Document:

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                                                                    EXHIBIT 10.3

                          GUARANTOR SECURITY AGREEMENT

       This Guarantor Security Agreement ("Agreement") dated May 16, 2000 is by
ELITE INFORMATION GROUP, INC., a Delaware corporation ("Guarantor"), in favor of
MELLON BANK, N.A. ("Bank").

                               W I T N E S S E T H

       WHEREAS, Bank has entered or is about to enter into certain financing
arrangements with Elite Information Systems, Inc., a California corporation
("Borrower") pursuant to which Bank may make loans and provide other financial
accommodations to Borrower; and

       WHEREAS, Guarantor has executed and delivered or is about to execute and
deliver to Bank a Continuing Guaranty in favor of Bank (the "Guaranty") pursuant
to which Guarantor absolutely and unconditionally guarantees to Bank the payment
and performance of all now existing and hereafter arising obligations,
liabilities and indebtedness of Borrower to Bank; and

       WHEREAS, Bank has conditioned its providing loans and other financial
accommodations to Borrower on Guarantor's granting a security interest in
substantially all of its assets in favor of Bank to secure Guarantor's
obligations to Bank under its Guaranty;

       NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

SECTION 1. DEFINITIONS.

       All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural. All references to
Guarantor, Borrower and Bank pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include their respective
successors and assigns. The words "hereof", "herein", "hereunder", "this
Agreement" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of Default shall
exist or continue or be continuing until such Event of Default is cured or
waived in accordance with Section 7.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:

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       1.1 "Accounts" shall mean all present and future rights of Guarantor to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.

       1.2 "Collateral" shall have the meaning set forth in Section 2 hereof.

       1.3 "Credit Agreement" shall mean the Credit Agreement of even date
herewith by and between Borrower, Guarantor and Bank, as the same now exists and
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

       1.4 "Equipment" shall mean all of Guarantor's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.

       1.5 "Event of Default" shall have the meaning set forth in Section 6.1
hereof.

       1.6 "Financing Agreements" shall mean, collectively, the Guaranty, the
Credit Agreement, this Agreement and all notes, guarantees, security agreements
and other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower, Guarantor or any Obligor in connection
with the Credit Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

       1.7 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.

       1.8 "Guaranty" shall have the meaning set forth in the recitals hereto.

       1.9 "Inventory" shall mean all of Guarantor's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.

       1.10 "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by Guarantor to Bank
and/or its affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under this Agreement or under any of the other
Financing Agreements, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of the Credit Agreement
or after the commencement of any case with respect to Borrower or Guarantor
under the United States Bankruptcy Code or any similar statute (including,
without limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or

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not due, primary or secondary, liquidated or unliquidated, secured or unsecured,
and however acquired by Bank.

       1.11 "Obligor" shall mean Guarantor and any other guarantor, endorser,
acceptor, surety or other person liable on or with respect to the Obligations or
who is the owner of any property which is security for the Obligations, other
than Borrower.

       1.12 "Person" or "person" shall mean any individual, sole proprietorship,
limited liability company, limited liability partnership, corporation
(including, without limitation, any corporation which elects subchapter S status
under the Internal Revenue Code of 1986, as amended), business trust,
unincorporated association, joint stock corporation, trust, joint venture or
other entity or any government or any agency or instrumentality or political
subdivision thereof.

       1.13 "Records" shall mean all of Guarantor's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Guarantor with respect to the
foregoing maintained with or by any other person).

SECTION 2. GRANT OF SECURITY INTEREST.

       To secure payment and performance of all Obligations, Guarantor hereby
grants to Bank a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Bank as security, the following property
and interests in property, whether now owned or hereafter acquired or existing,
and wherever located (collectively, the "Collateral"):

       2.1 Accounts and other indebtedness owed to Guarantor;

       2.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, proceeds of letters of credit, bankers'
acceptances and guaranties;

       2.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Guarantor now or hereafter held or
received by or in transit to Bank or its affiliates or at any other depository
or other institution from or for the account of Guarantor whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods

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described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including,
without limitation, returned, repossessed and reclaimed goods, and (d) deposits
by and property of account debtors or other persons securing the obligations of
account debtors;

       2.4 Inventory;

       2.5 Equipment;

       2.6 Records; and

       2.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and any claims against third parties for
loss or damage to or destruction of any or all of the foregoing.

SECTION 3. COLLATERAL COVENANTS.

       3.1 Accounts Covenants.

              (a) Bank shall have the right at any time or times, in Bank's name
or in the name of a nominee of Bank, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.

              (b) Guarantor shall deliver or cause to be delivered to Bank, with
appropriate endorsement and assignment, with full recourse to Guarantor, all
chattel paper and instruments which Guarantor now owns or may at any time
acquire promptly upon Guarantor's receipt thereof, except as Bank may otherwise
agree.

              (c) In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Guarantor shall upon
Bank's request, (i) hold the returned Inventory in trust for Bank, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Bank's instructions, and (iv) not
issue any credits, discounts or allowances with respect thereto without Bank's
written consent.

              (d) Bank may, at any time or times that an Event of Default exists
or has occurred and is continuing: (i) notify any or all account debtors that
the Accounts have been assigned to Bank and that Bank has a security interest
therein and Bank may direct any or all accounts debtors to make payment of
Accounts directly to Bank; (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations; (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Bank shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto; and (iv) take
whatever other action Bank may deem necessary or desirable for the protection of
its interests. At any time that an Event of Default exists or has occurred and
is continuing, at Bank's request, all invoices and statements

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sent to any account debtor shall state that the Accounts and such other
obligations have been assigned to Bank and are payable directly and only to Bank
and Guarantor shall deliver to Bank such originals of documents evidencing the
sale and delivery of goods or the performance of services giving rise to any
Accounts as Bank may require.

       3.2 Inventory Covenants. With respect to the Inventory: (a) Guarantor
shall at all times maintain inventory records reasonably satisfactory to Bank,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Guarantor's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Guarantor shall conduct a
physical count of the Inventory at any time or times as Bank may request on or
after an Event of Default, and promptly following such physical inventory count
shall supply Bank with a report in the form and with such specificity as may be
reasonably satisfactory to Bank concerning such physical count; (c) Guarantor
shall not remove any Inventory from the locations set forth or permitted herein,
without the prior written consent of Bank, except for sales of Inventory in the
ordinary course of Guarantor's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Bank's request, Guarantor shall, at its expense, at any time or times as
Bank may request on or after an Event of Default, deliver or cause to be
delivered to Bank written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Bank and by an appraiser acceptable to Bank,
addressed to Bank or upon which Bank is expressly permitted to rely; (e)
Guarantor shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including, but not limited to,
the requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (f) Guarantor assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (g) Guarantor shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate Guarantor to repurchase such Inventory; (h)
Guarantor shall keep the Inventory in good and marketable condition; (i)
Guarantor shall not, without prior written notice to Bank, acquire or accept any
Inventory on consignment or approval; and (j) upon the occurrence of an Event of
Default, Guarantor shall not return any Inventory to its vendors without the
prior written consent of Bank.

       3.3 Equipment Covenants. With respect to the Equipment: (a) upon Bank's
request, Guarantor shall, at its expense, at any time or times as Bank may
request on or after an Event of Default, deliver or cause to be delivered to
Bank written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Bank and by appraiser acceptable to Bank; (b)
Guarantor shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Guarantor shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Guarantor's business and not for personal,
family, household or farming use; (e) Guarantor shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Guarantor or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Guarantors in the ordinary course
of business; (f) the Equipment is now and shall remain personal property and
Guarantor shall not permit any of the Equipment to be or become a part of or
affixed to real

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property; and (g) Guarantor assumes all responsibility and liability arising
from the use of the Equipment.

       3.4 Power of Attorney. Guarantor hereby irrevocably designates and
appoints Bank (and all persons designated by Bank) as Guarantor's true and
lawful attorney-in-fact, and authorizes Bank, in Guarantor's or Bank's name, to:
(a) at any time an Event of Default exists or has occurred and is continuing:
(i) demand payment on Accounts or other proceeds of Inventory or other
Collateral; (ii) enforce payment of Accounts by legal proceedings or otherwise;
(iii) exercise all of Guarantor's rights and remedies to collect any Account or
other Collateral; (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Bank deems advisable; (v) settle,
adjust, compromise, extend or renew an Account; (vi) discharge and release any
Account or other obligations included in the Collateral; (vii) prepare, file and
sign Guarantor's name on any proof of claim in bankruptcy or other similar
document against an account debtor; (viii) notify the post office authorities to
change the address for delivery of Guarantor's mail to an address designated by
Bank, and open and dispose of all mail addressed to Guarantor; and (ix) do all
acts and things which are necessary, in Bank's determination, to fulfill
Guarantor's obligations under this Agreement and the other Financing Agreements;
and (b) at any time to: (i) take control in any manner of any item of payment or
proceeds thereof; (ii) have access to any lockbox or postal box into which
Guarantor's mail is deposited; (iii) endorse Guarantor's name upon any items of
payment or proceeds thereof and deposit the same in the Bank's account for
application to the Obligations; (iv) endorse Guarantor's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral; (v) sign
Guarantor's name on any verification of Accounts and notices thereof to account
debtors; and (vi) execute in Guarantor's name and file any UCC financing
statements or amendments thereto. Guarantor hereby releases Bank and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Bank's own gross negligence or
willful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.

       3.5 Right to Cure. Bank may, at its option: (a) cure any default by
Guarantor under any agreement with a third party or pay or bond on appeal any
judgment entered against Guarantor; (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral; and (c) pay any amount, incur any expense or perform any act
which, in Bank's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Bank with respect thereto.
Bank may add any amounts so expended to the Obligations and charge Guarantor's
account therefor, such amounts to be repayable by Guarantor on demand. Bank
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Guarantor. Any payment made or other action taken by Bank under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.

       3.6 Access to Premises. From time to time as reasonably requested by
Bank, at the cost and expense of Guarantor, (a) Bank or its designee shall have
complete access to all of Guarantor's premises during normal business hours and
after reasonable notice to Guarantor, or

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at any time and without notice to Guarantor if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Guarantor's books and records, including,
without limitation, the Records, and (b) Guarantor shall promptly furnish to
Bank such copies of such books and records or extracts therefrom as Bank may
request, and (c) use during normal business hours such of Guarantor's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and realization of other Collateral.

SECTION 4. REPRESENTATIONS AND WARRANTIES.

       Guarantor hereby represents and warrants to Bank the following (which
shall survive the execution and delivery of this Agreement):

       4.1 Corporate Existence, Power and Authority; Subsidiaries. Guarantor is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a Material Adverse Effect. The execution, delivery and
performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder are all within Guarantor's
corporate powers, have been duly authorized and are not in contravention of law
or the terms of Guarantor's certificate of incorporation, by-laws, or other
organizational documentation, or any material indenture, agreement or
undertaking to which Guarantor is a party or by which Guarantor or its property
are bound. This Agreement and the other Financing Agreements constitute legal,
valid and binding obligations of Guarantor enforceable in accordance with their
respective terms.

       4.2 Chief Executive Office; Collateral Locations. The chief executive
office of Guarantor and Guarantor's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule 4.2 hereto, subject to the right of Guarantor to establish new
locations in accordance with Section 5.2 below.

       4.3 Priority of Liens; Title to Properties. The security interests and
liens granted to Bank under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens permitted under Section 6.2(d)
of the Credit Agreement. Guarantor has good and marketable title to all of its
properties and assets subject to no liens, mortgages, pledges, security
interests, encumbrances or charges of any kind, except those granted to Bank and
such others as are specifically permitted under Section 6.2(d) of the Credit
Agreement.

       4.4 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Guarantor maintained at any bank or
other financial institution are set forth in Schedule 4.4 hereto, subject to the
right of Guarantor to establish new accounts in accordance with Section 5.4
below.

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       4.5 Accuracy and Completeness of Information. All information furnished
by or on behalf of Guarantor in writing to Bank in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of
Guarantor, which has not been fully and accurately disclosed to Bank in writing.

       4.6 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Bank on the date of each additional borrowing or
other credit accommodation under the Credit Agreement and shall be conclusively
presumed to have been relied on by Bank regardless of any investigation made or
information possessed by Bank. The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which Guarantor shall now or hereafter give, or cause to be given, to
Bank.

SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS.

       5.1 Maintenance of Existence. Guarantor shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
material permits, licenses, trademarks, tradenames, approvals, authorizations,
leases and contracts necessary to carry on the business as presently or proposed
to be conducted. Guarantor shall give Bank thirty (30) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and Guarantor shall deliver to Bank a copy of the amendment to the
Certificate of Incorporation of Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Guarantor as soon as it is available.

       5.2 New Collateral Locations. Guarantor may open any new location within
the continental United States provided Guarantor (a) gives Bank thirty (30) days
prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Bank such
agreements, documents, and instruments as Bank may deem reasonably necessary or
desirable to protect its interests in the Collateral at such location,
including, without limitation, UCC financing statements and if Guarantor leases
such new location, provides a favorable landlord waiver or subordination.

       5.3 Insurance. Guarantor shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Bank as to form, amount and insurer.
Guarantor shall furnish certificates, policies or endorsements to Bank as Bank
shall require as proof of such insurance, and, if Guarantor fails to do so, Bank
is authorized, but not required, to obtain such insurance at the expense of
Guarantor. All policies shall provide for at least thirty (30) days prior
written notice to Bank of any cancellation or reduction of coverage and that
Bank

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may act as attorney for Guarantor in obtaining, and at any time an Event of
Default exists or has occurred and is continuing, adjusting, settling, amending
and canceling such insurance. Guarantor shall cause Bank to be named as a loss
payee and an additional insured (but without any liability for any premiums)
under such insurance policies and Guarantor shall obtain non-contributory
lender's loss payable endorsements to all insurance policies in form and
substance satisfactory to Bank. Such lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Bank as its
interests may appear and further specify that Bank shall be paid regardless of
any act or omission by Guarantor or any of its affiliates. At its option, Bank
may apply any insurance proceeds received by Bank at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Bank may determine
or hold such proceeds as cash collateral for the Obligations.

       5.4 Additional Bank Accounts. Guarantor shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the accounts set forth in Schedule 4.4 hereto, except: (a) as to any new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Bank and subject to such conditions thereto as Bank may
establish; and (b) as to any accounts used by Guarantor to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Bank.

       5.5 Costs and Expenses. Guarantor shall pay to Bank on demand all
reasonable costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Bank's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including, but not limited to: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) all costs, expenses and fees for title insurance and
other insurance premiums, environmental audits, surveys, assessments,
environmental reports and inspections, appraisal fees and search fees; (c) costs
and expenses of preserving and protecting the Collateral; (d) costs and expenses
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Bank, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements or defending any claims made or
threatened against Bank arising out of the transactions contemplated hereby and
thereby (including, without limitation, preparations for and consultations
concerning any such matters); and (e) the reasonable fees and disbursements of
counsel (including legal assistants) to Bank in connection with any of the
foregoing.

       5.6 Further Assurances. At the request of Bank at any time and from time
to time, Guarantor shall, at its expense, at any time or times duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing

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Agreements. Where permitted by law, Guarantor hereby authorizes Bank to execute
and file one or more UCC financing statements signed only by Bank.

SECTION 6. EVENTS OF DEFAULT AND REMEDIES.

       6.1 Events of Default. The occurrence or existence of any Event of
Default under the Credit Agreement is referred to herein individually as an
"Event of Default", and collectively as "Events of Default".

       6.2 Remedies.

              (a) At any time an Event of Default exists or has occurred and is
continuing, Bank shall have all rights and remedies provided in this Agreement,
the other Financing Agreements, the Uniform Commercial Code and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by Guarantor or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Bank hereunder, under any of the other Financing
Agreements, the Uniform Commercial Code or other applicable law, are cumulative,
not exclusive and enforceable, in Bank's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall include,
without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Guarantor of this Agreement or any of
the other Financing Agreements. Bank may, at any time or times, proceed directly
against Guarantor or any Obligor to collect the Obligations without prior
recourse to the Collateral.

              (b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Bank may, in its discretion
and without limitation: (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Bank (provided, that, upon the occurrence of any
Event of Default described in Section 7.1(f) of the Credit Agreement, all
Obligations shall automatically become immediately due and payable); (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral; (iii) require Guarantor, at Guarantor's expense, to
assemble and make available to Bank any part or all of the Collateral at any
place and time designated by Bank; (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral; (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose; (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Bank or elsewhere) at such prices or
terms as Bank may deem reasonable, for cash, upon credit or for future delivery,
with the Bank having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Guarantor, which right or equity of redemption
is hereby expressly waived and released by Guarantor and/or (vii) terminate the
Credit Agreement and the other Financing Agreements. If any of the Collateral is
sold or leased by Bank upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is

                                       10
<PAGE>   11

finally collected by Bank. If notice of disposition of Collateral is required by
law, ten (10) days prior notice by Bank to Guarantor designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Guarantor waives any other notice. In the event
Bank institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Guarantor waives the posting of any
bond which might otherwise be required.

              (c) Bank may apply the cash proceeds of Collateral actually
received by Bank from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Bank may elect, whether or not then due. Guarantor shall remain liable to
Bank for the payment of any deficiency with interest at the highest rate
provided for in the Credit Agreement and all costs and expenses of collection or
enforcement, including reasonable attorneys' fees and legal expenses.

SECTION 7. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.

       7.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

              (a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California
(without giving effect to principles of conflicts of law).

              (b) Guarantor irrevocably consents and submits to the
non-exclusive jurisdiction of the Superior Court of the State of California,
County of Los Angeles and the United States District Court for the Central
District of California and waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement, the Credit Agreement or any of the other Financing Agreements or in
any way connected or related or incidental to the dealings of Guarantor and Bank
in respect of this Agreement or the other Financing Agreements or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and
agrees that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Bank shall have the right to bring any
action or proceeding against Guarantor or its property in the courts of any
other jurisdiction which Bank deems necessary or appropriate in order to realize
on the Collateral or to otherwise enforce its rights against Guarantor or its
property).

              (c) Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at Bank's option, by service upon Guarantor in any other manner provided under
the rules of any such courts

                                       11
<PAGE>   12

              (d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION: (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS; OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND BANK IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. GUARANTOR HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT BANK MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
GUARANTOR AND BANK TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

              (e) Bank shall not have any liability to Guarantor (whether in
tort, contract, equity or otherwise) for losses suffered by Guarantor in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Bank that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.

       7.2 Waiver of Notices. Guarantor hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Guarantor which Bank may elect to give shall entitle Guarantor
to any other or further notice or demand in the same, similar or other
circumstances.

       7.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Bank. Bank shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of Bank. Any
such waiver shall be enforceable only to the extent specifically set forth
therein. A waiver by Bank of any right, power and/or remedy on any one occasion
shall not be construed as a bar to or waiver of any such right, power and/or
remedy which Bank would otherwise have on any future occasion, whether similar
in kind or otherwise.

       7.4 Indemnification. Guarantor shall indemnify and hold Bank, and its
directors, agents, employees and counsel ("Indemnified Persons"), harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements,

                                       12
<PAGE>   13

or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel; provided, that, the Guarantor shall have no
obligation hereunder arising from the gross negligence or willful misconduct of
such Indemnified Persons. If any claim is made, or any action, suit or
proceeding is brought, against any Indemnified Person, pursuant to this Section,
the Indemnified Person shall notify the Guarantor within fifteen (15) days of
the Bank being notified in writing of the commencement of such action, suite or
proceeding, and the Guarantor may, at its election, assume the defense of such
action, suit or proceeding, employing counsel selected by the Guarantor and
reasonably satisfactory to the Indemnified Person, and pay the fees and expenses
of such counsel. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section may be unenforceable because it violates any
law or public policy, Guarantor shall pay the maximum portion which it is
permitted to pay under applicable law to Bank in satisfaction of indemnified
matters under this Section 7.4. The foregoing indemnity shall survive the
payment of the Obligations, the termination of this Agreement and the
termination or non-renewal of the Credit Agreement. All of the foregoing costs
and expenses shall be part of the Obligations and secured by the Collateral.

SECTION 8. MISCELLANEOUS.

       8.1 Notices. Except as otherwise set forth in this Agreement, all notices
and other communications provided for hereunder shall be in writing (including
facsimile communication) and mailed or sent by facsimile or delivered, if to
Guarantor, at its address set forth on the signature page hereof; and if to
Bank, at its address set forth on the signature page to the Credit Agreement;
or, as to each party, at such other address as shall be designated by such party
in written notice to the other party. All such notices and communications shall
be effective when sent by facsimile, or three days after such notice or
communication is deposited in the mails.

       8.2 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

       8.3 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon Guarantor and
its successors and assigns and inure to the benefit of and be enforceable by
Bank and its successors and assigns, except that Guarantor may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Bank. Bank may assign its rights and delegate its obligations under this
Agreement in accordance with Section 8.6 of the Credit Agreement.

       8.4 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior

                                       13
<PAGE>   14

agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.

       IN WITNESS WHEREOF, Guarantor has caused these presents to be duly
executed as of the day and year first above written.

                                     ELITE INFORMATION GROUP, INC., a Delaware
                                     corporation

                                     By: /s/ BARRY EMERSON
                                         -------------------------------
                                     Name: Barry Emerson
                                           -----------------------------
                                     Title: CFO
                                            ----------------------------

                                     CHIEF EXECUTIVE OFFICE:
                                     ----------------------

                                     5100 West Goldleaf Circle, Suite 100
                                     Los Angeles, California 90056-1271

                                       14
<PAGE>   15

                                  SCHEDULE 4.2

                                 Other Locations

Charlotte, North Carolina

<PAGE>   16

                                  SCHEDULE 4.4

                                  Bank Accounts

Mellon Bank
-----------

Concentration Account #0692932 - ABA or Bank Routing Number #043000261

Payroll Account (ZBA) #0692916 - ABA or Bank Routing Number #043301601

Money Market Investment - Account Number # S039489W0-00 DR 288

Fleet Bank
----------

Concentration Account:  #9402206053 - Bank Routing Number 011000138

Payroll Account:  #9359613592<PAGE>   1
                                                                    EXHIBIT 10.4

                               CONTINUING GUARANTY
                         (Elite Information Group, Inc.)

               1. Guaranty of Indebtedness. At the solicitation of Elite
Information Systems, a California corporation ("Debtor"), the undersigned
requests Mellon Bank, N.A., a national banking association ("Lender"), to extend
credit or provide other financial accommodations to Debtor, and in consideration
thereof, the undersigned unconditionally, absolutely and irrevocably guarantees
and promises to pay to Lender, or order, on demand, in lawful money of the
United States, as and when the same shall become due (by demand, acceleration or
otherwise), all present and future Indebtedness, as hereinafter defined, of
Debtor to Lender. The word "Indebtedness" is used herein in its most
comprehensive sense and includes any and all obligations of Debtor to Lender
under the certain Loan and Security Agreement, of even date herewith, between
Debtor and Lender and under all other Loan Documents to which Debtor is a party,
whether heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and howsoever arising, whether due or not due, absolute
or contingent, liquidated or unliquidated, secured or unsecured, and whether
Debtor may be liable individually or jointly with others, and whether recovery
upon such Indebtedness may be or hereafter becomes barred by any statute of
limitations, or whether such Indebtedness may be or hereafter becomes otherwise
unenforceable.

               2. Independent Obligations; Subrogation. The obligations of the
undersigned hereunder are independent of and separate from the obligations of
Debtor and any other guarantor, maker or endorser of the Indebtedness and shall
not be reduced by, but shall survive as if the same had not been made, any and
all payments by Debtor and/or any other guarantor, maker or endorser of the
Indebtedness and/or the application of any proceeds from any collateral security
for the Indebtedness until the Indebtedness is fully paid and finally
discharged. To the maximum extent permitted by law, the undersigned hereby
waives any claim, right or remedy which the undersigned may now have or
hereafter acquire against Debtor that arises hereunder and/or from the
performance by any guarantor hereunder, including, without limitation, any
claim, remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of Lender
against Debtor or any security which Lender now has or hereafter acquires,
whether or not such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise, until the Indebtedness is fully paid and
finally discharged. In addition, the undersigned hereby waives any right to
proceed against Debtor, now or hereafter, for contribution, indemnity,
reimbursement, and any other suretyship rights and claims, whether direct or
indirect, liquidated or contingent, whether arising under express or implied
contract or by operation of law, which the undersigned may now have or hereafter
have as against the Debtor with respect to the Indebtedness, until the
Indebtedness is fully paid and finally discharged. The undersigned also hereby
waives any rights to recourse to or with respect to any asset of Borrower, until
the Indebtedness is fully paid and finally discharged.

               3. Authority to Modify Obligations and Security. The undersigned
authorizes Lender, without notice or demand and without affecting the liability
hereunder, from
<PAGE>   2

time to time, whether before or after any notice of termination hereof or before
or after any default in respect of the Indebtedness, to: (a) renew, extend,
accelerate, or otherwise change the time for payment of, or otherwise change any
other term or condition of any document or agreement evidencing or relating to,
any Indebtedness, including, without limitation, increase or decrease of the
rate of interest thereon; (b) accept, substitute, waive, decrease, increase,
release, exchange or otherwise alter any collateral security, in whole or in
part, securing the Indebtedness or any other guaranty of the Indebtedness; (c)
apply any and all such collateral security and direct the order or manner of
sale thereof as Lender, in its sole discretion, may determine; (d) add, release
or substitute any one or more other guarantors, makers or endorsers of the
Indebtedness, and otherwise deal with Debtor or any other guarantor, maker or
endorser as Lender may elect; (e) in Lender's sole discretion, settle, release
on terms satisfactory to Lender, or by operation of law or otherwise, compound,
compromise, collect or otherwise liquidate any Indebtedness and/or any
collateral security therefor in any manner, and bid and purchase any collateral
security at any sale thereof; (f) apply any and all payments or recoveries from
Debtor, from any other guarantor, maker, endorser or from the undersigned to
such of the Indebtedness as Lender, in its sole discretion, may determine,
whether such Indebtedness is secured or unsecured or guaranteed or not
guaranteed by others; (g) apply any and all payments or recoveries from any
other guarantor, maker or endorser of the Indebtedness or sums realized from
collateral security furnished by any of them upon any of their indebtedness or
obligations to Lender as Lender, in its sole discretion, may determine, whether
or not such indebtedness or obligations relate to the Indebtedness; and (h)
refund at any time, at Lender's sole discretion, any payment received by Lender
in respect of any Indebtedness, and payment to Lender of the amount so refunded
shall be fully guaranteed hereby even though prior thereto this Continuing
Guaranty may have been cancelled or surrendered by Lender; all without in any
way diminishing, releasing or discharging the liability of the undersigned
hereunder.

               4. Waiver of Defenses. Upon default of Debtor in respect of any
Indebtedness, Lender may, at its option and without notice to the undersigned,
proceed directly against the undersigned to collect and recover the full amount
of the liability hereunder, or any portion thereof, and the undersigned waives
any right to require Lender to: (a) proceed against Debtor, or any other
guarantor, endorser, or other person whomsoever; (b) proceed against or exhaust
any collateral security given to or held by Lender in connection with the
Indebtedness; (c) give notice of the terms, time and place of any public or
private sale of any real or personal property security for the Indebtedness or
any other guaranty of the Indebtedness; or (d) pursue any other remedy in
Lender's power whatsoever. A separate action or actions may be brought and
prosecuted against the undersigned whether or not action is brought against
Debtor and/or any other guarantor, maker or endorser of the Indebtedness and
whether Debtor and/or any other guarantor, maker or endorser be joined in any
such action or actions; and the undersigned waives the benefit of any statute of
limitations affecting the liability hereunder or the enforcement hereof, and
agrees that any payment of any Indebtedness or other act which shall toll any
statute of limitations applicable thereto shall similarly operate to toll such
statute of limitations applicable to the liability hereunder.

               5. Right to Dispose of Security; Impairment of Rights. The
undersigned hereby authorizes and empowers Lender in its sole discretion,
without any notice or demand to

                                       2
<PAGE>   3

the undersigned whatsoever and without affecting the liability of the
undersigned hereunder, to exercise any right or remedy which Lender may have
available to it, including, but not limited to, judicial foreclosure, exercise
of rights of power of sale without judicial action, or taking a deed or an
assignment in lieu of foreclosure as to any collateral security for the
Indebtedness, whether real, personal or intangible property, and the undersigned
hereby waives any defense to the recovery by Lender against the undersigned of
any deficiency after such action notwithstanding any impairment or loss of any
right of reimbursement or subrogation or other right or remedy against Debtor,
or any other guarantor, maker or endorser, or against any collateral security
for the Indebtedness or for any guaranty of the Indebtedness. In furtherance of
the foregoing, and as provided in California Civil Code Section 2856, the
undersigned waives all rights and defenses that the undersigned may have by
reason of the Indebtedness being or becoming secured by real property. This
means, among other things: (a) Lender may collect from the undersigned without
first foreclosing on any real or personal property collateral pledged by Debtor;
(b) the amount of the Indebtedness may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price; and (c) Lender may collect from the undersigned even
if Lender, by foreclosing on the real property collateral, has destroyed any
right the undersigned may have to collect from Debtor. This is an unconditional
and irrevocable waiver of any rights and defenses the undersigned may have
because the Indebtedness is secured by real property. These rights and defenses
include, but are not limited to, any rights or defenses based upon Sections
580a, 580b, 580d, or 726 of the California Code of Civil Procedure. The
undersigned waives all rights and defenses arising out of an election of
remedies by Lender, even though that election of remedies, such as nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the undersigned's rights of subrogation and reimbursement against Debtor by the
operation of Section 580d of the California Code of Civil Procedure or
otherwise. Without limiting the foregoing and without waiving the benefits of
California Commercial Code Section 9501, the undersigned specifically agrees
that action maintained by Lender for the appointment of any receiver, trustee or
custodian to collect rents, issues or profits or to obtain possession of any
property shall not constitute an "action" within the meaning of Section 726 of
the California Code of Civil Procedure.

               6. Additional Waivers. The undersigned waives any defense arising
by reason of any disability or other defense of Debtor or by reason of the
cessation from any cause whatsoever of the liability of Debtor or by reason of
any act or omission of Lender or others which directly or indirectly results in
or aids the discharge or release of Debtor or any Indebtedness or any security
in respect thereof by operation of law or otherwise. The obligations hereunder
shall be enforceable without regard to the validity, regularity or
enforceability of any of the Indebtedness or any of the documents related
thereto, any other guaranty of the Indebtedness or any collateral security
documents securing any of the Indebtedness or securing any other guaranty of the
Indebtedness. No exercise by Lender of, and no omission of Lender to exercise,
any power or authority recognized herein and no impairment or suspension of any
right or remedy of Lender against Debtor, any other guarantor, maker or endorser
or any collateral security shall in any way suspend, discharge, release,
exonerate or otherwise affect any of the undersigned's obligations hereunder or
any collateral security furnished by the undersigned or give to the undersigned
any right of recourse against Lender. The undersigned specifically agrees that
the failure of Lender: (a) to perfect any lien on or security interest in any
property

                                       3
<PAGE>   4

heretofore or hereafter given by Debtor or any guarantor, maker or endorser to
secure payment of the Indebtedness or of any guaranty of the Indebtedness, or to
record or file any document relating thereto or (b) to file or enforce a claim
against the estate (either in administration, bankruptcy or other proceeding) of
Debtor, any guarantor, maker or endorser, shall not in any manner whatsoever
terminate, diminish, exonerate or otherwise affect the liability of the
undersigned hereunder.

               7. Additional Indebtedness; Duty of Undersigned. Additional
Indebtedness may be created from time to time at the request of Debtor and
without further authorization from or notice to the undersigned even though
Debtor's financial condition may deteriorate since the date hereof. In giving
Lender this Continuing Guaranty, the undersigned is an affiliate of Debtor and
is thoroughly acquainted with Debtor's financial condition and waives the right,
if any, to require Lender to disclose to the undersigned any information it may
now have or hereafter acquire concerning Debtor's character, credit, collateral,
financial condition or other matters. The undersigned has established adequate
means to obtain from Debtor on a continuing basis financial and other
information pertaining to Debtor's business and affairs, and assumes the
responsibility for being and keeping informed of the financial and other
conditions of Debtor and of all circumstances bearing upon the risk of
nonpayment of the Indebtedness hereunder which diligent inquiry would reveal. If
Debtor is a corporation or a partnership, Lender need not inquire into the
powers of Debtor or the authority of its officers, directors, partners or agents
acting or purporting to act in its behalf, and any Indebtedness created in
reliance upon the purported exercise of such power or authority is hereby
guaranteed. All Indebtedness of Debtor to Lender heretofore, now or hereafter
created shall be deemed to have been granted at the undersigned's special
insistence and request and in consideration of and in reliance upon this
Continuing Guaranty.

               8. Notices, Demands, Etc. Lender shall be under no obligation
whatsoever to make or give to the undersigned, and the undersigned hereby
waives, notice of acceptance of this Continuing Guaranty, diligence, all rights
of setoff and counterclaim against Lender, all demands, presentments, protests,
notices of protests, notices of nonperformance, notices of dishonor, and all
other notices of every kind or nature, including notice of the existence,
creation or incurring of any new or additional Indebtedness.

               9. Subordination. Except as otherwise provided in this paragraph,
any indebtedness of Debtor now or hereafter owing to the undersigned is hereby
subordinated to all Indebtedness of Debtor to Lender heretofore, now or
hereafter created, whether before or after notice of termination hereof, and
without the prior consent of Lender shall not be paid in whole or in part nor
will the undersigned accept any payment of or on account of any such
indebtedness at any time after the occurrence and during the continuance of an
Event of Default and while the undersigned remains liable under this Continuing
Guaranty. At the request of Lender, after the occurrence and during the
continuance of an Event of Default, Debtor shall pay to Lender all or any part
of such subordinated indebtedness and any amount so paid to Lender at its
request shall be applied to payment of the Indebtedness. Each payment on the
indebtedness of Debtor to the undersigned received in violation of any of the
provisions hereof shall be deemed to have been received by the undersigned as
trustee for Lender and shall be paid over to Lender immediately

                                       4
<PAGE>   5

on account of the Indebtedness, but without otherwise affecting in any manner
the undersigned's liability under any of the provisions of this Continuing
Guaranty. The undersigned agrees to file all claims against Debtor in any
bankruptcy or other proceeding in which the filing of claims is required by law
in respect of any indebtedness of Debtor to the undersigned, and Lender shall be
entitled to all of the undersigned's rights thereunder. If for any reason the
undersigned fails to file such claim at least thirty (30) days prior to the last
date on which such claim should be filed, Lender, as the undersigned's
attorney-in-fact, is hereby authorized to do so in the undersigned's name or, in
Lender's discretion, to assign such claim to and cause proof of claim to be
filed in the name of Lender's nominee. In all such cases, whether in
administration, bankruptcy or otherwise, the person or persons authorized to pay
such claim shall pay to Lender the full amount payable on the claim in the
proceeding, and to the full extent necessary for that purpose the undersigned
hereby assigns to Lender all the undersigned's rights to any payments or
distributions to which the undersigned otherwise would be entitled. If the
amount so paid is greater than the undersigned's liability hereunder, Lender
will pay the excess amount to the party entitled thereto.

               10. Delivery of Financial Statements and Tax Returns. The
undersigned agrees to deliver to Lender any and all information required by
Lender.

               11. Revival of Guaranty. If any payments of money or transfers of
property made to Lender by Debtor, any other guarantor, any maker or any
endorser should for any reason subsequently be declared to be fraudulent (within
the meaning of any state or federal law relating to fraudulent conveyances),
preferential or otherwise voidable or recoverable in whole or in part for any
reason (herein after collectively called "voidable transfers") under the
Bankruptcy Code or any other federal or state law and Lender is required to
repay or restore any such voidable transfer, or the amount or any portion
thereof, then as to any such voidable transfer or the amount repaid or restored
and all costs and expenses (including attorneys' fees) of Lender related
thereto, the undersigned's liability hereunder shall automatically be revived,
reinstated and restored and shall exist as though such voidable transfer had
never been made to Lender. In the event Lender shall have returned this
Continuing Guaranty to the undersigned and subsequently be required to restore
or repay any such voidable transfer, the amount thereof, or any portion thereof,
the undersigned shall remain liable as provided herein to the same extent as if
this Continuing Guaranty had not been returned to the undersigned.

               12. Delays; Cumulative Remedies. No failure or delay by Lender in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise of any other right,
power or privilege. All rights and remedies of Lender in respect of the
Indebtedness, the collateral security for the Indebtedness or for this or any
other guaranty, or under any document in respect of any of the foregoing, shall
be cumulative and may be exercised singly or concurrently, and are not exclusive
of any other right or remedy permitted by law or in equity.

               13. Complete Agreement; Modification; Termination. This
Continuing Guaranty contains all the terms and conditions of the agreement
between Lender and the

                                       5
<PAGE>   6

undersigned and is an integrated agreement. No evidence of any term or agreement
not set forth herein shall be admissible in any dispute involving this
Continuing Guaranty. None of the terms or provisions of this Continuing Guaranty
may be waived, altered, modified or amended, except by an instrument in writing
duly executed by the party to be charged thereby. This Continuing Guaranty may
be terminated upon receipt by Lender of written notice of its termination;
provided, however, that termination shall not apply to any Indebtedness created
prior to the time such notice of termination becomes effective as provided
herein. Such notice of termination shall be personally delivered to an officer
of Lender at the originating office of Lender or mailed by registered or
certified mail, return receipt requested, postage prepaid, and addressed to
Lender at the originating office. In any event, notice of termination shall not
be effective until twelve o'clock noon, Pacific Standard or Daylight Savings
time, as the case may be, on the Lender business day succeeding the date such
notice is actually received by Lender as above provided. If the originating
office of Lender is not in existence at the time notice of termination is
desired to be given, then such notice shall be given in the manner above
provided by delivering the same to an officer of any other office of Lender.
Upon receipt of such termination as above provided, this Continuing Guaranty
shall terminate as and to the extent provided herein.

               14. Understanding of Waivers. The undersigned warrants and agrees
that the waivers set forth in this Continuing Guaranty are made with full
knowledge of their significance and consequences, and that under the
circumstances, the waivers are reasonable and not contrary to public policy or
law. If any of said waivers are determined to be contrary to any applicable law
or public policy, such waivers shall be effective only to the maximum extent
permitted by law. Should any one or more provisions of this Continuing Guaranty
be determined to be illegal or unenforceable, all other provisions hereof shall
nevertheless remain effective.

               15. Binding Effect. This Continuing Guaranty shall remain in full
force and effect and be binding in accordance with its terms upon the
undersigned, and the representatives, executors, administrators, heirs,
successors and assigns of the undersigned, and inure to the benefit of Lender,
its successors, endorsees, transferees and assigns, until the obligations and
liabilities of the undersigned hereunder shall have been finally satisfied by
payment in full.

               16. Attorneys' Fees. The undersigned agrees without demand to pay
to and reimburse Lender for all reasonable costs, attorneys' fees and other
expenses which Lender expends or incurs in the enforcement of any right relating
to any Indebtedness, including collection thereof, or in the enforcement of this
Continuing Guaranty.

               17. Unlimited Liability. The obligations of the undersigned
hereunder shall be in addition to any obligations of the undersigned under any
other guaranties of Indebtedness of Debtor to Lender or of any other person to
Lender heretofore given or hereafter to be given to Lender unless such other
guaranties are expressly modified or terminated in writing. The liability of the
undersigned to Lender shall at all times be deemed to be the aggregate liability
of the undersigned under the terms of this Continuing Guaranty and of any other
guaranties heretofore or hereafter given by the undersigned to Lender and not
expressly terminated or modified in writing.

                                       6
<PAGE>   7

               18. Governing Law; Jurisdiction; WAIVER OF JURY TRIAL; Venue.
This Continuing Guaranty and the rights, obligations and liabilities hereunder
shall be governed by, and shall be construed and interpreted in accordance with,
the laws of the State of California. The undersigned agrees that any legal
action or proceeding arising out of or relating to this Continuing Guaranty may
be instituted in the Superior Court of the State of California in the County of
Los Angeles, or in the United States District Court for the Central District of
California, at Lender's discretion. THE UNDERSIGNED AND LENDER MUTUALLY WAIVE
THE RIGHT TO A JURY TRIAL. By the execution and delivery of this Continuing
Guaranty, the undersigned irrevocably and unconditionally submits to the
jurisdiction of such courts in any such action or proceeding and waives any
objection relating to the basis for personal or in rem jurisdiction or to venue
which it may now or hereafter have in any such suit, action or proceeding.

               19. Captions. The captions or titles of the paragraphs of this
Continuing Guaranty are for convenience of reference only and shall not define
or limit any of the provisions hereof.

               20. Security. This Continuing Guaranty is secured by the
"Collateral" as defined in that certain General Security Agreement of even date
herewith by the undersigned in favor of Lender.

                      RECEIPT OF A TRUE COPY OF THIS CONTINUING GUARANTY IS
HEREBY ACKNOWLEDGED BY THE UNDERSIGNED.

               This Continuing Guaranty is made this 16th day of May, 2000.

                                     ELITE INFORMATION GROUP, INC.,
                                     a Delaware corporation

                                     By:
                                     Name:
                                     Title:

                                       7

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