<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 0-22466
FTP SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2906463
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
100 BRICKSTONE SQUARE, FIFTH FLOOR
ANDOVER, MASSACHUSETTS 01810
(Address of principal executive offices) (Zip Code)
(508) 685-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 33,619,096
- -------------------------------------- -------------------------------
Class Outstanding at November 8, 1996
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FTP SOFTWARE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at September 30, 1996
and December 31, 1995 (unaudited) 3
Consolidated Statements of Operations for the three and nine
months ended September 30, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature 26
</TABLE>
2
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FTP SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,210 $ 30,237
Short-term investments 24,108 36,211
Accounts receivable, net of allowance
for doubtful accounts of $1,800 for
1996 and $1,600 for 1995 12,882 30,787
Inventories 1,438 1,063
Prepaid expenses and other current assets 4,983 3,185
Refundable income taxes 15,332 11,686
Net assets of discontinued operations 6,295 1,333
-------- --------
Total current assets 79,248 114,502
Property and equipment, net 20,327 18,355
Purchased software, net 6,309 3,653
Investments 55,459 52,751
Other assets 1,106 368
-------- --------
Total assets $162,449 $189,629
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 11,218 9,614
Accrued employee compensation and benefits 3,529 4,484
Current portion of long-term obligations 188 811
Deferred revenue 9,004 9,091
-------- --------
Total current liabilities 23,939 24,000
Long-term obligations 73 821
-------- --------
Total liabilities 24,012 24,821
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 5,000,000 shares; none
issued and outstanding -- --
Common stock, $0.01 par value;
authorized 100,000,000 shares; issued
and outstanding 33,571,007 and 26,506,729
in 1996 and 1995, respectively 336 265
Additional paid-in capital 136,017 92,607
Retained earnings 1,330 72,130
Equity adjustments 754 (194)
-------- --------
Total stockholders' equity 162,449 164,808
Total liabilities and -------- --------
stockholders' equity $162,449 $189,629
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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FTP SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenue:
Product revenue $ 18,158 $30,983 $ 62,837 $89,899
Service revenue 4,116 3,480 12,051 9,306
-------- ------- -------- -------
Total revenue 22,274 34,463 74,888 99,205
-------- ------- -------- -------
Cost of revenue:
Product cost 1,903 1,657 4,704 5,129
Service cost 2,509 2,195 7,384 6,943
-------- ------- -------- -------
Total cost of revenue 4,412 3,852 12,088 12,072
-------- ------- -------- -------
Gross margin 17,862 30,611 62,800 87,133
-------- ------- -------- -------
Operating expenses:
Sales and marketing 10,836 9,520 33,007 24,706
Product development 44,558 6,374 57,238 15,444
General and administrative 5,310 3,032 14,479 8,785
-------- ------- -------- -------
Total operating expenses 60,704 18,926 104,724 48,935
-------- ------- -------- -------
Income (loss) from continuing
operations (42,842) 11,685 (41,924) 38,198
Investment income 1,265 1,418 3,450 3,714
-------- ------- -------- -------
Income (loss) from continuing
operations before provision
(benefit) for income taxes (41,577) 13,103 (38,474) 41,912
Provision (benefit) for income taxes 1,550 4,815 (1,473) 15,496
-------- ------- -------- -------
Net income (loss) from continuing
operations (43,127) 8,288 (37,001) 26,416
Discontinued operations:
Operating losses, net of income
tax benefit of $0, $2,050,
$2,480 and $2,610, respectively (1,324) (3,529) (29,039) (4,493)
Provision for dispositions (4,760) -- (4,760) --
-------- ------- -------- -------
Net income (loss) $(49,211) $ 4,759 $(70,800) $21,923
======== ======= ======== =======
Net income (loss) per share:
Continuing operations $(1.35) $ .30 $(1.29) $.93
Discontinued operations (.19) (.13) (1.18) (.16)
-------- ------- -------- -------
$(1.54) $.17 $(2.47) $.77
======== ======= ======= =======
Weighted average common and
common equivalent shares
outstanding 32,013 28,053 28,645 28,297
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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FTP SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $(37,001) $ 26,416
Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by continuing operations
Depreciation and amortization 6,329 4,154
Provision for doubtful accounts 200 200
Acquired in-process technology 37,852 --
Tax benefit of stock option activity -- 9,883
Changes in operating assets and liabilities net of effects
from acquisitions and divestitures:
Accounts receivable 20,388 (12,321)
Inventories (311) (614)
Prepaid expenses and other current assets (785) (490)
Refundable income taxes (5,557) (1,338)
Other assets (650) (169)
Accounts payable and accrued expenses (1,312) 1,545
Accrued employee compensation and benefits (2,460) 1,388
Deferred revenue (314) 2,040
------------ ----------
Net cash provided by continuing operations 16,379 30,694
Net cash used for discontinued operations (5,952) (3,487)
------------ ----------
Net cash provided by operating activities 10,427 27,207
------------ ----------
Cash flows from investing activities:
Capital expenditures (6,203) (6,939)
Maturities of investments 16,511 4,737
Acquisitions, net of cash acquired (3,776) --
Other investing activities, net 21 --
------------ ----------
Net cash provided by (used for) continuing operations 6,553 (2,202)
Net cash used for discontinued operations (32,809) (2,365)
------------ ----------
Net cash used for investing activities (26,256) (4,567)
------------ ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 1,402 6,268
Principal payments on long-term obligations (1,582) --
------------ ----------
Net cash (used for) provided by financing activities (180) 6,268
------------ ----------
Effect of exchange rate changes on cash (18) --
------------ ----------
Net (decrease) increase in cash and cash equivalents (16,027) 28,908
Cash and cash equivalents, beginning of period 30,237 10,896
------------ ----------
Cash and cash equivalents, end of period $ 14,210 $ 39,804
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM FINANCIAL DATA
The accompanying unaudited consolidated financial statements have been
prepared by FTP Software, Inc. ("FTP" or the "Company") in accordance with
generally accepted accounting principles. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting only of those of a normal recurring nature, necessary
for a fair presentation of the Company's financial position, results of
operations and cash flows at the dates and for the periods indicated. While the
Company believes that the disclosures presented are adequate to make the
information not misleading, these financial statements should be read in
conjunction with the audited consolidated financial statements and notes related
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
The results of the three- and nine-month periods ended September 30, 1996
are not necessarily indicative of the results to be expected for the full fiscal
year. The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS
During 1996, the Company acquired the following collaborative software
businesses: in March 1996, the Company acquired substantially all of the assets
of HyperDesk Corporation, including its GroupWorks/R/ product, for a net cash
purchase price of approximately $6.3 million; and in April 1996, the Company
acquired all of the outstanding stock of Campbell Services, Inc., the developer
of OnTime/R/, for a net cash purchase price of approximately $15.0 million
through the merger of a subsidiary of FTP into Campbell Services. In February
1996, the Company acquired the Mariner/TM/Internet software product line of
Networking Computing Devices, Inc. for a net cash purchase price of
approximately $7.4 million. All of these acquisitions were accounted for as
purchases and are now reflected in discontinued operations. See note 3.
On July 22, 1996, the Company acquired Firefox Communications Inc.
("Firefox"), a supplier of server-centric departmental and LAN-based IP
(Internet protocol) solutions and services, for a net purchase price of
approximately $61.0 million, through the merger of a wholly-owned subsidiary of
the Company into Firefox (the "Firefox Merger"). Pursuant to the Firefox
Merger, all of the outstanding shares of the common stock of Firefox were
converted into a total of approximately 6.4 million shares of the Company's
common stock ("Common Stock") valued at approximately $40.6 million and
approximately $9.1 million in cash. In addition, outstanding employee stock
options to purchase Firefox common stock were
6
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converted into options to purchase 359,216 shares of Common Stock valued at
approximately $1.5 million. The Company also incurred acquisition-related costs
of approximately $3.7 million and liabilities treated as assumed totaling
approximately $6.1 million which are included in the net purchase price. The
transaction was accounted for as a purchase. Based upon a valuation of the
assets acquired, approximately $2.6 million was allocated to completed
technology, which is included in purchased software and is being amortized over
its estimated useful life of three years; approximately $37.9 million was
allocated to in-process technology and charged to product development expense in
the three-month period ended September 30, 1996; and approximately $20.5 million
was allocated to the remaining assets of Firefox, primarily short-term
investments and accounts receivable. Results of operations include activity from
Firefox since the date of the acquisition.
The unaudited pro forma consolidated results of continuing operations would
have been as follows if the Firefox Merger had occurred on January 1, 1995 (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
---------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenue $22,496 $40,147 $83,193 $114,919
Net income (loss) (6,254) 8,801 (2,466) 27,432
Net income (loss) per share $ (.20) $ .25 $ (.09) $ .80
</TABLE>
These unaudited pro forma results are presented for informational purposes
only and include certain adjustments such as additional amortization expense as
a result of purchased software. They do not include the approximately $37.9
million charge for acquired in-process technology and do not purport to be
indicative of the Company's actual results of operations had the Firefox Merger
occurred on January 1, 1995, nor are they indicative of the Company's results of
operations for any future period. Anticipated efficiencies from the
consolidation of the Company and Firefox are not fully determinable and
therefore have been excluded from the amounts included in the pro forma summary
above.
The Company allocates the purchase price of acquired technologies to
completed technology and in-process technology based upon their respective fair
values. Completed technology that has reached technological feasibility is
valued using a risk adjusted cash flow model under which future cash flows are
discounted, taking into account risks related to existing and future markets and
assessments of the life expectancy of completed technology. In-process
technology that has not reached technological feasibility and that has no
alternative future use is valued by using the same method. Expected future cash
flows associated with in-process technology are discounted considering risks and
uncertainties related to the viability of and to potential changes in the future
target markets and to the completion of the products expected to be ultimately
marketed by the Company. Amounts charged to product development expense for in-
process technology are either not fully deductible in the same period or are
non-deductible for tax purposes.
7
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3. DISCONTINUED OPERATIONS AND RECLASSIFICATIONS
During September 1996, the Company announced its vision for the Virtual IP
("VIP") Network. The Company also announced a formal plan to spin off, through
the sale to third parties, within the next year, its collaborative lines of
business and discontinue selected product lines which were not specifically
related to the Company's continuing network connectivity business. These
operations are treated as discontinued operations in the accompanying financial
statements. As a result, the Company recorded a $4.8 million charge to write
down the related assets to estimated net realizable values.
The consolidated financial statements have been reclassified to report
separately in all periods presented the net assets and operating results of the
discontinued operations. Prior year operating results have been restated to
reflect continuing operations. Net assets of discontinued operations consist
primarily of purchased software and fixed assets less accounts payable and
accrued expenses. Summary operating results for the discontinued operations are
as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenue $1,937 $2,653 $ 6,458 $3,308
Gross margin 1,118 1,811 2,431 2,207
Operating loss 1,324 5,579 31,519 7,103
Net loss 6,084 3,529 33,799 4,493
</TABLE>
In addition, certain prior year amounts have been reclassified to conform
with the current year's presentation.
4. STOCK OPTION REPRICING
During the third quarter of 1996, the Company offered its employees (other
than executive officers) the opportunity to exchange each option to purchase
Common Stock granted during 1994, 1995 and 1996 for a new option covering 50% of
the number of shares of Common Stock covered by the original option, with a new
exercise price fixed at the date of exchange. During the option exchange offer
period, options to purchase 2,130,352 shares of Common Stock at exercise prices
ranging from $9.50 to $31.75 per share were exchanged for options to purchase
1,065,175 shares of Common Stock at exercise prices ranging from $7.25 to $9.063
per share.
5. LEGAL PROCEEDINGS
On March 14, 1996, a class action lawsuit was filed in the United States
District Court for the District of Massachusetts, naming FTP, certain of its
officers and two former officers as defendants. The lawsuit captioned Lawrence
--------
M. Greebel v. FTP Software, Inc. et al., Civil Action No. 96-10544, alleges that
- --------------------------------------
the defendants publicly issued false and misleading statements and omitted to
disclose material facts necessary to make such statements not false and
misleading, which the plaintiffs contend caused an artificial inflation in the
price of FTP's common stock. Specifically, the original complaint alleged that
the defendants knowingly concealed adverse facts and made false or misleading
forward and non-forward looking statements concerning the operating results and
financial condition of FTP, the effects of the
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Company's July 1995 corporate restructuring and changing competitive factors in
FTP's industry. The lawsuit, which is purportedly brought on behalf of a class
of purchasers of FTP's common stock during the period from July 14, 1995 to
January 3, 1996, alleges violations of Section 10(b) and Section 20(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5
thereunder and seeks relief in the form of unspecified compensatory damages,
costs and expenses and such other relief as the court deems proper and just.
Plaintiffs filed an amended complaint on August 12, 1996 adding allegations
concerning what plaintiffs claim were wrongful sales and accounting practices by
FTP during the class period, but asserting the same causes of action as the
original complaint. Plaintiffs filed a second amended complaint on September 12,
1996 which is identical in all respects to the first amended complaint except
that it adds additional plaintiffs and reflects the court's order concerning the
appointment of lead plaintiffs. On October 11, 1996, FTP filed a motion to
dismiss the second amended complaint on the grounds that the plaintiffs had not
met the pleading requirements of the Private Securities Reform Act of 1995. The
motion is scheduled to be heard by the court on January 7, 1997. FTP has
reviewed the allegations in the lawsuit, believes them to be without merit, and
intends to defend itself and its officers vigorously. In order to support an
adequate defense, FTP may be required to expend substantial sums for legal and
expert fees and costs. The cost of defending the litigation and the outcome of
the litigation are uncertain and cannot be estimated. If the lawsuit were
determined adversely to FTP, FTP could be required to pay a substantial
judgment, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
On February 23, 1996, a class action lawsuit, captioned Richard Zeid and
----------------
Siom Misrahi et al. v. John Kimberley, Frank M. Richardson, Mark A. Rowlinson
- -----------------------------------------------------------------------------
and Firefox Communications, Inc., Case No. C96 20136, was filed in the United
- --------------------------------
States District Court for the Northern District of California, San Francisco
Division (transferred to the San Jose Division) naming Firefox and certain of
its current and former officers and former directors as defendants. The
original complaint alleged that the defendants misrepresented or failed to
disclose material facts about Firefox's operations and financial results, which
the plaintiffs contended resulted in an artificial inflation of the price of
Firefox's common stock. The suit was purportedly brought on behalf of a class
of purchasers of Firefox's common stock during the period from August 3, 1995 to
January 2, 1996. The complaint alleged claims for violations of Sections 10(b)
and 20(a) of the Exchange Act and Rule 10b-5 thereunder and sought relief in the
form of unspecified compensatory damages, pre- and post-judgment interest,
attorneys and expert witness fees and other extraordinary, equitable and/or
injunctive relief as permitted by law, equity and the federal statutory
provisions under which the suit was brought. On June 5, 1996, the District
Court entered an order dismissing plaintiffs' complaint. Certain of plaintiffs'
claims that alleged that Firefox was responsible for false and misleading
analysts reports, Firefox statements and financial statements were dismissed
with leave to amend. In addition, certain of plaintiffs' claims that warnings
and disclosures in Firefox's Form 10-Qs were false and misleading were dismissed
with prejudice.
On July 19, 1996, plaintiffs filed an amended complaint. The amended
complaint alleges that defendants misrepresented or failed to disclose material
facts about Firefox's operations and financial results which the plaintiffs
contend resulted in an artificial inflation of the price of Firefox's common
stock. The amended complaint is purportedly brought on behalf of a class of
purchasers of Firefox's common stock during the period from July 20, 1995 to
January 2, 1996. The amended complaint also alleges claims for violations of
Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder and seeks
relief in the form of
9
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unspecified compensatory damages, pre- and post-judgment interest, attorneys and
expert witness fees and such extraordinary, equitable and/or injunctive relief
as if permitted by law, equity and the federal statutory provisions under which
the suit was brought. Specifically, the amended complaint alleges that
defendants knew allegedly material adverse non-public information about
Firefox's financial results and business conditions which allegedly was not
disclosed, that they improperly directed that certain sales and revenues be
recognized and failed to keep adequate reserves and participated in drafting,
reviewing and/or approving allegedly misleading statements, releases, analysts
reports and other public representations, including disclaimers and warnings of
and about Firefox. The amended complaint also alleges that John A. Kimberley, an
officer and director of Firefox, and Frank Richardson, a former officer and
director of Firefox, are liable as "controlling persons" of Firefox. On
September 6, 1996, Firefox filed a motion to dismiss the amended complaint on
the grounds that the plaintiffs had not met the pleading requirements of the
Private Securities Reform Act of 1995. The motion is scheduled to be heard by
the court on December 3, 1996.
Firefox has reviewed the allegations in the lawsuit, believes them to be
without merit and intends to defend itself and its officers and directors
vigorously. In order to support an adequate defense, Firefox may be required to
expend substantial sums for legal and expert fees and costs. The cost of
defending the litigation and the outcome of the litigation are uncertain and
cannot be estimated. If the lawsuit were determined adversely to Firefox,
Firefox could be required to pay a substantial judgment, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
6. INCOME TAXES
Due to the uncertainty as to when the deferred tax assets may be realized,
as of September 30, 1996 the Company has recorded a valuation allowance for all
tax assets in excess of amounts available to be recovered pursuant to tax loss
carrybacks.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW; RECENT DEVELOPMENTS
The following discussion and analysis provides information that management
of FTP Software, Inc. ("FTP" or the "Company") believes is relevant to an
assessment and understanding of FTP's consolidated results of operations and
financial condition for the three- and nine-month periods ended September 30,
1996. This discussion should be read in conjunction with FTP's unaudited
consolidated financial statements and the notes related thereto included
elsewhere herein.
FORWARD-LOOKING STATEMENTS IN THIS SECTION AND ELSEWHERE IN THIS REPORT ARE
MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED
IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN FOR A VARIETY OF REASONS.
THESE REASONS INCLUDE, BUT ARE NOT LIMITED TO, COMPETITION, TECHNOLOGICAL AND
OTHER MARKET CHANGES, INCREASED DEMANDS ON MANAGEMENT AS A RESULT OF RECENT
ACQUISITIONS, CHANGES IN DISTRIBUTOR TERMS OR PERFORMANCE, AND OTHER RISKS
OUTLINED BELOW AND IN APPENDIX A, "CAUTIONARY FACTORS RELEVANT TO FORWARD-
LOOKING STATEMENTS," TO THIS REPORT.
In late September 1996, the Company unveiled its vision for the
Virtual IP ("VIP") Network, a set of user-defined, standards-based software
solutions to deploy, manage and secure IP (Internet protocol) infrastructures.
The VIP Network is intended to enable companies to securely extend their
networks beyond traditional boundaries, intranets and the Internet to build
virtual workgroups or enable electronic commerce. The Company believes that the
VIP Network concept is an effective means both of combining FTP's client-based
networking software products and agent technology with the server-based
connectivity software products developed by Firefox Communications Inc.
("Firefox"), which was acquired by the Company in July 1996, and of addressing
opportunities in the continually changing networking software market. In
September 1996, the Company shipped its first two products for the VIP Network,
VIP OnNet32(R) v2.0 and the VIP Internet Gateway for NetWare, the Company's
first product incorporating Firefox's technology. VIP OnNet32 v2.0 is a robust
32-bit TCP/IP connectivity suite that provides end-users with a suite of
applications designed to reach and share information on corporate intranets and
the Internet and across legacy systems. The VIP Internet Gateway for NetWare
allows network managers to troubleshoot, manage and analyze users' access to a
company's intranet and Internet resources.
As part of its ongoing business, FTP continues to design, develop, market
and support networking and other software products that enable personal computer
users to find, access and use heterogeneous hardware, information and
applications resources across local area, enterprise-wide and global networks.
The Company's principal networking products, OnNet(R) and PC/TCP(R), which are
based upon the industry standard Transmission Control Protocol/Internet Protocol
("TCP/IP") data communications protocol suite, enable remote access, file and
resource sharing and other applications across a variety of operating systems,
computing platforms and network environments. To date, substantially all of
FTP's revenue has been attributable to sales of its OnNet and PC/TCP product
lines.
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Firefox, the Company's principal subsidiary, develops, markets and
supports server-based networking connectivity and communications software.
Firefox's products provide connectivity for local area networks ("LANs") running
Novell NetWare and allow work groups to access local and remote computing
resources, including the Internet, across different networking protocols and
client operating systems. Firefox's products are centrally configured on the
server and integrated with the network operating system ("NOS"), thereby taking
advantage of the management and security features already implemented in the NOS
and enhancing control, administration and security of the LAN. The Company
acquired Firefox on July 22, 1996 through the merger of a subsidiary of FTP into
Firefox, which continues to operate as a wholly-owned subsidiary of FTP.
Pursuant to the merger, all of the outstanding common stock of Firefox was
converted into a total of approximately 6.4 million shares of FTP's common stock
("Common Stock") and approximately $9.1 million in cash, and outstanding
employee options to purchase shares of the common stock of Firefox were
converted into options to purchase 359,216 shares of Common Stock.
In May 1996, as a result of significant changes in the networking
software industry and the increasingly rapid evolution of the Internet market
and in connection with its determination to effect certain cost-cutting
measures, FTP decided to reorganize its operations to better position itself to
address customer needs and to take advantage of the market potential for
intranet product suites incorporating both TCP/IP and Internet products. Such
cost-cutting measures included a reduction of approximately 10% in the number of
FTP's full-time employees, effected May 1, 1996.
In late 1995, FTP determined to explore then-existing opportunities in
the collaborative software market. As a result, in March 1996, FTP acquired
substantially all of the assets of HyperDesk Corporation, including its
GroupWorks product, for a net cash purchase price of approximately $6.3 million,
and in April 1996, FTP acquired Campbell Services, Inc., the developer of
OnTime, for a net cash purchase price of approximately $15.0 million. FTP also
acquired the Mariner Internet software product line of Network Computing
Devices, Inc. in February 1996 for a net cash purchase price of approximately
$7.4 million. As part of the announcement of its new strategic vision in
September 1996 and as a result of its determination to focus on the client-
server, agent, security and directory services products necessary to implement
that strategy, the Company announced a formal plan to spin off, through the sale
to third parties, its collaborative lines of business and to discontinue other
selected product lines, including those described above and the assets acquired
in early 1995 from Keyword Office Technologies Ltd. described under "Liquidity
and Capital Resources" below. Accordingly, these operations are treated as
discontinued operations in the accompanying financial statements, and the
Company has recorded a $4.8 million charge in the three- and nine-month periods
ended September 30, 1996 to write down the related assets to estimated net
realizable values.
Looking forward, FTP intends to continue to make substantial investments in
its business (including through internal and joint third party development
activities, royalty agreements and acquisitions) over the foreseeable future,
through the use of FTP's internal cash resources, the issuance of shares of its
common stock or other securities, or a combination thereof. There can be no
assurance, however, that the capital resources necessary in order to fund such
investments will be available or that, if available, such resources will be on
terms acceptable to FTP.
12
<PAGE>
RESULTS OF CONTINUING OPERATIONS
TOTAL REVENUE. Total revenue consists of product revenue and service
revenue. Product revenue includes revenue from product sales and royalties from
certain OEM customers. Service revenue includes revenue from maintenance,
consulting and training contracts and is recognized ratably over the length of
the contract periods.
Total revenue decreased from approximately $34.5 million for the three-
month period ended September 30, 1995 to approximately $22.3 million for the
same period of 1996. Product revenue decreased from approximately $31.0 million
for the three-month period ended September 30, 1995 to approximately $18.2
million for the same period of 1996. As a percentage of total revenue, product
revenue decreased from approximately 90% for the three-month period ended
September 30, 1995 to approximately 82% for the same period in 1996. Service
revenue increased from approximately $3.5 million for the three-month period
ended September 30, 1995 to approximately $4.1 million for the same period of
1996. As a percentage of total revenue, service revenue increased from
approximately 10% for the three-month period ended September 30, 1995 to
approximately 18% for the same period of 1996.
The Company's total revenue decreased from approximately $99.2 million
for the nine-month period ended September 30, 1995 to approximately $74.9
million for the same period of 1996. Product revenue decreased from
approximately $89.9 million (approximately 91% of total revenue) for the nine-
month period ended September 30, 1995 to approximately $62.8 million
(approximately 84% of total revenue) for the same period of 1996. Service
revenue increased from approximately $9.3 million (approximately 9% of total
revenue) for the nine-month period ended September 30, 1995 to approximately
$12.1 million (approximately 16% of total revenue) for the same period of 1996.
Product revenue decreased during the current year periods primarily as
a result of (i) an increase in the number of competitors and competing products
offered in the TCP/IP market, and (ii) longer product sales cycles, lower
average unit sales prices for FTP's products and, in the third quarter of 1996,
a decrease in unit sales, all of which FTP believes were attributable not only
to such increased competition but also to an increase in lower-priced or no-cost
products introduced by certain of FTP's competitors in the third and fourth
quarters of 1995 and a decrease in customer demand for DOS-based products. In
addition, the Company believes that a delay in the expected release date of
OnNet32 v2.0 resulted in the deferral of purchasing decisions by certain
customers, and that such deferral also contributed to the decrease in revenues
in the current quarter; however, the Company is unable to predict whether the
release of such product in September 1996 will result in an increase in product
revenue in subsequent periods. The dollar increases in service revenue from
the three- and nine-month periods ended September 30, 1995 to the same periods
in 1996 were primarily attributable to increased growth in FTP's installed
product base from which such revenues are obtained.
International sales consist of export sales, primarily to customers in
Europe, Asia Pacific and Canada. International sales of approximately $15.5
million and $9.5 million accounted for approximately 45% and 43% of the
Company's total revenue for the three-month periods ended September 30, 1995 and
1996, respectively. International sales of approximately $44.9 million and
$33.2 million accounted for approximately 45% and 44% of the Company's total
revenue for the nine-month periods ended September 30, 1995 and 1996,
respectively. The decreases from the three-month period ended September 30,
1995 to the same period of
13
<PAGE>
1996 and the nine-month period ended September 30, 1995 to the same
period of 1996 were primarily due to increased competition, longer sale cycles,
lower average unit sales prices and, in the third quarter of 1996, a decrease in
unit sales as described in the preceding paragraph.
Historically, FTP has priced, invoiced and collected international
sales primarily in United States dollars. Accordingly, currency fluctuations
have not had a material effect on FTP's income from operations. However,
Firefox prices, invoices and collects a substantial portion of its sales in
foreign currencies, primarily British pounds sterling, and FTP anticipates that
it will transact a greater number of sales in local currencies as its
distribution channels are combined with those of Firefox. Accordingly, the
Company anticipates that currency fluctuations may have an increased effect on
its results of operations and financial condition in the future.
As indicated above, FTP is facing increasing competition in the TCP/IP
market which has resulted in longer sales cycles and a decrease in average unit
sales prices for FTP's products. The slow-down in FTP's sales is also due, in
part, to technological changes in the market such as the decline in the use of
DOS-based computing systems, to the embedding of competing products into new
PCs, and to slower sales rates similar in effect to those experienced and
announced by hardware and other software manufacturers. Looking forward, FTP
anticipates that these trends will continue, and believes that the Company's
future is substantially dependent on the successful implementation of its new
corporate strategy described above under "Overview; Recent Developments." This
in turn will be dependent on the ability of the Company (i) to successfully
market the VIP Network concept, (ii) to enter into strategic alliances that will
enable the Company to both expand its distribution channels and develop
additional products to fully implement the VIP Network concept (through both the
incorporation of the Company's technologies in the products of third parties and
the incorporation of the technologies of third parties, possibly including
security and directory services technologies, in certain planned VIP Network
products) and (iii) to successfully develop and timely release the additional
VIP Network products necessary to fully implement the VIP Network concept. If
the Company is unsuccessful in any such regard, the Company believes that the
continuation of the trends described above will continue to have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, due to the encryption technology contained or expected
to be contained in certain of the Company's current and planned VIP Network
products, such products are and will be subject to U.S. export controls, and
there can be no assurance that such export controls will not limit the Company's
ability to distribute such products outside the United States or that
international customers will accept the products that the Company is allowed to
export under such controls, which could have a material adverse effect on the
Company's business, results of operations and financial condition. Even if the
Company is successful in implementing its new corporate strategy, there can be
no assurance that it will result in a material improvement in the Company's
business, results of operations or financial condition.
The Company believes that certain other factors have also contributed
to the decline in the Company's financial results in the current year.
Management of FTP believes that the rapid expansion of its sales and marketing
force from 220 persons at December 31, 1994 to 329 persons at December 31, 1995
to 375 persons at May 2, 1996, and the opening and expansion of several new
offices outside of the United States during 1995 and early 1996, resulted in
certain inefficiencies in its sales and marketing organizations. During the
fall of 1996, the Company hired a number of experienced management personnel to
reorganize the Company's sales and marketing organizations and eliminate such
inefficiencies. However, if the Company
14
<PAGE>
is unsuccessful in eliminating such inefficiencies, it will not be
able to take full advantage of the expansion of its sales and marketing
organizations, which may have a material adverse effect on its results of
operations. In addition, the acquisitions completed by the Company during 1996,
particularly the acquisition of Firefox, required the attention and dedication
of management and other resources, which caused a disruption of the business
activities of the Company and, in the case of the Firefox acquisition, Firefox,
as well as a loss of momentum in the business of Firefox. Finally, the Company
has experienced a loss of additional personnel since the May 1996 reorganization
described above under "Overview; Recent Developments" which the Company believes
is attributable to increased competition for qualified personnel in the
industry, the decline in the Company's financial results and the trading prices
of its Common Stock during 1996 and, to a lesser extent, the integration of
Firefox. FTP's ability to maintain or increase revenue will also be dependent
upon its ability to effectively respond to these factors.
See Appendix A for additional discussion of the factors described above and
other factors which may affect FTP's business, financial condition and results
of operations.
GROSS MARGIN. Product gross margin as a percentage of product revenue
decreased from approximately 95% for the three-month period ended September 30,
1995 to approximately 90% for the three-month period ended September 30, 1996,
and from approximately 94% for the nine-month period ended September 30, 1995 to
approximately 93% for the nine-month period ended September 30, 1996. The
product gross margin percentage decreases from 1995 to 1996 reflect increases in
costs, primarily those associated with the amortization of technologies licensed
or purchased in 1995 and 1996, on lower revenues during the current year
periods. Amortization expenses were approximately $0.9 million and $1.7 million
for the three- and nine-month periods ended September 30, 1996, respectively,
compared to approximately $0.5 million and $1.7 million, respectively, for the
same periods in 1995. As noted above under "-- Total Revenue," FTP believes
that average unit sales prices for and unit sales of its products may continue
to decrease as the markets for those products continue to become more
competitive, reducing gross margin on those products.
Service gross margin as a percentage of service revenue was approximately
37% and 39% for the three-month periods ended September 30, 1995 and 1996,
respectively, and approximately 25% and 39% for the nine-month periods ended
September 30, 1995 and 1996, respectively. These increases are primarily
attributable to a higher rate of increase in FTP's installed product base from
which such revenues are obtained compared to the rate of increase in the cost of
providing such services.
The gross margins reported above are not necessarily indicative of
gross margin for future periods, which may vary significantly depending on,
among other things, product mix, price competition, technological change, cost
changes and changes in product distribution channels.
SALES AND MARKETING. Sales and marketing expenses increased from
approximately $9.5 million for the three-month period ended September 30, 1995
to approximately $10.8 million for the same period in 1996. Such expenses as a
percentage of total revenue were approximately 28% and 49% for the three-month
periods ended September 30, 1995 and 1996, respectively. Sales and marketing
expenses increased from approximately $24.7 million for the nine-month period
ended September 30, 1995 to approximately $33.0 million for the same period in
1996. Such expenses as a percentage of total revenue were approximately 25% and
15
<PAGE>
44% for the nine-month periods ended September 30, 1995 and 1996, respectively.
The $1.3 million increase for the three-month period ended September 30, 1996
and the $8.3 million increase for the nine-month period ended September 30, 1996
were primarily the results of efforts to increase sales through the opening and
expansion of several international and domestic offices beginning in the first
quarter of 1995 (including the opening and expansion of offices in Europe in
1995 and the opening of offices in Japan and Singapore in late 1995 to early
1996), increasing the number of sales and marketing employees during the period
from January 1, 1995 through April 1996, increasing the levels of advertising,
trade show and international marketing activities, and higher sales and
marketing expenses incurred in the third quarter of 1996 relating to the
integration of Firefox. The percentage increases over these periods were due to
both the dollar increases in such expenses described above and the dollar
decreases in revenue over such periods described under "-- Total Revenue" above.
FTP expects to continue to incur significant expenses during the remainder
of 1996 relating to the implementation of its new corporate strategy, continued
domestic and international sales and marketing activities, the integration of
FTP's and Firefox's distribution channels and the reorganization of certain of
FTP's international offices. As a result of these factors, sales and marketing
expenses are expected to continue to increase both in dollars and as a
percentage of revenue in 1996.
PRODUCT DEVELOPMENT. Product development expenses increased from
approximately $6.4 million for the three-month period ended September 30, 1995
to approximately $44.6 million for the same period in 1996, representing
approximately 18% and 200% of total revenue for each period, respectively.
Product development expenses increased from approximately $15.4 million for the
nine-month period ended September 30, 1995 to approximately $57.2 million for
the same period in 1996, representing approximately 16% and 76% of total revenue
for each period, respectively.
The increase in product development expenses of approximately $38.2
million and $41.8 million for the three- and nine-month periods ended September
30, 1996, respectively, are primarily attributable to a charge of approximately
$37.9 million (approximately 170% and 51% of total revenue for the current year
three- and nine-month periods, respectively) for acquired in-process technology
related to the acquisition of Firefox. An increase in compensation expenses
related to an increase in personnel, as well as an increase in the use of
outside contractors in connection with new product releases, in the current year
three- and nine-month periods compared to the prior year periods also
contributed to the increase in product development expense.
Excluding the approximately $37.9 million charge for acquired in-process
technology in the current year three-month period, product development expenses
as a percentage of total revenue increased from approximately 18% for the three-
month period ended September 30, 1995 to approximately 30% for the same period
in 1996, and from approximately 16% for the nine-month period ended September
30, 1995 to approximately 26% for the same period in 1996. Such percentage
increases are primarily attributable to the decreases in total revenue and the
increases in personnel-related expenses and the use of outside contractors
described above in the current year periods compared to the prior year periods.
16
<PAGE>
FTP expects product development expenses to continue to increase in
the remainder of 1996 as the Company continues to develop products to support
the VIP Network strategy described above and as a result of the Firefox
acquisition.
The Company allocates the purchase price of acquired technologies to
completed technology and in-process technology based upon their respective fair
values. Completed technology that has reached technological feasibility is
valued using a risk adjusted cash flow model under which future cash flows are
discounted, taking into account risks related to existing and future markets and
assessments of the life expectancy of the completed technology. In-process
technology that has not reached technological feasibility and that has no
alternative future use is valued using the same method. Expected future cash
flows associated with in-process technology are discounted considering risks and
uncertainties related to the viability of and to the potential changes in future
target markets and to the completion of the products expected to ultimately be
marketed by the Company. Amounts charged to product development expense for in-
process technology are either not fully deductible in the same period or are
non-deductible for tax purposes.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased from approximately $3.0 million for the three-month period ended
September 30, 1995 to approximately $5.3 million for the same period in 1996,
representing approximately 9% and 24% of total revenue for such periods,
respectively. General and administrative expenses increased from approximately
$8.8 million for the nine-month period ended September 30, 1995 to approximately
$14.5 million for the same period in 1996, representing approximately 9% and 19%
of total revenue for such periods, respectively. The dollar increases over such
periods were primarily due to expenses relating to an increase in personnel
(including the hiring of certain senior executive officers) compared to the same
periods of 1995, costs incurred in connection with the defense of the legal
proceedings described under "Liquidity and Capital Resources" below and
increases in miscellaneous administrative costs. The percentage increases over
such periods were also due to such factors as well as to the decreases in
revenue over such periods described above under "-- Total Revenue."
INCOME (LOSS) FROM CONTINUING OPERATIONS. The Company had income from
continuing operations of approximately $11.7 million for the three-month period
ended September 30, 1995 compared to a loss from continuing operations of
approximately $(42.8) million for the same period in 1996, representing
approximately 34% and (192%) of total revenue for such periods, respectively.
The Company had income from continuing operations of approximately $38.2 million
for the nine-month period ended September 30, 1995 compared to a loss from
continuing operations of approximately $(41.9) million in the same period in
1996, representing approximately 39% and (56%) of total revenue for such
periods, respectively. These decreases were primarily due to the decreases in
total revenue described above under "-- Total Revenue," the charge for the
acquisition of in-process technology described above under "-- Product
Development," and the increases in other expenses described above.
Excluding the approximately $37.9 million charge for acquired in-process
technology in the three-month period ended September 30, 1996, loss from
continuing operations for the three- and nine-month periods ended September 30,
1996 was approximately $5.0 million (approximately (22%) of total revenue) and
approximately $4.1 million (approximately (5%) of total revenue), respectively.
17
<PAGE>
INVESTMENT INCOME. Investment income decreased from approximately
$1.4 million for the three-month period ended September 30, 1995 to
approximately $1.3 million for the same period in 1996, and from approximately
$3.7 million for nine-month period ended September 30, 1995 to approximately
$3.5 million for the same period in 1996. The decreases from 1995 to 1996 were
primarily attributable a reduction in the Company's investment portfolio
resulting from the investment of cash in the 1996 acquisitions described above
under "Overview; Recent Developments." The Company places net cash provided by
operating activities into high grade municipal bonds, U.S. government
treasury obligations, high grade corporate obligations and equity investments.
PROVISION FOR INCOME TAXES. The provision for income taxes was
approximately $4.8 million for the three-month period ended September 30, 1995
compared to approximately $1.6 million for the same period in 1996. The
effective tax rate decreased from approximately 37% for the three-month period
ended September 30, 1995 to approximately 4% for the same period in 1996. The
provision for income taxes was approximately $15.5 million for the nine-month
period ended September 30, 1995 compared to a benefit of approximately $1.5
million for the same period in 1996. The effective tax rate decreased from
approximately 37% for the nine-month period ended September 30, 1995 to
approximately 4% for the same period in 1996. Due to the uncertainty as to when
the deferred tax assets may be realized, the Company has recorded a valuation
allowance for all tax assets in excess of amounts available to be recovered
pursuant to tax loss carrybacks for the three- and nine-month periods ended
September 30, 1996.
DISCONTINUED OPERATIONS. As described above under "Overview; Recent
Developments," in September 1996 the Company announced a formal plan to spin
off, through the sale to third parties, its collaborative lines of business and
to discontinue other selected product lines. Accordingly, these operations are
treated as discontinued operations in the accompanying financial statements, and
the Company has recorded a $4.8 million charge in the three- and nine-month
periods ended September 30, 1996 to write down the related assets to estimated
net realizable values. As described in note 3 to the accompanying financial
statements, such financial statements have been reclassified to report
separately in all periods presented the net assets and operating results of the
discontinued operations, and prior year operating results have been restated to
reflect continuing operations. Net assets of discontinued operations consist
primarily of purchased software and fixed assets less accounts payable and
accrued expenses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, FTP had an aggregate of approximately $93.8
million in cash and cash equivalents, short-term investments and long-term
investments. Of this amount, approximately $14.2 million was invested primarily
in highly liquid investments with original maturities of three months or less,
approximately $24.1 million was invested in short-term investments consisting of
U.S. government obligations and commercial paper with maturities of less than
one year and approximately $55.5 million was invested in U.S. government
obligations, commercial paper and municipal obligations with maturities of
greater than one year and in equity investments.
Accounts receivable, net, totaled approximately $30.8 million at
December 31, 1995 and approximately $12.9 million at September 30, 1996. The
decrease in accounts receivable from
18
<PAGE>
December 31, 1995 to September 30, 1996 is primarily attributable to a decrease
in revenue in the first nine months of 1996 and to the payment in early 1996 of
a substantial portion of the accounts receivable outstanding at December 31,
1995.
In March 1995, FTP acquired substantially all of the assets of Keyword
Office Technologies Ltd. for a net cash purchase price of approximately $2.4
million. As noted above under "Overview; Recent Developments," in February 1996,
FTP acquired the Mariner product line of Network Computing Devices, Inc. for a
net cash purchase price of approximately $7.4 million; in March 1996, FTP
acquired substantially all of the assets of HyperDesk Corporation for a net cash
purchase price of approximately $6.3 million; and in April 1996, FTP acquired
all of the outstanding stock of Campbell Services by merger for a net cash
purchase price of approximately $15.0 million. In July 1996, FTP acquired
Firefox by merger pursuant to which all of the outstanding common stock of
Firefox was converted into a total of approximately 6.4 million shares of Common
Stock and approximately $9.1 million in cash. In connection with the Firefox
acquisition, the Company incurred approximately $3.7 million of acquisition-
related expenses (consisting primarily of investment advisory fees and legal and
accounting expenses).
FTP made capital expenditures of approximately $6.9 million and $6.2
million in the nine-month periods ended September 30, 1995 and 1996,
respectively. Capital expenditures are primarily the result of the purchase of
equipment, primarily relating to information systems.
To date, inflation has not had a material impact on the Company's
financial results.
Looking forward, FTP believes that its available cash, cash equivalents and
short-term investments and expected cash flow from operations will be sufficient
to fund FTP's operations at least through 1997. As noted above under "Overview;
Recent Developments," FTP intends to make substantial investments in the
products necessary to implement its new strategic vision. There can be no
assurance, however, that the capital resources necessary to continue to fund
such investments will be available or that, if available, such resources will be
on terms acceptable to FTP.
On March 14, 1996, a class action lawsuit was filed in the United
States District Court for the District of Massachusetts, naming FTP, certain of
its officers and two former officers as defendants. The lawsuit captioned
Lawrence M. Greebel v. FTP Software, Inc. et al., Civil Action No. 96-10544,
- -----------------------------------------------
alleges that the defendants publicly issued false and misleading statements and
omitted to disclose material facts necessary to make such statements not false
and misleading, which the plaintiffs contend caused an artificial inflation in
the price of FTP's common stock. Specifically, the original complaint alleged
that the defendants knowingly concealed adverse facts and made false or
misleading forward and non-forward looking statements concerning the operating
results and financial condition of FTP, the effects of the Company's July 1995
corporate restructuring and changing competitive factors in FTP's industry. The
lawsuit, which is purportedly brought on behalf of a class of purchasers of
FTP's common stock during the period from July 14, 1995 to January 3, 1996,
alleges violations of Section 10(b) and Section 20(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 thereunder and
seeks relief in the form of unspecified compensatory damages, costs and expenses
and such other relief as the court deems proper and just. Plaintiffs filed an
amended complaint on August 12, 1996 adding allegations concerning what
plaintiffs claim were wrongful sales and accounting practices by FTP during the
class period, but asserting the same causes of action as the original complaint.
Plaintiffs
19
<PAGE>
filed a second amended complaint on September 12, 1996 which is identical in all
respects to the first amended complaint except that it adds additional
plaintiffs and reflects the court's order concerning the appointment of lead
plaintiffs. On October 11, 1996, FTP filed a motion to dismiss the second
amended complaint on the grounds that the plaintiffs had not met the pleading
requirements of the Private Securities Reform Act of 1995. The motion is
scheduled to be heard by the court on January 7, 1997. FTP has reviewed the
allegations in the lawsuit, believes them to be without merit, and intends to
defend itself and its officers vigorously. In order to support an adequate
defense, FTP may be required to expend substantial sums for legal and expert
fees and costs. The cost of defending the litigation and the outcome of the
litigation are uncertain and cannot be estimated. If the lawsuit were determined
adversely to FTP, FTP could be required to pay a substantial judgment, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
On February 23, 1996, a class action lawsuit captioned Richard Zeid
-------------
and Siom Misrah et al. v. John Kimberley, Frank M. Richardson, Mark A. Rowlinson
- --------------------------------------------------------------------------------
and Firefox Communications, Inc., Case No. C96 20136, was filed in the United
- ---------------------------------
States District Court for the Northern District of California, San Francisco
Division, (transferred to the San Jose Division) naming Firefox and certain of
its current and former officers and former directors as defendants. On June 5,
1996, the District Court entered an order dismissing the complaint in its
entirety, with leave to amend. The original complaint alleged that the
defendants misrepresented or failed to disclose material facts about Firefox's
operations and financial results, which the plaintiffs contend resulted in an
artificial inflation in the price of Firefox's common stock. The suit was
purportedly brought on behalf of a class of purchasers of Firefox's common stock
during the period from August 3, 1995 to January 2, 1996. The complaint alleged
claims for violations of Sections 10(b) and 20(a) of the Exchange Act and Rule
10b-5 thereunder and sought relief in the form of unspecified compensatory
damages, pre- and post-judgment interest, attorneys' and expert witness fees and
such extraordinary, equitable and/or injunctive relief as permitted by law,
equity and the federal statutory provisions under which the suit was brought.
On June 5, 1996, the District Court entered an order dismissing plaintiffs'
complaint. Certain of plaintiffs' claims that alleged that Firefox was
responsible for false and misleading analysts reports, Firefox statements and
financial statements were dismissed with leave to amend. In addition, certain
of plaintiffs' claims that warnings and disclosures in Firefox's Form 10-Qs were
false and misleading were dismissed with prejudice.
On July 19, 1996, plaintiffs filed an amended complaint. The amended
complaint alleges that defendants misrepresented or failed to disclose material
facts about Firefox's operations and financial results which the plaintiffs
contend resulted in an artificial inflation of the price of Firefox's common
stock. The amended complaint is purportedly brought on behalf of a class of
purchasers of Firefox's common stock during the period from July 20, 1995 to
January 2, 1996. The amended complaint also alleges claims for violations of
Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder and seeks
relief in the form of unspecified compensatory damages, pre- and post-judgment
interest, attorneys and expert witness fees and such extraordinary, equitable
and/or injunctive relief as is permitted by law, equity and the federal
statutory provisions under which the suit was brought. Specifically, the
amended complaint alleges that defendants knew allegedly material adverse non-
public information about Firefox's financial results and business conditions
which allegedly was not disclosed, that they improperly directed that certain
sales and revenues be recognized and failed to keep adequate reserves and
participated in drafting, reviewing and/or approving allegedly misleading
statements, releases, analysts reports and other public representations,
20
<PAGE>
including disclaimers and warnings of and about Firefox. The amended complaint
also alleges that John A. Kimberley, an officer and director of Firefox, and
Frank Richardson, a former officer and director of Firefox, are liable as
"controlling persons" of Firefox. On September 6, 1996, Firefox filed a motion
to dismiss the amended complaint on the grounds that the plaintiffs had not met
the pleading requirements of the Private Securities Reform Act of 1995. The
motion is scheduled to be heard by the court on December 3, 1996.
Firefox has reviewed the allegations in the lawsuit, believes them to
be without merit, and intends to defend itself and its officers and directors
vigorously. In order to support an adequate defense, Firefox may be required to
expend substantial sums for legal and expert fees and costs. The cost of
defending the litigation and the outcome of the litigation are uncertain and
cannot be estimated. If the lawsuit were determined adversely to Firefox,
Firefox could be required to pay a substantial judgment, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
21
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
For a description of certain legal proceedings involving FTP and a
description of certain legal proceedings involving Firefox, see "Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part I of this Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On July 22, 1996, the Company held a special meeting of stockholders for
the purpose of considering a proposal to approve the issuance of the shares of
Common Stock issuable pursuant to the Agreement and Plan of Merger dated as of
May 21, 1996 among the Company, Firefox Acquisition Corp. and Firefox. The
affirmative vote of the holders of a majority of the 16,372,278 outstanding
shares of Common Stock entitled to vote and present at the meeting in person or
by proxy was required to approve such proposal, in accordance with the rules of
the National Association of Securities Dealers, Inc. (the "NASD"). Of such
shares, 9,789,312 were voted in favor of such proposal, 4,246,568 were voted
against such proposal, 99,770 abstained and 2,236,628 were not voted.
On August 22, 1996, the Company held a special meeting in lieu of 1996
annual meeting of stockholders for the purposes of: (i) electing Vinton G. Cerf,
Glenn C. Hazard and Louise A. Mathews as Class III Directors, to serve until the
1999 annual meeting of stockholders of the Company or until the qualification
and election of their successors; (ii) considering a proposal to approve an
amendment to the Company's Restated Articles of Organization, as amended, to
increase the number of authorized shares of Common Stock from 50 million to 100
million; and (iii) considering a proposal to approve the FTP Software, Inc. 1996
Executive Equity Incentive Plan. The results of the votes were as follows:
1. Election of Class III Directors:
<TABLE>
<CAPTION>
Nominee For Against Withheld Broker Non-Votes
- ------------- ---------- ------- --------- ----------------
<S> <C> <C> <C> <C>
Dr. Cerf 27,422,785 0 1,437,941 0
Mr. Hazard 27,419,271 0 1,441,455 0
Ms. Mathews 27,421,835 0 1,438,891 0
</TABLE>
The following persons continued as directors following the meeting: Class I
Directors -- David D. Clark and F. David Fowler; Class II Directors -- John H.
Keller, John A. Kimberley and David H. Zirkle.
2. Proposal to increase the number of authorized shares of Common Stock:
<TABLE>
<CAPTION>
For Against Abstained Broker Non-Votes
- ------------ --------- --------- ----------------
<S> <C> <C> <C>
26,407,170 2,247,933 134,697 70,926
</TABLE>
22
<PAGE>
The affirmative vote of the holders of a majority of the shares of Common Stock
outstanding as of the July 25, 1996 record date for the meeting (33,418,987
shares) was required to approve this proposal, in accordance with Massachusetts
law.
3. Proposal to approve the 1996 Executive Equity Incentive Plan:
<TABLE>
<CAPTION>
For Against Abstained Broker Non-Votes
- ------------ --------- --------- ----------------
<S> <C> <C> <C>
25,769,036 2,843,318 177,446 70,926
</TABLE>
The affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote and present at the meeting in person or by proxy
(28,860,726 shares) was required to approve this proposal, in accordance with
the rules of the NASD.
ITEM 5. OTHER INFORMATION.
Pursuant to an Amendment to Rights Agreement dated as of November 7, 1996
between the Company and State Street Bank and Trust Company, as Rights Agent,
the Company amended the Rights Agreement dated as of December 1, 1995 between
such parties to permit Kopp Investment Advisors, Inc. (but not any of its
transferees), subject to certain conditions, to own up to 6,722,400 shares of
the Company's Common Stock (slightly under 20% of the number of outstanding
shares of Common Stock) without triggering the exercisability of the Junior
Preferred Stock purchase rights established by the Rights Agreement.
On November 11, 1996, the Company announced that Glenn C. Hazard, President
of the Company, has also been elected as Chief Executive Officer of the Company.
David H. Zirkle, who had served as Chief Executive Officer of the Company since
January 1993, will continue to serve as Chairman of the Company until his
retirement, anticipated to occur in April 1997. Mr. Hazard joined the Company
as President and Chief Operating Officer in April 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS
EXHIBIT NO. TITLE
- ----------- -----
3.1 Restated Articles of Organization of the Company(1)
3.2 Certificate of Designation, Preferences and Rights of Junior
Preferred Stock of the Company(1)
3.3 Articles of Amendment to Restated Articles of Organization of
the Company*
3.4 Amended and Restated Bylaws of the Company(1)
4.1 Specimen common stock certificate(1)
4.2 Rights Agreement dated as of December 1, 1995 between the
Company and State Street Bank and Trust Company, as Rights Agent
(including form of Rights Certificate)(1)
23
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EXHIBIT NO. TITLE
- ----------- -----
4.3 Amendment to Rights Agreement dated as of November 7, 1996 between
the Company and State Street Bank and Trust Company, as Rights
Agent*
10.1 Indenture of Lease between the Company and North Andover Mills
Realty dated November 19, 1991(1)
10.2 Amendment No. 1 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of September 1, 1992(1)
10.3 Amendment No. 2 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of January 6, 1993(1)
10.4 Amendment No. 3 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of June 18, 1993(1)
10.5 Amendment No. 4 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of September 30, 1993(1)
10.6 Amendment No. 5 to Indenture of Lease between the Company and North
Andover Mills Realty Limited Partnership dated August 12, 1995(1)
10.7 Employment Agreement between the Company and David H. Zirkle dated
as of July 26, 1996*
10.8 Employment Agreement between the Company and David H. Zirkle dated
as of March 1, 1993(1)
10.9 Amendment No. 1 to Employment Agreement between the Company and
David H. Zirkle dated as of June 14, 1993(1)
10.10 Amendment No. 2 to Employment Agreement between the Company and
David H. Zirkle dated as of August 15, 1994(1)
10.11 Amendment No. 3 to Employment Agreement between the Company and
David H. Zirkle dated as of February 28, 1995(1)
10.12 Employment Agreement between the Company and Glenn C. Hazard dated
as of July 29, 1996*
10.13 Employment Agreement between the Company and Susan L. Bostrom dated
as of July 23, 1996*
10.14 Employment Agreement between the Company and Douglas F. Flood dated
as of July 23, 1996*
10.15 Employment Agreement between the Company and John H. Keller dated
as of July 23, 1996*
10.16 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox Merger*
10.17 Employment Agreement between the Company and Peter R. Simkin dated
as of the "Effective Date" of the Firefox Merger, together with
Amendment No. 1 thereto dated August 24, 1996*
24
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EXHIBIT NO. TITLE
- ----------- -----
10.18 Employment Agreement between the Company and John J. Warnock, Jr.,
dated as of July 31, 1996*
10.19 FTP Software, Inc. Stock Option Plan(1)
10.20 Composite FTP Software, Inc. 1993 Non-Employee Directors' Stock
Option Plan incorporating Amendment No. 1 effective as of June 2,
1995 and Amendment No. 2 effective as of August 22, 1996*
10.21 FTP Software, Inc. 1996 Executive Equity Incentive Plan*
10.22 FTP Software, Inc. 1993 Executive Bonus Plan(1)
10.23 FTP Software, Inc. 1994 Executive Compensation Plan(1)
10.24 FTP Software, Inc. 1995 Executive Compensation Plan(1)
10.25 FTP Software, Inc. 1995 V-P Sales Plan(1)
10.26 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.27 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of February 10,
1994(1)
10.28 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7,
1995(1)
10.29 Amended and Restated Agreement and Plan of Merger by and among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc.
dated as of May 21, 1996(2)
11 Weighted Shares Used in Computation of Earnings Per Share*
27 Financial Data Schedule*
99 Cautionary Statements Relevant to Forward-Looking Statements(3)
_____________________
*Filed herewith
(1) Included with, and incorporated herein by reference to, the Company's
Registration Statement on Form S-4 (No. 333-06917) filed with the
Securities and Exchange Commission (the "Commission") on June 26, 1996.
(2) Included as Appendix A to, and incorporated herein by reference to, the
Company's Joint Proxy Statement/Prospectus for its Special Meeting of
Stockholders filed with the Commission on July 1, 1996.
(3) Included as Appendix A to, and incorporated herein by reference to, the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
25
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FTP SOFTWARE, INC.
Date: November 14, 1996 By:/s/ John J. Warnock, Jr.
------------------------
John J. Warnock, Jr.
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
26
<PAGE>
APPENDIX A
CAUTIONARY FACTORS RELEVANT TO FORWARD-LOOKING STATEMENTS
FROM TIME TO TIME MANAGEMENT OF FTP SOFTWARE, INC. ("FTP" OR THE "COMPANY")
HAS MADE, AND MAY IN THE FUTURE MAKE, FORWARD-LOOKING STATEMENTS, BASED ON
MANAGEMENT'S THEN-CURRENT EXPECTATIONS, INCLUDING STATEMENTS MADE IN SECURITIES
AND EXCHANGE COMMISSION FILINGS, IN PRESS RELEASES AND ORAL STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. ALL FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS FOR A VARIETY
OF REASONS. THESE REASONS INCLUDE, BUT ARE NOT LIMITED TO, COMPETITION,
TECHNOLOGICAL AND OTHER MARKET CHANGES, INCREASED DEMANDS ON MANAGEMENT AS A
RESULT OF RECENT ACQUISITIONS, AND OTHER FACTORS OUTLINED BELOW AND IN "ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" OF THE COMPANY'S REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30, 1996 (THE "FORM 10-Q") TO WHICH THIS APPENDIX IS ATTACHED.
As used herein, the term the "Company" is generally deemed to refer to FTP
and its subsidiaries, including Firefox Communications Inc. ("Firefox"), which
the Company acquired on July 22, 1996 through a merger of a subsidiary of the
Company with Firefox.
Competition. As described in Item 2 of the Form 10-Q, in September 1996 the
Company announced its vision for the Virtual IP ("VIP") Network, a set of user-
defined, standards-based software solutions to deploy, manage and secure IP
(Internet protocol) infrastructures. The Company believes that none of its
competitors presently has a set of software solutions designed to provide the
features intended to be provided by the VIP Network. However, the Company
believes that the major U.S. computer and communications systems vendors,
including International Business Machines Corporation ("IBM"), Microsoft
Corporation ("Microsoft"), Novell, Inc. ("Novell") and Sun Microsystems, Inc.
("Sun"), could design and implement their own versions of the VIP Network. Such
vendors have substantially greater financial, technical, sales, marketing and
other resources than the Company, as well as greater name recognition and a
larger customer base, and the implementation by such vendors of similar products
could have a material adverse effect on the Company's business, results of
operations and financial condition.
The networking software industry is highly competitive, and is
characterized by evolving industry standards, frequent introduction of new
products and product enhancements, and continuous improvement in product
reliability, compatibility, memory use and performance. The Company's
networking software products compete with major computer and communications
systems vendors, again including IBM, Microsoft, Novell and Sun, as well as
smaller networking software companies, such as NetManage, Inc. ("NetManage").
Some of the Company's competitors have substantially greater financial,
technical, sales, marketing and other resources than the Company, as well as
greater name recognition and a larger customer base. In addition, the Company's
core product lines are based upon the Transmission Control Protocol/Internet
Protocol ("TCP/IP"), an open non-proprietary data communications protocol suite.
Several of the Company's competitors have developed proprietary networking
applications and certain of such vendors, including Microsoft, provide a TCP/IP
protocol suite in
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their products at little or no additional cost. The introduction of such
protocol suites has lengthened the sales cycles of, and has resulted in a
decrease in average unit sales prices for and, in the third quarter of 1996, a
decrease in unit sales of, certain of the Company's products and may continue to
have this effect, which has materially adversely affected the Company's results
of operations in the first three quarters of 1996 and may continue to have this
effect in the remainder of 1996 and beyond. The Company anticipates that other
companies may also enter the market with their own implementations of TCP/IP.
The Company is also facing competition from makers of terminal emulation
software, such as Attachmate Corporation ("Attachmate") and Wall Data, Inc.
("Wall Data"). In addition, existing competitors could devote additional
resources to the development of TCP/IP or expand their existing TCP/IP product
lines. Increased competition from existing or new products could adversely
affect demand for the Company's products and has led, and could continue to
lead, to increased price competition, longer sales cycles and other concessions,
adversely affecting the Company's gross margins and operating results.
The market for Internet-based software and services is new, intensely
competitive, rapidly evolving and subject to rapid technological change. The
Company expects competition in this market to persist, intensify and increase in
the future. Some of the Company's current and potential competitors have longer
operating histories, greater name recognition, larger installed customer bases
and significantly greater financial, technical and marketing resources than does
the Company. Such competition has had a material adverse effect on the
Company's business, operating results and financial condition in 1996. The
Company's current and potential competitors include Microsoft, browser software
vendors including Netscape Communications Corporation ("Netscape"), Web server
software and service vendors, PC and UNIX software vendors and other vendors,
including Apple Computer, Inc., Sun, Hewlett-Packard Co. ("Hewlett-Packard"),
IBM, Digital Equipment Corp. ("Digital"), The Santa Cruz Operation, Inc. and
Silicon Graphics, Inc. Certain operating system companies, such as Microsoft,
have incorporated Web client functionality into their software products and
offer this functionality at little or no additional cost to customers. If client
products incorporated into operating systems by such operating system vendors
gain market acceptance, these organizations may be better positioned than the
Company to sell server and applications software products. In addition, software
companies which have server products in other product categories may choose in
the future to enhance the functionality of existing products or develop new
competitive products. Further, the Company's current products are designed
around certain standards, and industry acceptance of competing standards could
decrease the demand for the Company's products. For example, Microsoft and IBM
are each proposing an alternative security standard, and widespread adoption of
either standard could have a material adverse effect on the Company's business,
financial condition and results of operations.
There can be no assurance that the Company will be able to compete
successfully against current or future competitors. Competitive pressures faced
by the Company have materially adversely affected its business, financial
condition and results of operations in the first three quarters of 1996 and may
continue to have such an effect during the remainder of 1996 and beyond.
Because NOV*IX and other Firefox products have been developed for LANs
running Novell's NetWare LAN operating system, sales of such products (and, as a
result, the business, financial condition and results of operations of the
Company) could be materially adversely affected by market developments adverse
to Novell or NetWare.
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Rapid Technological and Other Market Changes and Dependence on New
Products. The market for agent and networking software products is subject to
rapid changes in technology and customer preferences, such as the recent decline
in the use of DOS-based computing systems and the embedding of competing
products into new PCs. The Company's growth and future financial performance
will depend upon its ability to successfully market its new strategic VIP
Network concept and to develop and introduce new products and enhancements of
existing products that accommodate the latest technological advances and
customer requirements, and also on its ability to increase unit volume sales of
its connectivity products and to generate significant product revenues from its
new VIP Network products and products currently under development. Any failure
to increase revenues from connectivity products or to generate significant
revenues from such other products could have a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the VIP Network, new products or product enhancements will be
developed or marketed successfully by the Company on a timely basis or at all,
that the VIP Network and any new product or product enhancements will achieve
market acceptance, that other software vendors will not develop and market
products which are superior to the Company's products or that such other
products will not achieve greater market acceptance. In addition, the ability
of the Company to develop and market the VIP Network and new products and
product enhancements is dependent upon its ability to enter into certain
strategic alliances as described below under "Strategic Alliances" and to retain
qualified employees. Any failure by the Company to anticipate or respond
adequately to changes in technology and customer preferences, to develop and
introduce new products or product enhancements in a timely fashion, or to retain
qualified employees, could have a material adverse effect on its business,
financial condition and results of operations.
Because certain of the Company's products incorporate software and other
technologies developed and maintained by third parties, the Company is to a
certain extent dependent upon such third parties' ability to enhance their
current products, to develop new products on a timely and cost-effective basis
that will meet changing customer needs, and to respond to emerging industry
standards and other technological changes. There can be no assurance that the
Company would be able to replace the functionality provided by the third party
technologies currently offered in conjunction with the Company's products if
such technologies become unavailable to the Company or obsolete or incompatible
with future versions of the Company's products or market standards. The absence
of or any significant delay in the replacement of that functionality could have
a material adverse effect on the Company's business, financial condition or
results of operations.
Software products as complex as those offered by the Company may contain
undetected errors or failures when first introduced or as new versions are
released. There can be no assurance that, despite testing by the Company and
current and potential customers, errors will not be found in new products and
product enhancements after commencement of commercial shipments, resulting in
loss of or delay in market acceptance. Such loss or delay could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Declining Average Selling Prices. Until 1995, the market for the Company's
products was not characterized by significant price competition; however, as
noted above, the Company is facing increasing pricing pressures from
competitors. These pressures are likely to continue
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<PAGE>
to increase, have led to a decrease in average unit sales prices for certain of
the Company's products, could continue to have this effect on average unit sales
prices for the Company's products, and have had and could continue to have a
material adverse effect on the Company's results of operations and financial
condition.
Reliance on Strategic Alliances. In addition to internal development, the
Company expects to implement its VIP Network strategy described under Item 2
of the Form 10-Q in part through strategic alliances with industry partners
that have developed products and technologies that are complementary to those of
the Company (both for the purpose of incorporating the Company's technologies in
the products of third parties and the incorporation of the technologies of third
parties, possibly including security and directory services technologies, in
certain planned Company products) as well as strategic alliances with industry
partners that have developed complementary distribution channels. This strategy
is an important component of the Company's ability to achieve its goal of
providing to its customers, through the VIP Network, a set of user-defined,
standards-based software solutions to deploy, manage and secure IP
infrastructures, enabling companies to securely extend their networks beyond
traditional boundaries, intranets and the Internet to build virtual workgroups
or enable electronic commerce. While the Company is searching for strategic
alliance opportunities, there can be no assurance that it will be successful in
identifying or developing such alliances or that such alliances will achieve
their intended purposes.
While the Company does not presently intend to acquire additional
businesses or companies, the Company continues to evaluate potential
acquisitions and may pursue acquisition candidates if it determines that an
acquisition would further its corporate strategy as described above.
Acquisitions involve a number of special risks and factors, including, among
other things, the diversion of management's attention, the assimilation of the
operations and personnel of the acquired company or business, the incorporation
of acquired products into existing product lines, adverse short-term effects on
reported operating results, the amortization of acquired intangible assets, the
loss of key employees of the acquired company or business and the difficulty of
presenting a unified corporate image. No assurance can be given that any
acquisition by the Company will or will not occur, that if an acquisition does
occur that it will not materially and adversely affect the Company or that any
such acquisition will be successful in enhancing its business. If the
operations of an acquired company or business do not meet expectations, the
Company may be required to restructure the acquired business or write off the
value of some or all of the assets of the acquired business.
Changes in Personnel. The Company experienced rapid growth during 1995 and
early 1996, from approximately 474 employees at January 1, 1995 to approximately
880 employees at April 30, 1996, which placed a significant demand on the
Company's management and other resources. Included in such increase were key
members of management as well as approximately 150 employees hired in connection
with business acquisitions. In early May 1996, in connection with a
reorganization of the Company's operations, the Company decided to effect
certain cost-cutting measures, including a reduction of approximately 10% in the
number of the Company's full-time employees. Since the May reorganization, the
number of the Company's employees has decreased further, which the Company
believes is primarily attributable to increased competition for qualified
personnel in the market, to the decline in the Company's operating results and
the trading prices of its Common Stock during 1996 and, to a lesser extent, the
integration of Firefox. In connection with the Firefox acquisition, the number
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of the Company's employees increased by approximately 124 persons. At September
30, 1996, the Company employed approximately 700 persons in its continuing
operations.
Additionally, management of FTP believes that the rapid expansion of its
sales and marketing force during the same period, from approximately 220 persons
at December 31, 1994 to approximately 330 persons at December 31, 1995 to
approximately 375 persons at May 2, 1996, and the opening and expansion of
several new offices outside of the United States during 1995 and early 1996,
resulted in certain inefficiencies in its sales and marketing organizations.
During the fall of 1996, the Company hired a number of experienced management
personnel to reorganize the Company's sales and marketing organizations and
eliminate such inefficiencies. However, if the Company is unsuccessful in
eliminating such inefficiencies, it will not be able to take full advantage of
the expansion of its sales and marketing organizations, which may have a
material adverse effect on its results of operations.
Competition for qualified personnel in the software industry is intense and
there can be no assurance that the Company will be able to retain a sufficient
number of qualified employees. The success of the Company will depend to a
significant degree upon its ability to retain qualified personnel and the
continued contributions of its key management, marketing, product development
and operational personnel. It may become increasingly difficult for the Company
to hire, train and assimilate new employees. If the Company is unable to
recruit or retain key technical, sales and other personnel, the Company's
business, financial condition and results of operations could be materially
adversely affected.
Integration of Firefox. The successful combination of companies in the
rapidly changing high technology industry requires coordination of sales and
marketing and research and development efforts and may be more difficult to
accomplish than in some other industries. While the Company believes that the
integration of Firefox is substantially complete, the Company and Firefox are in
the process of integrating their distribution channels. Firefox has relied
significantly on its independent distributors, systems integrators and value-
added resellers for certain elements of the marketing and distribution of its
products. There can be no assurance that any of Firefox's current distributors,
systems integrators or value-added resellers will be retained. Any changes in
distribution channels may adversely affect sales of the Firefox product line and
consequently may adversely affect the Company's business, financial condition
and results of operations, at least in the near term.
Potential Fluctuations in Operating Results. The Company's operating
results have in the past and may in the future fluctuate from period to period
as a result of a variety of factors, including, among other things: the
purchasing patterns of its customers; the lengthening of sales cycles; the mix
of products sold; customer order deferrals in anticipation of new products or
product enhancements; market acceptance and timing of the introductions of new
products and product enhancements by the Company and its competitors; variations
in sales by product and distribution channel; changes in resellers' inventory
practices; the exercise of stock rotation or inventory price protection
practices by distributors; the accuracy of resellers' forecasts of customer
demands; fluctuations in domestic and foreign economic conditions; competitive
pricing pressures; and the Company's sales compensation programs, which are
based on both quarterly and annual sales levels. In addition, substantially all
of the Company's product revenue and profit in each quarter result from orders
received in that quarter, and an increasingly large portion of orders are
received during the last month of such quarter. If revenue does not meet
expectations in any given quarter, operating results may be materially
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adversely affected. There can be no assurance that the Company will not
experience significant fluctuations in operating results in the future.
Quarterly sales and operating results generally depend on the volume and timing
of and ability to fulfill orders received within the quarter, which are
difficult to forecast. The Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall of demand for the Company's products and services in
relation to the Company's expectations would have an immediate adverse impact on
the Company's business, financial condition and results of operations. To the
extent that expenses precede or are not subsequently followed by increased
revenue, the Company's business, financial condition and results of operations
will be materially adversely affected. Based on the foregoing, the Company
believes that period to period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an indicator of future
performance.
International Sales. Sales outside the United States accounted for
approximately 44% and 46% of the Company's total revenues in 1994 and 1995,
respectively. Sales in the United Kingdom accounted for approximately 40% and
39% of Firefox's net revenues in 1994 and 1995, respectively. The Company
expects that sales outside the United States will continue to account for a
substantial portion of revenue for the foreseeable future. Growth in
international sales is expected to be a significant factor in the future success
of the Company. The Company's international sales have decreased in 1996,
primarily as a result of increased competition, longer sales cycles, lower
average unit sales prices and, in the third quarter of 1996, decreased unit
sales as described above. There can be no assurance that the Company will be
able to increase international sales of its products or that its international
distribution channels will be able to service and support its products
adequately.
Due to the encryption technology contained or to be contained in certain of
the Company's current and planned VIP Network products, such products are and
will be subject to U.S. export controls, and there can be no assurance that such
export controls will not limit the Company's ability to distribute such products
outside the United States or that international customers will accept the
products that the Company is allowed to export under such controls, which could
have a material adverse effect on the Company's business, results of operations
and financial condition. See "Government Regulation and Legal Uncertainties"
below.
There are certain general risks inherent in conducting international
business, including exposure to currency exchange rate fluctuations, changes in
markets caused by various political, social and economic factors, unexpected
changes in regulatory requirements, tariffs and other trade barriers, costs and
risks of localizing products for foreign countries, longer payment terms,
potentially adverse tax consequences, repatriation of earnings, the burdens of
complying with a wide variety of foreign laws and the difficulties of managing
international operations. In addition, revenue of the Company earned in various
countries where the Company does business may be subject to taxation by more
than one jurisdiction, thereby adversely affecting the Company's earnings.
There can be no assurance that such factors will not have a material adverse
effect on the revenue from the Company's future international sales and,
consequently, the Company's business, financial condition and results of
operations.
An increase in the value of the U.S. dollar relative to foreign currencies
would make the Company's products more expensive and therefore potentially less
competitive in those markets. While the Company has historically priced,
invoiced and collected international sales primarily in United States dollars,
Firefox prices, invoices and collects a substantial portion of its
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sales in foreign currencies, primarily British pounds sterling, and FTP
anticipates that it will transact a greater number of sales in local currencies
as its distribution channels are combined with those of Firefox. Accordingly,
the Company anticipates that fluctuations in currency exchange rates could in
the future have an adverse effect on its results of operations and financial
condition.
Because substantially all of the Company's international sales are
indirect, any material increase in the Company's international sales as a
percentage of total revenue may have an adverse effect on its gross margins due
to the lower per unit revenue realized by the Company on sales through indirect
channels.
Proprietary Rights. The Company considers its implementations of the
TCP/IP protocol, its OnNet(R) Kernel software and PC/TCP(R) Kernel software, to
be proprietary and relies primarily on a combination of copyrights, trademarks,
trade secret law and contracts to protect such proprietary implementations.
However, the basic TCP/IP protocols are non-proprietary and other parties have
developed their own versions. See "Competition" above.
The Company generally enters into confidentiality and/or license agreements
with its consultants, distributors, customers and potential customers and limits
access to and distribution of its source code and other proprietary information.
Although the Company currently has no issued patents, the number of patents
granted on software inventions is increasing. Consequently, there is a growing
risk of third parties asserting patent claims against the Company. In the
future, the Company may receive communications from third parties asserting that
the Company's products infringe, or may infringe, the patents or other
proprietary rights of such third parties, or seeking indemnification against
such infringement, or asserting that the Company must obtain a license from such
third parties. Such communications, and any resulting litigation, could result
in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations. If any claims or actions were to be asserted against the Company and
the Company were required to seek a license of a third party's intellectual
property, there can be no assurance that the Company would be able to acquire
such a license on reasonable terms or at all, and no prediction can be made
about the effect that such license might have on the Company's business,
financial condition or results of operations. Should litigation with respect to
any such claim commence, such litigation could be extremely expensive and time
consuming and could materially adversely affect the Company's business,
financial condition and results of operations regardless of the outcome of the
litigation.
Marketing and Distribution Risks. As part of its sales and marketing
strategies, the Company intends to continue to exert significant sales and
marketing efforts. There can be no assurance that these efforts will be
successful. For example, there can be no assurance that the Company will be
able to attract or retain qualified direct sales personnel, that such efforts
will result in increased sales of the Company's products, or that such efforts
will enable the Company to compete successfully against the larger and better
funded sales and marketing organizations of some of its competitors.
The Company relies significantly on its independent distributors, systems
integrators and value-added resellers for certain elements of the marketing and
distribution of its products. The agreements in place with these organizations
are generally non-exclusive. These organizations are not within the control of
the Company, may represent other product lines in
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addition to those of the Company and are not obligated to purchase products from
the Company. There can be no assurance that such organizations will give a high
priority to the marketing of the Company's products, and such organizations may
give a higher priority to other products, which may include the products of the
Company's competitors. Actions of this nature by such organizations could result
in a lower sales effort applied to the Company's products and a consequent
reduction in the Company's operating results. The Company's results of
operations can also be materially adversely affected by changes in the inventory
strategies of its resellers, which can occur rapidly and in many cases may not
be related to end-user demand.
The Company may grant its distributors limited rights to exchange unsold
products for other products and provide inventory price protection in the event
of price reductions by the Company. While the Company provides allowances for
projected returns and price protection in certain instances, there can be no
assurance that allowances will be sufficient to offset product returns and price
protection in the future. Substantial returns of products or a decrease in the
price of the Company's products could have a material adverse effect on the
Company's business, financial condition and results of operations.
Government Regulation and Legal Uncertainties. The Company is not currently
subject to direct regulation by any government agency, other than regulations
applicable to business generally, and (with the exception of regulations
controlling the export and import of encryption technology referred to below)
there are currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use of
the Internet, it is possible that various laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing and
characteristics and quality of products and services. For example, the
relatively new Communications Decency Act prohibits distribution of obscene,
lascivious or indecent communications on the Internet. The adoption of any such
laws or regulations may decrease the growth of the Internet, which could in turn
decrease the demand for certain of the Company's products and increase the
Company's cost of doing business or otherwise have an adverse effect on the
Company's business, financial condition or results of operations. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, libel and personal privacy is uncertain. Due to the encryption
technology contained in certain of the Company's products, such products are
subject to U.S. export controls. There can be no assurance that such export
controls, either in their current form or as may be subsequently enacted, will
not limit the Company's ability to distribute products outside of the United
States or electronically or that international customers will accept the
products that the Company is allowed to export within the limits of those
controls. While the Company takes precautions against unlawful exportation, the
global nature of the Internet makes it virtually impossible to effectively
control the distribution of the Company's products. In addition, federal or
state legislation or regulation may further limit levels of encryption or
authentication technology. Any such export restrictions, new legislation or
regulation or unlawful exportation could have a material adverse effect on the
Company's business, financial condition and results of operations.
Legal Proceedings Against FTP and Firefox. See Item 2 of the Form 10-Q for
a description of certain legal proceedings against FTP and Firefox which could
materially adversely affect such companies' future business, operations and
financial condition.
A-8
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. TITLE
----------- -----
3.1 Restated Articles of Organization of the Company(1)
3.2 Certificate of Designation, Preferences and Rights of
Junior Preferred Stock of the Company(1)
3.3 Articles of Amendment to Restated Articles of Organization of the
Company*
3.4 Amended and Restated Bylaws of the Company(1)
4.1 Specimen common stock certificate(1)
4.2 Rights Agreement dated as of December 1, 1995 between the
Company and State Street Bank and Trust Company, as Rights Agent
(including form of Rights Certificate)(1)
4.3 Amendment to Rights Agreement dated as of November 7, 1996
between the Company and State Street Bank and Trust Company, as
Rights Agent*
10.1 Indenture of Lease between the Company and North Andover Mills
Realty dated November 19, 1991(1)
10.2 Amendment No. 1 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of September 1, 1992(1)
10.3 Amendment No. 2 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of January 6, 1993(1)
10.4 Amendment No. 3 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of June 18, 1993(1)
10.5 Amendment No. 4 to Indenture of Lease between the Company and North
Andover Mills Realty dated as of September 30, 1993(1)
10.6 Amendment No. 5 to Indenture of Lease between the Company and North
Andover Mills Realty Limited Partnership dated August 12, 1995(1)
10.7 Employment Agreement between the Company and David H. Zirkle dated as
of July 26, 1996*
10.8 Employment Agreement between the Company and David H. Zirkle dated as
of March 1, 1993(1)
10.9 Amendment No. 1 to Employment Agreement between the Company and David
H. Zirkle dated as of June 14, 1993(1)
10.10 Amendment No. 2 to Employment Agreement between the Company and
David H. Zirkle dated as of August 15, 1994(1)
10.11 Amendment No. 3 to Employment Agreement between the Company and
David H. Zirkle dated as of February 28, 1995(1)
<PAGE>
EXHIBIT NO. TITLE
----------- -----
10.12 Employment Agreement between the Company and Glenn C. Hazard dated
as of July 29, 1996*
10.13 Employment Agreement between the Company and Susan L. Bostrom
dated as of July 23, 1996*
10.14 Employment Agreement between the Company and Douglas F. Flood
dated as of July 23, 1996*
10.15 Employment Agreement between the Company and John H. Keller dated
as of July 23, 1996*
10.16 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox Merger*
10.17 Employment Agreement between the Company and Peter R. Simkin dated
as of the "Effective Date" of the Firefox Merger, together with
Amendment No. 1 thereto dated August 24, 1996*
10.18 Employment Agreement between the Company and John J. Warnock, Jr.,
dated as of July 31, 1996*
10.19 FTP Software, Inc. Stock Option Plan(1)
10.20 Composite FTP Software, Inc. 1993 Non-Employee Directors' Stock
Option Plan incorporating Amendment No. 1 effective as of June 2,
1996 and Amendment No. 2 effective as of August 22, 1996*
10.21 FTP Software, Inc. 1996 Executive Equity Incentive Plan*
10.22 FTP Software, Inc. 1993 Executive Bonus Plan(1)
10.23 FTP Software, Inc. 1994 Executive Compensation Plan(1)
10.24 FTP Software, Inc. 1995 Executive Compensation Plan(1)
10.25 FTP Software, Inc. 1995 V-P Sales Plan(1)
10.26 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.27 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of February 10,
1994(1)
10.28 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7, 1995(1)
10.29 Amended and Restated Agreement and Plan of Merger by and among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc.
dated as of May 21, 1996(2)
11 Weighted Shares Used in Computation of Earnings Per Share*
<PAGE>
EXHIBIT NO. TITLE
----------- -----
27 Financial Data Schedule*
99 Cautionary Statements Relevant to Forward-Looking Statements(3)
_____________________
*Filed herewith
(1) Included with, and incorporated herein by reference to, the Company's
Registration Statement on Form S-4 (No. 333-06917) filed with the
Securities and Exchange Commission (the "Commission") on June 26, 1996.
(2) Included as Appendix A to, and incorporated herein by reference to, the
Company's Joint Proxy Statement/Prospectus for its Special Meeting of
Stockholders filed with the Commission on July 1, 1996.
(3) Included as Appendix A to, and incorporated herein by reference to, the
Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1996.
<PAGE>
EXHIBIT 3.3
FEDERAL IDENTIFICATION
NO. 04-2906463
----------------------
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
We, Douglas F. Flood Senior Vice President,
-----------------------------------------,
and W. Robert Kellegrew, Jr. Assistant Clerk,
---------------------------------------------,
of FTP Software, Inc.
--------------------------------------------------------------
(Exact name of corporation)
located at 100 Brickstone Square, 5th Floor, Andover, Massachusetts
--------------------------------------------------------
(Street address of corporation in Massachusetts)
01801
-----
certify that these Articles of Amendment affecting articles numbered:
Article 3
------------------------------------------------------------------
(Number those articles 1,2,3,4,5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting
held on August 22, 1996, by vote of:
--------- --
the corporation's
26,340,371 shares of Common Stock, $.01 par value, of 33,418,988
---------- ----------------------------- ----------
(type, class & series, if any)
shares outstanding,
shares of of
--------- ---------------------------- ---------------
(type, class & series, if any)
shares outstanding, and
shares of of
---------- ---------------------------- ----------------
(type, class & series, if any)
shares outstanding,
being at least a majority of each type, class or series
outstanding and entitled to vote thereon:
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -----------------------------------------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common: 50,000,000 $.01
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Preferred: Preferred: 5,000,000 $.01
- -----------------------------------------------------------------------------------------------------------------------
(Junior
Preferred: 500,000 $.01)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -----------------------------------------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common: 100,000,000 $.01
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Preferred: Preferred: 5,000,000 $.01
- -----------------------------------------------------------------------------------------------------------------------
(Junior
Preferred: 500,000 $.01)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
See Exhibit A attached hereto and made a part hereof.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: .
------------------------------------
SIGNED UNDER THE PENALTIES OF PERJURY, this 22nd day of August, 1996.
---- ------ ----
/s/Douglas F. Flood , Senior Vice President,
- ------------------------------------------------
/s/W. Robert Kellegrew, Jr. , Assistant Clerk.
- ------------------------------------------------
<PAGE>
Exhibit A
---------
Article 3 of the Restated Articles of Organization of the corporation, as
amended, is amended to increase the total number of shares of Common Stock, $.01
par value, which the corporation is authorized to issue from 50,000,000 to
100,000,000.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDEMENT
(GENERAL LAWS, CHAPTER 156B, SECTION 72)
========================================================================
========================================================================
I hereby approve the within Articles of Amendment and, the filing fee in
the amount of $ having been paid, said articles are deemed
-------------
to have been filed with me this day of
------------ -------------------
19 .
--------
Effective date:
--------------------------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Lisa M. McGrath, Esq.
-----------------------------------------
FTP Software, Inc.
------------------------------------------
100 Brickstone Square, 5th Floor, Andover,
-------------------------------------------
Massachusetts 01810
<PAGE>
EXHIBIT 4.3
-----------
AMENDMENT TO RIGHTS AGREEMENT
-----------------------------
This Amendment, dated as of November 7, 1996, amends the Rights Agreement
dated as of December 1, 1995 (the "Rights Agreement") between FTP Software,
Inc., a Massachusetts corporation (the "Company"), and State Street Bank and
Trust Company, a national banking association (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has approved an amendment to
the Rights Agreement pursuant to Section 27 thereof;
NOW THEREFORE, in consideration of these premises, the mutual agreements
herein set forth, and other good and valuable consideration, the sufficiency of
which is hereby acknowledged by each party, the parties hereto hereby agree as
follows:
1. Amendment. The definition of "Acquiring Person" set forth in Section
---------
1(a) of the Rights Agreement is hereby amended to read as follows:
"(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates of such Person, shall be the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding, but shall not include
(i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company, (iv) any
Person organized, appointed, or established by the Company or a Subsidiary
of the Company pursuant to the terms of any plan described in clause (iii)
above or (v) any Person who has reported or is required to report its or
their beneficial ownership (but less than 20%) on Schedule 13G under the
Exchange Act (or any comparable or successor report) or on Schedule 13D
under the Exchange Act (or any comparable or successor report) which
Schedule 13D does not state any intention to or reserve the right to
control or influence the management or policies of the Company or engage in
any of the actions specified in Item 4 of such Schedule (other than the
disposition of the Common Stock) and, within 10 Business Days of being
requested by the Company to advise it regarding the same, certifies to the
Company that such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Rights and who,
together with all of such Person's Affiliates, thereafter does not acquire
additional shares of Common Stock while the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding, provided, however, that if
-------- -------
the Person requested to so certify fails to do so within 10 Business Days,
then such Person shall become an Acquiring Person on the day immediately
following the last day of such 10 Business Day Period; and provided,
--------
further, that "Acquiring Person" shall not include Kopp Investment
-------
Advisors, Inc. (but no purchaser or assignee of such Person or direct or
indirect purchaser or transferee of
<PAGE>
any shares of Common Stock of the Company from such Person) ("Kopp") so
long as (x) the shares of Common Stock of the Company beneficially owned by
Kopp do not exceed 6,722,400 shares (such number to be adjusted in the
event of any stock dividend, stock split or combination of shares,
recapitalization, repurchase of shares by the Company or any other change
in the Company's capital stock which in the determination of the Board in
its sole discretion requires an adjustment to such number to maintain it at
less than 20% of the Company's outstanding shares) and (y) Kopp has not
filed a Schedule 13D or Schedule 13G that expresses any intention or
reservation of the right to control or influence the management or policies
of the Company or to engage in any of the actions specified in Item 4 of
such Schedule 13D (other than the disposition of Common Stock)."
2. Effect of Amendment. Except as expressly amended hereby, the Rights
-------------------
Agreement shall remain in full force and effect.
3. Governing Law. This Amendment shall be deemed to be a contract made
-------------
under the laws of The Commonwealth of Massachusetts and for all purposes shall
be governed by and construed in accordance with the laws of said state
applicable to contracts made and to be performed entirely within said state.
4. Counterparts. This Amendment may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day first above written.
ATTEST: FTP SOFTWARE, INC.
By
-------------------------------
Name:
Title:
ATTEST: STATE STREET BANK AND TRUST
COMPANY
By
-------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and David H. Zirkle ("Employee"),
effective as of the 26th day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Chairman and Chief Executive Officer, or in such other
executive position as the Board of Directors of the Company (the "Board") may
designate from time to time with Employee's consent, provided, that each of the
Company and Employee agrees and acknowledges that the Chief Executive Officer
designation may be removed, and that such removal shall not affect, or be
affected by, any of the terms of this Agreement. In addition, and without
further compensation, Employee shall serve as a director and/or officer of one
or more of the Company's Affiliates (as hereafter defined) if so elected or
appointed from time to time. Employee shall, on a full-time basis, perform such
duties and responsibilities for the Company and its Affiliates as are intrinsic
to Employee's position and status with the Company or as may otherwise
reasonably be designated from time to time by the Board. Employee shall devote
his best efforts, business judgment, skill and knowledge exclusively to the
advancement of the business and interests of the Company and its Affiliates.
Employee shall not engage in any other business activity (whether or not such
business activity is pursued for gain, profit or other pecuniary advantage) or
serve on any other board of directors or in any industry, trade, professional,
governmental or academic position during the term of this Agreement, except as
may be expressly approved in advance in writing by the Board, which approval
shall not be unreasonably withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the following rate: (i) during the period commencing on the date
hereof and continuing through February 28, 1997, Three Hundred Thousand Dollars
($300,000) per annum and (ii) commencing on March 1, 1997, Eighty Thousand
Dollars ($80,000) per annum; in each case payable in accordance with the payroll
practices of the Company and subject to adjustment from time to time by the
Board in its sole discretion. Such base salary, as adjusted from time to time,
is referred to as the "Base Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise
<PAGE>
provided under the terms of such incentive or bonus compensation plan or this
Agreement, any Bonus payable to Employee shall be pro-rated during Employee's
first and last year of service as an executive officer of the Company, provided,
in each case, that Employee has been employed for at least three (3) months of
the twelve (12) month period on which the cash incentive or bonus compensation
plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
2
<PAGE>
ii. Material breach by Employee of any provision of this Agreement or
of any obligation (contractual or at common law) of confidentiality owed to the
Company or any of its Affiliates (a "Confidentiality Obligation"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the Board from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position of
Chairman of the Company or in such other position to which Employee may
subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
3
<PAGE>
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to the greater of (i) the sum of the Base Salary and the
amount of any Bonus paid or payable during the remainder of the Term or (ii) the
sum of the Base Salary and the amount of any Bonus paid or payable to Employee
during the twelve (12) months preceding the month during which such termination
occurs and (B) shall pay the full cost of Employee's continued participation in
the Company's group health and dental insurance plans for so long as Employee
remains entitled to continue such participation under COBRA or any successor law
and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
4
<PAGE>
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice of all facts necessary for the
Company to determine the amount and duration of its obligations in connection
with any termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 7 and 10 and any
Confidentiality Obligation shall survive the termination of Employee's
employment hereunder. Employee recognizes that, except as expressly provided in
Section 5.d, 5.e or 5.g, as applicable, no compensation is earned after
termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or any
Confidentiality Obligation, the damage to the Company and its Affiliates would
be irreparable, that the damage would be extremely difficult to ascertain, and
that money damages alone would not be an adequate remedy. Accordingly, Employee
agrees that the Company and its Affiliates and their successors and assigns, in
addition to any other remedies available to them, shall be entitled to
preliminary and permanent injunctive relief against any breach or threatened
breach by Employee of any of said covenants, without having to post bond. The
parties further agree that, if any provision of Section 7 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against competition, covenants of confidentiality or similar covenants
with any person or entity other than the Company
5
<PAGE>
that would affect the performance of Employee's obligations hereunder. Employee
shall not disclose to or use on behalf of the Company any proprietary
information of any third party without such party's consent.
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement constitutes the
--------------------------------------
entire agreement between the parties and supersedes all prior communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of Employee's employment. Without limiting the generality of the
foregoing, the Company and Employee agree that the Employment Agreement dated
November 6, 1992 and the Employment Agreement dated March 1, 1993 between such
parties, in each case as amended to date, are hereby terminated and superseded
in their entireties by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by Employee and by an expressly
authorized representative of the Company. Employee and the Company agree that
their respective rights and remedies against the other are cumulative and that
they may be exercised singularly or collectively, successively or concurrently.
A waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
17. Service as a Director. Each of the Company and Employee acknowledges that
---------------------
each of the election or appointment of Employee as a member of the Board of
Directors, Employee's status as a member of the Board of Directors and
Employee's resignation or removal as a member of the Board of Directors is
governed by the
6
<PAGE>
articles of organization and bylaws of the Company and by Massachusetts law, and
shall not in any way affect, or be affected by, the terms of this Agreement.
18. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
19. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7. Employee agrees that said restraints are necessary for
the reasonable and proper protection of the Company and its Affiliates and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ---------------------------- ----------------------------------
David H. Zirkle Title: President
7
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and Glenn C. Hazard ("Employee"),
effective as of the 29th day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its President and Chief Operating Officer or in such other
executive position as the Board of Directors of the Company (the "Board") may
designate from time to time with Employee's consent, it being understood that
the designation of Employee as Chief Executive Officer in lieu of Chief
Operating Officer shall not affect, or be affected by, any of the terms of this
Agreement. In addition, and without further compensation, Employee shall serve
as a director and/or officer of one or more of the Company's Affiliates (as
hereafter defined) if so elected or appointed from time to time. Employee
shall, on a full-time basis, perform such duties and responsibilities for the
Company and its Affiliates as are intrinsic to Employee's position and status
with the Company or as may otherwise reasonably be designated from time to time
by the Board or by the Chairman of the Company (the "Chairman") or any designees
of the Chairman. Employee shall devote his best efforts, business judgment,
skill and knowledge exclusively to the advancement of the business and interests
of the Company and its Affiliates. Employee shall not engage in any other
business activity (whether or not such business activity is pursued for gain,
profit or other pecuniary advantage) or serve on any other board of directors or
in any industry, trade, professional, governmental or academic position during
the term of this Agreement, except as may be expressly approved in advance in
writing by the Board or the Chairman, which approval shall not be unreasonably
withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of Two Hundred and Seventy-Five Thousand Dollars ($275,000)
per annum, payable in accordance with the payroll practices of the Company and
subject to adjustment from time to time by the Board in its sole discretion.
Such base salary, as adjusted from time to time, is referred to as the "Base
Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
In addition, Employee shall be paid a cash bonus of Sixty-Two Thousand
Dollars ($62,000) for the year ended December 31, 1996, which shall be paid by
the Company to Employee within forty-five (45) days following the end of such
year.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
e. Relocation. The Company agrees to reimburse Employee for Employee's
----------
expenses in relocating from Ohio to Massachusetts as described in, and in
accordance with and subject to, the terms of the letter agreement of even date
herewith between the Company and Employee (as amended from time to time, the
"Relocation Agreement"). Employee agrees that if he voluntarily terminates his
employment with the Company, other than for Good Reason (as hereinafter
defined), before the first anniversary of the date Employee commenced his
employment with the Company, Employee shall promptly reimburse the Company for
all payments made by the Company pursuant to the Relocation Agreement and this
Section 4.e.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of
2
<PAGE>
the issue. If such question arises and Employee fails to submit to such medical
examination, the Company's determination of the issue shall be binding on
Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
ii. Material breach by Employee of any provision of this Agreement or
the Employee Confidentiality and Inventions Agreement dated as of May 9, 1996
between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the Board or the Chairman from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position of
President of the Company and in the position of either Chief Operating Officer
or Chief Executive Officer of the Company or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
3
<PAGE>
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to two times the greater of (i) the sum of the Base Salary and
the amount of any Bonus paid or payable during the remainder of the Term or (ii)
the sum of the Base Salary and the amount of any Bonus paid or payable to
Employee during the twelve (12) months preceding the month during which such
termination occurs and (B) shall pay the full cost of Employee's continued
participation in the Company's group health and dental insurance plans for so
long as Employee remains entitled to continue such participation under COBRA or
any successor law and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
4
<PAGE>
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice of all facts necessary for the
Company to determine the amount and duration of its obligations in connection
with any termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 4.e, 7 and 10 and in
the Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or in the
Confidentiality and Inventions Agreement, the damage to the Company and its
Affiliates would be irreparable, that the damage would be extremely difficult to
ascertain, and that money damages alone would not be an adequate remedy.
Accordingly, Employee agrees that the Company and its
5
<PAGE>
Affiliates and their successors and assigns, in addition to any other remedies
available to them, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by Employee of any of said
covenants, without having to post bond. The parties further agree that, if any
provision of Section 7 or of the Confidentiality and Inventions Agreement shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its being extended over too great a time, too large a geographic area
or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by applicable
law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against competition, covenants of confidentiality or similar covenants
with any person or entity other than the Company that would affect the
performance of Employee's obligations hereunder. Employee shall not disclose to
or use on behalf of the Company any proprietary information of any third party
without such party's consent.
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
Chairman, or to such other address as either party may specify by written notice
to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement and the Relocation Agreement, each of
which is incorporated herein by reference, constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, other than the Confidentiality and Inventions Agreement
and the Relocation Agreement. This Agreement may be amended or
6
<PAGE>
modified only by a written instrument signed by Employee and by an expressly
authorized representative of the Company. Employee and the Company agree that
their respective rights and remedies against the other are cumulative and that
they may be exercised singularly or collectively, successively or concurrently.
A waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
17. Service as a Director. Each of the Company and Employee acknowledges that
---------------------
each of the election or appointment of Employee as a member of the Board of
Directors, Employee's status as a member of the Board of Directors and
Employee's resignation or removal as a member of the Board of Directors is
governed by the articles of organization and bylaws of the Company and by
Massachusetts law, and shall not in any way affect, or be affected by, the terms
of this Agreement.
18. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
19. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
- ---------------------------- By:
Glenn C. Hazard -----------------------------------------
Title:
--------------------------------------
7
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and Susan L. Bostrom ("Employee"),
effective as of the 23rd day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Senior Vice President of Global Marketing and Strategic
Planning, or in such other executive position as the Board of Directors of the
Company (the "Board") may designate from time to time with Employee's consent.
In addition, and without further compensation, Employee shall serve as a
director and/or officer of one or more of the Company's Affiliates (as hereafter
defined) if so elected or appointed from time to time. Employee shall, on a
full-time basis, perform such duties and responsibilities for the Company and
its Affiliates as are intrinsic to Employee's position and status with the
Company or as may otherwise reasonably be designated from time to time by the
Board or by the President of the Company (the "President") or any designees of
the President. Employee shall devote his best efforts, business judgment, skill
and knowledge exclusively to the advancement of the business and interests of
the Company and its Affiliates. Employee shall not engage in any other business
activity (whether or not such business activity is pursued for gain, profit or
other pecuniary advantage) or serve on any other board of directors or in any
industry, trade, professional, governmental or academic position during the term
of this Agreement, except as may be expressly approved in advance in writing by
the Board or the President, which approval shall not be unreasonably withheld,
delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of One Hundred Sixty-Five Thousand Dollars ($165,000) per
annum, payable in accordance with the payroll practices of the Company and
subject to adjustment from time to time by the Board in its sole discretion.
Such base salary, as adjusted from time to time, is referred to as the "Base
Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
2
<PAGE>
ii. Material breach by Employee of any provision of this Agreement or
the Employee Confidentiality and Inventions Agreement dated as of January 29,
1996 between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
3
<PAGE>
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to two times the greater of (i) the sum of the Base Salary and
the amount of any Bonus paid or payable during the remainder of the Term or (ii)
the sum of the Base Salary and the amount of any Bonus paid or payable to
Employee during the twelve (12) months preceding the month during which such
termination occurs and (B) shall pay the full cost of Employee's continued
participation in the Company's group health and dental insurance plans for so
long as Employee remains entitled to continue such participation under COBRA or
any successor law and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
4
<PAGE>
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice of all facts necessary for the
Company to determine the amount and duration of its obligations in connection
with any termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 4.e, 7 and 10 and in
the Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or in the
Confidentiality and Inventions Agreement, the damage to the Company and its
Affiliates would be irreparable, that the damage would be extremely difficult to
ascertain, and that money damages alone would not be an adequate remedy.
Accordingly, Employee agrees that the Company and its Affiliates and their
successors and assigns, in addition to any other remedies available to them,
shall be entitled to preliminary and permanent injunctive relief against any
breach or threatened breach by Employee of any of said covenants, without having
to post bond. The parties further agree that, if any provision of Section 7 or
of the Confidentiality and Inventions Agreement shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against
5
<PAGE>
competition, covenants of confidentiality or similar covenants with any person
or entity other than the Company that would affect the performance of Employee's
obligations hereunder. Employee shall not disclose to or use on behalf of the
Company any proprietary information of any third party without such party's
consent.
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement and the Relocation Agreement, each of
which is incorporated herein by reference, constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, other than the Confidentiality and Inventions Agreement
and the Relocation Agreement. This Agreement may be amended or modified only by
a written instrument signed by Employee and by an expressly authorized
representative of the Company. Employee and the Company agree that their
respective rights and remedies against the other are cumulative and that they
may be exercised singularly or collectively, successively or concurrently. A
waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
17. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be
6
<PAGE>
executed in two or more counterparts, each of which shall be an original and all
of which together shall constitute one and the same instrument.
18. Governing Law. This is a Massachusetts contract and shall be construed
-------------
and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, USA, without regard to the conflict of laws
principles thereof. Employee and the Company consent to the exclusive
jurisdiction of the state and federal courts of the Commonwealth of
Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ---------------------------- ------------------------------------
Susan L. Bostrom Title:
---------------------------------
7
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and Douglas F. Flood ("Employee"),
effective as of the 23rd day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Senior Vice President of Business Development and Planning
and General Counsel or in such other executive position as the Board of
Directors of the Company (the "Board") may designate from time to time with
Employee's consent. In addition, and without further compensation, Employee
shall serve as a director and/or officer of one or more of the Company's
Affiliates (as hereafter defined) if so elected or appointed from time to time.
Employee shall, on a full-time basis, perform such duties and responsibilities
for the Company and its Affiliates as are intrinsic to Employee's position and
status with the Company or as may otherwise reasonably be designated from time
to time by the Board or by the President of the Company (the "President") or any
designees of the President. Employee shall devote his best efforts, business
judgment, skill and knowledge exclusively to the advancement of the business and
interests of the Company and its Affiliates. Employee shall not engage in any
other business activity (whether or not such business activity is pursued for
gain, profit or other pecuniary advantage) or serve on any other board of
directors or in any industry, trade, professional, governmental or academic
position during the term of this Agreement, except as may be expressly approved
in advance in writing by the Board or the President, which approval shall not be
unreasonably withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of Two Hundred Thousand Dollars ($200,000) per annum, payable
in accordance with the payroll practices of the Company and subject to
adjustment from time to time by the Board in its sole discretion. Such base
salary, as adjusted from time to time, is referred to as the "Base Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
2
<PAGE>
ii. Material breach by Employee of any provision of this Agreement or
the Employee Confidentiality and Inventions Agreement dated as of January 29,
1996 between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part of
Employee with respect to the Company or any of its Affiliates or conviction of
or plea of nolo contendere by Employee to a felony or any crime involving moral
turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
3
<PAGE>
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to two times the greater of (i) the sum of the Base Salary and
the amount of any Bonus paid or payable during the remainder of the Term or (ii)
the sum of the Base Salary and the amount of any Bonus paid or payable to
Employee during the twelve (12) months preceding the month during which such
termination occurs and (B) shall pay the full cost of Employee's continued
participation in the Company's group health and dental insurance plans for so
long as Employee remains entitled to continue such participation under COBRA or
any successor law and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
4
<PAGE>
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice of all facts necessary for the
Company to determine the amount and duration of its obligations in connection
with any termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 4.e, 7 and 10 and in
the Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or in the
Confidentiality and Inventions Agreement, the damage to the Company and its
Affiliates would be irreparable, that the damage would be extremely difficult to
ascertain, and that money damages alone would not be an adequate remedy.
Accordingly, Employee agrees that the Company and its Affiliates and their
successors and assigns, in addition to any other remedies available to them,
shall be entitled to preliminary and permanent injunctive relief against any
breach or threatened breach by Employee of any of said covenants, without having
to post bond. The parties further agree that, if any provision of Section 7 or
of the Confidentiality and Inventions Agreement shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against
5
<PAGE>
competition, covenants of confidentiality or similar covenants with any person
or entity other than the Company that would affect the performance of Employee's
obligations hereunder. Employee shall not disclose to or use on behalf of the
Company any proprietary information of any third party without such party's
consent.
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement and the Relocation Agreement, each of
which is incorporated herein by reference, constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, other than the Confidentiality and Inventions Agreement
and the Relocation Agreement. This Agreement may be amended or modified only by
a written instrument signed by Employee and by an expressly authorized
representative of the Company. Employee and the Company agree that their
respective rights and remedies against the other are cumulative and that they
may be exercised singularly or collectively, successively or concurrently. A
waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
17. Service as a Director. Each of the Company and Employee acknowledges that
---------------------
each of the election or appointment of Employee as a member of the Board of
Directors, Employee's status as a member of the Board of Directors or Employee's
resignation or removal as a member of the Board of Directors is governed by the
articles
6
<PAGE>
of organization and bylaws of the Company and by Massachusetts law, and shall
not in any way affect, or be affected by, the terms of this Agreement.
18. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
19. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ---------------------------- -----------------------------------------
Douglas F. Flood Title:
--------------------------------------
7
<PAGE>
Exhibit 10.15
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and John H. Keller ("Employee"),
effective as of the 23rd day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Senior Vice President of Global Engineering and Development
or in such other executive position as the Board of Directors of the Company
(the "Board") may designate from time to time with Employee's consent. In
addition, and without further compensation, Employee shall serve as a director
and/or officer of one or more of the Company's Affiliates (as hereafter defined)
if so elected or appointed from time to time. Employee shall, on a full-time
basis, perform such duties and responsibilities for the Company and its
Affiliates as are intrinsic to Employee's position and status with the Company
or as may otherwise reasonably be designated from time to time by the Board or
by the President of the Company (the "President") or any designees of the
President. Employee shall devote his best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and interests of the
Company and its Affiliates. Employee shall not engage in any other business
activity (whether or not such business activity is pursued for gain, profit or
other pecuniary advantage) or serve on any other board of directors or in any
industry, trade, professional, governmental or academic position during the term
of this Agreement, except as may be expressly approved in advance in writing by
the Board or the President, which approval shall not be unreasonably withheld,
delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of Two Hundred Twenty-Five Thousand Dollars ($225,000) per
annum, payable in accordance with the payroll practices of the Company and
subject to adjustment from time to time by the Board in its sole discretion.
Such base salary, as adjusted from time to time, is referred to as the "Base
Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the Company, provided, in each case, that
Employee has been employed for at least three (3) months of the twelve (12)
month period on which the cash incentive or bonus compensation plan is based.
1
<PAGE>
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
ii. Material breach by Employee of any provision of this Agreement or
the Employee Confidentiality and Inventions Agreement dated as of January 29,
1996 between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
2
<PAGE>
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
3
<PAGE>
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to two times the greater of (i) the sum of the Base Salary and
the amount of any Bonus paid or payable during the remainder of the Term or (ii)
the sum of the Base Salary and the amount of any Bonus paid or payable to
Employee during the twelve (12) months preceding the month during which such
termination occurs and (B) shall pay the full cost of Employee's continued
participation in the Company's group health and dental insurance plans for so
long as Employee remains entitled to continue such participation under COBRA or
any successor law and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice
4
<PAGE>
of all facts necessary for the Company to determine the amount and duration of
its obligations in connection with any termination pursuant to Section 5.d, 5.e
or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 4.e, 7 and 10 and in
the Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or in the
Confidentiality and Inventions Agreement, the damage to the Company and its
Affiliates would be irreparable, that the damage would be extremely difficult to
ascertain, and that money damages alone would not be an adequate remedy.
Accordingly, Employee agrees that the Company and its Affiliates and their
successors and assigns, in addition to any other remedies available to them,
shall be entitled to preliminary and permanent injunctive relief against any
breach or threatened breach by Employee of any of said covenants, without having
to post bond. The parties further agree that, if any provision of Section 7 or
of the Confidentiality and Inventions Agreement shall be determined by any court
of competent jurisdiction to be unenforceable by reason of its being extended
over too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against competition, covenants of confidentiality or similar covenants
with any person or entity other than the Company that would affect the
performance of Employee's obligations hereunder. Employee shall not disclose to
or use on behalf of the Company any proprietary information of any third party
without such party's consent.
5
<PAGE>
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement and the Relocation Agreement, each of
which is incorporated herein by reference, constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, other than the Confidentiality and Inventions Agreement
and the Relocation Agreement. This Agreement may be amended or modified only by
a written instrument signed by Employee and by an expressly authorized
representative of the Company. Employee and the Company agree that their
respective rights and remedies against the other are cumulative and that they
may be exercised singularly or collectively, successively or concurrently. A
waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
17. Service as a Director. Each of the Company and Employee acknowledges that
---------------------
each of the election or appointment of Employee as a member of the Board of
Directors, Employee's status as a member of the Board of Directors or Employee's
resignation or removal as a member of the Board of Directors is governed by the
articles of organization and bylaws of the Company and by Massachusetts law, and
shall not in any way affect, or be affected by, the terms of this Agreement.
6
<PAGE>
18. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
19. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
____________________________ By:____________________________________
John H. Keller Title:_________________________________
7
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and John A. Kimberley ("Employee"),
effective as of the Effective Time, as defined in that certain Amended and
Restated Agreement and Plan of Merger, dated as of May 21, 1996, among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc. (the
"Effective Time").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing at
the Effective Time. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Vice Chairman or in such other executive position as the
Board of Directors of the Company (the "Board") or the President of the Company
(the "President") may designate from time to time with Employee's consent. In
addition, and without further compensation, Employee shall serve as a director
and/or officer of one or more of the Company's Affiliates (as hereafter defined)
if so elected or appointed from time to time. Employee shall, on a full-time
basis, perform such duties and responsibilities for the Company and its
Affiliates as are intrinsic to Employee's position and status with the Company
or as may otherwise reasonably be designated from time to time by the Board or
by the President or any designees of the President, and at such location(s) as
the Company may request from time to time. Employee shall devote his best
efforts, business judgment, skill and knowledge exclusively to the advancement
of the business and interests of the Company and its Affiliates. Employee shall
not engage in any other business activity (whether or not such business activity
is pursued for gain, profit or other pecuniary advantage) or serve on any other
board of directors or in any industry, trade, professional, governmental or
academic position during the term of this Agreement, except as may be expressly
approved in advance in writing by the Board or the President, which approval
shall not be unreasonably withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of Two Hundred Thousand Dollars ($200,000) per annum, payable
in accordance with the payroll practices of the Company and subject to
adjustment from time to time by the Board in its sole discretion. Such base
salary, as adjusted from time to time, is referred to as the "Base Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
2
<PAGE>
ii. Material breach by Employee of any provision of this Agreement
or the Employee Confidentiality and Inventions Agreement of even date herewith
between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. A decrease in the Base Salary of more than fifteen percent
(15%) or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
3
<PAGE>
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal the greater of (i) the sum of the Base Salary and the amount
of any Bonus paid or payable during the remainder of the Term or (ii) the sum of
the Base Salary and the amount of any Bonus paid or payable to Employee during
the twelve (12) months preceding the month during which such termination occurs
and (B) shall pay the full cost of Employee's continued participation in the
Company's group health and dental insurance plans for so long as Employee
remains entitled to continue such participation under COBRA or any successor law
and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Time: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall
4
<PAGE>
constitute the entire obligation of the Company to Employee. Employee shall
promptly give the Company notice of all facts necessary for the Company to
determine the amount and duration of its obligations in connection with any
termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 7 and 11 and in the
Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United Kingdom with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United Kingdom. Employee will be deemed to have engaged in such line of
business if he participates therein as an employee, consultant, partner,
proprietor or investor (provided that Employee shall not be deemed to have
engaged in such line of business solely by reason of any passive equity
investment in any entity that does not exceed 5% of the outstanding capital
stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Restriction on Transfer of Shares. Employee agrees not to, directly or
---------------------------------
indirectly, sell, transfer, pledge, encumber, assign or otherwise dispose of
more than 40,000 shares of the Common Stock of the Company during any fiscal
quarter of the Company.
9. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or Section 8 or
in the Confidentiality and Inventions Agreement, the damage to the Company and
its Affiliates would be irreparable, that the damage would be extremely
difficult to ascertain, and that money damages alone would not be an adequate
remedy. Accordingly, Employee agrees that the Company and its Affiliates and
their successors and assigns, in addition to any other remedies available to
them, shall be entitled to preliminary and permanent injunctive relief against
any breach or threatened breach by Employee of any of said covenants, without
having to post bond. The parties further agree that, if any provision of
Section 7 or of the Confidentiality and Inventions Agreement shall be determined
by any court of competent jurisdiction to be unenforceable by reason of its
being extended over too great a time, too large a geographic area or too great a
range of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
10. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other
5
<PAGE>
agreement to which Employee is a party or is bound and that Employee is not now
subject to any covenants against competition, covenants of confidentiality or
similar covenants with any person or entity other than the Company that would
affect the performance of Employee's obligations hereunder. Employee shall not
disclose to or use on behalf of the Company any proprietary information of any
third party without such party's consent.
11. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
12. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
13. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
14. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
15. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
16. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
17. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement, which is incorporated herein by
reference, constitutes the entire agreement between the parties and supersedes
all prior communications, agreements and understandings, written or oral, with
respect to the terms and conditions of Employee's employment, other than the
Confidentiality and Inventions Agreement. This Agreement may be amended or
modified only by a written instrument signed by Employee and by an expressly
authorized representative of the Company. Employee and the Company agree that
their respective rights and remedies against the other are cumulative and that
they may be exercised singularly or collectively, successively or concurrently.
A waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
18. Service as a Director. Each of the Company and Employee acknowledges that
---------------------
each of the election or appointment of Employee as a member of the Board of
Directors, Employee's status as a member of the Board of Directors and
Employee's resignation or removal as a member of the Board of Directors is
governed by the
6
<PAGE>
articles of organization and bylaws of the Company and by Massachusetts law, and
shall not in any way affect, or be affected by, the terms of this Agreement.
19. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
20. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Time.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ------------------------------- --------------------------------
John A. Kimberley Title:
-----------------------------
8
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and Peter R. Simkin ("Employee"),
effective as of the Effective Time, as defined in that certain Amended and
Restated Agreement and Plan of Merger, dated as of May 21, 1996, among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc. (the
"Effective Time").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing at
the Effective Time. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Chief Technology Officer or in such other executive position
as the Board of Directors of the Company (the "Board") or the President of the
Company (the "President") may designate from time to time with Employee's
consent. In addition, and without further compensation, Employee shall serve as
a director and/or officer of one or more of the Company's Affiliates (as
hereafter defined) if so elected or appointed from time to time. Employee
shall, on a full-time basis, perform such duties and responsibilities for the
Company and its Affiliates as are intrinsic to Employee's position and status
with the Company or as may otherwise reasonably be designated from time to time
by the Board or by the President or any designees of the President, and at such
location(s) as the Company may request from time to time. Employee shall devote
his best efforts, business judgment, skill and knowledge exclusively to the
advancement of the business and interests of the Company and its Affiliates.
Employee shall not engage in any other business activity (whether or not such
business activity is pursued for gain, profit or other pecuniary advantage) or
serve on any other board of directors or in any industry, trade, professional,
governmental or academic position during the term of this Agreement, except as
may be expressly approved in advance in writing by the Board or the President,
which approval shall not be unreasonably withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of One Hundred Fifty Thousand Dollars ($150,000) per annum,
payable in accordance with the payroll practices of the Company and subject to
adjustment from time to time by the Board in its sole discretion. Such base
salary, as adjusted from time to time, is referred to as the "Base Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled
--------------
to participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
2
<PAGE>
ii. Material breach by Employee of any provision of this Agreement
or the Employee Confidentiality and Inventions Agreement of even date herewith
between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. A decrease in the Base Salary of more than fifteen percent
(15%) or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
3
<PAGE>
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal the greater of (i) the sum of the Base Salary and the amount
of any Bonus paid or payable during the remainder of the Term or (ii) the sum of
the Base Salary and the amount of any Bonus paid or payable to Employee during
the twelve (12) months preceding the month during which such termination occurs
and (B) shall pay the full cost of Employee's continued participation in the
Company's group health and dental insurance plans for so long as Employee
remains entitled to continue such participation under COBRA or any successor law
and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to
which Employee would be entitled pursuant to Section 5.g.i as a result of a
Change of Control shall be reduced to the maximum amount for which the Company
will not be limited in its deduction pursuant to Section 280G of the Internal
Revenue Code or any successor provision. Any such reduction shall be applied to
the amounts due under Section 5.g.i as Employee may reasonably determine or, if
Employee fails to make such determination promptly following notice from the
Company, as the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not
apply if (A) the present value, net of all federal, state and other income and
excise taxes, of all payments and benefits to which Employee is entitled
hereunder without such limitations exceeds (B) the present value, net of all
federal, state and other income and excise taxes, of all payments and benefits
to which Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Time: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall
4
<PAGE>
constitute the entire obligation of the Company to Employee. Employee shall
promptly give the Company notice of all facts necessary for the Company to
determine the amount and duration of its obligations in connection with any
termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 7 and 11 and in the
Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Restriction on Transfer of Shares. Employee agrees not to, directly or
---------------------------------
indirectly, sell, transfer, pledge, encumber, assign or otherwise dispose of
more than 40,000 shares of the Common Stock of the Company during any fiscal
quarter of the Company.
9. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or Section 8 or
in the Confidentiality and Inventions Agreement, the damage to the Company and
its Affiliates would be irreparable, that the damage would be extremely
difficult to ascertain, and that money damages alone would not be an adequate
remedy. Accordingly, Employee agrees that the Company and its Affiliates and
their successors and assigns, in addition to any other remedies available to
them, shall be entitled to preliminary and permanent injunctive relief against
any breach or threatened breach by Employee of any of said covenants, without
having to post bond. The parties further agree that, if any provision of
Section 7 or of the Confidentiality and Inventions Agreement shall be determined
by any court of competent jurisdiction to be unenforceable by reason of its
being extended over too great a time, too large a geographic area or too great a
range of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by applicable law.
10. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other
5
<PAGE>
agreement to which Employee is a party or is bound and that Employee is not now
subject to any covenants against competition, covenants of confidentiality or
similar covenants with any person or entity other than the Company that would
affect the performance of Employee's obligations hereunder. Employee shall not
disclose to or use on behalf of the Company any proprietary information of any
third party without such party's consent.
11. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
12. Indemnification. The Company shall indemnify and hold Employee harmless
---------------
to the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
13. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
14. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
15. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
16. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
17. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement, which is incorporated herein by
reference, constitutes the entire agreement between the parties and supersedes
all prior communications, agreements and understandings, written or oral, with
respect to the terms and conditions of Employee's employment, other than the
Confidentiality and Inventions Agreement. This Agreement may be amended or
modified only by a written instrument signed by Employee and by an expressly
authorized representative of the Company. Employee and the Company agree that
their respective rights and remedies against the other are cumulative and that
they may be exercised singularly or collectively, successively or concurrently.
A waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under this Agreement with respect to
any other or continued violation of any provision of this Agreement. Any waiver
shall be enforceable only if in writing and signed by an expressly authorized
representative of the Company and by Employee.
18. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be
6
<PAGE>
executed in two or more counterparts, each of which shall be an original and all
of which together shall constitute one and the same instrument.
19. Governing Law. This is a Massachusetts contract and shall be construed
-------------
and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, USA, without regard to the conflict of laws
principles thereof. Employee and the Company consent to the exclusive
jurisdiction of the state and federal courts of the Commonwealth of
Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Time.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ----------------------------- ------------------------------------
Peter R. Simkin Title:
---------------------------------
7
<PAGE>
Exhibit 10.17
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Amendment") is made and
entered into by and between FTP Software, Inc., a Massachusetts corporation (the
"Company"), and Peter R. Simkin ("Employee"), effective as of the 22nd day of
August, 1996.
WHEREAS, the Company and Employee have entered into an Employment Agreement (the
"Agreement") dated as of the Effective Time, as defined in that certain Amended
and Restated Agreement and Plan of Merger, dated as of May 21, 1996, among the
Company, Firefox Acquisition Corp. and Firefox Communications Inc.; and
WHEREAS, the Company and Employee desire to amend the Agreement to increase
Employee's Base Salary (as defined in the Agreement) retroactive to July 22,
1996;
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Amendments. Section 4.a of the Agreement is hereby amended, effective as
----------
of July 22, 1996, by deleting the words "One Hundred Fifty Thousand Dollars
($150,000)" appearing in the first and second lines thereof and replacing them
with the words "One Hundred Sixty-Five Thousand Dollars ($165,000)".
2. Effect on Agreement. Except as specifically amended hereby, the Agreement
-------------------
shall continue in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the date first above written.
EMPLOYEE: FTP SOFTWARE, INC.
- -------------------------- By:
Peter R. Simkin -----------------------------------------
Title:
--------------------------------------
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
This Agreement is made and entered into by and between FTP Software, Inc., a
Massachusetts corporation (the "Company"), and John J. Warnock, Jr.
("Employee"), effective as of the 31st day of July, 1996 (the "Effective Date").
In consideration of the mutual promises, terms and conditions set forth in this
Agreement, the parties hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
----------
Agreement, the Company hereby offers and Employee hereby accepts employment.
2. Term. Subject to earlier termination pursuant to Section 5, the term of
----
Employee's employment hereunder (the "Term") shall be one year, commencing on
the Effective Date. The Term may be renewed or extended only by a written
agreement signed by both Employee and an expressly authorized representative of
the Company; provided, however, that if a Change of Control (as defined in
Section 5) occurs, the then-current Term shall be automatically extended so that
the remainder of the Term is not less than twelve (12) full calendar months from
the date of the Change of Control.
3. Duties; Conflicting Interests. During the Term, Employee agrees to serve
-----------------------------
the Company as its Senior Vice President and Chief Financial Officer or in such
other executive position as the Board of Directors of the Company (the "Board")
may designate from time to time with Employee's consent. In addition, and
without further compensation, Employee shall serve as a director and/or officer
of one or more of the Company's Affiliates (as hereafter defined) if so elected
or appointed from time to time. Employee shall, on a full-time basis, perform
such duties and responsibilities for the Company and its Affiliates as are
intrinsic to Employee's position and status with the Company or as may otherwise
reasonably be designated from time to time by the Board or by the President of
the Company (the "President") or any designees of the President. Employee shall
devote his best efforts, business judgment, skill and knowledge exclusively to
the advancement of the business and interests of the Company and its Affiliates.
Employee shall not engage in any other business activity (whether or not such
business activity is pursued for gain, profit or other pecuniary advantage) or
serve on any other board of directors or in any industry, trade, professional,
governmental or academic position during the term of this Agreement, except as
may be expressly approved in advance in writing by the Board or the President,
which approval shall not be unreasonably withheld, delayed or conditioned.
For the purposes of this Agreement, the term "Affiliates" shall mean all
persons and entities directly or indirectly controlling, controlled by or under
common control with the Company, where control may be by either management
authority or equity interest.
4. Compensation and Benefits.
--------------------------
a. Base Salary. During the Term, the Company shall pay Employee a base
-----------
salary at the rate of Two Hundred Thousand Dollars ($200,000) per annum, payable
in accordance with the payroll practices of the Company and subject to
adjustment from time to time by the Board in its sole discretion. Such base
salary, as adjusted from time to time, is referred to as the "Base Salary."
b. Cash Incentive and Bonus Compensation. If a cash incentive or bonus
-------------------------------------
compensation plan is made available to executives of the Company generally and
Employee is not then covered by any other cash incentive or bonus compensation
plan, Employee shall be entitled during the Term to participate in such plan (if
any) in accordance with the plan's then current terms. Any compensation paid to
Employee under such an incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. Except as otherwise provided under the
terms of such incentive or bonus compensation plan or this Agreement, any Bonus
payable to Employee shall be pro-rated during Employee's first and last year of
service as an executive officer of the
<PAGE>
Company, provided, in each case, that Employee has been employed for at least
three (3) months of the twelve (12) month period on which the cash incentive or
bonus compensation plan is based.
c. Stock Options. Upon a "Change of Control," as hereafter defined, any
-------------
and all stock options granted to Employee by the Company and not yet exercised,
expired, surrendered or canceled shall automatically vest and become exercisable
in full, but shall remain exercisable only in accordance with the terms of any
applicable stock option plan, certificate or agreement.
d. Other Benefits. During the term hereof, Employee shall be entitled to
--------------
participate in any and all employee benefit plans from time to time in effect
for employees of the Company generally, except to the extent such plans are in a
category of benefit otherwise provided to Employee. Such participation shall be
subject to the terms of the applicable plan documents and generally applicable
Company policies.
e. Relocation. The Company agrees to reimburse Employee for Employee's
----------
expenses in relocating from Pennsylvania to Massachusetts as described in, and
in accordance with and subject to, the terms of the letter agreement dated April
17, 1996 between the Company and Employee (as amended from time to time, the
"Relocation Agreement"). Employee agrees that if he voluntarily terminates his
employment with the Company, other than for Good Reason (as hereinafter
defined), before the first anniversary of the date Employee commenced his
employment with the Company, Employee shall promptly reimburse the Company for
all payments made by the Company pursuant to the Relocation Agreement and this
Section 4.e.
5. Termination of Employment and Severance Benefits. Notwithstanding the
------------------------------------------------
provisions of Section 2, Employee's employment hereunder shall terminate prior
to the expiration of the Term under the following circumstances.
a. Death. In the event of Employee's death, Employee's employment
-----
hereunder shall immediately and automatically terminate and the Company shall
pay to Employee's designated beneficiary or, if none, to Employee's estate, a
sum equal to three (3) months' Base Salary plus any Bonus due Employee, pro-
rated through the date of Employee's death.
b. Disability.
-----------
i. The Company may terminate Employee's employment hereunder, upon
written notice to Employee, if Employee becomes disabled (whether physically or
mentally) and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for any 180 (whether or not consecutive) days
during any period of 365 consecutive calendar days.
ii. Notwithstanding that someone else may be performing Employee's
tasks while Employee is disabled, Employee shall continue to receive the Base
Salary in accordance with Section 4.a and benefits in accordance with Section
4.d to the extent permitted by the then-current terms of the applicable benefit
plans, until Employee becomes eligible for disability income benefits under the
Company's disability income plan or until the termination of Employee's
employment, whichever occurs first. While receiving disability income payments
under the Company's disability income plan, Employee shall not be entitled to
receive any Base Salary under Section 4.a, but shall continue to participate in
Company benefit plans in accordance with Section 4.d (to the extent permitted by
the then-current terms of such plans) until the termination of Employee's
employment.
iii. If any question arises as to whether during any period Employee
is disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, Employee, at the request of the Company, shall
submit to a medical examination by a physician reasonably selected by the
Company to determine whether Employee is so disabled and such determination
shall for the purposes of this Agreement be conclusive of the issue. If such
question arises and Employee fails to submit to such medical examination, the
Company's determination of the issue shall be binding on Employee.
2
<PAGE>
c. By the Company for Cause. The Company may terminate Employee's
------------------------
employment hereunder for Cause at any time upon written notice to Employee
setting forth in reasonable detail the nature of such Cause. The following, as
determined by the Board, shall constitute Cause for termination by the Company:
i. Employee's willful failure to perform (other than by reason of
disability), or gross negligence in the performance of, Employee's duties and
responsibilities to the Company or any of its Affiliates; or
ii. Material breach by Employee of any provision of this Agreement or
the Employee Confidentiality and Inventions Agreement dated as of January 29,
1996 between the Company and Employee (the "Confidentiality and Inventions
Agreement"); or
iii. Fraud, embezzlement or other material dishonesty on the part
of Employee with respect to the Company or any of its Affiliates or conviction
of or plea of nolo contendere by Employee to a felony or any crime involving
moral turpitude; or
iv. Willful failure of Employee to meet specific performance
criteria, reasonably appropriate to Employee's position, as such criteria are
approved by the President from time to time.
Upon the giving of notice of termination of Employee's employment hereunder for
Cause, the Company shall have no further obligation or liability to Employee,
other than for Base Salary earned and unpaid at the date of termination.
For purposes of this Agreement, no act, or failure to act, on Employee's
part shall be considered "willful" unless such act, or failure to act, was not
in good faith and was without reasonable belief that Employee's action or
omission was in the best interest of the Company.
d. By the Company Other than for Cause. The Company may terminate
-----------------------------------
Employee's employment hereunder other than for Cause at any time upon written
notice to Employee. If such termination occurs either before or after a Change
of Control Period (as defined in Section 5.g) and provided that Employee
executes a release of claims in the form attached hereto and marked "A" (the
"Employee Release") and does not revoke the same within the period stated in
Employee Release, then the Company shall (i) pay Employee, within ten (10)
business days after such termination, a lump sum payment equal to twelve (12)
months' Base Salary at the rate in effect on the date of termination and (ii)
shall pay the full cost of Employee's continued participation in the Company's
group health and dental insurance plans for so long as Employee remains entitled
to continue such participation under the federal law known as "COBRA" or any
successor law and the applicable plan terms.
e. By Employee for Good Reason. Employee may terminate employment
---------------------------
hereunder for Good Reason at any time upon written notice to the Company setting
forth in reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by Employee:
i. Failure of the Company to continue Employee in the position
specified in the first sentence of Section 3 or in such other position to which
Employee may subsequently be assigned with Employee's consent; or
ii. Material diminution in the nature or scope of Employee's
responsibilities, duties or authority; provided, however, that the Company's
failure to continue Employee in the position of director or officer of any of
its Affiliates and any diminution of the business of the Company or any of its
Affiliates, including without limitation the sale or transfer of any or all of
the assets of the Company or any of its Affiliates, shall not constitute "Good
Reason"; or
iii. Permanent transfer of Employee, without Employee's consent, to
a work site located such that Employee's commute to and from work is more than
fifty (50) miles each way; or
3
<PAGE>
iv. A decrease in the Base Salary of more than fifteen percent (15%)
or the material failure of the Company to provide Employee benefits in
accordance with the terms of Section 4.b or 4.d hereof.
In the event of termination in accordance with this Section 5.e, the Company
shall provide Employee pay and benefits in accordance with Section 5.d, provided
that Employee executes the Employee Release and does not revoke the same within
the period stated in the Employee Release.
f. By Employee Other than for Good Reason. Employee may terminate
--------------------------------------
employment hereunder at any time upon thirty (30) days' prior written notice to
the Company.
g. Upon a Change of Control.
------------------------
i. If a Change of Control occurs and if on the date of, or within
one year following, such Change of Control (a "Change of Control Period"), the
Company terminates Employee's employment with the Company other than for Cause
or Employee terminates his employment with the Company for Good Reason and, in
either event, Employee executes the Employee Release and does not revoke the
same within the period stated in the Employee Release, then, in lieu of any
payments to or on behalf of Employee under Section 5.c or 5.e, the Company (A)
shall pay Employee, within ten (10) business days after such termination, a lump
sum payment equal to two times the greater of (i) the sum of the Base Salary and
the amount of any Bonus paid or payable during the remainder of the Term or (ii)
the sum of the Base Salary and the amount of any Bonus paid or payable to
Employee during the twelve (12) months preceding the month during which such
termination occurs and (B) shall pay the full cost of Employee's continued
participation in the Company's group health and dental insurance plans for so
long as Employee remains entitled to continue such participation under COBRA or
any successor law and the applicable plan terms.
ii. Notwithstanding the foregoing, the payments and benefits to which
Employee would be entitled pursuant to Section 5.g.i as a result of a Change of
Control shall be reduced to the maximum amount for which the Company will not be
limited in its deduction pursuant to Section 280G of the Internal Revenue Code
or any successor provision. Any such reduction shall be applied to the amounts
due under Section 5.g.i as Employee may reasonably determine or, if Employee
fails to make such determination promptly following notice from the Company, as
the Company may reasonably determine.
The limitations of the immediately preceding paragraph shall not apply
if (A) the present value, net of all federal, state and other income and excise
taxes, of all payments and benefits to which Employee is entitled hereunder
without such limitations exceeds (B) the present value, net of all federal,
state and other income and excise taxes, of all payments and benefits to which
Employee would be entitled hereunder if such limitations applied.
iii. A Change of Control shall be deemed to take place if after the
Effective Date: (A) within twenty-four (24) months after the commencement of a
tender offer or exchange offer for voting securities of the Company (other than
by the Company or any of its Affiliates), the individuals who were directors of
the Company immediately prior to the commencement of such offer shall cease to
constitute a majority of the Board; or (B) the stockholders of the Company
approve a merger or consolidation of the Company with any Person, 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) more than seventy-five percent (75%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (C) there occurs
a closing of a sale or other disposition by the Company of all or substantially
all of the assets of the Company other than to any of its Affiliates or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates.
iv. The Company shall promptly reimburse Employee for the amount of
all reasonable attorneys' fees and expenses incurred by Employee in seeking to
obtain or enforce any right or benefit provided Employee under this Section 5.g.
4
<PAGE>
h. Post-Agreement Employment. If Employee remains in the employ of the
-------------------------
Company or any of its Affiliates following the end of the Term, then such
employment shall be at will.
6. Effect of Termination of Employment. The provisions of this Section 6
-----------------------------------
shall apply to any termination of employment hereunder, whether due to the
expiration of the Term or pursuant to Section 5 or otherwise.
a. Payment by the Company of any Base Salary, pro-rated Bonus or
contributions to the cost of Employee's continued participation in the Company's
group health and dental plans or of out placement services that may be due
Employee in each case under the applicable termination provision of Section 5
hereof shall constitute the entire obligation of the Company to Employee.
Employee shall promptly give the Company notice of all facts necessary for the
Company to determine the amount and duration of its obligations in connection
with any termination pursuant to Section 5.d, 5.e or 5.g.
b. Except for medical and dental plan coverage continued pursuant to
Section 5.d, 5.e or 5.g, benefits shall terminate pursuant to the term of the
applicable benefit plans based on the date of termination of Employee's
employment without regard to any continuation of Base Salary or other payment to
Employee following such date of termination.
c. The obligations of Employee set forth in Sections 4.e, 7 and 10 and in
the Confidentiality and Inventions Agreement shall survive the termination of
Employee's employment hereunder. Employee recognizes that, except as expressly
provided in Section 5.d, 5.e or 5.g, as applicable, no compensation is earned
after termination of employment.
7. Restricted Activities. In consideration of the terms of this Agreement,
---------------------
Employee agrees that some restrictions on Employee's activities during and after
employment are necessary to protect the goodwill, confidential information and
other legitimate interests of the Company and its Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company and its Affiliates have worldwide business and commercial implications
for the Company and its Affiliates, without geographic limit. In consideration
of the payments set forth herein, Employee agrees not to engage, directly or
indirectly, for a period of six (6) months following the termination of his
employment for any reason whatsoever (the "Non-Competition Period"), in any line
of business which competes in the United States with a line of business carried
on by the Company or any of its Affiliates on the date of such termination, or
any line of business in which the Company or any of its Affiliates, as of the
date of such termination, has made definite plans to become engaged in the
United States. Employee will be deemed to have engaged in such line of business
if he participates therein as an employee, consultant, partner, proprietor or
investor (provided that Employee shall not be deemed to have engaged in such
line of business solely by reason of any passive equity investment in any entity
that does not exceed 5% of the outstanding capital stock of such entity).
b. Employee agrees that he shall not, during the Non-Competition Period,
engage in any activity for the purpose of (i) inducing, diverting or taking away
any employee of the Company or any of its Affiliates or (ii) inducing, diverting
or taking away any consultant of the Company in a manner which would deprive the
Company or any of its Affiliates of the consultant's services.
8. Enforcement of Covenants. Employee acknowledges and agrees that, were
------------------------
Employee to breach any of the covenants contained in Section 7 or in the
Confidentiality and Inventions Agreement, the damage to the Company and its
Affiliates would be irreparable, that the damage would be extremely difficult to
ascertain, and that money damages alone would not be an adequate remedy.
Accordingly, Employee agrees that the Company and its Affiliates and their
successors and assigns, in addition to any other remedies available to them,
shall be entitled to preliminary and permanent injunctive relief against any
breach or threatened breach by Employee of any of said covenants, without having
to post bond. The parties further agree that, if any provision of Section 7 or
of the Confidentiality and Inventions Agreement shall be determined by any court
of competent jurisdiction to be
5
<PAGE>
unenforceable by reason of its being extended over too great a time, too large a
geographic area or too great a range of activities, such provision shall be
deemed to be modified to permit its enforcement to the maximum extent permitted
by applicable law.
9. Conflicting Agreements. Employee hereby represents and warrants that the
----------------------
execution of this Agreement and the performance of Employee's obligations
hereunder will not breach or be in conflict with any other agreement to which
Employee is a party or is bound and that Employee is not now subject to any
covenants against competition, covenants of confidentiality or similar covenants
with any person or entity other than the Company that would affect the
performance of Employee's obligations hereunder. Employee shall not disclose to
or use on behalf of the Company any proprietary information of any third party
without such party's consent.
10. Litigation Assistance. Employee covenants and agrees that he shall, upon
---------------------
reasonable notice, during the Term and for three (3) full years after the
expiration or termination of this Agreement, furnish such information and
assistance to the Company as may be reasonably required by the Company in
connection with any litigation in which it or any of its Affiliates is, or may
become, a party. The Company shall reimburse Employee for all reasonable out-
of-pocket expenses incurred by Employee in furnishing such information and
assistance.
11. Indemnification. The Company shall indemnify and hold Employee harmless to
---------------
the extent provided in its then-current Articles of Organization or By Laws.
Employee agrees to promptly notify the Company of any actual or threatened claim
arising out of or as a result of Employee's employment with the Company.
12. Withholding. All payments made by the Company under this Agreement shall
-----------
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
13. Assignment. Neither the Company nor Employee may make any assignment of
----------
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
Employee if the Company shall hereafter effect a reorganization, consolidate
with or merge into any entity or transfer all or substantially all of its
properties or assets to any entity. This Agreement shall inure to the benefit
of and be binding upon the Company and Employee, their respective successors,
executors, administrators, heirs and permitted assigns.
14. Severability. The terms of this Agreement are severable. If any portion
------------
or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this
Agreement, or the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable, shall
not be affected thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
15. Notices. Any and all notices, requests, demands and other communications
-------
provided for by this Agreement shall be in writing and shall be effective when
delivered in person or deposited in the United States mail, postage prepaid,
registered or certified, or by recognized overnight courier and addressed to
Employee at Employee's last known address on the books of the Company or, in the
case of the Company, at its principal place of business, attention of the
President, or to such other address as either party may specify by written
notice to the other actually received.
16. Entire Agreement; Amendment and Waiver. This Agreement, together with the
--------------------------------------
Confidentiality and Inventions Agreement and the Relocation Agreement, each of
which is incorporated herein by reference, constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Employee's employment, other than the Confidentiality and Inventions Agreement
and the Relocation Agreement. This Agreement may be amended or modified only by
a written instrument signed by Employee and by an expressly authorized
representative of the Company. Employee and the Company agree that their
respective rights and remedies against the other are cumulative and that they
may be exercised singularly or collectively, successively or concurrently. A
waiver of any violation or failure to enforce any provision of this Agreement
shall not constitute a waiver of any rights under
6
<PAGE>
this Agreement with respect to any other or continued violation of any provision
of this Agreement. Any waiver shall be enforceable only if in writing and signed
by an expressly authorized representative of the Company and by Employee.
17. Headings, References and Counterparts. The headings and captions in this
-------------------------------------
Agreement are for convenience only and in no way define or describe the scope or
content of any provision of this Agreement. References in this Agreement to
Sections are references to the specified Sections of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
18. Governing Law. This is a Massachusetts contract and shall be construed and
-------------
enforced under and be governed in all respects by the laws of the Commonwealth
of Massachusetts, USA, without regard to the conflict of laws principles
thereof. Employee and the Company consent to the exclusive jurisdiction of the
state and federal courts of the Commonwealth of Massachusetts, USA.
Employee acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon Employee
pursuant to Section 7 and pursuant to the Confidentiality and Inventions
Agreement. Employee agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, effective
as of the Effective Date.
EMPLOYEE: FTP SOFTWARE, INC.
By:
- ---------------------------- --------------------------------------------
John J. Warnock, Jr. Title:
-----------------------------------------
7
<PAGE>
EXHIBIT 10.20
[COMPOSITE]
FTP SOFTWARE, INC.
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(INCORPORATING AMENDMENT NO. 1 DATED JUNE 2, 1995
AND AMENDMENT NO. 2 DATED AUGUST 22, 1996)
1. PURPOSE. The purpose of this 1993 Non-Employee Directors' Stock
-------
Option Plan (the "Plan") is to advance the interests of FTP Software Inc. (the
"Company") by enhancing the ability of the Company to attract and retain non-
employee directors who are in a position to make significant contributions to
the success of the Company and to reward directors for such contributions
through ownership of shares of the Company's Common Stock (the "Stock").
2. ADMINISTRATION. The Plan shall be administered by a committee (the
--------------
"Committee") of the Board of Directors (the "Board") of the Company designated
by the Board for that purpose. Unless and until a Committee is appointed, the
Plan shall be administered by the entire Board, and references in the Plan to
the "Committee" shall be deemed references to the Board. The Committee shall
have authority, not inconsistent with the express provisions of the Plan: (a)
to (i) issue options to purchase Stock granted in accordance with the formula
set forth in Section 4.a hereof to Eligible Directors (as defined below) and
(ii) grant additional options to purchase Stock to Eligible Directors pursuant
to Section 4.b hereof (an option granted under either Section 4.a or 4.b hereof
is referred to herein as an "Option"); (b) to prescribe the form or forms of
instruments evidencing awards and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan. Such determinations of the
Committee shall be conclusive and shall bind all parties.
3. ELIGIBILITY OF DIRECTORS FOR STOCK OPTIONS. Directors eligible to
------------------------------------------
receive Options ("Eligible Directors") shall be those directors who are not, at
the time they become an Eligible Director, employees of the Company or of any
subsidiary of the Company and (i) who are directors on the Effective Date of
---
this Plan (which shall be the eligibility date for such directors) or (ii) who
are first elected a director of the Company after the Effective Date of this
Plan (which election date shall be the eligibility date for any such director).
4. GRANT OF OPTIONS; EXERCISE PRICE.
--------------------------------
a. Each individual who is an Eligible Director shall, on his or her
eligibility date as determined under Section 3, automatically be granted an
Option to purchase 30,000 shares of Stock of the Company (subject to adjustment
as provided in Sections 5 and 10) at an exercise price equal to the Fair Market
Value of the Stock on the effective date of grant; provided,
--------
<PAGE>
however, that if an individual who becomes an Eligible Director after the
- -------
Effective Date of this Plan is elected to or appointed to less than a full
three-year term of office, the number of shares subject to such Option shall be
reduced to that number obtained by multiplying 30,000 by a fraction, the
numerator of which is the number of days in the term of office for which such
Eligible Director is elected or appointed and the denominator of which is 1,096.
Thereafter, on each date that an Eligible Director is elected to a new three-
year term of office, such Eligible Director shall automatically be granted an
Option to purchase 30,000 shares of Stock of the Company (subject to adjustment
as provided in Sections 5 and 10) at an exercise price equal to the Fair Market
Value of the Stock on the effective date of grant.
b. The Committee may, at such time or times as it may choose, grant
additional Options to any Eligible Director, with the number of shares of Stock
subject to each such Option and the terms and conditions of each such Option to
be determined by the Committee subject to the other provisions of this Plan
(other than Sections 4.a and 7.a hereof). The exercise price of each such
Option shall not be less than the Fair Market Value of the Stock on the
effective date of grant.
c. All Options granted under this Plan shall expire on the tenth
anniversary of the effective date of grant.
5. NUMBER OF SHARES. The number of shares of Stock of the Company which
----------------
may be issued upon the exercise of Options granted under the Plan, including
shares forfeited pursuant to Section 7, shall not exceed 500,000 in the
aggregate, subject to increase under Section 10, which increases and appropriate
adjustments as a result thereof shall be made by the Committee, whose
determination shall be binding on all persons.
6. STOCK TO BE DELIVERED. Shares of Stock to be delivered pursuant to an
---------------------
Option granted under this Plan may constitute an original issue of authorized
Stock or may consist of previously issued Stock acquired by the Company, as
shall be determined by the Board. The Board and the proper officers of the
Company shall take any appropriate action required for such delivery. No
fractional shares shall be delivered under the Plan.
The Company will not be obligated to deliver any shares of Stock
pursuant to the Plan (a) until all conditions of the Option have been satisfied,
(b) until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulations have been complied with, (c) if the outstanding Stock
is at the time listed on NASDAQ or any other stock exchange, until the shares to
be delivered have been listed or authorized to be listed on NASDAQ or such other
exchange upon official notice of notice of issuance, and (d) until all other
legal matters in connection with the issuance and delivery of such shares have
been approved by the Company's counsel. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Options, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
2
<PAGE>
If an Option is exercised by the Eligible Director's legal
representative, the Company will be under no obligation to deliver Stock
pursuant to such exercise until the Company is satisfied as to the authority of
such representative.
7. EXERCISABILITY; EXERCISE; PAYMENT OF EXERCISE PRICE.
---------------------------------------------------
a. All Options granted under Section 4.a of the Plan shall become
exercisable as to 10,000 shares after one year from the effective date of the
grant, as to an additional 10,000 shares after two years from the effective date
of grant, and as to the final 10,000 shares after three years from the effective
date of grant so that the Options are 100% exercisable three years from the
effective date of the grant; provided, however, that an Option granted on the
-------- --------
Effective Date of this Plan shall become exercisable as to 10,000 shares at the
scheduled end of the term of office of the Eligible Director holding such
Option, as to an additional 10,000 shares on the later of one year prior to the
scheduled end of the term of office of such Eligible Director or the Effective
Date, and as to the remaining 10,000 shares, on the later of two years prior to
the scheduled end of the term of office of such Eligible Director or the
Effective Date; and, provided, further, that if an Eligible Director is granted
-------- -------
an Option for fewer than 30,000 shares as a result of the proviso to the first
sentence of Section 4.a, such Option shall become exercisable as follows: at
the scheduled end of the term of office of such Eligible Director, the lesser of
10,000 shares or the full amount of the Option; if the scheduled term of office
exceeds one year, at one year prior to the scheduled end of such term of office,
the lesser of 10,000 shares or the remainder of such Option; if the scheduled
term of office exceeds two years, at two years prior to the scheduled end of
such term of office, the remainder of such Option.
b. Each Option granted under Section 4.b hereof shall become exercisable
at such time or times, and on such conditions, as the Committee may specify;
provided, however, that if the Committee does not so specify, one-third of the
- -------- -------
shares subject to such Option may be purchased commencing one year after the
effective date of grant, and an additional one-third of such shares may be
purchased commencing on each of the second and third anniversaries of the
effective date of grant.
c. The Committee may at any time and from time to time (i) accelerate the
time at which all or any part of an Option may be exercised, (ii) provide for
the acceleration of the exercisability of an Option upon the occurrence of
certain events and (iii) extend the time by which an Option must be exercised
(e.g., following death or termination) up to the latest date by which such
Option could have been exercised without regard to Section 8 hereof. The
Committee may reduce the exercise price of an Option at any time after the time
of grant, but in no event may the exercise price paid for Stock which is part of
an original issue of authorized Stock be less than the par value per share of
the Stock.
d. Any exercise of an Option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any documents
required by the Committee and (2) payment in full as provided below for the
number of shares for which the Option is exercised.
3
<PAGE>
e. The exercise price of Stock purchased on exercise of an Option must be
paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) through the delivery of shares
of Stock which have been outstanding and held by the Option holder for at least
six months and which have a Fair Market Value on the last business day preceding
the date of exercise equal to the exercise price, or (3) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (4) by any combination of
the permissible forms of payment.
f. To the extent shares of Stock covered under an Option are not
delivered because the Option lapses or is terminated, such forfeited shares may
be regranted in another Option within the limits set forth in Section 5.
8. TERMINATION OF OPTIONS.
----------------------
a. If an Eligible Director ceases to be a director by reason of death or
total and permanent disability (as determined by the Committee), the following
will apply:
All Options held by the Eligible Director that are not exercisable on
the thirtieth day after termination of the Eligible Director's status as a
director will terminate as of such date. All Options that are exercisable as of
said thirtieth day will continue to be exercisable until the earlier of (1) the
first anniversary of the date on which the Eligible Director's status as a
director ended or (2) the date on which the Option would have terminated had the
Eligible Director remained a director. If the Eligible Director has died or is
totally or permanently disabled, the Option may be exercised within such limits
by the Eligible Director's legal representative.
b. If an Eligible Director's service with the Company terminates for any
reason other than death or incapacity as provided above, all options held by the
director that are not then exercisable shall terminate. Options that are
exercisable on the date of such termination shall continue to be exercisable
until the earlier of (1) three months thereafter or (2) the date on which the
Option would have terminated had the director remained an Eligible Director, and
after completion of that period, such Options shall terminate to the extent not
previously exercised, expired or terminated.
c. Certain Corporate Transactions. In the event of a consolidation or
------------------------------
merger in which the Company is not the surviving corporation or which results in
the acquisition of substantially all the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert, or
in the event of the sale or transfer of substantially all the Company's assets
or a dissolution or liquidation of the Company (a "covered transaction"), all
outstanding Options under the Plan will terminate as of the effective date of
the covered transaction, provided that each such outstanding Option not
otherwise exercisable shall become immediately exercisable in full 20 days prior
to the effective date thereof.
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9. GENERAL PROVISIONS.
------------------
a. Documentation of Options. Options will be evidenced by written
------------------------
instruments prescribed by the Committee from time to time. Such instruments may
be in the form of agreements, to be executed by both an Eligible Director and
the Company, or certificates, letters or similar instruments, which need not be
executed by an Eligible Director but acceptance of which will evidence agreement
to the terms thereof.
b. Rights as a Stockholder. An option holder shall not have the rights
-----------------------
of a stockholder with respect to Options under the Plan except as to Stock
actually received by him or her under the Plan.
c. Tax Withholding. The Eligible Director or other appropriate person
---------------
shall remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Committee with
regard to such requirements, prior to the delivery of any Stock. If and to the
extent that such withholding is required, the Committee may permit the Eligible
Director or such other person to elect at such time and in such manner as the
Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Stock having a value calculated to
satisfy the withholding requirement.
d. Nontransferability of Options. No Option may be transferred other
-----------------------------
than by will or by the laws of descent and distribution, and during a director's
lifetime an Option may be exercised only by the director (or, in the event of
the director's incapacity, the person or persons legally appointed to act on the
director's behalf).
10. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
------------------------------------------------
a. In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution to common stockholders other than normal cash dividends, the
Committee will make any appropriate adjustments to the maximum number of shares
that may be delivered under the Plan under Section 5 above.
b. In any event referred to in paragraph (a), the Committee will also
make any appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, exercise
prices relating to Options and any other provision of Options affected by such
change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan.
11. FAIR MARKET VALUE. For purposes of the Plan, Fair Market Value of a
-----------------
share of Stock on any date will be the average of the bid and asked prices in
the over-the-counter market with respect to such Stock, as reported by the
National Association of Securities Dealers, Inc.
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("NASD") Automated Quotations System or such other similar system then in use
(or by the appropriate equivalent closing price if the Stock is then listed on
any stock exchange or is included in the NASD National Market System), on that
date; or, if on any such a date such Stock is not quoted by any such
organization, the average of the closing bid and asked prices with respect to
such Stock, as furnished by a professional market maker making a market in such
Stock selected by the Committee; or if such prices are not available, the fair
market value of such Stock as of such date as determined in good faith by the
Committee; provided, however, that the Fair Market Value of shares subject to
-------- -------
Options granted on the Effective Date shall be the price per share to the public
of the Common Stock issued in the Company's IPO.
12. EFFECTIVE DATE AND TERM. This Plan, having been approved by the Board
-----------------------
of Directors on September 1, 1993, shall become, in accordance with the terms of
the approving vote of the Board, effective on the effectiveness of the Company's
first Registration Statement on Form S-1 for the registration of the sale of its
Common Stock under the Securities Act of 1933, as amended ("IPO") (the
"Effective Date"), subject to approval of this Plan by vote of a majority of the
shareholders of the Company present and eligible to vote on the question at an
annual or special meeting of stockholders held not later than September 1, 1994.
Options may be granted under the Plan prior to the date of stockholder approval,
and options so granted shall be effective on the effective date of grant subject
to stockholder approval of the Plan as provided in this Section. No Options may
be awarded under this Plan after November 1, 2003, but the Plan shall continue
thereafter while previously awarded Options remain subject to the Plan.
13. EFFECT OF TERMINATION, AND AMENDMENT. Neither adoption of the Plan
------------------------------------
nor the grant of Options to an Eligible Director shall confer upon any person
any right to continued status as a director with the Company or any subsidiary
or affect in any way the right of the Company or subsidiary to terminate a
director relationship at any time or affect the Company's right to grant to such
director options or other stock awards that are not subject to the Plan, to
issue to such director stock as a bonus or otherwise, or to adopt other plans or
arrangements under which stock may be issued to directors. The Committee may at
any time terminate the Plan as to any further grants of Options. The Committee
may at any time or times amend the Plan for any purpose which may at the time be
permitted by law.
As adopted by the Board of Directors on September 1, 1993.
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Exhibit 10.21
FTP SOFTWARE, INC.
1996 EXECUTIVE EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Executive Equity Incentive Plan (the "Plan") is to
advance the interests of FTP Software, Inc. (the "Company") by enhancing its
ability to attract and retain executive officers and encourage them to make
significant contributions to the success of the Company and its subsidiaries
through ownership of shares of the Company's common stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant awards hereunder ("Awards") in the form of Options, Stock Appreciation
Rights, Restricted Stock and Unrestricted Stock Awards, or combinations thereof,
all as defined and more fully described below.
2. ADMINISTRATION
The Plan will be administered by a committee (the "Committee") of the Board
of Directors (the "Board of Directors" or the "Board") of the Company. The
Committee shall consist of at least two directors, each of whom shall be a "Non-
Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). A majority of the
members of the Committee shall constitute a quorum, and all determinations of
the Committee shall be made by a majority of its members. Any determination of
the Committee under the Plan may be made without notice or meeting of the
Committee by a writing signed by a majority of the Committee members.
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to: (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award; (e) waive compliance by the
holder of an Award with any obligations to be performed by such holder under the
Award and waive any term or condition of an Award; (f) amend or cancel an
existing Award in whole or in part (and if an Award is canceled, grant another
Award in its place on such terms as the Committee shall specify), except that
the Committee may not, without the consent of the holder of an Award, take any
action under this clause with respect to such Award if such action would
adversely affect the rights of such holder; (g) prescribe the form or forms of
instruments that are required or deemed appropriate under the Plan, including
any written notices and elections required of Participants (as defined below),
and change such forms from time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any
<PAGE>
questions and settle all controversies and disputes that may arise in
connection with the Plan. Such determinations and actions of the Committee, and
all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, shall be conclusive and shall
bind all parties. Nothing in this paragraph shall be construed as limiting the
power of the Committee to make adjustments under Section 7.3 or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which it is approved by the
stockholders of the Company.
No Award may be granted under the Plan after the tenth anniversary of the
approval of the Plan by the stockholders of the Company, but Awards previously
granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6 below, the maximum
aggregate number of shares of Stock that may be delivered under the Plan is
1,500,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award payable
in Stock or cash is satisfied in cash rather than Stock, the number of shares of
Stock as to which such Award was not exercised or for which cash was substituted
shall be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock may be delivered under the Plan.
Subject to Sections 7.3 and 8.6(a): (i) the maximum aggregate number of
shares of Stock as to which Options may be granted under the Plan to any
Participant during any calendar year is 1,000,000; (ii) the maximum aggregate
number of shares of Stock as to which Stock Appreciation Rights may be granted
under the Plan to any Participant during any calendar year is 1,000,000; and
(iii) the maximum aggregate number of shares of Stock as to which Restricted
Stock Awards may be granted under the Plan is 100,000. For purposes of this
paragraph, except as otherwise provided in regulations or other guidelines
issued under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), any repricing of an Option or Stock Appreciation Right shall be
treated as a new grant and shall count against the applicable limit set forth in
this paragraph.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") are
employees of the Company or any of its subsidiaries who are identified from time
to time by the Board of Directors as executive officers of the Company. A
"subsidiary" for purposes of the Plan shall be a corporation in which the
Company owns, directly or indirectly, stock possessing 50% or more
2
<PAGE>
of the total combined voting power of all classes of stock. A "parent" of
another corporation for purposes of the Plan shall be any corporation which
owns, directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock of such other corporation.
6. TYPES OF AWARDS
6.1. OPTIONS.
(A) NATURE OF OPTIONS. An Option is an Award entitling the holder on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Code (any
Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not incentive stock options, may
be granted under the Plan.
(B) EXERCISE PRICE. The exercise price of an Option shall be determined by
the Committee subject to the following:
(1) The exercise price of an ISO shall not be less than 100% (110% in the
case of an ISO granted to a ten-percent shareholder) of the fair market value of
the Stock subject to the Option, determined as of the time the Option is
granted. A "ten-percent shareholder" is any person who at the time of grant
owns, directly or indirectly, or is deemed to own by reason of the attribution
rules of Section 424(d) of the Code, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any of its
subsidiaries.
(2) In no case may the exercise price paid for Stock which is part of an
original issue of authorized Stock be less than the par value per share of the
Stock.
(3) The Committee may reduce the exercise price of an Option at any time
after the time of grant, but in the case of an Option originally awarded as an
ISO, only with the consent of the Participant.
(C) DURATION OF OPTIONS. The latest date on which an Option may be
exercised shall be the tenth anniversary (fifth anniversary, in the case of an
ISO granted to a ten-percent shareholder) of the date on which the Option was
granted, or such earlier date as may have been specified by the Committee at the
time the Option was granted.
(D) EXERCISE OF OPTIONS. Options granted under any single Award shall
become exercisable at such time or times, and on such conditions, as the
Committee may specify; provided, however, that if the Committee does not so
specify, 25% of the shares subject to the Award may be purchased commencing one
year after the date of grant, and an additional 25% of such shares may be
purchased commencing on the second, third and fourth anniversaries of the date
of grant. The Committee may at any time and from time to time (i) accelerate
the time at which all or any part of an Option may be exercised, (ii) provide
for the acceleration of the
3
<PAGE>
exercisability of an Option upon the occurrence of certain events, and (iii)
extend the time by which an Option must be exercised (e.g., following death or
termination) up to the latest date by which such Option could have been
exercised without regard to Section 7; provided, that an extension of an ISO
under (iii) shall not be effective without the consent of the holder of the ISO.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (i) any documents
required by the Committee and (ii) payment in full in accordance with paragraph
(e) below for the number of shares for which the Option is exercised.
(E) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must be
paid for as follows: (i) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (ii) if so permitted by the
instrument evidencing the Option (or in the case of an Option which is not an
ISO, by the Committee at or after grant of the Option), (A) through the delivery
of shares of Stock which have been outstanding for at least six months (unless
the Committee expressly approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, or (B) by delivery of a promissory note of the Option holder to
the Company, payable on such terms as are specified by the Committee, or (C) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (D) by
any combination of the foregoing permissible forms of payment; provided, that if
the Stock delivered upon exercise of the Option is an original issue of
authorized Stock, at least so much of the exercise price as represents the par
value of such Stock must be paid other than by the Option holder's promissory
note or personal check.
(F) FAIR MARKET VALUE. For all purposes under this Plan, "fair market
value" shall mean with respect to the Common Stock and at any date, (i) the
reported closing price of such stock on the Nasdaq National Market or New York
Stock Exchange or other established stock exchange on such date, or if no sale
of such stock shall have been made on the Nasdaq National Market or such an
exchange on that date, on the preceding date on which there was such a sale,
(ii) if such stock is not then quoted on the Nasdaq National Market and is not
then listed on such an exchange, the average of the closing bid and asked prices
per share for such stock in the over-the-counter market as quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") on such date, or (iii) if such stock is not then listed on such an
exchange or quoted on NASDAQ or the Nasdaq National Market, an amount determined
in good faith by the Committee in its sole discretion.
6.2. STOCK APPRECIATION RIGHTS.
(A) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
("SAR") is an Award entitling the holder on exercise of the Right to receive an
amount, in cash or Stock or a combination thereof (such form to be determined by
the Committee), determined in whole or in part by reference to appreciation in
Stock value.
4
<PAGE>
In general, a Stock Appreciation Right entitles the Participant to receive,
with respect to each share of Stock as to which the Right is exercised, the
excess of the share's fair market value on the date of exercise over its fair
market value on the date the Right was granted.
(B) GRANT OF STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted only in tandem with Options granted under the Plan. A Stock
Appreciation Right granted in tandem with an Option which is not an ISO may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an ISO may be granted only at the time the Option
is granted.
(C) RULES APPLICABLE TO SAR AWARDS.
(1) The Stock Appreciation Right shall be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and shall be
exercisable in accordance with the procedure required for exercise of the
related Option.
(2) The Stock Appreciation Right shall terminate and no longer be
exercisable upon the termination or exercise of the related Option, except that
a Stock Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of shares as to
which the related Option has been exercised or has terminated exceeds the number
of shares not covered by the Stock Appreciation Right.
(3) The Option shall terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(4) The Stock Appreciation Right shall be transferable only with the
related Option.
(5) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the fair market value of the Stock subject to the Option
exceeds the exercise price of such Option.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(A) NATURE OF RESTRICTED STOCK AWARD. A Restricted Stock Award entitles
the holder to acquire, for a purchase price specified by the Committee (but in
no event less than par value), shares of Stock subject to the restrictions
described in paragraph (d) below ("Restricted Stock").
(B) ACCEPTANCE OF AWARD. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price of the shares
covered by the Award. Payment may be by certified or bank check or other
instrument acceptable to the Committee.
5
<PAGE>
(C) RIGHTS AS A STOCKHOLDER. A Participant who receives Restricted Stock
shall have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee otherwise determines, certificates evidencing
shares of Restricted Stock shall remain in the possession of the Company until
such shares are free of all restrictions under the Plan.
(D) RESTRICTIONS. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant dies or otherwise suffers a
Status Change (as defined in Section 7.2 below) for any reason, must be offered
to the Company for purchase at the price originally paid for the Stock. These
restrictions shall lapse at such time or times, and on such conditions, as the
Committee may specify. The Committee may at any time accelerate the time at
which the restrictions on all or any part of the shares of Restricted Stock
shall lapse. Upon lapse of all restrictions, Stock shall cease to be restricted
for purposes of the Plan.
(E) NOTICE OF ELECTION. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(F) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
the Stock delivered pursuant to the Award will be Restricted Stock.
(G) UNRESTRICTED STOCK. The Committee may, in its sole discretion, approve
the sale to any Participant of shares of Stock free of restrictions under the
Plan for a price which is not less than the par value of the Stock.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. DEATH.
If a Participant dies, the following shall apply:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be exercised by
the Participant's executor or administrator or the person or persons to whom the
Option or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one-year period ending with the first
anniversary of the Participant's death (or such shorter or longer period as the
Committee may determine at any time), and shall terminate on the last day of
such period. In no event, however, shall an Option or Stock Appreciation Right
remain exercisable beyond the latest date on which it could have been exercised
without regard to this Section 7.1. Except as otherwise determined by the
Committee, all Options and Stock Appreciation Rights held by a Participant
immediately prior to death that are not then exercisable shall terminate at
death.
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<PAGE>
(b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant must be transferred to the Company upon the
Participant's death (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock shall be deemed
to be so transferred at such time without any further action by the Participant)
in accordance with Section 6.3(d) above.
7.2. TERMINATION OF SERVICE (OTHER THAN BY DEATH).
If a Participant ceases to be an Employee for any reason other than death
(such termination of the employment relationship being hereinafter referred to
as a "Status Change"), the following shall apply:
(a) Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the Status
Change. Any Options or SARs that were exercisable immediately prior to the
Status Change shall continue to be exercisable for a period of three months
following the date of such Status Change (or such longer period as the Committee
may determine at any time), and shall terminate on the last day of such period,
unless the Award provides by its terms for immediate termination in the event of
a Status Change or unless the Status Change results from a termination for cause
as determined by the Committee in its sole discretion, provided, however, if
such Status Change results from the Participant's permanent and total
disability, such three-month period shall be increased to a one-year period. In
no event, however, shall an Option or Stock Appreciation Right remain
exercisable beyond the latest date on which it could have been exercised without
regard to this Section 7.2. For purposes of this paragraph, a Status Change
shall not be deemed to have resulted by reason of (i) a bona fide leave of
absence approved for purposes of the Plan by the Committee, or (ii) a transfer
of employment between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary corporation of
such corporation) issuing or assuming an option in a transaction to which
Section 424(a) of the Code applies.
(b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant at the time of the Status Change must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock shall be deemed
to be so transferred at such time without any further action by the Participant)
in accordance with Section 6.3 above.
7.3. CERTAIN CORPORATE TRANSACTIONS.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to options hereunder are
changed into or exchanged for cash or property or securities not of the
Company's issue, or upon a sale of substantially all the property of the Company
to,
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<PAGE>
or the acquisition of stock representing more than eighty percent (80%) of
the voting power of the stock of the Company then outstanding by, another
corporation or person, the Plan shall terminate, and all options theretofore
granted hereunder shall terminate, unless provision be made in writing in
connection with such transaction for the continuance of the Plan and/or for the
assumption of options theretofore granted, or the substitution for such options
of options covering the stock of a successor employer corporation, or a parent
or a subsidiary thereof, with appropriate adjustments as to the number and kind
of shares and prices, in which event the Plan and options theretofore granted
shall continue in the manner and under the terms so provided. If the Plan and
unexercised options shall terminate pursuant to the foregoing sentence, all
persons entitled to exercise any unexercised portions of options then
outstanding shall have the right, at such time prior to the consummation of the
transaction causing such termination as the Company shall designate, to exercise
the unexercised portions of their options, including the portions thereof which
would, but for this Section 7.3, not yet be exercisable.
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which shall evidence agreement by the Participant
to the terms thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award shall
not give a Participant any rights as a stockholder; the Participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of the Stock issued under the Award.
However, the Committee may, on such conditions as it deems appropriate, provide
that a Participant will receive a benefit in lieu of cash dividends that would
have been payable on any or all Stock subject to the Participant's Award had
such Stock been outstanding from the date of grant of the Award. Without
limitation, the Committee may provide for payment to the Participant of amounts
representing such dividends, either currently or in the future, or for
investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restrictions from shares previously delivered under the
Plan (i) until all conditions of the applicable Award have been satisfied or
removed, (ii) until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with, (iii) if the
outstanding Stock is at the time listed on any stock exchange or the Nasdaq
National Market, until the shares to be delivered have been listed or authorized
to be listed on such exchange or such Market upon official notice of issuance,
and (iv) until all other legal matters in connection
8
<PAGE>
with the issuance and delivery of such shares have been approved by the
Company's counsel. If the sale of Stock issuable under the Plan has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and may require that the certificates evidencing such
Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company shall be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company shall withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee shall have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock.
If and to the extent that such withholding is required, the Committee may permit
the Participant or such other person to elect at such time and in such manner as
the Committee provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, shares of Stock having a value
calculated to satisfy the withholding requirement.
If at the time an ISO is exercised, the Committee determines that the
Company could be liable for withholding requirements with respect to a
disposition of any of the shares of Stock received upon exercise, the Committee
may require as a condition of exercise that the person exercising the ISO agree
(i) to inform the Company promptly of any disposition (within the meaning of
Section 424(c) of the Code) of Stock received upon exercise, and (ii) to give
such security as the Committee deems adequate to meet the potential liability of
the Company for the withholding requirements and to augment such security from
time to time in any amount reasonably deemed necessary by the Committee to
preserve the adequacy of such security.
8.5. NONTRANSFERABILITY OF AWARDS.
No Award (other than an Award in the form of an outright transfer of cash
or Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during a Participant's lifetime an Award requiring
exercise may be exercised only by him or her (or in the event of the
Participant's incapacity, the person or persons legally appointed to act on the
Participant's behalf).
9
<PAGE>
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after the
effective date of the Plan, the Committee shall make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan and,
subject to paragraph (c) of this Section 8.6, the other limitations set forth in
Section 4 above.
(b) In any event referred to in paragraph (a) of this Section 8.6, the
Committee shall also make any appropriate adjustments to the number and kind of
shares of stock or securities with respect to which Awards are then outstanding
or subsequently granted, any exercise prices relating to Awards and any other
provision of Awards affected by such change. The Committee may also make such
adjustments to take into account material changes in law or in accounting
practices or principles, mergers, consolidations, acquisitions, dispositions or
similar corporate transactions, or any other event, if it is determined by the
Committee that adjustments are appropriate to avoid distortion in the operation
of the Plan.
(c) In the case of ISOs, or for purposes of making adjustments to the per-
Participant limits set forth in the third paragraph of Section 4, the
adjustments described above in this Section 8.6 shall be made only to the extent
consistent with continued qualification of the option under Section 422 of the
Code (in the case of an ISO) or the rules under Section 162(m) of the Code (in
the case of the limitations set forth in the third paragraph of Section 4).
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards shall confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or any
subsidiary to terminate an employment relationship. Except as specifically
provided by the Committee in any particular case, the loss of existing or
potential profit in Awards granted under the Plan will not constitute an element
of damages in the event of termination of an employment relationship even if the
termination is in violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock, the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
10
<PAGE>
9. EFFECT, AMENDMENT, SUSPENSION AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant shall
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Company may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate or suspend the Plan as to any further grants of any or all types
of Awards, provided that (except to the extent expressly required or permitted
by the Plan) no such amendment will, without the approval of the stockholders of
the Company, effectuate a change for which stockholder approval is required by
the rules of the National Association of Securities Dealers, Inc. applicable to
the Company.
As adopted by the Board of Directors of the Company on July 22, 1996 and by the
stockholders of the Company on August 22, 1996.
11
<PAGE>
EXHIBIT 11
FTP SOFTWARE, INC.
WEIGHTED SHARES USED IN COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
---------------- -----------
FOR THE PERIOD ENDED SEPTEMBER 30, 1996:
<S> <C> <C>
Common stock outstanding, beginning of period 26,967,104 26,506,729
Weighted average common stock issued
during the period ended September 30, 1996 5,045,542 2,138,445
------------ -----------
Weighted average shares of common stock
outstanding 32,012,646 28,645,174
============ ===========
FOR THE PERIOD ENDED SEPTEMBER 30, 1995:
Common stock outstanding, beginning of period 24,952,915 23,344,122
Weighted average common stock issued
during the period ended September 30, 1995 611,024 1,401,838
Weighted average common stock equivalents 3,668,011 4,815,773
Weighted average treasury shares acquired
using the treasury stock method (1,179,300) (1,265,120)
------------ -----------
Weighted average shares of common
stock outstanding 28,052,650 28,296,613
============ ===========
</TABLE>
For the three- and nine-months periods ended September 30, 1996 and
1995 there was no material difference between the computation of fully diluted
and primary weighted average shares of common stock outstanding.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 14,210 30,237
<SECURITIES> 24,108 36,211
<RECEIVABLES> 14,682 32,387
<ALLOWANCES> 1,800 1,600
<INVENTORY> 1,438 1,063
<CURRENT-ASSETS> 79,248 114,502
<PP&E> 35,289 27,572
<DEPRECIATION> 14,962 9,217
<TOTAL-ASSETS> 162,449 189,629
<CURRENT-LIABILITIES> 23,939 24,000
<BONDS> 0 0
0 0
0 0
<COMMON> 336 265
<OTHER-SE> 138,101 164,543
<TOTAL-LIABILITY-AND-EQUITY> 162,449 189,629
<SALES> 62,837 89,899
<TOTAL-REVENUES> 74,888 99,205
<CGS> 4,704 5,129
<TOTAL-COSTS> 12,088 12,072
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (38,474) 41,912
<INCOME-TAX> (1,473) 15,496
<INCOME-CONTINUING> (37,001) 26,416
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (70,800) 21,923
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (2.47) .77
</TABLE>
