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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
----------------------------- ----------------
COMMISSION FILE NUMBER 1-9189
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CHEYENNE SOFTWARE, INC.
- -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3175893
- ----------------------------------- -------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3 EXPRESSWAY PLAZA, ROSLYN HEIGHTS, NY 11577
- --------------------------------------------- -------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (516) 465-4000
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
SERIES A JUNIOR PARTICIPATING PREFERRED
STOCK PURCHASE RIGHTS AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT OF THIS FORM 10-K. [ ]
AS OF SEPTEMBER 17, 1996, THE AGGREGATE MARKET VALUE OF COMMON STOCK HELD
BY NON-AFFILIATES OF THE REGISTRANT, COMPUTED BY REFERENCE TO THE CLOSING PRICE
($20.25) AS REPORTED BY THE AMERICAN STOCK EXCHANGE ON SEPTEMBER 17, 1996 WAS
$756,238,558.
THE AGGREGATE NUMBER OF REGISTRANT'S OUTSTANDING SHARES ON SEPTEMBER 17,
1996 WAS 37,698,236 SHARES OF COMMON STOCK, $0.01 PAR VALUE (EXCLUDING 2,343,900
SHARES OF TREASURY STOCK).
DOCUMENTS INCORPORATED BY REFERENCE:
REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR ITS 1996 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON DECEMBER 12, 1996 IS INCORPORATED HEREIN BY REFERENCE
INTO PART III OF THIS FORM 10-K.
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CHEYENNE SOFTWARE, INC. FORM 10-K
ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1996
TABLE OF CONTENTS
PART I
Item 1 - Business .............................................................3
Item 2 - Properties ..........................................................15
Item 3 - Legal Proceedings ...................................................15
Item 4 - Submission of Matters to a Vote of Security Holders .................17
PART II
Item 5 - Market for Registrant's Common Stock and Related Stockholder Matters.17
Item 6 - Selected Financial Data .............................................19
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................20
Item 8 - Financial Statements and Supplementary Data .........................30
Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..............................30
PART III
Item 10- Directors and Executive Officers of the Registrant...................30
Item 11- Executive Compensation...............................................30
Item 12- Security Ownership of Certain Beneficial Owners
and Management......................................................30
Item 13- Certain Relationships and Related Transactions.......................30
PART IV
Item 14- Exhibits, Financial Statement Schedules, and
Reports on Form 8-K................................................31
Signatures...................................................................35
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P A R T I
ITEM 1. BUSINESS
Cheyenne Software, Inc., a Delaware corporation formed in 1983, ("Cheyenne", or
the "Company") is engaged in the development, sale, and support of software
products for use in desktop and networked personal computer ("PC") environments,
including Local Area Network ("LAN") and Wide Area Network ("WAN") applications.
Cheyenne's product strategy is to provide storage management, security, and
communications software for desktops and distributed enterprise networks.
The Company's products provide key services to administrators and users of
desktop computers and PC-based networks, helping them to access, move, share,
and protect data in ways that enhance the productivity of the individual and the
enterprise. Aimed at automating operations and minimizing downtime, Cheyenne's
storage management and security products include backup and disaster recovery
capabilities as well as virus detection and purging utilities. The Company is
also expanding its communications offerings -- starting with facsimile and
adding voice and data transmission -- to comprise full telephony services.
By selling through distributors, to Original Equipment Manufacturers ("OEMs"),
Value Added Resellers ("VARs"), and end-users, Cheyenne has succeeded in
establishing a large worldwide user community. The Company made its first direct
venture into non-U.S. markets in 1991 by initiating sales operations in Europe,
and it has since established itself as a strong competitor in the global market
by opening sales offices and support facilities in strategically selected sites
throughout the world. In addition to its Corporate Headquarters in Roslyn
Heights, New York, the Company now has European Headquarters near Paris,
Japanese Headquarters in Tokyo and Pacific Rim (excluding Japan) Headquarters in
Singapore.
COMPANY DEVELOPMENT
When it was founded in 1983, the Company's business was to develop, sell, and
support custom software for vertical markets such as healthcare and finance.
The Company operates on a June 30 fiscal year (sometimes referred to herein as
"FY"). In fiscal year 1988, the Company introduced ARCserve-Registered
Trademark- for NetWare, the industry's first client/server-based storage
management product for the growing LAN environment. This innovative technology
quickly established Cheyenne as the world leader in network storage management
for the PC-LAN market.
During the early 1990's, the Company experienced significant growth, capturing a
large share of the market for NetWare storage management products. In late
fiscal year 1993, the Company embarked on a major product diversification
program, expanding its product mix to address the fast-growing market areas of
security and communications. At the same time, the Company began developing
products for other important networking environments.
In fiscal year 1994, Cheyenne introduced its anti-virus product,
InocuLAN-Registered Trademark-, and its first communications product, FAXserve,
both for NetWare. To further strengthen its communications product line, the
Company in May 1994 purchased Bit Software, Inc. and its product which
integrates FAX, data, and voice communication into a single application. In
fiscal year 1995, Cheyenne introduced its first Windows NT products, ARCserve
for Windows NT and InocuLAN for Windows NT, and its first UNIX product,
ARCserve/Open for UNIX.
Also in fiscal year 1995, Cheyenne broadened its storage management product line
with the acquisitions of products from NETstor, Inc. and NetFRAME Systems, Inc.,
which extended the Company's offerings beyond file based backup and recovery
into the new areas of hierarchical storage management ("HSM") and high speed
fault tolerant, image backup. In fiscal year 1996, the Company acquired the net
assets of Chili Pepper Software, Inc. ("Chili Pepper"), a manufacturer of HSM
solutions for desktop personal computers. Throughout fiscal year 1996,
Cheyenne's continued investments in storage management enabled it to capture a
larger share of the Windows NT backup market, and its Windows NT-based business
grew from less than $3 million in revenue and 6,000 units in fiscal year 1995 to
approximately $30 million in revenue and 85,000 units in fiscal year 1996.
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Cheyenne's commitment to product diversification continued in June of 1996 when
the Company entered the desktop, consumer, and SOHO (small office/home office)
markets with storage management and anti-virus software for personal computers
running Windows 95 and Windows 3.1.
CORPORATE STRUCTURE AND ORGANIZATION
In July 1995, Cheyenne established three divisions, each differentiated by the
operating system platform for its products: a NetWare division, a New Territory
(Windows NT and Windows 95) division, and a UNIX division. Each division has
its own engineering and product marketing groups, located in or near the
Company's New York headquarters. By focusing on solutions which target each of
the major platforms, the Company seeks to align its activities to address the
needs of its distribution channels, strategic partners, and end-user customers.
Cheyenne's worldwide sales organization includes customer service, with
globally-distributed resources dedicated to localizing products, services, and
marketing for each of the major geographical areas.
MAJOR PRODUCTS AND MARKET POSITION
The increased dependence of distributed enterprises - and of businesses in
general - upon electronic communications has propelled the fast growth of the
computer networking industry. At the same time, the wide acceptance of personal
computers in homes, offices, and public areas has led to greater need for
protection of information assets. Ongoing technology advancements have enabled
the ubiquitous use of sophisticated communication devices for the transmission
of voice, data, and images. Cheyenne has capitalized on all three of these
trends, with continual introductions of leading-edge network storage management
products, virus-arresting utilities, and productivity-enhancing communication
tools.
Understanding the need for application software which operates on multiple
stand-alone platforms as well as in heterogeneous computer environments,
Cheyenne offers its products for most of the major PC operating systems,
including Novell's NetWare, Microsoft's Windows NT, leading versions of UNIX,
and popular desktop systems such as Windows, Windows 95, Macintosh, and OS/2.
NETWORK STORAGE MANAGEMENT
The success of the ARCserve family of products, which perform storage backup,
restoration, and disaster-recovery operations, enabled Cheyenne to emerge early
as the industry leader in storage management for networked systems.
The ARCserve product line accounted for 74.3% of Cheyenne's revenues in fiscal
year 1996, compared to 80.2% in fiscal year 1995 (the FY95 figure reflects
changes made by the Company in FY96 to certain product categories). The
product line consists of the base ARCserve package and other options like
disaster recovery, RAID tape array support, image backup, and on-line backup of
mission critical databases and/or applications, all of which combine to improve
network availability, reliability, and overall enterprise productivity.
ARCserve 6 for NetWare, introduced in December 1995, and upgrades to this new
product, accounted for 79% of total ARCserve for NetWare sales in FQ496.
ARCserve 6 for Windows NT, introduced in June 1996, is expected by Cheyenne to
fuel major revenue growth in fiscal year 1997. ARCserve 6 for UNIX is currently
scheduled for release in the first half of fiscal year 1997.
For large NetWare superservers, Cheyenne offers JETserve, a high performance,
streamlined, full-system, image back-up solution. To further complement its
ARCserve products for NetWare and UNIX, the Company offers Cheyenne HSM. This
storage management system for on-line data across any combination of media
automatically migrates seldom-used data to less expensive storage media while
allowing the migrated data to be conveniently retrieved as needed. The
Company's current product development plans include offering HSM for Windows NT
during fiscal year 1997.
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In March of 1996, Cheyenne announced its "Application Agent Strategy" for
groupware, database, and Web server applications. These software agents work in
tandem with the ARCserve host system to enable on-line backup of mission-
critical groupware and on-line transaction processing ("OLTP") applications
running on NetWare, Windows NT, UNIX, and OS/2. This on-line backup allows
backup to take place while business-essential programs run, facilitating
uninterrupted, 24 hours a day, seven days a week operations. These include
applications such as SAP R/3, relational database applications such as those
from Oracle, Sybase, and Informix, and groupware applications such as Lotus
Notes, Microsoft Exchange Server, and the Novell GroupWise products.
SECURITY
Cheyenne's premier anti-virus product, InocuLAN, has gained a strong position in
the NetWare market. The Windows NT version, introduced in late fiscal year 1995,
was the first anti-virus product to be shipped for Windows NT. It achieved
strong sales growth during its first year, contributing to Cheyenne's FY96
overall growth in the Windows NT market. Cheyenne is working with other leading
vendors to create the industry's first integrated firewall and anti-virus
solution to protect against the spread of viruses through the Internet,
Intranets, and corporate networks.
COMMUNICATIONS
After entering the communications market in fiscal year 1994 with FAXserve for
NetWare, Cheyenne quickly established a strong position which it continues to
maintain today. In early 1996, the Company entered into an exclusive agreement
with Novell to ship Cheyenne's FAXserve product as the integrated facsimile
service for Novell's GroupWise product, a groupware offering which is expected
to be introduced before the end of calendar year 1996.
Also in 1996, Cheyenne joined Novell and IBM to introduce the IBM PC Server 310
Small Business Solution, IBM's new computer line for small businesses.
Cheyenne's FAXserve software, shipped with PC Server 310 systems, provides
integrated facsimile services which route incoming and outgoing FAXes to and
from users' desktops through a single centralized FAX line or pool. Cheyenne
intends to focus on the expansion of the retail and OEM markets for its desktop
communications products during fiscal year 1997.
DESKTOP
In fiscal year 1996, leveraging the technology it acquired from Chili Pepper,
Cheyenne embarked on a major new business initiative and entered the consumer
and SOHO market by introducing its desktop product line: Cheyenne Backup,
Cheyenne Anti-Virus, and Cheyenne Infinite Disk. As desktop computers become
more powerful and more complex, and as networking becomes more pervasive through
such media as the Internet and other on-line services, the level of
sophistication of Cheyenne's PC-LAN products will become a requirement in
consumer and SOHO environments. Cheyenne intends to capitalize on these fast-
growing markets by tailoring versions of its high-end products to meet the needs
of the desktop. These products will offer the advanced features which are newly
required by this market and which are not available from traditional suppliers
of desktop products.
As part of the Company's desktop strategy, in June 1996, Cheyenne strengthened
its relationship with Hewlett-Packard's Colorado Memory Systems ("HP/CMS")
Division by its acquisition of the exclusive rights to Colorado Backup, the
software which HP/CMS ships with its SureStore tape drive products and the
technology which is the basis for the backup capability within the Microsoft
Windows 95 operating system. Cheyenne will enhance the licensed software. This
agreement establishes Cheyenne as the exclusive provider of backup software for
the HP/CMS Division for at least a one year period from the date of first
shipment of the enhanced product.
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SALES AND CHANNELS STRATEGY; MARKETING
DISTRIBUTION
Computer product distributors comprise the major sales channels for Cheyenne's
products, accounting for approximately 76 percent of the Company's revenues in
fiscal year 1996. The major customers for distributors are VARs. VARs provide
many value-added services such as systems integration, installation, and
training, and are expected to continue as the primary channel for Cheyenne's
growing markets. At the end of fiscal year 1996, Cheyenne's two-tier
distribution network included over 90 distributors and 2000 VARs in 38
countries.
Cheyenne has entered into non-exclusive agreements with each distributor. Most
distributor agreements have one year terms, may be canceled by either party upon
30-60 days' notice, provide for the exchange of inventory by Cheyenne within 90
days of delivery and contain no minimum purchase requirements by the
distributor.
Sales through distributors have increased in FY93, FY94, FY95 and FY96 as
follows:
Distribution Sales (In thousands)
----------------------------------
Territory FY93 FY94 FY95 FY96
----------- ---- ----- ----- -----
Northern America $15,785 $34,039 $41,089 $51,490
Europe 16,792 33,696 45,394 56,144
Japan 725 2,341 6,740 12,235
ROW 1,888 4,097 7,640 12,017
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$35,190 $74,173 $100,863 $131,886
------- ------- ------- --------
------- ------- ------- --------
The above increases were mainly due to:
a) An expanding LAN market;
b) Better recognition and acceptance of Cheyenne's products in the LAN
marketplace;
c) Increased advertising, training, sales and customer support;
d) A broader product line;
e) The increased availability of foreign language-translated products; and
f) The addition of new distributors, particularly outside the United
States.
To support the growing sales in North America, the Company added 63 sales and
marketing personnel in FY96. Cheyenne now has regional sales offices serving
North America in Atlanta, Chicago, Dallas, Seattle, San Diego and Ontario,
Canada.
In Europe, sales and service centers were added in the U.K. and Germany during
FY93 to augment the Company's European presence and to support sales efforts out
of its French office. The number of full time European employees grew from 76
in FY95 to 122 in FY96.
The Company has rapidly expanded sales in the rest of the world ("ROW") by
adding new distributors during FY95 and FY96. Sales and service centers were
added in FY96 in Beijing and in FY95 in Australia, Brazil, Mexico, Singapore and
Taiwan, in addition to Miami, FL (the U.S. base for Cheyenne's ROW sales), added
in FY94. Singapore since the end of FY95 serves as the Company's base for Asia
(excluding Japan) and the Company has relocated a key manager from the United
States to Singapore to oversee expansion in this area. Full-time employees
supporting the non-Japan Asia territory have increased from 5 in FY95 to 14 in
FY96. Employees directly supporting ROW sales increased from 4 in FY95 to 9 in
FY96.
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Although the Japanese networking market is still relatively small, Cheyenne's
management believes the potential is significant. In February 1993, the Company
formed a subsidiary in Tokyo ("Cheyenne KK") which now has 29 full time
employees compared to 16 last year (in FY96, certain employees were reclassified
from Cheyenne KK to the Singapore office). Sales in Japan from all sources have
increased in FY93, FY94, FY95 and FY96 as follows:
Japan Sales (In thousands)
--------------------------
FY93 FY94 FY95 FY96
----- ----- ---- -----
$725 $2,341 $7,828 $17,430
OEM
Cheyenne has also established relationships with several large OEMs, which buy
directly from the Company. These OEMs then bundle Cheyenne's software with their
hardware and/or software in order to add value to the products which they
provide to their customers. Included among Cheyenne's OEM customers are Compaq,
Computer Associates, Hewlett Packard, IBM, and Intel. In FY95, Cheyenne entered
into OEM agreements with Fujitsu LTD. and Mitsubishi and in FY96 entered into an
OEM agreement with NEC in Japan.
Management believes that its OEM agreements have made a significant contribution
to the growth in the Company's unit sales, because of the enhanced market
penetration and visibility that resulted from the investments in advertising and
promotion that OEM companies normally undertake. No single OEM relationship
accounted for more than 5% of Cheyenne's revenues in FY96. Total OEM revenues
were $13.3 million or about 23% of total revenues in FY93, $13.3 million or
about 14% of total revenues in FY94, $16.4 million or about 13% of total
revenues in FY95 and $23.6 million or about 14% of total revenues in FY96.
During the last three years, as Cheyenne's ARCserve products have become more
readily available throughout the world via distribution, the need for OEM
customers to bundle the product has lessened. Distributors now bundle ARCserve
with many different hardware devices and provide the value-added services to
customers that were previously the responsibility of the OEM. As a result of
this change in the marketplace, distributor sales over the last several years
have grown more rapidly than OEM sales.
MAJOR ACCOUNTS
Recently Cheyenne initiated a Major Accounts Program to better serve its
national and multi-national customers who need licensing at the site level.
Revenues from these type of sales in FY95 were approximately $3,108,000 and grew
to approximately $8,906,000 in FY96. In July 1996, the Company commenced the
sale of site licenses through large resellers which is expected to further
accelerate sales in this segment.
DIRECT
Cheyenne's Direct Sales organization offers products to those customers who find
it more convenient to make purchases by calling one of the Company's toll-free
telephone numbers. Cheyenne has also introduced electronic commerce to its
World Wide Web site in fiscal year 1996, enabling customers to order and pay for
products on-line through the Company's Web site. These direct sales channels
currently account for less than 5 percent of Cheyenne's total revenues.
FLUCTUATIONS IN PURCHASING PATTERNS
Changes in purchasing patterns of one or more of Cheyenne's major customers
could result in material fluctuations in quarterly operating results.
Cheyenne's major customers are large, sophisticated businesses which make their
own independent purchasing decisions. The timing of new product announcements
and introductions by Cheyenne could also have an impact on the purchasing
patterns of Cheyenne's major customers. Typically, the personal computer
industry experiences some seasonal variations in demand, with weaker sales in
the summer months (FQ1) because of customers' vacations and planned shutdowns.
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This seasonality is more pronounced in Europe. In addition, the Company
typically experiences increased sales in Japan in its FQ3 and lower sales in
Japan in its FQ4 due to seasonality peculiar to that market. As noted above,
the Company has recently entered the desktop market. The Company expects to
realize a large portion of its annual desktop revenues in its FQ2, due to the
seasonality of the consumer market.
SIGNIFICANT CUSTOMERS
One distributor (Ingram Micro Inc.), on a worldwide basis, including its foreign
subsidiaries, accounted for greater than 10% of the Company's revenues in FY96
(16%), FY95 (15%) and FY94 (17%). At June 30, 1996, this customer accounted
for 23% of Cheyenne's outstanding trade accounts receivable.
RETURNS AND EXCHANGES; PRICE PROTECTION
Like other manufacturers of computer software and hardware products, Cheyenne is
exposed to the risk of product returns and exchanges from its distributors.
Cheyenne's exchange policy generally allows its distributors, subject to certain
limitations, to exchange purchased products. Although certain major
distributors and OEM's have return rights, most of Cheyenne's contracts provide
for no or only limited return rights.
The risk of product returns and exchanges may increase if the demand for new
products introduced by Cheyenne is lower than Cheyenne anticipates at the time
of introduction. Should any new product experience a high rate of bugs or
performance difficulties, Cheyenne could experience product returns and
exchanges, unexpected warranty expenses and lower than expected revenues in a
particular quarter.
Individual end users may return products to Cheyenne through dealers and
distributors within 90 days from the date of purchase. Cheyenne offers a 30 day
money back guarantee for certain direct purchases from Cheyenne by individual
end users. Such returns have historically been minimal.
Although Cheyenne believes that it provides an adequate allowance for sales
returns and exchanges in its financial statements, there can be no assurance
that actual sales returns and exchanges in the future will not exceed Cheyenne's
allowance. Product returns or exchanges materially in excess of recorded
allowances could result in a material adverse effect on operating results. In
FY96, Cheyenne increased the allowance for sales returns and exchanges due to,
among other things, higher sales volumes, new product releases and product
upgrades in FY96.
Cheyenne is also exposed to the impact on its distributors of list price
reductions by Cheyenne of its products. As with many other suppliers, Cheyenne
provides many of its distributors with some price protection in the event that
Cheyenne reduces the list price of its products. Distributors are usually
offered some credit for the impact of a list price reduction on the expected
revenue from Cheyenne's products in the distributors' inventories at the time of
the price reduction. Through June 30, 1996, there have been no material price
reductions on Cheyenne products and therefore no material credits have been
issued for list price reductions. However, there can be no assurance that in
the future there will not be material credits for price protection.
NEW CHANNELS
A substantial portion of Cheyenne's revenues are derived from products that
function in a Novell NetWare operating environment. Cheyenne has introduced
products that work in different operating environments, such as Microsoft
Windows 95 and Windows NT and UNIX, OS/2 and MacIntosh. Products for some of
these platforms are not sold in Cheyenne's traditional channels of distribution.
The success of these products will therefore in part be determined by Cheyenne's
ability to develop and maintain relationships with new channels of distribution.
There can be no assurance that Cheyenne will be able to develop these
relationships or that such relationships, if developed, will be successful.
Cheyenne at the end of FY96 had 304 full time employees devoted to its worldwide
sales, marketing and training activities versus 196 people last year (certain
employees have been reclassified since FY95). In addition, four of the
Company's senior executives spend a significant portion of their time supporting
this activity.
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STRATEGIC ALLIANCES AND PARTNERSHIPS
A key Cheyenne strategy is to capitalize on strategic alliances with major
suppliers of computer software and hardware, to supplement and strengthen the
Company's own marketing efforts.
Recognizing that other vendors have secured leading positions in the systems
management market and that customer preferences for these products are now well
established, Cheyenne in fiscal year 1996 de-emphasized its own systems
management product, Monitrix, in favor of partnering with these market leaders.
Cheyenne now seeks to leverage the recognition it has attained as the leader in
storage management - a key component of the total systems management solution.
As a result, some of the Company's systems management partners have begun
replacing their own storage backup and recovery software with Cheyenne's
ARCserve products. Among these vendors that now incorporate Cheyenne products
into their offerings are Computer Associates, which utilizes Cheyenne's HSM and
image backup technologies within its CA-Unicenter systems management products,
and Intel Corporation, which bundles ARCserve storage management with its
Storage Express product. A February 1996 agreement with Intel further enhanced
Intel's commitment to ARCserve for NetWare and added ARCserve for NT to Intel's
LANDesk management products, which products provide comprehensive services for
clients and servers.
The Company in fiscal year 1996 continued to strengthen its relationship with
Compaq Computer Corporation which includes Cheyenne's ARCserve for NetWare and
ARCserve for Windows NT products among the options supplied with Compaq's
"SmartStart CD." Shipped with all Compaq server configurations, the SmartStart
CD enables users to access trial versions of Cheyenne products contained on the
CD with the option of ordering full licenses to these products by calling a
Compaq toll-free number to make their purchase.
The Company in fiscal year 1996 expanded its existing worldwide relationship
with Hewlett-Packard. In the desktop arena, Cheyenne will become the exclusive
provider of backup software that is shipped with HP/Colorado Memory Systems tape
drives. In addition, HP will ship the Japanese version of Cheyenne ARCserve for
Windows NT with its high-end SureStore tape drives sold in Japan. These new
agreements augment an existing agreement with HP to ship ARCserve for NetWare
with all SureStore tape drives worldwide.
Pursuant to a May 1995 agreement with Santa Cruz Operations, Inc. ("SCO"), SCO
ships a customized version of ARCserve/Open for UNIX with each of its OpenServer
operating systems, thereby giving Cheyenne's products increased prominence in
the UNIX market. Hitachi, Ltd., now bundles Japanese versions of ARCserve 6 for
NetWare and ARCserve 6 for Windows NT, as well as English versions of ARCserve 6
for Windows NT, with its FLORA line of desktop, laptop, and personal computer
servers.
Currently, the majority of PC-LAN operating system platforms are either Novell
NetWare or Microsoft Windows NT and the primary PC platforms are Microsoft
Windows and Windows 95. Strong associations with these two companies are
important to the success of any application. Cheyenne currently maintains close
relationships with both companies and participates in many joint marketing
activities, such as tradeshows and seminar programs.
In addition to joint marketing ventures, Cheyenne enters technology exchange
agreements with some vendors. Late in fiscal year 1996, Cheyenne and Computer
Associates announced an agreement to develop the first comprehensive object-
oriented storage solution known as BOSS, Business Object Storage Specification.
In June 1996, the companies published the specifications and announced their
intention to develop and ship integrated products based on the specifications by
the end of calendar 1996. These products will provide an object-oriented
software system that manages and protects data stored across a globally-
distributed heterogeneous enterprise from a central management console.
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SERVICES; SUPPORT
Cheyenne provides sales and technical assistance by telephone to resellers and
end-users, to whom they also offer formal training programs. The technical and
customer support staff that is responsible for training OEM customers,
distributors, resellers and end-users, as well as responding to all technical
questions from customers throughout the world, now numbers 139 employees versus
134 last year. In fiscal year 1996, the Company introduced fee-based technical
and customer support services for certain products, and it will continue to
expand those services in fiscal year 1997. Revenues from such fee-based
services are expected to be immaterial for at least the first six months of
fiscal year 1997. The Company also outsources certain technical support
services, which contributed to increased expenses in FY96.
BUSINESS POLICIES
Cheyenne licenses rather than sells its software products. As is common practice
in the PC software industry, the software is not sold outright, but rather is
licensed on a perpetual basis in order to protect the underlying intellectual
property which constitutes a valuable corporate asset. Cheyenne's end-user
licenses are, for the most part, break-the-seal, shrink-wrapped licenses similar
to those for most other PC products. Through its site license program to major
accounts, Cheyenne also allows certain customers to copy the software for use
within their facilities, based on specified and well-defined restrictions and
other criteria.
In order to promote customer loyalty and to capitalize on Cheyenne's substantial
installed base, the Company offers upgrade versions of many of its software
products at prices that are discounted relative to initial license prices.
Historically, Cheyenne provided upgrades only through its direct tele-sales
channel, but in fiscal year 1996, Cheyenne introduced these upgrade products
through its distributors and resellers which is expected to result in increased
future upgrade sales.
OPERATIONS AND PRODUCTION
In fiscal year 1996, Cheyenne invested approximately $14 million in its
operations infrastructure, adding a new 100,000 square foot research and
development and marketing facility in Lake Success, New York, and developing
core capabilities in areas such as MIS, telecommunications, order
administration, and supply chain management. This operations infrastructure is
being designed for a global enterprise, and in fiscal year 1997 the Company
expects to begin to extend these enhanced capabilities to its sales and service
organizations throughout the world.
Cheyenne outsources the manufacturing, packaging, and distribution of its
products, a strategy which minimizes the need for capital investment and
maximizes flexibility.
RESEARCH & DEVELOPMENT (R&D)
Cheyenne primarily develops its software products internally. However, outside
contractors and third party publishers are used for the development or supply of
software that provides certain aspects of some products.
Cheyenne's industry is characterized by rapid technological change, resulting in
continuing pressure for price/performance improvements in response to advances
in computer software and hardware technology. Cheyenne believes that its future
success will depend, in large part, on its ability to enhance and develop its
software products satisfactorily to meet specific market needs and to maintain
its technological leadership. As noted above, Cheyenne has introduced products
that function in many different operating system environments. ARCserve and
related Cheyenne software products currently offer users the ability to back up
the data from Microsoft DOS, Windows and NT, MacIntosh and certain UNIX
workstations connected to a Novell NetWare network. A substantial portion of
Cheyenne revenues are derived from products that work in the Novell NetWare
network operating system environment. Novell faces increasing competition from
a number of sources in the network environment, including Microsoft. Microsoft
may enjoy certain competitive advantages over Novell, which may enable Microsoft
to compete effectively against Novell in the market for network operating
systems. As a result, sales of Cheyenne products into the Novell network
marketplace may be affected.
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In FY95, Cheyenne began to ship a version of ARCserve that operates in the
Microsoft Windows NT environment. Some of Cheyenne's competitors also offer
Microsoft Windows NT backup. The market for Microsoft Windows NT backup
products is in the early stages of development and it is too soon to predict
whether Cheyenne will obtain market share in the Windows NT market similar to
the Company's market share in the NetWare market. In FY95, Cheyenne also
released InocuLAN for Windows NT and continues to develop communications
software products for the Windows NT marketplace. Failure to succeed in the
Windows NT market could have a material adverse effect on Cheyenne's operating
results, especially if Windows NT becomes the dominant network operating system.
Cheyenne has released hierarchical storage management products for the NetWare
and UNIX markets. Cheyenne also continues to develop backup products directed at
the UNIX operating system environment. UNIX operating systems are now
increasingly competitive with Novell NetWare and Microsoft Windows NT operating
systems. Cheyenne's competitive position in the Unix markets is presently
insignificant, but is expected by the Company to improve during the next few
years.
There can be no assurance that Cheyenne's efforts to develop Microsoft Windows
NT, additional UNIX and other products will be technologically successful, that
any resulting products will achieve market acceptance or that Cheyenne will
elect to develop software products for the operating environments that
ultimately are accepted by the marketplace. The failure to do so may have a
materially adverse effect on the Company.
The computer software industry has experienced delays in its product development
and 'debugging' efforts, and Cheyenne has experienced such delays and could
experience additional delays in the future. Significant delays in developing,
completing or shipping new or enhanced products and/or the inability of such
products to perform as expected could adversely effect Cheyenne in a number of
ways, including a loss of competitiveness of Cheyenne's products, negative
publicity and delayed purchasing decisions, and could, therefore, adversely
effect Cheyenne's financial results. Furthermore, it can be expected that as
products become more complex, development cycles will become longer and more
expensive.
The R&D staff at the end of FY96 increased to 142 engineers, programmers and
documentation specialists from 130 at the end of FY95. This group is
responsible for developing new software products and enhancing, documenting and
supporting existing software products. In addition, a group of 72
engineers/testers are employed in testing and quality control of Cheyenne
software products versus 55 last year. The Company's total expenses for
research and development were $25,193,000 in FY96, $15,174,000 in FY95 and
$8,981,000 in FY94. Cheyenne anticipates that it will continue to commit
substantial resources to research and development in the future. In addition to
internal development, Cheyenne also obtains technology through the use of
strategic acquisitions.
COMPETITION
Cheyenne operates in a highly competitive market for computer software products,
characterized by rapidly changing technology, evolving standards and changing
strategic direction of major hardware manufacturers and operating systems
vendors.
The market for network backup computer software is becoming more competitive.
The Company's major competitor in the Novell NetWare and Microsoft Windows NT
storage management markets is Seagate Software, a subsidiary of Seagate
Corporation, which includes technology acquired from Palindrome and Arcada
Software. Seagate Software, through its parent, also offers hardware storage
products. The Company's major competitor in the UNIX storage management market
is Legato Systems, Inc., which also offers products in the NetWare and Windows
NT markets. Other competitors of the Company in the storage management market
include Computer Associates International, Inc., Sterling Software, EMC Corp.
and Intel. The Company's competitors continue to broaden their operating system
coverage.
In the storage management area, the Company expects increased competition from
systems and network management companies although the Company is currently
working with a number of these companies to integrate Cheyenne's storage
management products with the products of such vendors. Also, many companies
which have historically focused on storage management in the mainframe market
are expanding into the client/server market where the Company has focused its
products. The Company also expects additional competition from other existing
and newly formed companies.
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<PAGE>
The Company's major competitors in the security/anti-virus market are Symantec
Corporation ("Symantec") and McAfee Associates, Inc. ("McAfee"). Some
developers of Internet products are integrating anti-virus capabilities in
those products. While Cheyenne is working with certain of these developers,
those activities are expected to increase competition in the anti-virus market.
The Company competes against a number of software developers in the
communications software markets. Cheyenne's facsimile products compete
primarily against Symantec Corporation, Phoenix Technologies, Inc. and SofNet,
Inc., as well as facsimile services provided in certain operating systems. As
noted below in more detail, the Company in July, 1996, entered the market for
telephony software products. Some of the competitors in the facsimile product
market also compete against the Company in the telephony market. In addition,
leading voice-mail hardware vendors like Octel Communications Corporation,
Lucent Technologies and Centigram Communications offer proprietary voice mail
and other telephony software.
In the desktop market, where the Company is a new entrant, the Company competes
primarily with Symantec and McAfee.
As noted above, the Company competes against a large number of companies, which
vary in size and the scope of products offered. As the Company enters new
markets, it is likely to face additional, market-specific competitors.
Many of the Company's current and potential competitors have significantly
greater financial, technical, marketing and other resources than the Company.
The Company expects further competition as a result of past and future industry
consolidations, particularly in the storage management market. Certain current
competitors have also established alliances to jointly sell and market
integrated anti-virus and storage management products against the Company's
offerings. Similar alliances may be formed by the Company's competitors in the
future.
Network operating system vendors, like Novell or Microsoft, could introduce new
or upgrade existing operating systems to include functionality offered by the
Company's products, which could materially impact the Company.
Cheyenne believes that the principal competitive factors affecting its markets
include product features, performance, price, customer service and sales and
marketing activities. While the Company believes its products are
technologically superior to the competition, many competitors in the Company's
markets and, in particular, the storage management market, now offer features
once only offered by Cheyenne and offer some features not offered by Cheyenne.
Price competition has become a significant factor in the high performance end of
the network backup software business in which Cheyenne primarily competes. Even
more intense price competition exists in the low performance sector of that
market. The Company also expects to experience significant competition based on
price in the desktop market. Increased competition, particularly based on price,
may reduce gross margins and affect the Company's market share.
There can be no assurance that the Company can maintain or improve its
competitive position against current or future competitors or that competitive
pressures faced by the Company will not materially adversely affect its
business, operating results and/or financial condition in future periods.
PROPRIETARY INFORMATION, PATENTS AND TRADEMARKS
Cheyenne currently relies on copyright, trade secret and trademark law, as well
as provisions in its license, distribution and other agreements in order to
protect its intellectual property rights. Cheyenne has registered certain
patents in the United States and has other United States and international
patents pending and intends to file further patent applications. No assurance
can be given that any Cheyenne patent will provide protection for Cheyenne's
competitive position or that the patents pending will be issued or, if issued,
will provide protection for Cheyenne's competitive position. Although Cheyenne
intends to protect patent rights vigorously, there can be no assurance that
these measures will be successful. Additionally, no assurance can be given that
the claims on any patents held by Cheyenne will be sufficiently broad to protect
Cheyenne's technology.
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<PAGE>
In addition, no assurance can be given that any patents issued to Cheyenne will
not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to Cheyenne. The loss of patent
protection on Cheyenne's technology or the circumvention of its patent
protection by competitors could have a material adverse effect on Cheyenne's
ability to compete successfully in its business.
The software industry is characterized by frequent litigation regarding
copyright, patent and other intellectual property rights. Cheyenne believes
that its products, trademarks and other proprietary rights do not infringe on
the proprietary rights of third parties. There can, however, be no assurance
that third parties will not assert claims against Cheyenne with respect to
existing or future products or that licenses will be available on reasonable
terms, or at all, with respect to any third party technology. Cheyenne receives
such claims from time to time. Litigation to determine the validity of any
third party claims could result in significant expense to Cheyenne and could
divert the efforts of Cheyenne's technical and management personnel, whether or
not such litigation is determined in favor of Cheyenne. The Company generally
agrees to indemnify its distributors and OEM's against such claims, which could
increase the expense and complexity of defending against such claims.
In the event of an adverse result in any such litigation, Cheyenne could be
required to expend significant resources to develop non-infringing technology or
to obtain licenses to the technology which is the subject of the litigation.
There can be no assurance that Cheyenne would be successful in such development
or that any such licenses would be available. In addition, the laws of certain
countries in which Cheyenne's products are or may be developed, manufactured or
sold may not protect Cheyenne's products and intellectual property rights to the
same extent as the laws of the United States.
All employees have agreed to assign to Cheyenne certain technical and other
information and patent rights, if any, acquired by them during their employment
by Cheyenne. All employees have also agreed to protect the confidentiality of
Cheyenne's trade secrets and the like both during and following the termination
of their employment.
Cheyenne received U.S. Trademark Registrations for Cheyenne-Registered
Trademark- in 1986, for ARCserve-Registered Trademark- and Monitrix-Registered
Trademark- in FY90, for InocuLAN-Registered Trademark- in FY94 and for
ARCsolo-Registered Trademark- in FY95. Certain other Cheyenne marks have been
registered or applied for registration in the United States and other countries.
EMPLOYEES
As of June 30, 1996, Cheyenne employed 778 persons, consisting of 142 engineers,
programmers and documentation specialists, 72 engineers/testers responsible for
quality assurance, 139 employees providing technical and customer support, 304
in sales and marketing (including training), and 121 in administration and
accounting. Last year, the Company employed a total of 621 persons on a
worldwide basis. None of Cheyenne's employees are represented by a labor union.
Cheyenne considers its relations with its employees to be satisfactory.
ACQUISITIONS
ACQUISITIONS IN FY95
On December 19, 1994, the Company acquired certain assets and assumed certain
liabilities of NETstor, Inc. ("NETstor"), a developer of Hierarchical Storage
Management software products for the UNIX computer platform in the network
storage management market, for $1,150,000 in cash.
On March 30, 1995, the Company acquired the DataJET product line and certain
other assets and assumed certain liabilities of NetFRAME Systems, Inc.
("NetFRAME"). DataJET is an image based, high performance software backup
product for NetWare file servers which is now sold by the Company under the name
of JETserve. Cheyenne made an $801,000 cash payment for DataJET and pays
royalties to NetFRAME based on the Company's sales of products utilizing the
DataJET technology.
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ACQUISITIONS IN FY96
On September 28, 1995, Cheyenne acquired certain assets and assumed certain
liabilities of Chili Pepper, a manufacturer of HSM solutions for the desktop PC,
for approximately $718,000 in cash and the assumption of approximately
$1,568,000 of liabilities.
On October 31, 1995, Cheyenne acquired certain assets of Media Blitz, Inc.
("Media Blitz"), a manufacturer of optical and tape jukebox and CD-ROM
management software solutions for the Microsoft Windows NT environment, for
approximately $4,000,000 plus $219,000 of related transaction costs, of which
$1,719,000 was paid at closing and $1,250,000 is payable on each of October 31,
1996 and 1997.
In June, 1996, the Company acquired for $2,073,000 a license to certain software
from Hewlett Packard - Colorado Memory Systems. The Company will enhance this
software to develop new products. The Company paid $250,000 in August, 1996 and
$250,000 will be paid on the first day of each quarter thereafter, commencing on
October 1, 1996, until the enhanced product is shipped to an end user at which
time the balance will be due.
ACQUISITIONS SUBSEQUENT TO FY96
In July, 1996, Cheyenne acquired certain assets of Mediatrends, Inc.
("Mediatrends"), a developer of standards-based computer telephony software
technology, for approximately $2,073,000, including related acquisition costs.
In July, 1996, Cheyenne also acquired all the outstanding shares of Intelligence
Quotient International Limited ("IQ"), a developer of open file management and
partial backup technologies for NetWare and Windows NT platforms located in the
U.K., for approximately $11,882,000 in cash, including transaction costs and the
assumption of approximately $136,000 of net liabilities.
The Company in August, 1996, made an additional small acquisition. Through
August 31, 1996, the Company has not realized significant revenues from the
above described acquisitions.
All of the above described acquisitions were accounted for as purchases. The
consolidated financial statements attached hereto, at Note 1, describe in
further detail the accounting for the above described transactions.
Cheyenne intends to continue the use of strategic acquisitions to provide
certain technology for its overall product strategy. In addition to the
significant business risks associated with acquisitions, which include the
failure to integrate the companies in an efficient and timely manner, the
failure to coordinate research and development and sales efforts, the failure to
retain key personnel and the failure to integrate the acquired products into
Cheyenne's product mix, Cheyenne may incur significant acquisition expenses for
legal, accounting and financial advisory services and other costs related to the
combination of the companies. These costs, when added to the consideration paid
to the Sellers, may have a significant adverse impact on Cheyenne's
profitability and financial resources.
GATES/FA
Cheyenne entered into the microcomputer distribution business in July 1987 via
the acquisition of F.A. Computer Technologies, Inc. which then sold shares to
the public in 1988 and then merged with Gates Distributing, Inc., forming
Gates/FA Distributing, Inc. ("Gates/FA").
In a secondary offering, Cheyenne sold 801,710 common shares of Gates/FA on June
17, 1992. The Company sold an additional 100,000 common shares of Gates/FA on
February 3, 1993. At that time, Cheyenne's ownership of Gates/FA was reduced
from 49% to 21.5% of the outstanding shares of common stock of Gates/FA.
Thereafter, Cheyenne reflected its investment in Gates/FA
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<PAGE>
in its consolidated financial statements using the equity method of accounting.
On August 29, 1994, Cheyenne exchanged its remaining 1,348,290 shares of
Gates/FA common stock for 798,996 common shares of Arrow Electronics, Inc.
("Arrow"), a public company. In FY95, the contribution to net income from the
Gates/FA equity ownership was only approximately 0.2% of net income.
The Arrow transaction qualified as a tax-free exchange and resulted in a pre-tax
gain of $21,232,000 for financial reporting purposes. After the transaction,
Cheyenne owned approximately 2% of Arrow's outstanding common stock. The
Company therefore accounted for its investment in Arrow common stock under the
cost method of accounting. In FY95, Cheyenne sold all of its 798,996 shares of
Arrow common stock for $30,324,000, which resulted in a net loss of $11,000.
ITEM 2. PROPERTIES
The main offices of Cheyenne were moved from 55 Bryant Avenue, Roslyn, New York
to 3 Expressway Plaza, Roslyn Heights, New York during FY93. Due to the
Company's rapid expansion, the original lease at 3 Expressway Plaza for 33,000
square feet has been expanded to 44,000 square feet. The lease for 3 Expressway
Plaza started January 1, 1993. The average annual rental expense for the
remaining two and a half year term is approximately $1,049,000 per year,
exclusive of electricity, certain real estate tax escalations and other related
costs.
In FY95, Cheyenne entered into a lease for a 100,000 square foot building
located at 2000 Marcus Avenue, Lake Success, New York. The facility is used
primarily for research and development and technical support. The lease
commenced on September 1, 1995 and the average annual rental expense for the
seven year term is $1,316,000 per year, exclusive of electricity, certain real
estate tax escalations and other related costs.
The Company leases additional facilities, including facilities in Atlanta,
Chicago, Austin, Dallas, Miami, Seattle, San Diego, Fremont, Minneapolis, and
Canada, France, Germany, the United Kingdom, Japan, Brazil, Australia, Mexico,
Beijing, Taiwan and Singapore.
ITEM 3. LEGAL PROCEEDINGS
Neither Cheyenne nor any of its subsidiaries is a party to any material pending
legal proceedings, other than routine litigation incidental to the business, and
other than as set forth below:
1) IN RE CHEYENNE SOFTWARE, INC. SECURITIES LITIGATION
Master File No. 94 Civ. 2771 (TCP)
On or about June 11, 1994, a securities fraud class action Complaint, entitled
BELL V. CHEYENNE SOFTWARE, INC., ET AL., was filed in the United States District
Court for the Eastern District of New York. The lawsuit names as defendants the
Company and several of its officers and directors. In the following weeks,
several other similar lawsuits were filed in the Eastern District of New York.
The actions allege securities fraud claims under Sections 10(b) and 20 of the
Securities Exchange Act of 1934, and seek compensatory damages on behalf of all
the shareholders who purchased shares of the Company between January 24, 1994
and June 17, 1994, as well as attorneys' fees and costs. The gravamen of the
actions is that the Company and the individual defendants made
misrepresentations and omissions to the public, which caused the Company's stock
to be artificially inflated. The suits rely on what is known as the "fraud on
the market" theory of liability.
On July 20, 1994, the Court ordered that all of the actions be consolidated
under the caption In Re Cheyenne Software, Inc. Securities Litigation. On March
8, 1995, plaintiffs filed an Amended Complaint. On April 16, 1996, the Court
certified a class of investors who purchased Cheyenne's common stock between
January 24, 1994 and June 7, 1994. Notification of the members of that class is
pending. On May 13, 1996, the Court granted in part and denied in part, the
defendants' Motion to Dismiss certain of the claims alleged in the Amended
Complaint. The Court has lifted the stay of discovery that it had imposed
pending a ruling on the Motion to Dismiss.
The defendants deny any and all liability and intend to vigorously defend
against the claims.
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2) RAND V. OXENHORN, ET AL.
Delaware Chancery Court (New Castle County) No. 13583
On or about June 27, 1994, a shareholder derivative Complaint, entitled RAND V.
OXENHORN, ET AL., was filed in the Court of Chancery for the State of Delaware
in and for New Castle County. The lawsuit, purportedly filed derivatively on
behalf of the Company, names as defendants eleven of its present or former
officers and directors. The Complaint's factual allegations are similar
to those of IN RE CHEYENNE SOFTWARE, INC. SECURITIES LITIGATION
described above. However, instead of securities fraud claims, the action
alleges that the defendants breached their fiduciary obligations to the Company.
The suit seeks a variety of compensatory damages as well as attorneys fees.
On August 19, 1994, the defendants filed a Motion to Dismiss on the grounds that
(1) the plaintiff failed to comply with the pleading and demand requirements of
a derivative action and (2) the pleadings fail to state a claim upon which
relief may be granted. On October 14, 1994, and before defendants' Motion to
Dismiss was ruled on, an Amended Complaint was filed only naming as defendants
six of Cheyenne's officers or directors. On February 16, 1995, Cheyenne filed a
Motion to Dismiss the Amended Complaint on the same grounds listed above. That
Motion has not yet been ruled on.
The defendants deny any and all liability and intend to vigorously defend
against the claims.
3) SEC FORMAL PRIVATE INVESTIGATION
On June 28, 1994, the Securities and Exchange Commission ("SEC") commenced an
Informal Inquiry into Cheyenne. On or about April 14, 1995, the SEC advised the
Company that it had issued a Formal Order of Private Investigation of the
Company. The Private Investigation is a continuation of the Informal Inquiry.
The Formal Order, among other things, enables the SEC to utilize its subpoena
powers to obtain relevant information from third parties as well as the Company.
The Private Investigation relates to possible violations of federal securities
laws. The Company has been cooperating and intends to continue cooperating
fully with the SEC.
4) BEIER V. CHEYENNE SOFTWARE, INC., ET AL.
Master File No. 95 Civ. 2275 (DRH)
On or about September 26, 1995, a Complaint was filed in the United States
District Court for the Eastern District of New York against the Company and one
of its officers alleging fraudulent and negligent misrepresentation. The
plaintiff alleges that misrepresentations were made to him by one of the
Company's officers in connection with the plaintiffs investment decision in
Cheyenne's common stock in June, 1994. The Company's motion to consolidate this
action with IN RE CHEYENNE SOFTWARE, INC. SECURITIES LITIGATION described above
was recently denied. On January 26, 1996, the Company served a Motion to
Dismiss all of the claims alleged in the Complaint. On September 6, 1996, the
Complaint was dismissed in its entirety, with leave to amend. The plaintiff may
refile an amended complaint by October 7, 1996.
Management of the Company, based on advice from its outside legal counsel, does
not believe that the ultimate resolution of this lawsuit will have a material
adverse effect on the financial position or the results of operations of the
Company.
The defendants deny any and all liability and intend to vigorously defend
against the claims.
5) CERTAIN OTHER PURPORTED CLASS ACTION LAWSUITS
The Company and members of the Company's Board of Directors have been named in
five purported class action lawsuits filed in April, 1996 in the Court of
Chancery of the State of Delaware. Substantially, each lawsuit alleges that the
Company's Board of Directors breached the fiduciary duties owed by it to
shareholders by rejecting a request of McAfee Associates, Inc. to negotiate a
merger of the Company and McAfee. Each lawsuit requests substantially similar
relief: (i) that the Company, among other things, explore fully any
transaction, including a combination with McAfee, that would allegedly maximize
shareholder value, and (ii) that the purported class be awarded damages in an
unspecified amount. None of the defendants have
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filed answers or responses to the Complaints, pursuant to written and oral
understandings with the plaintiffs. Management of the Company, based on advice
of outside counsel, does not believe that the ultimate resolution of these
lawsuits will have a material adverse effect on the financial position or the
results of operations of the Company.
The defendants deny any and all liability and intend to vigorously defend
against the claims.
Adverse decisions or settlements may occur in one or more of the above actions.
While the final resolution of these actions, individually or in the aggregate,
are not expected to have a material adverse effect on the financial position of
the Company, it is possible that the Company's future results of operations or
cash flows could be materially adversely affected in future periods.
SETTLED ACTIONS
1) JWANCO, INC., ET AL. V. CHEYENNE SOFTWARE, INC. ET AL.
California Superior Court (County of Alameda) No. H-183331-1
On or about May 2, 1995, plaintiffs JWANCO, Inc. (formerly known as Bit
Software, Inc.), Jonathan Wan, Yau Ki Chuck, Norman Chan, David Law and David
Wong filed an action in the Superior Court of California in and for the County
of Alameda against the Company, Cheyenne Communications, Inc., a wholly owned
subsidiary of the Company, and several of its officers, directors and employees.
The Complaint alleged breach of contract, fraud, wrongful termination, negligent
infliction of emotional distress, and a number of other related torts. On or
about May 20, 1996, the Company and the other defendants settled this matter by
the Company agreeing to pay an immaterial amount.
2) PCPC V. CHEYENNE SOFTWARE, INC.
United States District Court (District of Delaware) Case No. 95-301 (SLR)
On May 19, 1995, Personal Computer Peripherals Corporation ("PCPC") filed a
lawsuit in the United States District Court for the District of Delaware, Case
No. 95-301(SLR), naming Cheyenne, Legato Systems, Inc., Arcada Software,
Artisoft, Palindrome (a subsidiary of Seagate) and Symantec as defendants. PCPC
alleged infringement of patent No. 5,135,065, entitled "Backup Computer Program
for Networks" issued to PCPC on July 21, 1992. On August 15, 1996, the Company
settled this matter by agreeing to pay an immaterial amount.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Commencing March 20, 1990, the Registrant's common stock began trading on the
American Stock Exchange ("AMEX") under the symbol of "CYE". From July 7, 1986,
through the opening of business on March 28, 1994, the common stock was listed
on the Pacific Stock Exchange under the symbol "CYE".
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The following table sets forth, for the periods indicated, the high and low
sales prices of the common stock as reported by the AMEX:
QUARTER ENDED HIGH LOW
------------- ---- ----
September 30, 1994 $13.38 $7.75
December 31, 1994 13.88 9.13
March 31, 1995 17.75 13.25
June 30, 1995 20.00 12.38
September 30, 1995 $22.00 $16.63
December 31, 1995 27.75 16.88
March 31, 1996 26.38 14.13
June 30, 1996 24.25 15.00
At a meeting held on February 10, 1994 (the "1994 Stock Split") and
a meeting held on February 23, 1993 (the "1993 Stock Split"), the Board of
Directors of Cheyenne declared separate three-for-two stock splits payable in
the form of 50% stock dividends with respect to the issued and outstanding
shares of common stock. The 1994 Stock Split was paid on March 29, 1994 to
stockholders of record at the close of business on March 1, 1994 and the 1993
Stock Split was paid on April 8, 1993 to stockholders of record at the close
of business on March 12, 1993.
As of September 17, 1996, Cheyenne had 37,698,236 shares outstanding (excluding
2,343,900 shares of treasury stock), and the number of holders of record of the
Company was approximately 990.
Cheyenne has never paid a cash dividend on its common stock. The declaration
and payment of future cash dividends by Cheyenne will be determined by the Board
of Directors in light of conditions then existing, including Cheyenne's
earnings, financial condition, capital requirements, and other circumstances.
It is the present policy of Cheyenne's Board of Directors to retain cash and any
earnings for the operation and expansion of the Company and, therefore, it is
not anticipated that cash dividends will be paid on its common stock in the
foreseeable future even if legally permissible.
On February 23, 1995, Cheyenne announced that the Board of Directors had
authorized management to purchase up to 4,000,000 shares of the Company's
outstanding common stock. During FY95, Cheyenne purchased 2,035,000 shares of
its common stock for approximately $30,458,000, at prices ranging from
approximately $13.50 to $17.25 per share. No shares were purchased during FY96.
On July 19, 1996, Cheyenne announced that the Board of Directors had
reauthorized the purchase of up to 2,000,000 shares of its common stock over the
next 12 months. From July 25, 1996 through September 17, 1996, the Company
purchased 308,900 shares of its common stock for approximately $5,600,000, at
prices ranging from approximately $16.62 to $19.00 per share.
Purchases are dictated by overall financial and market conditions and other
factors affecting the operations of the Company.
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ITEM 6. SELECTED FINANCIAL DATA (2)
The following information has been summarized from the Registrant's consolidated
financial statements included elsewhere in this Annual Report on Form 10-K and
should be read in conjunction with Item 7 which follows and such consolidated
financial statements and the related notes thereto.
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ----- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Earnings (1)
- ---------------------
Revenues $174,096 $127,927 $97,737 $56,694 $22,353
Net Income (3) $27,228 $38,504 $32,538 $20,650 $ 8,833
Income Before Extraordinary Credit
Per Share (3)(4) .70 .97 .82 .53 .17
Net Income Per Share (3) .70 .97 .82 .53 .24
June 30
----------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ----- ---- ---- ----
(In thousands)
Balance Sheet Data
- ------------------
Total Assets $176,472 $129,394 $115,387 $65,741 $29,743
Working Capital $86,822 $57,786 $87,378 $48,589 $18,695
Shareholders' Equity $150,522 $116,310 $105,071 $61,262 $26,825
</TABLE>
(1) All per share data have been restated for all periods presented to
reflect the payment on March 29, 1994, April 8, 1993 and March 25,
1992 of three-for-two stock splits.
2) The acquisition of the net assets of Bit Software, Inc. ("Bit") in
May, 1994 for 140,590 shares of common stock was accounted for under
the pooling of interests method and, accordingly, prior year financial
data have been restated to include Bit's financial data.
(3) FY95 net income per share includes a one-time gain, net of income
taxes, of $.28 per share in connection with the Company's exchange of
1,348,290 shares of Gates/FA common stock for 798,996 shares of Arrow
Electronics common stock. FY96 and FY95 net income includes charges
for purchased research and development of $6,272,000 and $1,251,000,
respectively.
(4) In FY92, Cheyenne realized an extraordinary credit of $.07 per share
in connection with the utilization of net operating losses.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXCEPT FOR HISTORICAL INFORMATION AND STATEMENTS CONTAINED IN MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
("MD&A"), THE MATTERS AND ITEMS SET FORTH IN THE MD&A ARE FORWARD LOOKING
STATEMENTS THAT INVOLVE UNCERTAINTIES AND RISKS SOME OF WHICH ARE DISCUSSED
BELOW, INCLUDING UNDER THE CAPTION "CAUTIONARY STATEMENTS - ADDITIONAL IMPORTANT
FACTORS TO BE CONSIDERED."
In FY96, Cheyenne completed a transition to an important new product in the
NetWare category and launched a significant new product in the Windows NT
category. While the product transitions were technological successes,
Cheyenne's FY96 revenue and earnings were below expectations primarily
attributable to lower than expected revenue in FQ296 and FQ396.
The Company believes that revenue in both of these quarters was negatively
affected by the introduction of the latest generation of ARCserve for NetWare,
Version 6, at the end of FQ296. Purchase decisions are often delayed around the
time of a new product introduction. A higher than expected number of customers
appear to have delayed purchase decisions until the product's general acceptance
by the market.
By February 1996, sales of ARCserve 6 for NetWare began to accelerate and sales
of prior versions began to drop. In FQ496, ARCserve Version 6 and upgrades to
this new product made up approximately 79% of the Company's ARCserve for NetWare
business. Sales of upgrades from prior versions to this new product generated
approximately $7,440,000 of revenue in FY96 and are expected to generate an
additional $15,000,000 - $20,000,000 in revenue in FY97.
In FQ496, Cheyenne announced the release of ARCserve 6 for Windows NT into this
fast growing market. Augmented by InocuLAN for Windows NT, sales by Cheyenne in
the Windows NT category grew from approximately $3.6 million in FQ196, or 9.4%
of sales, to approximately $12.3 million in FQ496, or 24.9% of sales.
In FQ496, Cheyenne also announced a suite of desktop products, including back-
up, storage management, facsimile and anti-virus. Desktop products represent a
new and significant market for the Company. The desktop market is primarily
reached by retail and OEM channels. In addition, the Company must invest
significantly to achieve brand recognition in the desktop market. Cheyenne
expects that its relationships with Hewlett Packard/Colorado Memory Systems and
Symantec Corporation will increase the awareness of Cheyenne's storage product
in this new market. While the Company's gross margins in desktop products are
expected to be lower than in network products, Cheyenne believes that it must
continue to enter new markets such as desktop to maintain and improve its
competitive position.
For these same reasons, Cheyenne also continues to increase its focus on
products for the Unix storage management market. Due to the fragmented nature
of the UNIX market, no single vendor enjoys a large portion of this market.
While revenues in this market are expected to grow rapidly from a small base,
the Company's revenues in FY97 from the Unix market are not expected to be
material. However, the availability of products in this category is important
for high end customers, who then may purchase the Company's NetWare or Windows
NT product offerings. In FY97, the Company expects to release a new generation
of its ARCserve product for the Unix markets.
The success of the Company's efforts to diversify its product line, begun in
FY94, was evident in FY96, as the Company's sales from products outside the
NetWare market increased as a percentage of sales by approximately 17% compared
to FY95.
The expansion into new technological and geographic markets and increased
competition have required significant expenditures by Cheyenne in FY96 and FY95.
While sales continued to grow during this period, operating expenses increased
at a higher rate. Therefore, operating income as a percentage of net sales,
excluding charges for purchased R&D, decreased from an unsustainable 46.4% in
FY94, to 30.5% in FY95 and to 25.2% in FY96. The Company believes that its
investment in broader product markets will result in long term competitive
advantages. Except for the Windows NT market where the Company has now
established itself as a leading vendor, it is too early to determine the success
of the Company's expansion into new technological markets. If expected revenue
increases are realized in the future, the Company expects to maintain and
improve its current net margins. Conversely, if the expected level of sales
from these new markets is not realized, then net
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margins would be adversely affected.
As noted above, the Company's business experienced volatility in FY96, which may
continue in FY97. Since a large portion of the Company's revenues are derived
through the distribution channel, maintaining an appropriate level and mix of
product inventory is critical. Cheyenne estimates that distributors in the
North America channel had approximately 90 days of inventory "on hand" as of
June 30, 1996, based on the fourth quarter sell through rate. This is a slight
decrease from inventory levels in North America as of March 31, 1996 and a
significant decrease from June 30, 1995. However, certain distributors in North
America are estimated to have higher levels of inventory on hand as of June 30,
1996, when compared to March 31, 1996.
Based on the inability of the Company's distributors in Europe to provide timely
and complete sell-through reports, the Company is not able to timely and
precisely assess the level of inventory in Europe on a "days on hand" basis.
However, the Company estimates that the dollar value of channel inventory in
Europe increased as of June 30, 1996 compared to March 31, 1996. The general
economic conditions in Europe, and Germany (the Company's largest market in
Europe), in particular, have resulted in lower sales in Europe. As a result,
the Company's level of reorders in Europe in upcoming quarters is uncertain.
The level of channel inventory in Asia is currently immaterial.
CAUTIONARY STATEMENTS - ADDITIONAL IMPORTANT FACTORS TO BE CONSIDERED
Set forth below are important factors which could cause actual results to be
adversely affected and to differ materially from the forward looking statements
in this MD&A, and other oral or written forward looking statements made by the
Company from time to time.
PRODUCT CONCENTRATION. The Company historically has derived substantially all
of its revenues from the ARCserve product line, a majority of which supports the
Novell NetWare operating system. In fiscal year 1996, sales of the ARCserve
product line accounted for 74.3% of the Company's sales, down from 80.2% in
fiscal year 1995. In fiscal year 1996, sales of all products relating to the
NetWare market accounted for 75.9% of the Company's sales, down significantly
from 91.4% in fiscal year 1995. The Company expects further reductions in these
percentages over the next several years. This is due in part to the increased
momentum of the Windows NT operating system and the Company's product
diversification strategy. The Company has recently increased sales of ARCserve
supporting Windows NT, Unix and other operating systems and intends to devote
significant resources to further increase such sales. However, since the
NetWare platform is still the largest segment for Cheyenne, increased sales in
the other portions of the market like Windows NT may not be sufficient in the
foreseeable future to offset any decline or slowing in the growth of revenues
from NetWare products. Therefore, the success of ARCserve for NetWare and an
increase in sales of Windows NT products are critical to the future success of
Cheyenne. The failure of ARCserve 6 for NetWare or Windows NT to maintain broad
market acceptance, whether due to competition, product quality or other factors,
would have a material adverse effect on the Company's business. Sales of
ARCserve 6 for NetWare and the Company's other NetWare products are linked
closely with the growth in the NetWare operating system. The apparent slowing
in the growth of the NetWare platform, the Company's significant dependence on
this platform, and general uncertainty in the networking operating system
segment created by the competition between Microsoft and Novell, subjects the
Company's performance to increased volatility.
UNCERTAIN ACCEPTANCE OF NEW PRODUCTS; TECHNICAL PROBLEMS. As is the case with
new products generally, market acceptance of new products can never be assured.
If Cheyenne's new products experience a high number of significant "bugs," or
fail to include features required by users, or fail to receive favorable product
and other reviews in trade publications, market acceptance may be delayed or may
never be realized. Competitive factors may also impact the market acceptance of
new products. Cheyenne also must provide the level of technical support
required by its user base. The Company's ability to train its staff and to
forecast demand for technical support, and the successful implementation and
use of communications and other systems, will impact the quality of service
provided. High quality customer support should improve market acceptance of the
product. Conversely, if Cheyenne provides less than the required level of
service, market acceptance may be adversely impacted.
END OF QUARTER SALES. Historically, a substantial percentage of Cheyenne's
sales have been completed in the last few weeks of each fiscal quarter, in part
because customers are able, or believe that they are able, to negotiate lower
prices and more favorable terms. Cheyenne's competitors also frequently offer
end of the quarter purchase incentives, which Cheyenne cannot control and which
21
<PAGE>
could affect purchases of Cheyenne products. If Cheyenne determines not to
negotiate more favorable terms at the end of any fiscal quarter, as it has
previously done, or expected sales do not occur, revenues could be adversely
affected. Quarterly results are therefore difficult to predict until the end of
each quarter and may fluctuate significantly from quarter to quarter.
Furthermore, this buying pattern results in a significant level of orders to be
processed and fulfilled at the end of each fiscal quarter. The Company's
worldwide order entry system is centralized in New York, while most orders are
fulfilled from a third party production facility in another state. The
inability of the Company to process and fulfill end of the quarter orders due to
time constraints, communication problems, operational difficulties or factors
beyond its control like electrical problems and weather related shutdowns could
have an adverse effect on revenues in any fiscal quarter. The Company recently
began to upgrade its information management systems in an effort to realize
operational efficiencies and to facilitate future growth. The Company's
operations have been, and may continue to be, disrupted in connection with the
transition to the new system. The transition is expected to be substantially
completed by the end of FQ197.
VOLATILITY OF CHEYENNE'S COMMON STOCK. Cheyenne's earnings and stock price have
been and may continue to be subject to significant volatility, particularly on a
quarterly basis. Cheyenne has previously experienced shortfalls in revenue and
earnings from levels expected by securities analysts, which have had an
immediate and significant adverse effect on the trading price of Cheyenne's
common stock. This may occur again in the future. Since a significant
percentage of Cheyenne's revenues are generated late in the fiscal quarter,
Cheyenne may not learn of revenue shortfalls until near the end of the fiscal
quarter, which could result in greater volatility in the trading price of
Cheyenne's common stock. Cheyenne's common stock is also subject to the
volatility of the high technology sector which is a highly dynamic industry, as
well as the strategic direction of, and announcements from, other companies such
as Novell and Microsoft which affect Cheyenne's business. In particular, the
assessment by investors of the relative performance of Novell's NetWare
operating system (Cheyenne's historically largest market) and Microsoft's
Windows NT operating system (a new and fast growing market for Cheyenne) may
further increase the volatility of Cheyenne's common stock.
VOLATILITY OF FUTURE RESULTS. There are a number of factors and risks, some
beyond Cheyenne's control, which will also affect future operating results, and
increase the volatility of Cheyenne's common stock, including, without
limitation: receipt and fulfillment of expected orders and reorders; the level
and timing of returns and exchanges; changes in general business conditions and
seasonality; the growth in computer networking; market volatility related to the
competition between Novell, Microsoft and other network operating system vendors
and other factors; the successful expansion of Cheyenne into the Windows NT,
UNIX, desktop, groupware, Internet, and firewall markets; the ability to expand
successfully into new geographic regions; the maintenance and expansion of
strategic partnerships; the effectiveness of price and other competition faced
by Cheyenne; the market acceptance of new products like ARCserve Version 6 for
NetWare and Windows NT and the timing of such acceptance; the rate of upgrade
from old versions of products to new versions; the successful establishment by
Cheyenne of fee-based technical support; the successful integration of recent
acquisitions; changes in distributors' and other customers' buying patterns;
changes in the Company's and the industry's sales and inventory practices;
improvement of economic conditions in Europe, and in particular Germany;
one-time events and other factors which may disrupt the Company's business.
22
<PAGE>
RESULTS OF OPERATIONS
The following table includes a summary of items from the consolidated statements
of earnings as a percentage of revenues. Please refer to this table while
reading the following discussion.
<TABLE>
<CAPTION>
TABLE 1
Comparison FY96 v FY95 v FY94
(In thousands, except per share data)
FY96 FY95 FY94
------------------------- ------------------------ ----------------------
Amount Ratio Amount Ratio Amount Ratio
-------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $174,096 100.0% $127,927 100.0% $97,737 100.0%
Cost of Sales 33,120 19.0 21,690 16.9 11,641 11.9
---------- ------- --------- ------- -------- --------
Gross Profit 140,976 81.0 106,237 83.1 86,096 88.1
Operating Expenses:
Research & Development 25,193 14.5 15,174 11.9 8,981 9.2
Selling & Marketing 53,951 31.0 41,222 32.2 23,747 24.3
General & Administrative 17,903 10.3 10,784 8.4 8,066 8.2
Charge for Purchased R&D 6,272 3.6 1,251 1.0 --- ---
---------- ------- --------- ------- -------- --------
Total Operating Expenses 103,319 59.4 68,431 53.5 40,794 41.7
---------- ------- --------- ------- -------- --------
Operating Income 37,657 21.6 37,806 29.6 45,302 46.4
Non-Operating Income (expense):
Interest Income, net 2,737 1.6 3,437 2.7 1,668 1.7
Other (loss) gains, net (130) (.1) 21,431 16.7 738 0.7
---------- ------- --------- ------- -------- --------
Total Non-Operating Income 2,607 1.5 24,868 19.4 2,406 2.4
---------- ------- --------- ------- -------- --------
Income Before Income Taxes &
Equity in Earnings of Gates/FA 40,264 23.1 62,674 49.0 47,708 48.8
Provision for Income Taxes 13,036 7.5 24,255 19.0 16,742 17.1
Equity in Earnings of Gates/FA --- --- 85 0.1 1,572 1.6
---------- ------- --------- ------- -------- --------
Net Income $27,228 15.6% $38,504 30.1% $32,538 33.3%
---------- ------- --------- ------- -------- --------
---------- ------- --------- ------- -------- --------
Net Income per share* $.70 $0.97 $0.82
---------- --------- --------
---------- --------- --------
Weighted average number of common shares and
equivalents outstanding 38,928 39,617 39,877
---------- --------- --------
---------- --------- --------
*All per share data has been restated for all periods presented to reflect the
payment on March 29, 1994 of a three-for-two stock split.
</TABLE>
- 23 -
<PAGE>
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
REVENUES
Cheyenne's revenues increased 36% in FY96 over FY95 to $174,096,000 from
$127,927,000.
A detailed breakdown of sales is shown in Table 2
TABLE 2
SOFTWARE SALES BREAKDOWN
(In thousands)
<TABLE>
<CAPTION>
FY96 % FY95 % FY94 % FY93 %
---- --- ---- --- ---- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Distribution:
North America $51,490 29.6% $41,089 32.1% $34,039 34.8% $15,785 27.8%
Europe 56,144 32.2 45,394 35.5 33,696 34.5 16,792 29.6
Japan 12,235 7.0 6,740 5.3 2,341 2.4 725 1.3
Rest of World 12,017 6.9 7,640 6.0 4,097 4.2 1,888 3.4
------- ----- -------- ---- ------ ----- ----- -----
Total Distribution 131,886 75.7 100,863 78.9 74,173 75.9 35,190 62.1
OEM 23,612 13.6 16,383 12.8 13,335 13.6 13,308 23.5
Major Accounts 8,906 5.1 3,108 2.4 1,534 1.6 1,316 2.3
Direct and Other (US) 9,692 5.6 7,573 5.9 8,695 8.9 6,880 12.1
------ ----- -------- ---- ------ ----- ----- -----
Total $174,096 100.0% $127,927 100.0% $97,737 100.0% $56,694 100.0%
--------- ------- ---------- ------- --------- -------- --------- -------
--------- ------- ---------- ------- --------- -------- --------- -------
</TABLE>
As shown, North America Distribution sales increased 25.3% in FY96, European
Distribution sales increased 23.7%, Japan Distribution sales increased 81.5% and
Rest of World Distribution sales increased 57.3% (certain "Other" sales in
prior fiscal years have been reallocated to appropriate categories). The
increase in distribution sales is attributed to an expanding LAN market, better
recognition and acceptance of Cheyenne products in the LAN marketplace, a
broader product line, the addition of new distributors, particularly
international distributors, and the increased availability of foreign
language-translated products.
As in previous fiscal years, substantially all of Cheyenne's revenues from
distribution in North America are from sales to three large distributors, the
largest of which accounted for approximately 44% of North America distribution
sales and 16% of total sales in FY96. While the Company has not generally
experienced problems with collections in North America, the competition between
these three distributors has intensified which could affect the Company's
ability to collect from one or more of these companies. In FY96, the Company
experienced a higher level of accounts receivable write-offs, primarily due to
collection problems with certain companies in Latin America.
Except for United States, Germany and Japan, no one country accounted for more
than 10% of the Company's total sales in FY96. Cheyenne conducts its business in
Japan in Yen. Cheyenne is therefore exposed to currency risk from exchange rate
movement of the US dollar versus the Yen. The currency risk increases as the
level of business conducted by Cheyenne in Japan grows. Cheyenne also incurs
significant expenses for its European business in local currency and is subject
to currency risk in these local currencies. Cheyenne does not currently hedge
against any foreign currency risk.
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<PAGE>
New product releases and upgrades like ARCserve 6 for NetWare and Windows NT
typically result in revenue increases during the first three to six months due
to initial inventory purchases. The level of such purchases is generally based
on the estimated rate of sale to end users. If the actual rate differs from
the expected rate, the rate of purchases in subsequent periods may be affected.
Cheyenne records an allowance for estimated returns and exchanges each fiscal
quarter based on historical information and other factors known to the Company
that affect returns and exchanges. Cheyenne estimates have generally been
accurate, although Cheyenne in the past has, and may in the future,
underestimate or overestimate actual returns and exchanges. Due to the
increased level of returns and exchanges, primarily in connection with increased
sales volumes and the release of new products and upgrades, Cheyenne increased
the allowance for sales returns in FY96.
In connection with the end of the quarter buying pattern discussed previously,
certain distributors may purchase large amounts to obtain rebates and incentives
offered by the Company at the end of a fiscal quarter. The level of inventory
held by distributors is subject to the strategies and performance goals of each
distributor which change from time to time. As a result, quarterly fluctuations
in revenue could occur.
OEM sales increased 44.1% in FY96, and increased as a percentage of consolidated
sales to 13.6% in FY96 from 12.8% in FY95. Cheyenne distributors around the
world are now offering the Company's software products in configurations similar
to, and competitive with, those offered by the OEM channel. This trend resulted
in increased percentage of sales to Cheyenne distributors at the expense of OEM
percentage of total sales over the last several fiscal years. Major Account
sales increased 186.6% from FY95, as a result of increased penetration into
Fortune 1000 companies.
PLEASE REFER TO TABLE 1
GROSS PROFIT
Gross profit represents revenues less cost of sales. Cost of sales consists
primarily of technical support costs, production costs, manuals, packaging,
order fulfillment, product costs, shipping costs and royalties paid (when
applicable) to third parties under licensing agreements. The gross profit
margin decreased to 81.0% in FY96 from 83.1% in FY95, primarily due to a
significant increase in technical support costs. Excluding technical support
costs, FY96 versus FY95 gross margins would have been 89.6% versus 90.3%.
The Company believes that providing a high level of technical support is
necessary to compete effectively and has accordingly invested and will continue
to invest in this area. Since the Company currently receives only insignificant
revenue from its technical support services, increases in the level of technical
support spending have and will continue to affect gross profit margins. The
failure of the Company to provide high quality and cost-effective technical
support also could materially affect revenues, further decreasing gross profit,
especially in the desktop market where sale prices are lower and volumes are
expected to be higher.
The release of competitive technology or market changes may cause Cheyenne
products to become obsolete more quickly than expected. From time to time, the
Company may incur significant inventory rework costs to modify computer software
and to correct software bugs, including the cost of replacing inventory in the
distribution channel. In either case, cost of sales would be increased and
gross margins could be adversely affected. Historically, this has not been a
significant issue for Cheyenne.
RESEARCH & DEVELOPMENT ("R&D")
R&D expenses increased 66.0% in FY96 versus FY95. Since sales only increased
36.1%, R&D as a percentage of sales increased from 11.9% in FY95 to 14.5% in
FY96. The increase was due to the Company's significantly broader product line
that must be further developed and supported by Cheyenne's engineering and
technical support personnel. Therefore, additional engineers were added during
FY96 and significant investments were made by the Company in test and other
equipment. The percentage increase in
25
<PAGE>
R&D was much greater than the percentage sales increase since developing new and
enhancing existing products has become an increasingly more sophisticated and
complicated task, requiring even higher manpower levels before any increased
revenues are realized from such development. The Company believes this
investment in a large R&D staff will provide a long-term termcompetitive
advantage.
The Company continues to expand its product line by developing versions of its
products to support various operating systems, including Novell NetWare,
Microsoft Windows NT, Windows 3.1 and Windows 95, certain Unix operating
systems, and other operating systems. This effort has required significant
dollar level increases in research and development. However, it is anticipated
that R&D as a percentage of sales will not increase further, if Cheyenne's
internal sales expectations are met.
All new products are subject to significant technical risk, based on the
complexity of the software and the required interaction with third party
hardware and software. In the past, the Company has experienced delays in the
development of new products or upgrades. Such delays may occur in the future.
There can be no assurance that significant order deferrals in anticipation of
new products or upgrades will not occur. In addition, the Company has in the
past discovered software bugs (typical in complex software products) in released
products and may have lost revenues and customers as a result. Despite testing
by the Company, bugs may be found in the future in released products, which
could result in loss or delay of market acceptance. In such event, the
Company's business and results could be adversely affected.
SELLING AND MARKETING EXPENSES
Selling and Marketing expenses increased 30.9% in FY96 over FY95 but decreased
as a percentage of sales to 31.0% from 32.2%. The dollar increase was mainly
due to additional sales and marketing personnel. Also, expanded marketing
programs and promotions and increased expenditures on direct sales directly to
end-users of upgrades, etc. were factors in the increase.
GENERAL AND ADMINISTRATIVE EXPENSES ("G&A")
G&A expenses include the costs of the finance, human resources, legal,
office and facilities management departments. G&A expenses increased 66.0% in
FY96 over FY95 and increased as a percentage of sales to 10.3% from 8.4%,
primarily due to increased legal expenses and related costs associated with
litigation and responding to an unsolicited merger proposal. The Company's rent
expense also has increased in connection with the Company's 100,000 plus square
foot facility in Lake Success, New York.
PURCHASED RESEARCH AND DEVELOPMENT
In connection with the acquisition of Chili Pepper, the Company recorded a
$1,636,000 expense for purchased research and development in FQ196. In
connection with the acquisition of Media Blitz, the Company recorded a
$2,763,000 expense for purchased research and development in FQ296. In
connection with the license of certain technology from Hewlett-Packard/Colorado
Memory Systems, the Company recorded a $2,073,000 expense for purchased research
and development in FQ496. The Company also made certain immaterial adjustments
to purchased research and development in FY96 related to a prior acquisition.
TOTAL OPERATING EXPENSES
As a result of the above items, total operating expenses increased to
$103,319,000 in FY96, or a 51.0% increase over FY95 which amounted to
$68,431,000. Excluding the charges for purchased research and development
during FY96 and FY95, total operating expenses increased 44.5% versus last year.
Operating expenses have also generally increased due to the Company's
acquisitions, and due to the cost of the assimilation of the sometimes
geographically diverse operations and personnel of the acquired companies.
Since the Company's recent acquisitions have not yet generated significant
revenue, operating margins therefore have been negatively affected.
26
<PAGE>
OPERATING INCOME
Operating income, excluding the charges for purchased research and development
in FY96 and FY95, increased to $43,929,000 in FY96 and FY95, or 25.2% of sales,
in FY96 from $39,057,000, or 30.5% of sales, in FY95. The Company continues to
invest in its business and build the infrastructure to support its global
customer base and to improve its long term competitive position. These
increased costs have affected and may continue to affect margins.
NON-OPERATING INCOME
Non-operating income decreased from $24,868,000 in FY95 to $2,607,000 in FY96
(the Company in FY95 realized a pre-tax gain of $21,232,000 in connection with
its sale of Gates F/A common stock). Interest income decreased from $3,437,000
in FY95 to $3,050,000 in FY96. The decrease was due to lower interest rates and
to a reduction in investments of the Company in order to fund the Company's
purchases of its common stock and acquisitions. During FY96, the Company
entered into various capital leases with rates that it feels are favorable.
Interest expense during FY96 related to these capital leases amounted to
$306,000.
Included in the FY96 non-operating income is a $466,000 currency loss. Pursuant
to Statement of Financial Accounting Standard No. 52, "Foreign Currency
Translations," companies are required to differentiate between intercompany
transactions that are of a long-term investment nature and those for which
settlement is planned or anticipated in the foreseeable future. Currency
exchange gains or losses related to long-term transactions are recorded as a
separate component of equity. Other currency exchange gains or losses related
to intercompany transactions affect income. Prior to FQ396, the Company treated
its intercompany transactions with it Japanese subsidiary as long-term. Based
on changed circumstances, the Company in FQ396 began to treat such transactions
as short-term. Based on changes in exchange rates which occurred prior to and
in FQ396, Cheyenne incurred a currency loss in connection with certain
intercompany transactions between Cheyenne and its subsidiary in Japan.
PROVISION FOR INCOME TAXES
The provision for income taxes for FY96 was $13,036,000 or 32.4% of pretax
income compared to $24,255,000 or 38.6% in FY95 (which was increased by about
4.6 percentage points in connection with the gain on the sale of Gates/FA
shares). The Company obtains tax benefits from its Foreign Sales Corporation
("FSC") and tax-exempt investment income.
EQUITY IN EARNINGS OF GATES/FA
The equity in earnings of Gates/FA in FY95 was $85,000. In FQ195, Cheyenne
exchanged all of its 1,348,290 shares of Gates/FA common stock for 798,996
shares of Arrow common stock. Prior to its sale of the Arrow shares, Cheyenne
accounted for its Arrow investment under the cost method of accounting.
PER SHARE DATA
The net income per share in FY96 was $0.70 versus $0.97 in FY95. Excluding one
time adjustments related to charges for purchased research and development
during FY96 and FY95 and the one-time gain in FY95 for the exchange of Gates/FA
shares for shares of Arrow Electronics, Inc., net income per share was $0.81 in
FY96 versus $0.71 in FY95. The weighted average number of common shares and
equivalents outstanding decreased to 38,928,000 in FY96 from 39,617,000 in FY95
primarily due to the Company's purchases of its shares.
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994
Please refer to Table 1 and Table 2.
27
<PAGE>
REVENUES
Cheyenne's revenues increased 30.9% in FY95 over FY94 to $127,927,000 from
$97,737,000. The increase in revenues in FY95 was primarily for the same
reasons noted for FY96, including increased distribution sales, geographic
expansion and product diversification.
GROSS PROFIT
The gross profit margin decreased to 83.1% of revenue in FY95 from 88.1% in
FY94, primarily due to a significant increase in technical support costs.
Excluding technical support costs, FY95 versus FY94 gross margins would have
been 90.3% versus 91.0%.
R&D
R&D expenses increased 69% in FY95 versus FY94. Since sales only increased
30.9%, R&D as a percentage of sales increased from 9.2% in FY94 to 11.9% in
FY95. The increase was due to the Company's significantly broader product line
that was further developed and supported by Cheyenne's engineering and technical
personnel. Therefore, additional engineers were added during FY95. The
percentage increase in R&D was much greater than the percentage sales increase
since developing new and enhancing existing products has become an increasingly
more sophisticated and complicated task, requiring even higher manpower levels.
SELLING AND MARKETING EXPENSES
Selling and Marketing expenses increased 73.6% in FY95 over FY94 and increased
as a percentage of sales to 32.2% from 24.3%. The increase was mainly due to
additional sales and marketing personnel, particularly in Europe, where new
distributors entered this market competing more on price and less on services,
necessitating increased expenditures by the Company. Also, expanded marketing
programs and promotions and increased expenditures on direct sales to end-users
of upgrades were factors in the increase.
G&A
G&A expenses increased 33.7% in FY95 over FY94, and slightly increased as a
percentage of sales to 8.4% from 8.2% The main factor was increases in legal
fees and related costs. The cost of an expanded intellectual property
protection program and start-up costs in new countries were also factors in
increased G&A expenses.
PURCHASED RESEARCH & DEVELOPMENT
In connection with the acquisition of NETstor, Inc., the Company recorded a
$547,000 expense for purchased research and development in FQ295. In connection
with the acquisition of the DataJET product line from NetFRAME Systems, Inc.,
the Company recorded a $704,000 expense for purchased research and development
in FQ395.
TOTAL OPERATING EXPENSES
Total operating expenses increased to $68,431,000 in FY95, or a 67.7% increase
over FY94 which amounted to $40,794,000. Excluding the charge for purchased
research and development during FY95, total operating expenses increased 64.7%
versus the previous year.
OPERATING INCOME
Operating income, excluding the charge for purchased research and development
during FY95, decreased to $39,057,000, or 30.5% of sales, in FY95 from
$45,302,000, or 46.4% of sales, in FY94. Due to the expansion into new
geographic markets and increased competition, operating expenses increased at a
higher rate than sales, negatively affecting operating income.
28
<PAGE>
NON-OPERATING INCOME
Non-operating income increased to $24,868,000 in FY95 from $2,406,000 in FY94,
(the Company in FY95 realized a pre-tax gain of $21,232,000 in connection with
its sale of Gates F/A shares). Interest income increased to $3,437,000 in FY95
from $1,668,000 in FY94. The increase was due to an increased cash, cash
equivalents and investments, most of which was generated from operations, and
the exercise of stock options.
PROVISION FOR INCOME TAXES
The provision for income taxes for FY95 was $24,255,000 or 38.6% of pretax
income compared to $16,742,000 or 35% of pretax income in FY94. Excluding the
Federal and State increases in the rate due to the excess tax gain on the sale
of Gates/FA shares, the effective income tax rate for FY94 would have been
approximately 34%. Such rate is lower than the combined Federal and State
statutory rate due mainly to the benefits from the Company's FSC, tax exempt
investment income and R&D tax credits.
EQUITY IN EARNINGS OF GATES/FA
The equity in earnings of Gates/FA decreased in FY95 to $85,000 from $1,572,000
in FY94. In FQ195, Cheyenne exchanged its 1,348,290 shares of Gates/FA common
stock for 798,996 shares of Arrow common stock.
PER SHARE DATA
The net income per share in FY95 was $0.97 per share, including a one time net
gain, net of income taxes, of 26 cents per share, as a result of the exchange of
Gates/FA shares for Arrow shares and the write-off of purchased research and
development related to the two acquisitions in FY95, versus $0.82 per share in
FY94. The weighted average number of common shares and equivalents outstanding
decreased to 39,617,000 shares versus 39,877,000 shares in the previous fiscal
year. The number of shares decreased mainly due to the Company's purchase of
its shares, although this was offset by an increase in shares due to stock
option exercises, new stock option grants and the increase in share price in
FY95.
LIQUIDITY AND CAPITAL RESOURCES
The Company has no debt and $85,023,000 in cash, cash equivalents and
investments as of June 30, 1996. Subsequent to that date, the Company used
approximately $14,000,000 million in connection with certain acquisitions and
approximately $5,600,000 for purchases of the Company's common stock. Cash,
cash equivalents and investments increased during FY96 from cash generated from
operations of $29,352,000 and $3,684,000 of cash received from the exercise of
stock options. All accounts payable are current, and accounts receivable
collections are about 92.5 days, versus 89.0 days at the end of FY95 (calculated
based on accounts receivable balances at the end of each period). Net accounts
receivables increased 41.1% versus FY95 on a sales increase of 36.1%. One
distributor in FY96 accounted for 16% of the Company's revenues and as of June
30, 1996 accounted for 23% of outstanding net trade accounts receivable. The
loss of this customer, or any of the other major distributors of Cheyenne's
products or their failure to pay for products purchased, could have a material
adverse effect on Cheyenne's operating results.
Capital expenditures were $13,914,000 in FY96 versus $10,974,000 in FY95. The
increase is primarily due to purchases of computers, telephone and test
equipment and other items needed to support the growing employee base and
business. The Company is leasing certain equipment on terms it believes
favorable, which has increased cash available for operations. It is anticipated
that capital expenditures will be about $14,000,000 in FY97. Further
investments in computers, test equipment and facilities are planned based upon
continued growth in the number of employees to support Cheyenne's growing
business.
Management believes Cheyenne's current cash, cash equivalents and investment
positions coupled with anticipated cash flow from operations, will be more than
adequate to meet its anticipated cash requirements for planned capital
expenditures and operations for the next twelve months and any additional
purchases of the Company's common stock.
Cheyenne may utilize significant portions of cash in connection with potential
acquisitions.
29
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements included with this Form 10-K are set forth
under Item 14 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and executive officers is incorporated
herein by reference from the section entitled "Election of Directors" of the
Company's definitive Proxy Statement to be filed pursuant to Regulation 14A of
the Securities Exchange Act of 1934, as amended, for Cheyenne's Annual Meeting
of Stockholders to be held on December 12, 1996 (the "Proxy Statement"). The
Proxy Statement is anticipated to be filed within 120 days after the end of
Cheyenne's fiscal year ended June 30, 1996.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by reference
from the section entitled "Executive Compensation" of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is incorporated herein by reference from the section entitled
"Principal Stockholders; Shares held by Management" of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is
incorporated herein by reference from the section entitled "Certain
Relationships and Related Transactions" of the Proxy Statement.
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets:
June 30, 1996 and 1995 F - 2
Consolidated Statements of Earnings:
Years ended June 30, 1996, 1995 and 1994 F - 3
Consolidated Statements of Shareholders' Equity:
Years ended June 30, 1996, 1995 and 1994 F - 4
Consolidated Statements of Cash Flows:
Years ended June 30, 1996, 1995 and 1994 F - 5
Notes to Consolidated Financial Statements F - 6
2. FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts S - 1
Other schedules are omitted because of (i) the absence of conditions
requiring the filing of such Schedules or (ii) the inclusion of the
applicable information in the consolidated financial statements included
in this Report.
31
<PAGE>
3. Exhibits incorporated by reference or filed with this
Report:
Number Exhibits
- ------ --------
3.1.1 Certificate of Incorporation of Cheyenne, as amended, incorporated
by reference to Exhibit 3.1 of Cheyenne's Registration Statement
on Form S-1, No. 33-8113 ("1986 Registration Statement").
3.1.2 Certificate of Amendment of the Certificate of Incorporation of
Cheyenne, incorporated by reference to Exhibit 1
to Cheyenne's Current Report on Form 8-K, dated December 2,
1986.
3.1.3 Certificate of Amendment of the Certificate of Incorporation of
Cheyenne, Incorporated by reference to Exhibit 4.4 to Cheyenne's
Annual Report on Form 10-K for the year ended June 30, 1995 (the
"1995 Form 10-K").
3.2 Restated By-laws of Cheyenne as of April 15, 1996, incorporated
by reference to Exhibit 99 to Cheyenne's
Current Report on Form 8-K, filed April 16, 1996.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.3 Certificate of Designations of Series A Junior Participating
Preferred Stock of Cheyenne, incorporated by
reference to Exhibit A of Exhibit 1 to Cheyenne's Registration
Statement on Form 8-A filed by Cheyenne on
April 15, 1996 (the "Form 8-A").
4.4 Rights Agreement, dated as of April 15, 1996, between Cheyenne
and Continental Stock Transfer and Trust
Company, as Rights Agent, incorporated by reference to the Form
8-A.
10.1 1987 Non-Qualified Stock Option Plan, as amended, incorporated by
reference to Exhibit 4.2 to Cheyenne's
Registration Statement on Form S-8/S-3 effective March 12, 1996
(the Form "S-8/S-3") File No. 333-01655.
10.2 1989 Incentive Stock Option Plan, as amended, incorporated by
reference to Exhibit 4.3 to the Form S-8/S-3.
10.3 1992 Stock Option Plan for Outside Directors, as amended,
incorporated by reference to Exhibit 4.4 to the Form
S-8/S-3.
10.4 Cheyenne's 401(k) Plan, incorporated by reference to Exhibit
10.56 to Cheyenne's Annual Report on Form 10-
K for the fiscal year ended June 30, 1991 (the "1991 Form 10-K").
10.5 Lease, for facility at 3 Expressway Plaza, Roslyn Heights, New
York, dated June 30, 1992, between Cheyenne
and LKM Expressway Plaza Limited Partnership, as amended,
incorporated by reference to Exhibit 10.13.5 to
Cheyenne's Annual Report on Form 10-K for the year ended June 30,
1992 (the "1992 Form 10-K").
10.5.1 First Modification of Lease Agreement, dated February 1, 1993,
between Cheyenne and LKM Expressway Plaza Limited Partnership,
incorporated by reference to Exhibit 10.13.7 to Cheyenne's Annual
Report on Form 10-K for the year ended June 30, 1993 (the "1993
Form 10-K").
10.5.2 Second Modification of Lease Agreement, dated October 25, 1993,
between Cheyenne and LKM Expressway Plaza Limited Partnership,
incorporated by reference to Exhibit 10.13.9 to Cheyenne's Annual
Report on Form 10-K for the year ended June 30, 1994 (the "1994
Form 10-K").
10.6 Lease Agreement, relating to the facility at 2000 Marcus Avenue,
Lake Success, New York, dated December 20, 1994, between Cheyenne
and Elan Associates, incorporated by reference to Exhibit 10.70
to the 1995 Form 10-K.
*10.7 Employment Agreement, dated October 1, 1991, between Cheyenne and
Eli Oxenhorn, incorporated by reference to Exhibit 10.1.3 to the
1992 Form 10-K.
32
<PAGE>
*10.7.1 Amendment to Employment Agreement between Cheyenne and Eli
Oxenhorn, dated October 7, 1993, incorporated by reference to
Exhibit 10.1.4 to the 1994 Form 10-K.
*10.7.2 Consulting and Non-competition Agreement between Cheyenne and Eli
Oxenhorn, incorporated by reference to Exhibit 10.66 to the 1994
Form 10-K.
*10.8 Employment Agreement, dated January 1, 1993, between Cheyenne and
Alan Kaufman, incorporated by reference to Exhibit 10.5.2 to the
1993 Form 10-K.
*10.8.1 Amendment to Employment Agreement between Cheyenne and Alan
Kaufman, dated October 7, 1993, incorporated by reference to
Exhibit 10.5.3 to the 1994 Form 10-K.
*10.8.2(1) Amendment to Employment Agreement between Cheyenne and Alan
Kaufman, dated December 30, 1995.
*10.9 Employment Agreement, dated September 1, 1992, between Cheyenne
and Elliot Levine, incorporated by reference to Exhibit 10.42.3
to the 1993 Form 10-K.
*10.9.1 Amendment to Employment Agreement between Cheyenne and Elliot
Levine, dated October 7, 1993, incorporated by reference to
Exhibit 10.42.4 to the 1994 Form 10-K.
*10.9.2 Amendment to Employment Agreement between Cheyenne and Elliot
Levine, dated October 24, 1994, incorporated by reference to
Exhibit 10.42.5 to the 1995 Form 10-K.
*10.9.3 Amendment to Employment Agreement between Cheyenne and Elliot
Levine, dated August 30, 1995, incorporated by reference to
Exhibit 10.42.6 to the 1995 Form 10-K.
*10.9.4 Deferred Compensation Agreement between Cheyenne and Elliot
Levine, incorporated by reference to Exhibit 10.55 to the 1991
Form 10-K.
*10.10 Employment Agreement, dated September 5, 1991 between Cheyenne
and ReiJane Huai, incorporated by reference to Exhibit 10.54 to
the 1991 Form 10-K.
*10.10.1 Amendment to Employment Agreement between Cheyenne and ReiJane
Huai, incorporated by reference to Exhibit 10.54.1 to the 1994
Form 10-K.
*10.10.2 Deferred Compensation Agreement between Cheyenne and ReiJane
Huai, incorporated by reference to Exhibit 10.59 to the 1993 Form
10-K.
*10.11 Employment Agreement, dated May 4, 1992, between Cheyenne and
James P. McNiel, incorporated by reference to Exhibit 10.57.1 to
the 1994 Form 10-K.
*10.11.1 Amendment to Employment Agreement between Cheyenne and James P.
McNiel, dated October 7, 1993, incorporated by reference to
Exhibit 10.57.2 to the 1994 Form 10-K.
*10.11.2(1) Separation Agreement, dated April 9, 1996, between Cheyenne and
James P. McNiel.
*10.12 Employment Agreement, dated November 16, 1994, between Cheyenne
and Doris Granatowski, incorporated by reference to Exhibit 10.69
to the 1995 Form 10-K.
33
<PAGE>
*10.13 Employment Agreement, dated July 1, 1995, between Cheyenne and
Michael B. Adler, Esq., incorporated by reference to Exhibit
10.67 to the 1995 Form 10-K.
*10.14 Employment Agreement, dated June 8, 1995, between Cheyenne and
Yuda Doron, incorporated by reference to Exhibit 10.68 to the
1995 Form 10-K.
*10.15(1) Employment Agreement, dated as of May 1, 1996, between Cheyenne
and Wayne Lam.
*10.16(1) Change of Control Employment Agreement, dated May 20, 1996,
between Michael B. Adler, Esq. and Cheyenne.
*10.17(1) Change of Control Employment Agreement, dated May 20, 1996,
between Yuda Doron and Cheyenne.
*10.18(1) Change of Control Employment Agreement, dated May 20, 1996,
between Doris Granatowski and Cheyenne.
*10.19(1) Change of Control Employment Agreement, dated May 20, 1996,
between ReiJane Huai and Cheyenne.
*10.20(1) Change of Control Employment Agreement, dated May 20, 1996,
between Alan Kaufman and Cheyenne.
*10.21(1) Change of Control Employment Agreement, dated May 20, 1996,
between Wayne Lam and Cheyenne.
*10.22(1) Change of Control Employment Agreement, dated May 20, 1996,
between Elliot Levine and Cheyenne.
21. Subsidiaries of Cheyenne.
23. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
- --------------
*Denotes a compensation plan of other arrangement under which directors or
executive officers may participate.
(1) Filed herewith.
(b) Reports on Form 8-K:
On July 12, 1996, Cheyenne filed a current Report on Form 8-K reporting
the closing of Cheyenne's purchase of all the outstanding shares of
Intelligence Quotient International Limited, a United Kingdom based
company.
34
<PAGE>
CHEYENNE SOFTWARE, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
(FORM 10-K)
JUNE 30, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Shareholders and Board of Directors
Cheyenne Software, Inc. and Subsidiaries:
We have audited the consolidated financial statements of Cheyenne
Software, Inc. and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule
listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Cheyenne Software, Inc. and subsidiaries as of June 30, 1996 and
1995 and the results of their operations and their cash flows for each
of the years in the three-year period ended June 30, 1996 in conformity
with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York
August 16, 1996
F-1
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,845 15,592
Short-term investments 26,621 15,088
Accounts receivable, less allowance for doubtful accounts
of $1,357,000 and $1,302,000, respectively 44,010 31,201
Deferred income taxes 2,901 1,400
Prepaid income taxes 3,664 1,453
Prepaid expenses and other current assets 5,945 4,765
-------- -------
Total current assets 107,986 69,499
Long-term investments 33,557 40,522
Fixed assets, net 29,024 16,511
Other assets 5,905 2,862
------- -------
Total assets $ 176,472 129,394
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable 9,455 5,962
Accrued expenses 5,101 5,751
Income taxes payable 1,041 -
Current portion of obligations under capital leases 2,186 -
Current portion of deferred rent 58 -
Other current liabilities 3,323 -
------- -------
Total current liabilities 21,164 11,713
Obligations under capital leases 2,028 -
Deferred income taxes 469 1,352
Deferred rent 1,039 -
Other liabilities 1,250 -
------- -------
Total liabilities 25,950 13,065
------- -------
Minority interest in subsidiary - 19
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
none issued - -
Common stock, par value $.01 per share; 75,000,000 shares
authorized; 40,033,589 and 39,313,861 shares issued 400 393
Additional paid-in capital 60,994 53,008
Retained earnings 120,274 93,046
Foreign currency translation adjustment (626) 464
Net unrealized loss on investments (62) (143)
Treasury stock, at cost; 2,035,000 shares (30,458) (30,458)
------- -------
Total shareholders' equity 150,522 116,310
-------- -------
Total liabilities and shareholders' equity $176,472 129,394
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues $ 174,096 127,927 97,737
Cost of sales 33,120 21,690 11,641
-------- ------- -------
Gross profit 140,976 106,237 86,096
-------- ------- -------
Operating expenses:
Selling and marketing 53,951 41,222 23,747
Research and development 25,193 15,174 8,981
General and administrative 17,903 10,784 8,066
Charge for purchased research and development 6,272 1,251 -
-------- ------- -------
Total operating expenses 103,319 68,431 40,794
-------- ------- -------
Operating income 37,657 37,806 45,302
Non-operating income (expense):
Interest income 3,050 3,437 1,668
Other income, net 336 199 738
Interest expense (313) - -
Other (loss) gain (466) 21,232 -
-------- ------- -------
Total non-operating income 2,607 24,868 2,406
-------- ------- -------
Income before income taxes and equity in
earnings of Gates/FA 40,264 62,674 47,708
Provision for income taxes 13,036 24,255 16,742
Equity in earnings of Gates/FA - 85 1,572
-------- ------- -------
Net income $ 27,228 38,504 32,538
======= ======= =======
Net income per share $ .70 .97 .82
======= ======= =======
Weighted average number of common shares and
equivalents outstanding 38,928 39,617 39,877
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN NET
------------------ ADDITIONAL CURRENCY UNREALIZED
NUMBER PAID-IN RETAINED TRANSLATION (LOSS) GAIN ON
OF SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT INVESTMENTS
--------- ------ ------- -------- ---------- --------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1993 25,117 $ 251 38,974 22,004 33 -
Three-for-two common stock split 12,812 128 (128) - - -
Issuance of common stock on exercise of
stock options 857 9 5,314 - - -
Tax benefit from exercise of stock options - - 5,975 - - -
Transactions involving affiliate's common stock - - (50) - - -
Foreign currency translation adjustment - - - - 23 -
Net income for the year ended June 30, 1994 - - - 32,538 - -
------ ------ -------- ------ ----- ------
Balances at June 30, 1994 38,786 388 50,085 54,542 56 -
Issuance of common stock on exercise of
stock options 532 5 1,515 - - -
Tax benefit from exercise of stock options - - 1,882 - - -
Transactions involving affiliate's common stock - - (474) - - -
Adjustment to common stock issued in
connection with acquisition (4) - - - - -
Purchase of treasury stock - - - - - -
Foreign currency translation adjustment - - - - 408 -
Net unrealized loss on investments - - - - - (143)
Net income for the year ended June 30, 1995 - - - 38,504 - -
------ ------ -------- ------ ----- ------
Balances at June 30, 1995 39,314 393 53,008 93,046 464 (143)
Stock option expense - - 317 - - -
Issuance of common stock on exercise of
stock options 720 7 3,677 - - -
Tax benefit from exercise of stock options - - 3,992 - - -
Foreign currency translation adjustment - - - - (1,090) -
Net unrealized gain on investments - - - - - 81
Net income for the year ended June 30, 1996 - - - 27,228 - -
------ ------ -------- ------ ----- ------
Balances at June 30, 1996 40,034 $ 400 60,994 120,274 (626) (62)
------ ------ -------- ------ ----- -------
------ ------ -------- ------ ----- -------
<CAPTION>
TREASURY STOCK
-------------------------
NUMBER
OF SHARES AMOUNT
---------- ------
<S> <C> <C>
Balances at June 30, 1993 - $ -
Three-for-two common stock split - -
Issuance of common stock on exercise of
stock options - -
Tax benefit from exercise of stock options - -
Transactions involving affiliate's common stock - -
Foreign currency translation adjustment - -
Net income for the year ended June 30, 1994 - -
--------- -------
Balances at June 30, 1994 - -
Issuance of common stock on exercise of
stock options - -
Tax benefit from exercise of stock options - -
Transactions involving affiliate's common stock - -
Adjustment to common stock issued in
connection with acquisition - -
Purchase of treasury stock 2,035 (30,458)
Foreign currency translation adjustment - -
Net unrealized loss on investments - -
Net income for the year ended June 30, 1995 - -
-------- ---------
Balances at June 30, 1995 2,035 (30,458)
Stock option expense - -
Issuance of common stock on exercise of
stock options - -
Tax benefit from exercise of stock options - -
Foreign currency translation adjustment - -
Net unrealized gain on investments - -
Net income for the year ended June 30, 1996 - -
------- --------
Balances at June 30, 1996 2,035 $ (30,458)
------- --------
------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income $ 27,228 38,504 32,538
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of Gates/FA common stock - (21,232) -
Tax benefit from exercise of stock options 3,992 1,882 5,975
Equity in earnings of Gates/FA - (85) (1,572)
Loss on sale of Arrow Electronics common stock - 11 -
Charge for purchased research and development 6,272 1,251 -
Depreciation and amortization 8,787 3,587 1,792
Stock option expense 317 - -
Deferred rent 1,097 - -
Change in assets and liabilities, net of effects from acquisitions:
Increase in accounts receivable (12,703) (7,721) (9,073)
Increase in other current assets (3,391) (2,187) (2,071)
Increase in other assets (2,378) (1,211) (802)
Increase in accounts payable, accrued expenses and
income taxes payable 2,515 1,605 5,685
Deferred income taxes (2,384) (1,078) 802
-------- ------- -------
Net cash provided by operating activities 29,352 13,326 33,274
-------- ------- -------
Investing activities:
Purchases of fixed assets (13,914) (10,974) (5,290)
Purchases of investments (28,716) (29,265) (51,916)
Proceeds from sales and maturities of investments 24,279 31,033 17,320
Payments for acquisitions of Chili Pepper and Media Blitz (2,437) - -
Payments for acquisitions of NETstor and DataJET technology - (1,951) -
Purchase of minority interest (235) - -
Net proceeds from sale of Arrow Electronics common stock - 30,324 -
-------- ------- -------
Net cash (used in) provided by investing activities (21,023) 19,167 (39,886)
-------- ------- -------
Financing activities:
Principal payments under capital lease obligations (1,670) - -
Proceeds from exercise of stock options 3,684 1,520 5,323
Purchase of treasury stock - (30,458) -
-------- ------- -------
Net cash provided by (used in) financing activities 2,014 (28,938) 5,323
-------- ------- -------
Effect of exchange rate changes on cash (1,090) 408 23
-------- ------- -------
Increase (decrease) in cash and cash equivalents 9,253 3,963 (1,266)
Cash and cash equivalents at beginning of year 15,592 11,629 12,895
-------- ------- -------
Cash and cash equivalents at end of year $ 24,845 15,592 11,629
======== ======= =======
Supplemental information
Noncash investing and financing activities:
Issuances of and other transactions related to affiliate's common stock $ - (474) (50)
======== ======= =======
Deferred acquisition payments $ 4,573 - -
======== ======= =======
Acquisition of equipment under capital leases $ 5,884 - -
======== ======= =======
Cash paid during the year for income taxes $ 10,993 26,723 6,949
======== ======= =======
Cash paid during the year for interest $ 306 - -
======== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1996 and 1995
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Cheyenne Software, Inc. and its subsidiaries (Cheyenne or the Company) are
engaged in the development, sale and support of software products for
use in desktop and networked personal computer environments,
including for Local Area Network (LAN) and Wide Area Network (WAN)
applications.
On February 1, 1993, the Company commenced operations of a 95% owned
Japanese subsidiary, Cheyenne Software KK, to produce and market
certain of the Company's products in Japan. In fiscal 1996, the
Company acquired the 5% minority interest in Cheyenne Software KK for
$235,000.
On December 19, 1994, the Company acquired certain assets and assumed
certain liabilities of NETstor, Inc. (NETstor), a developer of
Hierarchical Storage Management (HSM) software products for the
UNIX computer platform in the network storage management market, for
$1,150,000 of cash. The acquisition has been accounted for as a
purchase and the operating results of NETstor are included in the
consolidated statement of earnings from the date of acquisition. In
connection with the acquisition, the Company recorded a $547,000
expense for purchased research and development and $94,000 of
capitalized software which is included in other assets in the
accompanying balance sheet and is being amortized on a straight
line basis over two years. The revenues and net earnings of
NETstor prior to the acquisition were insignificant compared to the
Company's consolidated results.
On March 30, 1995, the Company acquired the DataJET product line and
certain other assets and assumed certain liabilities of NetFRAME
Systems, Inc. (NetFRAME). DataJET is an image based, high
performance software backup product for NetWare file servers. Cheyenne
made cash payments aggregating $801,000 for DataJET and pays
royalties to NetFRAME based on the Company's sales of products
utilizing the DataJET technology. The acquisition has been accounted for
as a purchase. In connection with the acquisition, the Company
recorded a $704,000 expense for purchased research and
development. The revenues and net earnings for the DataJET product prior
to the acquisition were insignificant compared to the Company's
consolidated results.
On September 28, 1995, Cheyenne acquired certain assets and assumed certain
liabilities of Chili Pepper Software, Inc. (Chili Pepper), a
manufacturer of HSM solutions for the desktop PC, for
approximately $718,000 of cash and the assumption of approximately
$1,568,000 of liabilities. The acquisition has been accounted for
using the purchase method of accounting, and accordingly, the
purchase price has been allocated to the assets purchased, including
approximately $476,000 to capitalized software which is included
in other assets and is being amortized over three years. In
connection with the acquisition, Cheyenne recorded an expense for
purchased research and development of approximately $1,636,000.
The operating results of Chili Pepper are included in the
consolidated statement of earnings from the date of acquisition. The
revenues and net earnings for Chili Pepper prior to the
acquisition were insignificant compared to the Company's consolidated
results.
On October 31, 1995, Cheyenne acquired certain assets of Media Blitz, Inc.
(Media Blitz), a manufacturer of optical and tape jukebox and
CD-ROM management software solutions for the Microsoft Windows
(Continued)
F-6
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
NT environment, for approximately $4,000,000 plus $219,000 of related
transaction costs, of which $1,719,000 was paid at closing and
$1,250,000 is payable on each of October 31, 1996 and 1997. The
acquisition has been accounted for using the purchase method of
accounting, and accordingly, the purchase price has been allocated to
the assets purchased, including approximately $1,254,000 for
capitalized software which is included in other assets and is being
amortized over three years. In addition, approximately $2,763,000 was
recorded as an expense for purchased research and development. The
excess of the purchase price over the fair value of the net assets
acquired of $162,000 was allocated to goodwill, which is included in
other assets and is being amortized on a straight-line basis over
three years. The operating results of Media Blitz are included in the
consolidated statement of earnings from the date of acquisition. The
revenues and net earnings for Media Blitz prior to the acquisition
were insignificant compared to the Company's consolidated results.
In June 1996, the Company acquired for $2,073,000 a license to certain
software which was not technologically feasible at the time of
purchase. The Company will enhance such software to develop new
products. The license fee was recorded as a charge for purchased
research and development. The Company paid $250,000 in August, 1996
and $250,000 will be paid on the first day of each quarter
thereafter, commencing October 1, 1996, until the enhanced product is
shipped to an end user, at which time the balance will be due.
The technological feasibility of the purchased in-process technology (research
and development) related to all of the above acquisitions was not yet
established at the dates of acquisition and the technologies had no
alternative uses.
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of Cheyenne
Software, Inc. and its majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in
consolidation.
REVENUE AND PROFIT RECOGNITION
The Company recognizes revenue from software licenses and sales, and the sale
of upgrades or enhancements, to customers at delivery provided no
significant vendor and post-contract customer support (PCS)
obligations remain and collectibility of the resulting receivables is
probable. Revenue attributable to PCS included in site-license
agreements, primarily consisting of free upgrades for a specified
period, is deferred and recognized over the period it is earned.
Maintenance fees are recognized as revenue ratably over the
period of the related contract. Development fee income is
recognized ratably during the software development period and royalty
income is recognized when earned. The Company provides a liability
for future PCS (primarily telephone customer support) related to
revenue recorded, which is included in accrued liabilities in the
accompanying balance sheets. The Company also provides for
estimated product returns and exchanges, rebates and cooperative
advertising costs, which are reflected as reductions to accounts
receivable in the accompanying balance sheets since the Company
grants credits for such items. The provision for returns and
exchanges and rebates reduces revenues and the provision for cooperative
advertising is included in sales and marketing expenses. Technical
support costs are included in cost of sales.
(Continued)
F-7
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVESTMENTS
The Company has evaluated its investment policies consistent with Financial
Accounting Standards Board Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No.115), and
determined that all of its investment securities are classified as
available-for-sale. Available-for-sale securities are carried at fair
value, with unrealized gains and losses reported in shareholders'
equity under the caption "net unrealized loss on investments". The
amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is
included in interest income. Realized gains and losses, and declines in
value judged to be other-than-temporary on available-for-sale
securities, are included in interest income. The cost of securities
sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included
in interest income.
FIXED ASSETS
Fixed assets are stated at cost, net of accumulated amortization. Amortization
of leasehold improvements is provided for over the lesser of the term
of the related leases or the estimated life of the assets, and
depreciation of equipment, furniture and fixtures, and purchased
computer software is provided for over their estimated useful lives.
The straight-line method is used for financial reporting purposes,
and an accelerated method is used, where applicable, for income tax
purposes.
Useful lives used for depreciation and amortization of fixed assets are
primarily as follows: computer equipment, five years; purchased
computer software, three years; furniture, fixtures and office
equipment, ten years; and trade show equipment, three years.
INTANGIBLE ASSETS
Intangible assets net of accumulated amortization, at June 30, 1996 and 1995
of $4,422,000 and $1,285,000, respectively, are included in other
assets and include costs of acquiring product technology, computer
software development, and patents which are amortized using the
straight-line method over their estimated useful lives, typically no
more than five years. Capitalized software development costs from
acquisitions is being amortized on a straight-line basis over the
estimated product life, or based on the ratio of current period
revenues to total projected product revenues, whichever results in
greater amortization expense. The estimated product lives have ranged
from two to three years.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 (SFAS No. 121) that establishes accounting standards for the
impairment of long lived assets, certain intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of. In conformity
with SFAS No. 121, it is the Company's policy to evaluate and
recognize an impairment if it is probable that the recorded amounts are
in excess of anticipated undiscounted future cash flows.
(Continued)
F-8
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
SOFTWARE DEVELOPMENT COSTS
Costs associated with Cheyenne's development and enhancement of proprietary
software are expensed as incurred. Such costs that could be
capitalized pursuant to Financial Accounting Standard Board
Statement No.86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed", are immaterial due to the
short period of time and minimal costs incurred between when the
Company's products reach technological feasibility and when they are
available for general release to the public.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
realized or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments", requires disclosure of the fair
value of certain financial instruments. As of June 30, 1996 and
1995, the fair value of all financial instruments approximate book
values because of the short maturity of these instruments.
EARNINGS PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents (stock options) outstanding.
All references to number of shares and per share data have been
restated for all periods presented to reflect the three-for-two
stock split (note 6).
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign subsidiaries have been
translated at rates of exchange at the end of the period. Revenues
and expenses have been translated at the weighted average rates of
exchange in effect during the period. Gains and losses resulting from
translation are accumulated as a separate component of stockholders'
equity. In fiscal 1996 other loss is comprised of a foreign currency
loss of approximately $466,000 in connection with certain intercompany
balances that are of a short term investment nature between Cheyenne
and its subsidiary in Japan.
TREASURY STOCK
On February 23, 1995, the Board of Directors of the Company authorized
management to purchase up to 4,000,000 shares of the Company's
outstanding common stock. Purchases are dictated by overall financial
and market conditions and other factors affecting the operations of the
Company. During fiscal 1995, Cheyenne purchased 2,035,000 shares of
its common stock for approximately $30,458,000, at prices ranging
from approximately $13.50 to $17.25 per share. Treasury stock is
recorded at cost.
(Continued)
F-9
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On various dates subsequent to June 30, 1996 through August 16, 1996, the
Company purchased 199,900 shares of its common stock for
approximately $3,558,000, at prices ranging from approximately
$16.62 to $19.00 per share.
USE OF ESTIMATES
The preparation of 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 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. Among the more
significant estimates included in these financial statements are the
estimated allowance for doubtful accounts receivable, reserve for
returns and exchanges, charges for purchased research and
development and the liability for PCS. Actual results could differ from
those estimates.
RECLASSIFICATION
Certain prior year information has been reclassified to conform with the
1996 presentation format.
(2) INVESTMENT IN GATES/FA DISTRIBUTING, INC. (GATES/FA) AND ARROW ELECTRONICS,
INC.
(a) At June 30, 1992, Cheyenne owned 24.2% (1,448,290 common shares) of
Gates/FA, a distributor of microcomputers, software and computer
peripheral equipment. On February 3,1993, Cheyenne sold 100,000
shares of Gates/FA common stock, which resulted in a reduction of
Cheyenne's ownership interest in Gates/FA to approximately 21.5%.
Cheyenne accounted for its investment in Gates/FA using the equity
method of accounting, which reflected the cost of the Company's
investment adjusted for its proportionate share of the net income
or loss and capital transactions of Gates/FA.
(b) On August 29, 1994, Cheyenne exchanged its remaining 1,348,290 shares
of Gates/FA common stock for 798,996 common shares of Arrow
Electronics, Inc., a public company. The transaction qualified
as a tax-free exchange and resulted in a pre-tax gain of $21,232,000 for
financial reporting purposes. After the transaction, Cheyenne
owned approximately 2% of Arrow's outstanding common stock.
Accordingly, the Company accounted for its investment in Arrow common
stock under the cost method of accounting.
(c) During the third and fourth quarters of fiscal 1995, Cheyenne sold its
Arrow common stock for $30,324,000, which resulted in a net loss
of approximately $11,000.
(Continued)
F-10
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
At June 30, 1996, the cost and related fair value of investments are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
FAIR UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES
---- ----- ----- ------
(In thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
Municipal debt $ 41,243 41,157 43 (129)
U.S. Treasury bills and notes 10,858 10,858 -- --
Corporate debt 4,520 4,488 4 (36)
Commercial Paper 2,787 2,800 13 --
U.S. government agencies debt 886 875 -- (11)
Equity securities 46 100 54 --
-------- ----- --- -----
$ 60,340 60,278 114 (176)
-------- ----- --- -----
-------- ----- --- -----
</TABLE>
Of the above investments, $26,621,000, $33,557,000 and $100,000 are
included in the balance sheet captions "short-term investments",
"long-term investments" and "other assets", respectively.
The contractual maturities of debt securities at fair market value are as
follows:
<TABLE>
<CAPTION>
WITHIN 1 1 TO 5 5 TO 10 AFTER 10
YEAR YEARS YEARS YEARS TOTAL
---- ----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Municipal debt $11,952 15,305 800 13,100 41,157
U.S. Treasury bills and notes 10,858 -- -- -- 10,858
Corporate Debt 1,011 3,477 -- -- 4,488
Commercial Paper 2,800 -- -- -- 2,800
U.S. government agencies debt -- 875 -- -- 875
------- ------ --- ------ ------
$26,621 19,657 800 13,100 60,178
------- ------ --- ------ ------
------- ------ --- ------ ------
</TABLE>
At the time the Company implemented SFAS No. 115 during the first quarter
of fiscal 1995, management decided to classify certain
investments as held-to-maturity due to its having the positive
intent and ability to hold those securities to maturity.
During the fourth quarter of fiscal 1995, the Company sold a
portion of its securities classified as held-to-maturity prior
to their maturity dates to purchase treasury stock. The
amortized cost of these securities was approximately $16,683,000
and the net realized gain amounted to approximately $5,000.
(Continued)
F-11
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Investments at June 30, 1995 consisted of the following:
AMORTIZED FAIR
COST VALUE
---- -----
(In thousands)
Municipal debt $37,956 37,736
U.S. Treasury bills and notes 9,555 9,555
Government agencies debt 4,841 4,829
Preferred securities 3,393 3,393
Equity Securities 150 240
Corporate debt 98 97
------- ------
$55,993 55,850
------- ------
------- ------
Of the above investments, $15,088,000, $40,522,000 and $240,000 are
included in the balance sheet captions "short-term investments",
"long-term investments" and "other assets", respectively.
(4) FIXED ASSETS
Fixed assets consist of the following:
JUNE 30,
1996 1995
---- ----
(In thousands)
Computer equipment $23,860 14,143
Leasehold improvements 7,538 1,646
Purchased computer software 4,317 3,083
Furniture and fixtures 3,696 2,049
Office equipment 3,451 2,175
Trade show equipment 674 586
------- ------
43,536 23,682
Less accumulated depreciation
and amortization 14,512 7,171
------- ------
$29,024 16,511
------- ------
------- ------
Computer equipment includes $5,884,000 of assets recorded under capital
leases.
(Continued)
F-12
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) INCOME TAXES
Income tax expense consists of:
CURRENT DEFERRED TOTAL
------- -------- -----
(In thousands)
1996:
Federal $13,105 (2,105) 11,000
State 772 -- 772
Foreign 1,543 (279) 1,264
------- ------- ------
$15,420 (2,384) 13,036
------- ------- ------
------- ------- ------
1995:
Federal $21,249 (906) 20,343
State 3,306 (172) 3,134
Foreign 778 -- 778
------- ------- ------
$25,333 (1,078) 24,255
------- ------- ------
------- ------- ------
1994:
Federal $13,714 720 14,434
State 2,226 82 2,308
------- ------- ------
$15,940 802 16,742
------- ------- ------
------- ------- ------
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax asset and liability at June
30, 1996 and 1995 are as follows:
1996 1995
------ -----
(In thousands)
Deferred tax assets:
Accrual for product returns and exchanges $1,088 646
Allowance for doubtful accounts receivable 489 487
Deferred Rent 460 --
Accrued expenses 483 158
Other 381 109
------ -----
$2,901 1,400
------ -----
------ -----
Deferred tax liabilities:
Fixed assets depreciation $ 469 853
Other -- 499
------ -----
$ 469 1,352
------ -----
------ -----
Management of the Company has determined, based upon historical pre-tax
earnings and expected taxable income in the future, that it is more
likely than not that the Company will realize its deferred tax assets
and therefore, has not recorded a valuation allowance.
(Continued)
F-13
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The following is a reconciliation of the provision for income taxes to the
"expected" amounts computed by applying the statutory Federal income
tax rate to the Company's income before income taxes:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands, except for percentages)
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" income tax
expense $14,092 35.0% $21,966 35.0% $17,248 35.0%
Increase (decrease) in income taxes
resulting from:
State income taxes, net of
Federal benefit 501 1.2 2,037 3.3 1,500 3.0
Foreign income tax rate differential 408 1.0 428 .7 -- --
Excess tax gain on sale of
Gates/FA common stock -- -- 1,779 2.8 -- --
Foreign Sales Corporation
(FSC) benefit (1,498) (3.7) (809) (1.3) (1,244) (2.5)
Tax-exempt investment income (816) (2.0) (919) (1.5) (452) (.9)
Research and development
tax credit -- -- (227) (.4) (374) (.8)
Other 349 .9 -- -- 64 .2
------- ----- ------- ----- ------- -----
Provision for income taxes $13,036 32.4% $24,255 38.6% $16,742 34.0%
------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- -----
</TABLE>
(6) STOCK SPLITS
On February 10, 1994, the Company's Board of Directors declared a
three-for-two stock split, payable in the form of a 50%
stock dividend which was distributed on March 29, 1994 to holders of
record on March 1, 1994. The par value of the additional
12,812,458 shares of common stock issued in connection with the split
was transferred to common stock from additional paid-in capital.
All references to number of shares (except shares authorized), per
share data and stock option plan data have been restated for
all periods presented to reflect the stock split.
(7) STOCK OPTIONS AND STOCK PURCHASE RIGHTS
1984 INCENTIVE STOCK OPTION PLAN
Cheyenne adopted an incentive stock option plan (1984 Plan) and has
reserved 1,687,500 shares for issuance to key employees. Options
are not exercisable until two years after their grant and expire if
not exercised within five years. The number of shares that may be
exercised under the option are limited, on a cumulative basis, to
not more than 25% in the first year in which they become
exercisable, 50% in the second year, and 100% thereafter. Options may
not be granted at less than the fair market value of the
underlying shares at date of grant.
(Continued)
F-14
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
1989 INCENTIVE STOCK OPTION PLAN
Cheyenne adopted an incentive stock option plan (1989 Plan) and has reserved
5,806,250 shares, as amended, for issuance to employees. Options are
not exercisable until two years after their grant and expire if not
exercised within five years. The 1989 Plan was amended during fiscal
1995 to increase the maximum term for which options are exercisable
from five to seven years. The number of shares that may be exercised
under the option is limited, on a cumulative basis, to not more than
25% in the first year in which they become exercisable, 50% in the
second year, and 100% thereafter. Options may not be granted at less
than the fair market value of the underlying shares at the date of
grant. The option price may be paid in cash or with previously owned
stock.
NONQUALIFIED STOCK OPTION PLAN
In December 1987, a nonqualified stock option plan (1987 Plan) was adopted
and 4,237,500 common shares have been reserved, as amended, for
issuance to officers, directors and employees of the Company at such
exercise prices, in such amounts, and upon such terms and conditions, as
determined by the Option Committee of the Board of Directors. Option
prices may be paid in cash or with previously owned common stock.
The 1987 Plan was amended in fiscal 1995 to include consultants as eligible
for grants under the 1987 Plan and the maximum term for which options
are exercisable was increased from five to seven years.
DIRECTORS' PLAN
In fiscal 1993, a stock option plan for outside directors (Directors' Plan)
was adopted and 405,000 common shares have been reserved for issuance
to members of the Board of Directors who are not employees (Outside
Directors). Pursuant to the plan, each Outside Director will receive
options to purchase 16,875 shares of common stock on January 1 of
each year that such director serves the Company in such capacity. All
stock options granted under the Directors' Plan are immediately
exercisable. The exercise price per share of each option will be equal
to the fair market value of the shares of common stock on the date of
grant. Each option granted under the Directors' Plan expires upon the
earlier of five years following the date of grant or one year following
the date an Outside Director ceases to serve in such capacity,
provided that the option is exercised within five years after the
date of its grant. No grants may be made under the Directors' Plan
subsequent to the earlier to occur of January 2, 1997 or the issuance
of common stock or exercise of options pursuant to the Directors'
Plan equal to the maximum number of shares of common stock reserved for
under the Directors' Plan.
OTHER STOCK OPTIONS
During the year ended June 30, 1994, certain directors exercised nonqualified
stock options to purchase 67,500 shares of common stock at $1.41 per
share.
(Continued)
F-15
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of activity under the 1984 Plan, 1989 Plan, 1987 Plan, and
Directors' Plan, which have all been restated to reflect the stock
split, is as follows:
NUMBER OF OPTION PRICE
SHARES RANGE PER SHARE
------ ---------------
Outstanding at June 30, 1993 2,877,363 1.11-21.33
Granted 1,171,951 18.58-21.33
Exercised (1,113,738) 1.11-8.95
Canceled (76,650) 1.67-21.33
-----------
Outstanding at June 30, 1994 2,858,926 1.11-21.33
Granted 2,241,110 8.63-13.75
Exercised (531,844) 1.11-8.94
Canceled (125,526) 8.63-21.33
-----------
Outstanding at June 30, 1995 4,442,666 3.51-21.33
Granted 1,661,415 20.50-26.13
Exercised (719,727) 3.51-21.33
Canceled (469,610) 8.63-23.25
-----------
Outstanding at June 30, 1996 4,914,744 5.26-26.13
-----------
-----------
At June 30, 1996, 1,048,919 options were exercisable and options to purchase
1,690,548 shares were available for future grant under all stock
option arrangements. The exercise prices of all nonqualified stock
options were equal to the fair market value of the underlying shares at
date of grant.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation," which must be adopted
by the Company in fiscal 1997. The Company has elected not to
implement the fair value based accounting method for employee stock
options, but has elected to disclose, commencing in fiscal 1997, the
proforma net income and earnings per share as if such method had been
used to account for stock-based compensation cost as described in the
Statement.
STOCK PURCHASE RIGHTS
In April 1996, the Board of Directors of the Company declared a dividend of
one Stock Purchase Right (Right) for each outstanding share of the
Company's common stock, that was paid to shareholders of record on
April 26, 1996. Each Right entitles the holder to purchase from the
Company one one- hundredth of a share of voting Series A Junior
Participating Preferred Stock of the Company at a price of $100 per
one one-hundredth of a Preferred Share, subject to adjustment. If any
entity acquires beneficial ownership of 20% or more of the Company's
outstanding common stock or there commences a tender offer or
exchange offer which would result in such ownership, the Rights will
then be distributed, separate from the common stock and become
exercisable. The Company may
(Continued)
F-16
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
redeem the Rights for $.01 per Right at any time prior to such time as a
person or group has acquired 20% or more of the outstanding shares of
the Company's common stock. Preferred Shares purchasable upon exercise of
the Rights will not be redeemable. Each preferred share will be entitled
to a minimum preferential quarterly dividend payment of $1 per share but
will be entitled to an aggregate dividend of 100 times the dividend
declared per common share. In the event of liquidation, the holders of
the preferred shares will be entitled to a minimum preferential
liquidation payment of $100 per share but will be entitled to an
aggregate payment of $100 times the payment made per common share. Each
preferred share will entitle the holder to 100 votes on all matters
submitted to shareholders of the Company, voting together as a single
class with the holders of common shares. Finally, in the event of any
merger, consolidation or other transaction in which common shares are
exchanged, each preferred share will be entitled to receive 100 times
the amount received per common share. These rights are protected by
customary antidilution provisions. The Rights will expire on April 15,
2006, unless previously redeemed, exchanged or exercised.
In addition, the Company has entered into change of control employment
agreements with certain employees.
(8) OBLIGATIONS UNDER CAPITAL AND OPERATING LEASES
During 1996, Cheyenne entered into various capital leases for computer
equipment expiring at various dates through 1998. Future minimum payments
required under such leases are as follows
(In thousands)
Years ending June 30:
1997 $ 2,572
1998 2,357
------
Total minimum lease payments 4,929
Less: amount representing interest 715
------
Present value of net minimum lease payments $ 4,214
------
------
The present value of net minimum lease payments is reflected on the balance
sheet as current and noncurrent obligations under capital leases of
approximately $2,186,000 and $2,028,000, respectively. The carrying value
of assets held under capital leases at June 30, 1996 was approximately
$4,345,000.
Cheyenne leases office facilities under various operating leases. The leases
expire through 2004 and are subject to escalation clauses for taxes and
other expenses. Effective September 1, 1995, Cheyenne entered into a
lease for a new office facility which expires in 2002. The total base
rent is being charged to expense on a straight-line basis over the term
of the lease. The first payment commences one year from the inception of
the lease. Accordingly, Cheyenne has recorded deferred rent to reflect
the excess of rent expense over cash payments since inception of the
lease. Future minimum rentals required as of June 30, 1996 are as
follows:
F-17
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(In thousands)
Years ending June 30:
1997 $ 4,344
1998 3,563
1999 3,028
2000 2,429
2001 1,845
Thereafter 2,579
-------
$ 17,788
-------
-------
Rent expense was approximately $5,155,000, $1,995,000 and $1,121,000 for
the years ended June 30, 1996, 1995 and 1994, respectively.
(9) EMPLOYEE BENEFIT PLANS
Effective May 1, 1991, Cheyenne established a voluntary savings and defined
contribution plan under Section 401(k) of the Internal Revenue Code. This
plan covers all employees meeting certain eligibility requirements. For
the years ended June 30, 1996, 1995 and 1994, Cheyenne provided a
matching contribution of $353,000, $242,000 and $142,000, respectively,
which was equal to 25% of each participant's contribution up to a maximum
of 16% of annual compensation. Employees are 100% vested in their own
contributions and become fully vested in the employer contributions after
three years. The Company does not provide its employees any other
postretirement or postemployment benefits.
(10) BUSINESS AND CREDIT CONCENTRATIONS AND EXPORT SALES
The majority of the Company's customers are original equipment
manufacturers and distributors of computer equipment and software. One
customer on a worldwide basis, including its foreign subsidiaries,
accounted for greater than 10% of the Company's revenues in fiscal 1996
(16%), fiscal 1995 (15%) and fiscal 1994 (17%). At June 30, 1996, there
were four customers which accounted for more than five percent of the
Company's outstanding accounts receivable, aggregating 43% of accounts
receivable.
Export sales by geographic area are as follows:
1996 1995 1994
---- ---- -----
(In thousands)
Europe $ 59,737 48,802 35,156
Canada 3,138 2,219 3,159
Other 13,882 8,580 4,099
------- ------- -------
$ 76,757 59,601 42,414
------- ------- -------
------- ------- -------
Revenue, net income and identifiable assets as of or for the year ended
June 30, 1996 related to the Company's operations in Japan amounted
to $17,430,000, $1,181,000 and $8,011,000, respectively.
(Continued)
F-18
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) LEGAL AND OTHER MATTERS
(a) In fiscal 1994, the Company received $649,000 in settlement of a
lawsuit, net of related expenses, from Legato Corp. arising out
of an advertisement placed by Legato, which is included in other
income in the accompanying consolidated statement of earnings.
(b) In June 1994, a securities fraud class action complaint was filed
against the Company and several of its officers and directors. The
actions allege securities fraud claims under Sections 10(b) and 20 of
the Securities Exchange Act of 1934 whereby it was alleged that the
Company and the individual defendants made misrepresentations and
omissions to the public which caused the Company's stock to be
artificially inflated, and seek compensatory damages on behalf of all
the shareholders who purchased shares between approximately January
24, 1994 and approximately June 17, 1994, as well as attorneys' fees
and costs. In addition, there is a shareholder derivative complaint
alleging that certain officers and directors breached their
fiduciary obligations to the Company. In April 1996, the Court
granted the plaintiffs Motion for Class Certification. The defendants
deny any and all liability and intend to vigorously defend against
the claims. The ultimate outcome of the litigation cannot presently
be determined. Accordingly, no provision for any liability that may
result upon adjudication has been recognized in the accompanying
consolidated financial statements.
On or about April 14, 1995, the Securities and Exchange Commission
(SEC) advised the Company that it had issued a Formal Order of
Private Investigation of the Company related to possible violations
of federal securities laws, which was the continuation of an
informal inquiry which began in June 1994. The Company has been
cooperating and intends to continue cooperating fully with the SEC.
(c) In May 1995, JWANCO, Inc. (formerly known as Bit Software, Inc.), and
various related individuals filed an action against the Company and
several of its officers, directors and employees. The essence of the
allegations was that the defendants breached agreements and defrauded
JWANCO, Inc., and the individual plaintiffs in connection with the
Company's acquisition of certain assets and assumption of certain
liabilities of Bit Software, Inc. on May 19, 1994. These allegations
were substantially similar to those described in note 11(b) above.
In May 1996, this action was settled for a nominal amount.
(d) In May 1995, Personal Computer Peripherals Corporation filed an
action against the Company and five other defendants alleging patent
infringement. In fiscal 1996, the Company recorded an insignificant
amount for the settlement of this action.
(e) In September 1995, a Complaint was filed against the Company and one
of its officers alleging fraudulent and negligent misrepresentation.
The plaintiff alleges that misrepresentations were made to him by one
of the Company's officers in connection with the plaintiff's
investment decision in Cheyenne's common stock in June, 1994.
Subsequent to June 30, 1996 this complaint was dismissed in its
entirety, with leave to amend. The plaintiff may refile an amended
complaint by October 7, 1996. Management of the Company, based on
advice from its legal counsel, does not believe that the ultimate
resolution of this lawsuit will have a material adverse effect on the
financial position or results of operations of the Company.
(Continued)
F-19
<PAGE>
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(f) The Company and members of the Company's Board of Directors have been
named in five purported class action lawsuits filed in April, 1996.
Substantially, each lawsuit alleges that the Company's Board of
Directors breached the fiduciary duties owed by it to shareholders by
rejecting a request of McAfee Associates, Inc. (McAfee) to negotiate
a merger of the Company and McAfee. Management of the Company, based
on advice of outside legal counsel, does not believe that the
ultimate resolution of this lawsuit will have a material adverse
effect on the financial position or results of operations of the
Company.
(12) SUBSEQUENT EVENTS
In July 1996, Cheyenne acquired certain assets of Mediatrends, Inc.
(Mediatrends), a developer of standards-based computer telephony software
technology, for approximately $1,665,000 in cash plus related
transaction costs. The acquisition will be accounted for using the
purchase method of accounting. Approximately $2,035,000 will be recorded
in fiscal 1997 as an expense for purchased research and development. The
operating results of Mediatrends will be included in the consolidated
statement of earnings from the date of acquisition. The revenues and
earnings of Mediatrends for the periods prior to the acquisition were
insignificant compared to those of Cheyenne.
In July 1996, Cheyenne also acquired all the outstanding common stock of
Intelligence Quotient International, Ltd. (IQ), a developer of open
file management and partial backup technologies for NetWare and Windows
NT platforms located in the U.K., for approximately $10,982,000 in cash,
the assumption of approximately $136,000 of net liabilities plus related
transaction costs. The acquisition will be accounted for using the
purchase method of accounting, and accordingly, the purchase price will
be allocated to certain assets purchased and liabilities assumed,
including approximately $2,444,000 for capitalized software. The excess
of the purchase price over the fair value of the net assets acquired of
approximately $1,332,000 will be allocated to goodwill, which will be
amortized on a straight-line basis over three years. In addition,
approximately $8,241,000 will be recorded in fiscal 1997 as an expense
for purchased research and development. The operating results of IQ will
be included in the consolidated statement of earnings from the date of
acquisition. The revenues and earnings of IQ for the periods prior to the
acquisition were insignificant compared to those of Cheyenne.
(13) INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of selected quarterly financial data for the
fiscal years ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
September 30, December 31, March 31, June 30, Total
--------------- -------------- ------------- ------------ ---------------
1995 1994 1995 1994 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 38,464 21,652 42,449 29,611 44,014 35,636 49,169 41,028 174,096 127,927
Operating income 10,566 5,062 9,655 9,585 7,683 10,770 9,753 12,389 37,657 37,806
Other gain (loss) -- 21,232 -- -- (464) -- (2) -- (466) 21,232
Income taxes 3,896 12,108 3,464 3,406 2,588 4,116 3,088 4,625 13,036 24,255
Net income 7,396 14,938 7,113 6,613 5,313 7,975 7,406 8,978 27,228 38,504
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Net income
per share $ .19 .38 .18 .17 .14 .20 .19 .23 .70 .97
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
</TABLE>
F-20
<PAGE>
Schedule II
CHEYENNE SOFTWARE, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS - AT END
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
----------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1996:
Allowance for doubtful accounts $ 1,302,000 1,906,000 - 1,851,000 (1) 1,357,000
========= ========= ======== ========= =========
Year ended June 30, 1995:
Allowance for doubtful accounts $ 611,000 1,079,000 - 388,000 (1) 1,302,000
========= ========= ======== ========= =========
Year ended June 30, 1994:
Allowance for doubtful accounts $ 436,500 634,800 - 460,300 (1) 611,000
========= ========= ======== ========= =========
</TABLE>
(1)Uncollectible amounts written off, net of recoveries.
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CHEYENNE SOFTWARE, INC.
Dated: September 25, 1996 By: /S/ ReiJane Huai
-----------------------
ReiJane Huai, Chairman of
the Board, President and Chief
Executive Officer
(principal executive officer)
Dated: September 25, 1996 By: /S/ Elliot Levine
-----------------------
Elliot Levine, Executive Vice
President
Senior Financial Officer and
Treasurer
(principal financial and
accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
September 25, 1996 /S/ Rino Bergonzi
-----------------------
Rino Bergonzi, Director
September 25, 1996 /S/ Richard F. Kramer
-----------------------
Richard F. Kramer, Director
September 25, 1996 /S/ Bernard D. Rubien
-----------------------
Bernard D. Rubien, Director
September 25, 1996 /S/ Ginette Wachtel
-----------------------
Ginette Wachtel, Director
35
<PAGE>
EXHIBIT INDEX
Number Exhibits Page
------ -------- ----
*10.8.2 Amendment to Employment Agreement between
Cheyenne and Alan Kaufman, dated December 30,
1995.
*10.11.3 Separation Agreement, dated April 9, 1996,
between Cheyenne and James P. McNiel.
*10.15 Employment Agreement, dated as of May 1, 1996,
between Cheyenne and Wayne Lam.
*10.16 Change of Control Employment Agreement, dated
May 20, 1996, between Michael B. Adler, Esq.
and Cheyenne.
*10.17 Change of Control Employment Agreement, dated
May 20, 1996, between Yuda Doron and Cheyenne.
*10.18 Change of Control Employment Agreement, dated
May 20, 1996, between Doris Granatowski and
Cheyenne.
*10.19 Change of Control Employment Agreement, dated
May 20, 1996, between ReiJane Huai and Cheyenne.
*10.20 Change of Control Employment Agreement, dated
May 20, 1996, between Alan Kaufman and Cheyenne.
*10.21 Change of Control Employment Agreement, dated
May 20, 1996, between Wayne Lam and Cheyenne.
*10.22 Change of Control Employment Agreement, dated
May 20, 1996, between Elliot Levine and
Cheyenne.
21. Subsidiaries of Cheyenne.
23. Consent of KPMG Peat Marwick LLP.
27. Financial Data Schedule.
- ---------------------
*Denotes a compensation plan of other
arrangement under which directors or executive officers
may participate.
<PAGE>
EXHIBIT 10.8.2
AMENDMENT 2 TO EMPLOYMENT AGREEMENT
(ALAN KAUFMAN)
This Amendment ("Amendment") is effective as of the 30th day of December, 1995,
between CHEYENNE SOFTWARE, INC., a Delaware corporation, with an office at Three
Expressway Plaza, Roslyn Heights, New York 11577 ("Cheyenne") and ALAN KAUFMAN,
with an address of 1150 Park Avenue, New York, New York 10128 ("Employee").
RECITALS
A. On January 1, 1993 Cheyenne and Employee entered into an Employment
Agreement, as amended by Amendment 1 on October 7, 1993 (the
"Agreement").
B. Cheyenne and Employee desire to amend the Agreement, as provided for
below.
C. All capitalized terms not defined herein shall have the meaning set
forth in the Agreement.
AMENDMENT
1.The Employment Period shall be extended to December 31, 1998.
2.In Section 5(b) delete "Eight Thousand ($8,000) dollars" and replace with
"Thirteen Thousand Eight Hundred ($13,800) dollars."
3.Add a new Section 5(c) as follows:
"Cheyenne shall reimburse the Employee in an amount equal to Thirteen
Thousand Five Hundred Dollars ($13,500) per annum for life insurance
premiums, incurred by the Employee, payable in four (4) equal quarterly
installments each year during the Employment Period."
3.In Section 7, first sentence, delete "one hundred (100%) percent" and
replace with "one hundred fifty (150%) percent."
4.In Section 7, third sentence, delete "five (5) years" and replace with "ten
(10) years."
5.In Section 8(a), delete "January 1, 1996" and replace with "January 1,
1999" and delete "December 31, 1996" and replace with "December 31,
1999."
- 2 -
<PAGE>
6.This Amendment is subject to the approval of the Cheyenne Software, Inc.
Board of Directors.
7.Except as amended herein, the Agreement shall remain unmodified.
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment
as of the date first written above.
CHEYENNE SOFTWARE, INC.
By:/s/ ReiJane Huai
-----------------
Its: President
------------
/s/ Alan Kaufman
--------------------
Alan Kaufman
3
<PAGE>
EXHIBIT 10.11.3
SEPARATION AGREEMENT
(JAMES MCNIEL)
AGREEMENT effective as of April 9, 1996 by and between JAMES MCNIEL, residing at
18 Central Drive, Glen Head, New York 11545 (the "Employee") and CHEYENNE
SOFTWARE, INC., with offices at 3 Expressway Plaza, Roslyn Heights, New York
11577 (the "Company"):
WHEREAS, the Employee has been employed by the Company, in various positions,
and most recently as Executive Vice President-Business Development;
WHEREAS, the Employee and the Company are parties to that certain Employment
Agreement dated May 4, 1992, as amended on October 7, 1993 ("Employment
Agreement"), which expires on September 1, 1996;
WHEREAS, the Employee and the Company have mutually agreed to terminate the
Employment Agreement and agree that it will be in their mutual best interests
for their employment relationship to cease as provided herein;
WHEREAS, the Company and the Employee are desirous of resolving all potential
differences and disputes between them amicably and in an orderly fashion;
NOW, THEREFORE, the parties, intending to be legally bound, mutually agree as
follows:
1. EMPLOYEE'S SEPARATION OF EMPLOYMENT.
The Company and Employee acknowledge and mutually agree that the Employment
Agreement shall terminate as of the effective date of this Agreement and neither
the
4
<PAGE>
Company or the Employee has any continuing rights, duties or obligations under
the Agreement (including any obligation of Cheyenne to make any further payment
to Employee under the Employment Agreement) except for paragraph 9 of this
Agreement. Employee hereby resigns as an officer of the Company and as an
officer and/or director of any of its subsidiaries or affiliates and shall no
longer hold himself out as such. Pursuant to paragraph 4 below, Employee shall
continue as a non-officer employee of Company until the earlier of December 31,
1996 or any termination pursuant to paragraph 3(a) of this Agreement (the
"Separation Date"). Employee agrees to execute any and all forms required by
the Company for submission to the Securities and Exchange Commission in
connection with his resignation as an executive officer of the Company or the
termination of the employment relationship between Employee and the Company.
2. PAYMENT OF ACCRUALS: NO OTHER VESTED RIGHTS.
Employee acknowledges that he has no accrued vacation or sick days as of the
date hereof and shall not accrue any vacation or sick days through the
Separation Date. Employee expressly acknowledges that, other than his rights in
the Company's 401(k) Savings Plan (the "Plan"), he has no vested rights in any
pension, profit sharing or other retirement plan, savings plan, performance
bonus arrangement or stock option program related to his employment with the
Company and that he has no claim for vacation leave, sick leave or similar
accruals, or for payments as a result of any such accruals, except as set forth
on Appendix A. Employee's sale of any shares acquired by any option exercise
and any activity by Employee in the Company's securities shall be in compliance
with the Company's policies regarding insider trading as they apply to him and
the plan documents governing such options. Employee acknowledges and agrees
that he shall remain subject to the "short-swing" profit rules of the SEC as
specified therein and that he shall take all steps necessary to comply with such
rules. Employee agrees to pay to the Company any and all taxes required to be
withheld in connection with the exercise of any stock options by Employee and
any sales of the Company's securities. The Company shall continue matching
contributions under the Plan until the Separation Date.
3. SEPARATION PAYMENT: CONTINUATION OF GROUP HEALTH INSURANCE
(a) In consideration of the Employee's execution of this Separation Agreement,
and the providing of employment services by the Employee to the Company pursuant
to paragraph 4, the Company through the Separation Date shall pay to the
Employee his full salary at the rate of $180,000 per year less required
deductions and withholding,
5
<PAGE>
including federal, state and local taxes, along with his current automobile
allowance of $500 per month. Notwithstanding the foregoing, the Company's
obligations to make the foregoing payments shall cease immediately upon
termination of Employee's employment with the Company with substantial cause,
prior to December 31, 1996. The Company may terminate, without liability,
Employee's employment for substantial cause (as defined below) at any time with
effective immediately upon notice to Employee. The Company shall pay Employee
the compensation to which Employee is entitled through the end of the day of
such termination and thereafter the Company's obligations with respect to
Employee's continued employment shall irrevocably terminate. Termination shall
be for substantial cause if Employee's employment is terminated by the Company
because of: (i) any act or failure to act by Employee which involves bad faith
conduct by Employee and which is to the detriment of the Company; (ii)
Employee's willful refusal or willful failure to act in accordance with any
lawful and reasonable direction or order of the Company related to paragraph 4;
(iii) Employee's exhibiting material unavailability (defined as unavailability
for more than 4 consecutive weeks or an aggregate 8 weeks prior to the
Separation Date) for service to the Company (other than by reason of Employee's
death or disability) related to paragraph 4; (iv) Employee's willful or
intentional disclosure of confidential information of the Company, or any other
violation of paragraph 8 or a violation of paragraph 11 below; (v) Employee's
violation of the Company's policies regarding insider trading; (vi) Employee's
conviction of a felony; (vii) Employee's willfully or intentionally acting in
any way that has a direct and adverse effect on the Company's reputation;
(viii) the commission of a criminal act against, or in derogation of the
interest of the Company; (ix) interference with the relationship between the
Company and any supplier, client, customer or similar person; or (x) the
performance of any similar action that the Company, in its sole discretion, may
deem to be sufficiently injurious to the interest of the Company to constitute
substantial cause for termination.
(b) In addition to the payment set forth in subparagraph (a) hereof, the
Employee shall, at the Company's sole cost and expense, continue to be covered
under the Company's group health and hospitalization insurance plans through the
Separation Date with the same coverage, deductibles and other plan conditions as
exist on the date hereof. Nothing in this Separation Agreement is intended in
any way to alter, modify or supersede the Employee's rights on or after the
Separation Date to elect to continue coverage under the Company's group health
and hospitalization insurance plans at the Company's group rates therefor (plus
a small administrative fee) and at the Employee's
6
<PAGE>
sole cost and expense, all in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1986, as amended.
4. EMPLOYEE'S COOPERATION IN TRANSITION.
In consideration for the Company's payment to the Employee as set forth herein,
the Employee agrees to cooperate in the transition process by which he will be
replaced as the Company's Executive Vice President-Business Development, such
that he will make himself available through December 31, 1996, to respond to
inquiries from any executive officer of the Company or any other persons
designated by the foregoing concerning aspects or status of certain projects or
matters in which he was involved. Employee shall also engage in such business
activities as agreed between the Employee and the Company through the Separation
Date. Employee shall maintain a home office through the Separation Date
sufficient to permit him to carry out his duties hereunder. Employee shall
cease to have an office at the Company as of the effective date of this
Agreement. However, the Company, prior to the Separation Date, will provide
Employee with office space and conference rooms to the extent available on an as
needed basis.
5. EMPLOYEE'S GENERAL RELEASE AND WAIVER OF ALL CLAIMS.
In consideration of the Company's execution of this Separation Agreement, and
the provision to the Employee of the benefits described herein, which the
Employee expressly agrees are over and above those to which he would otherwise
be entitled, Employee, on behalf of himself, his heirs, estate, executors,
administrators, representatives and assigns does fully and forever release and
discharge CHEYENNE SOFTWARE, INC., its subsidiaries, affiliates, officers,
directors, employees, agents, representatives, attorneys, predecessors in
interest, successors and assigns ("Released Parties") from all actions, claims,
demands, losses, expenses, obligations and liabilities related to any conduct or
activity occurring on or before the effective date of this Agreement, including,
but not limited to: (a) any claims relating to or arising from the Employee's
employment with the Company under the Employment Agreement or otherwise or the
cessation of that employment; (b) any alleged employment discrimination,
including, without limitation, sexual harassment, under any federal, state or
municipal statute, regulation, order, rule or legal authority, including,
without limitation, the New York Human Rights Law, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act and otherwise; (c)
any and all claims for wages, salary, bonuses or any other form of compensation;
(d) any and all contract, tort or personal injury claims; (e) any and all claims
for punitive, exemplary or statutory
7
<PAGE>
damages; and (f) any and all claims for attorney's fees. The Employee
represents and warrants that he has not assigned any such claims or authorized
any other person, group or entity to assert such claims on his behalf. Employee
expressly waives any and all rights under the laws of any jurisdiction in the
United States, or any other country, that limit a general release to claims
against the aforesaid parties known or suspected to exist in his favor as of the
date of this Separation Agreement and Release. The foregoing release does not
apply to the Company's obligations under this Agreement, including the Company's
indemnification obligation under paragraph 12.
6. NO OTHER CLAIMS.
As further consideration and inducement for this Agreement, Employee agrees and
represents that he has not filed or otherwise pursued any charges, complaints or
claims of any nature which are in any way pending against the Company or any of
the Released Parties, with any local, state or federal government agency or
court and, to the extent permitted by law, further agrees and represents that he
will not do so in the future. If any government agency or court assumes
jurisdiction of any charge, complaint, cause of action or claim covered by this
Separation Agreement against the Company or any of the Released Parties, on
behalf of or related to the Employee, he will take reasonable actions to ensure
that such agency or court withdraws from and/or dismisses the matter, with
prejudice, including but not limited to, requesting such action by such agency
or court. The Employee agrees he will not participate or cooperate in such
matters except as required by law.
7. CONFIDENTIALITY.
The Employee agrees that the terms of this Agreement are confidential and shall
not be disclosed, referenced or discussed with anyone other than his immediate
family or his counsel, except as may otherwise be required by law. The parties
agree that this is a material term of the Agreement.
8. NON SOLICITATION; CONFIDENTIAL INFORMATION; NON-COMPETE.
(a) The Employee acknowledges that the Company has a vital interest in
retaining its employees. The Employee therefore agrees that from the date
hereof through December 31, 1997, he will not directly, or encourage any third
party to, induce or recruit any
8
<PAGE>
employee of the Company or any of its affiliates to apply for or accept
employment with any other person or entity. Employee after the Separation Date
may furnish in good faith references for employees of Cheyenne in response to
third party inquiries.
(b) The Employee acknowledges that during his employment with the Company, he
had access to, and possession of, confidential and proprietary information,
trade secrets, data, and documents belonging to the Company and its affiliates
pertaining to the financial, legal, commercial and business affairs of the
Company, including without limitation, documents and information relating to its
method of operation, processes, software, source code, algorithms, formulas,
marketing techniques, customer lists, practices, policies, programs, procedures,
personnel data or applications and which is not known to others, or readily
available to others from sources other than the Employee or officers or other
employees of the Company, or is not in the public domain. The Employee agrees
that he will not disclose any such confidential and/or proprietary information,
trade secrets, data, or documents to any person or entity without the prior
written consent of the Company or pursuant to a court order and further agrees
that he will abide by and continue to abide by the terms of paragraph 9 of the
Employment Agreement which is incorporated by reference herein.
(c) The Employee hereby acknowledges and recognizes the highly competitive
nature of the Company's business and accordingly agrees that, in consideration
of this Separation Agreement, he will not, prior to December 31, 1996 directly
or indirectly: (i) engage in any Competitive Activity (as hereinafter defined)
in the United States of America, whether such engagement shall be as an officer,
director, employee, consultant, agent, lender, stockholder, or other
participant; or (ii) assist others in the United States in engaging in any
Competitive Activity; or (iii) solicit or participate in the solicitation of any
business involving any Competitive Activity from any person, firm or other
entity, wherever located, which was, or at the time is, a supplier or customer
of computer software for server-based local area network or enterprise storage
management, antivirus and facsimile communication applications, of Cheyenne, its
subsidiaries or affiliates. As used herein, the term "Competitive Activity"
shall mean and include the development and/or marketing of computer software for
server-based local area network (LAN) or enterprise storage management,
antivirus and facsimile communication applications. Competitive Activity shall
not include assisting third parties with the marketing of Cheyenne software
products. The foregoing shall not apply to Employee's ownership of 5% or less
of the outstanding shares in any publicly traded company. It is the desire and
intent of the parties that the provisions of this paragraph 8(c) shall be
enforced to the fullest extent permissible under the laws and public policies
applied in each jurisdiction
9
<PAGE>
in which enforcement is sought. Accordingly, if any particular provision of
this paragraph 8(c) shall be adjudicated to be invalid or unenforceable, such
provision of this paragraph 8(c) shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision of this paragraph 8(c) in
the particular jurisdiction in which such adjudication is made. In addition, if
the scope of any restriction contained in this paragraph 8(c) is too broad to
permit enforcement thereof to its fullest extent, then such restriction shall
be enforced to the maximum extent permitted by law, and the Employee hereby
consents and agrees that such restriction shall be enforced to the maximum
extent permitted by law, and the Employee hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
(d) The Company acknowledges that Employee intends, prior to the Separation
Date, to engage in certain consulting activities not in violation of this
Agreement. Employee agrees to submit to the Company for its prior review and
comment any press release or similar public announcement to be issued regarding
Employee's consulting activities and which refers to Cheyenne prior to the
Separation Date. All such documents should be sent to the Legal Department,
Att: General Counsel. Except with the prior written consent of the President of
the Company, Employee agrees that he is not authorized to make any public
statements on behalf of Cheyenne, including, without limitation, the endorsement
by Cheyenne of the business of any third party, including product or marketing
strategies.
9. RETURN OF THE COMPANY'S PROPERTY.
The Employee agrees and represents that he has returned to the Company all
equipment and/or property belonging to it which has been or is in his care,
custody, possession or control, other than the property and equipment which is
identified on the Schedule appended hereto as Appendix B, which may be retained
by Employees at the prices specified in Appendix B or returned to the Company by
the Separation Date.
10. NO RIGHTS TO REEMPLOYMENT.
The Employee further agrees to relinquish and hereby does relinquish any and all
right to reemployment with the Company.
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11. NON-DISPARAGEMENT.
Each party expressly agrees to refrain from uttering any disparaging remarks
concerning the other or making any other statement, oral or written, which
portrays the other in an unfavorable light or subject the other to scorn,
obloquy or ridicule, except with respect to the Company, it warrants only to use
reasonable efforts to cause its officers, directors and employees to refrain
therefrom.
12. INDEMNITY.
The Company shall indemnify Employee from any claims and expenses incurred by
Employee in connection with any action to which he is made a party by reason of
his employment by the Company, provided that the Company's indemnity obligation
above shall not exceed the fullest indemnity permitted by the Company's Articles
of Incorporation or its by-laws or the laws of the State of Delaware.
13. KNOWING AND VOLUNTARY AGREEMENT: MERGER.
The Employee acknowledges that he is entering into this Separation Agreement
knowingly and voluntarily after carefully reviewing it; that he has had the
opportunity to review it with counsel of his own choosing; that he understands
its final and binding effect; that the only promises made to him to obtain his
agreement and signature are those stated in this Separation Agreement; that this
Separation Agreement supersedes any and all prior oral or written agreements
between the parties other than paragraph 9 of the Employment Agreement which
shall survive the execution hereof, and that this document represents the
complete terms of their agreement and may not be amended or modified except in a
signed writing. There are no representations, inducements or promises not set
forth herein on which either party has relied or may rely.
14. NON-ADMISSION
Neither the execution of this Agreement nor the Company's performance thereunder
shall be deemed to constitute an admission of wrongdoing or liability to the
Employee by the Company and any such liability is expressly denied. Neither the
execution of this Agreement nor the Employees performance thereunder shall be
deemed to constitute an admission of wrongdoing or liability to the Company by
the Employee and any such liability is expressly denied.
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15. SEVERABILITY.
Should any of the provisions of this Agreement be rendered invalid by a court or
government agency of competent jurisdiction, it is agreed that this shall not in
any way or manner affect the enforceability of the other provisions of this
Agreement which shall remain in full force and effect.
16. CHOICE OF LAW.
This Agreement will be governed and construed in accordance with the laws of the
State of New York.
17. JOINT PARTICIPATION IN PREPARATION OF AGREEMENT.
The parties hereto participated jointly in the negotiation and preparation of
this Separation Agreement, and each party has had the opportunity to obtain the
advice of legal counsel and to review, comment upon, and redraft it.
Accordingly, it is agreed that no rule of construction shall apply against any
party in favor of any party. This Separation Agreement shall be construed as if
the parties jointly prepared it, and any uncertainty or ambiguity shall not be
interpreted against any one party and in favor of the other.
18. ATTORNEYS' FEES AND COSTS.
As further mutual consideration for the promises set forth herein, the Company
and the Employee agree that they each are responsible for their own attorneys'
fees and costs, and each agrees that they each agree that they will not seek
from the other reimbursement for attorneys' fees and/or costs incurred in or
relating to any matters addressed in this Separation Agreement.
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19. HEADINGS.
The headings in this Agreement are used for ease of reference only, and should
not be used as aids in interpreting this Agreement.
IN WITNESS WHEREOF, the parties have caused this Separation Agreement to be
executed.
JAMES MCNIEL CHEYENNE SOFTWARE, INC.
/s/ James McNiel By:/s/ ReiJane Huai
- ----------------------------- ------------------
Date Signed: Date Signed:
----------------- --------------------
STATE OF NEW YORK)
)SS.:
COUNTY OF NASSAU)
On April 10, 1996 before me personally came JAMES MCNIEL to me and known to me
to be the individual described in, and who executed, the foregoing Separation
Agreement, and duly acknowledged to me that he executed the same.
/s/ Eileen DiBenedetto
----------------------------
Notary Public
[Notary seal]
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APPENDIX A
Option Grant Grant Number of Exercise Outstanding Shares
Number Date Shares Price Vested
as of
12/31/96*
76 2/20/92 135,000 $5.26 67,500 All
299 11/15/93 187,500 $21.33 187,500 All
917 5/9/95 100,000 $12.75 100,000 33,333
*Assumes that Employee's employment has not been terminated for substantial
cause as provided for above.
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APPENDIX B
1. page device (Employee shall pay all charges)
2. HP 200LX
3. mobile phone (Employee shall pay all charges)
4. Compaq 5000 + dock + monitor (to be returned by Employee to Compaq by the
earlier of 12/31/96 or expiration of the loan period, unless Employee reaches a
separate arrangement with Compaq, for which Cheyenne will have no liability)
5. fax machine
cost: no charge
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
(WAYNE LAM)
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of May 1,
1996, by and between CHEYENNE SOFTWARE, INC. ("Employer"), and WAYNE LAM
("Employee").
Now therefore, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties intending to be legally bound,
agree as follows:
AGREEMENT
1. TERM OF EMPLOYMENT. The Employer hereby employs the Employee as the
Vice President and General Manager, NetWare Division, and the Employee hereby
agrees to serve the Employer in such capacity for the period commencing on
the date hereof (the "Effective Date") and ending April 30, 1998 (hereinafter
referred to as the "Employment Period").
2. SCOPE OF DUTIES. The Employee shall serve as the Vice President and
General Manager, NetWare Division and shall engage in the management of the
day to day operations of such Division or in such other capacity as directed
by the President of the Employer. The Employee shall report and be
responsible to the President of the Employer or other person designated by
the President or the Board of Directors.
3. RESTRICTION ON OUTSIDE BUSINESS ACTIVITIES. During employment, Employee
shall devote Employee's full energies, interest, abilities, and productive
time to the performance of duties for Employer and shall not, without
Employer's prior written consent: a. render to others services of any kind,
or engage in any other business activity that would materially interfere with
the performance of Employee's duties under this Agreement; b. perform any
services, directly or indirectly, whether as an employee, consultant,
independent contractor, for any person or entity competing, directly or
indirectly with Employer; c. own, directly or indirectly, whether as partner,
creditor, shareholder, or otherwise, any interest in any entity competing,
directly or indirectly, with Employer; d. promote, participate, or engage in
any activity or other business competitive with Employer; e. compete,
directly or indirectly, with any products or services marketed or offered by
Employer; or f. engage in any activity which could be deemed to be a conflict
of interest. Nothing herein contained shall prevent or be construed to as
preventing the Employee from holding or purchasing five
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(5%) percent or less of any class of stock or securities of a corporation
which is listed on a national securities exchange or regularly traded in the
over-the-counter market, or making other investments or participating in
business ventures not in competition with the business of the Employer, as
long as such investments and business ventures shall not require any time
during normal business hours and do not conflict with Employee's duties
obligations to the Employer provided in this Employment Agreement.
4. EMPLOYEE'S COMPENSATION AND BENEFITS. Employer shall pay a base salary
to Employee of $140,000 per year, payable semi-monthly in arrears or at such
other intervals as other employees are paid. Any change in Employee's salary
or bonus shall be subject to the sole discretion of Employer. During
employment, Employee shall receive all benefits generally available to
Employer's other employees of like position when and as Employee becomes
eligible for them. The Employee shall be entitled to participate in any and
all fringe benefits and/or plans, generally afforded to other employees of
the Employer (to the extent the Employee otherwise qualifies therefore under
the specific terms and conditions of each such benefit), including, without
limitation, group disability, life insurance, medical insurance and pension
plans (401K) which are, or which may become available generally to senior
personnel of the Employer. The Corporation shall reimburse the Employee in an
amount equal to $500 per month for expenses relating to an automobile used by
the Employee in connection with the business of the Corporation.
5. TERMINATION OF EMPLOYMENT
a. BY DEATH. Employee's employment shall terminate automatically upon the
death of Employee. Employer shall pay or provide to Employee's beneficiaries
or estate, as appropriate, the compensation as of the date of death and
benefits to which Employee is entitled through the end of the pay period in
which death occurs. Thereafter, Employer's obligations to Employee and/or to
his beneficiaries or estate shall terminate except as provided in paragraph 6.
b. BY DISABILITY. If, in the sole opinion of Employer, Employee shall be
prevented from properly performing Employee's duties by reason of any
physical or mental incapacity for a period of more than six (6) months in the
aggregate or four (4) consecutive months in any twelve-month period, then, to
the extent permitted by law, Employee's employment shall terminate on, and
the compensation and benefits to which Employee is entitled shall be paid or
provided up through, the last day of the month in which the day evidencing
incapacity occurs and thereafter Employer's obligations shall terminate.
c. BY EMPLOYER FOR CAUSE. Employer may terminate, without liability,
Employee's employment for cause (as defined below) at any time and without
notice. Employer shall pay Employee the compensation to which Employee is
entitled through
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the end of the day of such termination and thereafter Employer's obligations
shall terminate. Termination shall be for cause if Employee's employment is
terminated by Employer because of:
(i) any act or failure to act by Employee which involves bad faith conduct
by Employee and which is to the detriment of Employer;
(ii) Employee's willful refusal or willful failure to act in accordance with
any lawful and reasonable direction or order of Employer;
(iii) Employee's exhibiting material unfitness or material unavailability for
service to Employer (other than by reason of Employee's death or disability);
(iv) Employee's materially unsatisfactory performance, material misconduct,
dishonesty or theft, habitual material neglect, material carelessness or
material incompetence in the performance of his duties for Employer;
(v) Employee's willful or intentional disclosure of confidential information
of Employer, or any other violation of paragraphed 9 or 10 below;
(vi) Employee's providing false information to Employer in connection with
Employee's application for employment;
(vii) Employee's violation of Employer's policies regarding insider trading;
(viii) Employee's violation of Employer's policies regarding controlled
substances;
(ix) Employee's conviction of a crime, except a minor traffic violation; or
(x) Employee's willfully or intentionally acting in any way that has a
direct, substantial and adverse effect on Employer's reputation.
The foregoing is not intended to limit Employer's rights to terminate
Employee for other reasons not listed above that constitute cause.
d. TERMINATION OBLIGATIONS Employee hereby acknowledges and agrees that
all personal property, including, without limitation, all books, manuals,
memorandums, policy statements, correspondence (letters, telegrams,
mailgrams), minutes of meetings, agendas, interoffice communications,
forecasts, analyses, working papers, charts, expense account reports,
ledgers, journals, financial statements, statements of accounts, data
compilations, records, reports, notes, memoranda, computer disks, flow
charts, computer documents and computer software, data sheets, contracts,
lists, and other documents, proprietary information, and equipment furnished
to or prepared by Employee in the course of or incident to Employee's
employment, belong exclusively to the Employer and shall be promptly returned
to the Employer upon termination of Employee's employment for any reason.
6. DEATH BENEFIT. In addition to all other insurance and similar death
benefits generally made available to employees of the Employer, if Employee's
death occurs during the term of the Employment Period, the Employer shall
provide a death benefit to the estate of the Employee equal to 100% of the
Employee's then current annual
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<PAGE>
Base Salary at the date of death. Such death benefit shall be payable as may
be determined by the Employer, but not less often than twelve (12) equal
monthly installments, payable on the last day of each month, commencing in
the month subsequent to the month in which the death occurs.
7. SEVERANCE PAYMENT.
a. If the Employer and the Employee do not enter into a renewal agreement
to be effective May 1, 1998, for a period of at least 2 years and containing
similar terms and conditions to those set forth herein, then the Employer
will pay the Employee, as additional compensation, an amount equal to 25% of
the Employee's then current annual Base Salary, as determined under Section 4,
payable semi-monthly in arrears for the six months ending October 31, 1998,
such compensation is hereunder referred to as the "Severance Payment".
b. Notwithstanding the provisions of Section 7 (a) above, the Employee will
not receive the Severance Payment if,
(i) the Employer declines to enter into a renewal agreement with the Employee
because the Employee breached the confidentiality and/or non-compete provisions
of this Agreement or any other terms or conditions of their employment;
(ii) the Employee has been terminated for Cause hereunder, or
(iii) the Employee declines to enter into a renewal agreement with the
Employer, and the Employer has offered a renewal agreement for a period of not
less than two years, containing similar terms and conditions as discussed
herein.
8. SURVIVAL. Certain provisions of this Agreement, including paragraphs
5d, 9, 10 and 11 are intended to continue and survive termination or
suspension of Employee's employment with Employer.
9. CONFIDENTIALITY AND NON-DISCLOSURE; NON-SOLICITATION
a. For purposes of this paragraph, the following definitions shall apply:
(i) Inventions shall mean all inventions, processes, methods, formulas,
techniques, improvements, modifications and enhancements, whether or not
patentable, made by Employee, whether or not during the hours of Employee's
employment or with the use of Employer's facilities, materials or personnel,
either solely or jointly, during Employee's employment by Employer and all
inventions, processes, methods, formulas, techniques, improvements,
modifications and enhancements made by Employee, during a period of one year
after any termination of Employee's employment, which relate directly to the
past, present or future business of Employer and which are within the scope
of Employee's duties during the last 12 months of Employee's employment by
Employer.
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<PAGE>
(ii) Work Product shall mean all documentation, software, creative
works, know-how and information created, in whole or in part, by Employee
during Employee's employment by Employer, whether or not copyrightable or
otherwise protectable, excluding Inventions.
(iii) Trade Secrets shall mean compensation data, marketing strategies, new
material research, pending projects and proposals, research and development,
technological data, all proprietary information, actual and potential,
customer lists, vendor lists, pricing and credit techniques, research and
development activities, documentation, software, know-how and information
relating to the past, present or future business of Employer or any plans
relating to the foregoing, or relating to the past, present or future business
of a third party that are disclosed to Employer, which Employer does not
disclose to third parties without restrictions on use or further disclosure.
b. (i) Employee shall promptly disclose to Employer all Inventions and keep
accurate records relating to the conception and reduction to practice of all
Inventions. Such records shall be the sole and exclusive property of
Employer, and the Employee shall surrender possession of the records to
Employer upon any suspension or termination of Employee's employment with
Employer.
(ii) Employee hereby assigns to Employer, without additional consideration
to Employee, the entire right, title and interest in and to the Inventions and
Work Product and in and to all copyrights, patents, trademarks and any and all
other proprietary rights therein or based thereon. Employee agrees that the
Work Product shall be deemed to be a "work made for hire." Employee shall
execute all such assignments, oaths, declarations and other documents as may be
prepared by Employer to effect the foregoing.
(iii) Employer, without additional consideration to Employee, shall have
the exclusive worldwide and perpetual right to use and to make, use and sell
products and/or services derived from any Inventions or Work Product.
c. Employee shall provide Employer with all information, documentation, and
assistance Employer may request to perfect, enforce or defend the proprietary
rights in or based on the Inventions, Work Product or Trade Secrets.
Employer, in its sole discretion, shall determine the extent of the
proprietary rights, if any, to be protected in or based on the Inventions,
Work Product, and Trade Secrets. All such information, documentation and
assistance shall be provided by Employee at no additional expense to
Employer, except for out-of-pocket expenses which Employee incurred at
Employer's request.
d. During employment and thereafter, Employee shall treat Trade Secrets on a
confidential basis and not disclose them to others without the prior written
consent of
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Employer or use Trade Secrets for any purpose other than for the performance
of services for Employer. Employee acknowledges that the Trade Secrets are
the sole and exclusive property of Employer. Employee shall surrender
possession of all Trade Secrets to Employer upon any suspension or
termination of Employee's employment with Employer. If, after such time,
Employee becomes aware of any Trade Secrets in Employee's possession,
Employee shall immediately surrender those Trade Secrets to Employer.
e. During the period of one year after any suspension or termination of
Employee's employment by Employer, Employee shall not contact, directly or
indirectly, any customer or employee of Employer with whom Employee had
contact during the last 12 months of Employee's employment with Employer.
f. In the event of a breach or threatened breach by the Employee of the
provisions of this paragraph 9, the Employer shall be entitled to an
injunction restraining the Employee from disclosing, in whole or in part, the
aforementioned proprietary or confidential information of the Employer, or
from rendering any services to any person, firm, corporation, association or
other entity to whom such proprietary or confidential information, in whole
or in part, has been disclosed or is threatened to be disclosed. Nothing
herein contained shall be construed as prohibiting the Employer from pursuing
any other remedies available to the Employer for such breach or threatened
breach, including the recovery of damages from the Employee.
10. RESTRICTIVE COVENANTS.
a. The Employee hereby acknowledges and recognizes the highly competitive
nature of the Employer's business and accordingly agrees that, in
consideration of the premises contained herein, Employee will not from and
after the date hereof and during the Employment Period, until the Designated
Date (as hereinafter defined), whether such engagement shall be as an
officer, director, employee, consultant, agent, lender, stockholder, or other
participant; or (ii) assist others in engaging in Competitive Activity. As
used herein, the term "Competitive Activity" shall mean and include the
development and/or marketing in the United States of computer software for
server-based local area network and wide area network applications, including
but not limited to storage management, data management/monitoring, data
security and data communications.
b. As used in paragraph 10, the "Designated Date" shall mean the following:
(i) if the Employee willfully terminates employment with the Employer in
violation of this Employment Agreement prior to the expiration of the
Employment Period the "Designated Date" shall mean the second (2nd)
anniversary of the effective date of such termination;
(ii) the Employer terminates the employment of the Employee under this
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Employment Agreement for cause, then the "Designated Date" shall be the
second (2nd) anniversary of the effective date of such termination; or
(iii) the Employer, after the Employment Period, terminates the employment
of the Employee without cause, then the term "Designated Date" shall mean the
effective date of such termination.
c. It is the desire and intent of the parties that the provisions of this
paragraph 10 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction which enforcement is
sought. Accordingly, if any particular provision of this paragraph 10 shall
be adjudicated to be invalid or unenforceable, such provision of this
paragraph 10 shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provisions of this paragraph 10 in the
particular jurisdiction in which such adjudication is made. In addition, if
the scope of any restriction contained in this paragraph 10 is too broad to
permit enforcement thereof to its fullest extent, then such restriction shall
be enforced to the maximum extent permitted by law, and the Employee hereby
consents and agrees that such restriction shall be enforced to the maximum
extent permitted by law, and the Employee hereby consents and agrees that
such scope may be judicially modified accordingly in any proceeding brought
to enforce such restriction.
d. If there is a breach or threatened breach by the Employee of the
provisions of this paragraph 10, the Employer shall be entitled to an
injunction restraining the Employee from such breach. Nothing herein
contained shall be construed as prohibiting the Employer from pursuing any
other remedies available for such breach or threatened breach or any other
breach of this Employment Agreement.
11. NOTICES. All notices required or permitted to be given under the
provisions of this Employment Agreement shall be in writing and delivered
personally or by certified or registered mail, return receipt requested,
postage prepaid to the following persons at the following addresses, or to
such other persons at such other addresses as any party may request by notice
in writing to the other party to this Agreement:
If to Employee:
Wayne Lam
103 Liberty Avenue
North Babylon NY 11703
If to Employer:
Cheyenne Software, Inc.
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3 Expressway Plaza
Roslyn Heights, NY 11577
Att: General Counsel
12. SUCCESSORS AND ASSIGNS. This Employment Agreement shall be binding on
the successors and assigns of the Employer and shall inure to the benefit and
be enforceable by and against its successors and assigns. This Employment
Agreement is personal in nature and may not be assigned or transferred by the
Employee without the prior written consent of the Employer.
13. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in
full force and effect.
14. ENTIRE AGREEMENT;INTEGRATION;AMENDMENTS. The terms of this Agreement
are intended by the parties to be the final expression of their Agreement
with respect to the employment of Employee by Employer and may not be
contradicted by evidence of any prior or contemporaneous agreement. Employee
acknowledges that Employee has read and understands the Agreement, is fully
aware of its legal effect, has not acted in reliance upon any representations
or promises made by Employer other than those contained in writing herein,
and has entered into the agreement freely based on Employee's own judgment,
whether or not Employee consulted counsel. This Agreement constitutes the
complete and exclusive statement of its terms and no extrinsic evidence
whatsoever may be introduced in any legal proceeding involving this
Agreement. This Agreement contains the entire agreement between the parties
and supersedes all prior oral, written and implied agreements,
understandings, commitments, and practices between the parties, including all
prior employment agreements, if any. No amendments to this Agreement may be
made except by a writing signed by both parties.
15. CHOICE OF LAW. The formation, construction, and performance of this
Agreement shall be construed in accordance with the laws of the State of New
York. IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the day and year first above written.
Employee Cheyenne Software, Inc.
/s/Wayne Lam By: /s/ ReiJane Huai
- ------------- ------------------------
Wayne Lam
Its:
-----------------------
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EXHIBIT 10.16
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Michael Adler (the "Executive"), dated as of
the 20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(c)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company and/or any of its Affiliated
Companies is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise occurred in anticipation of a Change of Control that has
actually taken place, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination of
employment.
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(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or the acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who
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were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies
subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period"); PROVIDED, that if the Executive and the
Company have agreed before the Effective Date that the Executive will retire
on a specified date prior to such third anniversary (an "Agreed Retirement
Date"), the Employment Period shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned to the Executive at any
time during the 120-day period immediately preceding the Effective Date and
(B) the Executive's services
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shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than
35 miles by ground transportation from such location.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and/or its Affiliated Companies
and, to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company and/or its
Affiliated Companies in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly rate, at least equal to twelve
times the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the Company
and its Affiliated Companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs. During
the Employment Period, the Annual Base Salary shall be reviewed no more than
12 months after the last salary increase awarded to the Executive prior to
the Effective Date and thereafter at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
highest of the aggregate amount of bonuses paid to the Executive in any of
the last three full calendar years prior to the Effective Date (annualized in
the event that the Executive was not employed by the Company and/or any of
its Affiliated Companies for the
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whole of any such calendar year) (the "Highest Annual Bonus"). Each such
Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
Affiliated Companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
Affiliated Companies for the Executive under such plans, practices, policies
and programs as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer
executives of the Company and its Affiliated Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period,
the Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its Affiliated Companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the Company and
its Affiliated Companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its Affiliated
Companies.
(v) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its Affiliated Companies in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time
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thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the
Executive by the Company and its Affiliated Companies at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as provided generally at any time thereafter with respect
to other peer executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its Affiliated
Companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below), it may
give to the Executive written notice in accordance with Section 12(b) of this
Agreement of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company and/or any of its
Affiliated Companies shall terminate effective on the 30th day after receipt
of such notice by the Executive (the "Disability Effective Date"), provided
that, within the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company and its Affiliated Companies on a
full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and
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acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement,
"Cause" shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer of the Company or an officer of the Company and/or any of its
Affiliated Companies senior to the Executive or based upon the advice of
counsel for the Company and/or any of its Affiliated Companies shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i) or (ii)
above, and specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by
the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting require-
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ments), authority, duties or responsibilities as contemplated by
Section 4(a) of this Agreement, or any other action by the Company and/or
any of its Affiliated Companies which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company and/or
such Affiliated Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes
to
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a showing of Good Reason or Cause shall not waive any right of the Executive
or the Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest Annual Bonus and (z) the Executive's car
allowance, expressed as an annual amount based on the rate required to
be paid pursuant to Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall con-
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tinue, or shall cause one or more of its Affiliated Companies to
continue, benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been terminated or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
Affiliated Companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility, and for purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the expiration of a
number of years after the Date of Termination equal to the Multiple, and to
have retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide, or cause one or more of its Affiliated
Companies to timely pay or provide, to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall deliver, or shall cause one or more of its
Affiliated Companies to deliver, to the Executive an amount of cash equal
to the lesser of the Spread (as defined below) and the Fair Value (as
defined below), in each case as of the Date of Termination, of each stock
option held by the Executive immediately before the Date of Termination
that is not fully vested and exercisable as of the date the Notice of
Termination is delivered; PROVIDED, that if the Change in Control
transaction was intended to be accounted for using pooling-of-interests
accounting under APB No. 16 and would be eligible for such accounting
treatment absent the delivery of such cash, and the Company determines
based upon the advice of its accountants that delivery of such cash would
make the Change in Control transaction ineligible for such accounting
treatment, the Company may elect instead to deliver or cause to be
delivered to the Executive
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common stock of the Company or of a parent corporation of the Company that
is traded on a national securities exchange or on the NASDAQ National
Market System and has a Market Value (as defined below) as of the Date of
Termination equal to the amount of such cash. Such shares of common stock
shall have been registered under all applicable federal securities laws
and state blue sky laws and shall be delivered to the Executive in a
manner suitable for transfer on the principal exchange or the NASDAQ
National Market System on which such shares are traded (unless the
Executive determines, based on the advice of counsel of his choice, that
any such registration is not required for such shares of common stock to
be freely transferable by the Executive). The Company shall notify the
Executive within 5 business days after the Date of Termination of whether
it will deliver or cause to be delivered cash or common stock, and shall
deliver such cash or common stock on the 30th business day after the Date
of Termination; PROVIDED, that if the Executive determines, based upon the
advice of counsel of his choice, that receipt of such cash or common stock
would cause him to be subject to liability under Section 16(b) of the
Exchange Act, he shall so notify the Company, and the delivery of such
cash or common stock, as well as any other action or decision taken by the
Executive or the Company and its Affiliated Companies in connection with
the payment described in this Section 6(a)(v), shall be delayed for the
minimum period necessary to avoid such liability, as determined by the
Executive. The "Fair Value" of a stock option means the fair value of
such option, as determined by Lazard Freres using reasonable and customary
valuation methods. The "Spread" of a stock option means the difference
between the Market Value as of the Date of Termination of the underlying
shares of stock and the exercise price for such shares. The "Market
Value" of stock as of the Date of Termination means the average of the
daily high and low trading values of such stock during the 30-day period
immediately preceding the Date of Termination.
The "Multiple" means three, unless the Executive has an Agreed Retirement
Date, in which event the "Multiple" means a fraction, the numerator of which
is the number of days in the period beginning on (and including) the day
after the Date of Termination and ending on (and including) the Agreed
Retirement Date, and the denominator of which is 365.
(b) DEATH. If the Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of a death
benefit equal to one hundred percent of the Executive's Annual Base Salary
(the "Death Benefit"), payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Ac-
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crued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, and the Death Benefit shall be payable to the Executive's estate,
in each case in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the
Company and its Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and its Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death with respect
to other peer executives of the Company and its Affiliated Companies and
their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of Other Benefits, the term Other Benefits as utilized in this
Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and
its Affiliated Companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) the Annual Base Salary
through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
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7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
Affiliated Companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or
any of its Affiliated Companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any
of its Affiliated Companies at or subsequent to the Date of Termination shall
be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make
or cause to be made the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
except as specifically provided in Section 6(a)(ii), such amounts shall not
be reduced whether or not the Executive obtains other employment. The
Company agrees to pay, or to cause one or more of its Affiliated Companies to
pay, as incurred, to the full extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, any of its Affiliated
Companies, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (whether such contest is between the Company or any of
its Affiliated Companies and the Executive or between either of them and any
third party, and including as a result of any contest by the Executive about
the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for
in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended
(the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affiliated Companies to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax
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imposed by Section 4999 of the Code or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred
to as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company or one or more of its
Affiliated Companies. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Company or one or more of its Affiliated
Companies to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company, its Affiliated Companies and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company or one or more of its Affiliated Companies to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment by the Company or one or more of its Affiliated Companies of the
Gross-Up Payment. Such notification shall be given as soon as practicable but
no
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later than ten business days after the Executive is informed in writing of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not
pay such claim prior to the expiration of the 30-day period following the
date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall
cause one or more of its Affiliated Companies to bear and pay directly, all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for a
refund, the Company shall advance, or shall cause one or more of its
Affiliated Companies to advance, the amount of such payment to the Executive,
on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with
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respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company or one or more of its Affiliated Companies pursuant to Section
9(c), the Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 9(c)) promptly pay to the Company or, if so directed
by the Company, to one or more of its Affiliated Companies, the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company or one or more of its Affiliated Companies pursuant
to Section 9(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated
Companies all secret or confidential information, knowledge or data relating
to the Company or any of its Affiliated Companies, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its Affiliated Companies and
which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company
and/or its Affiliated Companies, the Executive shall not, without the prior
written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and its Affiliated Companies and those
designated by it. In no event shall an asserted violation of the provisions
of this Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This
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Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect.
This Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
IF TO THE EXECUTIVE:
Michael Adler
64 Moorewood Oaks
Port Washington, NY 11050
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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(d) The Company may withhold or cause to be withheld from any
amounts payable under this Agreement such Federal, state, local or foreign
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be
terminated by either the Executive or the Company (or any such Affiliated
Company, if applicable) at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the Company or any of its Affiliated Companies and the
Executive with respect to the subject matter hereof, except for any
Proprietary Rights Document signed by the Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused this Agreement to be executed in its name on its behalf,
all as of the day and year first above written.
/s/ Michael Adler
-----------------
Michael Adler
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
-----------------
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EXHIBIT 10.17
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Yuda Doron (the "Executive"), dated as of the
20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
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the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(c) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business Combination"), in
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each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Ex-
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ecutive at any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 35 miles by ground transportation from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and/or its Affiliated Companies and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company and/or its Affiliated Companies in accordance with this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
highest of the aggregate amount of bonuses paid to the Executive in any of the
last three full calendar years prior to the Effective Date (annualized in the
event that the Executive was not employed
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by the Company and/or any of its Affiliated Companies for the whole of any such
calendar year) (the "Highest Annual Bonus"). Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its Affiliated Companies. Without limiting the generality of the foregoing, the
Company shall pay to or for the account of the Executive (as the Company may
determine) during each twelve-month period during the Employment Period, in
twelve equal monthly installments in arrears on the last day of each month, (i)
the amount of the premiums paid by the Executive on New England Mutual Life
Insurance Company Policy No. 8714531, not to exceed $2,562 in each such twelve
month period, and (ii) the amount of the premiums paid by the Executive on
Provident Life and Casualty Company Disability
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Policy No. 36-337-6069043 (including the Non-Disabling Injury Rider), not to
exceed $5,585 in each such twelve-month period.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability
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Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. For purposes of this Agreement, "Disability" shall mean the absence of
the Executive from the Executive's duties with the Company and its Affiliated
Companies on a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct
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described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company and/or any of its Affiliated Companies which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company and/or
such Affiliated Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to
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the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than thirty days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x)
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the Executive's Annual Base Salary, (y) the Highest Annual Bonus and
(z) the Executive's car allowance, expressed as an annual amount
based on the rate required to be paid pursuant to Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall continue, or shall cause one or more of its Affiliated Companies to
continue, benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been terminated or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
Affiliated Companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility, and for purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the expiration of a
number of years after the Date of Termination equal to the Multiple, and to
have retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion;
(iv) to the extent not theretofore paid or provided, the Company shall
timely pay or provide, or cause one or more of its Affiliated Companies to
timely pay or provide, to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall deliver, or shall cause one or more of its
Affiliated Companies to deliver, to the Executive an amount of cash equal
to the lesser of the Spread (as defined below) and the Fair Value (as
defined below), in each case as of the Date of Termination, of each stock
option held by the Executive immediately before the Date of Termination
that is not fully vested and exercisable as of the date the Notice of
Termination is delivered; PROVIDED, that if the Change in Control trans-
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action was intended to be accounted for using pooling-of-interests
accounting under APB No. 16 and would be eligible for such accounting
treatment absent the delivery of such cash, and the Company determines
based upon the advice of its accountants that delivery of such cash would
make the Change in Control transaction ineligible for such accounting
treatment, the Company may elect instead to deliver or cause to be
delivered to the Executive common stock of the Company or of a parent
corporation of the Company that is traded on a national securities exchange
or on the NASDAQ National Market System and has a Market Value (as defined
below) as of the Date of Termination equal to the amount of such cash.
Such shares of common stock shall have been registered under all applicable
federal securities laws and state blue sky laws and shall be delivered to
the Executive in a manner suitable for transfer on the principal exchange
or the NASDAQ National Market System on which such shares are traded
(unless the Executive determines, based on the advice of counsel of his
choice, that any such registration is not required for such shares of
common stock to be freely transferable by the Executive). The Company
shall notify the Executive within 5 business days after the Date of
Termination of whether it will deliver or cause to be delivered cash or
common stock, and shall deliver such cash or common stock on the 30th
business day after the Date of Termination; PROVIDED, that if the Executive
determines, based upon the advice of counsel of his choice, that receipt of
such cash or common stock would cause him to be subject to liability under
Section 16(b) of the Exchange Act, he shall so notify the Company, and the
delivery of such cash or common stock, as well as any other action or
decision taken by the Executive or the Company and its Affiliated Companies
in connection with the payment described in this Section 6(a)(v), shall be
delayed for the minimum period necessary to avoid such liability, as
determined by the Executive. The "Fair Value" of a stock option means the
fair value of such option, as determined by Lazard Freres using reasonable
and customary valuation methods. The "Spread" of a stock option means the
difference between the Market Value as of the Date of Termination of the
underlying shares of stock and the exercise price for such shares. The
"Market Value" of stock as of the Date of Termination means the average of
the daily high and low trading values of such stock during the 30-day
period immediately preceding the Date of Termination.
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
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(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of a death benefit equal to one
hundred percent of the Executive's Annual Base Salary (the "Death Benefit"),
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, and the Death Benefit shall be payable to the
Executive's estate, in each case in a lump sum in cash within 30 days of the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and its Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and its Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the
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Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and the
timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
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(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affiliated Companies to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst &
Young or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
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paid by the Company or one or more of its Affiliated Companies to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the
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Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance, or shall cause one or more of its Affiliated Companies to
advance, the amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and its Affiliated Companies and those designated by it. In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis for
deferring or
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withholding any amounts otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Yuda Doron
2600 Netherland Avenue
Riverdale, NY 10463
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
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communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ Yuda Doron
--------------------------
Yuda Doron
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
------------------------
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EXHIBIT 10.18
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Doris Granatowski (the "Executive"), dated as of
the 20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
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(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business Combination"), in
each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who
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were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (1) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned to the Executive at any
time during the 120-day period immediately preceding the Effective Date and
(B) the Executive's services
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shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles by
ground transportation from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and/or its Affiliated Companies
and, to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as
such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company and/or its
Affiliated Companies in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least
equal to the highest of the aggregate amount of bonuses paid to the
Executive in any of the last three full calendar years prior to the
Effective Date (annualized in the event that the Executive was not employed
by the Company and/or any of its Affiliated Companies for the
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whole of any such calendar year) (the "Highest Annual Bonus"). Each such
Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such
Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its
Affiliated Companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured
with respect to both regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable), savings opportunities
and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its
Affiliated Companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 120-day period
immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its Affiliated Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its Affiliated Companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the Company and
its Affiliated Companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its
Affiliated Companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its Affiliated Companies in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time
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thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, payment of club dues, and
car allowance, in accordance with the most favorable plans, practices,
programs and policies of the Company and its Affiliated Companies in effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its Affiliated Companies at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its Affiliated
Companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company and its Affiliated Companies on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and
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acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting require-
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ments), authority, duties or responsibilities as contemplated by Section
4(a) of this Agreement, or any other action by the Company and/or any of
its Affiliated Companies which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company and/or such Affiliated Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to
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a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest Annual Bonus and (z) the Executive's car
allowance, expressed as an annual amount based on the rate required to
be paid pursuant to Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall con-
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tinue, or shall cause one or more of its Affiliated Companies to continue,
benefits to the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(b)(iv) of this
Agreement if the Executive's employment had not been terminated or, if more
favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its Affiliated
Companies and their families, provided, however, that if the Executive
becomes reemployed with another employer and is eligible to receive medical
or other welfare benefits under another employer-provided plan, the medical
and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility, and for purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for retiree benefits pursuant
to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until the expiration of a number of
years after the Date of Termination equal to the Multiple, and to have
retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide, or cause one or more of its Affiliated
Companies to timely pay or provide, to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall deliver, or shall cause one or more of its
Affiliated Companies to deliver, to the Executive an amount of cash equal
to the lesser of the Spread (as defined below) and the Fair Value (as
defined below), in each case as of the Date of Termination, of each stock
option held by the Executive immediately before the Date of Termination
that is not fully vested and exercisable as of the date the Notice of
Termination is delivered; PROVIDED, that if the Change in Control
transaction was intended to be accounted for using pooling-of-interests
accounting under APB No. 16 and would be eligible for such accounting
treatment absent the delivery of such cash, and the Company determines
based upon the advice of its accountants that delivery of such cash would
make the Change in Control transaction ineligible for such accounting
treatment, the Company may elect instead to deliver or cause to be
delivered to the Executive
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common stock of the Company or of a parent corporation of the Company that
is traded on a national securities exchange or on the NASDAQ National
Market System and has a Market Value (as defined below) as of the Date of
Termination equal to the amount of such cash. Such shares of common stock
shall have been registered under all applicable federal securities laws and
state blue sky laws and shall be delivered to the Executive in a manner
suitable for transfer on the principal exchange or the NASDAQ National
Market System on which such shares are traded (unless the Executive
determines, based on the advice of counsel of her choice, that any such
registration is not required for such shares of common stock to be freely
transferable by the Executive). The Company shall notify the Executive
within 5 business days after the Date of Termination of whether it will
deliver or cause to be delivered cash or common stock, and shall deliver
such cash or common stock on the 30th business day after the Date of
Termination; PROVIDED, that if the Executive determines, based upon the
advice of counsel of her choice, that receipt of such cash or common stock
would cause her to be subject to liability under Section 16(b) of the
Exchange Act, she shall so notify the Company, and the delivery of such
cash or common stock, as well as any other action or decision taken by the
Executive or the Company and its Affiliated Companies in connection with
the payment described in this Section 6(a)(v), shall be delayed for the
minimum period necessary to avoid such liability, as determined by the
Executive. The "Fair Value" of a stock option means the fair value of such
option, as determined by Lazard Freres using reasonable and customary
valuation methods. The "Spread" of a stock option means the difference
between the Market Value as of the Date of Termination of the underlying
shares of stock and the exercise price for such shares. The "Market Value"
of stock as of the Date of Termination means the average of the daily high
and low trading values of such stock during the 30-day period immediately
preceding the Date of Termination.
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of a death benefit equal to one
hundred percent of the Executive's Annual Base Salary (the "Death Benefit"),
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Ac-
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crued Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, and the Death Benefit shall be payable to the Executive's estate, in
each case in a lump sum in cash within 30 days of the Date of Termination. With
respect to the provision of Other Benefits, the term Other Benefits as utilized
in this Section 6(b) shall include, without limitation, and the Executive's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and its Affiliated
Companies to the estates and beneficiaries of peer executives of the Company and
its Affiliated Companies under such plans, programs, practices and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
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7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affiliated Companies to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax
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imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company or one or more of its Affiliated Companies to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
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later than ten business days after the Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance, or shall cause one
or more of its Affiliated Companies to advance, the amount of such payment to
the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
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respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and its Affiliated Companies and those designated by it. In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
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Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Doris Granatowski
4 White Gate Drive
Old Brookville, NY 11545
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
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(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/Doris Granatowski
----------------------
Doris Granatowski
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
-------------------------
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EXHIBIT 10.19
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and ReiJane Huai (the "Executive"), dated as of the
20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
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the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substan-
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tially all of the assets of the Company or the acquisition of assets of another
corporation (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be
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at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the
120-day period immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35
miles by ground transportation from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and/or its Affiliated Companies and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company and/or its Affiliated Companies in accordance with this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the
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"Annual Bonus") in cash at least equal to the highest of the aggregate amount of
bonuses paid to the Executive in any of the last three full calendar years prior
to the Effective Date (annualized in the event that the Executive was not
employed by the Company and/or any of its Affiliated Companies for the whole of
any such calendar year) (the "Highest Annual Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its Affiliated Companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
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procedures of the Company and its Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company and its
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Affiliated Companies on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
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(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company and/or any of its Affiliated Companies which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company and/or
such Affiliated Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice,
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specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest Annual Bonus and (z) the Executive's car
allowance, expressed as an annual amount based on the rate required to
be paid pursuant to Section 4(b)(vi);
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(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall continue, or shall cause one or more of its Affiliated Companies to
continue, benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been terminated or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
Affiliated Companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility, and for purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the expiration of a
number of years after the Date of Termination equal to the Multiple, and to
have retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide, or cause one or more of its Affiliated
Companies to timely pay or provide, to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of a death benefit
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equal to fifty percent of the Executive's Annual Base Salary (the "Death
Benefit"), payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, and the Death Benefit shall be payable to the
Executive's estate, in each case in a lump sum in cash within 30 days of the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and its Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and its Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
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Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affili-
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ated Companies to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company or one or more of its Affiliated Companies should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
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paid by the Company or one or more of its Affiliated Companies to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance, or shall cause one
or more
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of its Affiliated Companies to advance, the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and its Affiliated Companies and those designated by it. In no event shall an
asserted violation of the provisions
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of this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
ReiJane Huai
2 Carlisle Drive
Old Brookville, NY 11545
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
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communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ ReiJane Huai
---------------------------
ReiJane Huai
CHEYENNE SOFTWARE, INC.
By/s/ Michael Adler
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EXHIBIT 10.20
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Alan Kaufman (the "Executive"), dated as of the
20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
<PAGE>
(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of
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assets of another corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the
120-day period immediately
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preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles by ground
transportation from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and/or its Affiliated Companies and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company and/or its Affiliated Companies in accordance with this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
highest of the
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aggregate amount of bonuses paid to the Executive in any of the last three full
calendar years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company and/or any of its Affiliated Companies
for the whole of any such calendar year) (the "Highest Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its Affiliated Companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable
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to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company and its Affiliated Companies on a full-time basis for 180
consecutive
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business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position
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(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company and/or any of its Affiliated
Companies which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company and/or such Affiliated Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice,
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specifies the termination date (which date shall be not more than thirty days
after the giving of such notice). The failure by the Executive or the Company
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest Annual Bonus and (z) the Executive's car
allowance, expressed as an annual amount based on the rate required to
be paid pursuant to Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer
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period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue, or shall cause one or more
of its Affiliated Companies to continue, benefits to the Executive and/or
the Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility, and for purposes of
determining eligibility (but not the time of commencement of benefits) of
the Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have remained
employed until the expiration of a number of years after the Date of
Termination equal to the Multiple, and to have retired on the last day of
such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion;
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide, or cause one or more of its Affiliated
Companies to timely pay or provide, to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall deliver, or shall cause one or more of its
Affiliated Companies to deliver, to the Executive an amount of cash equal
to the lesser of the Spread (as defined below) and the Fair Value (as
defined below), in each case as of the Date of Termination, of each stock
option held by the Executive immediately before the Date of Termination
that is not fully vested and exercisable as of the date the Notice of
Termination is delivered; PROVIDED, that if the Change in Control
transaction was intended to be accounted for using pooling-of-interests
accounting under APB No. 16 and would be eligible for such accounting
treatment absent the delivery of
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such cash, and the Company determines based upon the advice of its
accountants that delivery of such cash would make the Change in Control
transaction ineligible for such accounting treatment, the Company may
elect instead to deliver or cause to be delivered to the Executive common
stock of the Company or of a parent corporation of the Company that is
traded on a national securities exchange or on the NASDAQ National Market
System and has a Market Value (as defined below) as of the Date of
Termination equal to the amount of such cash. Such shares of common stock
shall have been registered under all applicable federal securities laws and
state blue sky laws and shall be delivered to the Executive in a manner
suitable for transfer on the principal exchange or the NASDAQ National
Market System on which such shares are traded (unless the Executive
determines, based on the advice of counsel of his choice, that any such
registration is not required for such shares of common stock to be freely
transferable by the Executive). The Company shall notify the Executive
within 5 business days after the Date of Termination of whether it will
deliver or cause to be delivered cash or common stock, and shall deliver
such cash or common stock on the 30th business day after the Date of
Termination; PROVIDED, that if the Executive determines, based upon the
advice of counsel of his choice, that receipt of such cash or common stock
would cause him to be subject to liability under Section 16(b) of the
Exchange Act, he shall so notify the Company, and the delivery of such cash
or common stock, as well as any other action or decision taken by the
Executive or the Company and its Affiliated Companies in connection with
the payment described in this Section 6(a)(v), shall be delayed for the
minimum period necessary to avoid such liability, as determined by the
Executive. The "Fair Value" of a stock option means the fair value of such
option, as determined by Lazard Freres using reasonable and customary
valuation methods. The "Spread" of a stock option means the difference
between the Market Value as of the Date of Termination of the underlying
shares of stock and the exercise price for such shares. The "Market Value"
of stock as of the Date of Termination means the average of the daily high
and low trading values of such stock during the 30-day period immediately
preceding the Date of Termination.
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of a death benefit
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equal to one hundred percent of the Executive's Annual Base Salary (the "Death
Benefit"), payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, and the Death Benefit shall be payable to the
Executive's estate, in each case in a lump sum in cash within 30 days of the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and its Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and its Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
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Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affili-
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ated Companies to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 9) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
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paid by the Company or one or more of its Affiliated Companies to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance, or shall cause one
or more
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of its Affiliated Companies to advance, the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and its Affiliated Companies and those designated by it. In no event shall an
asserted violation of the provisions
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of this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Alan Kaufman
1150 Park Avenue
New York, New York 10128
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and
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communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ Alan Kaufman
---------------------------
Alan Kaufman
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
--------------------------
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EXHIBIT 10.21
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Wayne Lam (the "Executive"), dated as of the
20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
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(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of
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assets of another corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the
120-day period immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was
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employed immediately preceding the Effective Date or any office or location less
than 35 miles by ground transportation from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and/or its Affiliated Companies and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company and/or its Affiliated Companies in accordance with this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
highest of the aggregate amount of bonuses paid to the Executive in any of the
last three full calendar years prior to the Effective Date
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(annualized in the event that the Executive was not employed by the Company
and/or any of its Affiliated Companies for the whole of any such calendar year)
(the "Highest Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following the fiscal
year for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its Affiliated Companies.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its Affiliated Companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
Affiliated Companies.
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(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company and its Affiliated Companies on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and
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acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company and/or any of its Affiliated Companies which results in a
diminution in such position, au-
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thority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company and/or such Affiliated Company promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
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the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest Annual Bonus and (z) the Executive's car
allowance, expressed as an annual amount based on the rate required to
be paid pursuant to Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall continue, or shall cause one or more of its Affiliated Companies to
continue, benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section
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4(b)(iv) of this Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company
and its Affiliated Companies and their families, provided, however, that
if the Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another employer-
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility, and for purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until
the expiration of a number of years after the Date of Termination equal to
the Multiple, and to have retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion;
(iv) to the extent not theretofore paid or provided, the Company shall
timely pay or provide, or cause one or more of its Affiliated Companies to
timely pay or provide, to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits"); and
(v) the Company shall deliver, or shall cause one or more of its
Affiliated Companies to deliver, to the Executive an amount of cash equal
to the lesser of the Spread (as defined below) and the Fair Value (as
defined below), in each case as of the Date of Termination, of each stock
option held by the Executive immediately before the Date of Termination
that is not fully vested and exercisable as of the date the Notice of
Termination is delivered; PROVIDED, that if the Change in Control
transaction was intended to be accounted for using pooling-of-interests
accounting under APB No. 16 and would be eligible for such accounting
treatment absent the delivery of such cash, and the Company determines
based upon the advice of its accountants that delivery of such cash would
make the Change in Control transaction ineligible for such accounting
treatment, the Company may elect instead to deliver or cause to be
delivered to the Executive common stock of the Company or of a parent
corporation of the Company that is traded on a national securities
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exchange or on the NASDAQ National Market System and has a Market Value (as
defined below) as of the Date of Termination equal to the amount of such
cash. Such shares of common stock shall have been registered under all
applicable federal securities laws and state blue sky laws and shall be
delivered to the Executive in a manner suitable for transfer on the
principal exchange or the NASDAQ National Market System on which such
shares are traded (unless the Executive determines, based on the advice of
counsel of his choice, that any such registration is not required for such
shares of common stock to be freely transferable by the Executive). The
Company shall notify the Executive within 5 business days after the Date of
Termination of whether it will deliver or cause to be delivered cash or
common stock, and shall deliver such cash or common stock on the 30th
business day after the Date of Termination; PROVIDED, that if the Executive
determines, based upon the advice of counsel of his choice, that receipt of
such cash or common stock would cause him to be subject to liability under
Section 16(b) of the Exchange Act, he shall so notify the Company, and the
delivery of such cash or common stock, as well as any other action or
decision taken by the Executive or the Company and its Affiliated Companies
in connection with the payment described in this Section 6(a)(v), shall be
delayed for the minimum period necessary to avoid such liability, as
determined by the Executive. The "Fair Value" of a stock option means the
fair value of such option, as determined by Lazard Freres using reasonable
and customary valuation methods. The "Spread" of a stock option means the
difference between the Market Value as of the Date of Termination of the
underlying shares of stock and the exercise price for such shares. The
"Market Value" of stock as of the Date of Termination means the average of
the daily high and low trading values of such stock during the 30-day
period immediately preceding the Date of Termination.
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and its Affiliated Companies
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to the estates and beneficiaries of peer executives of the Company and its
Affiliated Companies under such plans, programs, practices and policies relating
to death benefits, if any, as in effect with respect to other peer executives
and their beneficiaries at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of the
Executive's death with respect to other peer executives of the Company and its
Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) the Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
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12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affiliated Companies to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any
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interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company or one or more of its Affiliated Companies to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such
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shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance, or shall cause one
or more of its Affiliated Companies to advance, the amount of such payment to
the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and its Affiliated Companies and those designated by it. In no event shall an
asserted violation of the provisions of this Section 10 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or
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assets of the Company to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
Wayne Lam
103 Liberty Avenue
North Babylon, NY 11073
IF TO THE COMPANY:
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to
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be a waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ Wayne Lam
------------------------
Wayne Lam
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
-------------------------
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EXHIBIT 10.22
CHANGE OF CONTROL
EMPLOYMENT AGREEMENT
AGREEMENT by and between Cheyenne Software, Inc., a Delaware
corporation (the "Company") and Elliot Levine (the "Executive"), dated as of the
20th day of May, 1996.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company and its Affiliated Companies (as defined below) will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below) of the Company. The
Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change of Control and to encourage the Executive's full attention
and dedication to the Company and its Affiliated Companies currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliated Companies" shall mean companies controlled by,
controlling or under common control with the Company.
(b) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(c)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company and/or any of its Affiliated Companies is terminated prior to
the date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Executive that such termination of employment (i) was at the
request of a third party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise occurred in anticipation of a Change of
Control that has actually taken place, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
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(c) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change
of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of
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assets of another corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ and/or in the employ of one or more of its Affiliated
Companies, and the Executive hereby agrees to remain in the employ of the
Company and/or in the employ of one or more of its Affiliated Companies subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary of such date (the "Employment
Period"); PROVIDED, that if the Executive and the Company have agreed before
the Effective Date that the Executive will retire on a specified date prior to
such third anniversary (an "Agreed Retirement Date"), the Employment Period
shall end on the Agreed Retirement Date.
4. TERMS OF EMPLOYMENT. (a) POSITION AND DUTIES. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned to the Executive at any time during the
120-day period immediately
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preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office or location less than 35 miles by ground
transportation from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and/or its Affiliated Companies and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company and/or its Affiliated Companies in accordance with this Agreement. It
is expressly understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter be deemed
to interfere with the performance of the Executive's responsibilities to the
Company and/or its Affiliated Companies.
(b) COMPENSATION. (i) BASE SALARY. During the Employment Period,
the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its Affiliated
Companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) ANNUAL BONUS. In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
highest of the
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aggregate amount of bonuses paid to the Executive in any of the last three full
calendar years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company and/or any of its Affiliated Companies
for the whole of any such calendar year) (the "Highest Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its Affiliated
Companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at any
time during the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its Affiliated
Companies.
(iv) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company and
its Affiliated Companies. Without limiting the generality of the foregoing, the
Company shall reimburse the Executive in an amount equal to thirteen thousand
five hundred dollars ($13,500) per annum for split dollar life insurance
premiums incurred by the Executive, payable in four equal installments per year.
(v) EXPENSES. During the Employment Period, the Executive shall
be entitled to receive prompt reimburse-
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ment for all reasonable expenses incurred by the Executive in accordance with
the most favorable policies, practices and procedures of the Company and its
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its Affiliated Companies.
(vi) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and car allowance, in
accordance with the most favorable plans, practices, programs and policies of
the Company and its Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its Affiliated Companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to the Executive by
the Company and its Affiliated Companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as provided generally at any time thereafter with respect to other peer
executives of the Company and its Affiliated Companies.
(viii) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its Affiliated Companies.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company and/or any of its Affiliated Companies
shall terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such
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receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company and its
Affiliated Companies on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company and its Affiliated
Companies (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or an officer of the Company and/or any of its Affiliated Companies
senior to the Executive or based upon the advice of counsel for the Company
and/or any of its Affiliated Companies shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
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(c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 4(a) of this Agreement, or any other action by
the Company and/or any of its Affiliated Companies which results in a
diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company and/or
such Affiliated Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company and/or any of its Affiliated
Companies to comply with any of the provisions of Section 4(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Company and/or such
Affiliated Company promptly after receipt of notice thereof given by the
Executive;
(iii) a requirement by the Company and/or any of its Affiliated
Companies that the Executive be based at any office or location other than
as provided in Section 4(a)(i)(B) hereof or that the Executive travel on
business of the Company and/or any of its Affiliated Companies to a
substantially greater extent than required immediately prior to the
Effective Date;
(iv) any purported termination by the Company and/or any of its
Affiliated Companies of the Executive's employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific
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termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
thirtieth day after the date on which the Company notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) GOOD REASON;
OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during the Employment Period,
the Company or any of its Affiliated Companies shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay, or shall cause one or more of its
Affiliated Companies to pay, to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Highest Annual Bonus and (y) a fraction, the
numerator of which is the number of days in the current fiscal year
through the Date of Termination, and the denominator of which is 365
and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3) shall
be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) the "Multiple" (as
defined below) and (2) the sum of (x) the Executive's Annual Base
Salary, (y) the Highest
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Annual Bonus and (z) the Executive's car allowance, expressed as an
annual amount based on the rate required to be paid pursuant to
Section 4(b)(vi);
(ii) for a number of years after the Executive's Date of Termination
equal to the Multiple, or such longer period as may be provided by the
terms of the appropriate plan, program, practice or policy, the Company
shall continue, or shall cause one or more of its Affiliated Companies to
continue, benefits to the Executive and/or the Executive's family at least
equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 4(b)(iv)
of this Agreement if the Executive's employment had not been terminated or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its
Affiliated Companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility, and for purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive
shall be considered to have remained employed until the expiration of a
number of years after the Date of Termination equal to the Multiple, and to
have retired on the last day of such period;
(iii) unless the Executive has an Agreed Retirement Date, the Company
shall provide, or shall cause one or more of its Affiliated Companies to
provide, at their sole expense as incurred, the Executive with outplacement
services the scope and provider of which shall be selected by the Executive
in the Executive's sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide, or cause one or more of its Affiliated
Companies to timely pay or provide, to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice or contract or
agreement of the Company and its Affiliated Companies (such other amounts
and benefits shall be hereinafter referred to as the "Other Benefits").
The "Multiple" means three, unless the Executive has an Agreed Retirement Date,
in which event the "Multiple" means a fraction, the numerator of which is the
number of days in the period beginning on (and including) the day after the Date
of Termination and ending on (and including) the Agreed Retirement Date, and the
denominator of which is 365.
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(b) DEATH. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of a death benefit equal to one
hundred percent of the Executive's Annual Base Salary (the "Death Benefit"),
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, and the Death Benefit shall be payable to the
Executive's estate, in each case in a lump sum in cash within 30 days of the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 6(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and its Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and its Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive's estate and/or the Executive's beneficiaries, as in
effect on the date of the Executive's death with respect to other peer
executives of the Company and its Affiliated Companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its Affiliated
Companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its Affiliated Companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) the Annual Base Salary through the Date
of Termination, (y) the amount of any compensation
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previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its Affiliated Companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
Affiliated Companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make or
cause to be made the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company or any of its Affiliated Companies may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and except as
specifically provided in Section 6(a)(ii), such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to
pay, or to cause one or more of its Affiliated Companies to pay, as incurred, to
the full extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, any of its Affiliated Companies, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (whether
such contest is between the Company or any of its Affiliated Companies and the
Executive or between either of them and any third party, and including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
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9. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
or any of its Affiliated Companies to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company or one or more of its Affiliated Companies. Any Gross-Up Payment, as
determined pursuant to this Section 9, shall be paid by the Company or one or
more of its Affiliated Companies to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company, its Affiliated Companies and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company or one or more of its Affiliated Companies should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter
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is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company or one or more of its
Affiliated Companies to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company or one or more of its Affiliated Companies of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly, or shall cause
one or more of its Affiliated Companies to bear and pay directly, all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to
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a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance, or shall cause one
or more of its Affiliated Companies to advance, the amount of such payment to
the Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company or one or more of its Affiliated Companies pursuant to Section 9(c),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company's complying with the requirements of
Section 9(c)) promptly pay to the Company or, if so directed by the Company, to
one or more of its Affiliated Companies, the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company or one
or more of its Affiliated Companies pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and its Affiliated Companies
all secret or confidential information, knowledge or data relating to the
Company or any of its Affiliated Companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its Affiliated Companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company and/or its Affiliated
Companies, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any
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such information, knowledge or data to anyone other than the Company and its
Affiliated Companies and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
11. SUCCESSORS. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. MISCELLANEOUS. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
IF TO THE EXECUTIVE:
-------------------
Elliot Levine
12 Whitewood Drive
Roslyn, NY 11576
IF TO THE COMPANY:
-------------------
Cheyenne Software, Inc.
3 Expressway Plaza
Roslyn Heights, NY 11577
Attention: General Counsel
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold or cause to be withheld from any amounts
payable under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company and/or any of its Affiliated Companies, the employment of the
Executive by the Company and/or any of its Affiliated Companies is "at will"
and, prior to the Effective Date, the Executive's employment may be terminated
by either the Executive or the Company (or any such Affiliated Company, if
applicable) at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement. From and after the Effective
Date this Agreement shall supersede any other agreement between the Company or
any of its Affiliated Companies and the Executive with respect to the subject
matter hereof, except for any Proprietary Rights Document signed by the
Executive.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
/s/ Elliot Levine
------------------
Elliot Levine
CHEYENNE SOFTWARE, INC.
By /s/ ReiJane Huai
----------------------
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EXHIBIT 21
CHEYENNE SOFTWARE, INC.
SUBSIDIARIES OF THE COMPANY
CSAC, INC.
CSIC CORP.
CHEYENNE AC CORP.
CHEYENNE ADVANCED TECHNOLOGY LTD.
CHEYENNE COMMUNICATIONS, INC.
CHEYENNE SOFTWARE CANADA LTD.
CHEYENNE SOFTWARE DEUTSCHLAND, GMBH
CHEYENNE SOFTWARE DOMESTIC SALES CORP.
CHEYENNE SOFTWARE INTERNATIONAL, INC.
CHEYENNE SOFTWARE INTERNATIONAL SALES CORP.
CHEYENNE SOFTWARE KK
CHEYENNE SOFTWARE LIMITADA
CHEYENNE SOFTWARE PTE. LTD
CHEYENNE SOFTWARE, S.A.R.L.
CHEYENNE SOFTWARE (UK) LTD.
<PAGE>
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cheyenne Software, Inc. and Subsidiaries:
We consent to incorporation by reference in the Registration Statements (No.
33-26340 and No. 33-43328) on Form S-3 and Registration Statement (No.
33-74612 and 333-01665) on Form S-8/S-3 of Cheyenne Software, Inc. and
subsidiaries of our report dated August 16, 1996, relating to the consolidated
balance sheets of Cheyenne Software, Inc. and subsidiaries as of June 30,
1996 and 1995, and the related consolidated statements of earnings,
shareholders' equity and cash flows and related schedule for each of the
years in the three-year period ended June 30, 1996, which report appears in
the June 30, 1996 annual report on Form 10-K of Cheyenne Software, Inc. and
subsidiaries.
KPMG PEAT MARWICK LLP
Jericho, New York
September 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
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0
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