<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) THE SECURITIES EXCHANGE ACT OF
1934
COMMISSION FILE NUMBER 0-21761
GEOTEL COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-3194255
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
900 CHELMSFORD STREET, TOWER II, 12TH FLOOR
LOWELL, MASSACHUSETTS 01851
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (978) 275-5100
NO CHANGE SINCE LAST REPORT
(Former name, former address and former fiscal year, if changed since
last report)
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 such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
CLASS OUTSTANDING AT MAY 5, 1999
Common Stock, $0.01 par value 27,200,258 Shares
============================= ===========================
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GEOTEL COMMUNICATIONS CORPORATION
INDEX TO FORM 10-Q
PAGE NO.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Balance Sheets as of March 31, 1999 and
December 31, 1998........................................... 3
Consolidated Statements of Income for the three
months ended March 31, 1999 and 1998........................ 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998........................ 5
Notes to Consolidated Financial Statements...................... 6-7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8-13
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds....................... 13
Item 6 Exhibits and Reports on Form 8-K................................ 13
Signature....................................................... 14
Exhibit 10.1 Executive Change of Control
Agreement - John McMahon.................................... 15
Exhibit 10.2 Executive Change of Control
Agreement - Jane Eisenberg.................................. 21
Exhibit 10.3 Executive Change of Control
Agreement - Judith Kelly.................................... 27
Exhibit 27.1 Financial Data Schedule........................... 33
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEOTEL COMMUNICATIONS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $59,784 $54,359
Accounts receivable, net................................. 10,169 8,401
Prepaid expenses and other current assets................ 3,324 2,557
Deferred income taxes.................................... 2,103 1,906
------- -------
Total current assets..................................... 75,380 67,223
------- -------
Property and equipment, net.............................. 4,465 4,159
Deferred income taxes.................................... 1,284 1,205
Other assets............................................. 1,476 1,385
------- -------
Total assets............................................. $82,605 $73,972
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 660 $ 1,261
Accrued expenses......................................... 3,216 2,307
Accrued compensation and related accruals................ 3,970 3,088
Income taxes payable..................................... 633 997
Deferred revenue......................................... 9,858 10,562
------- -------
Total current liabilities................................ 18,337 18,215
------- -------
Stockholders' equity:
Preferred stock.......................................... -- --
Common stock............................................. 278 275
Additional paid-in capital............................... 52,502 48,356
Retained earnings........................................ 13,062 8,837
Unearned compensation.................................... (1,527) (1,664)
------- -------
64,315 55,804
Less treasury stock, at cost............................. (47) (47)
------- -------
Total stockholders' equity............................... 64,268 55,757
------- -------
Total liabilities and stockholders' equity............... $82,605 $73,972
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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GEOTEL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 1998
------- -------
<S> <C> <C>
Revenues:
Software license................................. $13,263 $ 6,149
Services and other............................... 4,605 1,629
------- -------
Total revenues................................... 17,868 7,778
------- -------
Cost of Revenues:
Cost of software license......................... 222 185
Cost of services and other....................... 2,515 1,439
------- -------
Total cost of revenues........................... 2,737 1,624
------- -------
Gross profit........................................ 15,131 6,154
------- -------
Operating Expenses:
Research and development......................... 2,831 1,346
Sales and marketing.............................. 4,858 2,396
General and administrative....................... 1,353 781
------- -------
Total operating expenses......................... 9,042 4,523
------- -------
Income from operations.............................. 6,089 1,631
Other income........................................ 671 534
------- -------
Income before income taxes.......................... 6,760 2,165
Provision for income taxes.......................... 2,535 812
------- -------
Net income.......................................... $ 4,225 $ 1,353
======= =======
Net income per common share:
Basic earnings .................................. $ 0.16 $ 0.05
======= =======
Diluted earnings ................................ $ 0.14 $ 0.05
======= =======
Weighted average number of common and common
equivalent shares outstanding:
Basic shares..................................... 26,615 25,858
======= =======
Diluted shares................................... 29,566 27,711
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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GEOTEL COMMUNICATIONS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 4,225 $ 1,353
Adjustments to reconcile net income to net
cash provided by (used in)operating activities:
Depreciation and amortization.............................. 301 227
Equity compensation........................................ 137 59
Deferred income taxes...................................... (276) --
Tax benefit from employees' exercise of stock options...... 2,540 --
Changes in operating assets and liabilities:
Accounts receivable, net................................... (1,768) (919)
Prepaid expenses and other current assets.................. (767) (328)
Accounts payable........................................... (601) 104
Accrued expenses, compensation and other
current liabilities .................................... 1,791 486
Income taxes payable....................................... (364) (248)
Deferred revenue........................................... (704) 1,341
-------- -------
Net cash provided by operating activities.............. 4,514 2,075
------- -------
Cash flows used in investing activities:
Purchases of property and equipment........................ (698) (1,055)
------- -------
Cash flows from financing activities:
Proceeds from option exercises............................. 1,609 165
------- -------
Net increase in cash and cash equivalents....................... 5,425 1,185
Cash and cash equivalents, beginning of period.................. 54,359 40,428
------- -------
Cash and cash equivalents, end of period........................ $59,784 $41,613
======= =======
</TABLE>
The accompanying footnotes are an integral part of these consolidated financial
statements.
5
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GEOTEL COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the three months ended March 31,
1999 and the related footnote information are unaudited and have been prepared
on a basis substantially consistent with the 1998 audited consolidated financial
statements, and in the opinion of management include all adjustments (consisting
of only normal recurring adjustments) necessary for fair presentation of the
results of this interim period. These statements should be read in conjunction
with the consolidated financial statements and related notes for the year ended
December 31, 1998 included in the Company's Amended Form 10-K. The results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the results to be expected for the entire year.
GeoTel Communications Corporation ("GeoTel or the "Company") is a leading
global provider of customer-interaction software solutions for mission-critical
call center applications. The Company's full-featured Computer Telephony
Integration (CTI) products create an enterprise-wide customer-interaction
platform by integrating multi-vendor networks, automatic call distributors,
voice response systems, databases, desktop applications and other resources.
Solutions are provided for single-site, multi-site and network service provider
deployments. Principal operations of the Company commenced during 1995. The
Company currently derives substantially all of its revenues from software
licenses and related services. The Company markets its products in the United
States through a direct sales force which is complemented by strategic sales
channels, selected resellers and international partners.
On August 14, 1998, the Board of Directors approved a two-for-one stock
split of the Company's common stock, to be effected in the form of a 100% stock
dividend, payable to shareholders of record on August 31, 1998. All references
to number of shares and to per share information in the financial statements and
related footnotes have been adjusted to reflect the stock split on a retroactive
basis.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. COMPUTATION OF INCOME PER SHARE
Net income per basic common share is computed by dividing net income by the
weighted average number of common shares outstanding for the period which
includes vested restricted common stock. Net income per diluted common share is
computed based on the weighted average number of common and dilutive common
equivalent shares outstanding during each period. Common equivalent shares
consist of the Company's common stock options and unvested restricted common
stock outstanding in the period. The calculation of per share earnings is as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 1998
------- -------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
Basic:
Net income............................................. $ 4,225 $ 1,353
======= =======
Weighted average common shares outstanding............. 26,615 25,858
======= =======
Net income per share................................... $ 0.16 $ 0.05
======= =======
Diluted:
Net income............................................. $ 4,225 $ 1,353
======= =======
Weighted average common shares outstanding............. 26,615 25,858
Weighted Common stock equivalents...................... 2,951 1,853
------- -------
Total weighted average shares and
equivalents outstanding ............................ 29,566 27,711
======= =======
Net income per share................................... $ 0.14 $ 0.05
======= =======
</TABLE>
6
<PAGE> 7
3. SUBSEQUENT EVENT
Pursuant to an Agreement and Plan of Merger and Reorganization dated as of
April 12, 1999 (the "Merger Agreement") by and among Cisco Systems, Inc.
("Cisco"), GeoTel and Geronimo Merger Corp., a wholly-owned subsidiary of Cisco
("Merger Sub"), Merger Sub will merge (the "Merger") with and into GeoTel, with
the separate corporate existence of Merger Sub ceasing and GeoTel continuing as
the surviving corporation and a wholly-owned subsidiary of Cisco. At the
effective time of the Merger (the "Effective Time"), each share of GeoTel's
common stock issued and outstanding immediately prior to the Effective Time will
be converted automatically into the right to receive .5138 shares of Cisco's
common stock. The value of the transaction based on the trading price of Cisco's
common stock on the date of the Merger Agreement, is approximately $2 billion.
The consummation of the Merger is subject to various conditions precedent,
including (i) approval of the Merger Agreement by the stockholders of GeoTel and
(ii) expiration or early termination of the waiting period required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
GeoTel has granted Cisco an option to acquire 3,000,000 shares of its
common stock, at an exercise price of $60.50 per share, exercisable upon the
occurrence of certain events. In addition, certain stockholders of GeoTel have
agreed to vote in favor of the approval of the Merger Agreement.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying consolidated
financial statements for the periods specified and the associated notes. Further
reference should be made to the Company's Amended Form 10-K for the year ended
December 31, 1998.
OPERATING RESULTS
The following table presents selected unaudited financial information as
the percentage of the Company's total revenues represented by each item, for the
Company's quarters ended March 31, 1999 and 1998. The Company's operating
results for any one quarter are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
----- -----
<S> <C> <C>
Revenues
Software license ............................ 74.2% 79.1%
Services and other .......................... 25.8 20.9
----- -----
Total revenues .............................. 100.0 100.0
Cost of Revenues:
Cost of software license .................... 1.2 2.4
Cost of services and other .................. 14.1 18.5
----- -----
Total cost of revenues ...................... 15.3 20.9
----- -----
Gross profit ..................................... 84.7 79.1
----- -----
Operating Expenses:
Research and development .................... 15.8 17.3
Sales and marketing ......................... 27.2 30.8
General and administrative .................. 7.6 10.0
----- -----
Total operating expenses .................... 50.6 58.1
----- -----
Income from operations ........................... 34.1% 21.0%
==== ====
</TABLE>
REVENUES
Total revenues for the first quarter of 1999 increased by 129.7% to
$17,868,000 from $7,778,000 for the first quarter of 1998. Software license
revenue during the first quarter of 1999 increased by 115.7% to $13,263,000 from
$6,149,000 for the first quarter of 1998. Software license revenue as a
percentage of total revenues decreased to 74.2% from 79.1%, as a result of the
revenue mix, as services and other revenues increased at a greater rate. The
Company believes that the increase in software license revenue is attributable
rate to several factors including continued market acceptance of the Company's
products indicated by an increase in unit sales; an increase in the size of the
Company's direct sales force; expansion of the sales channels through the
addition of selected resellers and international partners, and an increase in
the Company's customer base. Services and other revenue for the first quarter
of 1999 increased by 182.7% to $4,605,000 from $1,629,000 for the first
quarter of 1998 and increased as a percentage of total revenues to 25.8% from
20.9%. In the first quarter of 1999, maintenance revenue, installation services
revenue, and professional services and other revenue represented 48.2%, 22.6%
and 29.2%, respectively, of services and other revenue. In the first quarter of
1998, maintenance revenue, installation services revenue and professional
services and other revenue represented 51.7%, 40.0%, and 8.3%, respectively, of
services and other revenue. Services and other revenue increased in dollars and
as a percentage of total revenues in the first quarter of 1999, primarily as a
result of an increase in the Company's customer base and professional service
revenue. The Company anticipates that maintenance revenue will increase in
dollars as the Company's customer base increases. Installation services revenue
will vary based upon software license revenue. Professional services and other
revenue are non-recurring in nature and will fluctuate in dollars and as a
percentage of total revenues from quarter to quarter. The Company performs
professional services primarily in situations where such work will result in
additional software license revenue.
International revenues for the first quarter of 1999 increased 241.3% to
$7,675,000 from $2,249,000 for the first quarter of 1998 and increased as a
percentage of total revenues to 43.0% from 28.9%. International revenues in 1999
and 1998 were derived from eleven and three customers, respectively. The Company
believes that it will continue to derive a significant portion of its total
revenues from international sales. To date, the Company's international revenues
have been denominated in U.S. currency.
8
<PAGE> 9
A significant portion of the Company's total revenues to date has been
derived from a limited number of customers. Revenues attributable to the five
largest customers accounted for approximately 58.2% and 60.3% of the Company's
total revenues for the quarters ended March 31, 1999 and 1998, respectively. For
the quarters ended March 31, 1999 and 1998, three and two customer(s)
individually represented more than ten percent of the Company's total revenue,
respectively. The Company expects that it will continue to be dependent upon a
limited number of customers for a significant portion of its revenues in future
periods.
COST OF REVENUES
Cost of software license. Cost of software license consists principally of
development costs and the costs of interface cards. Cost of software license for
the first quarter of 1999 increased by 20% to $222,000 from $185,000 for the
first quarter of 1998. Cost of software license as a percentage of software
license revenue were 1.7% and 3.0% for the first quarters of 1999 and 1998,
respectively. The decrease as a percentage of software license revenue for the
first quarter of 1999 compared to the 1998 period is due to the decrease in
development costs associated with development revenues. The Company believes
that in future periods, the percentage of cost of software licenses will range
from 1% to 5% of software license revenue but may increase depending upon the
size of any development related contracts.
Cost of services and other. Cost of services and other revenue consists
principally of the costs incurred to provide installation, professional
services, maintenance and training services. The expenses incurred to provide
these services are comprised primarily of personnel (salaries, fringe benefits
and recruiting fees), travel and facility costs. Cost of services and other
revenue for the first quarter of 1999 increased by 74.8% to $2,515,000 from
$1,439,000 for the first quarter of 1998. Cost of services and other revenue as
a percentage of services and other revenue were 54.6% and 88.3% for the first
quarters of 1999 and 1998, respectively. The increase in dollars were primarily
due to an increase in personnel and travel costs. These costs increased as a
result of the increase in the number of customers under maintenance contracts.
The decrease as a percentage of services and other revenues is due to
professional service revenue having increased at a faster rate than the other
components of services and other revenue. The Company believes that in future
periods, cost of services and other revenue as a percentage of services and
other revenue will fluctuate significantly based upon the mix of the services
provided. The Company plans to continue to invest in its infrastructure both
domestically and internationally and as a result, the Company anticipates that
the cost of services and other revenue will increase in dollars and as a
percentage of services and other revenue. The Company believes that in future
periods, cost of services and other revenue will range from 70% to 80% of
services and other revenue.
OPERATING EXPENSES
Research and development. Research and development expenses consist
principally of personnel and facility costs. Research and development expenses
for the first quarter of 1999 increased by 110.3% to $2,831,000 from $1,346,000
for the first quarter of 1998. Research and development expenses as a percentage
of total revenue were 15.8% and 17.3% for the first quarters of 1999 and 1998,
respectively. The decrease as a percentage of total revenue for the periods was
primarily the result of the Company's significant revenue growth. The increase
in absolute dollars for the periods was the result of increases in personnel and
related facility costs. The major product development efforts in the first
quarter of 1999 related to the development of interfaces for international
carriers, computer telephony integration for the desktop and enhancements to the
Company's existing products. The Company plans to continue to introduce
enhancements to its existing products and new products that can be sold to
existing and new customers. The Company is currently working on several projects
that will be designed to enhance its products in the areas of desktop
integration, computer telephony integration, and for use with the Internet and
Intranets. The Company is also enhancing its products to work in international
markets and is working to expand its portfolio of international carrier network
interfaces. The Company anticipates that research and development expenses will
continue to increase in absolute dollars and range from 15% to 20% of total
revenue in the foreseeable future.
Sales and Marketing. Sales and marketing expenses consist principally of
personnel (salaries, commissions and fringe benefits), travel, trade shows,
promotional expenses and facility costs. Sales and marketing expenses for the
first quarter of 1999 increased by 102.8% to $4,858,000 from $2,396,000 for the
first quarter of 1998. Sales and marketing expenses as a percentage of total
revenues were 27.2% and 30.8% for the first quarters of 1999 and 1998,
respectively. The decrease as a percentage of total revenue for the periods was
primarily the result of the Company's significant revenue growth. The increase
in absolute dollars in 1999 was primarily comprised of increases in personnel,
travel, facility and commission costs. The increase in personnel costs was the
result of adding sales personnel to the direct sales force. Direct sales
personnel headcount increased to fifty-one at the end of the first quarter of
1999 from twenty-seven at the end of the first quarter of 1998. The commission
expense increase was attributable to higher sales. The Company anticipates that
sales and marketing expenses will increase in absolute dollars but not vary
significantly as a percentage of total revenue in the foreseeable future as the
Company continues its international expansion and increases its reseller
channel. The Company anticipates that sales and marketing expenses will range
from 25% to 35% in the foreseeable future.
9
<PAGE> 10
General and Administrative. General and administrative expenses consist
principally of personnel costs for administrative, finance, information systems,
human resources and general management personnel, as well as legal expenses and
facility costs. General and administrative expenses for the first quarter of
1999 increased by 73.2% to $1,353,000 from $781,000 for the first quarter of
1998. General and administrative expenses as a percentage of total revenues were
7.6% and 10.0% for the first quarters of 1999 and 1998, respectively. The
decrease as a percentage of total revenue for the periods was primarily the
result of the Company's significant revenue growth. General and administrative
expenses have increased in absolute dollars due to an increase in personnel,
travel, information technology and legal costs. These costs have increased due
to an increase in employees and the growth of the business. The Company
anticipates that general and administrative expenses will increase in absolute
dollars but continue as a percentage of total revenues ranging from 7% to 10% in
the foreseeable future.
INTEREST INCOME
Interest income of $671,000 and $534,000 for the first quarters of 1999 and
1998, respectively, resulted from investments of the Company's cash balances.
PROVISION FOR INCOME TAXES
The Company's effective tax rate for the first quarter of 1999 and 1998 was
approximately 37.5%. The Company expects the effective tax rate to remain at
approximately 37.5% throughout the remainder of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's cash and cash equivalents, accounts
receivable and working capital increased to $59,784,000, $10,169,000 and
$57,043,000, respectively, from $54,359,000, $8,401,000 and $49,008,000,
respectively, at December 31, 1998.
The Company generated cash in the amount of $4,514,000 from operations in
the first quarter of 1999 compared to $2,075,000 in the corresponding period of
1998. The improvement in cash flow from operations is primarily the result of
tax benefits from employees' exercise of stock options, timing of paying
accruals netted against growth of accounts receivable and more profitable
operations as a result of higher revenues.
The Company used cash in investing activities of $698,000 and $1,055,000 in
the first quarters of 1999 and 1998, respectively. Capital expenditures
decreased due to an increase in leasehold improvements for expanded office space
in 1998 while no similar expansion occurred in 1999. The Company generated cash
from financing activities of $1,609,000 and $165,000 in the first quarters of
1999 and 1998, respectively. Financing activities consisted of exercises of
employee stock options.
As of March 31, 1999, the Company had no material commitments for capital
expenditures.
The Company believes that existing cash balances and funds generated from
operations will be sufficient to meet its anticipated liquidity and working
capital requirements for at least the next twelve months.
IMPACT ON THE YEAR 2000 ISSUE
The Company is aware of the issues associated with the programming code in
existing information technology systems as well as non-information technology
systems (such as building security, voice mail, telephone, electricity, water
and other systems containing embedded microprocessors) as the millennium (Year
2000) approaches. The Company has designed its products to, and has commenced
efforts to ensure that the information technology systems and non-information
technology systems will function properly beyond 1999. Based on an assessment of
its products to date, the Company believes that its current products are
compatible with Year 2000 functionality. The Company's Year 2000 compliance
evaluation stage has been completed and the Company does not foresee a material
impact on its business or operating results from the Year 2000 problem. Before
any new products are introduced, the Company will continue to evaluate the
compatibility with Year 2000 functionality.
Based on its assessments to date, the Company believes it will not
experience any material disruption as a result of the Year 2000 issues. However,
if certain critical third-party providers, such as those providing electricity,
water or telephone service, experience difficulties resulting in disruption of
service to the Company, a shut down of the Company's operations at individual
facilities could occur for the duration of the disruption. There can be no
assurance that further assessment of the Company's products and internal
10
<PAGE> 11
systems and applications will not indicate that additional Company efforts to
assure Year 2000 compliance are necessary, and such efforts may be costly and
may divert the Company's resources from other product development or
infrastructure improvement programs. The foregoing could result in the loss of
or delay in market acceptance of the Company's products and services, increased
service and warranty costs to the Company or payment by the Company of
compensatory or other damages. Further, there can be no assurance that the
systems operated by other companies upon which the Company relies will be Year
2000 compliant on a timely basis. The Company's business, operating results and
financial condition could be materially adversely affected by the failure of the
Company's products and its internal systems and applications to properly operate
or manage data beyond 1999. Costs incurred in the compliance effort have been
immaterial and are expensed as incurred. The Company estimates that the
remediation stage was more than 90% complete at March 31, 1999 and that the
remaining stages for the Year 2000 Program are on schedule to be completed by
June 30, 1999. Currently, the Company has not developed a contingency plan
should its products or internal systems fail to operate after the Year 2000 but
plans to develop such a contingency plan during the second and third quarters of
1999.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company does not provide forecasts of future financial performance of
the Company. However, from time to time, information provided by the Company or
statements made by its employees may contain "forward-looking" information that
involves risks and uncertainties. In particular, statements contained in this
Form 10-Q that are not historical facts (including, but not limited to,
statements concerning services and other revenue, anticipated international
revenues, anticipated cost of revenues levels, anticipated operating expense
levels and such expense levels relative to the Company's total revenues, product
development plans and liquidity and working capital requirements) constitute
forward-looking statements and are made under the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
of operations and financial condition have varied and may in the future vary
significantly from those stated in any forward-looking statements. Factors that
may cause such differences include, without limitation, the risks, uncertainties
and other information discussed below, as well as the accuracy of the Company's
internal estimates of revenue and operating expense levels. Each of these
factors, and others, are discussed from time to time in the filings made by the
Company with the Securities and Exchange Commission.
The Company's future results are subject to substantial risks and
uncertainties. The Company has experienced substantial revenue growth since the
ICR product introduction and first achieved profitability in the first quarter
of 1996. However, due to the Company's limited operating history there can be no
assurance that such revenue growth and profitability will continue in the future
on a quarterly or annual basis. Future operating results will depend on many
factors, including the demand for the Company's products, the level of product
and price competition, the Company's success in expanding its direct sales
force, indirect distribution channels and international sales and the ability of
the Company to develop and market new products and control costs. In order to
support the growth of its business, the Company plans to significantly expand
its level of operations. Due to the anticipated increase in the Company's
operating expenses caused by this expansion, the Company's operating results
will be adversely affected if revenues do not increase. The Company currently
expects to derive substantially all of its revenues from software licenses of
its products and related services and that it will continue to be dependent upon
a limited number of customers for a significant portion of its revenues in
future periods. Although demand for the Company's products have grown in recent
quarters, the market for solutions focused on enhanced voice and data routing
technology that enable customer-oriented companies to manage customer
interaction in a mission critical call center environment is still an emerging
market. The Company's future financial performance will depend in large part on
continued growth in the number of organizations adopting software applications
to enhance their responsiveness to customers and the number of applications
developed for use in these environments.
The Company's quarterly operating results may in the future vary
significantly depending on factors such as: i) increased competition from
Genesys, Lucent Technologies, and Aspect Telecommunications Corporation.
Additional competitors, including other ACD providers, such as Northern
Telecommunications, Inc. and Rockwell International Corporation and technology
solutions companies such as IBM and IEX Corporation, may enter the market by
enhancing their proprietary private network solutions or by entering into
arrangements with the interexchange carriers. Additionally, the Company competes
with traditional CTI vendors in the single site segment of the marketplace. This
portion of the market is highly fragmented with no one vendor representing a
large share of the market. Most ACD vendors offer CTI solutions specific to
their ACD offering. In addition other companies offer CTI products that
integrate with third-party ACD products, ii) the timing of new product
announcements and changes in pricing policies by the Company and its
competitors, iii) market acceptance of new and enhanced versions of the
Company's products, iv) the size and timing of significant orders, v) order
cancellations by customers, vi) the lengthy sales cycles of the Company's
products, vii) changes in operating expenses, viii) changes in Company strategy,
ix) personnel changes, x) the Company's ability to manage growth, if any,
including the continued improvement in its financial and management controls and
growth of its employee work force and xi) general economic factors. Product
revenues are also difficult to forecast because the market for the Company's
products is rapidly evolving,
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<PAGE> 12
and the Company's sales cycle varies substantially from customer to customer. A
significant portion of the Company's revenues and operating income has been, and
is expected to continue to be, derived from software licensing fees from a
limited number of customers. Variability in the timing of such license fees may
cause material fluctuations in the Company's business, operating results and
financial condition. The Company's products and services generally require
capital expenditures by customers as well as the commitment of resources to
implement the Company's products. Accordingly, the Company is substantially
dependent on its customers' decisions as to the timing and level of such
expenditures and resource commitments. In addition, the Company typically
realizes a significant portion of license revenues in the last month of a
quarter. As a result, the magnitude of quarterly fluctuations may not become
evident until late in, or after the close of, a particular quarter. The
Company's expenses are based in part on the Company's expectations as to future
revenue levels and to a large extent are fixed in the short-term. If revenues do
not meet expectations, the Company's business, operating results and financial
condition are likely to be materially adversely affected. In particular, because
only a small portion of the Company's expenses varies with revenues, net income
may be disproportionately affected by a reduction in revenues. 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. Due to the foregoing factors, it is likely that in some
future quarter the Company's revenue or operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's common stock could be materially adversely affected.
If the merger is not completed for any reason, GeoTel may be subject to a
number of material risks, including the following: (i) GeoTel may be required to
pay Cisco a termination fee of $55 million, (ii) the option granted to Cisco by
GeoTel may become exercisable, under certain circumstances, (iii) the price of
GeoTel common stock may decline to the extent that the current market price of
GeoTel common stock reflects a market assumption that the merger will be
completed and (iv) costs related to the merger, such as legal, accounting and
financial advisor fees, must be paid even if the merger is not completed. In
addition, GeoTel's customers may, in response to the announcement of the merger,
delay or defer purchasing decisions. Any delay or deferral in purchasing
decisions by GeoTel customers could have a material adverse effect on GeoTel's
business, regardless of whether or not the merger is ultimately completed.
Similarly, current and prospective GeoTel employees may experience uncertainty
about their future role with Cisco until Cisco's strategies with regard to
GeoTel are announced and executed. This may adversely affect GeoTel's ability to
attract and retain key management, sales, marketing and technical personnel.
Further, if the merger is terminated and GeoTel's board of directors determines
to seek another merger or business combination, there can be no assurance that
it will be able to find a partner willing to pay an equivalent or more
attractive price than that which would be paid in the merger. In addition, while
the merger agreement is in effect and subject to certain limited exceptions,
GeoTel is prohibited from soliciting, initiating or encouraging or entering into
certain extraordinary transactions, such as merger, sale of assets or other
business combination, with any party other than Cisco. Furthermore, if the
merger agreement is terminated and Cisco exercises its option to purchase GeoTel
common stock, GeoTel would not be able to account for future transactions as a
"pooling of interest."
International sales accounted for approximately 43.0% and 28.9% of the
Company's revenues for the first quarter of 1999 and 1998, respectively. As part
of its business strategy, the Company is seeking opportunities to expand its
products into international markets. The Company believes that such expansion is
important to the Company's ability to continue to grow and to market its
products and services. In marketing its products and services internationally,
however, the Company will face new competitors, some of whom may have
established strong relationships with carriers. In addition, the ability of the
Company to enter the international markets will be dependent upon the Company's
ability to integrate its products with local proprietary networks in foreign
countries. There can be no assurance that the Company will be successful in
integrating its products with these proprietary networks or marketing or
distributing its products abroad or that, if the Company is successful, its
international revenues will be adequate to offset the expense of establishing
and maintaining international operations. Additionally, there can be no
assurance that the Company will be successful in integrating its product in
international markets and such revenues are subject to a number of risks
including compliance with regulatory requirements, export restrictions and
controls, international trade barriers, protection of intellectual property
rights, management of international operations, collection of receivables,
political instability, currency exchange rate fluctuation and potentially
adverse tax consequences. To date, the Company has limited experience in
marketing and distributing its products internationally. In addition to the
uncertainty as to the Company's ability to establish an international presence,
there are certain difficulties and risks inherent in doing business on an
international level, such as compliance with regulatory requirements and changes
in these requirements, export restrictions, export controls relating to
technology, tariffs and other trade barriers, protection of intellectual
property rights, difficulties in staffing and managing international operations,
longer payment cycles, problems in collecting accounts receivable, political
instability, fluctuations in currency exchange rates and potentially adverse tax
consequences. There can be no assurance that one or more of such factors will
not have a material adverse effect on any international operations established
by the Company and, consequently, on the Company's business, operating results
and financial condition. Additional information on the factors that could affect
the Company's financial results is included in the Company's 1998 Amended Form
10-K, which has been filed with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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<PAGE> 13
Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments. The Company does not participate in derivative
financial instruments, other financial instruments for which the fair value
disclosure would be required under SFAS No. 107, or derivative commodity
instruments. All of the Company's investments are in short-term,
investment-grade commercial paper and money market accounts that are carried at
fair value on the Company's books. Accordingly, the Company has no quantitative
information concerning the market risk of participating in such investments.
Primary Market Risk Exposures. The Company's primary market risk exposures
are in the areas of interest rate risk and foreign currency exchange rate risk.
The Company's investment portfolio of cash equivalents is subject to interest
rate fluctuations, but the Company believes this risk is immaterial due to the
short-term nature of these investments. Substantially all of the Company's
business outside the United States is conducted in U.S. dollar-denominated
transactions, whereas the Company's operating expenses in Europe and Australia
are denominated in local currency. The Company has no foreign exchange
contracts, option contracts, or other foreign hedging arrangements. However, the
Company believes the operating expenses of its foreign operations are
immaterial, and therefore any associated market risk is unlikely to have a
material adverse effect on the Company's business, results of operations, or
financial condition.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On November 20, 1996, the Company's Registration Statement of Form S-1
(File No. 333-13263) became effective. The net proceeds from the offering were
approximately $26,704,000. To date, the Company has utilized approximately
$756,000 of the proceeds to repay borrowings under its outstanding equipment
lines of credit. The Company has not used any of the remaining proceeds from the
effective date (November 20, 1996) through March 31, 1999. No payments were made
to directors, officers (except in their capacity as employees of the Company) or
to persons owning ten percent or more of any class of equity securities of the
Company, or to the affiliates of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 10.1 Executive Change of Control Agreement- John McMahon
Exhibit 10.2 Executive Change of Control Agreement - Jane Eisenberg
Exhibit 10.3 Executive Change of Control Agreement - Judith Kelly
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K on April 22, 1999 relating
to an agreement and plan of merger and reorganization by and among Cisco
Systems, Inc. and the Company which was approved by the Board of Directors.
13
<PAGE> 14
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.
GEOTEL COMMUNICATIONS CORPORATION
(Registrant)
May 10, 1999 /s/ Timothy J. Allen
---------------------------------
Timothy J. Allen
Vice President of Finance,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and
Chief Accounting Officer)
14
<PAGE> 1
EXHIBIT 10.1
EXECUTIVE CHANGE IN CONTROL AGREEMENT
AGREEMENT made as of this 12th day of March, 1999 by and between GeoTel
Communications Corporation, a Delaware corporation with its principal place of
business in Littleton, Massachusetts (the "Company") and John McMahon (the
"Executive").
1. PURPOSE. The Company considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. The Board of Directors of the Company (the "Board")
recognizes, however, that, as is the case with many corporations, the
possibility of a Change in Control (as defined in Section 2 hereof) exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. Therefore, the
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control. Nothing in this Agreement shall be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the Company.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to
have occurred in any one of the following events:
(a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "Act")) becomes a
"beneficial ownee' (as such term is defined in Rule 13d-3 promulgated under the
Act) (other than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then outstanding securities;
(b) persons who, as of September 30, 1996, constituted the
Company's Board (the "Incumbent Board") cease for any reason, including without
limitation as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to September 30, 1996 whose
election was approved by at least a majority of the directors then comprising
the Incumbent Board shall, for purposes of this Agreement, be considered a
member of the Incumbent Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other entity, other
than (i) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
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<PAGE> 2
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a re-capitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 50% of the combined
voting power of the Company's then outstanding securities, or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
3. TERMINATING EVENT. A "Terminating Event" shall mean any of the
events provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the Executive
with the Company for any reason other than (A) a wilful act of dishonesty by the
Executive with respect to any matter involving the Company or any subsidiary or
affiliate, or (B) conviction of the Executive of a crime involving moral
turpitude, or (C) the gross or wilful failure by the Executive to substantially
perform the Executive's duties with the Company, or (D) the failure by the
Executive to perform his full-time duties with the Company by reason of his
death, disability or retirement; provided, however, that a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control. For purposes of clause (D) of this
Section 3(a), Section 6 and Section 7(b) hereof, "disability" shall mean the
Executive's incapacity due to physical or mental illness which has caused the
Executive to be absent from the full-time performance of his duties with the
Company for a period of six (6) consecutive months if the Company shall have
given the Executive a Notice of Termination and, within thirty (30) days after
such Notice of Termination is given, the Executive shall not have returned to
the full time performance of his duties. For purposes of clause (D) of this
Section 3(a) and Section 5, "retirement" shall mean termination of the
Executive's employment in accordance with the Company's retirement policy, not
including early retirement, generally applicable to its salaried employees, as
in effect immediately prior to the Change in Control, or in accordance with any
retirement arrangement established with respect to the Executive with the
Executive's express written consent;
(b) termination by the Executive of the Executive's employment
with the Company for Good Reason. Good Reason shall mean the occurrence of any
of the following events:
(i) a materially adverse change, not consented to by the
Executive, in the nature or scope of the Executive's responsibilities,
authorities, powers, functions or duties from the responsibilities, authorities,
powers, exercised by the Executive immediately prior to the Change in Control;
or functions or duties
(ii) a reduction in the Executive's annual base salary and
bonuses as in effect on the date hereof or as the same may be increased from
time to time except for across-the-board salary or bonuses reductions similarly
affecting all or substantially all management employees; or
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<PAGE> 3
(iii) the relocation of the Company's offices at which the
Executive is principally employed immediately prior to the date of a Change in
Control to a location more than twenty-five (25) miles from such offices, or the
requirement by the Company for the Executive to be based anywhere other than the
Company's offices at such location, except for required travel on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations immediately prior to the Change in Control.
4. SEVERANCE PAYMENT. In the event a Terminating Event occurs
within twelve (12) months after a Change in Control,
(a) the Company shall continue to pay to the Executive an amount
equal to the Executive's base salary as in effect on the Date of Termination (as
such term is defined in Section 7(b)) for a period of six (6) months following
the Date of Termination;
(b) the Executive shall continue to be covered under the medical
benefit plans maintained by the Company on the Date of Termination, at no
additional charge to the Executive, for a period of six (6) months following the
Date of Termination; and
(c) the Company shall pay to the Executive all reasonable legal
and arbitration fees and expenses incurred by the Executive in successfully
obtaining or enforcing any right or benefit provided by this Agreement.
5. Term. This Agreement shall take effect on the date first set
forth above and shall terminate upon the earlier of (a) the termination by the
Company of the employment of the Executive because of (A) a wilful act of
dishonesty by the Executive with respect to any matter involving the Company or
any subsidiary or affiliate, or (B) commission of the Executive of a crime
punishable as a felony, or (C) the gross or wilful failure by the Executive to
perform in a satisfactory manner a substantial portion of the Executive's duties
with the Company, or (D) the failure by the Executive to perform his full-time
duties with the Company by reason of his death, disability (as defined in
Section 3(a)) or retirement (as defined in Section 3(a)), (b) the resignation or
termination of the Executive for any reason prior to a Change in Control or (c)
the resignation of the Executive after a Change in Control for any reason other
than the occurrence of any of the events enumerated in Section 3(b)(i)-(iii) of
this Agreement.
6. WITHHOLDING. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Company under applicable law.
7. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) NOTICE OF TERMINATION. After a Change in Control and during
the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with this Section 7. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and the Date of Termination.
17
<PAGE> 4
Further, a Notice of Termination pursuant to one or more of the clauses (A)
through (C) of Section 3(a) hereof is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board (after reasonable notice to
the Executive and an opportunity for the Executive, accompanied by the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the termination met the criteria set forth in one or
more of clauses (A) through (C) of Section 3(a) hereof.
(b) DATE OF TERMINATION. "Date of Termination," with respect to
any purported termination of the Executive's employment after a Change in
Control and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination. In the case of a
termination by the Company other than a termination pursuant to one or more of
clauses (A) through (C) of Section 3(a) (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given.
(c) NO MITIGATION. The Company agrees that, if the Executive's
employment by the Company is terminated during the, term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
4(a), (b) and (c) hereof. Further, the amount of any payment provided for in
this Agreement shall not be reduced by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) SETTLEMENT AND ARBITRATION OF DISPUTES. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
be settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 7(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof
8. ASSIGNMENT; PRIOR AGREEMENT. Neither the Company nor the
Executive may make any assignment of this Agreement of any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party, and without such consent any attempted
18
<PAGE> 5
transfer shall be null and void and of no effect. This Agreement shall inure to
the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
In the event of the Executive's death after a Terminating Event but prior to the
completion by the Company of all payments due him under Section 4(a), (b) and
(c) of this Agreement, the Company shall continue such payments to the
Executive's beneficiary designated in writing to the Company prior to his death
(or to his estate, if the Executive fails to make such designation).
9. ENFORCEABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
11. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Company, or to the Company at its main office, attention of the Board
of Directors.
12. EFFECT ON OTHER PLANS. An election by the Executive to resign
after a Change in Control and a Terminating Event under the provisions of this
Agreement shall not be deemed a voluntary termination of employment by the
Executive for the purpose of interpreting the provisions of any of the Company's
non-competition agreements, non-disclosure agreements, benefit plans, programs
or policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies and except
that the Executive shall have no rights to any severance benefits under any
severance pay plan.
13. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
14. GOVERNING LAW. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of the Commonwealth
of Massachusetts.
15. OBLIGATIONS OF SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will use its best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
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<PAGE> 6
16. ELECTION OF REMEDIES. An election by the Executive to resign
after a Change in Control and a Terminating Event under the provisions of this
Agreement shall not constitute a breach by the Executive of any employment
agreement between the Company and the Executive, and shall be deemed a
termination of employment by the Company without cause for the purpose of
determining the Executive's right to receive any benefits or cash compensation
under any such employment agreement. Nothing in this Agreement shall be
construed to limit the rights of the Executive under any employment agreement
the Executive may then have with the Company, provided, however, that if there
is a Terminating Event under Section 3 hereof after a Change in Control, the
Executive may elect either to receive the severance payment provided under
Section 4 or such base salary and cash compensation as the Executive may be
entitled to receive under any employment agreement, but may not elect to receive
both. The foregoing proviso shall apply only to base salary and cash
compensation to which the Executive may be entitled under any employment
agreement and shall not be construed to limit the rights of the Executive to
receive any benefits under such employment agreement other than base salary or
cash compensation in the event that the Executive elects to receive severance
payments under this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ John C. Thibault
-----------------------------------
Name: John C. Thibault
Title:
/s/ John McMahon
---------------------------------------
John McMahon
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<PAGE> 1
EXHIBIT 10.2
EXECUTIVE CHANGE IN CONTROL AGREEMENT
AGREEMENT made as of this 12th day of March, 1999 by and between GeoTel
Communications Corporation, a Delaware corporation with its principal place of
business in Littleton, Massachusetts (the "Company") and Jane Eisenberg (the
"Executive").
1. PURPOSE. The Company considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. The Board of Directors of the Company (the "Board")
recognizes, however, that, as is the case with many corporations, the
possibility of a Change in Control (as defined in Section 2 hereof) exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders. Therefore, the
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control. Nothing in this Agreement shall be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the Company.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to
have occurred in any one of the following events:
(a) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "Act")) becomes a
"beneficial ownee' (as such term is defined in Rule 13d-3 promulgated under the
Act) (other than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power of the Company's then outstanding securities;
(b) persons who, as of September 30, 1996, constituted the
Company's Board (the "Incumbent Board") cease for any reason, including without
limitation as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to September 30, 1996 whose
election was approved by at least a majority of the directors then comprising
the Incumbent Board shall, for purposes of this Agreement, be considered a
member of the Incumbent Board;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other entity, other
than (i) a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the voting
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<PAGE> 2
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a re-capitalization of the Company (or similar transaction) in which
no "person" (as hereinabove defined) acquires more than 50% of the combined
voting power of the Company's then outstanding securities, or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
3. TERMINATING EVEN. A "Terminating Event" shall mean any of the
events provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the Executive
with the Company for any reason other than (A) a wilful act of dishonesty by the
Executive with respect to any matter involving the Company or any subsidiary or
affiliate, or (B) conviction of the Executive of a crime involving moral
turpitude, or (C) the gross or wilful failure by the Executive to substantially
perform the Executive's duties with the Company, or (D) the failure by the
Executive to perform his full-time duties with the Company by reason of his
death, disability or retirement; provided, however, that a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control. For purposes of clause (D) of this
Section 3(a), Section 6 and Section 7(b) hereof, "disability" shall mean the
Executive's incapacity due to physical or mental illness which has caused the
Executive to be absent from the full-time performance of his duties with the
Company for a period of six (6) consecutive months if the Company shall have
given the Executive a Notice of Termination and, within thirty (30) days after
such Notice of Termination is given, the Executive shall not have returned to
the fulltime performance of his duties. For purposes of clause (D) of this
Section 3(a) and Section 5, "retirement" shall mean termination of the
Executive's employment in accordance with the Company's retirement policy, not
including early retirement, generally applicable to its salaried employees, as
in effect immediately prior to the Change in Control, or in accordance with any
retirement arrangement established with respect to the Executive with the
Executive's express written consent;
(b) termination by the Executive of the Executive's employment
with the Company for Good Reason. Good Reason shall mean the occurrence of any
of the following events:
(i) a materially adverse change, not consented to by the
Executive, in the nature or scope of the Executive's responsibilities,
authorities, powers, functions or duties from the responsibilities, authorities,
powers, functions or duties exercised by the Executive immediately prior to the
Change in Control; or functions or duties
(ii) a reduction in the Executive's annual base salary and
bonuses as in effect on the date hereof or as the same may be increased from
time to time except for across-the-board salary or bonuses reductions similarly
affecting all or substantially all management employees; or
22
<PAGE> 3
(iii) the relocation of the Company's offices at which the
Executive is principally employed immediately prior to the date of a Change in
Control to a location more than twenty-five (25) miles from such offices, or the
requirement by the Company for the Executive to be based anywhere other than the
Company's offices at such location, except for required travel on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations immediately prior to the Change in Control.
4. SEVERANCE PAYMENT. In the event a Terminating Event occurs
within twelve (12) months after a Change in Control,
(a) the Company shall continue to pay to the Executive an amount
equal to the Executive's base salary as in effect on the Date of Termination (as
such term is defined in Section 7(b)) for a period of six (6) months following
the Date of Termination;
(b) the Executive shall continue to be covered under the medical
benefit plans maintained by the Company on the Date of Termination, at no
additional charge to the Executive, for a period of six (6) months following the
Date of Termination; and
(c) the Company shall pay to the Executive all reasonable legal
and arbitration fees and expenses incurred by the Executive in successfully
obtaining or enforcing any right or benefit provided by this Agreement.
5. TERM. This Agreement shall take effect on the date first set
forth above and shall terminate upon the earlier of (a) the termination by the
Company of the employment of the Executive because of (A) a wilful act of
dishonesty by the Executive with respect to any matter involving the Company or
any subsidiary or affiliate, or (B) commission of the Executive of a crime
punishable as a felony, or (C) the gross or wilful failure by the Executive to
perform in a satisfactory manner a substantial portion of the Executive's duties
with the Company, or (D) the failure by the Executive to perform his full-time
duties with the Company by reason of his death, disability (as defined in
Section 3(a)) or retirement (as defined in Section 3(a)), (b) the resignation or
termination of the Executive for any reason prior to a Change in Control or (c)
the resignation of the Executive after a Change in Control for any reason other
than the occurrence of any of the events enumerated in Section 3(b)(i)-(iii) of
this Agreement.
6. WITHHOLDING. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
7. NOTICE AND DATE OF TERMINATION; DISPUTES; ETC.
(a) NOTICE OF TERMINATION. After a Change in Control and during
the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party in accordance
with this Section 7. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and the Date of Termination.
23
<PAGE> 4
Further, a Notice of Termination pursuant to one or more of the clauses (A)
through (C) of Section 3(a) hereof is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than a majority of the entire
membership of the Board at a meeting of the Board (after reasonable notice to
the Executive and an opportunity for the Executive, accompanied by the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the termination met the criteria set forth in one or
more of clauses (A) through (C) of Section 3(a) hereof.
(b) DATE OF TERMINATION. "Date of Termination," with respect to
any purported termination of the Executive's employment after a Change in
Control and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination. In the case of a
termination by the Company other than a termination pursuant to one or more of
clauses (A) through (C) of Section 3(a) (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given.
(c) NO MITIGATION. The Company agrees that, if the Executive's
employment by the Company is terminated during the, term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section
4(a), (b) and (c) hereof. Further, the amount of any payment provided for in
this Agreement shall not be reduced by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) SETTLEMENT AND ARBITRATION OF DISPUTES. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
be settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 7(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof
8. ASSIGNMENT; PRIOR AGREEMENT. Neither the Company nor the Executive
may make any assignment of this Agreement of any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.
24
<PAGE> 5
In the event of the Executive's death after a Terminating Event but prior to the
completion by the Company of all payments due him under Section 4(a), (b) and
(c) of this Agreement, the Company shall continue such payments to the
Executive's beneficiary designated in writing to the Company prior to his death
(or to his estate, if the Executive fails to make such designation).
9. ENFORCEABILITY. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. WAIVER. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
11. NOTICES. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Company, or to the Company at its main office, attention of the Board
of Directors.
12. EFFECT ON OTHER PLANS. An election by the Executive to resign
after a Change in Control and a Terminating Event under the provisions of this
Agreement shall not be deemed a voluntary termination of employment by the
Executive for the purpose of interpreting the provisions of any of the Company's
non-competition agreements, non-disclosure agreements, benefit plans, programs
or policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies and except
that the Executive shall have no rights to any severance benefits under any
severance pay plan.
13. AMENDMENT. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
14. GOVERNING LAW. This is a Massachusetts contract and shall be
construed under and be governed in all respects by the laws of the Commonwealth
of Massachusetts.
15. OBLIGATIONS OF SUCCESSORS. In addition to any obligations
imposed by law upon any successor to the Company, the Company will use its best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
25
<PAGE> 6
16. ELECTION OF REMEDIES. An election by the Executive to resign
after a Change in Control and a Terminating Event under the provisions of this
Agreement shall not constitute a breach by the Executive of any employment
agreement between the Company and the Executive, and shall be deemed a
termination of employment by the Company without cause for the purpose of
determining the Executive's right to receive any benefits or cash compensation
under any such employment agreement. Nothing in this Agreement shall be
construed to limit the rights of the Executive under any employment agreement
the Executive may then have with the Company, provided, however, that if there
is a Terminating Event under Section 3 hereof after a Change in Control, the
Executive may elect either to receive the severance payment provided under
Section 4 or such base salary and cash compensation as the Executive may be
entitled to receive under any employment agreement, but may not elect to receive
both. The foregoing proviso shall apply only to base salary and cash
compensation to which the Executive may be entitled under any employment
agreement and shall not be construed to limit the rights of the Executive to
receive any benefits under such employment agreement other than base salary or
cash compensation in the event that the Executive elects to receive severance
payments under this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ John C. Thibault
-----------------------------------
Name: John C. Thibault
Title:
/s/ Jane Eisenberg
---------------------------------------
Jane Eisenberg
26
<PAGE> 1
EXHIBIT 10.3
EXECUTIVE CHANGE IN CONTROL AGREEMENT
-------------------------------------
AGREEMENT made as of this 1st day of December, 1997 by and between GeoTel
Communications Corporation, a Delaware corporation with its principal place of
business in Lowell, Massachusetts (the "Company") and Judith A. Kelly (the
"Executive").
1. PURPOSE. The Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel.
The Board of Directors of the Company (the "Board") recognizes, however, that,
as is the case with many corporations, the possibility of a Change in Control
(as defined in Section 2 hereof) exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders. Therefore, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control. Nothing in
this Agreement shall be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the employ
of the Company.
2. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred in any one of the following events:
(a) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934 (the "Act")) becomes a "beneficial owner"
(as such term is defined in Rule 13d-3 promulgated under the Act) (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities;
(b) persons who, as of September 30, 1996, constituted the Company's Board
(the "Incumbent Board") cease for any reason, including without limitation as a
result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board, provided that any person becoming a
director of the Company subsequent to September 30, 1996 whose election was
approved by at least a majority of the directors then comprising the Incumbent
Board shall, for purposes of this Agreement, be considered a member of the
Incumbent Board;
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation or other entity, other than (i) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
27
<PAGE> 2
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction in which no
"person" (as hereinabove defined) acquires more than 50% of the combined voting
power of the Company's then outstanding securities, or
(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
3. TERMINATING EVENT. A "Terminating Event" shall mean any of the events
provided in this Section 3 occurring subsequent to a Change in Control as
defined in Section 2:
(a) termination by the Company of the employment of the Executive with the
Company for any reason other than (A) a willful act of dishonesty by the
Executive with respect to any matter involving the Company or any subsidiary or
affiliate, or (B) conviction of the Executive of a crime involving moral
turpitude, or (C) the gross or willful failure by the Executive to substantially
perform the Executive's duties with the Company, or (D) the failure by the
Executive to perform his full-time duties with the Company by reason of his
death, disability or retirement; provided, however, that a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control. For purposes of clause (D) of this
Section 3(a), Section 6 and Section 7(b) hereof, "disability" shall mean the
Executive's incapacity due to physical or mental illness which has caused the
Executive to be absent from the full-time performance of his duties with the
Company for a period of six (6) consecutive months if the Company shall have
given the Executive a Notice of Termination and, within thirty (30) days after
such Notice of Termination is given, the Executive shall not have returned to
the full-time performance of his duties. For purposes of clause (D) of this
Section 3(a) and Section 5, "retirement" shall mean termination of the
Executive's employment in accordance with the Company's retirement policy, not
including early retirement, generally applicable to its salaried employees, as
in effect immediately prior to the Change in Control, or in accordance with any
retirement arrangement established with respect to the Executive with the
Executive's express written consent;
(b) termination by the Executive of the Executive's employment with the
Company for Good Reason. Good Reason shall mean the occurrence of any of the
following events:
(i) a materially adverse change, not consented to by the Executive, in
the nature or scope of the Executive's responsibilities, authorities, powers,
functions or duties from the responsibilities, authorities, powers, functions or
duties exercised by the Executive immediately prior to the Change in Control; or
(ii) a reduction in the Executive's annual base salary and bonuses as
in effect on the date hereof or as the same may be increased from time to time
except for across-the-board
28
<PAGE> 3
salary or bonuses reductions similarly affecting all or substantially all
management employees; or
(iii) the relocation of the Company's offices at which the Executive
is principally employed immediately prior to the date of a Change in Control to
a location more than twenty-five (25) miles from such offices, or the
requirement by the Company for the Executive to be based anywhere other than the
Company's offices at such location, except for required travel on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations immediately prior to the Change in Control.
4. SEVERANCE PAYMENT. In the event a Terminating Event occurs within twelve
(12) months after a Change in Control,
(a) the Company shall continue to pay to the Executive an amount equal to
the Executive's base salary as in effect on the Date of Termination (as such
term is defined in Section 7(b)) for a period of six (6) months following the
Date of Termination;
(b) the Executive shall continue to be covered under the medical benefit
plans maintained by the Company on the Date of Termination, at no additional
charge to the Executive, for a period of six (6) months following the Date of
Termination; and
(c) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in successfully
obtaining or enforcing any right or benefit provided by this Agreement.
5. TERM. This Agreement shall take effect on the date first set forth above
and shall terminate upon the earlier of (a) the termination by the Company of
the employment of the Executive because of (A) a willful act of dishonesty by
the Executive with respect to any matter involving the Company or any subsidiary
or affiliate, or (B) commission of the Executive of a crime punishable as a
felony, or (C) the gross or wilful failure by the Executive to perform in a
satisfactory manner a substantial portion of the Executive's duties with the
Company, or (D) the failure by the Executive to perform his full-time duties
with the Company by reason of his death, disability (as defined in Section 3(a))
or retirement (as defined in Section 3(a)), (b) the resignation or termination
of the Executive for any reason prior to a Change in Control or (c) the
resignation of the Executive after a Change in Control for any reason other than
the occurrence of any of the events enumerated in Section 3(b)(i)-(iii) of this
Agreement.
6. WITHHOLDING. All payments made by the Company under this Agreement shall
be net of any tax or other amounts required to be withheld by the Company under
applicable law.
7. NOTICE AND DATE OF TERMINATION: DISPUTES; ETC.
(a) NOTICE OF TERMINATION. After a Change in Control and during the term of
this Agreement, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the
29
<PAGE> 4
other party hereto in accordance with this Section 7. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and the Date of
Termination. Further, a Notice of Termination pursuant to one or more of the
clauses (A) through (C) of Section 3(a) hereof is required to include a copy of
a resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board at a meeting of the Board (after reasonable
notice to the Executive and an opportunity for the Executive, accompanied by the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the termination met the criteria set forth in one or
more of clauses (A) through (C) of Section 3(a) hereof.
(b) DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination. In the case of a
termination by the Company other than a termination pursuant to one or more of
clauses (A) through (C) of Section 3(a) (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given.
(c) NO MITIGATION. The Company agrees that, if the Executive's employment
by the Company is terminated during the term of this Agreement, the Executive is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 4(a), (b)
and (c) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) SETTLEMENT AND ARBITRATION OF DISPUTES. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the
Commonwealth of Massachusetts by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the American
Arbitration Association in the City of Boston. Such arbitration shall be
conducted in the City of Boston in accordance with the rules of the American
Arbitration Association for commercial arbitrations, except with respect to the
selection of arbitrators which shall be as provided in this Section 7(d).
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
30
<PAGE> 5
8. ASSIGNMENT; PRIOR AGREEMENTS. Neither the Company nor the Executive may
make any assignment of this Agreement of any interest herein, by operation of
law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due him under Section 4(a), (b) and (c) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
9. ENFORCEABILITY. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
11. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board of
Directors.
12. EFFECT ON OTHER PLANS. An election by the Executive to resign after a
Change in Control and a Terminating Event under the provisions of this Agreement
shall not be deemed a voluntary termination of employment by the Executive for
the purpose of interpreting the provisions of any of the Company's
non-competition agreements, non-disclosure agreements, benefit plans, programs
or policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies and except
that the Executive shall have no rights to any severance benefits under any
severance pay plan.
13. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Company.
14. GOVERNING, LAW. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.
31
<PAGE> 6
15. OBLIGATIONS OF SUCCESSORS. In addition to any obligations imposed by
law upon any successor to the Company, the Company will use its best efforts to
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
16. ELECTION OF REMEDIES. An election by the Executive to resign after a
Change in Control and a Terminating Event under the provisions of this Agreement
shall not constitute a breach by the Executive of any employment agreement
between the Company and the Executive, and shall be deemed a termination of
employment by the Company without cause for the purpose of determining the
Executive's right to receive any benefits or cash compensation under any such
employment agreement. Nothing in this Agreement shall be construed to limit the
rights of the Executive under any employment agreement the Executive may then
have with the Company, provided, however, that if there is a Terminating Event
under Section 3 hereof after a Change in Control, the Executive may elect either
to receive the severance payment provided under Section 4 or such base salary
and cash compensation as the Executive may be entitled to receive under any
employment agreement, but may not elect to receive both. The foregoing proviso
shall apply only to base salary and cash compensation to which the Executive may
be entitled under any employment agreement and shall not be construed to limit
the rights of the Executive to receive any benefits under such employment
agreement other than base salary or cash compensation in the event that the
Executive elects to receive severance payments under this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company by its duly authorized officer, and by the Executive, as of the
date first above written.
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ John C. Thibault
-----------------------------
Name: John C. Thibault
Title: President & CEO
/s/ Judith A. Kelly
-----------------------------
Judith A. Kelly
32
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10-Q FOR THE QUARTER ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FILING.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
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<SECURITIES> 0
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<ALLOWANCES> 700
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<PP&E> 7,675
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0
0
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<SALES> 17,868
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<CGS> 2,737
<TOTAL-COSTS> 9,042
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