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                                                                 EXHIBIT 10.12.1
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                               EMPLOYEE AGREEMENT
                      REGARDING INVENTIONS, CONFIDENTIALITY
                               AND NON-COMPETITION


Employee Name:  Ilya Gorelik


     In consideration of FirePond, Inc.'s (the "Company") grant of stock options
to me pursuant to the Incentive Stock Option Agreement dated October 2, 1998
(the "Stock Option Agreement"), I, the above-named Employee, hereby agree with
the Company as follows:

1.    DEFINITIONS.

     (a) PROPRIETARY INFORMATION. As used in this Agreement, "Proprietary
Information" means information which the Company possesses or to which the
Company has rights which has commercial value. Proprietary Information includes,
by way of example and without limitation, trade secrets, product ideas, designs,
configurations, processes, techniques, formulas, software, improvements,
inventions, data, know-how, copyrightable materials, marketing plans and
strategies, sales and financial reports and forecasts, list of present and
prospective customers, and information relating to research, development,
programming, purchasing, accounting, engineering, merchandising and licensing.
Proprietary Information includes information developed by me in the course of my
employment by the Company or otherwise relating to Inventions which belong to
the Company under Section 4 below, as well as other information to which I may
have access in connection with my employment.

     (b) INVENTIONS AND DEVELOPMENTS. As used in this Agreement, "Inventions and
Developments" means any and all inventions, developments, creative works and
useful ideas of any description whatsoever, whether or not patentable.
Inventions and Developments include, by way of example and without limitation,
discoveries and improvements which consist of or relate to any form of
Proprietary Information.

     (c) COMPANY-RELATED INVENTIONS AND DEVELOPMENTS. For purposes of this
Agreement, "Company-Related Inventions and Developments" means all Inventions
and Developments which either (a) relate at the time of conception or
development to the actual or demonstrably anticipated business of the Company or
to its actual or demonstrably anticipated research and development; (b) result
from or relate to any work performed for the Company, whether or not during
normal business hours; (c) are developed on Company time; or (d) are developed
through the use of the Company's Proprietary Information, equipment and
software, or other facilities or resources.

     (d) COMPANY. For purposes of this Agreement, all references to the
"Company" will be deemed to include the Company and its direct or indirect
subsidiaries and affiliates.

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     (e) CONFLICTING PRODUCT. As used in this Agreement, a "Conflicting Product"
means any computer program, product, process, system, or service of any person
or organization other than the Company, in existence or under development, which
is the same as, or similar to, or competes with a computer program, product,
process, system or service marketed or under development by the Company at any
time during my employment with the Company.

     (f) CONFLICTING ORGANIZATION. As used in this Agreement, a "Conflicting
Organization" means any person or organization other than the Company which is
engaged in or is about to become engaged in the design, research, development,
production, marketing, distribution, leasing, licensing, selling, or servicing
of a Conflicting Product.

2.   CONFIDENTIALITY. I understand and agree that my employment creates a
relationship of confidence and trust between me and the Company with respect to
(a) all Proprietary Information, and (b) the confidential information of others
with which the Company has a business relationship. The information referred to
in clauses (a) and (b) of the preceding sentence is referred to in this
Agreement, collectively, as "Confidential Information." At all times, both
during my employment with the Company and after its termination, I will keep in
confidence and trust all such Confidential Information, and will not use or
disclose any such Confidential Information without the written consent of the
Company, except as may be necessary in the ordinary course of performing my
duties to the Company. The restrictions set forth in this Section 2 will not
apply to information which is generally known to the public or in the trade,
unless such knowledge results from an unauthorized disclosure by me, but this
exception will not affect the application of any other provision of this
Agreement to such information in accordance with the terms of such provision. I
likewise agree to report to my supervisor immediately any violation of the
Company's security measures or prohibited disclosure of Confidential Information
by any person or organization. I agree to report to my supervisor immediately
the names of any persons or organizations that attempt to obtain Confidential
Information from me.

3.   DOCUMENTS, RECORDS, ETC. All documents, records, apparatus, equipment and
other physical property, including but not limited to papers, notebooks,
manuals, reports, computer files, software, vehicles, tools, keys, entry cards
or badges, credit authorizations, user identifications and passwords, whether or
not pertaining to Proprietary Information, which are furnished to me by the
Company or are produced by me in connection with my employment will be and
remain the sole property of the Company. I will return to the Company all such
materials and property as and when requested by the Company. In any event, I
will return all such materials and property immediately upon termination of my
employment for any reason. I will not take with me any such material or property
or any copies thereof upon such termination.

4.   OWNERSHIP OF INVENTIONS AND DEVELOPMENTS. I agree that all Company-Related
Inventions and Developments which I conceive or develop, in whole or in part,
either alone or jointly with others, during the term of my employment with the
Company will be the sole property of the Company. The Company will be the sole
owner of all patents, copyrights and other proprietary rights in and with
respect to such Company-Related Inventions and Developments. To the fullest
extent permitted by law, such Company-Related Inventions and Developments will
be deemed works made for hire. I hereby transfer and assign to the Company any
proprietary rights which I may have or acquire in any such Company-


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Related Inventions and Developments, and I waive any moral rights or other
special rights which I may have or accrue therein. I agree to execute any
documents and take any actions that may be required to effect and confirm such
transfer and assignment and waiver. The provisions of this Section 4 will apply
to all Company-Related Inventions and Developments which a re conceived or
developed during the term of my employment with the Company, whether before or
after the date of this Agreement, and whether or not further development or
reduction to practice may take place after termination of my employment, for
which purpose it will be presumed that any Company-Related Inventions and
Developments conceived by me which are reduced to practice within one year after
termination of my employment were conceived during the term of my employment
with the Company unless I am able to establish a later conception date by clear
and convincing written evidence. The provisions of this Section 4 will not
apply, however, to any Inventions and Developments which may be disclosed in a
separate Schedule attached to this Agreement prior to its acceptance by the
Company, representing Inventions and Developments made by me prior to my
employment by the Company.

5.   DISCLOSURE OF INVENTIONS AND DEVELOPMENTS. I agree promptly to disclose to
the Company, or any persons designated by it, in writing, all Company-Related
Inventions and Developments which are or may be subject to the provisions of
Section 4.

6.   OBTAINING AND ENFORCING PROPRIETARY RIGHTS. I agree to assist the Company,
at the Company's request from time to time and at the Company's expense, to
obtain and enforce patents, copyrights or other proprietary rights with respect
to Company-Related Inventions and Developments in any and all countries. I will
execute all documents reasonably necessary or appropriate for this purpose. This
obligation will survive the termination of my employment, provided that the
Company will compensate me at a reasonable rate after such termination for time
actually spent by me at the Company's request on such assistance. In the event
that the Company is unable for any reason whatsoever to secure my signature to
any document reasonably necessary or appropriate for any of the foregoing
purposes (including renewals, extensions, continuations, divisions or
continuation in part), I hereby irrevocably designate and appoint the Company
and its duly authorized officers and agents as my agents and attorneys-in-fact
to act for me and on my behalf, but only for the purpose of executing and filing
any such document and doing all other lawfully permitted acts to accomplish the
foregoing purposes with the same legal force and effect as if executed by me.

7.   SOLICITATION OF EMPLOYEES. I agree that for a period of twelve (12) months
immediately following the termination of my relationship with the Company for
any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or take away such
employees, or attempt to solicit, induce, recruit, encourage, or take away
employees of the Company, either for myself or for any other person or entity. I
agree that if I breach, or propose to breach, any portion of this Section 7, the
Company shall be entitled, in addition to all other remedies that it may have,
to damages, including damages associated with recruiting costs and training
costs for

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replacing Company's employee.

8.   COMPETITIVE ACTIVITIES. During the term of my employment with the Company
and for a period of 12 months thereafter (the "Non-competition Period"), I will
not, directly or indirectly, whether as owner, partner, shareholder, director,
officer, consultant, agent, employee, co-venturer or otherwise, (a) participate
in, invest in, organize or assist in organizing, work for or contract with, any
Conflicting Organization; or (b) sell or assist in the design, development,
manufacture, licensing, sale or support of any Conflicting Product. I understand
that the restrictions set forth in this Section 8 are intended to protect the
Company's legitimate interest in its Proprietary Information and established
customer relationships and goodwill, and agree that such restrictions are
necessary, reasonable and appropriate for this purpose.

9.   THIRD-PARTY AGREEMENTS AND RIGHTS. I hereby confirm that I am not bound by
the terms of any agreement with any previous employer or other party which
restricts in any way my use or disclosure of information or my engagement in any
business, except as may be disclosed in a separate Schedule attached to this
Agreement prior to its acceptance by the Company. I have delivered to the
Company true and complete copies of any agreements listed on said Schedule. I
represent to the Company that my execution of this Agreement, my employment with
the Company and the performance of my proposed duties for the Company will not
violate any obligations I may have to any such previous employer or other party.
In my work for the Company, I will not disclose or make use of any information
in violation of any agreements with or rights of any such previous employer or
other party, and I will not bring to the premises of the Company any copies or
other tangible embodiments of non-public information belonging to or obtained
from any such previous employment or other party.

10.  OTHER EMPLOYMENT. During the term of my employment with the Company, I
agree to keep the Company informed of any outside employment rendered by me. For
a period of one (1) year after the termination of my employment with the
Company, I will inform any prospective employer, before accepting such
employment, of the terms of this Agreement.

11.  EQUITABLE REMEDIES. I agree that it would be difficult to measure any
damages caused to the Company which might result from any breach by me of the
terms of this Agreement, and that in any event money damages would be an
inadequate remedy for any such breach. Accordingly, I agree that if I breach, or
propose to breach, any portion of this Agreement, the Company shall be entitled,
in addition to all other remedies that it may have to an injunction or other
appropriate equitable relief to restrain any such breach without showing or
proving any actual damage to the Company.

12.  ADDITIONAL REMEDIES. Notwithstanding the availability to the Company of any
other remedy in the event of my breach of the promises set forth in this
Agreement, and without waiving or abrogating such other remedies, I agree that
the Company shall be entitled to the following additional remedies in the event
that I breach any term of this Agreement.

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     (a) REPURCHASE OF SHARES. The Company may repurchase from me any of the
shares of the Company's stock that I own as a result of exercising options under
the stock Option Agreement ("Shares"), pursuant to Section 12 of the Stock
Option Agreement.

     (b) PAYMENT UPON THE SALE OF SHARES. In the event that I breach any of the
terms of this Agreement and, prior to such breach, I sold or thereafter sell any
Shares, I agree to pay to the Company the proceeds I received from any such
sale, pursuant to Section 13 of the Stock Option Agreement.

13.  BINDING EFFECT. This Agreement will be binding upon me and my heirs,
executors, administrators and legal representatives and will inure to the
benefit of the Company, any subsidiary of the Company, and its and their
respective successors and assigns.

14.  ENFORCEABILITY. If any portion or provision of this Agreement is to any
extent 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, will not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law. In the event that any provision of this Agreement is
determined by any court of competent jurisdiction to be unenforceable by reason
of excessive scope as to geographic, temporal or functional coverage, such
provision will be deemed to extent only over the maximum geographic, temporal
and functional scope as to which it may be enforceable.

15.  ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the Company and myself with respect to the subject matter hereof, and supersedes
all prior representations and agreements with respect to such subject matter
except for the Stock Option Agreement. This Agreement may not be amended,
modified or waived except by a written instrument duly executed by the person
against whom enforcement of such amendment, modification or waiver is sought.
The failure of any party to require the performance of any term or obligation of
this Agreement, or the waiver by any party of any breach of this Agreement, in
any particular case will not prevent any subsequent enforcement of such term of
obligation or to be deemed a waiver of any separate or subsequent breach.

16.  NOT A CONTRACT OF EMPLOYMENT. I understand that this Agreement does not
create any obligation on the part of the Company to continue my employment for
any fixed term, and that my employment may be terminated by the Company at any
time for any reason, except as may be otherwise provided in a written agreement
executed by a duly authorized officer of the Company.

17.  NOTICES. Any notices, requests, demands and other communications provided
for by this Agreement will be sufficient if in writing and delivered in person
or sent by registered or certified mail, postage prepaid, to me at the last
address which I have filed in writing with the Company or, in the case of any
notice to the Company, at its main offices, to the attention of its Chief
Executive officer.

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18.  GOVERNING LAW. This is a Minnesota contract and shall be construed under
and be governed in all respects by the laws of Minnesota, without giving effect
to the conflict of laws principles of Minnesota law. Any legal action or suit
related to this Agreement shall be brought exclusively in the courts of
Minnesota. Both parties agree that the courts of Minnesota are a convenient
forum for the resolution of disputes.

     I UNDERSTAND THAT THIS AGREEMENT AFFECTS IMPORTANT RIGHTS. I HAVE READ IT
CAREFULLY AND AM SATISFIED THAT I UNDERSTAND IT COMPLETELY.



                                       /s/ Ilya Gorelik
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                                       Signature of Employee

                                       10/22/98
                                       --------------------------------
                                       Date



Accepted and Agreed to by
FirePond, Inc.


By:  Shirley Spoors
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Name:  Shirley Spoors
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Title: Director, Human Resources
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Date:  10/22/98
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