
                                                        -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                                           
     Purchases of short- and long-term investments.....       (499)      (3,287)
     Maturities of short-term investments..............         --        2,250
     Sales of short-term investments...................      1,710        1,508
     Purchases of property.............................       (319)        (636)
     Additions to capitalized software.................     (1,106)      (2,098)
     Other.............................................         (4)         (10)
                                                        -----------  -----------
           Net cash used by investing activities.......       (218)      (2,273)
                                                        -----------  -----------

NET DECREASE  IN CASH AND CASH EQUIVALENTS.............     (2,204)      (8,017)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD........      9,187       15,556
                                                        -----------  -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD..............     $6,983       $7,539 
                                                        ===========  ===========
Supplemental disclosure:
    Cash paid for income taxes.........................        $94         $183

See notes to consolidated financial statements

WALKER INTERACTIVE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and include all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the financial position, operating results and cash flows for those periods. Results for the interim periods are not necessarily indicative of the results for the entire year. These condensed consolidated financial statements and any notes thereto should be read in conjunction with the audited consolidated financial statements included in the Walker Interactive Systems, Inc. Annual Report on Form 10-K for the year ended December 31, 1999.

2. EARNINGS PER SHARE

The Company calculates basic earnings per share ("EPS") and diluted EPS in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding for that period. Diluted EPS takes into account the effect of dilutive instruments, such as stock options, and uses the average share price for the period in determining the number of common stock equivalents that are to be added to the weighted average number of shares outstanding. Common stock equivalents are excluded from the diluted loss per share calculation because the effect would be antidilutive.

3. COMPREHENSIVE INCOME/(LOSS)

SFAS No. 130 requires disclosure of total non-stockholder changes in equity, which include unrealized gains and losses on securities classified as available-for-sale under SFAS No. 115, foreign currency translation adjustments accounted for under SFAS No. 52, and minimum pension liability adjustments made pursuant to SFAS No. 87.

The reconciliation of net loss to comprehensive loss for the three months ended March 31, 2000 and 1999 is as follows (in thousands):

                                      Three Months Ended
                                             March 31,
                                      -------------------
                                         2000      1999
                                      --------- ---------
Net loss.............................  ($5,407)  ($1,038)
Other comprehensive loss.............      (36)     (111)
                                      --------- ---------
Total comprehensive loss.............  ($5,443)  ($1,149)
                                      ========= =========

4. IMPAIRMENT AND RESTRUCTURING CHARGES

During the quarter ended June 30, 1999, the Board of Directors approved a plan to realign Walker's focus on its core financial and analytic applications. Associated with this change in strategy, the Board of Directors approved steps to restructure its operations to increase operating efficiencies. The Company will focus on its e-business and analytics product lines, specifically investing in Web-enabled functionality. During the quarter ended December 31, 1999, in refocusing its resources and efforts on e-business solutions for the enterprise, the company announced its intention to begin the process of divesting its IMMPOWER and Aptos product lines. During the year ended December 31, 1999, the Company recorded a pretax charge of $14,945 in connection with the change in strategic direction and the related costs of restructuring.

Charges against restructuring liabilities as of December 31,1999 during the three months ended March 31, 2000 were as follows (in thousands):

                                      Activity during three
                                      months ended March 31, 2000
                                       Restruc-
                                        turing     Charges   Balance
                          Balance at     and         to        at
                         December 31, impairment  liability March 31,
                             1999       charges    Q1 2000    2000
                         ------------ ----------- --------- ---------
Termination payments
  to employees..........        $842          --     ($393)     $449
Facility closures.......       1,727          --      (153)    1,574
                         ------------ ----------- --------- ---------
                              $2,569          --     ($546)   $2,023
                         ============ =========== ========= =========

Subsequent to March 31, 2000, the remaining expected charges against liabilities are attributable to remaining termination payments to employees and future lease payments on excess facilities which expire at various dates through 2009.

5. DIVESTITURES

On April 12, 2000 the Company announced that it had sold the stock of Revere Inc. to Gores Technology Group ("GTG"). Revere Inc.'s main products comprised the IMMPOWER Asset Management Application and the geoLATTICE Software Suite. The terms of the purchase agreement provided that GTG would pay $500,000 to the Company at closing with a settlement as of December 31, 2000 based on the final determination of Revere's net assets, as defined in the agreement. The final settlement may result in the Company receiving payments from or making payments to GTG. However, the amount of such payments , if any, is not currently determinable. In addition, to the extent that Revere's annual revenues through March 31, 2003 exceed certain thresholds, as defined in the agreement, the Company will receive additional payments from GTG. In March 2000, the Company completed the divestiture of its joint venture in China, transferring ownership to local management.

WALKER INTERACTIVE SYSTEMS, INC.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of results of operations and financial condition of the Company should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-Q. The report on this Form 10-Q contains forward-looking statements, including statements related to industry trends and demand for mainframe products, expected resolution of legal proceedings, cash commitments, working capital requirements, and possible expansion in international markets. Discussions containing such forward-looking statements may be found in the material set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations", generally and specifically therein under the captions "Liquidity and Capital Resources," and "Additional Risk Factors". Actual events or results may differ materially from those discussed herein. The Company disclaims any obligation to update these forward-looking statements as a result of subsequent events. The risk factors on pages 10 through 15, among others, should be considered in evaluating the Company's prospects and future financial performance.

Walker designs its software products specifically for the Internet architecture and e-business B2B models and believes that its architecture is among the most scalable and adaptable available for enterprise-level business software. The Company's strategy is to offer enterprise financial, operational and analytical e-business solutions to a variety of industries. Walker's e-business solutions support and enhance enterprise-wide financial, operational and analytic processes, including procurement, revenue management, financial management and insight, business planning, budgeting, forecasting, and financial consolidation. The Company's software products utilize the Microsoft Windows operating systems on the desktop, NT, UNIX and OS/390 operating systems on the server and industry-leading On Line Analytical Processing (OLAP), Relational Database Management Systems (RDBMS) including IBM's DB2, Hyperion Solutions Essbase, Microsoft SQL/Server and Oracle Express.

RESULTS OF OPERATIONS

REVENUES.

Total revenues for the three months ended March 31, 2000 were $14.5 million, a decrease of $9.4 million, or 39.6%, as compared to the three months ended March 31, 1999.

License revenues for the three months ended March 31, 2000 were $0.8 million, a decrease of $2.6 million, or 75.6%, as compared to the three months ended March 31, 1999. License revenues were negatively impacted by reduced activity in the IMMPOWER and Aptos product lines, which the Company is divesting. License revenues for these two product lines totaled $0.1 million for the three months ended March 31, 2000, compared with $2.0 million for the same quarter in the previous year. In addition, the license revenue decrease reflects the Company's longer sales cycle resulting from its transition to e-business.

Maintenance revenues for the three months ended March 31, 2000 have remained relatively flat at $7.6 million, compared to $7.9 million for the three months ended March 31, 1999.

Consulting revenues for the three months ended March 31, 2000 were $6.0 million, a decrease of $6.6 million, or 52.3%, as compared to the three months ended March 31, 1999. The Company believes the decrease in consulting revenues is partially attributable to a reduction in implementation engagements as a consequence of the decreased license revenues. The consulting revenue decrease also reflects a decline in Year 2000 consulting projects of $2.2 million, comparing the three months ended March 31, 2000 with the same period in the previous year.

COSTS OF LICENSES, MAINTENANCE AND CONSULTING.

Costs of licenses, maintenance and consulting were $7.9 million for the three months ended March 31, 2000, representing 54.4% of total revenues, and $11.4 million for the three months ended March 31, 1999, representing 47.7% of total revenues.

The costs of licenses as a percentage of license revenues increased in the three months ended March 31, 2000 as compared to the three months ended March 31, 1999. The increase results from a greater proportion of license revenues generated from the Company's products that utilize technology licensed from third parties.

The cost of maintenance, as a percentage of related revenue, was relatively unchanged in the three months ended March 31, 2000 as compared to the three months ended March 31, 1999.

The costs of consulting, as a percentage of related revenue, increased in the three months ended March 31, 2000 as compared to the three months ended March 31, 1999. The increase is primarily attributable to lower than expected consulting revenues, and an increase in the use of outside contractors.

SALES AND MARKETING.

Sales and marketing costs for the three months ended March 31, 2000 were $4.6 million, a decrease of $1.4 million, or 23.0%, as compared to the three months ended March 31, 1999. This decrease is largely attributable to the higher sales and marketing costs incurred in the first quarter of fiscal 1999 as the Company opened sales offices in Europe and the Asia Pacific region. As a percentage of total revenues, sales and marketing expenses were 31.6% and 24.8% in the three months ended March 31, 2000 and 1999, respectively. Sales and marketing expenses increased as a percentage of revenue because of the decrease in revenues in the three months ended March 31, 2000 as compared to the same period in the previous year.

PRODUCT DEVELOPMENT.

Product development related expenses, excluding amortization of capitalized software, were as follows (in thousands):

                                      Three Months Ended
                                            March 31,
                                      -------------------
                                         2000      1999
                                      --------- ---------
Product development expenditures.....   $4,129    $5,448
Less:
   Additions to capitalized software.   (1,106)   (2,098)
                                      --------- ---------
Product development expense..........   $3,023    $3,350
                                      ========= =========

Product development expense decreased $0.3 million, or 9.8%, in the three months ended March 31, 2000 as compared to the three months ended March 31, 1999 and was 20.9% and 14.0% of total revenues in the first quarters of 2000 and 1999, respectively. Additions to capitalized software decreased $1.0 million, or 47.3%, in the first quarter of fiscal 2000 as compared to the first quarter of fiscal 1999 and were 26.8% and 38.5% of product development expenditures, respectively. The decrease in software costs capitalized in the three months ended March 31, 2000 is primarily attributable to product development resources being allocated to projects that did not meet the criteria for capitalization.

AMORTIZATION OF CAPITALIZED SOFTWARE.

Capitalized software amortization in the three months ended March 31, 2000 was $1.3 million, a decrease of $0.2 million, or 10.9%, as compared to the three months ended March 31, 1999. The decrease in the first quarter of fiscal 2000 was due to a reduced asset base associated with the impairment of certain capitalized software costs in 1999, partially offset by the change in the estimated useful life for capitalized software from three to two years.

GENERAL AND ADMINISTRATIVE.

General and administrative expenses in the three months ended March 31, 2000 were $3.3 million, a decrease of $0.3 million, or 7.7%, as compared to the three months ended March 31, 1999. As a percentage of total revenues, general and administrative expenses were 23.0% and 15.1% in the three months ended March 31, 2000 and 1999, respectively. The absolute decrease in the three months ended March 31, 2000 is mainly due to decreased compensation and facilities costs resulting from the Company's restructuring actions commenced during the second half of 1999. General and administrative expenses increased as a percentage of revenue because of the decrease in revenues in the three months ended March 31, 2000 as compared to the same period in the previous year.

INCOME TAX EXPENSE (BENEFIT).

In the three months ended March 31, 2000, the Company provided $48,000 for state income taxes that could not be offset against net operating loss carryforwards. In the three months ended March 31, 1999, the Company provided an income tax benefit equal to 38%, the estimated effective tax rate, on a pretax loss of $1.7 million.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2000, the Company's principal sources of liquidity included cash, cash equivalents and short- and long-term investments aggregating $18.6 million. The Company believes that its existing cash balances, together with other sources of liquidity, including cash flows from operating activities and amounts available under the existing $6.0 million line of credit (all of which was available at March 31, 2000), will satisfy the Company's currently anticipated working capital and capital expenditure requirements for at least the next twelve months. The Company may seek additional funding through public or private equity or debt financing. There can be no assurance that if needed, additional financing can be obtained on acceptable terms, or at all. If additional funds are raised by issuing equity securities, dilution to stockholders would result.

The Company's operating activities used cash of $3.0 million in the three months ended March 2000 and $4.8 million in the first quarter of fiscal 1999. Cash flows from operating activities for the three months ended March 31, 2000 primarily reflected a net loss of $5.4 million and a decrease in accounts payable of $1.9 million. These were partially offset by depreciation and amortization of $1.9 million and a decrease in accounts receivable of $2.3 million. Cash flows from operating activities for the three months ended March 31, 1999 primarily reflected a net loss of $1.0 million, an increase in accounts receivable of $2.0 million and a decrease in accounts payable of $2.0 million. These were partially offset by depreciation and amortization of $2.4 million.

Financing activities provided $1.0 million in cash during the three months ended March 2000 and used $0.9 million in cash during the first quarter of fiscal 1999. In the three months ended March 31, 2000, proceeds from the issuance of stock under the Company's employee stock purchase plan and proceeds from stock options exercised provided $1.0 million in cash. In the three months ended March 31, 1999, the Company used cash in the amount of $0.9 million for the purpose of repurchasing Company stock. All stock repurchases were made pursuant to resolutions of the Company's Board of Directors in 1995 authorizing the repurchase of the Company's outstanding shares of common stock, not to exceed a total cost of $17.5 million. Through March 31, 2000, the Company had acquired 1,059,500 shares of its common stock at a cost of $11.1 million. As of March 31, 2000, the Company had reissued 1,048,462 of the repurchased shares in connection with the Company's employee stock purchase plan, one of its employee stock option plans and the acquisition of Revere.

Investing activities used $0.2 million and $2.3 million in cash during the three months ended March 31, 2000 and 1999, respectively. The major cash flows in the three months ended March 31, 2000 comprised additions to capitalized software of $1.1 million and fixed asset purchases of $0.3 million, offset by net sales of investments totaling $1.2 million. Cash flows from investing activities for the three months ended March 31, 1999 primarily reflected additions to capitalized software of $2.1 million and fixed asset purchases of $0.6 million, offset by net inflows from investments totaling $0.5 million.

ADDITIONAL RISK FACTORS

The Company operates in a rapidly changing environment that involves numerous risks and uncertainties which could have a material adverse effect on the Company. The following discussion details some, but not all, of these risks and uncertainties.

FLUCTUATION IN OPERATING RESULTS.

The Company's operating results fluctuate as a result of a variety of factors including:

1. the execution of new license agreements;
2. the shipment of software products;
3. customer acceptance criteria for services performed;
4. completion of milestone or other significant development requirements pursuant to the Company's license agreements;
5. the financial terms of consulting agreements and the inclusion of fixed as opposed to variable pricing;
6. third-party royalty payments for licensed software;
7. the demand for the Company's products and services;
8. changes in the Company's product mix;
9. the development and launch of new products, and the life cycles of the Company's existing products;
10. research and development expenditures required to update and expand the Company's product portfolio and related third-party consulting costs;
11. sales and marketing expenses generally related to the entry into new markets with new or existing products and maintenance of market share in existing markets;
12. acquisitions and the integration and development of acquired entities or products;
13. competitive conditions in the industry and
14. general economic conditions.

As a result, the Company believes that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as indications of future performance.

The Company's quarterly operating results are particularly dependent on the number of license agreement bookings executed in each quarter. The amount of quarterly bookings has varied substantially from quarter to quarter due to a variety of reasons including:

1. a high proportion of license agreements are negotiated during the latter part of each quarter and this process may not be completed before the quarter end;
2. the sales cycles for some of the Company's products are relatively long due to the Company's focus on "enterprise solutions" as opposed to individual products, which adds complexity to the customer's selection, negotiation and approval process;
3. the amount related to each booking may vary significantly due to the need for different solutions for different customers;
4. procurement procedures may vary from customer to customer, which may affect the timing of the bookings;
5. the period for a customer to complete product evaluations and to complete any subsequent purchase approval may be delayed due to resource limitations; and
6. economic, political and industrial conditions can adversely affect business opportunities without notice.

In addition, bookings that are executed during a particular quarter may not be recognized as revenue during such quarter because such bookings may not have met the Company's revenue recognition criteria. No assurance can be given that the Company will be able to effect new bookings in accordance with historical results or management's expectations, and the inability of the Company to do so could have a material adverse effect on the Company's operating results.

While the Company typically sells its software under a standard license agreement, license agreements associated with large enterprise solutions often require the negotiation of terms and conditions that differ substantially from the Company's standard license agreement terms. The negotiation of these agreements may extend the sales cycle. The Company may not always obtain terms and conditions that permit the recognition of revenue upon shipment of the licensed product or under the percentage of completion method of contract accounting rules. Accordingly, revenue may not be recognized after shipment of a product because specified milestones have not been met or because applicable services have not been completed.

The Company has and expects to enter into fixed-price consulting agreements, particularly in response to increased competition in the industry. The Company has recognized lower profit margins on certain fixed-price service agreements when compared to variable agreements. No assurance can be given that the Company will be able to conclude fixed-price agreements on terms that will allow the Company to retain its historical operating margins.

The Company has historically generated a majority of its consulting revenue from pre- and post-implementation services. The Company has provided services that include, but are not limited to, Year 2000 readiness engagements, best practice solution engagements and other hardware and software solutions. The Company intends to continue its pursuit of consulting engagements for which the Company believes it is qualified. There can be no assurances that these engagements will result in profit margins equal to or greater than those engagements that are specific to a customer's product implementation. Also, there can be no assurances that consulting revenue generated from non-implementation related projects will continue in the future.

Employee- and facility-related expenditures comprise a significant portion of the Company's operating costs and expenses, and are therefore relatively fixed over the short term. In addition, the Company's expense levels are based, in significant part, on the Company's forecasted revenue. If revenue levels fall below expectations, operating results are likely to be adversely affected. There can be no assurance that the Company will be able to achieve profitability on a quarterly or annual basis in the future. Any of the foregoing factors could cause the Company's future operating results to fall below the expectations of public securities market analysts, which could have an adverse effect on the trading price of the Company's common stock. See "Volatility of Stock Price."

RELIANCE ON THIRD PARTY TECHNOLOGY.

The Company generates revenue from internally developed software products, some of which utilize technology licensed from third parties. The Company expects to continue utilizing third party technology and may enter into agreements with additional business partners. If sales of software utilizing third party technology increase disproportionately, gross margins may be below historical levels due to third party royalty obligations. There can be no assurances that the third parties will renew existing agreements with the Company or will not require financial conditions that are unfavorable to the Company. In addition, there can be no assurances that existing third party agreements will not be terminated.

INDUSTRY.

Certain software companies, including the Company, have experienced significant economic downturns as a result of technological shifts and competitive pressures. These downturns are characterized by decreased product demand, price erosion, work slowdowns and layoffs. The Company's operations may, in the future, experience substantial fluctuations from period to period because of such industry patterns and general economic and political conditions that could affect the timing of orders from customers. There can be no assurance that such factors will not have a materially adverse effect on the Company's business, operating results or financial condition.

INTERNATIONAL.

The Company will continue its presence in international markets by marketing its B2B e-business solutions for the enterprise in additional countries. Risks associated with such pursuits include, but are not limited to, the following: changing market demands, economic and political conditions in foreign markets, foreign exchange fluctuations, longer collections cycles, difficulty in managing a geographically dispersed organization and changes in international tax laws. The downturn in the Asia Pacific business climate had an adverse effect on some market opportunities. Operating results are likely to be adversely affected if the Company's operations in international markets are not successful.

COMPETITION.

The business and financial applications software market for large complex organizations is intensely competitive. The Company's principal competitors with Tamaris solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. With Aptos solutions, the Company principally competes with Oracle Corporation, Lawson Software, Inc., Platinum Software, Inc., Systems Union Group Ltd. and Agresso AS. With the Horizon suite of products, the Company principally competes with Hyperion Solutions Corporation, Oracle Corporation and Comshare, Inc.

The Company also competes to a lesser extent with other independent software application vendors. Some of the Company's current and potential competitors have substantially greater financial, technical, marketing and sales resources than the Company. Some of these competitors also offer business application products not offered by the Company, primarily in the areas of human resources and manufacturing. However, Walker remains one of the few companies committed to providing and enhancing applications for the mainframe environment. Most of the competitors listed above compete with Walker by offering UNIX-based applications.

The Company encounters competition from a broader range of firms in the market for professional services. Principal competitors include consulting firms Andersen Consulting and IBM Global Services, the consulting divisions of the major accounting firms, which possess greater resources than the Company, and niche-consulting firms that specialize in the Company's products and compete primarily on the basis of price of services provided.

The principal competitive factors in the market for business and financial applications software and services include product functionality, flexibility, portability, integration, reliability, performance, product availability, speed of implementation, quality of customer support and user documentation, vendor reputation, experience, financial stability, cost effectiveness and price. The Company believes that it competes favorably with respect to these factors. There can be no assurance, however, that the Company will be able to compete successfully in the future.

RAPID TECHNOLOGICAL CHANGE.

The software industry is characterized by rapid technological change. The pace of change has accelerated due to advances in mainframe and client/server technology and the growth in Internet, Intranet and extranet utilization. The Company expects to evaluate potential opportunities and may invest in those that are compatible with the Company's strategic direction. However, there can be no assurance that any such investments will be profitable. The Company's products are also designed primarily for use with certain mainframe and client/server systems. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete. Accordingly, the Company's future success depends in part upon its ability to continue to enhance its current products and to develop and introduce new products that respond to evolving customer requirements and keep pace with technological development and emerging industry standards, such as new operating systems, hardware platforms, interfaces and third party applications software. There can be no assurances

1. that the Company will be successful in developing and marketing product enhancements or new products that respond to technological change, changes in customer requirements or emerging industry standards;
2. that the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of such products and enhancements; or
3. that any new products or enhancements that it may introduce will achieve market acceptance.

PRODUCT DEVELOPMENT.

The Company's continued success is dependent on its continued ability to introduce, develop and market new and enhanced versions of its software products, although there can be no assurance that such ability can be maintained. The Company plans to continue its investment in product development in future periods. However, there can be no assurance that revenues will be sufficient to support the future product development that is required for the Company to be competitive. Although the Company may be able to release new products in addition to enhancements to existing products, there can be no assurance that the Company's new or upgraded products will be accepted, will not be delayed or canceled, or will not contain errors or "bugs" that could affect the performance of the product or cause damage to users' data.

PROPRIETARY RIGHTS.

The Company regards its products as proprietary. Through its license agreements with customers and its internal security systems, confidentiality procedures and employee agreements, the Company has taken steps to maintain the trade secrecy of its products. However, there can be no assurances that misappropriation will not occur. In addition, the laws of some countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. There can be no assurance that the confidentiality of any proprietary information will provide any meaningful competitive advantage. The Company has no patents relating to its products. The Company believes that, because of the rapid pace of technological change in the computer software industry, patents and copyrights are less significant than factors such as the knowledge, ability and experience of the Company's employees, frequent product enhancements and the timeliness and quality of support services. There can be no assurance that the Company's current efforts to retain its products as proprietary will be adequate.

Although the Company believes that its products do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against the Company in the future with respect to current or future products or that any such assertions will not require the Company to enter into royalty arrangements or result in costly litigation.

PRODUCT LIABILITY.

The Company's license agreements with its customers contain provisions designed to limit the Company's exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in such license agreements may not be enforced as a result of international, federal, state and local laws or ordinances or unfavorable judicial decisions. The license and support of the Company's software for use in mission critical applications creates the risk of product liability claims against the Company. Damage liability or injunctive relief resulting from such a claim could cause a materially adverse impact on the Company's business, operating results and financial condition.

EMPLOYEES.

The Company believes that its continued success will depend in large part upon its ability to attract, train and retain highly skilled technical, sales, marketing and managerial personnel. The Company continues to hire a significant number of sales, marketing, services and technical personnel. Because of the high level of demand, competition for such personnel is intense and the Company sometimes experiences difficulty in locating candidates with appropriate qualifications or within desired geographic locations. Revenue growth is dependent on the Company's ability to attract, train, retain and productively manage such personnel.

ACQUISITION-RELATED RISKS.

The Company has acquired and may continue to acquire complimentary businesses, products or technology. The process of integrating an acquired company's business into the Company's operations may result in unforeseen operating difficulties and expenditures and may require significant management attention that would otherwise be available for the ongoing development of the Company's business. There can be no assurance that any anticipated benefits of an acquisition will be realized. Future acquisitions by the Company could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization related to goodwill and other intangible assets, which could materially affect the Company's operating results and financial condition. Acquisitions involve numerous risks, including difficulties in the assimilation of operations, technologies and products of the acquired company, risks associated with entering markets in which the Company has no or limited direct prior experience and the potential loss of key employees of the acquired company.

VOLATILITY OF STOCK PRICE.

High technology companies, including the Company, frequently experience volatility in their common stock prices. Factors such as quarterly fluctuations in results of operations, announcements of technological innovations by the Company or its competitors or the introduction of new products by the Company or its competitors and macroeconomic conditions in the computer hardware and software industries generally may have a significant adverse impact on the market price of the Company's stock. If revenues or earnings in any quarter fail to meet the expectations of the investment community, there could be an immediate impact on the Company's stock price. In addition, the Company has issued shares and stock options which, if sold directly or exercised and sold on the open market in large concentrations, could cause the Company's stock price to decline in the short term. Furthermore, the stock market has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for many high technology companies, in some cases unrelated to the operating performance of those companies. These broad market fluctuations may materially adversely affect the market price of the stock of the Company.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the reported market risks since December 31, 1999.

PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit Number	Exhibit Title
10.26	Executive Employment Agreement entered into between the Registrant and Stanley V. Vogler.
27.1	Financial Data Schedule (electronic filing only)

(b) Reports on Form 8-K

The Company filed no reports on Form 8-K during the quarter ended March 31, 2000.

WALKER INTERACTIVE SYSTEMS, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WALKER INTERACTIVE SYSTEMS, INC.

(Registrant)

Dated: May 12, 2000

By:  /s/ Stanley V. Vogler

Stanley V. Vogler

Chief Financial Officer

(Principal Financial and Accounting Officer)

WALKER INTERACTIVE SYSTEMS, INC.

INDEX TO EXHIBITS

Exhibit Number	Exhibit Title
10.26	Executive Employment Agreement entered into between the Registrant and Stanley V. Vogler.
27.1	Financial Data Schedule (electronic filing only)

EX-10.26

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the "Agreement") is entered into by and between Walker Interactive Systems, Inc. (the "Company"), a Delaware corporation, and Stanley Vogler ("Executive"), effective as of February 1, 2000 ("Effective Date").

WITNESSETH

Whereas, the Company desires to employ Executive and to assure itself of the continued services of Executive, and Executive desires to be employed by the Company, under the terms and conditions herein.

Now, Therefore, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Employment By The Company. The Company hereby employs Executive to render full-time services to the Company as its Chief Financial Officer. Executive shall have responsibilities, duties and authorities that are customarily associated with such position, and such other duties that are assigned by the Chief Executive Officer. Executive's employment by the Company shall commence on the Effective Date.

2. Compensation. The Company agrees to compensate Executive as follows:

a. Base Salary - The Company shall pay Executive a base salary at the initial rate of $225,000 per year. Such base salary shall be paid pursuant to the Company's ordinary business practice, and shall be subject to ordinary payroll deductions and tax withholdings. Subsequent changes to the base salary rate, if any, shall be determined by the Board from time to time.

b. Incentive Bonus Plan - Executive will be eligible for an incentive bonus. Target bonus will be 55% of base salary for on-plan performance. Results above plan will have accelerated payout with no cap. Bonus amounts will be set annually by Compensation Committee of the Board and paid annually in cash. For the first year of the executive's employment, the incentive bonus will be guaranteed to be a minimum of 22.5% of base salary. The specific terms of the incentive bonus (e.g., performance targets, payment terms, etc.) will be agreed upon by the Executive and the Chief Executive Officer with concurrence of the Board and will be documented separately. Changes to the incentive bonus plan for subsequent years will be determined by the Board.

c. Sign-on, Temporary Living and-Relocation Bonus -Walker Interactive will provide the Executive a one-time "signing bonus" of $60,000 which can be drawn down by the Executive in total or in progress payments anytime beginning 30 days after the Effective Date. This amount represents payment in full for all relocation, temporary living, related commuting and any similar expenses. This amount can be structured in a flexible and tax-advantaged manner if possible at Executive's option, but will not be "grossed up" or increased should Executive's actual expenses exceed this amount. Payments will be subject to withholding for payroll and income taxes to the extent required by law.

d. Stock Options - The Executive will be granted stock options to purchase an aggregate total of 200,000 shares of the Company's common stock at an exercise price equal to the closing market price on the last trading day prior to the date this grant is approved by the Board. Options will vest over four years at the rate of 25% at the end of each year. Options will have a ten-year life. The terms of such options shall be as set forth in the Company's stock option plans and standard form stock option agreement, which agreement shall be modified as necessary to reflect the foregoing terms.

e. Other Benefits - The Company will provide Executive with health insurance and other benefits consistent with Company policy for senior executives.

3. Outside Activities. Executive will be able to serve on up to two Board of Director positions provided these activities do not conflict with or diminish Executive's ability to conduct his duties as the Company's Chief Financial Officer. Any renewal of these Board positions, any new Board positions or any other professional activities unrelated to the Company will require the prior approval of the Walker Interactive Board of Directors.

4. Proprietary And Confidential Information Obligations. Executive agrees to execute the Company's standard Proprietary Information Agreement, a copy of which is attached as Exhibit A. Executive further acknowledges that these obligations continue upon termination of Executive's employment with the Company.

5. Employee Handbook. By signing this Agreement, Executive acknowledges that he has received and read the Company's employee handbook. Executive agrees to abide by all Company policies and procedures.

6. Nonsolicitation. While employed by the Company and for two (2) years thereafter, Executive agrees that in order to protect the Company's confidential and proprietary information from unauthorized use, Executive will not, either directly or through others, solicit or attempt to solicit: any employee, consultant or independent contractor providing services to the Company within the prior six (6) months at the time of the Executive's termination of employment, to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or business entity; or the business of the sort provided by the Company to any customer, vendor or distributor of the Company which, at the time of termination or six (6) months immediately prior thereto, was listed on the Company's customer, vendor or distributor list.

7. Termination of Employment. Executive and the Company each acknowledge that either party has the right to terminate Executive's employment with the Company at any time for any reason whatsoever, with or without advance notice. This at-will employment relationship cannot be changed except in writing signed by a duly authorized officer of the Company.

7.1 Company-Initiated Termination.

(a) If the Executive's employment terminates due to an Involuntary Termination Without Cause Executive shall be entitled to receive the following benefits, as severance: (i) a payment equal to Executive's Base Salary for twelve (12) months plus Executive's target bonus for the year in which termination occurs, (ii) COBRA Continuation Benefits; (iii) the portion of Executive's stock options that would have vested on or before the date twelve (12) months from the occurrence of the Covered Termination shall accelerate and immediately become vested and exercisable. (iv) the period during which Executive may exercise any and all stock options deemed vested as of the date of Executive's termination shall be extended such that Executive will have twelve (12) months after the date of such termination to exercise such options (provided that any such extension shall not extend the maximum term during which any such option may be exercised beyond ten (10) years).

(b) Notwithstanding section 7.1 (a) above, if the Company (i) merges or combines with any other company or entity in a manner which produces a change of control; (ii) sells all or substantially all its assets to any other company or entity; (iii) has forty percent (40%) or more of its stock acquired by a person and/or affiliates of such person, the Executive shall receive: (i) continued payment of base salary for twelve (12) months following Executive's date of termination for any reason; (ii) continued health care benefits for twelve (12) months following Executive's termination of employment under the federal COBRA law; (iii) accelerated vesting of any and all shares, pursuant to any and all stock options granted to Executive; and (iv) twelve (12) months after the date of Executive's termination of employment for any reason to exercise any and all vested shares subject to any and all stock options granted to Executive (provided that any such extension shall not extend the maximum term during which any such option may be exercised beyond ten (10) years). For the purposes of this agreement, "change of control" means a merger or consolidation in which the Company is not the surviving corporation, or in which the shareholders of the Company immediately prior to the merger or consolidation do not hold a majority of the shares of the resulting corporation.

(c) In the event Executive's employment is terminated at any time with Cause, all of Executive's compensation and benefits will cease immediately, and Executive shall not be entitled to any severance benefits.

(d) Except as expressly provided herein, Executive will not be entitled to any other compensation, severance, pay-in-lieu of notice or any other such compensation. This severance provision does not affect the "at will" nature of Executive's employment.

(e) Any severance payments to Executive with respect to a Company Termination or a Covered Termination shall be subject to applicable withholding for appropriate federal, state, local (and foreign, if applicable) income and employment taxes, and shall be payable at such time or times as the Company may elect; provided that Executive shall not receive such severance payments at a rate slower than the Company's regularly scheduled payment dates for payroll and bonus, as applicable. If Executive is indebted to the Company at his date of termination, the Company reserves the right to offset any severance payment under this Agreement by the amount of such indebtedness. In no event shall payment of any such severance payment be made prior to Executive's date of termination or in the absence of an effective release pursuant to Section 7.6.

7.2 Executive-Initiated Termination. Executive may voluntarily terminate his employment with the Company at any time by giving the Chief Executive Officer thirty (30) days written notice. In the event Executive voluntarily terminates his employment with the Company, all of Executive's compensation and benefits will cease as of the termination date. Executive acknowledges that he will not receive any severance pay or benefits upon such voluntary termination. Termination of Executive's employment due to a Constructive Termination that constitutes a Covered Termination shall not be treated as a "voluntary termination" covered by this Section 7.2.

7.3 Accrued Vacation Pay. In addition to any other amount payable under this Section 7, Executive will be entitled to receive any accrued vacation pay in accordance with the Company's vacation pay policy then in effect for employees generally.

7.4 Mitigation. Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by any retirement benefits received by Executive after the date of the termination of Executive's employment or otherwise.

7.5 Tax Consequences. Executive acknowledges that he has been advised by the Company to consult with a tax advisor or attorney with respect to the tax consequences, if any, of this Agreement to his stock option grants.

7.6 Employee Agreement And Release Prior to Receipt of Benefits. Upon the occurrence of a Company Termination or a Covered Termination, and prior to the receipt of any benefits under this Agreement on account of such termination, Executive shall execute the Employee Agreement and Release (the "Release") in the form attached hereto as Exhibit B. Such Release shall specifically relate to all of Executive's rights and claims in existence at the time of such execution and shall confirm Executive's obligations under the Company's standard form of proprietary information and inventions agreement. It is understood that Executive has twenty-one (21) calendar days to consider whether to execute such Release, and Executive may revoke such Release within seven (7) calendar days after execution. In the event Executive does not execute such Release within the twenty- one (21)-day period, or if Executive revokes such Release within the subsequent seven (7)-day period, no benefits shall be payable under this Agreement, and this Agreement shall be null and void.

7.7 Limitation on Competitive Activities. While employed by the Company and during the twelve (12) month period after the occurrence of a Company Termination or a Covered Termination, Executive will not directly or indirectly (whether for compensation or without compensation), as an individual proprietor, partner, stockholder, officer, employee, consultant, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1%) of the total outstanding stock of a publicly held company), engage in any business activity that is competitive with the business of the Company ("Competitive Activity"). For purposes of this Agreement, "Competitive Activity" shall be deemed to include, without limitation, obtaining employment, performing work or providing services to SAP, PeopleSoft, Oracle, Hyperion or QSP (or any related corporation, partnership or other related entity). These Competitive Activities are prohibited in addition to any limitations on Executive's activities set forth in his Proprietary Information Agreement with the Company, and they are considered by the parties hereto to constitute a reasonable restriction for the purpose of protecting the business of the Company. However, if any such limitation is found by a court of competent jurisdiction to be unenforceable because it extends for too long a period or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. If Executive does not comply with any of the foregoing, no benefits shall be payable under this Agreement, any benefits previously paid to Executive pursuant to this Agreement shall be repaid or surrendered to the Company, and this Agreement shall be null and void.

7.8 Certain Reductions in Payments.

(a) Anything in this Agreement to the contrary notwithstanding, in the event that any payment, distribution or other benefit provided by the Company to or for the benefit of Executive (whether paid or payable or provided or to be provided pursuant to the terms of this Agreement or otherwise) (a "Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986 ("the Code") and (ii) but for this Section 7.7, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then, in accordance with this Section 7.7, such Payments shall be reduced to the maximum amount that would result in no portion of the Payments being subject to the Excise Tax, but only if and to the extent that such a reduction would result in Executive's receipt of Payments that are greater than the net amount Executive would receive (after application of the Excise Tax) if no reduction is made. The amount of required reduction, if any, shall be the smallest amount so that the Executive's net proceeds with respect to the Payments (after taking into account payment of any Excise Tax and all federal, state and local income, employment or other taxes) shall be maximized. If, notwithstanding any reduction described in this Section 7.7 (or in the absence of any such reduction), the Internal Revenue Service (the "IRS") determines that a Payment is subject to the Excise Tax (or subject to a different amount of the Excise Tax than determined by the Company or the Executive), then Section 7.7(c) shall apply. If the Excise Tax is not eliminated pursuant to this Section 7.7, Executive shall pay the Excise Tax.

(b) All determinations required to be made under this Section 7.7 shall be made by the Company's independent auditors. Such auditors shall provide detailed supporting calculations both to the Company and Executive. Any such reasonable determination by the Company's independent auditors shall be binding upon the Company and Executive. The Executive shall determine which and how much of the Payments, including without limitation any option acceleration benefits provide under this Agreement or any option ("Option Benefits"), as the case may be, shall be eliminated or reduced consistent with the requirements of this Section 7.7, provided that, if Executive does not make such determination within ten (10) business days of the receipt of the calculations made by the Company's independent auditors, the Company shall elect which and how much of the Option Benefits or other Payments, as the case may be, shall be eliminated or reduced consistent with the requirements of this Section 7.7, and then the Company shall notify Executive promptly of such election. Within five (5) business days thereafter, the Company shall pay to or distribute to or for the benefit of Executive such amounts as are then due to Executive under this Agreement.

(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Company's independent auditors hereunder, it is possible that Option Benefits or other Payments, as the case may be, will have been made by the Company which should not have been made ("Overpayment") or that additional Option Benefits or other Payments, as the case may be, which will not have been made by the Company could have been made ("Underpayment"), in each case, consistent with the calculations required to be made hereunder. In the event that the Company's independent auditors, based upon the assertion of a deficiency by the IRS against Executive or the Company which the Company's independent auditors believe has a high probability of success, determine that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of Executive shall be treated for all purposes as a loan ab initio to Executive which Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be deemed to have been made and no amount shall be payable by Executive to the Company if and to the extent such deemed loan and payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Company's independent auditors, based upon controlling precedent or other substantial authority, determine that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.

7.9 Definitions. For purposes of this Section 7, the following terms are defined as follows:

(a) "Base Salary" means Executive's base salary (excluding overtime, bonuses, draws, commissions and other forms of additional compensation and benefits), at the rate in effect during the last regularly scheduled payroll period immediately preceding any termination of Executive's employment.

(b) "Cause" means any of the following, as determined in good faith by the Board: (i) an intentional act which materially injures the Company; (ii) an intentional refusal or failure to follow lawful and reasonable directions of the Board or an individual to whom Executive reports (as appropriate); (iii) a willful and habitual neglect of duties; or (iv) a conviction of a felony involving moral turpitude which is reasonably likely to inflict or has inflicted material injury on the Company.

(c) "Change of Control" means that the Company (i) merges or combines with any other company or entity and the Company is not the surviving corporation, or the stockholders of the Company immediately prior to the merger or consolidation do not hold a majority of the shares of the resulting corporation; (ii) sells all or substantially all its assets to any other company or entity; or (iii) has forty percent (40%) or more of its stock acquired by a person and/or affiliates of such person.

(d) "COBRA Continuation Benefits" means that Executive shall receive the following benefits: Executive and Executive's covered dependents who are enrolled in a health or dental plan sponsored by the Company may be eligible to continue coverage under such health or dental plan (or to convert to an individual policy), at the time of the Executive's termination of employment under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The Company will notify the individual of any such right to continue health coverage at the time of termination. The Company will continue to pay its share of Executive's health insurance premiums until: (i) in the case of a Company Termination, three (3) months after the date of termination; and (ii) in the case of a Covered Termination, the earlier of twelve (12) months after the date of termination or such time as the Executive becomes eligible to participate in another employer's health insurance plan (the "COBRA Period"); provided that Executive elects to continue coverage under COBRA and timely pays Executive's portion of the premiums. No provision of this Agreement will affect the continuation coverage rules under COBRA, except that the Company's payment of any applicable insurance premiums during the COBRA Period will be credited as payment by Executive for purposes of Executive's payment required under COBRA. Therefore, the period during which Executive must elect to continue the Company's group medical or dental coverage at his or her own expense under COBRA, the length of time during which COBRA coverage will be made available to the Executive, and all other rights and obligations of Executive under COBRA (except the obligation to pay insurance premiums that the Company pays during the COBRA Period) will be applied in the same manner that such rules would apply in the absence of this Agreement.

(e) "Constructive Termination" means that Executive voluntarily terminates employment after any of the following are undertaken without Executive's express written consent: (A) the assignment to Executive of any duties or responsibilities which result in a diminution or adverse change of Executive's position, status or circumstances of employment; provided, however, that a mere change in Executive's title or reporting relationship shall not constitute a Constructive Termination; (B) a reduction by the Company in Executive's Base Salary; (C) a relocation of Executive's business office to a location more than thirty (30) miles from the location at which Executive performs duties as of the date of this Agreement, except for required travel by Executive on the Company's business to an extent substantially consistent with Executive's business travel obligations; (D) any breach by the Company of any provision of this Agreement or any other material agreement between Executive and the Company concerning Executive's employment; or (E) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company.

(f) "Involuntary Termination Without Cause" means Executive's dismissal or discharge other than for Cause. The termination of Executive's employment as a result of Executive's death or disability will not be deemed to be an Involuntary Termination Without Cause.

8. Indemnification and Directors and Officers Insurance. The Company shall indemnify Executive for all acts or omissions of Executive while Executive is serving as an officer or director of the Company to the fullest extent not prohibited either by the Company's Certificate of Incorporation or Bylaws or by the laws of the State in which the Company is incorporated. If the Company chooses to insure some or all of this liability or related liabilities through the purchase of a directors and officers liability insurance policy ("D&O Insurance Policy"), Executive shall at all times be a named insured on such policy while Executive is an officer or director of the Company and the Company is paying the premiums on any D&O Insurance Policy.

9. NONEXCLUSIVITY. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which Executive may otherwise qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under other agreements with the Company. Except as otherwise expressly provided herein, amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the date of a Covered Termination or Company Termination shall be payable in accordance with such plan, policy, practice or program.

10. Attorneys Fees. The Company shall pay reasonable legal fees and costs incurred by Executive in the negotiation and drafting of this agreement, up to a maximum of $5,000.

11. Notices. All notices, request, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or delivered by registered or certified mail (return receipt requested), or private overnight mail (delivery confirmed by such service), to the address listed below (or to such other address as either party shall designate by notice in writing to the other in accordance herein):

If to the Company:

Walker Interactive Systems, Inc.
Marathon Plaza Three North
303 Second Street
San Francisco, CA 94107
Attention: Chief Financial Officer

If to the Executive:

Stanley Vogler
[Home Address]

12. General.

12.1 Entire Agreement. This Agreement, together with the exhibits and agreements referred to herein, sets forth the complete, final and exclusive embodiment of the entire agreement between Executive and the Company with respect to the subject matter hereof. This Agreement is entered into without reliance upon any promise, warranty or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties, representations or agreements.

12.2 Severability. If a court of competent jurisdiction determines that any term or provision of this Agreement is invalid or unenforceable, then the remaining terms and provisions shall be unimpaired. Such court shall have the authority to modify or replace the invalid or unenforceable term or provision with a valid and enforceable term or provision which most accurately represents the parties' intention with respect to the invalid or unenforceable term or provision.

12.3 Amendment or Termination of Agreement. This Agreement may be changed or terminated upon the mutual written consent of the Company and Execuitve. The written consent of the Company to a change or termination of this Agreement must be signed by an executive officer of the Company after such change or the Board has approved termination.

12.4 Successors and Assigns. This Agreement shall bind the heirs, personal representatives, successors, assigns, executors and administrators of each party, and inure to the benefit of each party, its heirs, successors and assigns. However, because of the unique and personal nature of Executive's duties under this Agreement, Executive agrees not to delegate the performance of his or her duties under this Agreement.

12.5 Applicable Law. This Agreement shall be deemed to have been entered into and shall be construed and enforced in accordance with the laws of the State of California as applied to contracts made and to be performed entirely within California.

12.6 Headings. This section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

12.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, all of which together shall constitute one and the same instrument.

In Witness Whereof, the parties have duly authorized and caused this Agreement to be executed as follows:

Stanley Vogler	Walker Interactive Systems, Inc.
_______________________________________	By:____________________________________
Date:____________________________, 2000	Title:_________________________________
	Date:____________________________, 2000

Exhibit B

EMPLOYEE AGREEMENT AND RELEASE

I understand and agree completely to the terms set forth in the foregoing agreement.

I hereby confirm my obligations under the Walker Interactive Systems, Inc.'s (the "Company") proprietary information and inventions agreement.

In granting the release herein, I acknowledge that I understand that I am waiving the benefit of any provision of law in any jurisdiction to the following effect: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected her settlement with the debtor." (California Civil Code section 1542). I hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to the release of unknown and unsuspected claims granted in this Agreement.

Except as otherwise set forth in this Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and its and their respective officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to the date I execute this Agreement, including but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongful discharge; harassment; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to the Company's indemnification agreement.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Agreement; (B) I have the right to consult with an attorney prior to executing this Agreement; (C) I have twenty-one (21) days to consider this Agreement (although I may choose to voluntarily execute this Agreement earlier); (D) I have seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (E) this Agreement shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after this Agreement is executed by me, provided that the Company has also executed this Agreement by that date (the "Effective Date").

Walker Interactive Systems, Inc.	Stanley Vogler
By:____________________________________	_______________________________________
Title:_________________________________	Date:__________________________________

EX-27.1

 

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