<PAGE> 1
U.S. 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 JUNE 30, 1998
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)
2 HIGH STREET
NORTH ANDOVER, MASSACHUSETTS 01845
(Address of principal executive offices)
(Zip Code)
(978) 685-4000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, Par Value $.01 Per Share 34,035,463
- -------------------------------------- ------------------------------
Class Outstanding at August 11, 1998
<PAGE> 2
FTP SOFTWARE, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 (unaudited) 3
Consolidated Statements of Operations for the three and
six months ended June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1997 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 6. Exhibits and Reports on Form 8-K 20
Signature 24
2
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FTP SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,596 $ 37,569
Short-term investments 10,564 14,234
Accounts receivable, net of allowance for
doubtful accounts of $1,250 and 1,100 for
1998 and 1997, respectively 4,611 8,282
Prepaid expenses and other current assets 2,111 2,580
Refundable incomes taxes 2,975 3,165
-------- --------
Total current assets 58,857 65,830
Property and equipment, net 6,253 8,301
Purchased software, net 1,738 2,621
Investments 14,726 19,767
Other assets 1,377 956
-------- --------
Total assets $ 82,951 $ 97,475
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses (Note 2) $ 7,831 $ 10,976
Income taxes payable 1,786 1,613
Accrued employee compensation and benefits 1,760 3,652
Deferred revenue 5,654 5,715
-------- --------
Total liabilities 17,031 21,956
-------- --------
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 34,035,463 and
33,973,140 in 1998 and 1997, respectively 340 339
Additional paid-in capital 136,823 136,792
Accumulated deficit (71,682) (62,046)
Equity adjustments 439 434
-------- --------
Total stockholders' equity 65,920 75,519
======== ========
Total liabilities and stockholders' equity $ 82,951 $ 97,475
======== ========
</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 ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Product revenue $ 5,434 $ 13,073 $ 13,133 $ 29,899
Service revenue 2,894 4,673 6,123 9,202
-------- -------- -------- --------
Total revenue 8,328 17,746 19,256 39,101
-------- -------- -------- --------
Cost of revenue:
Product cost 1,164 3,964 2,344 6,953
Service cost 1,452 2,924 2,817 5,818
-------- -------- -------- --------
Total cost of revenue 2,616 6,888 5,161 12,771
-------- -------- -------- --------
Gross margin 5,712 10,858 14,095 26,330
-------- -------- -------- --------
Operating expenses:
Sales and marketing 6,571 13,115 12,731 27,396
Product development 3,517 8,375 7,126 16,230
General and administrative 2,461 4,612 5,802 8,947
-------- -------- -------- --------
Total operating expenses 12,549 26,102 25,659 52,573
-------- -------- -------- --------
Loss from operations (6,837) (15,244) (11,564) (26,243)
Investment and other income, net 1,068 1,150 2,078 1,785
-------- -------- -------- --------
Loss before income taxes (5,769) (14,094) (9,486) (24,458)
Provision (benefit) for income taxes 50 342 150 992
-------- -------- -------- --------
Net loss $ (5,819) $(14,436) $ (9,636) $(25,450)
======== ======== ======== ========
Basic and diluted net loss per share $ (0.17) $ (0.43) $ (0.28) $ (0.75)
======== ======== ======== ========
Weighted average common
shares outstanding 34,024 33,842 34,024 33,775
======== ======== ======== ========
</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>
SIX MONTHS ENDED JUNE 30,
1998 1997
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss from continuing operations $(9,636) $(25,450)
Adjustments to reconcile net loss from
continuing operations to net cash provided by
(used for) operating activities:
Depreciation and amortization 3,110 6,548
Loss on disposition of property and equipment 10 650
Amortization (accretion) of discounts and premiums
on investments 19 (83)
Changes in operating assets and liabilities:
Accounts receivable 3,671 6,363
Prepaid expenses and other current assets 469 485
Income taxes 190 743
Other assets (469) (591)
Accounts payable and accrued expenses (2,972) (1,463)
Accrued employee compensation and benefits (1,892) 1,803
Deferred revenue (61) (1,542)
-------- --------
Net cash used for continuing operations (7,561) (12,537)
Net cash provided by discontinued operations -- 2,209
-------- --------
Net cash used for operating activities (7,561) (10,328)
-------- --------
Cash flows from investing activities:
Capital expenditures (141) (2,576)
Maturities of investments, net 8,752 9,011
-------- --------
Net cash provided by investing activities 8,611 6,435
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 31 503
Principal payments on long-term obligations -- (240)
-------- --------
Net cash provided by financing activities 31 263
-------- --------
Effect of exchange rate changes on cash (54) 17
-------- --------
Net increase (decrease) in cash and cash equivalents 1,027 (3,613)
Cash and cash equivalents, beginning of period 37,569 22,036
-------- --------
Cash and cash equivalents, end of period $ 38,596 $ 18,423
======== ========
</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. (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, 1997.
The results of the three- and six-month periods ended June 30, 1998
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. RESTRUCTURE CHARGES
In July 1997, the Company reorganized its operations into business
units and effected a worldwide workforce reduction in order to lower the
Company's overall cost structure and create greater focus on specific strategic
business opportunities. This restructuring resulted in a charge of approximately
$17.1 million ($0.50 per share) in the third quarter of 1997. This charge
included severance related payments, excess facilities costs, the write-off of
fixed assets and other restructuring-related items such as losses related to
cancelled contracts; such costs were substantially completed in 1997.
In late December 1997, following a review of the financial results of
its business units for the second half of 1997, the Company decided to further
streamline its operations and to recombine its business units into one worldwide
organization. This restructuring resulted in a charge of approximately $1.3
million ($0.04 per share) in the fourth quarter of 1997. This charge included
costs similar to those incurred in connection with the third quarter
restructuring; these costs were substantially completed in the first quarter of
1998.
The following summarizes the 1997 restructuring charges, the related
write-offs and cash paid in connection with the restructurings for the six
months ended June 30, 1998 (dollars in thousands, unaudited):
6
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Severance Excess
Payments Facilities Other Total
--------- ---------- ----- -----
<S> <C> <C> <C> <C>
Accrued restructuring charge at
December 31, 1997 $ 766 $ 1,710 $ 268 $ 2,744
Cash paid (858) (1,353) (33) (2,244)
Reclassifications 92 143 (235) --
----- ------- ----- -------
Accrued restructuring charge at
June 30, 1998 $ 0 $ 500 $ 0 $ 500
===== ======= ===== =======
</TABLE>
Amounts related to severance with respect to the July 1997 workforce
reduction involved approximately 300 employees, primarily in sales and
marketing, product development and general and administrative functions at the
Company's domestic and European locations. Amounts related to facilities reflect
the cost of the lease of excess space arising primarily from the consolidation
of the Company's Massachusetts headquarters and manufacturing facilities into
the Company's North Andover, Massachusetts development offices.
Amounts related to severance with respect to the December 1997
workforce reduction involved approximately 21 employees, primarily in
development, at the Company's European locations. Amounts related to facilities
reflect the cost of the lease of excess space at the Company's U.K. facility.
3. LEGAL PROCEEDINGS
In March 1996, a class action lawsuit was filed in the United States
District Court for the District of Massachusetts, naming the Company and certain
of its current and 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 the Company'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 the Company, the effects of the Company's
July 1995 corporate restructuring and changing competitive factors in the
Company's industry. The lawsuit, which is purportedly brought on behalf of a
class of purchasers of the Company's common stock during the period from July
14, 1995 to January 3, 1996, alleges violations of Sections 10(b) and 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. In August 1996, plaintiffs filed an amended complaint adding allegations
concerning what plaintiffs claim were wrongful sales and accounting practices by
the Company during the class period, but asserting the same causes of action as
the original complaint. In October 1996, the Company filed a motion to dismiss
the complaint on the grounds that the plaintiffs had not met the pleading
requirements of the Private Securities
7
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
Litigation Reform Act of 1995. The motion was denied by the court on
February 13, 1997. On February 13, 1998, FTP filed a motion for partial summary
judgment and renewed motion to dismiss; plaintiffs filed their response on
March 20, 1998. The court has not yet set a date for a hearing on these motions.
The Company 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, the Company has spent and
expects to continue to spend 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 the Company, the Company 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.
In February 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 Communications
Inc., which the Company acquired in July 1996 ("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 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. In June 1996, the District Court
entered an order dismissing plaintiffs' complaint. In the order, the court
dismissed with prejudice certain of plaintiffs' claims that warnings and
disclosures in Firefox's Form 10-Qs were false and misleading, while granting
plaintiffs permission to amend their complaint as it concerned certain of
plaintiffs' claims that Firefox was responsible for false and misleading
analysts reports, Firefox statements and financial statements.
In July 1996, plaintiffs filed their amended complaint. The amended
complaint alleged that 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 amended complaint was 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 again 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 described above. Specifically, the amended complaint
alleged 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 that they 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 alleged that John A.
Kimberley, then an officer and director of Firefox, and Frank Richardson, a
former
8
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
officer and director of Firefox, were liable as "controlling persons" of
Firefox. In September 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 Litigation Reform Act of 1995. On May 8,
1997, the court dismissed the amended complaint on such grounds, without leave
to amend. Plaintiffs have appealed the dismissal to the Ninth Circuit Court of
Appeals; oral argument on the appeal has been set for September 14, 1998.
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 has spent and
expects to continue to spend 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 Firefox's business, financial condition and
results of operations.
4. EARNINGS PER SHARE
The earnings per share ("EPS") amounts have been computed in
accordance with SFAS No. 128, "Earnings per Share," which requires the
presentation of basic and diluted EPS. This Statement requires restatement of
all prior period EPS amounts presented after the effective date. Adoption of the
provisions of SFAS No. 128 had no impact on reported EPS for the three- and
six-month periods ended June 30, 1998 and 1997, as the effect of common stock
equivalents would have been anti-dilutive during such periods. A reconciliation
of the loss and share information used in the basic and diluted per share
computation for the three- and six-month periods ended June 30, 1998 and 1997
are as follows (in thousands, except per share amounts, unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (5,819) $(14,436) $ (9,636) $(25,450)
======== ======== ======== ========
Weighted average shares outstanding 34,024 33,842 34,024 33,775
Effect of dilutive securities -- -- -- --
-------- -------- -------- --------
Basic and diluted shares outstanding $ 34,024 $ 33,842 $ 34,024 $ 33,775
======== ======== ======== ========
Basic and diluted loss per share $ (0.17) $ (0.43) $ (0.28) $ (0.75)
======== ======== ======== ========
</TABLE>
Options to purchase 5,995 and 5,014 shares of common stock were
outstanding at June 30, 1998 and 1997, respectively. The diluted EPS computation
for the three- and six-month periods then ended did not include these additional
shares because the effect would have been anti-dilutive.
9
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. COMPREHENSIVE INCOME (LOSS)
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components (revenue,
expenses, gains and losses) in a full set of general-purpose financial
statements. This statement also requires that an entity classify items of other
comprehensive earnings by their nature in a financial statement. For example,
other comprehensive earnings may include foreign currency translation
adjustments and unrealized gains and losses on marketable securities classified
as available-for-sale. The Company adopted the provisions of SFAS No. 130
effective January 1, 1998 and will present such information in its Statement of
Stockholders' Equity. The Company's total comprehensive losses for the three-
and six-month periods ended June 30, 1998 and 1997 were as follows (in
thousands, unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net loss $(5,819) $(14,436) $(9,636) $(25,450)
Other comprehensive income (loss)
Foreign currency translation
adjustments 430 (120) (63) 115
Unrealized gain (loss) on securities 21 1,806 58 (93)
Add: reclassification adjustment for
(gains) losses included in net income (2) 24 35 45
------- -------- ------- --------
Other comprehensive income (loss) $ 449 $ 1,710 $ 30 $ 67
------- -------- ------- --------
Comprehensive loss $(5,370) $(12,726) $(9,606) $(25,383)
======= ======== ======= ========
</TABLE>
6. OTHER RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, "Disclosure about Segments of an Enterprise." SFAS No. 131 changes the
way public companies report information about operating segments. SFAS No. 131,
which is based on the management approach to segment reporting, establishes
requirements to report selected segment information quarterly and to report
entity-wide disclosures about products and services, major customers and the
material countries in which the entity holds assets and reports revenue. The
Company intends to adopt SFAS No. 131 for its fiscal year ending December 31,
1998. Management does not expect such adoption to have any material impact on
the way it reports information.
10
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FTP SOFTWARE, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
7. AGREEMENT AND PLAN OF REORGANIZATION WITH NETMANAGE, INC.
On June 15, 1998, the Company entered into an Agreement and Plan of
Reorganization with NetManage, Inc. ("NetManage") whereby a subsidiary of
NetManage will be merged into the Company, which will survive the merger as a
wholly-owned subsidiary of NetManage, and each outstanding share of the common
stock of the Company will be converted into 0.72767, subject to adjustment, of
a share of NetManage common stock, subject to the conditions set forth in the
Reorganization Agreement. Outstanding Company stock options will be converted
into options to purchase shares of NetManage common stock at the same
conversion rate, with appropriate changes to the exercise price. This merger,
which is intended to be accounted for as a pooling of interests, is conditioned
on, among other things, approval of the merger by the Company's stockholders
and approval by NetManage's stockholders of the issuance of the shares of
NetManage common stock in the merger.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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 the Company's consolidated results of
operations and financial condition. This discussion should be read in
conjunction with the Company's consolidated financial statements and the related
notes included above.
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 IN THIS REPORT FOR A VARIETY OF
REASONS. THESE REASONS INCLUDE, BUT ARE NOT LIMITED TO, RISKS RELATING TO
CONSUMMATION OF THE MERGER OF THE COMPANY WITH A SUBSIDIARY OF NETMANAGE, INC.
("NETMANAGE") DESCRIBED BELOW (THE "MERGER"), COMPETITION, COMPETITIVE PRICING
PRESSURES, CHANGES IN PERSONNEL, TECHNOLOGICAL AND OTHER MARKET CHANGES,
DEPENDENCE ON NEW PRODUCTS, DISTRIBUTION RISKS AND OTHER RISKS THAT ARE OUTLINED
BELOW AND IN EXHIBIT 99 TO THIS REPORT. THE MERGER IS SUBJECT TO A NUMBER OF
CONDITIONS, INCLUDING THOSE OUTLINED BELOW, THAT MAY NOT BE SATISFIED. OTHER
RISKS AND UNCERTAINTIES ASSOCIATED WITH THE MERGER ARE DESCRIBED IN THE JOINT
PROXY STATEMENT/PROSPECTUS OF THE COMPANY AND NETMANAGE, WHICH IS INCLUDED IN
NETMANAGE'S REGISTRATION STATEMENT ON FORM S-4 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON JULY 15, 1998.
RECENT DEVELOPMENTS
The Company is engaged in the design, development, marketing and
support of connectivity software applications that enable users to connect to
information across TCP/IP networks, including data residing on mainframes,
minicomputers and servers. These applications include terminal emulation, NFS
file sharing and printing, file transfer and legacy host access.
The Company has entered into an Agreement and Plan of Reorganization
dated as of June 15, 1998, as amended on June 30, 1998 and July 14, 1998 (the
"Reorganization Agreement"), with NetManage and Amanda Acquisition Corp., a
wholly-owned subsidiary of NetManage ("Merger Sub"), which provides for the
acquisition of the Company by NetManage through a merger of the Company with
Merger Sub (the "Merger") whereby each outstanding share of the Common Stock,
par value $0.01 per share, of the Company ("Common Stock") will be converted
into the right to receive, subject to downward adjustment as described below,
0.72767 of a share (the "Exchange Ratio") of the Common Stock, par value $0.01
per share, of NetManage ("NetManage Common Stock"), subject to the conditions
set forth in the Reorganization Agreement. Because FTP has met certain of the
financial tests set forth in the Reorganization Agreement, the Exchange Ratio
would not be adjusted if the closing of the Merger occurs before August 31,
1998, as currently expected.
The closing of the Merger is subject to a number of conditions,
including (a) certain approvals by the stockholders of the Company and the
stockholders of NetManage, respectively, (b) the receipt by NetManage of letters
from the independent accountants for each of NetManage and the Company to the
effect that they concur with the conclusion of the management of the respective
companies that the Merger will qualify for pooling of interests accounting
treatment and (c) the absence of any material adverse effect, as defined in the
Reorganization Agreement, with respect to either the Company or NetManage.
12
<PAGE> 13
RESULTS OF 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 support, consulting and
training. Payments received in advance for support contracts are initially
recorded as deferred revenue and are recognized ratably over the term of the
contract. Revenue from consulting and training is recognized as the services are
performed.
Total revenue decreased to approximately $8.3 million for the second
quarter of 1998 from approximately $17.7 million for the second quarter of 1997.
Product revenue decreased to approximately $5.4 million for the second quarter
of 1998 from approximately $13.1 million for the second quarter of 1997. Service
revenue decreased to approximately $2.9 million for the second quarter of 1998
from approximately $4.7 million for the second quarter of 1997. As a percentage
of total revenue, product revenue decreased to approximately 65% for the second
quarter of 1998 from approximately 74% for the second quarter of 1997, and
service revenue increased to approximately 35% for the second quarter of 1998
from approximately 26% for the second quarter of 1997.
The Company's total revenue decreased to approximately $19.3 million
for the first six months of 1998 from approximately $39.1 million for the first
six months of 1997. Product revenue decreased to approximately $13.1 million for
the first six months of 1998 from approximately $29.9 million for the first six
months of 1997. Service revenue decreased to approximately $6.1 million for the
first six months of 1998 from approximately $9.2 million for the first six
months of 1997. As a percentage of total revenue, product revenue decreased to
approximately 68% for the first six months of 1998 from approximately 76% for
the first six months of 1997, and service revenue increased to approximately 32%
for the first six months of 1998 from approximately 24% for the first six months
of 1997.
PRODUCT REVENUE. Product revenue decreased for the three- and
six-month periods ended June 30, 1998 compared to the same periods of 1997, both
in dollar amount and as a percentage of total revenue, primarily as a result of
decreases in sales volumes and, to a lesser extent, sales prices for certain of
the Company's products over such periods. The Company believes these decreases
are primarily attributable to the increase in lower-priced or no cost TCP/IP
connectivity products introduced by certain of the Company's competitors
commencing in late 1995, an increase in competition in the networking
applications segment of the networking software industry beginning in 1997 and
decreases in customer demand for DOS-based and 16-bit Windows-based products
since 1996. In addition, the Company believes that customers may have deferred
purchasing decisions in the latter half of June 1998 as a result of the
Company's June 15, 1998 announcement of the Reorganization Agreement, which may
also have contributed to the decrease in product revenue for the second quarter
of 1998. The Company also believes that the impact of the Company's July 1997
restructuring on the business activities of the Company, as well as a disruption
in U.S. sales resulting from the implementation during the third quarter of 1997
of the Company's plans to increase sales in the U.S. through indirect channels,
also contributed to the decrease in sales for the first six months of 1998
compared to the same period of 1997. See also "-- Factors Affecting Revenue"
below. In addition, product revenue for 1997 included payments from a strategic
partner. Revenues under this contract for 1998 will be substantially less than
1997 revenues under this contract, and the Company does not expect to receive
additional revenues under this contract following the third quarter of 1998.
13
<PAGE> 14
SERVICE REVENUE. The dollar decreases in service revenue for the
second quarter and first six months of 1998 compared to the same periods in
1997 are primarily attributable to a decrease in the Company's installed
product base during 1997 and an increase in the sale of support contracts
through indirect channels (which resulted in a decrease in the Company's
operating margins on such sales due to the lower per unit revenue realized by
the Company on such sales) beginning in the third quarter of 1997. The
percentage increases in the second quarter and first six months of 1998
compared to the same periods in 1997 are primarily due to the decrease in
product revenue described above.
INTERNATIONAL REVENUE. International sales consist of export sales,
primarily to customers in Europe, Asia Pacific, Latin America and Canada.
International sales of approximately $2.7 million and $8.2 million accounted for
approximately 33% and 46% of the Company's total revenue for the second quarter
of 1998 and 1997, respectively. International sales of approximately $7.9
million and $17.7 million accounted for approximately 41% and 45% of the
Company's total revenue for the first six months of 1998 and 1997, respectively.
The dollar decreases in the second quarter and first six months of 1998 compared
to the same periods in 1997 are attributable to the same factors that resulted
in the decreases in total product revenue over these periods described above
under "-- Product Revenue."
The Company prices, invoices and collects international sales
primarily in United States dollars. To date, currency fluctuations have not had
a material effect on the Company's results of operations and financial
condition.
FACTORS AFFECTING REVENUE. The Company has experienced a decrease in
sales volumes since 1995 and a decrease in sales prices during various periods
since 1995, which decreases the Company believes are primarily attributable to
increased competition, particularly the increase during 1997 in competition in
the networking applications software market, as well as to technological changes
in the market. Looking forward, if the Merger is not consummated, the Company
anticipates that some or all of these trends will continue, and believes that
the Company's future is substantially dependent on the ability of the Company
(i) to create greater focus on specific product opportunities and customer needs
within the Company's product categories, (ii) to formulate and implement its
sales and distribution strategies to most effectively take advantage of
strategic opportunities in its various product categories, (iii) to successfully
develop new product strategies and to timely release new products and product
enhancements, (iv) to take advantage of the emerging web-based networking
applications software market and the continued development of such market and
(v) to enter into and implement strategic alliances and OEM relationships to
develop necessary products or technologies, to expand the Company's distribution
channels or to jointly market or gain market awareness for the Company's
products. If the Company is unsuccessful in any such regard, or if the web-based
networking applications software market does not develop as anticipated by the
Company, the Company believes that the trends described above will continue to
have a material adverse effect on the Company's business, results of operations
and financial condition. Even if the Company is successful in implementing new
product strategies, 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 number of the Company's employees decreased significantly during
1997 and the first six months of 1998, both prior to and following the Company's
July and December 1997 restructurings, as a result both of the restructurings
and significant competition for qualified personnel in the industry. The Company
believes that this decrease, which resulted in significant turnover in the
Company's U.S. sales force, contributed to the decline in revenue for the first
six months of 1998. In connection with the July 1997 restructuring, the Company
reduced its workforce by approximately 300 employees in total. The Company has
experienced additional attrition during late 1997 and the first six months of
1998. As a
14
<PAGE> 15
result of the Company's December 1997 restructuring, which included a workforce
reduction involving approximately 21 employees, and attrition experienced in the
first half of 1998, the number of the Company's employees has decreased from
approximately 350 at December 31, 1997 to approximately 262 at June 30, 1998.
The Company's ability to maintain or increase revenue will depend in part on its
ability to retain, hire and train qualified personnel.
During the third quarter of 1997, the Company increased its focus in
the United States on sales through distributors, value-added resellers, systems
integrators and OEMs rather than direct sales, including, among other things, by
entering into an agreement with a third party that provides for the sale by such
party on behalf of the Company of certain maintenance services, support services
and products in the U.S. and Canada, with certain limited geographic exclusivity
with respect to certain of such services. While the third party arrangement
described above was intended to increase sales of the Company's products and
services in the U.S., there can be no assurance that such arrangement will be
successful or that sales of such products and services will not decrease as a
result. As noted above under "-- Service Revenue," service revenue decreased
during the second quarter and first half of 1998 due in part to an increase in
sales of support contracts through indirect channels. The Company continues to
evaluate its other distribution channels in the ordinary course of business.
Additional changes in distribution channels may adversely affect sales of the
Company's products and consequently may adversely affect the Company's business,
financial condition and results of operations, at least in the near term. Any
material increase in sales through indirect channels may have an adverse effect
on the Company's operating margins due to the lower per unit revenue realized by
the Company on sales through indirect channels if the Company is unable to
proportionately reduce selling, general and administrative expenses.
See "-- Liquidity and Capital Resources" below for a description of
certain legal proceedings and Exhibit 99 for additional discussion of the
factors described above and other factors which may affect the Company's
business, financial condition and results of operations.
GROSS MARGIN
Product gross margin as a percentage of product revenue was
approximately 79% and 70% in the second quarter of 1998 and 1997, respectively.
Product gross margin as a percentage of product revenue was approximately 82%
and 77% in the first six months of 1998 and 1997, respectively. These increases
resulted primarily from a decrease in both costs associated with the
amortization of technologies licensed or purchased in 1995 and 1996 and costs
associated with the localization of certain of the Company's products, partially
offset by the decrease in product revenue described under "-- Product Revenue"
above. Amortization expense was approximately $0.5 million and $1.6 million in
the second quarter of 1998 and 1997, respectively, and approximately $1.0
million and $2.7 million in the first six months of 1998 and 1997, respectively.
Service gross margin as a percentage of service revenue increased to
approximately 50% in the second quarter of 1998 from approximately 37% in the
second quarter of 1997. Service gross margin as a percentage of service revenue
increased to approximately 54% in the first six months of 1998 from
approximately 37% in the first six months of 1997. These increases were
primarily due to a reduction in costs related to a decrease in professional
services and technical support personnel resulting from the Company's July 1997
restructuring and workforce reduction.
The gross margins reported above are not necessarily indicative of
gross margin for future periods, which may vary significantly depending on,
among other things, changes in product strategy and
15
<PAGE> 16
mix, price competition, technological changes, cost changes and changes in
product distribution channels.
SALES AND MARKETING
Sales and marketing expenses were approximately $6.6 million and
$13.1 million in the second quarter of 1998 and 1997, respectively. Such
expenses as a percentage of total revenue were approximately 79% and 74% in the
second quarter of 1998 and 1997, respectively. Sales and marketing expenses were
approximately $12.7 million and $27.4 million in the first six months of 1998
and 1997, respectively. Such expenses as a percentage of total revenue were
approximately 66% and 70% in the first six months of 1998 and 1997,
respectively. The $6.5 million decrease in the second quarter of 1998 and the
$14.7 million decrease in the first six months of 1998 reflect decreases in
sales and marketing personnel resulting primarily from the Company's 1997
restructurings, as well as a decrease in the levels of the Company's
advertising, tradeshow and other marketing activities over such periods. The
percentage decrease in the first six months of 1998 compared to the same period
in 1997 was also primarily due to such factors. The percentage increase in the
second quarter of 1998 compared to the second quarter of 1997 was primarily due
to the decrease in total revenue over such periods.
If the Merger is not consummated, FTP expects that the dollar amount
of sales and marketing expenses will continue to decrease in 1998 from 1997
dollar amounts as a result of the Company's 1997 restructurings.
PRODUCT DEVELOPMENT
Product development expenses were approximately $3.5 million and
$8.4 million in the second quarter of 1998 and 1997, respectively, representing
approximately 42% and 47% of total revenue for each period, respectively.
Product development expenses were approximately $7.1 million and $16.2 million
in the first six months of 1998 and 1997, respectively, representing
approximately 37% and 42% of total revenue for each period, respectively. The
$4.9 million decrease in the second quarter of 1998 and the $9.1 million
decrease in the first six months of 1998 primarily reflect decreases in
development personnel resulting primarily from the Company's 1997
restructurings. The percentage decreases over such periods were also primarily
due to this factor.
If the Merger is not consummated, FTP expects that the dollar amount
of product development expenses will continue to decrease in 1998 from 1997
dollar amounts as a result of the Company's 1997 restructurings.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were approximately $2.5 million
and $4.6 million in the second quarter of 1998 and 1997, respectively,
representing approximately 30% and 26% of total revenue for each period,
respectively. General and administrative expenses were approximately
$5.8 million and $8.9 million in the first six months of 1998 and 1997,
respectively, representing approximately 30% and 23% of total revenue for each
period, respectively. The $2.1 million decrease in the second quarter of 1998
and the $3.1 million decrease in the first six months of 1998 were primarily the
result of a decrease in general and administrative personnel resulting primarily
from the Company's 1997 restructurings and costs incurred in 1997 in connection
with the defense of the legal proceedings described under "-- Liquidity and
Capital Resources" below. The percentage increases over such periods
16
<PAGE> 17
were primarily due to the decreases in total revenue over such periods described
above under "-- Total Revenue."
If the Merger is not consummated, FTP expects that the dollar amount
of general and administrative expenses will continue to decrease in 1998 from
1997 dollar amounts as a result of the Company's 1997 restructurings.
OPERATING LOSS
The Company experienced losses from operations of approximately $5.8
million and $14.4 million in the second quarter of 1998 and 1997, respectively,
representing approximately 70% and 81% of total revenue for each period,
respectively. The Company had losses from operations of approximately $9.6
million and $25.5 million in the first six months of 1998 and 1997,
respectively, representing approximately 50% and 65% of total revenue for each
period, respectively. These decreases in losses were primarily due to the
decreases in expenses over such periods described above.
INVESTMENT AND OTHER INCOME, NET
Investment and other income, net, was approximately $1.1 million and
$1.2 million for the second quarter of 1998 and 1997, respectively, and
approximately $2.1 million and $1.8 million for the first six months of 1998 and
1997, respectively. The increase in the first six months of 1998 compared to the
same period in 1997 was primarily due to a loss on disposal of fixed assets
recognized in the second quarter of 1997. The Company invests excess cash in
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 $0.1 million and
$0.3 million in the second quarter of 1998 and 1997, respectively, and
approximately $0.2 million and $1.0 million in the first six months of 1998 and
1997, respectively. The provision represents certain foreign and state tax
obligations which cannot be offset by the Company's net operating losses. 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.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had an aggregate of approximately
$63.9 million in cash and cash equivalents, short-term investments and long-term
investments. Of this amount, approximately $38.6 million was invested primarily
in highly liquid investments with original maturities of three months or less,
approximately $10.6 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 $14.7 million was invested in U.S. government
obligations, commercial paper and municipal obligations with maturities of
greater than one year.
The Company used approximately $7.6 million and $12.8 million of cash
for operations in the first six months of 1998 and 1997, respectively. The
Company made capital expenditures of approximately $0.1 million and $2.4 million
in the first six months of 1998 and 1997, respectively.
17
<PAGE> 18
Accounts receivable, net, decreased to approximately $4.6 million at
June 30, 1998 from approximately $8.3 million at December 31, 1997. This
decrease is primarily attributable to the decrease in total revenue during the
second quarter of 1998 described above under "-- Total Revenue" as well as an
increase in collections of the Company's accounts receivable.
With respect to Year 2000 compliance by the software products used in
the Company's internal software systems, the vendor of the Company's financial
and accounting systems has advised the Company that the current version of such
vendor's product is Year 2000 compliant and that the Company will receive such
version at no additional cost under such vendor's maintenance program. If the
Merger is not consummated, the Company currently intends to install such version
during the third quarter of 1998. The Company believes that its technical
support system, being the Company's other primary internal software system, is
Year 2000 compliant. Accordingly, the Company does not anticipate that it will
incur any material costs in connection with addressing Year 2000 compliance of
its internal systems.
With respect to Year 2000 compliance by the software products sold by
the Company, certain of such products are currently Year 2000 compliant, and the
Company is testing its other products for Year 2000 compliance and believes such
testing will be substantially complete by the end of the third quarter of 1998.
The Company does not anticipate that it will incur any material costs in
connection therewith.
To date, inflation has not had a material impact on the Company's
financial results.
On March 14, 1996, a class action lawsuit was filed against FTP and
certain of its current and former officers alleging violations of Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Rule 10b-5 thereunder. On February 23, 1996, a class action lawsuit
was filed against Firefox and certain of its current and former officers and
former directors also alleging violations of Sections 10(b) and 20(a) of the
Exchange Act and Rule 10b-5. For a more detailed description of these legal
proceedings, see Note 3 to the Company's consolidated financial statements
included above. Each of FTP and Firefox has reviewed the allegations in the
lawsuit against it, believes such allegations to be without merit and intends to
defend itself and its officers vigorously. In order to support an adequate
defense, each of FTP and Firefox has spent and expects to continue to spend
substantial sums for legal and expert fees and costs. The costs of defending
each lawsuit and the ultimate outcome of each lawsuit are uncertain and cannot
be estimated. If the lawsuit against FTP were ultimately determined adversely to
FTP, or if the lawsuit against Firefox were ultimately determined adversely to
Firefox, such company could be required to pay a substantial judgment, which
could have a material adverse effect on the Company's consolidated business,
financial condition and results of operations.
Looking forward, if the Merger is not consummated, the Company
believes that its available cash, cash equivalents and short-term investments
will be sufficient to fund its ordinary operating expenses at least through
1998.
18
<PAGE> 19
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 June 11, 1998, the Company held its 1998 annual meeting of
stockholders for the purposes of: (i) electing Kevin J. Burns and Vinton G. Cerf
as Class II Directors, to serve until the 2001 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 1996 Executive
Equity Incentive Plan to (A) increase the total number of shares of Common Stock
with respect to which awards may be granted from 1,500,000 to 2,100,000 and (B)
increase the total number of shares of Common Stock with respect to which
restricted stock awards may be granted from 100,000 to 200,000 (the "Executive
Equity Incentive Plan Proposal"); and (iii) considering a proposal to approve
the FTP Software, Inc. Amended and Restated 1993 Non-Employee Directors' Stock
Option Plan (the "Non-Employee Directors' Stock Option Plan Proposal"). The
results of the votes were as follows:
1. Election of Class II Directors:
<TABLE>
<CAPTION>
Nominee For Against Withheld Broker Non-Votes
- ------- ---------- ------- -------- ----------------
<S> <C> <C> <C> <C>
Mr. Burns 27,771,991 0 2,013,802 0
Dr. Cerf 27,954,101 0 1,831,692 0
</TABLE>
The following persons continued as directors following the meeting: Class I
Directors -- David D. Clark and F. David Fowler; Class III Directors -- Glenn C.
Hazard and Louise M. Cromwell.
2. The Executive Equity Incentive Plan Proposal:
For Against Withheld Broker Non-Votes
---------- --------- -------- ----------------
23,988,042 5,640,186 157,565 0
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
(29,785,793 shares) was required to approve this proposal, in accordance with
the rules of the NASD.
3. The Non-Employee Directors' Stock Option Plan Proposal:
For Against Withheld Broker Non-Votes
---------- --------- -------- ----------------
24,606,600 4,986,177 193,016 0
19
<PAGE> 20
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
(29,785,793 shares) was required to approve this proposal, in accordance with
the rules of the NASD.
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(2)
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(2)
4.4 Amendment No. 2 to Rights Agreement dated as of February 27,
1998 between the Company and State Street Bank and Trust
Company, as Rights Agent(3)
4.5 Amendment No. 3 to Rights Agreement dated as of June 15, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(4)
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 Glenn C. Hazard
dated as of July 29, 1996(2)
10.8 Amendment No. 1 to Employment Agreement between the Company and
Glenn C. Hazard dated as of June 19, 1997(5)
20
<PAGE> 21
EXHIBIT NO. TITLE
- ----------- -----
10.9 Amendment No. 2 to Employment Agreement between the Company and
Glenn C. Hazard dated as of September 4, 1997(6)
10.10 Amended and Restated Employment Agreement between the Company
and Glenn C. Hazard dated as of December 12, 1997(7)
10.11 Second Amended and Restated Employment Agreement between the
Company and Glenn C. Hazard dated as of June 13, 1998*
10.12 Employment Agreement between the Company and Douglas F. Flood
dated as of July 23, 1996(2)
10.13 Amendment No. 1 to Employment Agreement between the Company and
Douglas F. Flood dated as of June 19, 1997(5)
10.14 Amendment No. 2 to Employment Agreement between the Company and
Douglas F. Flood dated as of September 4, 1997(6)
10.15 Amended and Restated Employment Agreement between the Company
and Douglas F. Flood dated as of December 12, 1997(7)
10.16 Termination Agreement between the Company and Douglas F. Flood
dated as of June 13, 1998*
10.17 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox merger(2)
10.18 Amendment No. 1 to Employment Agreement between the Company and
John A. Kimberley dated as of June 19, 1997(5)
10.19 Employment Agreement between the Company and Dennis Leibl dated
as of December 12, 1997(7)
10.20 Amended and Restated Employment Agreement between the Company
and Dennis Leibl dated as of June 13, 1998*
10.21 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(2)
10.22 Amendment No. 2 to Employment Agreement between Company and
Peter R. Simkin dated as of December 15, 1996(5)
10.23 Amendment No. 3 to Employment Agreement between Company and
Peter R. Simkin dated as of June 19, 1997(5)
10.24 Employment Agreement between the Company and James A. Tholen
dated as of April 6, 1997(5)
10.25 Amended and Restated Employment Agreement between the Company
and James A. Tholen dated as of December 12, 1997(7)
10.26 Second Amended and Restated Employment Agreement between the
Company and James A. Tholen dated as of June 13, 1998*
10.27 FTP Software, Inc. Stock Option Plan(1)
10.28 FTP Software, Inc. 1996 Executive Equity Incentive Plan(2)
10.29 FTP Software, Inc. 1997 Employee Equity Incentive Plan(5)
21
<PAGE> 22
EXHIBIT NO. TITLE
- ----------- -----
10.30 FTP Software, Inc. Amended and Restated 1993 Non-Employee
Directors' Stock Option Plan*
10.31 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.32 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of
February 10, 1994(1)
10.33 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7,
1995(1)
10.34 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(9)
10.35 Composite Agreement and Plan of Reorganization by and among the
Company, NetManage, Inc. and Amanda Acquisition Corp. dated as
of June 15, 1998, as amended by Amendment No. 1 dated as of June
30, 1998 and Amendment No. 2 dated as of July 14, 1998(10)
27 Financial Data Schedule*
99 Cautionary Factors(11)
- ---------------------
*Filed with this Report.
(1) Included as an exhibit to, and incorporated in this Report 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 an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 filed with the Commission on November 14, 1996.
(3) Included as an exhibit to, and incorporated in this Report by reference to,
Amendment No. 2 on Form 8-A/A to the Company's Registration Statement on
Form 8-A filed with the Commission on July 9, 1998.
(4) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Curent Report on Form 8-K dated June 15, 1998 filed with the
Commission on June 19, 1998.
(5) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997 filed with the Commission on August 14, 1997.
(6) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14, 1997.
(7) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Annual Report on Form 10-K for the year ended December 31,
1997 filed with the Commission on March 30, 1998.
(8) Included as an exhibit to, and incorporated in this Report by reference to,
the Company's Annual Report on Form 10-K for the year ended December 31,
1996 filed with the Commission on March 31, 1997.
22
<PAGE> 23
(9) Included as Appendix A to, and incorporated in this Report by reference to,
the Company's Joint Proxy Statement/Prospectus filed with the Commission on
July 1, 1996.
(10) Included as Appendix A to, and incorporated in this Report by reference to,
the Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
(11) Incorporated by reference to the section entitled "Risk Factors" of the
Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
b. REPORTS ON FORM 8-K:
On June 19, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated June 15, 1998 with respect to (i) the execution by the
Company of the Reorganization Agreement and (ii) the execution by the Company of
Amendment No. 3 to the Rights Agreement dated as of December 1, 1995 between the
Company and State Street Bank and Trust Company, as Rights Agent, as amended by
Amendment to Rights Agreement dated as of November 7, 1996 and by Amendment No.
2 to Rights Agreement dated as of February 27, 1998 (as amended, the "Rights
Agreement"). Amendment No. 3 amends the Rights Agreement to permit the parties
to the Reorganization Agreement to consummate the Merger without triggering the
exercisability of the Rights (as defined in the Rights Agreement).
On July 24, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated July 23, 1998 with respect to its July 23, 1998
announcement of its results of operations for the second quarter of 1998, and
the effect of the same on the Exchange Ratio under the Reorganization Agreement,
as more particularly described in Item 2 of Part I of this Report.
On August 10, 1998, the Company filed with the Commission a Current
Report on Form 8-K dated August 10, 1998 with respect to the Company's August
10, 1998 announcement regarding net revenues for July 1998 and the effect of the
same on the Exchange Ratio under the Reorganization Agreement, as more
particularly described in Item 2 of Part I of this Report.
23
<PAGE> 24
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: August 14, 1998 By: /s/ James A. Tholen
----------------------------------------------
James A. Tholen,
Senior Vice President, Chief Operating Officer
and Chief Financial Officer
(principal financial and accounting officer)
24
<PAGE> 25
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(2)
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(2)
4.4 Amendment No. 2 to Rights Agreement dated as of February 27, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(3)
4.5 Amendment No. 3 to Rights Agreement dated as of June 15, 1998
between the Company and State Street Bank and Trust Company, as
Rights Agent(4)
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 Glenn C. Hazard dated
as of July 29, 1996(2)
10.8 Amendment No. 1 to Employment Agreement between the Company and
Glenn C. Hazard dated as of June 19, 1997(5)
10.9 Amendment No. 2 to Employment Agreement between the Company and
Glenn C. Hazard dated as of September 4, 1997(6)
10.10 Amended and Restated Employment Agreement between the Company and
Glenn C. Hazard dated as of December 12, 1997(7)
10.11 Second Amended and Restated Employment Agreement between the
Company and Glenn C. Hazard dated as of June 13, 1998*
i
<PAGE> 26
EXHIBIT NO. TITLE
- ----------- -----
10.12 Employment Agreement between the Company and Douglas F. Flood
dated as of July 23, 1996(2)
10.13 Amendment No. 1 to Employment Agreement between the Company and
Douglas F. Flood dated as of June 19, 1997(5)
10.14 Amendment No. 2 to Employment Agreement between the Company and
Douglas F. Flood dated as of September 4, 1997(6)
10.15 Amended and Restated Employment Agreement between the Company and
Douglas F. Flood dated as of December 12, 1997(7)
10.16 Termination Agreement between the Company and Douglas F. Flood
dated as of June 13, 1998*
10.17 Employment Agreement between the Company and John A. Kimberley
dated as of the "Effective Date" of the Firefox merger(2)
10.18 Amendment No. 1 to Employment Agreement between the Company and
John A. Kimberley dated as of June 19, 1997(5)
10.19 Employment Agreement between the Company and Dennis Leibl dated as
of December 12, 1997(7)
10.20 Amended and Restated Employment Agreement between the Company and
Dennis Leibl dated as of June 13, 1998*
10.21 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(2)
10.22 Amendment No. 2 to Employment Agreement between Company and Peter
R. Simkin dated as of December 15, 1996(5)
10.23 Amendment No. 3 to Employment Agreement between Company and Peter
R. Simkin dated as of June 19, 1997(5)
10.24 Employment Agreement between the Company and James A. Tholen dated
as of April 6, 1997(5)
10.25 Amended and Restated Employment Agreement between the Company and
James A. Tholen dated as of December 12, 1997(7)
10.26 Second Amended and Restated Employment Agreement between the
Company and James A. Tholen dated as of June 13, 1998*
10.27 FTP Software, Inc. Stock Option Plan(1)
10.28 FTP Software, Inc. 1996 Executive Equity Incentive Plan(2)
10.29 FTP Software, Inc. 1997 Employee Equity Incentive Plan(5)
10.30 FTP Software, Inc. Amended and Restated 1993 Non-Employee
Directors' Stock Option Plan*
10.31 Indenture of Lease between the Company and Andover Mills Realty
Limited Partnership dated as of October 1, 1993(1)
10.32 Amendment No. 1 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of February 10,
1994(1)
ii
<PAGE> 27
EXHIBIT NO. TITLE
- ----------- -----
10.33 Amendment No. 2 to Indenture of Lease between the Company and
Andover Mills Realty Limited Partnership dated as of June 7,
1995(1)
10.34 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(9)
10.35 Composite Agreement and Plan of Reorganization by and among the
Company, NetManage, Inc. and Amanda Acquisition Corp. dated as of
June 15, 1998, as amended by Amendment No. 1 dated as of June 30,
1998 and Amendment No. 2 dated as of July 14, 1998(10)
27 Financial Data Schedule*
99 Cautionary Factors(11)
- --------------------------
*Filed with this Report.
(1) Included as an exhibit to, and incorporated in this Report 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 an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 filed with the Commission on November 14, 1996.
(3) Included as an exhibit to, and incorporated in this Report by reference
to, Amendment No. 2 on Form 8-A/A to the Company's Registration Statement
on Form 8-A filed with the Commission on July 9, 1998.
(4) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Current Report on Form 8-K dated June 15, 1998 filed
with the Commission on June 19, 1998.
(5) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 filed with the Commission on August 14, 1997.
(6) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 filed with the Commission on November 14, 1997.
(7) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Annual Report on Form 10-K for the year ended December
31, 1997 filed with the Commission on March 30, 1998.
(8) Included as an exhibit to, and incorporated in this Report by reference
to, the Company's Annual Report on Form 10-K for the year ended December
31, 1996 filed with the Commission on March 31, 1997.
(9) Included as Appendix A to, and incorporated in this Report by reference
to, the Company's Joint Proxy Statement/Prospectus filed with the
Commission on July 1, 1996.
(10) Included as Appendix A to, and incorporated in this Report by reference
to, the Company's Joint Proxy Statement/Prospectus included in the
Registration Statement on Form S-4, Registration Number 333-59101, of
NetManage, Inc. filed with the Commission on July 15, 1998.
iii
<PAGE> 28
(11) Incorporated by reference to the section entitled "Risk Factors" of the
Company's Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration Number 333-59101, of NetManage, Inc.
filed with the Commission on July 15, 1998.
iv
<PAGE> 1
EXHIBIT 10.11
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated 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") as of June 13, 1998.
WHEREAS, NetManage, Inc., a Delaware corporation ("NetManage"), Amanda
Acquisition Corp., a Massachusetts corporation ("Merger Sub"), and the Company
intend to enter into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") pursuant to which Merger Sub will be merged with and
into the Company, with the Company surviving such merger as a wholly-owned
subsidiary of NetManage (the "Merger"); and
WHEREAS, the Company and Employee are parties to an Amended and Restated
Employment Agreement dated as of December 12, 1997 (the "Existing Employment
Agreement"); and
WHEREAS, Employee is the holder of an option to purchase 300,000 shares of the
common stock, $.01 par value per share, of the Company at an exercise price of
$1.7813 per share, granted on December 18, 1997 (the "Option"); and
WHEREAS, the Reorganization Agreement provides that it is a condition to the
Merger that Employee have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions set forth in this Agreement, and as an inducement to NetManage to
enter into the Reorganization Agreement, the parties hereto hereby agree that
the Existing Employment Agreement is amended and restated in its entirety,
effective as of the Effective Time (as defined in the Reorganization Agreement)
of the Merger (the "Effective Time"), 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 shall be one year ending on December 12, 1998;
PROVIDED, that unless written notice pursuant to Sections 5.c, d, e, f or g to
the contrary is given by either party hereto to the other at least thirty (30)
days prior to the expiration of the original or any renewal term (in which case
this Agreement shall terminate as of the last day of such term or, if earlier,
the date such notice becomes effective in accordance with such Section, in each
case with the effect provided in such Section), the term of Employee's
employment hereunder shall automatically renew for successive terms of one year
each; PROVIDED, FURTHER, 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. The term of this Agreement, as from time to time
renewed or extended, is referred to herein as the "Term."
3. DUTIES; CONFLICTING INTERESTS. During the Term, Employee agrees to serve
the Company as its President 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. 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
<PAGE> 2
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 any incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. The targeted percentage of Employee's
Base Salary payable as a Bonus under such plans (such targeted percentage
multiplied by Employee's Base Salary is hereinafter referred to as the "Target
Bonus") shall be as set forth or referred to in resolutions adopted from time to
time by the Board or the Compensation Committee of the Board. 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.
c. WAIVER OF OPTION; ACCELERATION OF REMAINING STOCK OPTIONS.
i. Effective as of the Effective Time, Employee fully, forever,
irrevocably and unconditionally relinquishes, releases and waives any and all
rights he now has or may have had in the future under that certain Stock Option
Certificate evidencing the Option, and agrees that, effective as of the
Effective Time, the Option shall be cancelled and shall thereafter be void and
of no further force or effect. Employee agrees, as a condition to receiving the
severance benefits set forth in Section 5.g.i below, to deliver to NetManage, at
the Effective Time, the stock option certificate evidencing the Option for
cancellation.
ii. Upon a Change of Control, 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, 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 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.
2
<PAGE> 3
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 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.
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
3
<PAGE> 4
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 and 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
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 (as defined below and including, without
limitation, the Merger) 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 any 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 the Company: (A)
shall pay Employee, within ten (10) business days after such termination, in
cash and one lump sum, an amount (the "Change of Control Payment") equal to 1.5
times the greater of (1) the sum of the Base Salary and the amount of any Target
Bonus paid or payable during the twelve (12) months following the date on which
such termination occurs or (2) the sum of the Base Salary and the amount of any
Target Bonus paid or payable to Employee during the twelve (12) months preceding
the date on which such termination occurs, payable as provided below; 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. Any decrease in Employee's Target Bonus that is approved
by the Board or the Compensation Committee of the Board after the date a Change
of Control occurs (the "Change of Control Date") and any decrease in Employee's
Base Salary that occurs after the Change of Control Date shall be disregarded
for purposes of the calculation set forth in the preceding clause (A). The
Change of Control Payment shall be in lieu of any payments to or on behalf of
Employee that may otherwise be required pursuant to Sections 5.d or 5.e.
ii. 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
4
<PAGE> 5
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.
iii. 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.
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.
6. EFFECT OF TERMINATION OF EMPLOYMENT. The provisions of this Section 6 shall
apply to any termination of employment hereunder:
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 other amounts that may be due Employee in each
case as expressly provided for 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, except as otherwise provided in
Section 5.g.
c. The obligations of Employee set forth in Sections 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, NetManage and their respective
Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company, NetManage and their respective Affiliates have worldwide business and
commercial implications for the Company, NetManage and their respective
Affiliates, without geographic limit. In consideration of the payments set forth
herein, Employee agrees that during the Non-Compete Period (as defined below) he
shall not, other than on behalf of NetManage or the Company, directly or
indirectly, without the prior written consent of NetManage: (i) engage in,
anywhere in the jurisdictions in which the Company, NetManage and their
respective Affiliates and resellers conduct business (the "Restricted Area"),
whether as an employee, agent, consultant, advisor, independent contractor,
proprietor, partner, officer, director or otherwise, or have any ownership
interest in (except for ownership of one percent (1%) or less of any
publicly-held entity), or participate in or facilitate the financing, operation,
management or control of, any firm, partnership, corporation, entity or business
that engages or participates in a Competing
5
<PAGE> 6
Business Purpose (as defined below); or (ii) interfere with the business of the
Company or NetManage or approach, contact or solicit the Company's or
NetManage's customers in connection with a Competing Business Purpose.
"Competing Business Purpose" means the design, development, marketing, sale or
support of software products for connecting personal computers to corporate
mainframe, midrange and UNIX computers. "Noncompete Period" means the period of
employment of Employee by the Company or NetManage and continuing for a period
of 18 months thereafter.
b. Employee agrees that during the Non-Compete Period he shall not,
directly or indirectly, without the prior written consent of NetManage, solicit,
encourage or take any other action which is intended to induce any employee of
NetManage or the Company to terminate his or her employment with NetManage or
the Company.
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.
10. LITIGATION ASSISTANCE. Employee covenants and agrees that he shall, upon
reasonable notice, during the Term and for three (3) full years after the
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
6
<PAGE> 7
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 and the
Confidentiality and Inventions Agreement, which is incorporated herein by
reference, constitute the entire agreement between the parties and supersede all
prior communications, agreements and understandings, written or oral, with
respect to the terms and conditions of Employee's employment, including the
Existing Employment 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 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.
20. TERMINATION OF THIS AGREEMENT. This Agreement shall automatically terminate
and shall be void and of no further force or effect if the Reorganization
Agreement is terminated in accordance with its terms, effective as of such
termination. If this Agreement terminates as provided in the preceding sentence,
the Existing Employment Agreement shall continue in full force and effect.
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, NETMANAGE AND THEIR RESPECTIVE AFFILIATES
AND THAT EACH AND EVERY ONE OF THE RESTRAINTS IS REASONABLE IN RESPECT TO
SUBJECT MATTER, LENGTH OF TIME AND GEOGRAPHIC AREA.
7
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by Employee, as of the
date first above written.
EMPLOYEE: FTP SOFTWARE, INC.
/s/ Glenn C. Hazard By: /s/ James A. Tholen
- -------------------------- -----------------------------------
Glenn C. Hazard Title: Chief Financial Officer
--------------------------------
8
<PAGE> 9
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me and on my
behalf in connection with my separation of employment, as set forth in the
Second Amended and Restated Employment Agreement between me and FTP Software,
Inc. (the "Company") dated as of June ___, 1998 (the "Employment Agreement"), I,
on my own behalf and on behalf of my heirs, beneficiaries and representatives
and all others connected with me, hereby release and forever discharge the
Company, NetManage, Inc. and their respective Affiliates and all of their
respective past and present officers, directors, shareholders, Employees,
agents, representatives, successors and assigns and all others connected with
them (all collectively, the "Releases"), both individually and in their official
capacities, from any and all liabilities, claims, demands, actions and causes of
action of whatever name or nature (all collectively "Claims") which I have had
in the past, now have, or might now have, through the date of my execution of
this Release of Claims, in any way resulting from, arising out of or connected
with my employment or its termination or pursuant to any federal, state or local
employment law, regulation or other requirement (including without limitation
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, and any applicable state fair
employment practices acts, each as amended from time to time).
Excluded from the scope of this Release of Claims is any right of
indemnification pursuant to the Articles of Organization or By-Laws of the
Company that I have or hereafter acquire if any claim is asserted or proceedings
are brought against me related or allegedly related to my having been an officer
or Employee of the Company or to any of my activities as an officer or Employee
of the Company.
I understand that I may revoke this Release of Claims only with respect to
claims under the Age Discrimination in Employment Act at any time within seven
(7) days of the date of my signing by written notice to the President of the
Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.
Intending to be legally bound, I have set my hand and seal on the date
written below.
Date: ______________________ Signature: _________________________________
9
<PAGE> 1
EXHIBIT 10.16
TERMINATION AGREEMENT
This Termination Agreement (this "Agreement") is made and entered into by and
between FTP Software, Inc., a Massachusetts corporation (the "Company"), and
Douglas F. Flood ("Employee") as of June 13, 1998.
WHEREAS, NetManage, Inc., a Delaware corporation ("NetManage"), Amanda
Acquisition Corp., a Massachusetts corporation ("Merger Sub"), and the Company
intend to enter into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") pursuant to which Merger Sub will be merged with and
into the Company, with the Company surviving such merger as a wholly-owned
subsidiary of NetManage (the "Merger"); and
WHEREAS, the Company and Employee are parties to an Amended and Restated
Employment Agreement dated as of December 12, 1997 (the "Employment Agreement");
and
WHEREAS, the Reorganization Agreement provides that it is a condition to the
Merger that Employee have entered into an agreement with respect to the amount
of severance payable to Employee in connection with the termination of his
employment under certain circumstances and with respect to certain restrictions
on the activities of Employee following the termination of his employment;
NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions set forth in this Agreement, the parties hereto hereby agree as
follows:
1. TERMINATION OF EMPLOYMENT. The Company and Employee hereby agree that
Employee's employment with the Company and its subsidiaries is hereby terminated
effective as of August 31, 1998, PROVIDED, that if Employee desires to resign
from the Company prior to August 31, 1998, Employee shall so notify the Chief
Executive Officer of the Company in writing, the Company shall consider such
requested early resignation in good faith, and the Company and Employee shall
use all reasonable efforts to agree on such earlier resignation date. As used
herein, the term "Resignation Date" shall mean the earlier of (a) August 31,
1998 or (b) such earlier resignation date as the parties hereto may mutually
agree upon pursuant to the proviso set forth in the immediately preceding
sentence.
2. PAYMENT. In consideration of Employee's resignation pursuant to Section 1
hereof, the Company shall (a) pay Employee, in cash and one lump sum, within ten
(10) days following the Resignation Date, provided that Employee executes a
release of claims in the form attached hereto and marked "A" and does not revoke
the same within the period stated in such release, the sum of $354,000 and (b)
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. Such payments shall be in full satisfaction of any and all payments
to or on behalf of Employee that may otherwise be required pursuant to Section 5
of the Employment Agreement and shall likewise discharge and release any and all
claims by Employee against the Company. 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.
3. 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, NetManage and their respective
Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company, NetManage and their respective Affiliates have worldwide business and
commercial implications for the Company, NetManage and their respective
Affiliates, without geographic limit. In consideration of the payments set forth
herein, Employee agrees that during the Non-Compete Period (as defined below) he
shall not, other than on behalf of NetManage or the Company, directly or
indirectly, without the prior written consent of NetManage: (i) engage in,
anywhere in the jurisdictions in which the Company, NetManage and their
respective Affiliates and resellers conduct business (the "Restricted Area"),
whether as an employee, agent, consultant, advisor, independent contractor,
proprietor,
<PAGE> 2
partner, officer, director or otherwise, or have any ownership interest in
(except for ownership of one percent (1%) or less of any publicly-held entity),
or participate in or facilitate the financing, operation, management or control
of, any firm, partnership, corporation, entity or business that is primarily
engaged in a Competing Business Purpose (as defined below); or (ii) interfere
with the business of the Company or NetManage or approach, contact or solicit
the Company's or NetManage's customers in connection with a Competing Business
Purpose. "Competing Business Purpose" means the design, development, marketing,
sale or support of software products the primary function of which is to connect
personal computers to information located on corporate mainframe, midrange and
UNIX computers. "Noncompete Period" means the period of employment of Employee
by the Company or NetManage and continuing for a period of 18 months thereafter.
b. Employee agrees that during the Non-Compete Period he shall not,
directly or indirectly, without the prior written consent of NetManage, solicit,
encourage or take any other action which is intended to induce any employee of
NetManage or the Company to terminate his or her employment with NetManage or
the Company.
4. EFFECT ON EMPLOYMENT AGREEMENT. The parties hereto hereby agree that the
Employment Agreement shall continue in full force and effect EXCEPT for the
following provisions, all of which are hereby superseded in their entireties by
the terms of this Agreement: Section 2, Section 5.d, Section 5.e, Section 5.f,
Section 5.g, Section 7 (all references in the Employment Agreement to Section 7
thereof hereafter being deemed to be references to Section 3 of this Agreement),
Section 16 and the form of Release of Claims attached as "A" to the Employment
Agreement. The parties hereto hereby acknowledge that Employee's Base Salary as
of the date hereof is $200,000 per year and agree that no adjustments to
Employee's Base Salary shall be made during the term of this Agreement.
5. 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.
6. 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.
7. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement, the Employment
Agreement (except as otherwise provided in Section 4 above) and the
Confidentiality and Inventions Agreement (as defined in the Employment
Agreement) constitute the entire agreement between the parties and supersedes
all prior communications, agreements and understandings, written or oral, with
respect to the subject matter hereof. 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.
8. 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.
2
<PAGE> 3
9. 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 3. EMPLOYEE AGREES THAT SAID RESTRAINTS ARE NECESSARY FOR
THE REASONABLE AND PROPER PROTECTION OF THE COMPANY, NETMANAGE AND THEIR
RESPECTIVE 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, as of the
date first above written.
EMPLOYEE: FTP SOFTWARE, INC.
/s/ Douglas F. Flood By: /s/ Glenn C. Hazard
- -------------------------- ----------------------------------------
Douglas F. Flood Title: President and Chief Executive Officer
-------------------------------------
3
<PAGE> 4
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me and on my
behalf in connection with my separation of employment, as set forth in the
Amended and Restated Employment Agreement between me and FTP Software, Inc. (the
"Company") dated as of December 12, 1997 (the "Employment Agreement"), I, on my
own behalf and on behalf of my heirs, beneficiaries and representatives and all
others connected with me, hereby release and forever discharge the Company,
NetManage, Inc. and their respective Affiliates and all of their respective past
and present officers, directors, shareholders, employees, agents,
representatives, successors and assigns and all others connected with them (all
collectively, the "Releases"), both individually and in their official
capacities, from any and all liabilities, claims, demands, actions and causes of
action of whatever name or nature (all collectively "Claims") which I have had
in the past, now have, or might now have, through the date of my execution of
this Release of Claims, in any way resulting from, arising out of or connected
with my employment or its termination or pursuant to any federal, state or local
employment law, regulation or other requirement (including without limitation
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, and any applicable state fair
employment practices acts, each as amended from time to time).
Excluded from the scope of this Release of Claims is any right of
indemnification pursuant to the Articles of Organization or By-Laws of the
Company that I have or hereafter acquire if any claim is asserted or proceedings
are brought against me related or allegedly related to my having been an officer
or employee of the Company or to any of my activities as an officer or employee
of the Company, including, without limitation, the proceeding captioned LAWRENCE
M. GREEBEL V. FTP SOFTWARE, INC., ET AL., Civil Action No. 96-10544, U.S.
District Court for the District of Massachusetts.
I understand that I may revoke this Release of Claims only with respect to
claims under the Age Discrimination in Employment Act at any time within seven
(7) days of the date of my signing by written notice to the President of the
Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.
Intending to be legally bound, I have set my hand and seal on the date
written below.
Date: Signature:
--------------------- ---------------------------------
Douglas F. Flood
4
<PAGE> 1
EXHIBIT 10.20
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") is made and
entered into by and between FTP Software, Inc., a Massachusetts corporation (the
"Company"), and Dennis Leibl ("Employee"), as of June 13th, 1998.
WHEREAS, NetManage, Inc., a Delaware corporation ("NetManage"), Amanda
Acquisition Corp., a Massachusetts corporation ("Merger Sub"), and the Company
intend to enter into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") pursuant to which Merger Sub will be merged with and
into the Company, with the Company surviving such merger as a wholly-owned
subsidiary of NetManage (the "Merger"); and
WHEREAS, the Company and Employee are parties to an Employment Agreement dated
as of December 12, 1997 (the "Existing Employment Agreement"); and
WHEREAS, the Reorganization Agreement provides that it is a condition to the
Merger that Employee have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions set forth in this Agreement, and as an inducement to NetManage to
enter into the Reorganization Agreement, the parties hereto hereby agree that
the Existing Employment Agreement is amended and restated in its entirety,
effective as of the Effective Time (as defined in the Reorganization Agreement)
of the Merger (the "Effective Time"), 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 shall be one year ending on December 12, 1998;
PROVIDED, that unless written notice pursuant to Sections 5.c, d, e, f or g to
the contrary is given by either party hereto to the other at least thirty (30)
days prior to the expiration of the original or any renewal term (in which case
this Agreement shall terminate as of the last day of such term or, if earlier,
the date such notice becomes effective in accordance with such Section, in each
case with the effect provided in such Section), the term of Employee's
employment hereunder shall automatically renew for successive terms of one year
each; PROVIDED, FURTHER, 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. The term of this Agreement, as from time to time
renewed or extended, is referred to herein as the "Term."
3. DUTIES; CONFLICTING INTERESTS. During the Term, Employee agrees to serve
the Company as its Senior Vice President/General Manager, VIP Network
Applications Business Unit, 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. 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.
<PAGE> 2
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 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 any 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.
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, 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 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.
2
<PAGE> 3
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 June 17, 1997
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.
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
Senior Vice President/General Manager, VIP Network Applications Business Unit,
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,
3
<PAGE> 4
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.
i. If a Change of Control (as defined below and including, without
limitation, the Merger) 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 any 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 the Company: (A)
shall pay Employee, within ten (10) business days after such termination, in
cash and one lump sum, an amount (the "Change of Control Payment") equal to 1.5
times the greater of (1) the sum of the Base Salary and the amount of any Bonus
paid or payable during the twelve (12) months following the date on which such
termination occurs or (2) the sum of the Base Salary and the amount of any Bonus
paid or payable to Employee during the twelve (12) months preceding the date on
which such termination occurs, payable as provided below; 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. Any decrease in Employee's Bonus and any decrease in Employee's Base
Salary that occurs after the date a Change of Control occurs shall be
disregarded for purposes of the calculation set forth in the preceding clause
(A). The Change of Control Payment shall be in lieu of any payments to or on
behalf of Employee that may otherwise be required pursuant to Sections 5.d or
5.e.
ii. 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.
iii. 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.
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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.
6. EFFECT OF TERMINATION OF EMPLOYMENT. The provisions of this Section 6 shall
apply to any termination of employment hereunder:
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 other amounts that may be due Employee in each
case as expressly provided for 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, except as otherwise provided in
Section 5.g.
c. The obligations of Employee set forth in Sections 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, NetManage and their respective
Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company, NetManage and their respective Affiliates have worldwide business and
commercial implications for the Company, NetManage and their respective
Affiliates, without geographic limit. In consideration of the payments set forth
herein, Employee agrees that during the Non-Compete Period (as defined below) he
shall not, other than on behalf of NetManage or the Company, directly or
indirectly, without the prior written consent of NetManage: (i) engage in,
anywhere in the jurisdictions in which the Company, NetManage and their
respective Affiliates and resellers conduct business (the "Restricted Area"),
whether as an employee, agent, consultant, advisor, independent contractor,
proprietor, partner, officer, director or otherwise, or have any ownership
interest in (except for ownership of one percent (1%) or less of any
publicly-held entity), or participate in or facilitate the financing, operation,
management or control of, any firm, partnership, corporation, entity or business
that engages or participates in a Competing Business Purpose (as defined below);
or (ii) interfere with the business of the Company or NetManage or approach,
contact or solicit the Company's or NetManage's customers in connection with a
Competing Business Purpose. "Competing Business Purpose" means the design,
development, marketing, sale or support of software products for connecting
personal computers to corporate mainframe, midrange and UNIX computers.
"Noncompete Period" means the period of employment of Employee by the Company or
NetManage and continuing for a period of 18 months thereafter.
b. Employee agrees that during the Non-Compete Period he shall not,
directly or indirectly, without the prior written consent of NetManage, solicit,
encourage or take any other action which is intended to induce any employee of
NetManage or the Company to terminate his or her employment with NetManage or
the Company.
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
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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
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 and the
Confidentiality and Inventions Agreement, which is incorporated herein by
reference, constitute the entire agreement between the parties and supersede all
prior communications, agreements and understandings, written or oral, with
respect to the terms and conditions of Employee's employment, including the
Existing Employment 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
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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 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.
19. TERMINATION OF THIS AGREEMENT. This Agreement shall automatically terminate
and shall be void and of no further force or effect if the Reorganization
Agreement is terminated in accordance with its terms, effective as of such
termination. If this Agreement terminates as provided in the preceding sentence,
the Existing Employment Agreement shall continue in full force and effect.
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, NETMANAGE AND THEIR RESPECTIVE 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, as of the
date first above written.
EMPLOYEE: FTP SOFTWARE, INC.
/S/ Dennis Leibl By: /s/ Glenn C. Hazard
- ---------------------------- -----------------------------------------
Dennis Leibl Title: President and Chief Executive Officer
--------------------------------------
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"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me and on my
behalf in connection with my separation of employment, as set forth in the
Amended and Restated Employment Agreement between me and FTP Software, Inc. (the
"Company") dated as of June ___, 1998 (the "Employment Agreement"), I, on my own
behalf and on behalf of my heirs, beneficiaries and representatives and all
others connected with me, hereby release and forever discharge the Company,
NetManage, Inc. and their respective Affiliates and all of their respective past
and present officers, directors, shareholders, Employees, agents,
representatives, successors and assigns and all others connected with them (all
collectively, the "Releases"), both individually and in their official
capacities, from any and all liabilities, claims, demands, actions and causes of
action of whatever name or nature (all collectively "Claims") which I have had
in the past, now have, or might now have, through the date of my execution of
this Release of Claims, in any way resulting from, arising out of or connected
with my employment or its termination or pursuant to any federal, state or local
employment law, regulation or other requirement (including without limitation
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, and any applicable state fair
employment practices acts, each as amended from time to time).
Excluded from the scope of this Release of Claims is any right of
indemnification pursuant to the Articles of Organization or By-Laws of the
Company that I have or hereafter acquire if any claim is asserted or proceedings
are brought against me related or allegedly related to my having been an officer
or Employee of the Company or to any of my activities as an officer or Employee
of the Company.
I understand that I may revoke this Release of Claims only with respect to
claims under the Age Discrimination in Employment Act at any time within seven
(7) days of the date of my signing by written notice to the President of the
Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.
Intending to be legally bound, I have set my hand and seal on the date
written below.
Date: _________________________ Signature: _________________________________
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EXHIBIT 10.26
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement (this "Agreement") is made
and entered into by and between FTP Software, Inc., a Massachusetts corporation
(the "Company"), and James A. Tholen ("Employee") as of June 13, 1998.
WHEREAS, NetManage, Inc., a Delaware corporation ("NetManage"), Amanda
Acquisition Corp., a Massachusetts corporation ("Merger Sub"), and the Company
intend to enter into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") pursuant to which Merger Sub will be merged with and
into the Company, with the Company surviving such merger as a wholly-owned
subsidiary of NetManage (the "Merger"); and
WHEREAS, the Company and Employee are parties to an Amended and Restated
Employment Agreement dated as of December 12, 1997 (the "Existing Employment
Agreement"); and
WHEREAS, Employee is the holder of an option to purchase 100,000 shares of the
common stock, $.01 par value per share, of the Company at an exercise price of
$1.7813 per share, granted on December 18, 1997 (the "Option"); and
WHEREAS, the Reorganization Agreement provides that it is a condition to the
Merger that Employee have entered into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises, terms
and conditions set forth in this Agreement, and as an inducement to NetManage to
enter into the Reorganization Agreement, the parties hereto hereby agree that
the Existing Employment Agreement is amended and restated in its entirety,
effective as of the Effective Time (as defined in the Reorganization Agreement)
of the Merger (the "Effective Time"), 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 shall be one year ending on December 12, 1998;
PROVIDED, that unless written notice pursuant to Sections 5.c, d, e, f or g to
the contrary is given by either party hereto to the other at least thirty (30)
days prior to the expiration of the original or any renewal term (in which case
this Agreement shall terminate as of the last day of such term or, if earlier,
the date such notice becomes effective in accordance with such Section, in each
case with the effect provided in such Section), the term of Employee's
employment hereunder shall automatically renew for successive terms of one year
each; PROVIDED, FURTHER, 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. The term of this Agreement, as from time to time
renewed or extended, is referred to herein as the "Term."
3. DUTIES; CONFLICTING INTERESTS. During the Term, Employee agrees to serve
the Company as its Senior Vice President and Chief Financial and Operating
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. 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
<PAGE> 2
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 and Thirty-Five Thousand Dollars ($235,000)
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 any incentive or bonus compensation plan (hereafter, "Bonus")
shall be in addition to the Base Salary. The targeted percentage of Employee's
Base Salary payable as a Bonus under such plans (such targeted percentage
multiplied by Employee's Base Salary is hereinafter referred to as the "Target
Bonus") shall be as set forth or referred to in resolutions adopted from time to
time by the Board or the Compensation Committee of the Board. 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.
c. WAIVER OF OPTION; ACCELERATION OF REMAINING STOCK OPTIONS.
i. Effective as of the Effective Time, Employee fully, forever,
irrevocably and unconditionally relinquishes, releases and waives any and all
rights he now has or may have had in the future under that certain Stock Option
Certificate evidencing the Option, and agrees that, effective as of the
Effective Time, the Option shall be cancelled and shall thereafter be void and
of no further force or effect. Employee agrees, as a condition to receiving the
severance benefits set forth in Section 5.g.i below, to deliver to NetManage, at
the Effective Time, the stock option certificate evidencing the Option for
cancellation.
ii. Upon a Change of Control, 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, 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 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.
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<PAGE> 3
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 April 1, 1997
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.
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
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<PAGE> 4
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
Senior Vice President and Chief Financial and Operating 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
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 (as defined below and including, without
limitation, the Merger) 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 any 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 the Company: (A)
shall pay Employee, within ten (10) business days after such termination, in
cash and one lump sum, an amount (the "Change of Control Payment") equal to 1.5
times the greater of (1) the sum of the Base Salary and the amount of any Target
Bonus paid or payable during the twelve (12) months following the date on which
such termination occurs or (2) the sum of the Base Salary and the amount of any
Target Bonus paid or payable to Employee during the twelve (12) months preceding
the date on which such termination occurs, payable as provided below; 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. Any decrease in Employee's Target Bonus that is approved
by the Board or the Compensation Committee of the Board after the date a Change
of Control occurs (the "Change of Control Date") and any decrease in Employee's
Base Salary that occurs after the Change of Control Date shall be disregarded
for purposes of the calculation set forth in the preceding clause (A). The
Change of Control Payment shall be in lieu of any payments to or on behalf of
Employee that may otherwise be required pursuant to Sections 5.d or 5.e.
ii. 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
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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.
iii. 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.
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.
6. EFFECT OF TERMINATION OF EMPLOYMENT. The provisions of this Section 6 shall
apply to any termination of employment hereunder:
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 other amounts that may be due Employee in each
case as expressly provided for 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, except as otherwise provided in
Section 5.g.
c. The obligations of Employee set forth in Sections 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, NetManage and their respective
Affiliates:
a. Employee hereby acknowledges that the activities carried on by the
Company, NetManage and their respective Affiliates have worldwide business and
commercial implications for the Company, NetManage and their respective
Affiliates, without geographic limit. In consideration of the payments set forth
herein, Employee agrees that during the Non-Compete Period (as defined below) he
shall not, other than on behalf of NetManage or the Company, directly or
indirectly, without the prior written consent of NetManage: (i) engage in,
anywhere in the jurisdictions in which the Company, NetManage and their
respective Affiliates and resellers conduct business (the "Restricted Area"),
whether as an employee, agent, consultant, advisor, independent contractor,
proprietor, partner, officer, director or otherwise, or have any ownership
interest in (except for ownership of one percent (1%) or less of any
publicly-held entity), or participate in or facilitate the financing, operation,
management or control of, any firm, partnership, corporation, entity or business
that engages or participates in a Competing
5
<PAGE> 6
Business Purpose (as defined below); or (ii) interfere with the business of the
Company or NetManage or approach, contact or solicit the Company's or
NetManage's customers in connection with a Competing Business Purpose.
"Competing Business Purpose" means the design, development, marketing, sale or
support of software products connecting personal computers to corporate
mainframe, midrange and UNIX computers. "Noncompete Period" means the period of
employment of Employee by the Company or NetManage and continuing for a period
of 18 months thereafter.
b. Employee agrees that during the Non-Compete Period he shall not,
directly or indirectly, without the prior written consent of NetManage, solicit,
encourage or take any other action which is intended to induce any employee of
NetManage or the Company to terminate his or her employment with NetManage or
the Company.
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.
10. LITIGATION ASSISTANCE. Employee covenants and agrees that he shall, upon
reasonable notice, during the Term and for three (3) full years after the
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
6
<PAGE> 7
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 and the
Confidentiality and Inventions Agreement, which is incorporated herein by
reference, constitute the entire agreement between the parties and supersede all
prior communications, agreements and understandings, written or oral, with
respect to the terms and conditions of Employee's employment, including the
Existing Employment 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 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.
19. TERMINATION OF THIS AGREEMENT. This Agreement shall automatically terminate
and shall be void and of no further force or effect if the Reorganization
Agreement is terminated in accordance with its terms, effective as of such
termination. If this Agreement terminates as provided in the preceding sentence,
the Existing Employment Agreement shall continue in full force and effect.
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, NETMANAGE AND THEIR RESPECTIVE 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 date first above written.
EMPLOYEE: FTP SOFTWARE, INC.
/s/ James A. Tholen By: /s/ Glenn C. Hazard
- ------------------------------ ----------------------------------------
James A. Tholen Title: President and Chief Executive Officer
-------------------------------------
7
<PAGE> 8
"A"
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the special payments to be made to me and on my
behalf in connection with my separation of employment, as set forth in the
Second Amended and Restated Employment Agreement between me and FTP Software,
Inc. (the "Company") dated as of June ___, 1998 (the "Employment Agreement"), I,
on my own behalf and on behalf of my heirs, beneficiaries and representatives
and all others connected with me, hereby release and forever discharge the
Company, NetManage, Inc. and their respective Affiliates and all of their
respective past and present officers, directors, shareholders, Employees,
agents, representatives, successors and assigns and all others connected with
them (all collectively, the "Releases"), both individually and in their official
capacities, from any and all liabilities, claims, demands, actions and causes of
action of whatever name or nature (all collectively "Claims") which I have had
in the past, now have, or might now have, through the date of my execution of
this Release of Claims, in any way resulting from, arising out of or connected
with my employment or its termination or pursuant to any federal, state or local
employment law, regulation or other requirement (including without limitation
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, and any applicable state fair
employment practices acts, each as amended from time to time).
Excluded from the scope of this Release of Claims is any right of
indemnification pursuant to the Articles of Organization or By-Laws of the
Company that I have or hereafter acquire if any claim is asserted or proceedings
are brought against me related or allegedly related to my having been an officer
or Employee of the Company or to any of my activities as an officer or Employee
of the Company.
I understand that I may revoke this Release of Claims only with respect to
claims under the Age Discrimination in Employment Act at any time within seven
(7) days of the date of my signing by written notice to the President of the
Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.
Intending to be legally bound, I have set my hand and seal on the date
written below.
Date: _______________________ Signature: _________________________________
8
<PAGE> 1
EXHIBIT 10.30
FTP SOFTWARE, INC.
AMENDED AND RESTATED
1993 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of this Amended and Restated 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 Eligible Director shall receive the following automatic option
grants:
i. Each Eligible Director shall, on the date he or she is first
elected or appointed as a director of the Company, automatically be granted
an Option to purchase 20,000 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, HOWEVER, that if an Eligible Director is elected to or appointed
to less than a full three-year term of office, the number of shares subject
to such Option
<PAGE> 2
shall be reduced to that number obtained by multiplying 20,000 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;
ii. thereafter, each Eligible Director shall, on each of the first
and second anniversaries of date he or she is first elected or appointed as
a director of the Company, and provided that such person is then serving as
a director of the Company, automatically be granted an Option to purchase
10,000 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, HOWEVER, that (A) if
the term of office of such Eligible Director is more than one year but less
than two years, the number of shares subject to the Option to be granted on
such first anniversary shall be reduced to that number obtained by
multiplying 10,000 by a fraction, the numerator of which is the number of
days in the second year of the term of office of such Eligible Director and
the denominator of which is 365 and (B) and if the term of office of such
Eligible Director is more than two years but less than three years, the
number of shares subject to the Option to be granted on such second
anniversary shall be reduced to that number obtained by multiplying 10,000
by a fraction, the numerator of which is the number of days in the third
year of the term of office of such Eligible Director and the denominator of
which is 365; and
iii. thereafter, with respect to each Eligible Director who is elected
to a new three-year term of office, such Eligible Director shall
automatically be granted (A) on the date of such election, an Option to
purchase 20,000 shares of Stock of the Company (subject to adjustment as
provided in Sections 5 and 10) and (B) on each of the first and second
anniversaries of such re-election, an Option to purchase 10,000 shares of
Stock of the Company (in each case subject to adjustment as provided in
Sections 5 and 10), provided that such person is then serving as a director
of the Company, in each case 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.
-2-
<PAGE> 3
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.
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. (i) All Options granted under Section 4.a.i and clause (A) of Section
4.a.iii of the Plan shall become exercisable as to 6,667 shares after one year
from the effective date of the grant, as to an additional 6,667 shares after two
years from the effective date of grant, and as to the final 6,666 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 if an Eligible Director is granted an Option for fewer than 20,000 shares
as a result of the proviso to the first sentence of Section 4.a.i, such Option
shall become exercisable as follows: at the scheduled end of the term of office
of such Eligible Director, the lesser of 6,667 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 6,667 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.
(ii) All Options granted under Section 4.a.ii and clause (B) of
Section 4.a.iii of the Plan shall be exercisable in full immediately upon grant.
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
-3-
<PAGE> 4
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.
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.
-4-
<PAGE> 5
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.
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).
-5-
<PAGE> 6
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. ("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.
-6-
<PAGE> 7
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.
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THIS REPORT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 38,596
<SECURITIES> 10,564
<RECEIVABLES> 5,861
<ALLOWANCES> 1,250
<INVENTORY> 0
<CURRENT-ASSETS> 58,857
<PP&E> 18,312
<DEPRECIATION> 12,059
<TOTAL-ASSETS> 82,951
<CURRENT-LIABILITIES> 17,031
<BONDS> 0
0
0
<COMMON> 340
<OTHER-SE> 65,580
<TOTAL-LIABILITY-AND-EQUITY> 82,951
<SALES> 13,133
<TOTAL-REVENUES> 19,256
<CGS> 2,344
<TOTAL-COSTS> 5,161
<OTHER-EXPENSES> 25,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,486)
<INCOME-TAX> 150
<INCOME-CONTINUING> (9,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,636)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
