<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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 0-23560
XcelleNet, Inc.
(Exact name of registrant as specified in its charter)
Georgia 58-1749705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Concourse Parkway, Suite 850
Atlanta, GA 30328
(Address of principal executive offices) (Zip Code)
(770) 804-8100
(Registrant's telephone number, including area code)
Not applicable
(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 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, $.01 par value: 8,274,206 shares as of October 31, 1997
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
XcelleNet, Inc. and Subsidiaries
Consolidated Statements of Operations - Unaudited
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Software license fees $ 7,214 $ 6,133 $ 23,780 $ 20,445
Software upgrade fees and services 4,969 3,227 13,792 8,491
- ---------------------------------------------------------------------------------------------------------------------
12,183 9,360 37,572 28,936
- ---------------------------------------------------------------------------------------------------------------------
Costs and expenses
Costs of license fees 715 387 1,851 1,388
Costs of software upgrade fees and services 2,055 938 5,555 2,525
Sales and marketing 4,867 5,384 16,212 15,223
Product development 2,259 1,500 6,663 4,402
General and administrative 1,712 1,506 5,245 4,388
Non-recurring charges 1,025 384 1,025 384
- ---------------------------------------------------------------------------------------------------------------------
12,633 10,099 36,551 28,310
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (450) (739) 1,021 626
Other income, net 249 204 589 757
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (201) (535) 1,610 1,383
Provision (benefit) for income taxes (69) (160) 645 529
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (132) $ (375) $ 965 $ 854
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ (0.02) $ (0.05) $ 0.11 $ 0.11
- ---------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 8,218 7,238 8,625 7,845
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
XcelleNet, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
Unaudited
September 30 December 31,
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 15,822 $ 10,587
Short-term investments 11,587 2,157
Trade receivables, net of allowance for doubtful accounts of $502 and $503 11,186 13,306
Prepaid expenses and other current assets 1,445 1,049
Income tax receivable 466 793
- ---------------------------------------------------------------------------------------------------------------------------
Total current assets 40,506 27,892
- ---------------------------------------------------------------------------------------------------------------------------
Furniture, fixtures and equipment, net 5,081 5,378
Capitalized software development costs, net of accumulated
amortization of $2,548 and $1,566 2,308 2,231
Intangible assets, net of accumulated amortization of $267 2,497 -
Deferred income tax assets 754 754
Other noncurrent assets 368 428
- ---------------------------------------------------------------------------------------------------------------------------
$ 51,514 $ 36,683
- ---------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities $ 6,974 $ 4,694
Long-term liabilities 827 859
Shareholders' equity 43,713 31,130
- ---------------------------------------------------------------------------------------------------------------------------
$ 51,514 $ 36,683
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
balance sheets.
<PAGE>
XcelleNet, Inc. and Subsidiaries
Consolidated Statements of Cash Flows - Unaudited
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
- --------------------------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 965 $ 854
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,280 2,248
Change in assets and liabilities, net of effects
of purchase of XIS:
Decrease (increase) in trade receivables 2,520 (1,243)
Increase in prepaid expenses and other current assets (394) (691)
Decrease (increase) in income tax receivable 327 (28)
Increase in current liabilities 1,580 283
(Decrease) increase in long-term liabilities (102) 24
- --------------------------------------------------------------------------------------------------------------------
Total adjustments 7,211 593
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 8,176 1,447
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
(Increase) decrease in short-term investments (9,430) 1,495
Purchases of furniture, fixtures, and equipment (1,736) (2,002)
Additions to capitalized software development costs (970) (1,740)
Purchase of XIS, net of cash acquired (719)
Increase in long-term investments 106 (229)
Other (160) (172)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (12,909) (2,648)
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Proceeds from issuance of common stock, net of related costs 10,629 525
Income tax benefits related to exercise of stock options 258
Repayment of XIS assumed liabilities (388)
Repayment of XIS note payable (600)
Other 69 (63)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 9,968 462
- --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,235 (739)
Cash and cash equivalents, beginning of period 10,587 9,304
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 15,822 $ 8,565
- --------------------------------------------------------------------------------------------------------------------
Supplemental disclosures
Interest paid $ 60
Income taxes paid $ 324 $ 868
Non Cash Investing Activities:
The Company purchased all of the capital stock of XIS, Inc. In conjunction
with the acquisition, liabilities were assumed as follows (in
thousands):
Fair value of noncash assets acquired 687
Amount paid in excess of fair value 2,565
Less: Purchase price:
Cash paid, net (719)
Common stock issued (775)
Note payable issued (1,200)
-------------
Total purchase price (2,694)
-----------
===========
Liabilities assumed $ 558
===========
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
XcelleNet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Unaudited
1. In the Company's opinion, the accompanying consolidated interim financial
statements include all adjustments, consisting only of normal, recurring
adjustments, necessary to present fairly the Company's consolidated results
of operations, condensed financial position and cash flows for the periods
indicated. The results of operations for interim periods are not
necessarily indicative of results expected for the entire year. The interim
financial statements should be read in conjunction with the audited
consolidated financial statements as of December 31, 1996 and the notes
thereto included in the Company's Form 10-K for the year ended December 31,
1996 filed with the Securities and Exchange Commission. Certain prior year
amounts have been re-classified to conform with the current year
presentations.
2. Net income (loss) per share is computed using the weighted average number
of shares of common stock outstanding plus common equivalent shares. Common
equivalent shares from stock options have been included in the computation
when dilutive. The effect of stock options was anti-dilutive for the three
months ended September 30, 1997 and was excluded from the calculation. The
difference between primary and fully diluted earnings (loss) per share is
not material for any periods presented, and fully diluted earnings (loss)
per share have therefore been excluded.
3. The Company expenses the production costs of advertising at the time
incurred, except for direct-response advertising, which is capitalized and
amortized over its expected period of future benefits. Direct-response
advertising consists primarily of advertisements in business, financial,
and software magazines and newspapers. The cost of each direct-response
advertisement is amortized over the four-month period following the
issuance of the publication in which it appears. Advertising expenditures
totaled $468,000 and $702,000 in the three months ended September 30, 1997
and 1996, and $1,372,000 and $1,877,000 for the nine months ended September
30, 1997 and 1996, respectively. Advertising expense was $468,000 and
$564,000 in the three months ended September 30, 1997 and 1996, and
$1,463,000 and $1,466,000 for the nine months ended September 30, 1997 and
1996, respectively. Unamortized advertising costs included in prepaid
expenses were $0 and $411,000 at September 30, 1997 and 1996, respectively.
4. On January 2, 1997, the Company completed the acquisition of XcelleNet
Integration Services, Inc. ("XIS", formerly Electronic Commerce, Inc.) for
a total consideration comprising cash, future payments and stock of
approximately $2,675,000. The transaction was accounted for as a purchase.
The excess of the purchase price over the tangible assets acquired totaled
$2,535,684 and is being amortized over 10 years. The operating results of
XIS since the date of acquisition are included in the accompanying
financial statements.
5. On April 1, 1997, the Company successfully completed a secondary public
offering of its common stock. The offering was comprised of 655,953 shares
issued by the Company (which included 54,544 shares classified as treasury
stock in the Company's accompanying Consolidated Condensed Balance Sheets)
and 777,047 shares sold by existing shareholders at an offering price of
$17.00 per share. The net proceeds to the Company (after underwriting
discounts and commissions and other related costs associated) totaled
approximately $10,000,000.
6. Effective for periods beginning after December 15, 1997, the Financial
Accounting Standards Board has adopted Statement of Financial Accounting
Standards "SFAS" No. 128, "Earnings per Share". This statement sets out new
guidelines for the calculation and presentation of earnings per share. The
following tables represent a reconciliation of basic and diluted weighted
average shares and a pro forma calculation of earnings per share using the
guidelines of SFAS No. 128. The Company does not anticipate that the
adoption of the statement will materially impact its earnings per share
calculation.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share data) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic weighted average shares outstanding 8,218 7,238 7,951 7,190
Shares of common stock assumed issued upon
exercise of stock options using the"treasury
stock" method as it applies to the computation
of diluted earnings per share -- -- 674 655
========= ========== ========= ==========
Diluted weighted average shares outstanding 8,218 7,238 8,625 7,845
========= ========== ========= ==========
Net (loss) earnings used in the computation of
basic and diluted earnings per share $ (132) $ (375) $ 965 $ 854
========= ========== ========= ==========
Earnings (loss) per share
Basic $ (0.02) $ (0.05) $ 0.12 $ 0.12
========= ========== ========= ==========
Diluted $ (0.02) $ (0.05) $ 0.11 $ 0.11
========= ========== ========= ==========
</TABLE>
No shares were included for the exercise of stock options for the three month
periods ended September 30, 1997 and 1996 as the effect was anti-dilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
In addition to historical information contained herein, this Quarterly Report
may contain forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
update any such forward-looking statements. Any forward-looking statements
contained herein are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. Factors that might cause such divergence include, but are not
limited to, those discussed in the Company's filings under the Securities
Exchange Act of 1934, as amended, and the Securities Act of 1933, as amended.
Readers should review such risk factors, including those set forth in the
Company's prospectus filed with the Securities and Exchange Commission, as
amended on March 26, 1997.
REVENUES. Total revenues increased 30% to $12,183,000 and 30% to $37,572,000 for
the three and nine months ended September 30, 1997 as compared to the prior year
periods. The increase in total revenues was due to increases in both license
fees and software upgrade fees and services. Software license fees increased 18%
to $7,214,000 and 16% to $23,780,000 in the three and nine months ended
September 30, 1997 respectively, as compared to the prior year periods. Software
license fees from RemoteWare for NT products accounted for 65% and 63% of total
software license fees for the three and nine months ended September 30, 1997
compared with 17% and 7% for the same periods in 1996, reflecting increasing
market acceptance of the RemoteWare for NT products released beginning in 1996.
Software license fees as a percentage of total revenues were 59% and 63% for the
three and nine months ended September 30, 1997 compared with 66% and 71% for the
same periods in 1996. The decrease in the software license fees as a percentage
of total revenues reflects the growth in software upgrade fees and services
revenues associated with the January 1997 acquisition of XcelleNet Integration
Services ("XIS", formerly Electronic Commerce, Inc.), the Company's larger
installed base and the high participation rate of RemoteWare customers in the
Company's software upgrade and maintenance programs. See Note 4 of Notes to
Consolidated Financial Statements.
License fees from new customers increased 51% to $2,837,000 and increased 32% to
$9,907,000 for the three and nine months ended September 30, 1997 as compared to
the same periods in 1996. License fees from new customers as a percentage of
total license fees increased to 39% from 31% for the three months ended
September 30, 1997 as compared to the same period in 1996 and increased to 42%
from 37% for the nine months ended September 30, 1997 compared with the same
period in 1996. The Company added 63 new customers in the third quarter of 1997
and 234 in the nine months ended September 30, 1997, compared with 65 and 212 in
the same periods in 1996. The average initial RemoteWare purchase for new
customers was $45,000 and $42,000 in the three and nine months ended September
30, 1997, compared with $29,000 and $35,000 in the same periods in 1996.
Software license fees from existing customers increased 3% to $4,377,000 and 7%
to $13,873,000 in the three and nine months ended September 30, 1997 as compared
to the same periods in 1996. Software license fees from existing customers
decreased as a percentage of total license fees to 61% from 69% in the three
months ended September 30, 1997 as compared to the same period during 1996 and
decreased to 58% from 63% for the nine months ended September 30, 1997 as
compared to the prior year period.
Software license fees generated by Solution Providers decreased to 32% from 39%
and to 28% from 44% in the three and nine months ended September 30, 1997, as
compared to the prior year periods, due to changes to the Company's Solution
Provider program that have resulted in fewer Solution Providers authorized to
remarket RemoteWare and lower remarketer discount rates. During the past few
quarters, the Company has taken steps to leverage its historically direct sales
model by signing several co-marketing and OEM agreements. However, these
agreements have not yet resulted in significant revenue.
Software upgrade fees and services increased 54% to $4,969,000 and 62% to
$13,792,000 in the three and nine months ended September 30, 1997 as compared to
the same periods in 1996. Software upgrade fees increased 27% to $3,772,000 and
39% to $10,713,000 in the three and nine months ended September 30, 1997, as
compared to the same periods in 1996, primarily due to the Company's growing
customer base and their significant participation rate in the Company's software
upgrade and maintenance programs. Services revenues increased 362% to $1,197,000
and 287% to $3,079,000 in the three and nine months ended September 30, 1997 as
compared to the same periods in 1996, primarily due to the Company's acquisition
in January 1997 of XIS.
COSTS OF LICENSE FEES. Costs of license fees increased 85% to $715,000 and 33%
to $1,851,000 in the three and nine months ended September 30, 1997 as compared
to the same periods in 1996. Costs of license fees increased as a percentage of
software license fees revenues to 10% and 8% for the three and nine months ended
September 30, 1997 from 6% and 7% for the three and nine months ended September
30, 1996. The increase in costs of license fees is due primarily to the
increased amortization of capitalized software associated with the RemoteWare
for NT products and the increased royalties associated with new products.
COSTS OF SOFTWARE UPGRADE FEES AND SERVICES. Costs of upgrade fees and services
increased 119% to $2,055,000 and 120% to $5,555,000 in the three and nine months
ended September 30, 1997 as compared to the same periods in 1996. Costs of
upgrade fees and services increased as a percentage of software upgrade fees and
services revenues to 41% and 40% for the three and nine months ended September
30, 1997 from 29% and 30% for the three and nine months ended September 30,
1996. The increase in costs of upgrade fees and services is primarily due to the
Company's January 1997 acquisition of XIS, which expanded the Company's systems
integration business.
SALES AND MARKETING. Sales and marketing expenses decreased 10% to $4,867,000
and increased 6% to $16,212,000 in the three and nine months ended September 30,
1997 as compared to the same periods in 1996. Sales and marketing expenses
decreased as a percentage of revenues to 40% and 43% from 58% and 53% in the
three and nine months ended September 30, 1997 as compared to the prior year
periods. The decrease in sales and marketing expenses was due primarily to lower
marketing personnel costs and lower advertising costs resulting from a more
focused marketing campaign.
PRODUCT DEVELOPMENT. The following table summarizes product development
expenditures:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Product development expenditures $ 2,259 $ 2,311 $ 7,633 $ 6,142
Less: capitalized software development costs - 811 970 1,740
- ------------------------------------------------------------------------------------------------------------------
Net product development expenses $ 2,259 $ 1,500 $ 6,663 $ 4,402
- ------------------------------------------------------------------------------------------------------------------
As a percentage of revenues:
Product development expenditures 19% 25% 20% 21%
Less: capitalized software development costs - (9)% (2)% (6)%
- ------------------------------------------------------------------------------------------------------------------
Net product development expenses 19% 16% 18% 15%
- ------------------------------------------------------------------------------------------------------------------
Capitalized product development rate - 35% 13% 28%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Product development expenditures (expenses plus capitalized software development
costs) decreased 2% to $2,259,000 and increased 24% to $7,633,000 in the three
and nine months ended September 30, 1997 as compared to the same periods in
1996. Capitalized software development costs were $0 and $970,000 for the three
and nine months ended September 30, 1997 and $811,000 and $1,740,000 in the
three and nine months ended September 30, 1996, respectively. The decrease in
product development expenditures and the elimination of capitalized software
for the third quarter is due to the May 1997 release of the RemoteWare for NT
products. Net product development expenses (product development expenditures
less capitalized software) increased 51% to $2,259,000 and 51% to $6,663,000 for
the three and nine months ended September 30, 1997 as compared to the same
periods in 1996. Net product development expenses as a percentage of revenues
increased to 19% and 18% from 16% and 15% for the three and nine months ended
September 30, 1997 as compared to the prior year periods.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased 14% to
$1,712,000 and 20% to $5,245,000 in the three and nine months ended September
30, 1997 as compared to the same periods in 1996. General and administrative
expenses decreased as a percentage of revenues to 14% from 16% for the three
months ended September 30, 1997 as compared to the prior year period. General
and administrative expenses decreased as a percentage of total revenues to 14%
from 15% for the nine months ended September 30, 1997 as compared to the prior
period. The absolute dollar increase in general and administrative expenses was
primarily due to additional personnel costs and the amortization of goodwill
associated with the January purchase of XIS.
NON-RECURRING CHARGES. The Company recorded non-recurring charges of $1,025,000
and $384,000 during the three months ended September 30, 1997 and 1996,
respectively. Non-recurring charges for the third quarter of 1997 consist of
severance and facilities costs associated with the Company's organizational
streamlining and tighter focus on its remote systems management strategy. The
third quarter 1996 charge was associated with changes in the Company's executive
management team. Excluding the non-recurring charges for each of these periods,
operating income as a percent of revenues was 5% for the third quarter 1997 as
compared to the operating loss of 4% of revenues for the prior year period, and
operating income of 5% and 3% of revenues for the nine months ended September
30, 1997 and 1996, respectively.
OTHER INCOME, NET. Other income increased 22% to $249,000 and decreased 22% to
$589,000 in the three and nine months ended September 30, 1997 as compared to
the same periods in 1996. The increase in interest income during the third
quarter of 1997 is primarily due to higher cash balances as a result of the
Company's public offering in April of 1997. The year to date decrease in
interest income as compared to the prior year period relates to lower cash
balances during the first quarter of 1997 as a result of acquisitions in late
1996 and early 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had cash, cash equivalents and short term
investments of $27,409,000, working capital of $33,532,000 and no long-term
debt.
During the first nine months of 1997, the Company generated $8,176,000 of cash
from operating activities, primarily from net income plus depreciation and
amortization. Net cash used in investing activities was $12,909,000 primarily
due to investment of the proceeds from the Company's public offering in
short-term investments and fixed asset additions. Net cash provided by financing
activities was $9,968,000 primarily due to proceeds from the sale of stock in
the public offering effective April 1, 1997, which totaled approximately
$10,000,000, net of issuance costs.
The Company believes that its current cash balances and cash flows from
operations will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
10.10 Form Indemnity Agreement (Incorporated herein by reference to
Exhibit 10.10 to Registration Statement No. 33-76012). In addition
to the individuals identified in Schedule 1 to this Exhibit, the
following have entered into a form Indemnity Agreement with the
Registrant substantially identical to this exhibit:
Geoffrey A. Moore
Robert I. Apollo
Corey M. Smith
Joseph W. Owen
David F. Held
Jethro J. Felton
10.25 Form of Change in Control Employment Agreements between the Company
and Messrs. Dennis M. Crumpler, Corey M. Smith, Sidney V. Sack,
Shereef W. Nawar, W. Michael Parham and Stefanus F. Coetzee
(Incorporated herein by reference to Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.28 Form of Change in Control Employment Agreements between the Company
and Messrs. David F. Held, Jethro J. Felton and Jeanne N. Bateman.
11 Statement re: computation of per share earnings
27.01 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter
ended September 30, 1997.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XcelleNet, Inc.
(Registrant)
Date: November 14, 1997 By: /s/ DAVID F. HELD
--------------------
David F. Held
Chief Financial Officer
(Principal Financial and
Authorized Officer)
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Exhibits
to
Quarterly Report
on
Form 10-Q
For the quarter ended
September 30, 1997
------------------
XcelleNet, Inc.
(Exact name of registrant as specified in its charter)
================================================================================
<PAGE>
Exhibit
Number Exhibit Description
- ------ -------------------
10.10 Form Indemnity Agreement (Incorporated herein by reference to
Exhibit 10.10 to Registration Statement No. 33-76012). In addition
to the individuals identified in Schedule 1 to this Exhibit, the
following have entered into a form Indemnity Agreement with the
Registrant substantially identical to this exhibit:
Geoffrey A. Moore
Robert I. Apollo
Corey M. Smith
Joseph W. Owen
David F. Held
Jethro J. Felton
10.25 Form of Change in Control Employment Agreements between the Company
and Messrs. Dennis M. Crumpler, Corey M. Smith, Sidney V. Sack,
Shereef W. Nawar, W. Michael Parham and Stefanus F. Coetzee
(Incorporated herein by reference to Exhibit 10.25 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.28 Form of Change in Control Employment Agreements between the Company
and Messrs. David F. Held, Jethro J. Felton and Jeanne N. Bateman.
11 Statement re: computation of per share earnings
27.01 Financial Data Schedule
<PAGE>
Exhibit 10.28
- --------------------------------------------------------------------------------
CHANGE IN CONTROL EMPLOYMENT AGREEMENT
--------------------------------------
AGREEMENT by and between XcelleNet, Inc., a Georgia corporation (the
"Company") and ______________________________(the "Executive"), dated as of the
[xx] day of [xxxx] 1997.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
-------------------
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in Section l(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii) otherwise
arose in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement the "Effective Date" shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
<PAGE>
2. Change of Control. For the purposes of this Agreement, a "Change of
-----------------
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock or other equity
interests and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the entity resulting from such Business Combination (including,
without limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan
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<PAGE>
(or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock or other equity
interests of the entity resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination and (iii) at least a majority of the members of the board of
directors or comparable body of the entity resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination.
3. Employment Period. The Company hereby agrees to continue the Executive
-----------------
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the "Employment Period").
4. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
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(b) Compensation.
------------
(i) Base Salary. During the Employment Period, the Executive shall
-----------
receive an annual base salary ("Annual Base Salary"), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary shall be reviewed
no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any entity controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
------------
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the greater of forty
percent (40%) of Annual Base Salary or the Executive's highest bonus under the
Company's executive compensation plan, or any comparable bonus under any
predecessor or successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year) (the "Recent Annual Bonus"). Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
---------------------------------------
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including,
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without limitation, medical, prescription, dental, disability, employee life,
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with benefits which are less favorable, in
the aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date.
(v) Expenses. During the Employment Period, the Executive shall be
--------
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date.
(vi) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date.
(vii) Office and Support Staff. During the Employment Period, the
------------------------
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any time during the
120-day period immediately preceding the Effective Date.
(viii) Vacation. During the Employment Period, the Executive shall
--------
be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date.
5. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that,
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within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative.
(b) Cause. The Company may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive's
duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
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<PAGE>
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of the
Effective Date shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(d) Termination Other Than for Death or Disability, Cause or Good
-------------------------------------------------------------
Reason. The Company may terminate the Executive's employment at any time for any
- ------
reason. The Executive's employment may be terminated by Executive at any time
for any reason.
(e) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 30
days after the giving of such notice). The failure by the
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<PAGE>
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(f) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
------------------------------------------------------
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II) the Annual
Bonus paid or payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed for less than
twelve full months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to as the "Highest
Annual Bonus") and (y) a fraction, the numerator of which is the number of days
in the current fiscal year through the Date of Termination, and the denominator
of which is 365 and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be hereinafter referred to
as the "Accrued Obligations"); and
B. the amount equal to the sum of (x) the Executive's
Annual Base Salary and (y) the Highest Annual Bonus; and
C. an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined benefit
retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no less
favorable to the Executive
-8-
<PAGE>
than those in effect under the Company's Retirement Plan immediately prior to
the Effective Date), and any excess or supplemental retirement plan in which the
Executive participates (together, the "SERP") which the Executive would receive
if the Executive's employment continued for [one] years after the Date of
Termination assuming for this purpose that all accrued benefits are fully
vested, and, assuming that the Executive's compensation in each of the three
years is that required by Section 4(b)(i) and Section 4(b)(ii), over (b) the
actuarial equivalent of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP as of the Date of Termination;
D. an amount equal to the product of (1) the fair market
value of the aggregate securities subject to the Unvested Options (as
hereinafter defined) less the aggregate exercise price for the Unvested Options,
and (2) 1.2; however, no amount shall be payable pursuant to this Section
6.(a)(i)D if the Company accelerates the exercisability of all of the Unvested
Options to a date no later than the Date of Termination; as used herein,
Unvested Options means any options, or portions thereof, to purchase the
Company's securities that have been granted to the Executive on or prior to the
Date of Termination, and which options or portions thereof are not exercisable
on the Date of Termination, but would become exercisable within eighteen (18)
months following the Date of Termination if the Executive remained employed by
the Company for such eighteen-month period, and assuming any performance-based
acceleration of exercisability that could occur during such eighteen-month
period did occur (the "Unvested Options").
(ii) for one year after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated, provided, however, that if the Executive
becomes re-employed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For purposes
of determining eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices, programs and
policies, the Executive shall be considered to have remained employed until
three years after the Date of Termination and to have retired on the last day of
such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program,
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<PAGE>
policy or practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter referred to as
the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason
-----
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's
---------------------------------
employment shall be terminated for Cause during the Employment Period, this
Agreement shall terminate without further obligations to the Executive other
than the obligation to pay to the Executive (x) his Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations
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<PAGE>
to the Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
-------------------------
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
---------------
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after
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payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $25,000 (taking into
account both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Executive resulting from an elimination of the Gross-Up Payment
and a reduction of the Payments, in the aggregate, to an amount (the "Reduced
Amount") such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Arthur
Andersen & Co. L.L.P. or such other certified public accounting firm as may be
designated by the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Company shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall-be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing
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<PAGE>
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
-13-
<PAGE>
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Non Competition. Upon termination of Executive's employment by
---------------
Executive or the Company for any reason:
(i) For one (1) year thereafter, Executive will not, within
the continental United States participate, directly or indirectly, in any
fashion engage in any activity as or for a competitor of the Company, which is
the same or similar to those activities in which Executive was involved for the
Company at the time of such termination or during the prior twelve (12) month
period;
(ii) For three (3) years thereafter, Executive will not engage
in recruiting or hiring or attempting to recruit or hire, directly or by
assisting others, any employee of the Company;
(iii) For three (3) years thereafter, Executive will not
solicit or accept, or attempt to solicit or accept, directly or by assisting
others, for purposes of
-14-
<PAGE>
providing products or services that are competitive with those provided by the
Company, any business from the Company's customers, including actively sought
prospective customers, with whom or which Executive made material contact while
employed by the Company.
If, and while, Executive acts in violation of this Section 11, the running of
the period specified in the particular subsection which Executive violated shall
be tolled and suspended.
12. Successors.
----------
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
13. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
------------------------------
------------------------------
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<PAGE>
------------------------------
------------------------------
If to the Company:
------------------
XcelleNet, Inc.
Suite 850
5 Concourse Parkway
Atlanta, Georgia 30328
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties that was in effect prior to the Effective Date of this Agreement
with respect to the subject matter hereof.
-16-
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-----------------------------
[Executive]
XCELLENET, INC.
By:
--------------------------
Vice President - Finance, Secretary
and Treasurer
-17-
<PAGE>
EXHIBIT 11
XCELLENET, INC. AND SUBSIDIARIES
Computation of Earnings Per Share of Common Stock
For the Three and Nine Months Ended September 30, 1997 and 1996
(amounts in thousands, except per share)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Weighted average number of common shares outstanding 8,218 7,238 7,951 7,190
Add - Shares of common stock assumed issued upon exercise of
stock options using the "treasury stock" method as it
applies to the computation of primary earnings per share -- -- 674 655
----------- ------------ ------------ ------------
Number of common and common equivalent shares outstanding 8,218 7,238 8,625 7,845
Add - Additional shares of common stock assumed issued upon
exercise of stock options using the "treasury stock" method as it
applies to the computation of fully diluted earnings per share -- -- (7) 84
----------- ------------ ------------ ------------
Number of common and common equivalent shares outstanding
assuming full dilution 8,218 7,238 8,618 7,929
=========== ============ ============ ============
Net income (loss) $ (132) $ (375) $ 965 $ 854
=========== ============ ===========================
Earnings (loss) per share:
Primary $ (0.02) $ (0.05) $ 0.11 $ 0.11
=========== ============ ===========================
Fully diluted $ (0.02) $ (0.05) $ 0.11 $ 0.11
=========== ============ ===========================
</TABLE>
A single presentation of primary earnings per share is made on the Consolidated
Statements of Operations because the effect of assuming full dilution is
insignificant in each period presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,822
<SECURITIES> 11,587
<RECEIVABLES> 11,688
<ALLOWANCES> 502
<INVENTORY> 0
<CURRENT-ASSETS> 40,506
<PP&E> 13,103
<DEPRECIATION> 8,022
<TOTAL-ASSETS> 51,514
<CURRENT-LIABILITIES> 6,974
<BONDS> 0
0
0
<COMMON> 83
<OTHER-SE> 43,630
<TOTAL-LIABILITY-AND-EQUITY> 51,514
<SALES> 7,214
<TOTAL-REVENUES> 12,183
<CGS> 715
<TOTAL-COSTS> 2,770
<OTHER-EXPENSES> 9,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (201)
<INCOME-TAX> (69)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (132)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
