SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
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Check the appropriate box:
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[ ] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
WORLDTALK COMMUNICATIONS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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[Worldtalk Logo]
WORLDTALK COMMUNICATIONS CORPORATION
5155 Old Ironsides Drive
Santa Clara, California 95054
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Worldtalk Communications Corporation ("Worldtalk") will be held at our
headquarters located at 5155 Old Ironsides Drive, Santa Clara, California on
Wednesday, November 17, 1999 at 9:00 a.m. Pacific Standard Time for the
following purposes:
1. To approve an amendment to Worldtalk's 1996 Equity Incentive
Plan to:
o increase the number of shares reserved under the plan
by 1,000,000 shares; and
o to provide for an automatic increase in the number of
shares reserved under the plan on July 1, 2000 and
each anniversary thereafter, of 3% of the total
shares of Worldtalk outstanding as of the immediately
preceding June 30, unless the board of directors of
Worldtalk determines prior to the increase to reduce
or eliminate the increase in any particular year.
2. To approve an increase in the number of authorized shares of
common stock from 25,000,000 to 50,000,000.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
Only stockholders of record at the close of business on ____________,
1999 are entitled to notice of and to vote at the meeting or any adjournment
thereof. Whether or not you expect to attend the meeting, please complete, date,
sign and promptly return the accompanying proxy in the enclosed postage-paid
envelope so that your shares may be represented at the meeting. If the record
holder of your shares is a broker, bank or other nominee, please follow the
instructions for voting that are given to you by such person or entity.
By Order of the Board of Directors
James Heisch
President and Chief Financial Officer
Santa Clara, California
November , 1999
<PAGE>
WORLDTALK COMMUNICATIONS CORPORATION
5155 Old Ironsides Drive
Santa Clara, California 95054
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PROXY STATEMENT
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November __, 1999
The accompanying proxy is solicited on behalf of the board of directors
of Worldtalk Communications Corporation, a Delaware corporation, for use at our
special meeting of stockholders to be held at our headquarters located at 5155
Old Ironsides Drive, Santa Clara, California on Wednesday, November 17, 1999 at
9:00 a.m. Pacific Standard Time. This proxy statement and the accompanying form
of proxy were first mailed to stockholders on or about November 3, 1999.
Record Date; Quorum
Only holders of record of our common stock at the close of business on
the record date of ___________, 1999 will be entitled to vote at the meeting. A
majority of the shares outstanding on the record date will constitute a quorum
for the transaction of business.
Outstanding Shares
At the close of business on the record date, we had __________ shares
of common stock outstanding and entitled to vote which were held by
approximately __________ stockholders, although we have been informed that there
are approximately __________ beneficial owners of our common stock.
Voting Rights; Required Vote
Holders of our common stock are entitled to one vote for each share
held as of the record date. In the event that a broker, bank, custodian, nominee
or other record holder of our common stock indicates on a proxy that it does not
have discretionary authority to vote certain shares on a particular matter (a
"broker non-vote"), then those shares will not be considered present and
entitled to vote with respect to that matter, although they will be counted in
determining whether or not a quorum is present at the meeting.
Approval of proposal 1 requires the affirmative vote of a majority of
the shares present in person or represented by proxy at the meeting and voted
for or against the proposal. Abstentions and broker non-votes will not affect
the outcome of the vote with respect to proposal 1.
Approval of proposal 2 requires the affirmative vote of a majority of
the shares of outstanding common stock. With respect only to proposal 2, broker
non-votes will have the same effect as a vote against proposal 2.
Voting of Proxies
The proxy accompanying this proxy statement is solicited on behalf of
our board of directors for use at the meeting. Stockholders are requested to
complete, date and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to Worldtalk. All executed, returned
proxies that are not revoked will be voted in accordance with the included
instructions. However, signed proxies that are returned without instructions as
to how they should be voted on a particular proposal at the meeting will be
counted as votes in favor of the proposal set forth in the accompanying notice
of meeting and this proxy statement. We are not aware of any other matters to be
brought before the meeting. However, as to any business that may properly come
before the meeting, we intend that proxies in the form enclosed will be voted in
accordance with the judgment of the persons holding such proxies.
In the event that sufficient votes in favor of any proposal properly
brought before the meeting are not received by the date of the meeting, the
persons named as proxies may propose one or more adjournments of the
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meeting to permit further solicitations of proxies. Any such adjournment would
require the affirmative vote of the majority of the outstanding shares present
in person or represented by proxy at the meeting.
We will pay the expenses of soliciting proxies to be voted at the
meeting. Following the original mailing of the proxies and other soliciting
materials, we and/or our agents may also solicit proxies by mail, telephone,
telegraph or in person. Following the original mailing of the proxies and other
soliciting materials, we will request that brokers, custodians, nominees and
other record holders of our common stock forward copies of the proxy and other
soliciting materials to persons for whom they hold shares of common stock and
request authority for the exercise of proxies. In such cases, upon the request
of the record holders, we will reimburse such holders for their reasonable
expenses.
Revocability of Proxies
Any person signing a proxy in the form accompanying this proxy
statement has the power to revoke it prior to the meeting or at the meeting
prior to the vote pursuant to the proxy. A proxy may be revoked by a writing
delivered to us stating that the proxy is revoked, by a subsequent proxy that is
signed by the person who signed the earlier proxy and is present at the meeting
or by attendance at the meeting and voting in person. Please note, however, that
if a stockholder's shares are held of record by a broker, bank or other nominee
and that stockholder wishes to vote at the meeting, the stockholder must bring
to the meeting a letter from the broker, bank or other nominee confirming that
stockholder's beneficial ownership of the shares and that such broker, bank or
other nominee is not voting such shares.
PROPOSAL NO. 1 -- AMENDMENT TO OUR 1996 EQUITY INCENTIVE PLAN
In July 1999, the board adopted, subject to stockholder approval, an
amendment to our 1996 Equity Incentive Plan to increase the number of shares of
common stock reserved for issuance thereunder by 1,000,000 shares, and to
provide for an automatic increase in the shares reserved under the plan on July
1, 2000 and each anniversary thereafter, of 3% of the total shares outstanding
as of the immediately preceding June 30, unless our board of directors
determines prior to the increase to reduce or eliminate the increase in any
particular year. We are asking our stockholders to approve such amendment.
The purpose of this amendment is to secure sufficient additional shares
under the plan so that we are able to maintain a competitive equity compensation
program. Our board believes that the increase in the number of shares reserved
for issuance under this plan and the automatic annual increase is in Worldtalk's
best interests because of our continuing need to attract and retain quality
employees and thereby remain competitive in our industry. Granting equity
incentives under the plan plays an important role in our efforts to attract and
retain employees of outstanding ability. Competition for skilled engineers and
other key employees in our industry is intense and the use of significant stock
options to retain and motivate such personnel is pervasive in the high
technology industries. Our board believes that the additional reservation of
shares with respect to which equity incentives may be granted will provide us
with adequate flexibility to ensure that we can continue to meet those goals and
facilitate the expansion of our employee base.
Below is a summary of the principal provisions of our 1996 Equity
Incentive Plan. This summary is not necessarily complete and is qualified in its
entirety by reference to the full text of the plan.
Summary of 1996 Equity Incentive Plan
Plan history
In February 1996, the board adopted, subject to stockholders approval,
our 1996 Equity Incentive Plan and reserved 1,000,000 shares of common stock for
issuance under the plan. The equity incentive plan was amended by the board and
stockholders in June 1997 and June 1998 to increase the number of shares
available for grant to a total of 2,750,000 shares. The purpose of the plan is
to provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to our success by offering
them an opportunity to participate in our future performance through awards of
stock options, restricted stock and stock bonuses.
As of September 30, 1999, options to purchase an aggregate of 2,539,341
shares of common stock were outstanding under the plan, with exercise prices
ranging from $2.25 to $4.25 per share, and an additional 45,280
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shares were available for grant, prior to taking into account the proposed
increase. As of September 30, 1999, options to purchase a total of 4,005,509
shares have been granted to all employees as a group, including all current
officers who are non-executive officers, of which options to purchase 2,188,789
shares were canceled. As of September 30, 1999, our current executive officers
as a group, consisting of five persons, have been granted options under the plan
to purchase an aggregate of 888,000 shares. Options were granted under the plan
to the named executive officers, as defined in "Executive Compensation," in the
following amounts: Robert Dickinson - 90,000 shares; Bernard Harguindeguy -
606,333 shares; Joseph Longo - 165,171 shares; and John Weald - 45,000 shares.
In addition, the following executive officers received more than 5% of the
options granted under the plan: James Heisch - 375,000 shares and Colin Crosby -
178,000 shares.
Shares
The stock subject to issuance under the plan consists of shares of our
authorized but unissued common stock. The number of shares of common stock
currently reserved for issuance under the plan is 2,750,000 shares. Shares
subject to options granted pursuant to the plan that expire or are terminated
for any reason without being exercised, shares subject to awards granted
pursuant to the plan that are forfeited or are repurchased by Worldtalk at the
original issue price, and shares subject to awards granted pursuant to the plan
that otherwise terminate without shares being issued will again become available
for grant and issuance pursuant to new awards under the plan. The number of
shares reserved under the plan is subject to proportional adjustment to reflect
stock splits, stock dividends and other similar events. Proposal 1 seeks to
increase the number of shares of common stock reserved under the plan by
1,000,000 shares, to a total of 3,750,000 shares, and to provide for an
automatic increase in the number of shares reserved under the plan on July 1,
2000 and on each anniversary thereafter, of 3% of the total shares outstanding
as of the immediately preceding June 30, unless our board of directors
determines prior to the increase to reduce or eliminate the increase in any
particular year.
Eligibility
Employees, officers, directors, consultants, independent contractors
and advisors of Worldtalk are eligible to receive awards under the plan. No
person will be eligible to receive more than 500,000 shares in any calendar year
pursuant to awards granted under the plan. Notwithstanding the foregoing, a new
employee is eligible to receive up to a maximum of 750,000 shares pursuant to
the plan in the calendar year in which he or she commences employment. As of
September 30, 1999, approximately 80 persons were in the class of persons
eligible to participate in the plan, 165,379 shares had been issued upon
exercise of options and 2,539,341 shares were subject to outstanding options. As
of that date, 45,280 shares were available for future grant, not including the
proposed amendment to the plan. If the proposed amendment had been approved by
the stockholders as of such date, there would have been 1,045,280 shares
available for future issuance under the plan. The closing price of our common
stock on the Nasdaq National Market was $__________ per share as of
____________, 1999, the last trading day before the record date for the special
stockholder's meeting.
Administration
The plan is administered by the compensation committee, the members of
which are appointed by our board of directors. The compensation committee
currently consists of David J. Cowan and Anthony Sun, both of whom are
non-employee directors, as defined in Rule 16b-3 promulgated under the Exchange
Act, and outside directors, as defined pursuant to Section 162(m) of the
Internal Revenue Code.
Subject to the terms of the plan, the compensation committee determines
the persons who are to receive awards, the number of shares subject to each such
award and the terms and conditions of such awards. The compensation committee
also has the authority to construe and interpret any of the provisions of the
plan or any awards granted under the plan.
Stock options
The plan permits the granting of options that are intended to qualify
either as incentive stock options, known as ISOs, or non-qualified stock
options, known as NQSOs. ISOs may be granted only to employees, including
officers and directors who are also employees, of Worldtalk. The option exercise
price for each ISO share must be no less than 100% of the fair market value, as
defined in the plan, of a share of our common stock at the time the ISO is
granted. The per share exercise price of an ISO granted to a 10% stockholder
must be no less than
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110% of the fair market value of a share of our common stock at the time the ISO
is granted. The option exercise price for each NQSO share must be no less than
85% of the fair market value of a share of common stock at the time of grant. We
have not granted options under the plan at less than fair market value and do
not intend to do so in the foreseeable future.
The exercise price of options granted under the plan may be paid as
approved by the compensation committee at the time of grant:
o in cash (by check);
o by cancellation of indebtedness of Worldtalk to the
participant;
o by surrender of shares of our common stock owned by the
participant for at least six months and having a fair market
value on the date of surrender equal to the aggregate exercise
price of the option;
o by tender of a full recourse promissory note;
o by waiver of compensation due to or accrued by the participant
for services rendered;
o by a same-day sale commitment from the participant and a
National Association of Securities Dealers, Inc. (NASD)
broker;
o by a margin commitment from the participant and a NASD broker;
or
o by any combination of the foregoing.
Restricted stock awards
The compensation committee may grant participants restricted stock
awards to purchase stock either in addition to, or in tandem with, other awards
under the plan, under such terms, conditions and restrictions as the
compensation committee may determine. The purchase price for such awards must be
no less than 85% of the fair market value of our common stock on the date of the
award, or in the case of an award granted to a 10% stockholder, the purchase
price must be 100% of fair market value, and can be paid for in any of the first
five forms of consideration listed above, as approved by the compensation
committee at the time of grant. We have not granted any restricted stock awards
under the plan to date, and we do not intend to do so in the foreseeable future.
Stock bonuses
The compensation committee may grant participants stock bonuses either
in addition to or in tandem with other awards under the plan, under such terms,
conditions and restrictions as the compensation committee may determine. We have
not granted any stock bonuses under the plan to date, and we do not intend to
grant stock bonuses from shares now reserved or now proposed to be reserved
under the plan.
Mergers, consolidations, change of control
In the event of a merger, consolidation, dissolution or liquidation of
Worldtalk, the sale of substantially all of its assets, or any other similar
corporate transaction, the successor corporation may assume awards under the
plan, substitute equivalent awards in exchange for those granted under the plan,
or provide consideration substantially similar to that which is provided to our
stockholders in such transaction. In the event that the successor corporation
does not assume or substitute awards, such awards will expire upon the closing
of such transaction at the time and upon the conditions as the board of
directors determines. In addition, each outstanding award shall immediately
accelerate and awards granted before October 18, 1996 shall become exercisable
in full while awards granted on or after October 18, 1996 that are not totally
vested shall become exercisable as to the number of shares that is equal to the
number of shares vested at the time of the closing of the corporate transaction,
plus the number of shares that would have vested had the award been held for the
year after the closing of that corporate transaction.
Amendment or termination of the plan
The board may at any time terminate or amend the plan, including
amending any form of award agreement or instrument to be executed pursuant to
the plan. However, the board may not amend the plan in any manner that
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requires stockholder approval pursuant to the Internal Revenue Code or its
regulations, or pursuant to the Exchange Act or Rule 16b-3 promulgated under the
Exchange Act.
Term of the plan
Unless terminated earlier as provided in the plan, the plan will expire
in February 2006, ten years from the date it was adopted by the board.
Federal income tax information
The following is a general summary as of the date of this proxy
statement of the federal income tax consequences to the company and participants
under the plan. Federal tax laws may change and the federal, state and local tax
consequences for any participant will depend upon his or her individual
circumstances. Each participant has been and is encouraged to seek the advice of
a qualified tax advisor regarding the tax consequences of participation in the
plan.
Incentive stock options. A participant will recognize no income upon
grant of an ISO and incur no tax on its exercise, unless the participant is
subject to the alternative minimum tax, referred to as AMT. If the participant
holds shares acquired upon exercise of an ISO, or the ISO shares, for more than
one year after the date the option was exercised and for more than two years
after the date the option was granted, the participant generally will realize
capital gain or loss, rather than ordinary income or loss, upon disposition of
the ISO shares. This gain or loss will be equal to the difference between the
amount realized upon such disposition and the amount paid for the ISO shares.
If the participant disposes of ISO shares prior to the expiration of
either required holding period, known as a disqualifying disposition, the gain
realized upon such disposition, up to the difference between the fair market
value of the ISO shares on the date of exercise (or, if less, the amount
realized on a sale of such shares) and the option exercise price, will be
treated as ordinary income. Any additional gain will be long-term or short-term
capital gain, depending upon the amount of time the ISO shares were held by the
participant.
Alternative minimum tax. The difference between the fair market value
of the ISO shares on the date of exercise and the exercise price is an
adjustment to income for purposes of AMT. The AMT, imposed to the extent it
exceeds the taxpayer's regular tax, is 26% of the portion of an individual
taxpayer's alternative minimum taxable income that would otherwise be taxable as
ordinary income, and 28% in the case of alternative minimum taxable income in
excess of $175,000. A maximum 20% AMT rate applies to the portion of alternative
minimum taxable income that would otherwise be taxable as net capital gain.
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference
items, including the difference between the fair market value of the ISO shares
on the date of exercise and the exercise price, and reducing this amount by the
applicable exemption amount ($45,000 in case of a joint return, subject to
reduction under certain circumstances). If a disqualifying disposition of the
ISO shares occurs in the same calendar year as exercise of the ISO, there is no
AMT adjustment with respect to those ISO shares. Also, upon a sale of ISO shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the ISO
shares at exercise over the amount paid for the ISO shares.
Non-qualified stock options. A participant will not recognize any
taxable income at the time an NQSO is granted. However, upon exercise of an
NQSO, the participant must include in income as compensation an amount equal to
the difference between the fair market value of the shares on the date of
exercise and the participant's exercise price. The included amount must be
treated as ordinary income by the participant and may be subject to withholding
by Worldtalk, either by payment in cash or withholding out of the participant's
salary. Upon resale of the shares by the participant, any subsequent
appreciation or depreciation in the value of the shares will be treated as
capital gain or loss.
Restricted stock awards and stock bonuses. Restricted stock and stock
bonuses will generally be subject to tax at the time of receipt, unless there
are restrictions that enable the participant to defer tax. At the time the tax
is incurred, the tax treatment will be similar to that discussed above for
NQSOs.
Maximum tax rates. The maximum tax rate applicable to ordinary income
is 39.6%. Long-term capital gain will be taxed at a maximum of 20%. For this
purpose, in order to receive long-term capital gain treatment, the
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shares must be held for more than twelve months. Capital gains may be offset by
capital losses and up to $3,000 of capital losses may be offset annually against
ordinary income.
Tax treatment of Worldtalk. We generally will be entitled to a
deduction in connection with the exercise of an NQSO by a participant or the
receipt of restricted stock or stock bonuses by a participant to the extent that
the participant recognizes ordinary income and we withhold tax. We will be
entitled to a deduction in connection with the disposition of ISO shares only to
the extent that the participant recognizes ordinary income on a disqualifying
disposition of the ISO shares.
ERISA. The plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Section 401(a)
of the Internal Revenue Code.
The board recommends a vote for the proposed amendment to our 1996
Equity Incentive Plan.
NEW PLAN BENEFITS
The amounts of future option grants under our 1996 Equity Incentive
Plan to our chief executive officer, our other four most highly compensated
executive officers who were serving as executive officers at the end of 1998,
all of our current executive officers as a group, all current directors who are
not executive officers as a group and all employees, including all officers who
are not executive officers, as a group, are not determinable because under the
terms of the equity incentive plan such grants are made in the discretion of the
compensation committee or its designees. Future option exercise prices under the
equity incentive plan are not determinable because they are based upon the fair
market value of our common stock on the date of grant.
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PROPOSAL NO. 2 -- INCREASE IN THE NUMBER OF AUTHORIZED SHARES
We are asking stockholders to approve the increase in the number of
authorized shares of our common stock from 25,000,000 to 50,000,000. Our
articles of incorporation currently authorize us to issue up to 25,000,000
shares of common stock.
The board has no immediate plans to issue a significant number of
additional shares of common stock. However, a larger number of authorized shares
of common stock will provide us certainty and flexibility to undertake various
types of transactions, including stock splits, financings, acquisitions,
increases in the shares reserved for issuance pursuant to stock incentive plans,
or other corporate transactions not yet determined. Therefore, our board of
directors is proposing to increase the number of shares of common stock reserved
for future issuance to 50,000,000.
Reasons for the increase
In order for the board to be able to respond to future circumstances
with necessary certainty and flexibility, we must have a sufficient number of
authorized shares to cover any stock dividends or other transactions. For
example, the number of shares currently authorized would not be sufficient to
approve a two-for-one stock split in the form of a 100% stock dividend without
first obtaining stockholder approval. Under the proposed certificate of
incorporation, the additional shares of common stock would be available for
issuance without further stockholder action, unless stockholder action is
otherwise required by Delaware law or the rules of the Nasdaq National Market.
We are is not currently contemplating any stock split or stock dividend or for
any stock split or dividend to occur in the future. Furthermore, the increase in
the authorized number of shares of common stock will provide us with additional
flexibility with regard to any future acquisitions. If the proposal to increase
the number of shares reserved for issuance under the equity incentive plan is
approved, we will also need additional shares of common stock to issue when
additional stock options are exercised. In the future, we may also seek to issue
securities in connection with strategic business relationships, which could be
impractical to complete if we would be required to seek stockholder approval.
Our board of directors unanimously recommends
voting for the amendment of the certificate of incorporation increasing
the authorized number of shares of common stock to 50,000,000.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 30,
1999, known to Worldtalk with respect to the beneficial ownership of our common
stock by: (i) each stockholder known by us to be the beneficial owner of more
than 5% of our common stock; (ii) each director; (iii) each executive officer
named in the Summary Compensation Table below; and (iv) all current directors
and executive officers as a group.
<TABLE>
Applicable percentage ownership in the following table is based on
14,378,825 shares of common stock outstanding as of September 30, 1999. The
table treats as outstanding, for purposes of calculating each specific
stockholder's percent ownership, all warrants held by the stockholder as of
September 30, 1999 and all options held by the stockholder that are exercisable
within 60 days after September 30, 1999. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
<CAPTION>
Percent of
Amount and Nature of Outstanding
Name of Beneficial Owner Beneficial Ownership Common Stock
------------------------ -------------------- ------------
<S> <C> <C>
Paul Hilal(1) ...................................................................... 4,800,000 30.1%
Hilal Capital Partners LLC
c/o Hilal Capital Management LLC
60 East 42nd Street, Suite 1946
New York, NY 10165
David J. Cowan(2) .................................................................. 1,568,977 10.9
Bessemer Venture Partners III L.P.
1025 Old Country Road, Suite 205
Westbury, NY 11590
Anthony Sun(3) ..................................................................... 1,276,334 8.9
Venrock Associates
30 Rockefeller Plaza, Rm. 5508
New York, NY 10112
Wade Woodson(4) .................................................................... 757,333 5.3
Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
Robert D. Dickinson III(5) ......................................................... 208,995 1.5
Bernard Harguindeguy(6) ............................................................ 225,000 1.5
Joseph Longo(7) .................................................................... 66,108 *
Max D. Hopper(8) ................................................................... 56,250 *
Simon Khalaf(9) .................................................................... 45,752 *
John G. Weald(10) .................................................................. 25,000 *
All officers and directors as a group (10 persons)(11) ............................. 8,814,009 54.5%
<FN>
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* Less than 1%
(1) Represents 1,194,667 shares of common stock held by Hilal Capital
Associates LLC, 662,833 shares held by Highbridge International, 619,167
shares held by Hilal Capital International, Ltd., 459,667 shares held by
Hilal Capital QP, L.P., 180,333 shares held by Hilal Capital, L.P. and
100,000 shares held by Philip Hilal. This number also includes 597,333
shares of common stock issuable upon exercise of a warrant held by Hilal
Capital Associates LLC, 323,167 shares of common stock issuable upon
exercise of a warrant held by Highbridge International, 301,333 shares of
common stock issuable upon exercise of a warrant held by Hilal Capital
International, Ltd., 223,833 shares of common stock issuable upon exercise
of a warrant held by Hilal
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Capital QP, L.P., 87,667 shares of common stock issuable upon exercise of a
warrant held by Hilal Capital, L.P. and 50,000 shares of common stock
issuable upon exercise of a warrant held by Philip Hilal. Mr. Paul Hilal, a
member of our board and the Chairman of the Board of Worldtalk, is a
non-managing member of Hilal Capital Partners LLC, which is the general
partner of Hilal Capital Associates LLC, Hilal Capital QP, L.P. and Hilal
Capital, L.P. Peter K. Hilal, M.D., the brother of Paul Hilal, is the
managing member of Hilal Capital Partners LLC. Hilal Capital Management LLC
is the investment manager for Highbridge International, Ltd. and Hilal
Capital International, Ltd. Peter K. Hilal, M.D. is the managing member of
Hilal Capital Management LLC. Paul Hilal does not hold voting or
dispositive control over any shares or warrants owned of record by Hilal
Capital Associates LLC, Highbridge International, Hilal Capital
International, Ltd., Hilal Capital QP, L.P., Hilal Capital, L.P., or Philip
Hilal. Paul Hilal disclaims beneficial ownership of all of these shares and
warrants.
(2) Mr. Cowan is a director of Worldtalk and a general partner of Deer III &
Co. L.P. ("Deer"), the general partner of Bessemer Venture Partners III,
L.P. ("BVP III"). The share number includes 1,305 shares held of record by
Mr. Cowan; 12,500 shares subject to options exercisable within 60 days
after September 30, 1999; 1,528,929 shares held of record by BVP III;
22,868 shares held of record by the general partners of Deer; and 3,375
shares over which BVP III exercises voting control, held of record by
individuals, each of whom is a present or former employee or consultant to
Bessemer Securities Corporation, the sole owner of the limited partner of
BVP III. Deer is a general partnership whose voting partners are Robert H.
Buescher, David J. Cowan, G. Felda Hardymon and Christopher F.O. Gabrieli.
BVP III disclaims beneficial ownership of securities held by the general
partners of Deer and the general partners disclaim beneficial ownership of
securities held by BVP III, except to the extent of their individual
partnership interest.
(3) Represents 12,500 shares of common stock subject to options exercisable
within 60 days of September 30, 1999; 872,599 shares held of record by
Venrock Associates; and 391,235 shares held of record by Venrock Associates
II, L.P. Each fund disclaims beneficial ownership of the shares held by the
other. Mr. Sun is a director of Worldtalk and a general partner of Venrock
Associates and Venrock Associates II, L.P.
(4) Mr. Woodson is a director of Worldtalk and a general partner of Sigma
Partners II, L.P. and Sigma Associates II, L.P. The share number represents
24,098 shares held by Mr. Woodson; 12,500 shares of common stock subject to
options exercisable within 60 days of September 30, 1999; 670,458 shares
held by Sigma Partners II, L.P.; and 50,277 shares held by Sigma Associates
II, L.P. Each fund disclaims beneficial ownership of the shares held by the
other.
(5) Includes 30,937 shares subject to options exercisable within 60 days after
September 30, 1999. Mr. Dickinson is Worldtalk's Chief Technical Officer.
(6) Represents shares subject to options exercisable within 60 days after
September 30, 1999. Mr. Harguindeguy is Worldtalk's former President and
Chief Executive Officer.
(7) Represents shares subject to options exercisable within 60 days after
September 30, 1999. Mr. Longo is Worldtalk's former Vice President,
Consulting and Customer Services.
(8) Mr. Hopper is a director of Worldtalk.
(9) Mr. Khalaf is Worldtalk's former Vice President, Marketing.
(10) Mr. Weald is Worldtalk's former Vice President, Engineering - Santa Clara.
(11) Includes warrants to purchase 1,583,333 shares listed in footnote (1) and
213,561 shares subject to options exercisable within 60 days after
September 30, 1999, including those set forth in footnotes (2) - (5) and
(8) above.
</FN>
</TABLE>
9
<PAGE>
DIRECTOR COMPENSATION
Worldtalk reimburses the members of the board for reasonable expenses
associated with their attendance at board meetings. All members of the board who
are not also employees or consultants of Worldtalk, or of an affiliate of
Worldtalk, are eligible to receive options under Worldtalk's 1996 Directors
Stock Option Plan. In June 1998, each of Messrs. Hopper, Cowan, Sun and Woodson
received a stock option pursuant to the directors stock option plan to purchase
5,000 shares of our common stock at a price of $5.00 per share. These options
vest with respect to 25% of the shares subject thereto on the fifth day after
each annual stockholders meeting of Worldtalk to be held in each of the four
calendar years after the date of grant, so long as the director continuously
remains a member of the board through the date of vesting. In December 1998,
Worldtalk repriced certain stock options that had previously been granted to
employees and directors. This repricing affected outstanding options to purchase
15,000 shares granted to each of Messrs. Cowan, Sun and Woodson in 1996. In
connection with the repricing, the exercise price of these options was reduced
from $8.00 per share to $3.50 per share.
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth all compensation awarded, earned or paid
for services rendered in all capacities to Worldtalk during each of 1996, 1997
and 1998 to Worldtalk's chief executive officer and the four other most highly
compensated executive officers who were serving as executive officers at the end
of 1998, which we refer to as the named executive officers. This information
includes the dollar values of base salaries and bonus awards, the number of
shares subject to stock options granted and certain other compensation, if any,
whether paid or deferred. We do not grant stock appreciation rights and has no
long-term compensation benefits other than stock options.
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation(2) Options Compensation (2)
- --------------------------- ---- ------ ----- --------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Dickinson III 1998 135,000 46,666 -- -- 227
Chief Technical Officer 1997 114,167 -- -- 45,000(3) --
1996 100,000 -- -- 45,000 --
Bernard Harguindeguy 1998 $210,000 $ 80,000 -- 175,000(4) $ 700
Former President and Chief 1997 173,103 70,000 -- 475,000(5) 205
Executive Officer 1996 -- 25,000 -- -- --
Simon Khalaf 1998 140,000 37,500 -- 75,625(6) 247
Former Vice President, Marketing 1997 134,792 30,000 -- 76,875(7) 119
1996 106,674 20,000 -- 27,500 62
Joseph Longo 1998 130,000 31,000 2,480 75,000 765
Former Vice President, Consulting 1997 115,000 -- 1,725 40,000 --
and Customer Services 1996 103,276 -- 1,545 --
John G. Weald 1998 136,962 26,666 -- 25,000 505
Former Vice President, 1997 128,471 19,000 -- 20,000 217
Engineering - Santa Clara 1996 110,000 12,000 -- -- 79
<FN>
- ------------
(1) Bonuses are paid at the discretion of the compensation committee based on
the achievement of certain objectives.
(2) Includes excess group term life insurance premiums.
(3) Represents shares subject to previously granted options that were repriced
in April 1997.
(4) Includes 75,000 shares subject to previously granted options that were
repriced in December 1998.
(5) Includes 175,000 shares subject to previously granted options that were
repriced in April 1997.
(6) Includes 625 shares subject to previously granted options that were
repriced in December 1998.
(7) Includes 26,875 shares subject to previously granted options that were
repriced in April 1997.
</FN>
</TABLE>
10
<PAGE>
<TABLE>
The following table sets forth further information regarding option
grants pursuant to our 1996 Equity Incentive Plan during 1998 to each of the
named executive officers. In accordance with the rules of the Securities and
Exchange Commission, the SEC, the table sets forth the hypothetical gains, or
option spreads, that would exist for the options at the end of their respective
ten-year terms. These gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the option was granted to the end
of the option term.
<CAPTION>
Option Grants in 1998
Potential Realizable
Number of Percentage of Value at Assumed Annual
Securities Total Options Rates of Stock Price
Underlying Granted to Appreciation for Option Term(2)
Options Employees in Exercise Price Expiration -------------------------------
Name Granted (1) Fiscal 1998 Per Share Date 5% 10%
---- ----------- ----------- --------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Robert D. Dickinson, III ........... -- -- -- -- -- --
Bernard Harguindeguy ............... 100,000 8.8% $ 3.00 4/17/08 $188,666 $477,121
75,000(3) 6.6 3.50 9/19/07 144,722 356,460
Simon Khalaf ....................... 75,000 6.6 3.00 4/17/08 141,500 358,591
625(3) 0.1 3.50 2/7/06 1,044 2,501
Joseph Longo ....................... 60,000 5.3 2.3125 10/28/08 99,475 240,548
15,000 1.3 3.00 4/17/08 28,300 71,718
John Weald ......................... 25,000 2.2 3.00 3/30/99 3,750 7,500
<FN>
- --------------
(1) The incentive stock options shown in the table were granted at fair market
value and typically become exercisable with respect to 12.5% of the shares
on the six-month anniversary of the grant and with respect to an additional
6.25% of the shares every three months that the optionee renders services
to Worldtalk thereafter. The options shown in the table will expire ten
years from the date of grant, subject to earlier termination upon
termination of employment.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the SEC and do not represent our estimate or
projection of future common stock prices.
(3) Represents the number of shares subject to previously granted options that
were repriced in December 1998.
</FN>
</TABLE>
<TABLE>
The following table sets forth certain information concerning the
exercise of options by each of the named executive officers during fiscal 1998,
including the aggregate amount of gains on the date of exercise. In addition,
the table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1998. Also reported are values of
in-the-money options that represent the positive spread between the respective
exercise prices of outstanding stock options and $3.8125 per share, which was
the closing price of Worldtalk's common stock as reported on the Nasdaq National
Market on December 31, 1998.
<CAPTION>
Aggregate Option Exercises in Fiscal 1998 and Fiscal Year-End Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End (2)
--------------------------- ---------------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Dickinson, III ............... -- -- 19,687 25,313 $ 1,230 $ 1,682
Bernard Harguindeguy ................... -- -- 135,937 264,063 23,728 95,016
Simon Khalaf ........................... 10,550 $ 30,858.75 88,081 100,246 130,112 63,742
Joseph Longo ........................... 5,000 12,500.00 38,283 106,888 86,420 131,255
John Weald ............................. -- -- 56,977 -- 143,702 --
<FN>
- -------------------
(1) Value Realized represents the fair market value of the shares of common
stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
11
<PAGE>
(2) These values, unlike the amounts set forth in the column entitled Value
Realized, have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's common stock on December 31,
1998, the last day of trading for the fiscal year.
</FN>
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee consists of Messrs. Cowan and Sun, neither of
whom has any interlocking relationships as defined by the SEC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From January 1, 1998 to the present, there has not been, nor is there
currently proposed, any transactions or series of similar transactions to which
we were, or will be, a party in which the amount involved exceeds $60,000 and in
which any of our executive officers, directors, 5% beneficial owners of our
common stock or member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest, other than normal
compensation arrangements which we described under "Executive Compensation"
above.
Employment Agreements
Worldtalk has entered into an employment agreement with Robert Dickinson
who is our Chief Technical Officer. This employment agreement provides, among
other things, that upon some corporate transactions, including changes in
control, either all shares of stock and options held by Mr. Dickinson will be
assumed, converted, substituted or replaced by the successor company or the
successor company may provide substantially similar consideration to Mr.
Dickinson as was provided to stockholders or option holders generally with
respect to any stock or options held Mr. Dickinson. In case of a sale of
Worldtalk, the successor company may not terminate Mr. Dickinson's employment
prior to the first anniversary of the sale of Worldtalk, except for cause,
without giving written notice. During the notice period, which must continue
until the first anniversary of the sale of Worldtalk, Mr. Dickinson will
continue to collect salary and bonus at then-current levels regardless of
whether his services are actually required by Worldtalk or its successor. All
employee benefits will continue and Mr. Dickinson's options and shares of stock
will continue to vest during the period of notice, provided that he was not
terminated for cause. Upon Worldtalk's request made during the twelve-month
period following the first anniversary of the sale, Mr. Dickinson must also
provide certain consulting services, paid at an hourly rate for services
actually performed. During this period, provided Mr. Dickinson's consulting
arrangement is not terminated for cause, his options and shares will continue to
vest.
Worldtalk also entered into an employment agreement with James Heisch, our
President and Chief Financial Officer. This employment agreement provides, among
other things, that upon specified corporate transactions, including changes of
control, occurring within two years after June 4, 1999, the vesting of Mr.
Heisch's options shall accelerate and be exercisable as to the number of shares
that are vested on the date of termination, plus a number of shares equal to
one-half of all shares that remain unvested on the date of the closing of the
specific corporate transaction. In addition, any shares that are subject to a
right of repurchase in favor of Worldtalk shall be released from this right of
repurchase, as to all shares that are vested on the date of termination, plus
one-half of all shares that remain unvested on the date of the closing of the
specific corporate transaction.
Financing
On July 7, 1999, we entered into an agreement for the sale of shares of
common stock and warrants for the purchase of common stock to affiliates of
Hilal Capital Management LLC and others. Under the agreement, the shares and the
warrants were placed in escrow until conditions were satisfied, which occurred
on July 19, 1999. On that date, a total of 3,333,334 shares at a price of $3.00
per share, and warrants to purchase up to 1,666,667 additional shares of common
stock, at an exercise price of $7.00 per share, were delivered to the investors.
A total of $10,000,000 was raised as a result of the sale of the shares and the
warrants. The investors were provided with registration rights relating to the
shares and the warrant shares and Worldtalk has filed a Registration Statement
on Form S-3 relating to the resale of these shares. Each investor was also
granted the right to participate in any new financing of Worldtalk to the extent
of the investor's percentage ownership.
12
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at our 2000 annual
meeting of stockholders must be received by us at our principal executive
offices no later than December 29, 1999 in order to be included in our proxy
statement and form of proxy relating to that meeting.
OTHER BUSINESS
Our board does not currently intend to bring any other business before the
meeting, and, so far as we know, no matters are to be brought before the meeting
except as specified in the notice of the meeting. As to any business that may
properly come before the meeting, however, it is intended that proxies, in the
form enclosed, will be voted in respect thereof in accordance with the judgment
of the persons voting such proxies.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES WILL BE REPRESENTED AT THE MEETING. IF THE RECORD HOLDER OF
YOUR SHARES IS A BROKER, BANK OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS
FOR VOTING THAT ARE GIVEN TO YOU BY SUCH PERSON OR ENTITY.
13
<PAGE>
Appendix A
WORLDTALK CORPORATION
1996 EQUITY INCENTIVE PLAN
As adopted on February 7, 1996
and Amended Through July 20, 1999
1. PURPOSE. The purpose of this Plan, as amended herein (the "Plan"),
is to provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Company,
its Parent, Subsidiaries and Affiliates, by offering them an opportunity to
participate in the Company's future performance through awards of Options,
Restricted Stock and Stock Bonuses. Capitalized terms not defined in the text
are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
18, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 3,750,000* Shares as of July 20, 1999. In
addition, on July 1, 2000 and each anniversary thereafter, the aggregate number
of Shares reserved and available for grant and issuance pursuant to this Plan
will be increased automatically by a number of Shares equal to three percent
(3%) of the total outstanding shares of the Company as of the immediately
preceding June 30, unless the Board determines prior to such increase of Shares
that all or a part of the increase shall not occur for such year. Subject to
Sections 2.2 and 18, Shares that: (a) are subject to issuance upon exercise of
an Option but cease to be subject to such Option for any reason other than
exercise of such Option; (b) are subject to an Award granted hereunder but are
forfeited or are repurchased by the Company at the original issue price; or (c)
are subject to an Award that otherwise terminates without Shares being issued
will again be available for grant and issuance in connection with Awards under
this Plan granted after such cessation, forfeiture, repurchase or termination.
At all times the Company shall reserve and keep available a sufficient number of
Shares as shall be required to satisfy the requirements of all outstanding
Options granted under this Plan and all other outstanding but unvested Awards
granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees but
are not members of the Compensation Committee of the Board) of the Company or of
a Parent or Subsidiary of the Company. All other Awards may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent, Subsidiary or Affiliate of the Company;
provided such consultants, contractors and advisors render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction. No person will be eligible to receive more than 500,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent, Subsidiary or Affiliate
of the Company (including new employees who are also officers and directors of
the Company or any Parent, Subsidiary or Affiliate of the Company but are not
members of the Compensation Committee of the Board) who are eligible to receive
up to a
- --------------------------
* Reflects (a) amendment adopted on June 12, 1997 to increase the number of
Shares reserved from 1,000,000 to 1,750,000; (b) amendment adopted on June
12, 1998 to increase the number of Shares reserved to 2,750,000; and (c)
amendment adopted on July 20, 1999 to increase the number of Shares
reserved to 3,750,000.
<PAGE>
Worldtalk Corporation
1996 Equity Incentive Plan
maximum of 750,000 Shares in the calendar year in which they commence their
employment. A person may be granted more than one Award under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as alternatives
to, other Awards under this Plan or any other incentive or compensation
plan of the Company or any Parent, Subsidiary or Affiliate of the
Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.
4.3 Exchange Act Requirements. If two or more members of the
Board are Outside Directors, the Committee will be comprised of at least two (2)
members of the Board, all of whom are Outside Directors and Disinterested
Persons. During all times that the Company is subject to Section 16 of the
Exchange Act, the Company will take appropriate steps to comply with the
disinterested administration requirements of Section 16(b) of the Exchange Act,
which will consist of the appointment by the Board of a Committee consisting of
not less than two (2) members of the Board, each of whom is a Disinterested
Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
-2-
<PAGE>
Worldtalk Corporation
1996 Equity Incentive Plan
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options will be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement governing such Option; provided, however, that no Option will
be exercisable after the expiration of ten (10) years from the date the Option
is granted; and provided further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("Ten Percent Stockholder") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number of Shares or percentage
of Shares as the Committee determines.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may be not less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(a) the Exercise Price of an ISO will be not less than 100% of the Fair Market
Value of the Shares on the date of grant; and (b) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option will always be
subject to the following:
(a) If the Participant is Terminated for any reason except
death or Disability, then the Participant may exercise such
Participant's Options only to the extent that such Options would have
been exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later than
the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three (3) months
after a Termination other than because of Participant's death or
disability), then Participant's Options may be exercised only to the
extent that such Options would have been exercisable by Participant on
the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no later
than twelve (12) months after the Termination Date (or such shorter or
longer time period not exceeding five (5) years as may be determined by
the Committee, with any such exercise beyond (a) three (3) months after
the Termination Date when the Ter-
-3-
<PAGE>
Worldtalk Corporation
1996 Equity Incentive Plan
mination is for any reason other than the Participant's death or
Disability, or (b) twelve (12) months after the Termination Date when
the Termination is for Participant's death or Disability, deemed to be
an NQSO), but in any event no later than the expiration date of the
Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date of this Plan to provide for a different limit on the
Fair Market Value of Shares permitted to be subject to ISOs, such different
limit will be automatically incorporated herein and will apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee and will be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case
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1996 Equity Incentive Plan
the Purchase Price will be 100% of the Fair Market Value. Payment of the
Purchase Price may be made in accordance with Section 8 of this Plan.
6.3 Restrictions. Restricted Stock Awards will be subject to
such restrictions (if any) as the Committee may impose. The Committee may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or part, based on length of service,
performance or such other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of
Shares (which may consist of Restricted Stock) for services rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may
be awarded for past services already rendered to the Company, or any Parent,
Subsidiary or Affiliate of the Company (provided that the Participant pays the
Company the par value of the Shares awarded by such Stock Bonus in cash)
pursuant to an Award Agreement (the "Stock Bonus Agreement") that will be in
such form (which need not be the same for each Participant) as the Committee
will from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. A Stock Bonus may be awarded upon satisfaction of
such performance goals as are set out in advance in the Participant's individual
Award Agreement (the "Performance Stock Bonus Agreement") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company, Parent, Subsidiary or Affiliate and/or individual performance factors
or upon such other criteria as the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the Participant and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will determine: (a) the nature, length and starting date of any period
during which performance is to be measured (the "Performance Period") for each
Stock Bonus; (b) the performance goals and criteria to be used to measure the
performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole Shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
will determine.
7.4 Termination During Performance Period. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
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1996 Equity Incentive Plan
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within
the meaning of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid
with respect to such shares); or (2) were obtained by Participant in
the public market;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
employees or directors of the Company will not be entitled to purchase
Shares with a promissory note unless the note is adequately secured by
collateral other than the Shares; provided, further, that the portion
of the Purchase Price equal to the par value of the Shares, if any,
must be paid in cash;
(d) by waiver of compensation due or accrued to the
Participant for services rendered; provided, further, that the portion
of the Purchase Price equal to the par value of the Shares, if any,
must be paid in cash;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD Dealer")
whereby the Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so purchased to pay
for the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the Participant
irrevocably elects to exercise the Option and to pledge the
Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose will be made in writing in a form acceptable to the Committee and
will be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
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1996 Equity Incentive Plan
(b) once made, then except as provided below, the election
will be irrevocable as to the particular Shares as to which the
election is made;
(c) all elections will be subject to the consent or
disapproval of the Committee;
(d) if the Participant is an Insider and if the Company is
subject to Section 16(b) of the Exchange Act: (1) the election may not
be made within six (6) months of the date of grant of the Award, except
as otherwise permitted by SEC Rule 16b-3(e) under the Exchange Act, and
(2) either (A) the election to use stock withholding must be
irrevocably made at least six (6) months prior to the Tax Date
(although such election may be revoked at any time at least six (6)
months prior to the Tax Date) or (B) the exercise of the Option or
election to use stock withholding must be made in the ten (10) day
period beginning on the third day following the release of the
Company's quarterly or annual summary statement of sales or earnings;
and
(e) in the event that the Tax Date is deferred until six (6)
months after the delivery of Shares under Section 83(b) of the Code,
the Participant will receive the full number of Shares with respect to
which the exercise occurs, but such Participant will be unconditionally
obligated to tender back to the Company the proper number of Shares on
the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 Voting and Dividends. No Participant will have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.
10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan (if requested by the Participant), and to each Participant
annually during the period such Participant has Awards outstanding; provided,
however, the Company will not be required to provide such financial statements
to Participants whose services in connection with the Company assure them access
to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award will be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at: (A) with respect to Shares that are "Vested" (as defined in
the Award or Exercise Agreement), the higher of Participant's original Purchase
Price or the Fair Market Value of such Shares on Participant's Termination Date;
or (B) with respect to Shares that are not "Vested" (as defined in the Award or
Exercise Agreement), at the Participant's original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or
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1996 Equity Incentive Plan
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
18. CORPORATE TRANSACTIONS.
18.1 Assumption or Replacement of Awards by Successor. In the
event of:
(a) a dissolution or liquidation of the Company,
(b) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a
wholly owned subsidiary, a reincorporation of the Company in a
different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative
stock holdings and the Awards granted under this Plan are
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1996 Equity Incentive Plan
assumed, converted or replaced by the successor corporation, which
assumption will be binding on all Participants),
(c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company (other than any
stockholder which merges (or which owns or controls another corporation
which merges) with the Company in such merger) cease to own at least
90% of the issued and outstanding capital stock or other equity
interests in the Company,
(d) the sale of all or substantially all of the assets of the
Company; or
(e) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Code wherein the stockholders
of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially
all of the outstanding shares of the Company from or by the
stockholders of the Company),
then, subject to Section 18.3 below, any or all outstanding Awards may be
assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative and subject to Section 18.3 below, the successor corporation may
substitute equivalent Awards or provide substantially similar consideration to
Participants as was provided to stockholders (after taking into account the
existing provisions of the Awards). The successor corporation may also issue, in
place of outstanding Shares of the Company held by the Participant,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Participant.
18.2 Termination of Awards. In the event of a transaction
described in clauses (a) through (e) of Section 18.1 and provided that the
successor corporation (if any) does not assume or substitute all outstanding
Awards as provided above, such Awards will expire on (and if the Company has
reserved to itself a right to repurchase shares issued upon exercise of Awards
at the original purchase price of such shares, such right shall terminate upon)
such event at such time and on such conditions as the Board shall determine upon
twenty (20) days advance written notice to Participants holding outstanding
Awards.
18.3 Acceleration of Vesting. In the event of a merger
described in either clause (b) or (c) of Section 18.1 above, the sale of all or
substantially all of the assets of the Company as a going concern in a single
transaction or series of related transactions or the sale or transfer of a
majority of the outstanding shares of the Company by the stockholders of the
Company in a single transaction or a series of related transactions other than
market transactions to unrelated purchasers (an "Acquisition") and:
(a) if the successor corporation, if any (the "Successor"),
does not assume or substitute Awards as provided above in Section 18.1,
then each outstanding Award granted on or after October 18, 1996 that
is not totally "Vested" (as defined in the Award or Exercise Agreement)
shall immediately accelerate and become exercisable as to the number of
shares that is equal to (i) the number of shares then "Vested" at the
closing of the Acquisition, plus (ii) the number of shares that would
have "Vested" had the Award been held for the year after such closing.
Awards granted before October 18, 1996 will excelerate and become
exercisable in full. Such acceleration shall be under the terms
described by the Board in the notice described in the last sentence of
Section 18.2; or
(b) if the Successor assumes or substitutes Awards as provided
above in Section 18.1, but any Participant's employment with the
Successor or any Parent, Subsidiary of Affiliate of the Successor (as
the definitions for such terms shall be revised to substitute the
Successor for the Company) is terminated by the Successor, such Parent,
Subsidiary or Affiliate without "cause" within one year after the
Acquisition, then the outstanding Awards held by the terminated
employee, as so substituted or assumed, and granted on or after October
18, 1996 shall provide that they will likewise immediately accelerate
and become exercisable on the date of such termination such that they
are exercisable for (i) the number of shares then "Vested" at the date
of such termination, plus (ii) the number of shares that would have
"Vested" had the Award been held for the year after such termination.
Awards granted before October 18, 1996 will accelerate vesting and
become exercisable in full upon such termination. For purposes hereof
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1996 Equity Incentive Plan
"cause" for termination of any Participant's employment will exist at
any time after the happening of one or more of the following events:
(i) Participant's conviction of a felony involving moral turpitude;
(ii) any willful act or acts of dishonesty undertaken by the
Participant and intended to result in substantial gain or personal
enrichment of Participant, directly or indirectly, at the expense of
the Successor, such Parent, Subsidiary or Affiliate; (iii) any willful
act or misconduct which is materially and demonstrably injurious to the
Successor, such Parent, Subsidiary or Affiliate; (iv) substantial and
repeated neglect of Participant's responsibility, or malfeasance
thereof, that remains uncured after thirty (30) days written notice of
such neglect; or (v) the death or disability (within the meaning of
Section 22(e)(3) of the Code) of the Participant.
18.4 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.5 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either; (a) granting an Award under this Plan in substitution
of such other company's award; or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied to
an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date on which the registration statement filed by the Company with the
SEC under the Securities Act registering the initial public offering of the
Company's Common Stock is declared effective by the SEC (the "Effective Date");
provided, however, that if the Effective Date does not occur on or before
December 31, 1996, this Plan will terminate as of December 31, 1996 having never
become effective. This Plan shall be approved by the stockholders of the Company
(excluding Shares issued pursuant to this Plan), consistent with applicable
laws, within twelve (12) months before or after the date this Plan is adopted by
the Board. Upon the Effective Date, the Board may grant Awards pursuant to this
Plan; provided, however, that: (a) no Option may be exercised prior to initial
stockholder approval of this Plan; (b) no Option granted pursuant to an increase
in the number of Shares subject to this Plan approved by the Board will be
exercised prior to the time such increase has been approved by the stockholders
of the Company; and (c) in the event that stockholder approval of such increase
is not obtained within the time period provided herein, all Awards granted
hereunder will be canceled, any Shares issued pursuant to any Award will be
canceled, and any purchase of Shares hereunder will be rescinded. So long as the
Company is subject to Section 16(b) of the Exchange Act, the Company will comply
with the requirements of Rule 16b-3 (or its successor), as amended, with respect
to stockholder approval.
20. TERM OF PLAN. Unless earlier terminated as provided herein, this
Plan will terminate ten (10) years after the date this Plan is adopted by the
Board or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or (if the Company is subject
to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the
Exchange Act or Rule 16b-3 (or its successor), as amended, thereunder,
respectively.
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22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"Affiliate" means any corporation that directly, or indirectly through one or
more intermediaries, controls or is controlled by, or is under common control
with, another corporation, where "control" (including the terms "controlled by"
and "under common control with") means the possession, direct or indirect, of
the power to cause the direction of the management and policies of the
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Award" means any award under this Plan, including any Option, Restricted Stock
or Stock Bonus.
"Award Agreement" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to administer this Plan,
or if no such committee is appointed, the Board.
"Company" means Worldtalk Communications Corporation, dba Worldtalk Corporation,
a corporation organized under the laws of the State of Delaware, or any
successor corporation.
"Disability" means a disability, whether temporary or permanent, partial or
total, within the meaning of Section 22(e)(3) of the Code, as determined by the
Committee.
"Disinterested Person" means a director who has not, during the period that
person is a member of the Committee and for one year prior to commencing service
as a member of the Committee, been granted or awarded equity securities pursuant
to this Plan or any other plan of the Company or any Parent, Subsidiary or
Affiliate of the Company, except in accordance with the requirements set forth
in Rule 16b-3(c)(2)(i) (and any successor regulation thereto) as promulgated by
the SEC under Section 16(b) of the Exchange Act, as such rule is amended from
time to time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" means the price at which a holder of an Option may purchase the
Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a share of the Company's
Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the last
trading day prior to the date of determination as reported in The Wall
Street Journal;
(b) if such Common Stock is publicly traded and is then listed
on a national securities exchange, its closing price on the last
trading day prior to the date of determination on the principal
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1996 Equity Incentive Plan
national securities exchange on which the Common Stock is listed or
admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted
on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked
prices on the last trading day prior to the date of determination as
reported in The Wall Street Journal; or
(d) if none of the foregoing is applicable, by the Committee
in good faith.
"Insider" means an officer or director of the Company or any other person whose
transactions in the Company's Common Stock are subject to Section 16 of the
Exchange Act.
"Outside Director" means any director who is not; (a) a current employee of the
Company or any Parent, Subsidiary or Affiliate of the Company; (b) a former
employee of the Company or any Parent, Subsidiary or Affiliate of the Company
who is receiving compensation for prior services (other than benefits under a
tax-qualified pension plan); (c) a current or former officer of the Company or
any Parent, Subsidiary or Affiliate of the Company; or (d) currently receiving
compensation for personal services in any capacity, other than as a director,
from the Company or any Parent, Subsidiary or Affiliate of the Company;
provided, however, that at such time as the term "Outside Director", as used in
Section 162(m) of the Code is defined in regulations promulgated under Section
162(m) of the Code, "Outside Director" will have the meaning set forth in such
regulations, as amended from time to time and as interpreted by the Internal
Revenue Service.
"Option" means an award of an option to purchase Shares pursuant to Section 5.
"Parent" means any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if at the time of the granting of an Award
under this Plan, each of such corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"Participant" means a person who receives an Award under this Plan.
"Plan" means this Worldtalk Corporation 1996 Equity Incentive Plan, as amended
from time to time.
"Restricted Stock Award" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's Common Stock reserved for issuance under
this Plan, as adjusted pursuant to Sections 2 and 18, and any successor
security.
"Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant to
Section 7.
"Subsidiary" means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the time of granting of the
Award, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"Termination" or "Terminated" means, for purposes of this Plan with respect to a
Participant, that the Participant has for any reason ceased to provide services
as an employee, director, consultant, independent contractor or advisor to the
Company or a Parent, Subsidiary or Affiliate of the Company, except in the case
of sick leave, military leave, or any other leave of absence approved by the
Committee, provided that such leave is for a period of not more than ninety (90)
days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The
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<PAGE>
Worldtalk Corporation
1996 Equity Incentive Plan
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").
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<PAGE>
Appendix B
WORLDTALK COMMUNICATIONS CORPORATION
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - November 17, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WORLDTALK.
The undersigned hereby appoints Paul Hilal and James Heisch or either
of them as proxies, each with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below, all shares of common stock,
par value $0.01 per share, of Worldtalk Communications Corporation, held of
record by the undersigned on ____________, 1999, at our special meeting of
stockholders to be held at our headquarters located at 5155 Old Ironsides Drive,
Santa Clara, California on Wednesday, November 17, 1999, at 9:00 a.m. Pacific
Standard Time, and at any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. WHEN NO
CHOICE IS INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND FOR PROPOSAL 2.
In their discretion, the proxy holders are authorized to vote upon such other
business as may properly come before the meeting or any adjournments or
postponements thereof to the extent authorized by Rule 14a-4(c) promulgated
under the Securities Exchange Act of 1934, as amended.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
(Continued and to be signed on reverse side)
<PAGE>
The Board of Directors recommends that you vote FOR Proposal 1 and FOR
Proposal 2.
1. Approval of an amendment to Worldtalk's 1996 Equity Incentive Plan to
increase the number of shares of common stock reserved for issuance
thereunder by 1,000,000 shares, and to provide for an automatic increase in
the shares reserved under the plan on July 1, 2000 and each anniversary
thereafter, of 3% of the total shares outstanding as of the immediately
preceding June 30, unless the board of directors determines prior to the
increase to reduce or eliminate the increase in any particular year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of an amendment of the certificate of incorporation increasing the
authorized number of shares of common stock to from 25,000,000 to
50,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:_______________________, 1999
Signature(s)______________________________________
Please sign exactly as your name(s) appear(s) on your stock
certificate. If shares of stock stand of record in the names of two or more
persons or in the name of husband and wife, whether as joint tenants or
otherwise, both or all of such persons should sign the proxy. If shares of stock
are held of record by a corporation, the proxy should be executed by the
president or vice president and the secretary or assistant secretary. Executors,
administrators or other fiduciaries who execute the above proxy for a deceased
stockholder should give their full title. Please date the proxy.
