<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended March 31, 1997 or
[ ] Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the transition period from
_______________ to _______________
COMMISSION FILE NUMBER: 0-26156
NOVADIGM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3160347
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
185 BERRY STREET, SUITE 3515 94107
SAN FRANCISCO, CALIFORNIA (Zip Code)
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 541-8420
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the Common Stock on July
25, 1997 as reported on the Nasdaq National Market, was approximately
$44,136,258. Shares of Common Stock held by each executive officer and director
and by each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
As of July 25, 1997, registrant had outstanding 17,254,934 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following document are incorporated by reference to Parts
II, III and IV of this Annual Report on Form 10-K: None.
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of July 25, 1997, the directors and the executive officers of the
Company are as follows:
<TABLE>
<CAPTION>
OFFICER OR
DIRECTOR
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Albion J. Fitzgerald 48 Chairman of the Board, Chief Executive Officer, and President 1992
Robert B. Anderson 41 Executive Vice President, Chief Operating Officer, Secretary and Director 1992
Joseph J. Fitzgerald 35 Vice President, Development 1992
Thomas V. Harmon 50 Vice President, Operations 1995
Stuart A. Jacobson 39 Executive Vice President, North America Operations 1994
Philip J. Myers 38 Vice President, Marketing 1993
H. Kent Petzold 50 Director 1992
Wallace D. Ruiz 45 Vice President, Finance, Treasurer and Chief Financial Officer 1995
</TABLE>
Mr. Albion Fitzgerald co-founded the Company in February 1992, serving
as Chairman since that time, and currently as Chief Executive Officer and
President. Mr. Fitzgerald has previously served as Chief Technology Officer. In
May 1990, Mr. Fitzgerald founded Fitzgerald Associates, the Company's
predecessor, and served as the chief architect in the development of EDM
technology. From 1988 to 1990, Mr. Fitzgerald was Director of Advanced
Technology for Pansophic Systems, Inc., a manufacturer of systems and
applications software. Mr. Fitzgerald founded and served as President of
ASI/TeIeMetrix. Inc., from 1985 to 1988, and was the chief architect of
Teleview, a session manager product. Mr. Fitzgerald's brother-in-law is Wallace
D. Ruiz, the Company's Chief Financial Officer, and Mr. Fitzgerald's brother is
Joseph Fitzgerald, the Company's Vice President, Development.
Mr. Robert Anderson joined the Company in June 1992 and currently serves
as Executive Vice President, Chief Operating Officer, Secretary and as a
director. From 1990 to 1992, Mr. Anderson served as Senior Vice President at
Stratagem, an investment banking firm specializing in mergers, acquisitions and
divestitures in the software industry. Prior to Stratagem, Mr. Anderson was
employed as a Vice President in the Corporate Finance Software Specialty Group
at Sutro & Company, Inc.
Mr. Joseph Fitzgerald co-founded the Company in February 1992. Since
that time he has served as Director of Development, and as of June 1996, Vice
President of Development. Mr. Fitzgerald is the brother of Albion Fitzgerald.
Mr. Thomas Harmon joined the Company as Vice President, Operations, in
April 1995, after eighteen months directing Novadigm operations projects as a
management consultant. From October 1988 through May 1993, Mr. Harmon was an
independent management consultant at Montefiore Medical Center where he directed
a project to implement major new clinical and financial systems.
Mr. Stuart Jacobson joined the Company in August 1994 and currently
serves as Executive Vice President, North America Operations. Prior to joining
the Company, Mr. Jacobson served as Managing Director, International and General
Manager Worldwide Distribution for ViewStar Corporation, a private document
management work flow software vendor. Prior to that, Mr. Jacobson held various
sales and management positions at Oracle Corporation since 1986, including Group
Manager of Asia Pacific Operation.
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<PAGE> 3
Mr. Philip Myers joined the Company in December, 1993 as Vice President,
Marketing after having supported the Company's initial product launch as a
marketing consultant since October 1992. From November 1991 through December
1993 Mr. Myers was President of Marketing Strategic Services, a marketing
consulting firm.
Mr. Kent Petzold has been a director of the Company since August 1992.
From August 1992 to May 1995, Mr. Petzold served as the President and Chief
Executive Officer of the Company. Prior to joining the Company, Mr. Petzold
served as Senior Vice President and General Manager, Software Products Division
of Pansophic Systems, Inc. from October 1990 to November 1991. From October 1985
to October 1990, Mr. Petzold was the President and Chief Executive officer of
Viasoft, Inc. Mr. Petzold also serves as a director of Relay Technology, Inc., a
privately held software company.
Mr. Wallace Ruiz joined the Company in May 1995 as Vice President,
Finance, Treasurer and Chief Financial Officer. From September 1993 until
joining the Company, he was Vice President, Treasurer and Chief Financial
Officer of Unisa Holdings, Inc., a designer, marketer, and retailer of women's
fashion footwear. From June 1989 until August 1993, Mr. Ruiz was employed as
Vice President and Chief Financial Officer of L. Luria & Son, Inc., a publicly
held retail chain. Mr. Ruiz is a Certified Public Accountant. He is the
brother-in-law of Albion Fitzgerald.
The term of office for each person elected director is until the next
Annual Meeting of Stockholders or until a successor has been elected or
qualified. Executive officers are elected by and serve at the discretion of the
Board of Directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16 (a) of the Exchange Act ("Section 16 (a)") requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers, Inc. Such officers, directors and ten-percent stockholders
are also required by SEC rules to furnish the Company with copies of all such
forms that they file. Based solely on its review of the copies of such forms
received by the Company, or written representations from certain reporting
persons that no Forms 5 were required for such persons, the Company believes
that during fiscal 1996 all Section 16(a) filing requirements applicable to its
officers, directors and ten-percent stockholders were complied with.
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<PAGE> 4
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the other four most highly compensated executive officers who received in excess
of $100,000 during the last fiscal year, (the "Named Executive Officers"),
information concerning compensation awarded to, earned by or paid for services
to the Company in all capacities during the fiscal years ended March 31, 1997,
1996 and 1995.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL1 ------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS ($)(1)
--------------------------- ---- ---------- --------- ------- ------------
<S> <C> <C> <C> <C> <C>
Albion J. Fitzgerald (2).................. 1997 $160,000 $-- -- $ 258
President and Chief Executive 1996 160,000 -- -- 209
Officer 1995 160,000 -- -- 209
Robert Ernens (3)(4)...................... 1997 228,228 -- 150,000(5) 21,508
Managing Director, Europe 1996 242,940 -- 100,000 3,974
1995 193,000 -- -- --
Michael P. Conti (6)...................... 1997 175,000 -- 250,000(7) 288
Vice President, Direct Channels 1996 120,000 200,000 50,000 203
1995 89,000 111,000 140,000 146
Wallace D. Ruiz........................... 1997 165,000 -- 175,000(8) 359
Chief Financial Officer and 1996 146,875 -- 140,000 --
Treasurer 1995 -- -- -- --
Stuart A. Jacobson........................ 1997 175,000 -- 260,000(9) 359
Executive Vice President, North 1996 120,000 150,000 100,000 351
America Operations 1995 80,000 105,000 140,000 263
- ---------------------------
</TABLE>
(1) Represents long-term disability insurance premiums paid by the Company,
except in the case of Mr. Ernens which amount represents lease payments
for an automobile.
(2) Mr. Fitzgerald succeeded H. Kent Petzold as President and Chief
Executive Officer as of May 18, 1995.
(3) Translated from French francs to United States dollars, computed at the
average exchange rate for the respective fiscal years.
(4) Mr. Ernens resigned from the Company effective as of May 20, 1997.
(5) Includes options to purchase an aggregate of 100,000 shares of Common
Stock which were granted to Mr. Ernens in connection with the Company's
option repricing program in exchange for options that had a higher
exercise price.
(6) Mr. Conti resigned from the Company effective March 31, 1997. All of Mr.
Conti's options expired 30 days after his resignation.
(7) Includes options to purchase an aggregate of 150,000 shares of Common
Stock which were granted to Mr. Conti in connection with the Company's
option repricing program in exchange for options that had a higher
exercise price.
(8) Includes options to purchase an aggregate of 140,000 shares of Common
Stock which were granted to Mr. Ruiz in connection with the Company's
option repricing program in exchange for options that had a higher
exercise price.
(9) Includes options to purchase an aggregate of 200,000 shares of Common
Stock which were granted to Mr. Jacobson in connection with the
Company's option repricing program in exchange for options that had a
higher exercise price.
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<PAGE> 5
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information concerning each grant of
options to purchase the Company's Common Stock made during the fiscal year ended
March 31, 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL REALIZABLE
VALUE MINUS EXERCISE
UNDERLYING PRICE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM (1)
OPTIONS EMPLOYEES PER SHARE EXPIRATION ------------------------
NAME GRANTED (#)(2) IN FISCAL YEAR ($/SH)(3)(4) DATE 5% 10%
---- -------------- -------------- ------------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Albion J. Fitzgerald -- -- -- -- -- --
Robert Ernens(5) 100,000(6) 5.67% $5.25 10/05/2000 $113,141 $243,652
50,000(7) 2.94% 5.25 10/01/2001 72,522 160,258
Michael P. Conti(9) 50,000(6) 2.94% 5.25 4/30/1997 13,125 26,250
100,000 5.67% 6.8750 4/30/1997 ** **
100,000(6) 5.67% 5.25 4/30/1997 26,250 52,500
Stuart A. Jacobson 100,000(6) 5.67% 5.25 10/05/2000 113,141 243,652
100,000(8) 5.67% 6.8750 8/16/2001 ** **
100,000(6) 5.67% 5.25 8/16/2001 145,048 320,518
60,000(7) 3.40% 5.25 10/01/2001 87,028 192,311
Wallace D. Ruiz 140,000(6) 7.95% 5.25 4/19/2000 158,397 341,114
35,000 1.99% 5.25 10/1/2001 50,767 112,181
</TABLE>
- ---------------------------
** Such options were subsequently exchanged for options having lower
exercise prices in connection with the Company's option repricing
program. See "Report of Board of Directors on Executive Compensation --
Report on Repricing of Options."
(1) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the
option term. These numbers are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth.
(2) Except as otherwise noted, and subject to note 6 below, all options vest
at a rate of 25% after the first year and then 1/48th thereafter.
(3) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by reference to the closing
sale price of the Common Stock on the Nasdaq National Market on the date
of grant.
(4) Exercise price may be paid in cash, promissory note, by delivery of
already-owned shares subject to certain conditions, or pursuant to a
cashless exercise procedure under which the optionee provides
irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to the Company, out of the sale proceeds, an amount
equal to the exercise price plus all applicable withholding taxes.
(5) Mr. Ernens resigned from the Company effective May 20, 1997.
(6) In connection with the Company's option repricing program, such options
were granted in exchange for options having a higher exercise price. The
new options had the same vesting schedule as the options for which they
were exchanged except that the vesting schedule was extended by three
months in each case.
(7) All of the shares subject to such option will vest on the sixth
anniversary of the vesting start date.
(8) 50,000 of the shares subject to the option will vest on the sixth
anniversary of the vesting start date.
(9) Mr. Conti resigned from the Company effective March 31, 1997. All of Mr.
Conti's options expired 30 days after his resignation.
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<PAGE> 6
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table shows stop options exercised by Named Executive
Officers during fiscal year 1997, including the aggregate value of gains on the
date of the exercise. In addition, this table includes the number of shares
covered by both exercisable and non-exercisable stock options as of fiscal
year-end. Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT MARCH 31, 1997 AT MARCH 31, 1997 (1)
ACQUIRED ON VALUE --------------------------- ----------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albion J. Fitzgerald -- -- -- -- -- --
Robert Ernens -- -- 154,583 135,417 -- --
Michael P. Conti -- -- 58,334 116,666 -- --
Stuart A. Jacobson 20,000 $254,280 70,000 295,000 -- --
Wallace D. Ruiz -- -- 62,917 182,083 -- --
</TABLE>
(1) Based on the closing price of the Company's Common Stock on March 31,
1997 of $4.125 (U.S.), less the exercise price of the option.
EMPLOYMENT CONTRACTS AND CHANGE-OF-CONTROL ARRANGEMENTS
In October 1996, the Company entered into a letter agreement with
Stuart A. Jacobson, Executive Vice President, North America Operations, pursuant
to which any unvested options held by Mr. Jacobson will accelerate and vest upon
the occurrence of a change in control. In addition, in April 1997, the Company
entered into employment agreement with Wallace D. Ruiz, Chief Financial Officer
and Treasurer (the "Executive"), pursuant to which Mr. Ruiz is entitled to
receive an annual base salary of $165,000, subject to any increases as the Board
of Directors shall authorize from time to time in connection with an annual
review, plus additional variable compensation under the Company's executive
compensation plan.
Subject to certain limitations, Mr. Ruiz's employment agreement
provides that if the Executive is terminated at any time during the period
beginning 90 days before and ending 12 months after a Change of Control (the
"Change of Control Period") then the Executive shall be entitled to receive, in
the case of an Involuntary or Constructive Termination other than for cause or
as a result of the Executive's death or disability, severance pay in an amount
equal to 50% of the Executive's base compensation plus a pro rata share of the
bonus and commissions that the Executive would have earned had he been employed
by the Company at the end of the year in which termination occurred and, in the
case of death or disability, such other benefits, if any, as may then be
established under the Company's then-existing benefit plans. In addition, any
unvested options held by the Executive prior to termination shall (i) in the
case of Involuntary or Constructive Termination other than for cause, accelerate
and become exercisable in full or (ii) in the case of death or disability,
accelerate and become exercisable as to that number of additional shares that
would have vested if the Executive had remained continuously employed for a
period of six months following such termination and shall remain exercisable for
the period prescribed in the stock option agreements.
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<PAGE> 7
If the Executive voluntarily resigns from the Company or if the Company
terminates the Executive for cause, the Executive shall not be entitled to
receive severance or other benefits except for those, if any, as may be
established under the Company's benefit plans as existing at the time of
termination.
For the purposes of Mr. Ruiz's employment agreement, a Change of
Control shall mean the occurrence of any of the following: (i) any person
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the total voting power represented by the
Company's then outstanding voting securities; (ii) a change in the composition
of the Board of Directors occurring within a two-year period as a result of
which fewer than a majority of the directors are Incumbent Directors (as
defined); or (iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent at least 50% of the total voting power of the surviving
entity immediately after such merger or consolidation.
Involuntary or Constructive Termination is defined in the employment
agreement to mean (i) without the Executive's express written consent, the
assignment to the Executive of any duties or the significant reduction of the
Executive's duties, either of which is inconsistent with the Executive's
position with the Company and responsibilities in effect immediately prior to
such assignment, or the removal of the Executive from such position and
responsibilities; (ii) without the Executive's express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites available to the Executive immediately prior to such reduction;
(iii) a reduction by the Company in the base compensation of the Executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the Executive is
entitled immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced; (v) any purported
termination of the Executive by the Company which is not effected for disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; or (vi) the failure of the Company to obtain the assumption of the
employment agreement by any successors.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
INTRODUCTION
Prior to the Company's initial public offering that was completed in
July 1995, the Board of Directors was primarily responsible for establishing and
administering the Company's compensation policies. In this role, and consistent
with the Company's status as a privately held corporation, the Board determined
the Chief Executive Officer's salary directly and reviewed and approved
employment compensation matters for other management personnel. The Board of
Directors, through a Stock Option Committee consisting at that time of two
directors who were also executive officers of the Company, also administered the
Company's 1992 Stock Option Plan.
The Compensation Committee of the Board of Directors (the "Committee")
was established in May 1995 and is composed only of outside directors. During
fiscal 1997, the Compensation Committee consisted of Dennis DeCoste and Michelle
Axelson, both of whom resigned in July 1997. The Compensation Committee
currently has two vacancies. In general, the Committee is responsible for
reviewing and recommending for approval by the Board of Directors the Company's
compensation practices, including executive salary levels and variable
compensation programs. With respect to the compensation of the Company's Chief
Executive Officer, the Committee reviews and submits to the Board for approval
the various elements of the Chief Executive Officer's compensation. With respect
to other executive officers, the Committee reviews the recommendations for such
individuals presented by the Chief Executive Officer and the basis therefor and
approves or modifies the compensation packages for such individuals. Base salary
levels for executive officers of the Company are generally established at or
near the start of each fiscal
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<PAGE> 8
year, and final bonuses for executive officers are determined at the end of each
fiscal year based upon such individual's performance and, the performance of the
Company.
EXECUTIVE COMPENSATION
The Company has a compensation program which consists of two principal
components: cash-based compensation, both fixed and variable, and equity-based
compensation. These two principal components are intended to attract, retain,
motivate and reward executives who are expected to manage both the short-term
and long-term success of the Company.
Cash-based compensation.
Base salary - The salaries of each of the executive officers
(other than the Chief Executive Officer) for the year ended March 31,
1997 were approved by the Board of Directors, upon the recommendation
of the Chief Executive Officer.
Bonuses - The Company has a discretionary bonus pool pursuant
to which members of senior management, including the Company's
executive officers, may receive annual cash bonuses. The purpose of the
bonuses is to motivate senior management to perform to the best of
their abilities in order to enhance stockholder value through the
achievement of corporate objectives. For the fiscal year-ended March
31, 1997, the allocation of the bonus pool was determined by the Chief
Executive Officer, with the exception of his own bonus, based upon
subjective factors.
Equity-based compensation.
Stock options - Stock options are periodically granted to
provide additional incentive to executives and other key employees to
maximize long-term total return to the Company's stockholders. Options
generally vest over a four year period to encourage option holders to
continue in the employ of the Company. The exercise price of options is
the market price on the date of grant, ensuring that the option will
acquire value only to the extent that the price of the Company's Common
Stock increases relative to the market price at the date of grant.
Option grants to executive officers will be determined by the
Compensation Committee, in its discretion, or in some cases by the
Stock Option Committee, subject to the oversight of the Compensation
Committee. In making its determination, the Compensation Committee
intends to consider the executive's position at the Company, such
executive's individual performance, the number of options held (if any)
and any other factors that the Compensation Committee may deem
relevant.
CHIEF EXECUTIVE OFFICER COMPENSATION
During the year ended March 31, 1997, Mr. Fitzgerald received a base
salary approved by the Board of Directors upon the recommendation of the
Compensation Committee. This represented no increase from the base salary
received by Mr. Fitzgerald for the prior fiscal year. The Compensation Committee
recommended that no bonus be awarded to the Chief Executive Officer for this
fiscal year. The Board believed that Mr. Fitzgerald, as Chief Executive Officer,
significantly and directly influenced the Company's overall performance.
-8-
<PAGE> 9
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162 of the Code limits the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly-compensated executive officers. The Company may deduct
such compensation only to the extent that during any fiscal year the
compensation paid to such individual does not exceed $1 million or meet certain
specified conditions (including stockholder approval). Based on the Company's
current compensation plans and policies and proposed regulations interpreting
this provision of the Code, the Company and the Committee believe that, for the
near future, there is little risk that the Company will lose any significant tax
deduction for executive compensation.
REPORT ON REPRICING OF OPTIONS
In August 1996, the Board of Directors of the Company determined that
the purposes of the 1992 Stock Option Plan were not being adequately achieved
with respect to those employees holding options with exercise prices greater
than the then-current market value of the Company's Common Stock and that it was
in the best interests of the Company and the Company's stockholders that the
Company retain and motivate such employees. The Board of Directors further
determined that it would be in the best interests of the Company and the
Company's stockholders to provide such optionees the opportunity to exchange
their options with exercise prices equal to the then-current market value of the
Company's Common Stock. On October 1, 1996, upon approval of the Stock Option
Committee of the Board of Directors of the Company, the Company offered certain
employees who were holders of outstanding options under the 1992 Stock Option
Plan at exercise prices in excess of $5.25 per share the opportunity to exchange
such options for new stock options at an exercise price of $5.25 per share, the
fair market value of the Company's Common Stock at the close of business on that
date. Any option holder accepting such offer was required to extend the vesting
period of existing unvested shares by 3 months (vested options remained vested).
A total of 140 employees of the Company were eligible to participate in the
repricing and those employees' existing options had an average exercise price of
$14.47 per share prior to the repricing. Of such eligible employees, 131
participated in the repricing, including the Named Executive Officers noted in
the table below.
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<PAGE> 10
The following table sets forth certain information regarding the
participation of each of the Named Executive Officers in the Company's repricing
of options described above:
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
Length of
Number of Market Price Exercise Price Original Option
Securities of Stock at at Time of Term
Underlying Time of Repricing or Remaining at
Options Repricing or Amendment Date of
Repriced or Amendment New Exercise Repricing or
Name and Position Date Amended Price Amendment
- -------------------------------- ---- ------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert Ernens, October 1, 1996 100,000 $5.25 $15.4375 $5.25 1,465 days
Managing Director, Europe
Michael P. Conti October 1, 1996 50,000 5.25 15.4375 5.25 1,465 days
Vice President-Direct Sales October 1, 1996 100,000 5.25 6.875 5.25 1,780 days
Stuart A. Jacobson, October 1, 1996 100,000 5.25 15.4375 5.25 1,465 days
Executive Vice President, North October 1, 1996 100,000 5.25 6.875 5.25 1,780 days
AmericaOperations
Wallace D. Ruiz, October 1, 1996 140,000 5.25 13.00 5.25 1,826 days
Vice President and Chief
Financial Officer
</TABLE>
SUMMARY
The Board of Directors intends that its compensation program shall be
fair and motivating and shall be successful in attracting and retaining
qualified employees and in linking compensation directly to the Company's
success. The Board of Directors and the Compensation Committee intend to review
this program on an ongoing basis to evaluate its continued effectiveness.
THE BOARD OF DIRECTORS
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<PAGE> 11
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return with those of the Nasdaq Stock Market - U.S. Index and the Hambrecht &
Quist Technology Index. The graph assumes that $100 was invested on July 14,
1995 (the effective date of the Company's initial public offering) in (i) the
Company's Common Stock, (ii) the Nasdaq Stock Market (U.S.) Index and (iii) the
Hambrecht & Quist Technology Index, including reinvestment of dividends. Note
that historic stock price performance is not necessarily indicative of future
stock price performance.
COMPARISON OF TWENTY MONTH CUMULATIVE TOTAL RETURN *
AMONG NOVADIGM, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
[PERFORMANCE CHART HERE]
<TABLE>
<CAPTION>
Measurement Period Nasdaq Stock Market Hambrecht & Quist
(Fiscal Year Covered) Novadigm, Inc. (U.S.) Index Technology Index
- --------------------- -------------- ------------ ----------------
<S> <C> <C> <C>
July 14, 1995 $100 $100 $100
Fiscal Year Ended 3/31/96 101 111 99
Fiscal Year Ended 3/31/97 28 123 116
</TABLE>
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<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Company as of July 25, 1997 for the
following: (i) each person or entity known by the Company to own beneficially
more than 5% of the outstanding shares of the Company's Common Stock, (ii) each
director of the Company, (iii) each of the Named Executive Officers and (iv) all
directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENTAGE BENEFICIALLY
BENEFICIAL OWNER (1) OWNED (2) OWNED
- ---------------------------------------------------------- --------- -----
<S> <C> <C>
Albion J. Fitzgerald (3)................................... 3,581,250 20.7%
c/o Novadigm, Inc.
One International Boulevard
Suite 200
Mahwah, New Jersey 07495
Joseph J. Fitzgerald....................................... 1,462,717 8.5%
c/o Novadigm, Inc.
One International Boulevard
Suite 200
Mahwah, New Jersey 07495
Shannon L. Ruiz (4)........................................ 870,000 5.0%
c/o Novadigm, Inc.
One International Boulevard
Suite 200
Mahwah, New Jersey 07495
Robert B. Anderson......................................... 655,069 3.8%
H. Kent Petzold (5)........................................ 413,667 2.4%
Stuart A. Jacobson (6)..................................... 145,464 *
Wallace D. Ruiz (7)........................................ 88,999 *
All directors and executive officers as a group
(10 persons) (8)......................................... 6,511,332 37.7%
</TABLE>
- ---------------------------
* Less than one percent.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes shares which could be acquired upon exercise of options if such
options are exercisable within 60 days after July 25, 1997.
(3) Excludes 870,000 shares held by Shannon L. Ruiz, Albion J. Fitzgerald's
spouse, as to which Mr. Fitzgerald disclaims beneficial ownership.
(4) Excludes 3,581,250 shares held by Albion J. Fitzgerald, Ms. Ruiz's
spouse, as to which Ms. Ruiz disclaims beneficial ownership.
-12-
<PAGE> 13
(5) Includes options exercisable for 285,333 shares of Common Stock under the
Company's 1992 Stock Option Plan and options exercisable into an aggregate
of 33,334 shares pursuant to an option agreement between Mr. Petzold and a
certain stockholder of the Company.
(6) Includes 108,333 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of July 25, 1997 under the Company's 1992 Stock
Option Plan.
(7) Includes 75,834 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become
exercisable within 60 days of July 25, 1997 under the Company's 1992 Stock
Option Plan.
(8) Includes options exercisable for 633,666 shares of Common Stock under the
Company's 1992 Stock Option Plan and options exercisable by H. Kent
Petzold for 33,334 shares of Common Stock pursuant to an agreement with a
certain stockholder of the Company. See note (6) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 19, 1997, the Company lent William Fitzgerald $94,717 evidenced
by a promissory note. Mr. Fitzgerald is an employee of the Company and the
brother of Albion Fitzgerald, the Chief Executive Officer of the Company. The
promissory note is due on March 19, 1998 and bears interest at a rate of 5.83%.
The loan is secured by 35,000 shares of Common Stock owned by Mr. Fitzgerald.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following items are filed as part of the report:
3. Exhibits
10.14 Employment Agreement effective as of April 1, 1997 by and
between the Registrant and Wallace D. Ruiz.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NOVADIGM, INC.
(Registrant)
By: /s/ WALLACE D. RUIZ
------------------------------------
Wallace D. Ruiz
Vice President, Finance, Treasurer, and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: July 29, 1997
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Wallace D. Ruiz, as his
attorneys-in-fact with full power of substitution, for him in any and all
capacities, to sign any and all amendments to this Report on Form 10-K and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below on July 29, 1997 by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ALBION J. FITZGERALD Chairman of the Board, Chief Executive Officer and
- ------------------------------- President
Albion J. Fitzgerald (Principal Executive Officer) July 29, 1997
-
/s/ WALLACE D. RUIZ Vice President Finance, Treasurer, and Chief Financial
- ------------------------------- Officer
Wallace D. Ruiz (Principal Financial and Accounting Officer) July 29, 1997
-
/s/ ROBERT B. ANDERSON
- ------------------------------- Executive Vice President, Chief Operating Officer,
Robert B. Anderson Secretary and Director July 29, 1997
/s/ H. KENT PETZOLD Director
- -------------------------------
H. Kent Petzold July 29, 1997
</TABLE>
-15-
<PAGE> 16
EXHIBIT INDEX
<TABLE>
Exhibit Number Description
- -------------- -----------
<S> <C>
10.14 Employment Agreement effective as of April 1, 1997 by
and between the Registrant and Wallace D. Ruiz.
</TABLE>
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into
effective as of April 1, 1997, by and between Wallace D. Ruiz (the "Executive")
and Novadigm, Inc., a Delaware corporation (the "Company").
R E C I T A L S
A. It is expected that the Company from time to time will consider
the possibility of an acquisition by another company or other change of control.
The Board of Directors of the Company (the "Board") recognizes that such
consideration can be a distraction to the Executive and can cause the Executive
to consider alternative employment opportunities. The Board has determined that
it is in the best interests of the Company and its stockholders to assure that
the Company will have the continued dedication and objectivity of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the
Company and its stockholders to provide the Executive with an incentive to
continue his employment and to motivate the Executive to maximize the value of
the Company upon a Change of Control for the benefit of its stockholders.
C. The Board believes that it is imperative to provide the Executive
with certain benefits upon termination of the Executive's employment in
connection with a Change of Control, which benefits are intended to provide the
Executive with financial security and provide sufficient incentive and
encouragement to the Executive to remain with the Company notwithstanding the
possibility of a Change of Control.
D. Further, the Board believes that it is in the best interests of
the Company and its stockholders to provide additional benefits to the Executive
in the event the Executive's employment terminates for any reason other than a
Change in Control. Such benefits are intended to provide the Executive with
financial security and provide sufficient incentive and encouragement to the
Executive to remain with the Company notwithstanding the possible termination of
employment.
E. To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Executive, to
agree to the terms provided herein.
F. Certain capitalized terms used in the Agreement are defined in
Section 6 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of the Executive by the Company, the
parties agree as follows:
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<PAGE> 2
1. Duties and Scope of Employment.
(a) Position. The Company shall employ the Executive in the
position of Vice President, Finance/Chief Financial Officer/Treasurer, as such
position was defined in terms of responsibilities and compensation as of the
effective date of this Agreement; provided, however, that the Board of Directors
by mutual agreement with the Executive shall have the right, at any time prior
to the occurrence of a Change of Control, to revise such responsibilities and
compensation. The Executive shall continue to devote his full business efforts
and time to the Company and its subsidiaries. The Executive shall comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during his employment. During the term of the Executive's
employment with the Company, the Executive shall devote his full time, skill and
attention to his duties and responsibilities, and shall perform them faithfully,
diligently and competently, and the Executive shall use his best efforts to
further the business of the Company and its affiliated entities.
2. Base Compensation. Effective April 1, 1997, the Company shall
pay the Executive as compensation for his services a base salary at the
annualized rate of $165,000 (the "Annual Salary"), subject to any increases as
the Board shall authorize from time to time in connection with an annual review.
The Annual Salary shall be paid periodically in accordance with normal Company
payroll. The Annual Salary together with agreed upon bonus and commission
amounts, and any increases in such compensation that the Board of Directors may
grant from time to time, is referred to in this Agreement as "Base
Compensation."
3. Executive Benefits. The Executive shall be eligible to
participate in the employee benefit plans and executive compensation programs
maintained by the Company applicable to other key executives of the Company,
including (without limitation) retirement plans, savings or profit-sharing
plans, stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, and similar plans or
programs, subject in each case to the generally applicable terms and conditions
of the applicable plan or program in question and to the determination of any
committee administering such plan or program. In addition, the Executive shall
continue to be entitled to receive any other benefits currently received by the
Executive such as automobile and car phone allowance benefits.
4. Agreement Term. The terms of this Agreement shall terminate
upon the earlier of (i) the date that all obligations of the parties hereunder
have been satisfied, or (ii) twelve (12) months after a Change of Control unless
the Executive's employment terminates as a result of Involuntary or Constructive
Termination. A termination of the terms of this Agreement pursuant to the
preceding sentence shall be effective for all purposes, except that such
termination shall not affect the payment or provision of compensation or
benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement.
-2-
<PAGE> 3
5. Severance Benefits.
(a) Termination in Connection With a Change of Control.
Subject to Section 5(b) and Section 7 below, if the Company terminates the
Executive's employment at any time during the period beginning thirty (30) days
before and ending twelve (12) months after a Change of Control, then the
Executive shall be entitled to receive severance benefits as follows:
(i) Involuntary or Constructive Termination. If the
Executive's employment terminates as a result of Involuntary or Constructive
Termination other than for Cause, then (1) the Executive shall be entitled to
receive severance pay in an amount equal 100% of the Executive's Base
Compensation for the year coinciding with the year of termination plus an amount
equal to the bonus and commissions the Executive would have earned had he been
employed by the Company at the end of such year multiplied by a fraction (x) the
numerator of which is the number of completed months in that year, and (y) the
denominator of which is twelve (12) (the "Current Bonus") and (2) in addition to
any portion of the Executive's stock options that were exercisable immediately
prior to such termination, such options shall accelerate and become exercisable
in full. Any severance payments except for the Current Bonus to which the
Executive is entitled pursuant to this Section shall be paid in a lump sum
within thirty (30) days of the Executive's termination. The Current Bonus to
which the Executive is entitled pursuant to this Section shall be paid in a lump
sum within thirty (30) days of the date that the Company's audit is complete for
such year.
(ii) Voluntary Resignation; Termination For Cause. If
the Executive voluntarily resigns from the Company (other than as an Involuntary
or Constructive Termination described in subsection 5(a)(i)), or if the Company
terminates the Executive's employment for Cause, then the Executive shall not be
entitled to receive severance or other benefits except for those (if any) as may
then be established under the Company's then existing benefit plans at the time
of such termination.
(iii) Disability; Death. If the Company terminates
the Executive's employment as a result of the Executive's Disability, or such
Executive's employment is terminated due to the death of the Executive, then (1)
the Executive or the Executive's estate, as the case may be, shall be entitled
to receive severance pay in an amount equal to one-half (1/2) of the Executive's
Base Compensation for the year coinciding with the year of termination plus his
Current Bonus, (2) in addition to any portion of the Executive's stock options
that were exercisable immediately prior to such termination, such options shall
accelerate and become exercisable as to that number of additional shares that
would have vested if the Executive had remained continuously employed for a
period of six (6) months following such termination (and if any of such options
vest on an annual basis, the appropriate credit shall be given as if the vesting
accrued monthly), and such options shall remain exercisable for the period
prescribed in Executive's stock option agreements and (3) the Executive or the
Executive's estate, as the case may be, shall be entitled to receive such other
benefits (if any) as may then be established under
-3-
<PAGE> 4
the Company's then existing benefit plans at the time of such Disability or
death. Any severance payments except for the Current Bonus to which the
Executive is entitled pursuant to this Section shall be paid in a lump sum
within thirty (30) days of the Executive's termination. The Current Bonus to
which the Executive is entitled pursuant to this Section shall be paid in a lump
sum within thirty (30) days of the date that the Company's audit is complete for
such year.
(b) Certain Business Combinations. In the event it is
determined by the Board of Directors, upon receipt of a written opinion of the
Company's independent public accountants, that the enforcement of any section or
subsection of this Agreement, including, but not limited to, Section 5(a) (which
allows for the acceleration of the vesting of stock options to purchase shares
of the Company's Common Stock in connection with a Change of Control).
-4-
<PAGE> 5
above, would preclude accounting for any proposed business combination of the
Company involving a Change of Control as a pooling of interests, and the Board
otherwise desires to approve such a proposed business transaction which requires
as a condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such section or subsection of this Agreement
shall be null and void.
6. At-Will Employment. The Company and the Executive acknowledge
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
including, without limitation, any termination prior to a Change of Control, the
Executive shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
policies at the time of termination. The following terms referred to in this
Agreement shall have the following meanings:
(a) Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Executive in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Executive, (ii) committing a felony or an act of fraud against the Company or
its affiliates, and (iii) acts by the Executive which constitute gross
misconduct, are injurious to the Company, and which are demonstrably willful and
deliberate on the Executive's part after there has been delivered to the
Executive a written demand of cessation of such acts from the Company which
describes the basis for the Company's belief that the Executive engaged or
committed such acts.
(b) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the Company as
of the date hereof, or (B) are elected, or nominated for election, to the Board
of Directors of the Company with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but shall
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
-5-
<PAGE> 6
(iii) A merger or consolidation of the Company with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.
(c) Involuntary or Constructive Termination.
"Involuntary or Constructive Termination" shall mean (i) without the Executive's
express written consent, the assignment to the Executive of any duties or the
significant reduction of the Executive's duties, either of which is inconsistent
with the Executive's position with the Company and responsibilities in effect
immediately prior to such assignment, or the removal of the Executive from such
position and responsibilities; (ii) without the Executive's express written
consent, a substantial reduction, without good business reasons, of the
facilities and perquisites available to the Executive immediately prior to such
reduction; (iii) a reduction by the Company in the Base Compensation of the
Executive as in effect immediately prior to such reduction; (iv) a material
reduction by the Company in the kind or level of employee benefits to which the
Executive is entitled immediately prior to such reduction with the result that
the Executive's overall benefits package is significantly reduced; (v) without
the Executive's express written consent, any relocation of the Executive's job
or office more than 40 miles from the Executive's then current job or office;
(vi) any purported termination of the Executive by the Company which is not
effected for Disability or for Cause, or any purported termination for which the
grounds relied upon are not valid; or (vii) the failure of the Company to obtain
the assumption of this Agreement by any successors contemplated in Section 8
below.
(d) Disability. "Disability" shall mean that the
Executive has been unable to perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such inability,
at least 26 weeks after its commencement, 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 (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Executive's employment. In the event
that the Executive resumes the performance of substantially all of his duties
hereunder before the termination of his employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been revoked.
7. Successors.
(a) Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the same
-6-
<PAGE> 7
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement
and all rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.
8. Notice.
(a) General. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Secretary.
(b) Notice of Termination. Any termination by the Company
whether for Cause or without Cause or by the Executive as a result of an
Involuntary or Constructive Termination shall be communicated by a notice of
termination to the other party hereto given in accordance with Section 8 of this
Agreement. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated, and shall specify the termination date (which shall be not more than
15 days after the giving of such notice). The failure by the Executive to
include in the notice any fact or circumstance which contributes to a showing of
Involuntary or Constructive Termination shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Executive shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor shall any such
payment be reduced by any earnings that the Executive may receive from any other
source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Executive and by an authorized officer of
the Company (other than the Executive). No waiver by
-7-
<PAGE> 8
either party of any breach of, or of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Delaware.
(e) Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(f) Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by arbitration
in Santa Clara County, California in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Punitive damages shall not
be awarded.
(g) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (g) shall be
void.
(h) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(i) Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Executive.
(j) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
COMPANY: NOVADIGM, INC.
/s/ Albion J. Fitzgerald
By:______________________________________
Albion J. Fitzgerald
Chief Executive Officer
/s/ Wallace D. Ruiz
EXECUTIVE: _________________________________________
Wallace D. Ruiz
-9-
