<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 2000
REGISTRATION NO. 333-84683
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
TUMBLEWEED COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-3336053
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
700 SAGINAW DRIVE
REDWOOD CITY, CALIFORNIA 94063
(Address, Including Zip Code, of Principal Executive Offices)
------------------------------------
WORLDTALK COMMUNICATIONS CORPORATION 1992 STOCK OPTION PLAN
WORLDTALK COMMUNICATIONS CORPORATION 1996 EQUITY INCENTIVE PLAN
WORLDTALK COMMUNICATIONS CORPORATION 1996 DIRECTORS STOCK OPTION PLAN
(Full Title of the Plans)
BERNARD J. CASSIDY, ESQ.
SECRETARY AND GENERAL COUNSEL
TUMBLEWEED COMMUNICATIONS CORP.
700 SAGINAW DRIVE
REDWOOD CITY, CALIFORNIA 94063
(Name and Address of Agent for Service)
(650) 216-2000
(Telephone Number, Including Area Code, of Agent for Service)
------------------------------------
COPY TO:
GREGORY C. SMITH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
525 UNIVERSITY DRIVE, SUITE 220
PALO ALTO, CALIFORNIA 94301
------------------------------------
This Amendment covers 620,937 shares of common stock, par value $0.001
per share, of the Registrant originally registered on the Registrant's
Registration Statement on Form S-4 filed on December 7, 1999 (the "S-4
Registration Statement"). The registration fees in respect of the securities
registered hereby were paid at the time of the original filing of the S-4
Registration Statement.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION. *
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION. *
*The document(s) containing the information specified in Part I of Form S-8 have
been or will be sent or given to employees as specified by Rule 428(b)(1) under
the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Tumbleweed Communications Corp. (the "Company" or the "Registrant") hereby
incorporates by reference the following documents:
(a) The Registrant's prospectus filed on December 30, 1999 pursuant
to Rule 424(b) under the Securities Act, which contains audited financial
statements for the Registrant's latest fiscal year for which such statements
have been filed.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by the Registrant
document referred to in (a) above.
(c) The description of the Registrant's Common Stock contained in
Amendment No. 1 to the Registrant's Registration Statement on Form 8-A filed
with the Securities and Exchange Commission under Section 12 of the Exchange
Act on August 2, 1999, including any amendment or report filed for the
purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after filing of the
Registration Statement and, prior to the filing of a post-effective amendment
to the Registration Statement that indicates that all securities offered have
been sold or that deregisters all securities then remaining unsold, will be
deemed to be incorporated by reference in the Registration Statement and to
be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated
by reference herein will be deemed to be modified or superseded for purposes
of the Registration Statement to the extent that a statement contained herein
or in any other subsequently filed document that is or is deemed to be
incorporated by reference herein modifies or supersedes such previous
statement. Any such statement so modified or superseded will not be deemed to
constitute a part of the Registration Statement, except as so modified or
superseded.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Skadden, Arps, Slate, Meagher & Flom LLP will issue an opinion about
the validity of the shares of the Company's Common Stock offered hereby. Two
attorneys at Skadden, Arps beneficially own a total of approximately 55,344
shares of the Company's Common Stock, of which approximately 54,246 shares
are owned by Gregory C. Smith,
2
<PAGE>
brother of Jeffrey C. Smith, the President and Chief Executive Officer of the
Company and Chairman of its board of directors.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law, or the DGCL, as
amended, allows a corporation to eliminate the personal liability of directors
of a corporation to the corporation or its stockholders for monetary damages for
a breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the DGCL provides, among other things, that the Company
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding (other
than an action by or in the right of the Company) by reason of the fact that the
person is or was a director, officer, agent or employee of the Company or is or
was serving at the Company's request as a director, officer, agent, or employee
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' ties, judgment, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with the
action, suit or proceeding. The power to indemnify applies (a) if the person is
successful on the merits or otherwise in defense of any action, suit or
proceeding, or (b) if the person acted in good faith and in a manner he
reasonably believed to be in the best interest, or not opposed to the best
interest, of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The power to
indemnify applies to actions brought by or in the right of the Company as well,
but only to the extent of defense expenses (including attorneys' fees but
excluding amounts paid in settlement) actually and reasonably incurred and not
to any satisfaction of judgment or settlement of the claim itself, and with the
further limitation that in these actions no indemnification shall be made in the
event of any adjudication of negligence or misconduct in the performance of his
duties to the Company, unless the court believes that in light of all the
circumstances indemnification should apply.
Section 174 of the DGCL provides, among other things, that a director
who willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption may be held liable for these actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time may avoid liability by causing his or her dissent to these
actions to be entered in the books containing the minutes of the meetings of the
board of directors at the time the action occurred or immediately after the
absent director receives notice of the unlawful acts.
The Company's Amended and Restated Certificate of Incorporation
includes a provision that eliminates the personal liability of its directors for
monetary damages for breach of fiduciary duty as a director, except for
liability:
- for any breach of the director's duty of loyalty to the Company
or its stockholders;
- for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the DGCL regarding unlawful dividends and
stock purchases; or
- for any transaction from which the director derived an improper
personal benefit.
These provisions are permitted under Delaware law.
The Company's Amended and Restated Bylaws provide that the Company
must:
3
<PAGE>
- indemnify its directors and officers to the fullest extent
permitted by Delaware law;
- indemnify its other employees and agents to the same extent that
it indemnified its officers and directors, unless otherwise
determined by the Company's board of directors; and
- advance expenses, as incurred, to its directors and executive
officers in connection with a legal proceeding to the fullest
extent permitted by Delaware Law.
The indemnification provisions contained in the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws are not
exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise. In
addition, the Company maintains insurance on behalf of its directors and
executive officers insuring them against any liability asserted against them in
their capacities as directors or officers or arising out of this status.
The Company has entered or intends to enter into agreements to
indemnify its directors and executive officers, in addition to indemnification
provided for in the Company's bylaws. These agreements, among other things, will
provide for indemnification of the Company's directors and executive officers
for expenses, judgments, fines and settlement amounts incurred by any such
person in any action or proceeding arising out of the person's services as a
director or executive officer or at the Company's request. The Company believes
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
See Exhibit Index.
ITEM 9. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended, or the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment to this Registration Statement) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission, or the Commission,
4
<PAGE>
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, that are incorporated by
reference in the Registration Statement.
(b) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Post-Effective
Amendment No. 1 to Form S-8 Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Redwood City,
State of California, on this 22nd day of February, 2000.
TUMBLEWEED COMMUNICATIONS CORP.
By: /s/ BERNARD J. CASSIDY
-----------------------------------
Bernard J. Cassidy
GENERAL COUNSEL AND SECRETARY
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 22, 2000.
* Chairman of the Board, President and
- -------------------------------- Chief Executive Officer (Principal
Jeffrey C. Smith Executive Officer)
/s/ JOSEPH C. CONSUL Vice President - Finance and Chief
- -------------------------------- Financial Officer (Principal Financial
Joseph C. Consul Officer and Principal Accounting Officer)
*
- -------------------------------- Director
David F. Marquardt
*
- -------------------------------- Director
Timothy C. Draper
*
- -------------------------------- Director
Eric J. Hautemont
*By: /s/ JOSEPH C. CONSUL
---------------------------
Joseph C. Consul
ATTORNEY-IN-FACT
6
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
4.1* Specimen Common Stock Certificate
4.2* Investors' Rights Agreement, dated as of February 26, 1999,
among the Registrant, the Founders, and the holders of the
Registrant's preferred stock
4.3* Warrant to Purchase Stock, dated November 30, 1998, issued to
Silicon Valley Bank
4.4 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form S-4 filed on
December 7, 1999)
4.5 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.4 to Registrant's Registration
Statement on Form S-1 filed on August 5, 1999)
4.6 Amended and Restated Investors' Rights Agreement, dated as of
February 26, 1999, among the Registrant, the Founders, and
the holders of the Registrant's preferred stock
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding
the legality of the securities being registered
23.1 Consent of KPMG LLP, independent accountants
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 5.1)
24.1* Power of Attorney
99.1* 1993 Stock Option Plan, as amended, and form of agreements
thereunder
99.2* 1999 Omnibus Stock Incentive Plan and form of stock option
thereunder
99.3* 1999 Employee Stock Purchase Plan
99.4 Worldtalk Communications Corporation 1996 Equity Incentive
Plan
99.5 Worldtalk Communications Corporation 1996 Directors Stock
Option Plan
99.6 Worldtalk Communications Corporation 1992 Stock Option Plan
99.7 Agreement and Plan of Merger, dated as of November 18, 1999,
among Tumbleweed Communica tions Corp., Keyhole Acquisition
Corp. and Worldtalk Communications Corporation (incorporated
by reference to Exhibit 2.1 to Registrant's Registration
Statement on Form S-4 filed on December 7, 1999)
* Previously filed.
7
<PAGE>
TUMBLEWEED COMMUNICATIONS CORP.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
JANUARY 31, 2000
<PAGE>
SECTION 1. GENERAL.....................................................1
1.1 DEFINITIONS........................................1
SECTION 2. RESTRICTIONS ON TRANSFER....................................2
SECTION 3. REGISTRATION................................................3
3.1 DEMAND REGISTRATION................................3
3.2 PIGGYBACK REGISTRATIONS............................4
3.3 FORM S-3 REGISTRATION..............................5
3.4 EXPENSES OF REGISTRATION....................................6
3.5 OBLIGATIONS OF THE COMPANY..................................6
3.6 TERMINATION OF REGISTRATION RIGHTS..........................7
3.7 DELAY OF REGISTRATION; FURNISHING INFORMATION...............8
3.8 INDEMNIFICATION.............................................8
3.9 ASSIGNMENT OF REGISTRATION RIGHTS..........................10
3.10 AMENDMENT OF REGISTRATION RIGHTS...........................10
3.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS...............10
3.12 "MARKET STAND-OFF" AGREEMENT...............................10
3.13 RULE 144 REPORTING.........................................11
SECTION 4. MISCELLANEOUS..............................................11
4.1 GOVERNING LAW..............................................11
4.2 SURVIVAL...................................................11
4.3 SUCCESSORS AND ASSIGNS.....................................11
4.4 SEVERABILITY...............................................12
4.5 AMENDMENT AND WAIVER.......................................12
4.6 DELAYS OR OMISSIONS........................................12
4.7 NOTICES....................................................13
4.8 ATTORNEYS' FEES............................................13
4.9 TITLES AND SUBTITLES.......................................13
4.10 COUNTERPARTS...............................................13
<PAGE>
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the "Agreement")
is entered into as of the 31st day of January, 2000, by and among TUMBLEWEED
COMMUNICATIONS CORP., a Delaware corporation (the "Company"), the Founders (as
hereinafter defined), the persons listed on Exhibit A hereto (the "Investors")
and the persons listed on Exhibit B hereto (collectively, the "Acquisition
Stockholders").
RECITALS
WHEREAS, the Company, the Founders and the persons listed on Exhibit A
hereto are parties to that certain Amended and Restated Investors' Rights
Agreement dated as of February 26, 1999 (the "Prior Agreement") pursuant to
which the Company granted certain of such persons certain participation,
registration and information rights;
WHEREAS, on November 18, 1999, the Company entered into an Agreement
and Plan of Merger by and among the Company, Keyhole Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of the Company, and Worldtalk
Communications Corporation, a Delaware corporation (the "Merger Agreement"),
pursuant to which the Company agreed to extend registration rights to certain
additional persons as set forth below; and
WHEREAS, the Company, the Founders and the Investors intend that this
Agreement shall supersede the Prior Agreement, and that the Prior Agreement
shall terminate immediately upon the execution of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Merger Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Form S-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"Founders" shall mean Jeffrey C. Smith and Jean-Christophe D. Bandini.
"Holder" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 3.9 hereof, except that the Acquisition
Stockholders shall not be deemed Holders for purposes of Sections 3.1 and 3.3
hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock (the "Common Stock") registered
under the Securities Act.
<PAGE>
"Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"Registrable Securities" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 3 of this Agreement are not assigned.
"Registrable Securities then outstanding" shall be the number of shares
determined by calculating the total number of shares of the Company's Common
Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by the Company
in complying with Sections 3.1, 3.2 and 3.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company). In the case of registration pursuant to Section 3.1, "Registration
Expenses" also shall include the reasonable fees and expenses of a single
special legal counsel for the Holders not to exceed $15,000 and the fees and
expenses of any special audits not to exceed $15,000 related to such
registration.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"Shares" shall mean (i) shares of Common Stock beneficially owned or
held by the Founders, (ii) shares of Common Stock issued to the Investors and
(iii) for purposes of Section 1, Sections 3.2, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9 and
3.10 and Section 4 only, shares of Common Stock (the "Acquisition Shares")
issued to the Acquisition Stockholders.
SECTION 2. RESTRICTIONS ON TRANSFER
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
2
<PAGE>
(ii) (A) The transferee has agreed in writing to be bound by this
Section 2, (B) such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (C) if reasonably
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act.
Notwithstanding the provisions of paragraphs (i) and (ii) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
shareholders in accordance with their interest in the corporation, (C) a limited
liability company to its members or former members in accordance with their
interest in the limited liability company, or (D) to the Holder's family member
or trust for the benefit of an individual Holder, provided the transferee will
be subject to the terms of this Section 2 to the same extent as if he were an
original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
SECTION 3. REGISTRATION.
3.1 DEMAND REGISTRATION.
3.1.1 Subject to the conditions of this Section 3.1, if the Company
shall receive a written request from the Holders of more than twenty percent
(20%) of the Registrable Securities then outstanding (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of at least twenty percent (20%) of their Registrable
Securities or a lesser percentage if the Registrable Securities to be registered
will have an aggregate offering price to the public in excess of $2,000,000,
then the Company shall, within thirty (30) days of the receipt thereof, give
written notice of such
3
<PAGE>
request to all Holders, and subject to the limitations of this Section 3.1,
effect, as soon as practicable, the registration under the Securities Act of all
Registrable Securities that the Holders request to be registered.
3.1.2 If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 3.1
and the Company shall include such information in the written notice referred to
in Section 3.1.1. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 3.1, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities on
a pro rata basis based on the number of Registrable Securities held by all such
Holders (including the Initiating Holders). Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.
3.1.3 The Company shall not be required to effect a registration
pursuant to this Section 3.1 prior to the earlier of:
(i) August 15, 2001; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 3.1, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of filing of,
and ending on the date one (1) year following the effective date of, the
registration statement pertaining to the Initial Offering; or
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 3.1.1, the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 3.1, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be detrimental to the Company and its
shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company no more than twice in any one-year period.
3.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the
filing of any registration statement under the Securities Act for purposes of
a public offering of securities of the Company (including, but not limited
to, registration
4
<PAGE>
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to employee benefit plans or with
respect to corporate reorganizations or other transactions under Rule 145 of the
Securities Act) and will afford each such Holder an opportunity to include in
such registration statement all or part of such Registrable Securities held by
such Holder. Each Holder desiring to include in any such registration statement
all or any part of the Registrable Securities held by it shall, within fifteen
(15) days after the above-described notice from the Company, so notify the
Company in writing. Such notice shall state the intended method of disposition
of the Registrable Securities by such Holder. If a Holder decides not to include
all of its Registrable Securities in any registration statement thereafter filed
by the Company, such Holder shall nevertheless continue to have the right to
include any Registrable Securities in any subsequent such registration statement
or registration statements as may be filed by the Company with respect to
offerings of its securities, all upon the terms and conditions set forth herein.
3.2.1 UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 3.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 3.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting.
3.2.2 RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated or withdraw any
registration initiated by it under this Section 3.2 prior to the effectiveness
of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Company in accordance with Section 3.4 hereof.
3.3 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form
S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
3.3.1 promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
3.3.2 as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the
5
<PAGE>
Company; PROVIDED, HOWEVER, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section 3.3:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $1,000,000, or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 3.3, provided, that such
right to delay a request shall be exercised by the Company no more than twice in
any one-year period, or
(iv) if the Company has already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 3.3, or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
3.3.3 Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
3.4 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 3.1 or any registration under
Section 3.2 or Section 3.3 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of shares so registered. The Company shall not, however, be
required to pay for expenses of any registration proceeding begun pursuant to
Section 3.1 or 3.3, the request of which has been subsequently withdrawn by
the Initiating Holders unless (a) the withdrawal is based upon material
adverse information concerning the Company of which the Initiating Holders
were not aware at the time of such request or (b) the Holders of a majority
of Registrable Securities agree to forfeit their right to one requested
registration pursuant to Section 3.1 or Section 3.3, as applicable, in which
event such right shall be forfeited by all Holders. If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by
the holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 3.1 or Section 3.3 to a demand
registration.
3.5 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
6
<PAGE>
3.5.1 Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to sixty (60) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
3.5.2 Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
3.5.3 Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
3.5.4 Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
3.5.5 In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
3.5.6 Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
3.5.7 Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering and (ii) a letter dated as of such date, from the independent certified
public accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
3.6 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 3 shall terminate and be of no further force and effect
five (5) years after the date of the Company's Initial Offering. In addition,
a Holder's registration rights shall expire if (i) the Company has completed
its Initial Offering and is subject to the provisions of the Exchange Act,
(ii) such Holder (together with its affiliates, partners and former partners)
holds less than 1% of the Company's outstanding Common Stock (treating all
7
<PAGE>
shares of convertible Preferred Stock of the Company (the "Preferred Stock") on
an as converted basis) and (iii) all Registrable Securities held by such Holder
may be sold under Rule 144 during any one hundred eighty (180) day period.
3.7 DELAY OF REGISTRATION; FURNISHING INFORMATION.
3.7.1 No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 3.
3.7.2 It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 3.1, 3.2 or 3.3 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
3.8 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 3.1, 3.2 or 3.3:
3.8.1 To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 3.8.1 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
3.8.2 To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners,
8
<PAGE>
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder under
an instrument duly executed by such Holder and stated to be specifically for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 3.8.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 3.8 exceed the proceeds from the offering received
by such Holder.
3.8.3 Promptly after receipt by an indemnified party under this
Section 3.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 3.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 3.8.
3.8.4 If the indemnification provided for in this Section 3.8 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
9
<PAGE>
3.8.5 The obligations of the Company and Holders under this Section
3.8 shall survive completion of any offering of Registrable Securities in a
registration statement. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. In the event any offering of Registrable Securities is underwritten,
and the underwriting agreement provides for indemnification and/or contribution
by the Company and the Holders offering securities thereunder, the
indemnification and/or contribution obligations of the Company and the Holders
hereunder shall in no event exceed the obligations of the parties set forth in
such underwriting agreement.
3.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 3 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, parent, general partner, limited partner or retired partner of a
Holder, or an employee of a partner or shareholder of a Holder or, if such
partner or shareholder of Holder is a partnership or corporation, a partner or
shareholder of such partnership or corporation, (ii) is a Holder's family member
or trust for the benefit of an individual Holder, or (iii) acquires at least one
hundred thousand (100,000) shares of Registrable Securities (as adjusted for
stock splits and combinations); PROVIDED, HOWEVER, (A) the transferor shall,
within ten (10) days after such transfer, furnish to the Company written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
3.10 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 3 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of more than fifty percent (50%)
of the Registrable Securities (excluding the Acquisition Shares) which are not
held by the Founders, unless such amendment or waiver adversely affects the
Founders differently than the other Holders. Any amendment or waiver effected in
accordance with this Section 3.10 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 3, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
3.11 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, if the Company shall enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights senior to those granted to the Holders hereunder, then the
Company shall grant the Holders such senior registration rights.
3.12 "MARKET STAND-OFF" AGREEMENT. If requested by the Company as the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
shares of Common Stock (or other securities) of the Company held by such Holder
(other than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(i) such agreement shall apply only to the Company's Initial Offering;
and
10
<PAGE>
(ii) all officers and directors of the Company and their affiliates
enter into similar agreements.
The obligations described in this Section 3.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
3.13 RULE 144 REPORTING. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
SECTION 4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed under
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
4.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
4.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of Registrable Securities from time to time; PROVIDED, HOWEVER,
11
<PAGE>
that prior to the receipt by the Company of adequate written notice of the
transfer of any Registrable Securities specifying the full name and address of
the transferee, the Company may deem and treat the person listed as the holder
of such shares in its records as the absolute owner and holder of such shares
for all purposes, including the payment of dividends or any redemption price.
4.4 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.5 AMENDMENT AND WAIVER.
4.5.1 Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of more than fifty percent (50%) of the Registrable Securities which are not
held by the Founders unless the Founders would be adversely affected differently
than the other Holders, in which case a vote by a majority of the Founders shall
also be required.
4.5.2 Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of more than fifty percent (50%) of the
Registrable Securities which are not held by the Founders unless the Founders
would be adversely affected differently than the other Holders, in which case a
vote by a majority of the Founders shall also be required.
4.5.3 Notwithstanding the foregoing, this Agreement may be amended
with only the written consent of the Company to (i) include additional
purchasers of the Company's securities as "Holders" and parties hereto or (ii)
to include shares of Common Stock subsequently issued by the Company as
Registrable Securities hereunder.
4.5.4 By execution of this Agreement, the parties to the Prior
Agreement consent to the amendment and termination of the Prior Agreement.
4.5.5 Notwithstanding the foregoing and for avoidance of doubt, no
Holder of Acquisition Shares shall be entitled, directly or indirectly, to
initiate or create any obligation on the part of the Company to file a
registration statement.
4.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to exercise
any right, power, or remedy accruing to any Holder, upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on any Holder's
part of any breach, default or noncompliance under the Agreement or any waiver
on such Holder's part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the
12
<PAGE>
extent specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
4.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A or Exhibit B hereto or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
4.8 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
4.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Investors' Rights Agreement as of the date set forth in the first
paragraph hereof.
COMPANY: FOUNDERS:
TUMBLEWEED COMMUNICATIONS CORP. _______________________________
Jeffrey C. Smith
By: _________________________________
Jeffrey C. Smith
President and Chief Executive Officer _______________________________
Jean-Christophe D. Bandini
14
<PAGE>
INVESTORS: SOFINNOVA VENTURE PARTNERS III
By: Sofinnova Management L.P.,
HIKARI TSUSHIN, INC. Its General Partner
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
DRAPER FISHER ASSOCIATES FUND III, L.P.
By: _______________________________ ___________________________________
Name: Jeffrey C. Smith
Title:
DRAPER FISHER PARTNERS, L.L.C. TOLMI, L.L.C.
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
ADOBE VENTURES II, L.P. BESSEC VENTURES IV, L.P.
By: H&Q Adobe Ventures Management II, LLC By: Deer IV & Co., LLC,
Its General Partner its General Partner
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
H&Q TUMBLEWEED INVESTORS, L.P. BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co.,
its General Partner
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
15
<PAGE>
AUGUST CAPITAL, L.P., FOR ITSELF AND AS BAYVIEW INVESTORS
NOMINEE FOR:
AUGUST CAPITAL STRATEGIC PARTNERS, L.P.
AUGUST CAPITAL ASSOCIATES, L.P.
By: August Capital Management, L.L.C., By: _______________________________
the general partner for each of the Name:
foregoing Title:
By: _______________________________ CHARLES CORFIELD LIVING TRUST
Name: U/A 12/19/91
Title:
INNOVACOM 2 By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title: ___________________________________
Mark Pastore
DRAPER RICHARDS L.P.
By: Draper Richards Management Co.,
its General Partner
___________________________________
Donald R. Emery
By: _______________________________
Name:
Title: ___________________________________
Gregory C. Smith
___________________________________ GC&H INVESTMENTS
Jean-Christophe D. Bandini
___________________________________ By: _______________________________
Jeffrey J. Baymor Name:
Title:
___________________________________ ___________________________________
Eric Hautemont William A. Sahlman
16
<PAGE>
DRAPER ASSOCIATES, L.P.
___________________________________ By: __________, its General Partner
Joseph B. Lassiter III
___________________________________ By: _______________________________
Kenneth H. Keller Name:
Title:
HAMBRECHT & QUIST EMPLOYEE VENTURE UNITED PARCEL SERVICE GENERAL
FUND, L.P. SERVICES CO.
By: H&Q Venture Management, L.L.C.
Its: General Partner
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
___________________________________ HILAL CAPITAL, LP
Joseph C. Consul
By: _______________________________
___________________________________ Name:
Charles N. Corfield Title:
HILAL CAPITAL, QP, LP
___________________________________
Phil Hilal
HILAL CAPITAL ASSOCIATES, LLC By: _______________________________
Name:
Title:
By: _______________________________ HILAL CAPITAL INTERNATIONAL, LTD.
Name:
Title:
By: _______________________________
Name:
Title:
17
<PAGE>
HIGHBRIDGE INTERNATIONAL NARRAGANSETT I, LP
By: _______________________________ By: _______________________________
Name: Name:
Title: Title:
NARRAGANSETT OFFSHORE LTD.
By: _______________________________
Name:
Title:
18
<PAGE>
EXHIBIT A
SCHEDULE OF EXISTING PARTIES
NAMES AND ADDRESSES
Adobe Ventures II, L.P.
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
August Capital, L.P.
2480 Sand Hill Road, Suite 101
Menlo Park, CA 94025
Jean-Christophe D. Bandini
3375 Brittan Avenue, #11
San Carlos, CA 94070
Jeffrey J. Baymor
2169 Purisima Creek Road
Half Moon Bay, CA 94019
Bayview Investors Ltd.
555 California Street, Suite 2600
San Francisco, CA 94104
Bessec Ventures IV, L.P.
1400 Old Country Road, Suite 407
Westbury, NY 11590
Attention: Robert H. Buescher
Bessemer Venture Partners IV L.P.
1400 Old Country Road, Suite 407
Westbury, NY 11590
Attention: Robert H. Buescher
Joseph C. Consul
1131 Dwyer Avenue
San Jose, CA 95120
Charles N. Corfield
Charles N. Corfield Living Trust u/a 12/19/91
227 High Street
Palo Alto, CA 94301
A-1
<PAGE>
Draper Associates, L.P.
Draper Fisher Associates Fund III
Draper Fisher Partners, L.L.C.
400 Seaport Court, Suite 250
Redwood City, CA 94063
Draper Richards L.P.
50 California Street, Suite 2925
San Francisco, CA 94111
Attention: Robin Donohoe
Donald R. Emery
1608 Castro Street
San Francisco, CA 94114
GC&H Investments
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Hambrecht & Quist Employee Venture Fund, L.P. II
H&Q Tumbleweed Investors, L.P.
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Eric Hautemont
1351 Sacramento Street
San Francisco, CA 94109
Hikari Tsushin, Inc.
22F Ohtemachi Nomura Bldg.
2-1-1 Ohtemachi, Chiyoda-ku, Tokyo
Japan
Innovacom 2
455 Market Street, Suite 1440
San Francisco, CA 94105
Kenneth H. Keller
3386 Royal Meadow Lane
San Jose, CA 95135
Joseph B. Lassiter III
One Concord Road
Weston, MA 02193
A-2
<PAGE>
Mark R. Pastore
2320 Moraga Street
San Francisco, CA 9412
William A. Sahlman
77 Viles Street
Weston, MA 02193
Gregory C. Smith
155 Eleanor Drive
Woodside, CA 94062
Jeffrey C. Smith
1305 Altschul Avenue
Menlo Park, CA 94025
Sofinnova Venture Partners III
One Market Plaza
Steuart Tower, Suite 2630
San Francisco, CA 94105
Tolmi, L.L.C.
c/o National Registered Agents
of NV, Inc.
202 South Minnesota Street
Carson City, NV 89703
with a copy to:
Timothy Tomlinson, Esq.
Tomlinson Zisko Morosoli & Maser
200 Page Mill Road, 2nd Floor
Palo Alto, CA 94306
United Parcel Service General Services Co.
55 Glenn Lake Parkway North East
Atlanta, Georgia 30328
A-3
<PAGE>
EXHIBIT B
SCHEDULE OF NEW PARTIES
NAMES AND ADDRESSES
Hilal Capital, LP Phil Hilal
60 East 42nd Street - Suite 1946 c/o Hilal Capital Management LLC
New York, New York 10165 60 East 42nd Street - Suite 1946
Telephone: 212-953-1002 New York, New York 10165
Facsimile: 212-953-1012 Telephone: 212-953-1002
Facsimile: 212-953-1012
Hilal Capital QP, LP Highbridge International
60 East 42nd Street - Suite 1946 c/o Hilal Capital Management LLC
New York, New York 10165 60 East 42nd Street - Suite 1946
Telephone: 212-953-1002 New York, New York 10165
Facsimile: 212-953-1012 Telephone: 212-953-1002
Facsimile: 212-953-1012
Hilal Capital Associates LLC Narragansett I, LP
60 East 42nd Street - Suite 1946 c/o Narragansett Asset Management, LLC
New York, New York 10165 375 Park Avenue - Suite 1404
Telephone: 212-953-1002 New York, New York 10152
Facsimile: 212-953-1012 Telephone: 212-521-5042
Facsimile: 212-521-5029
Hilal Capital International, Ltd. Narragansett Offshore Ltd.
c/o Hilal Capital Management LLC c/o Leo Holdings, LLC
60 East 42nd Street - Suite 1946 375 Park Avenue - Suite 1404
New York, New York 10165 New York, New York 10152
Telephone: 212-953-1002 Telephone: 212-521-5042
Facsimile: 212-953-1012 Facsimile: 212-521-5029
B-1
<PAGE>
[SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP LETTERHEAD]
February 22, 2000
Tumbleweed Communications Corp.
700 Saginaw Drive
Redwood City, California 94063
Re: Tumbleweed Communications Corp.
Post-Effective Amendment No. 1 to Form S-8 Registration Statement
-----------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Tumbleweed Communications
Corp., a Delaware corporation (the "Company"), in connection with the
registration of 620,937 shares (the "Shares") of the Company's common stock,
par value $0.001 per share (the "Common Stock"), issuable pursuant to the
Agreement and Plan of Merger, dated as of November 18, 1999 (the "Merger
Agreement"), by and among the Company, Keyhole Acquisition Corp., a Delaware
corporation, and Worldtalk Communications Corporation, a Delaware corporation
("Worldtalk"), under Worldtalk's 1992 Stock Option Plan, Worldtalk's 1996
Equity Incentive Plan and Worldtalk's 1996 Directors Stock Option Plan
(collectively, the "Plans").
This opinion is being furnished in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Act").
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of (i) the
Company's Registration Statement on Form S-8 as filed with the Securities and
Exchange Commission (the "Commission") on August 6, 1999 under the Act; (ii)
the Company's Registration Statement on Form S-4 as filed with the Commission
on December 7, 1999 under the Act; (iii) the Company's Post-Effective
Amendment No. 1 to Form S-8 Registration Statement as proposed to be filed
with the Commission under the Act (the "Amendment to Form S-8"); (iv) a
specimen certificate representing the
<PAGE>
Tumbleweed Communications Corp.
February 22, 2000
Page 2
Common Stock; (v) the Amended and Restated Certificate of Incorporation of
the Company, as presently in effect; (vi) the Amended and Restated Bylaws of
the Company, as presently in effect; (vii) the Merger Agreement; (viii) the
Plans; and (ix) certain resolutions of the Board of Directors of the Company
relating to the issuance and sale of the Shares and related matters. We have
also examined originals or copies, certified or otherwise identified to our
satisfaction, of such records of the Company and such agreements,
certificates of public officials, certificates of officers or other
representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as certified, conformed or photostatic
copies and the authenticity of the originals of such latter documents. In
making our examination of documents executed or to be executed by parties
other than the Company, we have assumed that such parties had or will have
the power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite
action, corporate or other, and execution and delivery by such parties of
such documents and the validity and binding effect thereof. As to any facts
material to the opinions expressed herein that we have not independently
established or verified, we have relied upon statements and representations
of officers and other representatives of the Company and others. In rendering
the opinion set forth below, we have assumed that the certificates
representing the Shares will be manually signed by one of the authorized
officers of the transfer agent and registrar for the Common Stock and
registered by such transfer agent and registrar and will conform to the
specimen thereof examined by us.
We have also assumed that each award agreement setting forth the
terms of each grant of options or other awards under any of the Plans is
consistent with the respective Plan and has been duly authorized and validly
executed and delivered by the parties thereto, and that the consideration
received by the Company
<PAGE>
Tumbleweed Communications Corp.
February 22, 2000
Page 3
for the Shares delivered pursuant to the Plans will be in an amount at least
equal to the par value of such Shares.
Members of our firm are admitted to the bar in the State of
California, and we do not express any opinion with respect to the law of any
jurisdiction other than Delaware corporate law.
Based upon and subject to the foregoing, we are of the opinion that
the Shares have been duly authorized for issuance by the Company and, when
issued and paid for in accordance with the terms and conditions of the Plans
and the Merger Agreement, the Shares will be validly issued and, subject to
any restrictions imposed by the Plans, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission
as an exhibit to the Amendment to Form S-8. We also consent to the reference
to our firm under the caption "Legal Matters" in the Amendment to Form S-8.
In giving this consent, we do not thereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
/s/ Skadden, Arps, Slate, Meagher & Flom LLP
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors and Stockholders
Tumbleweed Communications Corp.:
We consent to incorporation by reference in this registration statement
(Post-Effective Amendment No. 1 to Form S-8 (No. 333-84683)) of Tumbleweed
Communications Corp. of our report dated March 18, 1999, except as to Note
10, which is as of August 3, 1999, relating to the consolidated balance
sheets of Tumbleweed Communications Corp. and subsidiary as of December 31,
1997 and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998, which report appears in the registration
statement on Form S-1 (No. 333-79687) of Tumbleweed Communications Corp.
/s/ KPMG LLP
San Francisco, California
February 22, 2000
<PAGE>
Exhibit 99.4
WORLDTALK CORPORATION
1996 EQUITY INCENTIVE PLAN
As adopted on February 7, 1996
and Amended Through November 17, 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 5,250,000* 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 November 17, 1999 to increase the number of Shares
reserved to 5,250,000.
<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>
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>
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
-4-
<PAGE>
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;
-5-
<PAGE>
(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;
-6-
<PAGE>
(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
-7-
<PAGE>
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
-8-
<PAGE>
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 accelerate 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
-9-
<PAGE>
"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.
-10-
<PAGE>
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
-11-
<PAGE>
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
-12-
<PAGE>
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").
---------------------------------------------------------
-13-
<PAGE>
Exhibit 99.5
WORLDTALK CORPORATION
1996 DIRECTORS STOCK OPTION PLAN
As Adopted February 7, 1996
and Amended through January 26, 1998
1. PURPOSE. This 1996 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for members of the Board of Directors
of Worldtalk Communications Corporation, dba Worldtalk Corporation (the
"COMPANY"), who are described in Section 6.1 below, by granting such persons
options to purchase shares of the Common Stock of the Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become
effective on the time and date (the "EFFECTIVE DATE") on which the registration
statement that has been or will be filed by the Company with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), to register the Company's Common Stock in an initial public
offering thereof, is declared effective by the SEC; 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, consistent with
applicable laws, prior to a date twelve (12) months after the date this Plan is
adopted by the Board. Options may be granted under this Plan after the
Effective Date provided that, in the event that stockholder approval is not
obtained within the time period provided herein, this Plan, and all options
granted hereunder (each an, "OPTION"), shall terminate. No Option that is
issued as a result of any increase in the number of shares authorized to be
issued under this Plan shall be exercised prior to the time such increase has
been approved by the stockholders of the Company and all such Options granted
pursuant to such increase shall similarly terminate if such stockholder
approval is not obtained. So long as the Company is subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended, (the "EXCHANGE ACT") the
Company will comply with the requirements of Rule 16b-3 with respect to
stockholder approval.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall
be nonqualified stock options ("NQSOS"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "SHARES") are
shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 200,000
Shares (post 1-for-2 1996 reverse stock split), subject to adjustment as
provided in this Plan. If any Option is terminated for any reason without being
exercised in whole or in part, the Shares thereby released from such Option
shall be available for purchase under other Options subsequently granted under
this Plan. At all times during the term of this Plan, the Company shall reserve
and keep available such number of Shares as shall be required to satisfy the
requirements of outstanding Options granted under this Plan; PROVIDED, HOWEVER
that if the aggregate number of Shares subject to outstanding Options granted
under this Plan plus the aggregate number of Shares previously issued by the
Company pursuant to the exercise of Options granted under this Plan equals or
exceeds the Maximum Number of Shares, then notwithstanding anything herein to
the contrary, no further Options may be granted under this Plan until the
Maximum Number is increased or the aggregate number of Shares subject to
outstanding Options granted under this Plan plus the aggregate number of Shares
previously issued by the Company pursuant to the exercise of Options granted
under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer
this Plan (the "COMMITTEE"). As used in this Plan, references to the Committee
shall mean either such Committee or the Board if no Committee has been
established to administer this Plan. The interpretation by the Committee of any
of the provisions of this Plan or any Option
<PAGE>
Worldtalk Corporation
1996 Directors Stock Option Plan
granted under this Plan shall be final and binding upon the Company and all
persons having an interest in any Option or any Shares purchased pursuant to an
Option.
6. ELIGIBILITY AND AWARD FORMULA.
6.1 ELIGIBILITY. Options may be granted only to members of the
Board who are not employees of, or consultants to, the Company or any Parent,
Subsidiary or Affiliate of the Company, as those terms are defined in Section
17 below (each an "ELIGIBLE DIRECTOR").
6.2 INITIAL GRANT. Each Eligible Director who is a member of the
Board on the Effective Date and has not previously been granted an option under
the Company's 1992 Stock Option Plan will automatically be granted an option
for 15,000 Shares on the Effective Date. Each Eligible Director who after the
Effective Date becomes a member of the Board will automatically be granted an
Option for 15,000 Shares on the date such individual first becomes a member of
the Board or on the date such individual returns as a Board member after a
break in service, as applicable. Each grant provided for in this Section 6.2
shall be referred to herein as an "INITIAL GRANT" and each individual who holds
one or more Options, whether Initial Grants or otherwise, shall be referred to
herein as an "OPTIONEE."
6.3 SUCCEEDING GRANTS. Each Eligible Director will automatically
be granted an Option for 5,000 Shares (a "SUCCEEDING GRANT") five (5) days
after each annual meeting of the Company's stockholders beginning with the
second such meeting following the Effective Date; PROVIDED THAT the Eligible
Director is still a member of the Board on the date of grant and has served
continuously as a member of the Board since:
(a) the date of the Eligible Director's Initial Grant occurring at
least one year prior to the date such Succeeding Grant is to be made (for
those who received an Initial Grant under Section 6.2 above); or
(b) the Effective Date (for those who were members of the Board on
the Effective Date but were ineligible to receive an Initial Grant under
Section 6.2 on the Effective Date due to the fact that they had
previously been granted one or more options under the Company's 1992
Stock Option Plan).
If there is no annual meeting of the Company's stockholders in any one calendar
year after 1996, Succeeding Grants in that year shall occur, subject to the
preceding sentence, on December 31 of that calendar year.
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 FORM OF OPTION GRANT. Each Option granted under this Plan
shall be evidenced by a written Stock Option Grant ("GRANT") in such form
(which need not be the same for each Optionee) as the Committee shall from time
to time approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 VESTING. Options granted under this Plan shall be exercisable
as they vest. The date an Optionee receives an Initial Grant or a Succeeding
Grant is referred to in this Plan as the "START DATE" for such Option. Subject
to the terms and conditions of the Plan and the Grant, each such Option shall
vest as to twenty-five percent (25%) of the Shares subject thereto on the fifth
(5th) day after each annual stockholders meeting of the Company to be held in
each of the four (4) calendar years after the Start Date, but as to each such
vesting period, only so long as the Optionee continuously remains a member of
the Board through the date of vesting. However, if there is no annual
stockholders' meeting in any calendar year after the Start Date for any Option,
the annual vesting date for that Option and for that year shall be December 31
of such calendar year.
7.3 EXERCISE PRICE. The exercise price of an Option shall be the
Fair Market Value (as defined in Section 17.4) of the Shares, at the time that
the Option is granted.
-2-
<PAGE>
7.4 TERMINATION OF OPTION. Except as provided below in this
Section, each Option shall expire ten (10) years after its Start Date (the
"EXPIRATION DATE"). The Option shall cease to vest if the Optionee ceases to be
a member of the Board. The date on which the Optionee ceases to be a member of
the Board shall be referred to as the "TERMINATION DATE." An Option may be
exercised after the Termination Date only as set forth below:
7.4.1 Termination Generally. If the Optionee ceases to be a
member of the Board for any reason except death or disability, then each Option
then held by such Optionee, to the extent (and only to the extent) that it
would have been exercisable by the Optionee on the Termination Date, may be
exercised by the Optionee within seven (7) months after the Termination Date,
but in no event later than the Expiration Date.
7.4.2 Death or Disability. If the Optionee ceases to be a
member of the Board because of the death of the Optionee or the disability of
the Optionee within the meaning of Section 22(e)(3) of the Internal Revenue
Code of 1986, as amended (the "CODE"), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee (or the Optionee's legal representative) within twelve (12) months
after the Termination Date, but in no event later than the Expiration Date.
8. EXERCISE OF OPTIONS.
8.1 NOTICE. Options may be exercised only by delivery to the
Company of an exercise agreement in a form approved by the Committee stating
the number of Shares being purchased, the restrictions imposed on the Shares
and such representations and agreements regarding the Optionee's investment
intent and access to information as may be required 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.
8.2 PAYMENT. Payment for the Shares purchased upon exercise of an
Option may be made (a) in cash or by check; (b) by surrender of shares of
Common Stock of the Company that have been owned by the Optionee for more than
six (6) months (and which 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 were
obtained by the Optionee in the open public market, having a Fair Market Value
equal to the exercise price of the Option; (c) by waiver of compensation due or
accrued to the Optionee for services rendered; (d) provided that a public
market for the Company's stock exists, through a "same day sale" commitment
from the Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD DEALER") whereby the Optionee
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; (e) provided that a public market for the Company's
stock exists, through a "margin" commitment from the Optionee and a NASD Dealer
whereby the Optionee 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; (f) if approved by the Board at any
time, 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 and secured by a
pledge agreement in form approved by the Committee under which the Shares shall
serve as collateral; PROVIDED, HOWEVER, that the portion of the Exercise Price
equal to the par value of the Shares purchased must be paid in cash; or (g) by
any combination of the foregoing.
8.3 WITHHOLDING TAXES. Prior to issuance of the Shares upon
exercise of an Option, the Optionee shall pay or make adequate provision for
any federal or state withholding obligations of the Company, if applicable.
8.4 LIMITATIONS ON EXERCISE. Notwithstanding the exercise periods
set forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
-3-
<PAGE>
8.4.1 Stockholder Approval. An Option shall not be
exercisable until such time as this Plan (or, in the case of Options granted
pursuant to an amendment increasing the number of shares that may be issued
pursuant to this Plan, such amendment) has been approved by the stockholders of
the Company in accordance with Section 15 hereof.
8.4.2 Compliance with Laws. An Option shall not be
exercisable unless such exercise is in compliance with the Securities Act and
all applicable state securities laws, as they are in effect on the date of
exercise.
8.4.3 Minimum Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased upon any exercise of
an Option, provided that such minimum number will not prevent the Optionee from
exercising the full number of Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or by the Optionee's
guardian or legal representative, unless otherwise permitted by the Committee.
No Option may be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent and distribution.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior
to the date of exercise, except as provided in this Plan. The Company shall
provide to each Optionee a copy of the annual financial statements of the
Company, at such time after the close of each fiscal year of the Company as
they are released by the Company to its stockholders.
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by
the Board or stockholders of the Company and compliance with applicable
securities laws; PROVIDED, HOWEVER, that no fractional shares shall be issued
upon exercise of any Option and any resulting fractions of a Share shall be
rounded up to the nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of
Shares upon exercise of any Options shall be subject to and conditioned upon
compliance with all applicable requirements of law, including without
limitation compliance with the Securities Act, compliance with all other
applicable state securities laws and compliance with the requirements of any
stock exchange or national market system on which the Shares may be listed. The
Company shall be under no obligation to register the Shares with the SEC or to
effect compliance with the registration or qualification requirement of any
state securities laws, stock exchange or national market system.
14. CORPORATE TRANSACTIONS.
14.1 ASSUMPTION OR REPLACEMENT OF OPTIONS 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
-4-
<PAGE>
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 Options granted under this Plan are assumed,
converted or replaced by the successor corporation, which assumption will
be binding on all Optionees);
(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 14.3 below, any or all outstanding Options may be
assumed, converted or replaced by the successor corporation (if any), which
assumption, conversion or replacement will be binding on all Optionees. In the
alternative and subject to Section 14.3 below, the successor corporation may
substitute equivalent Options or provide substantially similar consideration to
Optionees as was provided to stockholders (after taking into account the
existing provisions of the Options). The successor corporation may also issue,
in place of outstanding Shares of the Company held by the Optionee,
substantially similar shares or other property subject to repurchase
restrictions no less favorable to the Optionee.
14.2 TERMINATION OF OPTIONS. In the event of a transaction
described in clauses (a) through (e) of Section 14.1 and provided that the
successor corporation (if any) does not assume or substitute all outstanding
Options as provided above, such Options will expire on (and if the Company has
reserved to itself a right to repurchase shares issued upon exercise of Options
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 Optionees holding outstanding
Options.
14.3 ACCELERATION OF VESTING. In the event of a merger described
in either clause (b) or (c) of Section 14.1 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 Options as provided above in
Section 14.1, then each outstanding Option, whenever granted, that is not
totally "Vested" (as defined in the Option or Exercise Agreement) shall
immediately accelerate 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 14.2; or
(b) if the Successor assumes or substitutes Options as
provided above in Section 14.1, but any Optionee's status as a director
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 Options held by the
terminated director, 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 Option been held for the year after such
termination. Options granted before October 18, 1996 will accelerate
vesting and become exercisable in full upon such termination. For
purposes hereof "CAUSE" for termination of any Optionee's status as a
director will exist at any time after the happening of one or more of the
following events: (i) Optionee's conviction of a felony involving moral
turpitude; (ii)
-5-
<PAGE>
any willful act or acts of dishonesty undertaken by the Optionee and
intended to result in substantial gain or personal enrichment of
Optionee, 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
Optionee'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
Optionee.
14.4 OTHER TREATMENT OF OPTIONS. Subject to any greater
rights granted to Optionees under the foregoing provisions of this Section 14,
in the event of the occurrence of any transaction described in Section 14.1,
any outstanding Options will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."
15. AMENDMENT OR TERMINATION OF PLAN. The Committee may at any time
terminate or amend this Plan (but may not terminate or amend the terms of any
outstanding option without the consent of the Optionee); PROVIDED, HOWEVER,
that the Committee shall not, without the approval of the stockholders of the
Company, increase the total number of Shares available under this Plan (except
by operation of the provisions of Sections 4 and 11 above) or change the class
of persons eligible to receive Options. Further, the provisions in Sections 6
and 7 of this Plan shall not be amended more than once every six (6) months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. In any case, no amendment of this Plan
may adversely affect any then outstanding Options or any unexercised portions
thereof without the written consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the date this Plan is adopted by
the Board.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
17.1 "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 the Option, 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.
17.2 "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 Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
17.3 "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.
17.4 "FAIR MARKET VALUE" shall mean, as of any date, the value of a
share of the Company's Common Stock determined by the Board in its sole
discretion, exercised in good faith; PROVIDED, HOWEVER, that where there is a
public market for the Common Stock, the Fair Market Value per share shall be
the average of the closing bid and asked prices of the Common Stock on the last
trading day prior to the date of determination as reported in THE WALL STREET
JOURNAL (or, if not so reported, as otherwise reported by the Nasdaq Stock
Market) or, in the event the Common Stock is listed on a stock exchange or on
the Nasdaq National Market, the Fair Market Value per share shall be the
closing price on the exchange or on the Nasdaq National Market on the last
trading date prior to the date of determination as reported in THE WALL STREET
JOURNAL; PROVIDED, HOWEVER, that notwithstanding the foregoing, with respect to
the Initial Grants that are granted on the Effective Date, the "FAIR MARKET
VALUE" shall mean the price per share at which shares of the Company's Common
Stock are
-6-
<PAGE>
initially offered for sale to the public by the Company's underwriters in the
initial public offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the Securities Act.
-----------------------------------------------------------
-7-
<PAGE>
-8-
<PAGE>
Exhibit 99.6
WORLDTALK CORPORATION
1992 STOCK OPTION PLAN
As Adopted June 30, 1992 and Amended
November 9, 1992, April 30, 1993,
June 1, 1994 and December 20, 1995
1. PURPOSE. This 1992 Stock Option Plan ("Plan") is established as a
compensatory plan to attract, retain and provide equity incentives to
selected persons to promote the financial success of Worldtalk
Corporation, a California corporation (the "COMPANY"). Capitalized terms
not previously defined herein are defined in Section 17 of this Plan.
2. TYPES OF OPTIONS AND SHARES. Options granted under this Plan (the
"OPTIONS") may be either (a) incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "REVENUE CODE"), or (b) nonqualified stock options ("NQSOs"), as
designated at the time of grant. The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "SHARES")
are shares of the common stock of the Company.
3. NUMBER OF SHARES. The aggregate number of Shares that may be issued
pursuant to Options granted under this Plan is 4,000,000 Shares, subject
to adjustment as provided in this Plan. If any Option expires or is
terminated without being exercised in whole or in part, the unexercised
or released Shares from such Option shall be available for future grant
and purchase under this Plan. At all times during the term of this Plan,
the Company shall reserve and keep available such number of Shares as
shall be required to satisfy the requirements of outstanding Options
under this Plan.
4. ELIGIBILITY. Options may be granted to employees, officers, directors,
consultants, independent contractors and advisers (provided such
consultants, contractors and advisers render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction) of the Company or any Parent, Subsidiary or Affiliate of the
Company. ISOs may be granted only to employees (including officers and
directors who are also employees) of the Company or a Parent or
Subsidiary of the Company. The Board (as defined in Section 14) in its
sole discretion shall select the recipients of Options ("OPTIONEES"). An
Optionee may be granted more than one Option under this Plan. The
Company may also, from time to time, assume outstanding options granted
by another company, whether in connection with an acquisition of such
other company or otherwise, by either (a) granting an Option under this
Plan in replacement of the option assumed by the Company, or (b) treating
the assumed option as if it had been granted under this Plan if the terms
of such assumed option could be applied to an Option granted under this
Plan. Such assumption shall be permissible if the holder of the assumed
option would have been eligible
<PAGE>
to be granted an Option hereunder if the other company had applied the
rules of this Plan to such grant.
5. TERMS AND CONDITIONS OF OPTIONS. The Board shall determine whether each
Option is to be an ISO or an NQSO, 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
(which need not be the same for each Optionee), subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under this Plan shall
be evidenced by a written Stock Option Grant (the "GRANT") in such
form (which need not be the same for each Optionee) as the Board
shall from time to time approve, which Grant shall 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 shall be the date
on which the Board makes the determination to grant such Option
unless otherwise specified by the Board. The Grant representing
the Option will be delivered to Optionee with a copy of this Plan
within a reasonable time after the granting of the Option.
5.3 EXERCISE PRICE. The exercise price of an Option shall be not less
than 100% of the Fair Market Value of the Shares on the date the
Option is granted. The exercise price of any Option granted to a
person owning more than 10% of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary of
the Company ("TEN PERCENT SHAREHOLDER") shall not be less than
110% of the Fair Market Value of the Shares on the date the Option
is granted.
5.4 EXERCISE PERIOD. Options shall be exercisable within the times or
upon the events determined by the Board as set forth in the Grant;
provided, however, that no Option shall 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 Ten Percent
Shareholder shall be exercisable after the expiration of five (5)
years from the date the Option is granted.
5.5 LIMITATION ON ISOs. The aggregate Fair Market Value (determined
as of the time an Option is granted) of stock with respect to
which ISOs are exercisable for the first time by an Optionee
during any calendar year (under this Plan or under any other
incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares with respect to which ISOs are exercisable
for the first time by an Optionee during any calendar year exceeds
$100,000, the Options for the first $100,000 worth of Shares
<PAGE>
to become exercisable in such year shall be ISOs and the Options
for the amount in excess of $100,000 that becomes exercisable in
that year shall be NQSOs. In the event that the Revenue 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 shall be incorporated herein, and shall apply
to any Options granted after the effective date of such amendment.
5.6 OPTIONS NON-TRANSFERABLE. Options granted under this Plan, and
any interest therein, shall not be transferable or assignable by
Optionee, 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 pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and shall be
exercisable during the lifetime of Optionee only by Optionee;
provided, however, that NQSOs held by an Optionee who is not an
officer or director of the Company or other person (in each case,
an "INSIDER") whose transactions in the Company's common stock are
subject to Section 16(b) of the Securities Exchange Act of 1934,
as amended, (the "EXCHANGE ACT"), may be transferred to such
family members, trusts and charitable institutions as the Board,
in its sole discretion, shall approve at the time of the grant of
such Option.
5.7 ASSUMED OPTIONS. In the event the Company assumes an option
granted by another company, the terms and conditions of such
option shall remain unchanged (except the exercise price and the
number and nature of shares issuable upon exercise, which will be
adjusted appropriately pursuant to Section 424(c) of the Revenue
Code). In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section
4), such new option need not be granted at Fair Market Value on
the date of grant and may instead be granted with a similarly
adjusted exercise price.
6. EXERCISE OF OPTIONS.
6.1 NOTICE. 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 Board (which need not be the
same for each Optionee), stating the number of Shares being
purchased, the restrictions imposed on the Shares, if any, and
such representations and agreements regarding Optionee's
investment intent and access to information, if any, as may be
required 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.
<PAGE>
6.2 PAYMENT. Payment for the Shares may be made by check honored for
payment to the Company or, where approved by the Board in its sole
discretion and where permitted by applicable law: (a) by
cancellation of indebtedness of the Company to the Optionee; (b)
by surrender of shares of common stock of the Company having a
Fair Market Value equal to the applicable exercise price of the
Options, that have been owned by Optionee for more than six (6)
months (and which have been paid for within the meaning of the
Securities and Exchange Commission ("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 were obtained by Optionee in the open public market; (c) by
waiver of compensation due or accrued to Optionee for services
rendered; (d) provided that a public market for the Company's
stock exists, through a "same day sale" commitment from Optionee
and a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby Optionee
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; (e) provided
that a public market for the Company's stock exists, through a
"margin" commitment from Optionee and an NASD Dealer whereby
Optionee 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.
6.3 WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise
of an Option, Optionee shall pay or make adequate provision for
any federal or state withholding obligations of the Company, if
applicable. Where approved by the Board in its sole discretion,
Optionee may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain
Shares with a Fair Market Value equal to the minimum amount of
taxes required to be withheld. In such case, the Company shall
issue the net number of Shares to Optionee by deducting the Shares
retained from the Shares exercised. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined in accordance
with Section 83 of the Revenue Code (the "TAX DATE"). All
elections by Optionees to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Board and
shall be subject to the following restrictions.
(a) the election must be made on or prior to the applicable Tax
Date;
<PAGE>
(b) once made, the election shall be irrevocable as to the
particular Shares as to which the election is made; and
(c) all elections shall be subject to the consent or
disapproval of the Board.
In addition, if Optionee is an Insider, and if the Company is
subject to Section 16(b) of the Exchange Act, the following shall
apply:
(d) the election may not be made within six (6) months of the
date of grant of the Option; provided, however, that this
limitation shall not apply in the event that death or
disability of Optionee occurs prior to the expiration of
the six (6) month period;
(e) the election must be made either six (6) months prior to
the Tax Date or in the 10-day period beginning on the third
day following the public release of the Company's quarterly
or annual summary statement of operations; and
(f) if the Tax Date is deferred until six months after exercise
of the Option because no election is filed under Section
83(b) of the Revenue Code, Optionee shall receive the full
number of Shares with respect to which the Option is
exercised, but Optionee shall be unconditionally obligated
to tender back to the Company the proper number of Shares
on the Tax Date.
6.4 LIMITATION ON EXERCISE. Notwithstanding the exercise periods set
forth in the Grant, exercise of an Option shall always be subject
to the following:
6.4.1 If Optionee ceases to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company for any
reason except death or disability, Optionee may exercise
such Optionee's ISOs to the extent (and only to the extent)
that they would have been exercisable upon the date of
termination within ninety (90) days after the date of
termination (or such shorter time period as may be
specified in the Grant);
6.4.2 If Optionee is an Insider and the Company is subject to
Section 16(b) of the Exchange Act, Optionee's Option will
remain exercisable until the end of the thirty (30) day
period commencing on the first date on which Optionee may
exercise without having a matching purchase and sale under
Section 16(b), with any extension beyond ninety (90) days
after termination of employment
<PAGE>
deemed to be as an NQSO, and provided further that in no
event may an Option be exercisable later than the
expiration date of the Option.
6.4.3 If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated
because of the death of Optionee or disability of Optionee
within the meaning of Section 22(e)(3) of the Revenue Code,
Optionee's ISOs may be exercised to the extent (and only to
the extent) that they would have been exercisable by
Optionee on the date of termination, by Optionee (or
Optionee's legal representative) within twelve (12) months
after the date of termination (or such shorter time period
as may be specified in the Grant), but in any event no
later than the expiration date of the ISOs.
6.4.4 The Board shall have discretion to determine whether
Optionee has ceased to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company and the
effective date on which such employment terminated.
6.4.5 In the case of an Optionee who is a director, independent
consultant, contractor or adviser, the Board will have the
discretion to determine whether Optionee is "employed by
the Company or any Parent, Subsidiary or Affiliate of the
Company" pursuant to the foregoing Sections.
6.4.6 The Board 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 Optionee
from exercising the full number of Shares as to which the
Option is then exercisable.
6.4.7 An Option shall not be exercisable unless such exercise is
in compliance with the Securities Act of 1933, as amended
(the "SECURITIES ACT"), all applicable state securities
laws and the requirements of any stock exchange or national
market system upon which the Shares may then be listed as
they are in effect on the date of exercise. The Company
shall 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 national market system,
and the Company shall have no liability for any inability
or failure to do so.
7. RESTRICTIONS ON SHARES. At the discretion of the Board, the Company may
reserve to itself and/or its assignee(s) in the Grant (a) a right of
first refusal to purchase all Shares that an Optionee (or a subsequent
transferee) may propose to transfer to a third party and/or
<PAGE>
(b) a right to repurchase a portion of or all Shares held by an Optionee
upon Optionee's termination of employment or service with the Company or
a Parent, Subsidiary or Affiliate of the Company, for any reason within a
specified time as determined by the Board at the time of grant at (i)
Optionee's original purchase price, (ii) the Fair Market Value of such
Shares or (iii) a price determined by a formula or other provision set
forth in the Grant.
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. The Board shall have the
power to modify, extend or renew outstanding Options and to authorize the
grant of new Options in substitution therefor, provided that any such
action may not, without the written consent of Optionee, impair any
rights under any Option previously granted. Any outstanding ISO that is
modified, extended, renewed or otherwise altered shall be treated in
accordance with Section 424(h) of the Revenue Code. The Board shall have
the power to reduce the exercise price of outstanding Options without the
consent of Optionees by a written notice to the Optionees affected;
provided, however, that the exercise price per Share may not be reduced
below the minimum exercise price that would be permitted under Section
5.3 of this Plan for Options granted on the date the action is taken to
reduce the exercise price.
9. STOCK OWNERSHIP; FINANCIAL STATEMENTS. No Optionee shall have any of the
rights of a shareholder with respect to any Shares subject to an Option
until such Option is properly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is
prior to such date, except as provided in this Plan. However, the
Company shall provide to each Optionee, during the period for which he
has one or more Options outstanding, copies of the financial statements
of the Company, consisting of, at a minimum, a balance sheet and an
income statement, at such time after the close of each fiscal year of the
Company as such statements are released by the Company to its
shareholders. The Company shall not be required to provide such
information to key employees whose duties in connection with the Company
assume their access to equivalent information.
10. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan shall confer on any Optionee any right to continue in the
employ of, or 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 Optionee's employment or other relationship at any time, with
or without cause.
11. ADJUSTMENT OF OPTION SHARES. In the that the number of outstanding
shares of common stock of the Company is changed by a stock dividend,
stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure
<PAGE>
of the Company without consideration, or if a substantial portion of the
assets of the Company are distributed, without consideration in a
spin-off or similar transaction, to the shareholders of the Company, the
number of Shares available under this Plan and the number of Shares
subject to outstanding Options and the exercise price per Share of such
Options shall be proportionately adjusted, subject to any required action
by the Board of Directors (the "BOARD") or shareholders of the Company
and compliance with applicable securities laws; provided, however, that a
fractional share shall not be issued upon exercise of any Option and any
fractions of a Share that would have resulted shall either be cashed out
at Fair Market Value or the number of Shares issuable under the Option
shall be rounded up to the nearest whole number, as determined by the
Board; and provided further that the exercise price may not be decreased
to be below the par value, if any, for the Shares.
12. ASSUMPTION OF OPTIONS BY SUCCESSORS.
12.1 ASSUMPTION OR SUBSTITUTION. In the event of (a) a merger or
consolidation is which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly
owned subsidiary, a reincorporation, or other transaction in which
there is no substantial change in the shareholders of the
corporation and the Options granted under this Plan are assumed by
the successor corporation, which assumption shall be binding on
all Optionees), (b) a dissolution or liquidation of the Company,
(c) the sale of substantially all of the assets of the Company, or
(d) any other transaction which qualifies as a "corporate
transaction" under Section 424(a) of the Revenue Code wherein the
shareholders of the Company give up all of their equity interest
in the Company (except for the acquisition of all or substantially
all of the outstanding shares of the Company), any or all
outstanding Options may be assumed by the successor corporation,
which assumption shall be binding on all Optionees. In the
alternative, the successor corporation may substitute an
equivalent option or provide substantially similar consideration
to Optionees as was provided to shareholders (after taking into
account the existing provisions of Optionee's options, such as the
exercise price and the vesting schedule). The successor
corporation may also issue, in place of outstanding shares of the
Company held by Optionee as a result of the exercise of an Option
that is subject to repurchase, substantially similar shares or
other property subject to similar repurchase restrictions no less
favorable to Optionee.
12.2 EXPIRATION. In the event such successor corporation, if any,
refuses to assume or substitute Options, as provided above,
pursuant to a transaction described in Subsections 12.1 above, or
there is no successor corporation, and if the Company is ceasing
to exist as a separate corporate entity, the Options shall,
notwithstanding any contrary terms in the Grant, expire on (and,
in the case of a transaction described in
<PAGE>
Subsection 12.1(a) above, if the Company has reserved to itself a
right to repurchase Shares issued on exercise of Options at the
original purchase price of such Shares, such right shall terminate
on), a date at least 20 days after the Board gives written notice
to Optionees specifying the terms and conditions of such
termination.
12.3 ADDITIONAL PROVISIONS. Subject to the foregoing provisions of
this Section 12, in the event of the occurrence of any transaction
described in Section 12.1, any outstanding Option shall be treated
as provided in the applicable agreement or plan of merger,
consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction".
13. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall become effective on
the date that it is adopted by the Board of the Company. This Plan shall
be approved by the shareholders of the Company, in any manner permitted
by applicable corporate law, within twelve months before or after the
date this Plan is adopted by the Board. Upon the effective date of the
Plan, the Board may grant Options pursuant to this Plan; provided that,
in the event that shareholder approval is not obtained within the time
period provided herein, all Options granted hereunder shall terminate.
No Option that is issued as a result of any increase in the number of
shares authorized to be issued under this Plan shall be exercised prior
to the time such increase has been approved by the shareholders of the
Company and all such Options granted pursuant to such increase shall
similarly terminate if such Shareholder approval is not obtained. After
the Company becomes subject to Section 16(b) of the Exchange Act, the
Company will comply with the requirements of Rule 16b-3 with respect to
shareholder approval.
14. ADMINISTRATION. Until such time as the Company registers under the
Exchange Act, this Plan will be administered by the Board. If a
committee is appointed from among the members of the Board, or otherwise,
to aid in administration of the Plan, that committee shall have full
authority to administer the Plan, its decisions with respect to the Plan
being final and binding on the Company, except for actions with respect
to the Plan being final and binding on the Company, except for actions
with respect to which the Board cannot authorize a committee to take
under Section 311 of the California Corporations Code. In those cases
not authorized by Section 311 of such Code, the committee's decisions are
recommendations and the Board shall retain full authority to accept,
reject or modify those recommendations, the full Board's decisions being
final and binding on the Company. If, at the time the Company registers
under the Exchange Act, a majority of the Board is not comprised of
Disinterested Persons, the Company will take appropriate steps to comply
with the disinterested director requirements of Section 16(b) of the
Exchange Act, which may consist of the appointment by the Board of a
committee consisting of not less than two members of the Board, each of
whom is a Disinterested Person. As used in this Plan, references to the
"Board" shall mean either the committee appointed by the Board to
administer this Plan after
<PAGE>
the Company registers under the Exchange Act of the Board if no such
committee has been established. After registration of the Company under
the Exchange Act, Board members who are not Disinterested Persons may not
vote on any matters affecting the administration of this Plan or on the
grant of any Options pursuant to this Plan to Insiders, but any such
member may be counted for determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to Options
or administration of this Plan and may vote on the grant of any Options
pursuant to this Plan otherwise than to Insiders. The interpretation by
the Board of any of the provisions of this Plan or any Option granted
under this Plan shall be final and binding upon the Company and all
persons having an interest in any Option or any Shares purchased pursuant
to an Option. The Board may delegate to officers of the company the
authority to grant Options under this Plan to Options to Optionees who
are not Insiders of the Company.
15. TERM OF PLAN. Options may be granted pursuant to this Plan from time to
time within a period of ten (10) years after the date on which this Plan
is adopted by the Board.
16. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or
amend this Plan in any respect including (but not limited to) amendment
of any form of grant, exercise agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Board shall not,
without the approval of the shareholders of the Company, amend this Plan
in any manner that requires such shareholder approval pursuant to the
Revenue Code or the regulations promulgated thereunder as such provision
may apply to ISO plans or pursuant to the Exchange Act or Rule 16b-3 (or
its successor) promulgated thereunder.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following means:
17.1 "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 the Option, 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.
17.2 "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 Option, 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.
<PAGE>
17.3 "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.
17.4 "DISINTERESTED PERSON") shall have the meaning set forth in Rule
16b-3(c)(2)(i) 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.
17.5 "FAIR MARKET VALUE" shall mean the fair market value of the Shares
as determined by the Board from time to time in good faith. If a
public market exists for the Shares, the Fair Market Value shall
be the average of the last reported bid and asked prices for
common stock of the Company on the last trading day prior to the
date of determination (or the average closing price over the
number of consecutive working days preceding the date of
determination as the Board shall deem appropriate) or, in the
event the common stock of the Company is listed on a stock
exchange or on the NASDAQ National Market System, the Fair Market
Value shall be the closing price on such exchange or quotation
system on the last trading day prior to the date of determination
(or the average closing price over the number of consecutive
working days preceding the date of determination as the Board
shall deem appropriate).
<PAGE>
WORLDTALK CORPORATION
STOCK OPTION GRANT
Optionee:
Address:
Total Shares Subject to Option:
Exercise Price per Share: $
--
Date of Grant:
Expiration Date:
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. GRANT OF OPTION. Worldtalk Corporation, a California corporation (the
"COMPANY"), hereby grants to the optionee named above ("OPTIONEE") an
option (this "OPTION") to purchase the total number of shares of common
stock of the Company set forth above (the "SHARES") at the exercise price
per share set forth above (the "EXERCISE PRICE"), subject to all of the
terms and conditions of this Stock Option Grant (this "GRANT") and the
Company's 1992 Stock Option Plan, as amended to the date hereof (the
"PLAN"). If designated as an Incentive Stock Option above, this Option
is intended to qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "REVENUE CODE"). Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall be exercisable as to portions of
the Shares as follows: (a) this Option shall not be exercisable with
respect to any of the Shares until ____________ (the "FIRST VESTING
DATE"); (b) if Optionee has been continuously employed by the Company
within the meaning of Section 4 below at all times during the time period
beginning on the Date of Grant set forth above and ending on the First
Vesting Date, then on the First Vesting Date this Option shall become
exercisable as to twenty-five percent (25%) of the Shares; and (c)
thereafter this Option shall become exercisable as to an additional six
and one-fourth percent (6.25%) of the Shares on the same day as the First
Vesting Date each three month period thereafter if Optionee has remained
continuously employed by the Company within the meaning of Section 4
below at all times on or prior to the relevant quarterly vesting date,
PROVIDED that
<PAGE>
Optionee shall in no event be entitled under this Option to purchase
a number of shares of the Company's common stock greater than
the "Total Shares Subject to Option" indicated above. Notwithstanding
anything herein to the contrary, this Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or
before the Expiration Date; and provided further that this Option must
become exercisable as to at least 20% of the Shares for each full year
from the Date of Grant.
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act and all applicable
state securities laws as they are in effect on the date of exercise, and
the requirements of any stock exchange or national market system on which
the Company's common stock may be listed at the time of exercise.
Optionee understands that the Company is under no obligation to register,
qualify or list the Shares with the SEC, any state securities commission
or any stock exchange to effect such compliance.
4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or,
in the case of a nonqualified stock option, an Affiliate of the Company).
Optionee shall be considered to be employed by the Company for all
purposes under Section 2 and this Section 4 if Optionee is an officer,
director or full-time employee of the Company or any Parent, Subsidiary
or Affiliate of the Company or if the Committee determines that Optionee
is rendering substantial services as a part-time employee, consultant,
contractor or adviser to the Company or any Parent, Subsidiary or
Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to be employed by the Company or
any Parent, Subsidiary or Affiliate of the Company and the effective date
on which such employment terminated (the "TERMINATION DATE").
4.1 TERMINATION GENERALLY. If Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for
any reason except death or Disability, this Option, to the extent
(and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee
within sixty (60) days after the Termination Date, but in no event
later than the Expiration Date.
4.2 If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated because of
the death of Optionee or Disability of Optionee, this option, may
be exercised to the extent (and only to the extent) that it would
have been exercisable by Optionee on the Termination Date, by
Optionee (or Optionee's legal representative) within twelve (12)
months after the Termination Date, but in any event no later than
the Expiration Date.
<PAGE>
4.3 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or this Grant shall
confer on Optionee any right to continue in the employ of, or
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 Optionee's employment or other relationship at any time,
with or without cause.
5. MANNER OF EXERCISE.
5.1 EXERCISE AGREEMENT. This Option shall be exercisable by delivery
to the Company of an executed written Stock Option Exercise
Agreement in the form attached hereto as EXHIBIT A, or in such
other form as may be approved by the Company, which shall set
forth Optionee's election to exercise some or all of this Option,
the number of Shares being purchased, any restrictions imposed on
the Shares and such other representations and agreements as may be
required by the Company to comply with applicable securities laws.
5.2 EXERCISE PRICE. Such notice shall be accompanied by full payment
of the Exercise Price for the Shares being purchased. Payment for
the Shares may be made in cash (by check) or, where permitted by
applicable law: (a) by cancellation of indebtedness of the
Company to Optionee; (b) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from
Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD DEALER") whereby
Optionee 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 (c) by any combination of the foregoing.
5.3 WITHHOLDING TAXES. Prior to the issuance of the Shares upon
exercise of this Option, Optionee must pay or make adequate
provision for any applicable federal or state withholding
obligations of the Company. If Optionee is an Insider subject at
the time of exercise of this Option to Section 16(b) of the
Exchange Act, Optionee may provide for payment of Optionee's
minimum statutory withholding taxes upon exercise of the Option by
requesting that the Company retain Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld, all
as set forth in Section 6(c) of the Plan. In such case, the
Company shall issue the net number of Shares to Optionee by
deducting the Shares retained from the Shares exercised.
5.4 ISSUANCE OF SHARES. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the
Company shall cause the Shares to be issued in the name of
Optionee, Optionee's legal representative or Optionee's assignee.
<PAGE>
6. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option granted
to Optionee herein is an ISO, and if Optionee sells or otherwise disposes
of any of the Shares acquired pursuant to the ISO within (a) the date two
years after the Date of Grant, or (b) the date one year after exercise of
the ISO with respect to the Shares to be sold or disposed, Optionee shall
immediately notify the Company in writing of such disposition. Optionee
acknowledges and agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by
Optionee from any such early disposition by payment in cash (or in
Shares, to the extent permissible under Section 5.3) or out of the
current wages or other earnings payable to Optionee.
7. NONTRANSFERABILITY OF OPTION. If this Option is an ISO, or if Optionee
is an Insider subject to Section 16(b) of the Exchange Act, then this
Option may not be transferred in any manner other than by will or by the
law of descent and distribution and may be exercised during the lifetime
of Optionee only by Optionee. Otherwise, this Option may only be
transferred (a) pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder, or (b) to Optionee's immediate family, to a
trust for the benefit of Optionee or Optionee's immediate family, or to a
charitable entity qualified under Revenue Code Section 501(c), where
"immediate family" shall mean spouse, lineal descendant or antecedent,
brother or sister. The terms of this Option shall be binding upon the
executors, administrators, successors and assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date this
form of Grant was adopted of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 EXERCISE OF ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income
tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal
income tax purposes and may subject Optionee to an alternative
minimum tax liability in the year of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If this Option does not
qualify as an ISO, there may be a regular federal income tax
liability and a California income tax liability upon the exercise
of the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price. The Company will be
required to withhold from Optionee's compensation or
<PAGE>
collect from Optionee and pay to the applicable taxing authorities
an amount equal to a percentage of this compensation income at the
time of exercise.
8.3 DISPOSITION OF SHARES. In the case of an NQSO, if Shares are held
for more than one year before disposition, any gain on disposition
of the Shares will be treated as long-term capital gain for
federal and California income tax purposes. In the case of an
ISO, if Shares are held for more than one year after the date of
exercise and more than two years after the Date of Grant, any gain
on disposition on the Shares will be treated as long-term capital
gain for federal and California income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one year
or two year periods (a "DISQUALIFYING DISPOSITION"), gain on such
disqualifying disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if
any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price (the "SPREAD"), or, if less, the
difference between the amount realized on the sale of such Shares
and the Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
9. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the committee of the
Company's Board of Directors that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such
a dispute by such committee shall be final and binding on the Company and
on Optionee.
10. ENTIRE AGREEMENT. The Plan and the Stock Option Exercise Agreement
attached as EXHIBIT A are incorporated herein by this reference. This
Grant, the Plan and the Stock Option Exercise Agreement constitute the
entire agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject matter hereof.
WORLDTALK CORPORATION
By:
Title:
<PAGE>
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that
Optionee has read and understands the terms and provisions thereof, and accepts
this Option subject to all the terms and conditions of the Plan and this Stock
Option Grant. Optionee acknowledges that there may be adverse tax consequences
upon exercise of this Option or disposition of the Shares and that Optionee
should consult a tax adviser prior to such exercise or disposition.
<PAGE>
EXHIBIT A
WORLDTALK CORPORATION
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made this _____________ day of ____________,
19__ between Worldtalk Corporation, a California corporation (the "COMPANY"),
and the optionee named below ("OPTIONEE") pursuant to the Company's 1992
Stock Option Plan, as amended to the date hereof (the "PLAN"). Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Plan.
Optionee:
Social Security Number:
Address:
Number of Shares Purchased:
Purchase Price per Share: $
Aggregate Purchase Price:
Date of Option Grant:
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
Optionee hereby delivers to the Company the Aggregate Purchase Price, to the
extent permitted in the Grant, as follows (check as applicable and complete):
[ ] by Check honored for payment to the Company in the amount of
$_____, receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Optionee in the
amount of $_______________; or
[ ] through a "same-day-sale" commitment, delivered herewith, from
Optionee and the NASD Dealer named therein, in the amount of
$_____________.
<PAGE>
The Company and Optionee hereby agree as follows:
1. PURCHASE OF SHARES. On this date and subject to the terms and conditions
of this Exercise Agreement, Optionee hereby exercises the Grant between
the Company and Optionee dated as of the Date of Grant set forth above,
with respect to the Number of Shares Purchased set forth above of the
Company's common stock (the "SHARES") at an aggregate purchase price
equal to the Aggregate Purchase Price set forth above (the "AGGREGATE
PURCHASE PRICE") and the Price per Share set forth above (the "PURCHASE
PRICE PER SHARE"). The term "Shares" refers to the Shares purchased
under this Exercise Agreement and includes all securities received (a) in
replacement of the Shares, and (b) as a result of stock dividends or
stock splits with respect to the Shares.
2. REPRESENTATIONS OF PURCHASER. Optionee represents and warrants to the
Company that:
(a) Optionee has received, read and understood the Plan and the Grant
and agrees to abide by and be bound by their terms and conditions.
(b) Optionee is purchasing the Shares for Optionee's own account for
investment purposes only and not with a view to, or for sale in
connection with, a distribution of the Shares within the meaning
of the Securities Act.
(c) Optionee has no present intention of selling or otherwise
disposing of all or any portion or the Shares.
(d) Optionee is fully aware of (i) the highly speculative nature of
the investment in the Shares; (ii) the financial hazards involved;
and (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (E.G., that Optionee may not be
able to sell or dispose of the Shares or use them as collateral
for loans).
(e) Optionee is capable of evaluating the merits and risks of this
investment, has the ability to protect Optionee's own interests in
this transaction and is financially capable of bearing a total
loss of this investment.
3. COMPLIANCE WITH SECURITIES LAWS. Optionee understands and acknowledges
that the Shares have not been registered under the Securities Act and
that, notwithstanding any other provision of the Grant to the contrary,
the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable
state securities laws. Optionee agrees to cooperate with the Company to
ensure compliance with such laws. The Shares are being issued under the
Securities Act pursuant to (the Company will check the applicable box):
<PAGE>
[ ] the exemption provided by Rule 701;
[ ] the exemption provided by Rule 504;
[ ] Section 4(2) of the Securities Act;
[ ] other: ___________________________.
4. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the Shares
must be held indefinitely unless they are registered under the Securities
Act or unless an exemption from such registration is available and that
the certificate(s) representing the Shares will bear a legend to that
effect. Optionee understands that the Company is under no obligation to
register the Shares and that an exemption may not be available or may not
permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4.1 RULE 144. Optionee has been advised that Rule 144 promulgated
under the Securities Act, which permits certain resales of
unregistered securities, is not presently available with respect
to the Shares and, in any event, requires that the Shares be paid
for and then held for a minimum of two years before the may be
resold under Rule 144. Prior to an initial public offering of the
Company's stock, "nonaffiliates" (i.e. persons other than
officers, directors and major shareholders of the Company) may
resell only under Rule 144(k), which requires that the Shares be
paid for and held for a minimum of three years. Rules 144(k) is
not available to affiliates.
4.2 RULE 701. If the exemption relied upon for exercise of the Shares
is Rule 701, the Shares will become freely transferable, subject
to limited conditions regarding the method of sale, by
nonaffiliates 90 days after the first sale of common stock of the
Company to the general public pursuant to a registration statement
filed with and declared effective by the SEC, subject to any
lengthier market standoff agreement contained in this Exercise
Agreement or entered into by Optionee. Affiliates must comply
with the provisions (other than the holding period requirements)
of Rule 144.
5. STATE LAW RESTRICTIONS ON TRANSFER. Optionee understands that transfer
of the Shares may be restricted by Section 260.141.11 of the Rules of the
California Commissioner of Corporations, a copy of which is attached
hereto as ATTACHMENT 1, and that the certificate(s) representing the
Shares may bear a legend to that effect.
<PAGE>
6. MARKET STANDOFF AGREEMENT. Optionee agrees in connection with any
registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Optionee will not sell or otherwise dispose of any Shares or
any other securities of the Company without the prior written consent of
the Company or such underwriters, as the case may be, for such period of
time from the effective date of such registration as the Company or the
underwriters may specify for employee shareholders generally.
7. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company shall have an assignable right of
first refusal to purchase the Shares on the terms and conditions set
forth in this Section (the "RIGHT OF FIRST REFUSAL").
7.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "NOTICE") stating:
(a) Holder's bona fide intention to sell or otherwise transfer
such Shares; (b) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (c) the number of Shares to be
transferred to each Proposed Transferee; and (d) the bona fide
cash price or other consideration for which the Holder proposes
to transfer the Shares (the "OFFERED PRICE"); and the Holder shall
offer to sell the Shares at the Offered Price to the Company.
7.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company or its assignee
may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Shares proposed to be transferred
to any one or more of the Proposed Transferees, at the purchase
price determined in accordance with subsection 7.3 below.
7.3 PURCHASE PRICE. The purchase price for the Shares purchased under
this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value
of the non-cash consideration shall be determined by the Board of
Directors of the Company in good faith.
7.4 PAYMENT. Payment of the purchase price shall be made, at the
option of the Company or its assignee, either (a) in cash (by
check), by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company or such assignee, or by
any combination thereof within thirty (30) days after receipt of
the Notice or (b) in the manner and at the time(s) set forth in
the Notice.
<PAGE>
7.5 HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee as provided in this
Section, then the Holder may sell or otherwise transfer such
Shares to that Proposed Transferee at the Offered Price or at a
higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of
the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities
laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares
in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee
within such period, a new Notice shall be given to the Company,
and the Company shall again be offered the Right of First Refusal,
before any Shares held by the Holder may be sold or otherwise
transferred.
7.6 EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or
all of the Shares during Optionee's lifetime or on Optionee's
death by will or intestacy to Optionee's immediately family or a
trust for the benefit of Optionee or Optionee's immediate family
shall be exempt from the provisions of this Section; provided
that, as a condition to receiving the Shares, the transferee or
other recipient shall agree in writing to receive and hold the
Shares so transferred subject to the provisions of this Exercise
Agreement, and to transfer such Shares no further except in
accordance with the terms of this Exercise Agreement. As used
herein, "IMMEDIATE FAMILY" shall mean spouse, lineal descendant or
antecedent, brother or sister.
7.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal
shall terminate as to any Shares upon the first sale of common
stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the
SEC (other than a registration statement solely covering an
employee benefit plan or corporate reorganization).
8. COMPLIANCE WITH STATE SECURITIES LAWS. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH
QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH
SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE
RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY
CONDITIONED UPON
<PAGE>
SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
9. COMPANY'S REPURCHASE OPTION. The Company, and/or its assignees, shall
have the option to repurchase no less than all of the Shares that are
"Vested Shares" (as defined below) and/or no less than all of the Shares
that are "Unvested Shares" (as defined below) on the terms and conditions
set forth in this Section (the "REPURCHASE OPTION") if Optionee should
cease to be employed by the Company for any reason, or no reason,
including, without limitation, Optionee's death, disability, voluntary
resignation or termination by the Company with or without cause.
9.1 RIGHT OF TERMINATION UNAFFECTED. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any
manner whatsoever the right or power of the Company to terminate
Optionee's employment at any time, for any reason or no reason,
with or without cause. For purposes of this Exercise Agreement,
Optionee shall be considered to be "providing services to the
Company" if Optionee is an officer, director or full-time employee
of the Company or any Parent, Subsidiary or Affiliate of the
Company or if the Committee determines that Optionee is rendering
substantial services as a part-time employee, consultant,
contractor or adviser to the Company or any Parent, Subsidiary or
Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to provide services to the
Company or any Parent, Subsidiary or Affiliate of the Company and
determine the Termination Date.
9.2 UNVESTED AND VESTED SHARES. "UNVESTED SHARES" are Shares which
are subject to repurchase by the Company upon Optionee's
Termination at the original Purchase Price Per Share "VESTED
SHARES" are Shares which are subject to repurchase by the Company
upon Optionee's Termination at the higher of the Fair Market Value
of such Vested Shares on the Optionee's Termination Date or the
Optionee's original Purchase Price Per Share. On the Date of
Grant all of the Shares will be Unvested Shares. If Optionee has
continuously provided services to the Company or to any
Subsidiary, Parent or Affiliate of the Company at all times from
the Date of Grant until _________________ (the "FIRST VESTING
DATE"), then on the First Vesting Date twenty-five percent (25%)
of the total number of Shares subject to the Grant (or such lesser
total number of shares that have been purchased
upon exercise of the Grant) will be deemed Vested Shares.
Thereafter, for so long (and only for so long) as Optionee
continuously provides services to the Company, any Subsidiary,
Parent or Affiliate of the Company at all times after the First
Vesting Date, an additional six and one quarter percent (6.25%) of
the total number of Shares subject to the Grant (or such lesser
total number of shares that have been purchased
<PAGE>
upon exercise of the Grant) will be deemed Vested Shares on the
date that is the same as the First Vesting Date each calendar
quarter thereafter; PROVIDED that the Shares will vest at least
as rapidly as the rate of 20% for each of five (5) full years
following the Date of Grant. No Shares will become Vested Shares
after the TerminationDate. The number of Shares that are Vested
Shares or Unvested Shares will be proportionally adjusted to
reflect any stock dividend, stock split, reverse stock split or
recapitalization of the Common Stock of the Company occurring
after the Date of Grant.
9.3 EXERCISE OF REPURCHASE OPTION. At any time within ninety (90)
after the later of the Termination Date or the date the Optionee
purchased the Shares, the Company, or its assignee(s), may elect
to repurchase all of the Vested Shares and/or all of the Unvested
Shares by giving Optionee written notice of exercise of the
Repurchase Option.
9.4 CALCULATION OF REPURCHASE PRICE. The Company or its assignee(s)
shall have the option to repurchase from Optionee (or from
Optionee's personal representative as the case may be) all of the
Unvested Shares at the Optionee's original Purchase Price Per
Share (as adjusted to reflect any stock dividend, stock split,
reverse stock split or recapitalization of the Common Stock of the
Company occurring after the Date of Grant) and/or all of the
Vested Shares at the higher of the Fair Market Value of such
Vested Shares on the Termination Date or the Optionee's original
Purchase Price Per Share.
9.5 PAYMENT OF REPURCHASE PRICE. The repurchase price shall be
payable, at the option of the Company or its assignees, by check
or by cancellation of all or a portion of any outstanding
indebtedness of Optionee to the Company, or such assignee, or by
any combination thereof. The repurchase price shall be paid
without interest within thirty (30) days after exercise of the
Repurchase Option.
9.6 RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement shall
be construed to limit or otherwise affect in any manner whatsoever
the right or power of the Company (or any Parent, Subsidiary or
Affiliate of the Company) to terminate Optionee's employment or
other relationship with the Company (or any Parent, Subsidiary or
Affiliate of the Company) at any time for any reason or no reason,
with or without cause.
9.7 TERMINATION OF REPURCHASE OPTION. The Repurchase Option shall
terminate as to any Vested Shares upon the first sale of common
stock of the Company to the general public pursuant to a
registration statement filed with and declared effective
<PAGE>
by the SEC (other than a registration statement solely covering an
employee benefit plan or corporate reorganization).
10. ESCROW. As security for the faithful performance of this Exercise
Agreement, Optionee agrees, immediately upon receipt of the
certificate(s) evidencing the Shares, to deliver such certificate(s),
together with a stock power in the form of ATTACHMENT 2 attached hereto,
executed by Optionee and by Optionee's spouse, if any (with the date and
number of Shares left blank), to the Secretary of the Company or its
designee ("ESCROW HOLDER"), who is hereby appointed to hold such
certificate(s) and stock power in escrow and to take all such actions and
to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Exercise Agreement. Optionee and the
Company agree that Escrow Holder shall not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions
unless Escrow Holder is grossly negligent relative thereto. The Escrow
Holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine and may rely on advice of counsel and
obey any order of any court with respect to the transactions contemplated
herein. The Shares shall be released from escrow upon termination of
both the Repurchase Option and the Right of First Refusal; provided,
however, that such release shall not affect the rights of the Company
with respect to any pledge of Shares to the Company.
11. LEGENDS. Optionee understands and agrees that the Shares are subject to
a Right of First Refusal and a Repurchase Option held by the Company (or
its assignee) as set forth herein and that the certificate(s)
representing the Shares will bear legends in substantially the following
forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE AND TRANSFER AND RIGHT OF FIRST
REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AND MAY NOT BE TRANSFERRED EXCEPT AS SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL
AND REPURCHASE ARE BINDING ON TRANSFEREES OF THESE SHARES."
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD
<PAGE>
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
The California Commissioner of Corporations may require that the following
legend also be placed upon the share certificate(s) evidencing ownership of the
Shares:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S RULES."
If the foregoing legend is required, Optionee acknowledges receipt of a copy of
Section 260.141.11 of the Rules of the California Corporations Commissioner,
attached as ATTACHMENT 1.
12. STOP-TRANSFER NOTICES. Optionee understands and agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent,
if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
13. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT REPLYING ON THE
COMPANY FOR ANY TAX ADVICE. IN PARTICULAR, IF THE SHARES ARE SUBJECT TO
REPURCHASE BY THE COMPANY OR IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(b) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS
CONSULTED WITH OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF
FILING AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE. Optionee
hereby acknowledges that Optionee has been informed that, unless an
election is filed by the Optionee with the Internal Revenue Service (and,
if necessary
<PAGE>
the proper state taxing authorities), WITHIN 30 DAYS of the purchase of
the Shares, electing pursuant to Section 83(b) of the Internal Revenue
Code (and similar state tax provisions, if applicable) to be taxed
currently on any difference between the Purchase Price of the Shares and
their Fair Market Value on the date of purchase, there will be a
recognition of taxable income to the Optionee, measured by the excess, if
any, of the Fair Market Value of the Vested Shares, at the time they
cease to be Unvested Shares, over the Purchase Price for such Shares.
Optionee represents that Optionee has consulted any tax advisers Optionee
deems advisable in connection with Optionee's purchase of the Shares and
the filing of the election under Section 83(b) and similar tax
provisions. A form of Election under Section 83(b) is attached hereto as
ATTACHMENT 3 for reference. OPTIONEE HEREBY ASSUMES ALL RESPONSIBILITY
FOR FILING SUCH ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH
ELECTION OR FROM FAILURE TO FILE THE ELECTION AND PAYING TAXES RESULTING
FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED SHARES.
<PAGE>
14. ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by
reference. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and is governed by California law
except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE WORLDTALK CORPORATION
By: By:
-------------------------------- ----------------------------
(signature)
Its: Its:
------------------------------- ---------------------------
Dated: Dated:
----------------------------- -------------------------
<PAGE>
ATTACHMENT 1
RULE 260.141.11 RESTRICTION ON TRANSFER
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141 or 260.534 shall cause a copy of
this section to be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any
securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security
for which the Commissioner's writer consent is obtained or under
this rule not required;
<PAGE>
(10) by way of a sale qualified under Section 25111, 25112, 25113, or
25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or Subdivision (a) of Section
25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 251112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another
state;
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to
potential purchases at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy
of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities subject to
the qualification requirement of Section 25110 of the Code by
virtue of Section 260.011 of these rules, but exempt from that
qualification requirement by Subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the
legend required by this section,
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF
<PAGE>
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE>
ATTACHMENT 2
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise Agreement
dated as of _____________________, 19__, the undersigned hereby sells, assigns
and transfers unto __________________, ________________ shares of the common
stock of Worldtalk Corporation, a California corporation, standing in the
undersigned's name on the books of said corporation represented by Certificate
No. _____ delivered herewith, and does hereby irrevocably constitute the
Secretary of said corporation as attorney-in-fact, with full power of
substitution, to transfer said stock on the books of said corporation.
Dated:
--------------------------------
--------------------------------------
(Signature)
--------------------------------------
(Please Print Name)
--------------------------------------
(Spouse's Signature, if any)
--------------------------------------
(Please Print Spouse's Name)
<PAGE>
Attachment 3
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in gross income for the Taxpayer's current
taxable year the excess, if any, of the fair market value of the property
described below at the time of transfer over the amount paid for such property,
as compensation for services.
1. TAXPAYER'S NAME: _____________________________________________
TAXPAYER'S ADDRESS: _____________________________________________
_____________________________________________
SOCIAL SECURITY NUMBER: _____________________________________________
2. The property with respect to which the election is made is described as
follows: __________________ shares of Common Stock of Worldtalk
Corporation, a California corporation (the "COMPANY"), which is
Taxpayer's employer or the corporation for whom the Taxpayer performs
services.
3. The date on which the shares were transferred was _______________ and
this election is made for calendar year ____________.
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the share (without regard to restrictions other
than restrictions which by their terms will never lapse) was $___________
per share at the time of transfer.
6. The amount paid for such shares was $_________ per share.
7. The Taxpayer has submitted a copy of this statement of the Company.
<PAGE>
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITH
THE CONSENT OF THE IRS.
Dated:
---------------------------------- ----------------------------------
(Signature)
<PAGE>
WORLDTALK CORPORATION
STOCK OPTION GRANT
Optionee: ___________________________________
Address: ___________________________________
___________________________________
Total Shares Subject to Option: ___________________________________
Exercise Price per Share: $__________________________________
Date of Grant: ___________________________________
Expiration Date: ___________________________________
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. GRANT OF OPTION. Worldtalk Corporation, a California corporation (the
"COMPANY"), hereby grants to the optionee named above ("OPTIONEE") an
option (this "OPTION") to purchase the total number of shares of common
stock of the Company set forth above (the "SHARES") at the exercise price
per share set forth above (the "EXERCISE PRICE"), subject to all of the
terms and conditions of this Stock Option Grant (this "GRANT") and the
Company's 1992 Stock Option Plan, as amended to the date hereof (the
"PLAN"). If designated as an Incentive Stock Option above, this Option
is intended to qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "REVENUE CODE"). Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Plan.
2. EXERCISE PERIOD OF OPTION. Subject to the terms and conditions of the
Plan and this Grant, this Option shall be immediately exercisable with
respect to all of the Shares. The Shares underlying this Option shall be
subject to a vesting schedule and right of repurchase as set forth in the
Stock Option Exercise Agreement attached hereto as EXHIBIT A.
Notwithstanding anything herein to the contrary, this Option shall expire
on the Expiration Date set forth above and must be exercised, if at all,
on or before the Expiration Date.
3. RESTRICTION ON EXERCISE. This Option may not be exercised unless such
exercise is in compliance with the Securities Act and all applicable
state securities laws as they are in effect on the date of exercise, and
the requirements of any stock exchange or national market system on which
the Company's common stock may be listed at the time of exercise.
Optionee
<PAGE>
understands that the Company is under no obligation to register, qualify
or list the Shares with the SEC, any state securities commission or any
stock exchange to effect such compliance.
4. TERMINATION OF OPTION. Except as provided below in this Section, this
Option shall terminate and may not be exercised if Optionee ceases to be
employed by the Company or any Parent or Subsidiary of the Company (or,
in the case of a nonqualified stock option, an Affiliate of the Company).
Optionee shall be considered to be employed by the Company for all
purposes under Section 2 and this Section 4 if Optionee is an officer,
director or full-time employee of the Company or any Parent, Subsidiary
or Affiliate of the Company or if the Committee determines that Optionee
is rendering substantial services as a part-time employee, consultant,
contractor or adviser to the Company or any Parent, Subsidiary or
Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to be employed by the Company or
any Parent, Subsidiary or Affiliate of the Company and the effective date
on which such employment terminated (the "TERMINATION DATE").
4.1 TERMINATION GENERALLY. If Optionee ceases to be employed by the
Company or any Parent, Subsidiary or Affiliate of the Company for
any reason except death or Disability, this Option, to the extent
(and only to the extent) that it would have been exercisable by
Optionee on the Termination Date, may be exercised by Optionee
within sixty (60) days after the Termination Date, but in no event
later than the Expiration Date.
4.2 If Optionee's employment with the Company or any Parent,
Subsidiary or Affiliate of the Company is terminated because of
the death of Optionee or Disability of Optionee, this option, may
be exercised to the extent (and only to the extent) that it would
have been exercisable by Optionee on the Termination Date, by
Optionee (or Optionee's legal representative) within twelve (12)
months after the Termination Date, but in any event no later than
the Expiration Date.
4.3 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or this Grant shall
confer on Optionee any right to continue in the employ of, or
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 Optionee's employment or other relationship at any time,
with or without cause.
5. MANNER OF EXERCISE.
5.1 EXERCISE AGREEMENT. This Option shall be exercisable by delivery
to the Company of an executed written Stock Option Exercise
Agreement in the form attached hereto as EXHIBIT A, or in such
other form as may be approved by the Company, which shall set
forth Optionee's election to exercise some or all of this Option,
the number of Shares being purchased, any restrictions imposed on
the Shares and such other
<PAGE>
representations and agreements as may be required by the Company
to comply with applicable securities laws.
5.2 EXERCISE PRICE. Such notice shall be accompanied by full payment
of the Exercise Price for the Shares being purchased. Payment for
the Shares may be made in cash (by check) or, where permitted by
applicable law: (a) by cancellation of indebtedness of the
Company to Optionee; (b) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from
Optionee and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD DEALER") whereby
Optionee 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 (c) by any combination of the foregoing.
5.3 WITHHOLDING TAXES. Prior to the issuance of the Shares upon
exercise of this Option, Optionee must pay or make adequate
provision for any applicable federal or state withholding
obligations of the Company. If Optionee is an Insider subject at
the time of exercise of this Option to Section 16(b) of the
Exchange Act, Optionee may provide for payment of Optionee's
minimum statutory withholding taxes upon exercise of the Option by
requesting that the Company retain Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld, all
as set forth in Section 6(c) of the Plan. In such case, the
Company shall issue the net number of Shares to Optionee by
deducting the Shares retained from the Shares exercised.
5.4 ISSUANCE OF SHARES. Provided that such notice and payment are in
form and substance satisfactory to counsel for the Company, the
Company shall cause the Shares to be issued in the name of
Optionee, Optionee's legal representative or Optionee's assignee.
6. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option granted
to Optionee herein is an ISO, and if Optionee sells or otherwise disposes
of any of the Shares acquired pursuant to the ISO within (a) the date two
years after the Date of Grant, or (b) the date one year after exercise of
the ISO with respect to the Shares to be sold or disposed, Optionee shall
immediately notify the Company in writing of such disposition. Optionee
acknowledges and agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by
Optionee from any such early disposition by payment in cash (or in
Shares, to the extent permissible under Section 5.3) or out of the
current wages or other earnings payable to Optionee.
7. NONTRANSFERABILITY OF OPTION. If this Option is an ISO, or if Optionee
is an Insider subject to Section 16(b) of the Exchange Act, then this
Option may not be transferred in any manner other than by will or by the
law of descent and distribution and may be exercised during the lifetime
of Optionee only by Optionee. Otherwise, this Option may only be
transferred (a)
<PAGE>
pursuant to a qualified domestic relations order as defined by the Code
or Title I of the Employee Retirement Income Security Act, or the rules
thereunder, or (b) to Optionee's immediate family, to a trust for the
benefit of Optionee or Optionee's immediate family, or to a charitable
entity qualified under Revenue Code Section 501(c), where "immediate
family" shall mean spouse, lineal descendant or antecedent, brother or
sister. The terms of this Option shall be binding upon the executors,
administrators, successors and assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of the date this
form of Grant was adopted of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8.1 EXERCISE OF ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income
tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal
income tax purposes and may subject Optionee to an alternative
minimum tax liability in the year of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If this Option does not
qualify as an ISO, there may be a regular federal income tax
liability and a California income tax liability upon the exercise
of the Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price. The Company will be
required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of
exercise.
8.3 DISPOSITION OF SHARES. In the case of an NQSO, if Shares are held
for more than one year before disposition, any gain on disposition
of the Shares will be treated as long-term capital gain for
federal and California income tax purposes. In the case of an
ISO, if Shares are held for more than one year after the date of
exercise and more than two years after the Date of Grant, any gain
on disposition on the Shares will be treated as long-term capital
gain for federal and California income tax purposes. If Shares
acquired pursuant to an ISO are disposed of within such one year
or two year periods (a "DISQUALIFYING DISPOSITION"), gain on such
disqualifying disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if
any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price (the "SPREAD"), or, if less, the
difference between the amount realized on the sale of such Shares
and the Exercise Price. Any gain in excess of the Spread shall be
treated as capital gain.
<PAGE>
8.4 TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR
DISPOSITION OF THE SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS
CONSULTED WITH ANY TAX CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN
CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT
OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. IN
PARTICULAR, IF THE SHARES ARE SUBJECT TO REPURCHASE BY THE COMPANY
OR IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION 16(b) OF THE
EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH
OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF FILING AN
83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE.
9. INTERPRETATION. Any dispute regarding the interpretation of this Grant
shall be submitted by Optionee or the Company to the committee of the
Company's Board of Directors that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such
a dispute by such committee shall be final and binding on the Company and
on Optionee.
10. ENTIRE AGREEMENT. The Plan and the Stock Option Exercise Agreement
attached as EXHIBIT A are incorporated herein by this reference. This
Grant, the Plan and the Stock Option Exercise Agreement constitute the
entire agreement of the parties hereto and supersede all prior
undertakings and agreements with respect to the subject matter hereof.
WORLDTALK CORPORATION
By:
----------------------------
Title:
-------------------------
ACCEPTANCE
Optionee hereby acknowledges receipt of a copy of the Plan, represents that
Optionee has read and understands the terms and provisions thereof, and accepts
this Option subject to all the terms and conditions of the Plan and this Stock
Option Grant. Optionee acknowledges that there may be adverse tax consequences
upon exercise of this Option or disposition of the Shares and that Optionee
should consult a tax adviser prior to such exercise or disposition.
-------------------------------
Optionee
<PAGE>
EXHIBIT A
WORLDTALK CORPORATION
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made this __________ day of _______________,
19__ between Worldtalk Corporation, a California corporation (the "COMPANY"),
and the optionee named below ("OPTIONEE") pursuant to the Company's 1992
Stock Option Plan, as amended to the date hereof (the "PLAN"). Unless
otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Plan.
Optionee: ___________________________________
Social Security Number: ___________________________________
Address: ___________________________________
___________________________________
Number of Shares Purchased: ___________________________________
Purchase Price per Share: $__________________________________
Aggregate Purchase Price: ___________________________________
Date of Option Grant: ___________________________________
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
Optionee hereby delivers to the Company the Aggregate Purchase Price, to the
extent permitted in the Grant, as follows (check as applicable and complete):
[ ] by Check honored for payment to the Company in the amount of
$_____, receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Optionee in the
amount of $_________; or
[ ] through a "same-day-sale" commitment, delivered herewith, from
Optionee and the NASD Dealer named therein, in the amount of
$___________.
<PAGE>
The Company and Optionee hereby agree as follows:
1. PURCHASE OF SHARES. On this date and subject to the terms and conditions
of this Exercise Agreement, Optionee hereby exercises the Grant between
the Company and Optionee dated as of the Date of Grant set forth above,
with respect to the Number of Shares Purchased set forth above of the
Company's common stock (the "SHARES") at an aggregate purchase price
equal to the Aggregate Purchase Price set forth above (the "AGGREGATE
PURCHASE PRICE") and the Price per Share set forth above (the "PURCHASE
PRICE PER SHARE"). The term "Shares" refers to the Shares purchased
under this Exercise Agreement and includes all securities received (a) in
replacement of the Shares, and (b) as a result of stock dividends or
stock splits with respect to the Shares.
2. REPRESENTATIONS OF PURCHASER. Optionee represents and warrants to the
Company that:
(a) Optionee has received, read and understood the Plan and the Grant
and agrees to abide by and be bound by their terms and conditions.
(b) Optionee is purchasing the Shares for Optionee's own account for
investment purposes only and not with a view to, or for sale in
connection with, a distribution of the Shares within the meaning
of the Securities Act.
(c) Optionee has no present intention of selling or otherwise
disposing of all or any portion or the Shares.
(d) Optionee is fully aware of (i) the highly speculative nature of
the investment in the Shares; (ii) the financial hazards involved;
and (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (E.G., that Optionee may not be
able to sell or dispose of the Shares or use them as collateral
for loans).
(e) Optionee is capable of evaluating the merits and risks of this
investment, has the ability to protect Optionee's own interests in
this transaction and is financially capable of bearing a total
loss of this investment.
3. COMPLIANCE WITH SECURITIES LAWS. Optionee understands and acknowledges
that the Shares have not been registered under the Securities Act and
that, notwithstanding any other provision of the Grant to the contrary,
the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable
state securities laws. Optionee agrees to cooperate with the Company to
ensure compliance with such laws. The Shares are being issued under the
Securities Act pursuant to (the Company will check the applicable box):
<PAGE>
[ ] the exemption provided by Rule 701;
[ ] the exemption provided by Rule 504;
[ ] Section 4(2) of the Securities Act;
[ ] other: __________________________.
4. FEDERAL RESTRICTIONS ON TRANSFER. Optionee understands that the Shares
must be held indefinitely unless they are registered under the Securities
Act or unless an exemption from such registration is available and that
the certificate(s) representing the Shares will bear a legend to that
effect. Optionee understands that the Company is under no obligation to
register the Shares and that an exemption may not be available or may not
permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4.1 RULE 144. Optionee has been advised that Rule 144 promulgated
under the Securities Act, which permits certain resales of
unregistered securities, is not presently available with respect
to the Shares and, in any event, requires that the Shares be paid
for and then held for a minimum of two years before the may be
resold under Rule 144. Prior to an initial public offering of the
Company's stock, "nonaffiliates" (i.e. persons other than
officers, directors and major shareholders of the Company) may
resell only under Rule 144(k), which requires that the Shares be
paid for and held for a minimum of three years. Rules 144(k) is
not available to affiliates.
4.2 RULE 701. If the exemption relied upon for exercise of the Shares
is Rule 701, the Shares will become freely transferable, subject
to limited conditions regarding the method of sale, by
nonaffiliates 90 days after the first sale of common stock of the
Company to the general public pursuant to a registration statement
filed with and declared effective by the SEC, subject to any
lengthier market standoff agreement contained in this Exercise
Agreement or entered into by Optionee. Affiliates must comply
with the provisions (other than the holding period requirements)
of Rule 144.
5. STATE LAW RESTRICTIONS ON TRANSFER. Optionee understands that transfer
of the Shares may be restricted by Section 260.141.11 of the Rules of the
California Commissioner of Corporations, a copy of which is attached
hereto as ATTACHMENT 1, and that the certificate(s) representing the
Shares may bear a legend to that effect.
<PAGE>
6. MARKET STANDOFF AGREEMENT. Optionee agrees in connection with any
registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Optionee will not sell or otherwise dispose of any Shares or
any other securities of the Company without the prior written consent of
the Company or such underwriters, as the case may be, for such period of
time from the effective date of such registration as the Company or the
underwriters may specify for employee shareholders generally.
7. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by Optionee or
any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by
gift or operation of law), the Company shall have an assignable right of
first refusal to purchase the Shares on the terms and conditions set
forth in this Section (the "RIGHT OF FIRST REFUSAL").
7.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "NOTICE") stating:
(a) Holder's bona fide intention to sell or otherwise transfer
such Shares; (b) the name of each proposed purchaser or other
transferee ("Proposed Transferee"); (c) the number of Shares to be
transferred to each Proposed Transferee; and (d) the bona fide
cash price or other consideration for which the Holder proposes
to transfer the Shares (the "OFFERED PRICE"); and the Holder shall
offer to sell the Shares at the Offered Price to the Company.
7.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after receipt of the Notice, the Company or its assignee
may, by giving written notice to the Holder, elect to purchase all
(but not less than all) of the Shares proposed to be transferred
to any one or more of the Proposed Transferees, at the purchase
price determined in accordance with subsection 7.3 below.
7.3 PURCHASE PRICE. The purchase price for the Shares purchased under
this Section shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value
of the non-cash consideration shall be determined by the Board of
Directors of the Company in good faith.
7.4 PAYMENT. Payment of the purchase price shall be made, at the
option of the Company or its assignee, either (a) in cash (by
check), by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company or such assignee, or by
any combination thereof within thirty (30) days after receipt of
the Notice or (b) in the manner and at the time(s) set forth in
the Notice.
<PAGE>
7.5 HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee as provided in this
Section, then the Holder may sell or otherwise transfer such
Shares to that Proposed Transferee at the Offered Price or at a
higher price, provided that such sale or other transfer is
consummated within one hundred twenty (120) days after the date of
the Notice and provided further that any such sale or other
transfer is effected in accordance with any applicable securities
laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares
in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee
within such period, a new Notice shall be given to the Company,
and the Company shall again be offered the Right of First Refusal,
before any Shares held by the Holder may be sold or otherwise
transferred.
7.6 EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or
all of the Shares during Optionee's lifetime or on Optionee's
death by will or intestacy to Optionee's immediately family or a
trust for the benefit of Optionee or Optionee's immediate family
shall be exempt from the provisions of this Section; provided
that, as a condition to receiving the Shares, the transferee or
other recipient shall agree in writing to receive and hold the
Shares so transferred subject to the provisions of this Exercise
Agreement, and to transfer such Shares no further except in
accordance with the terms of this Exercise Agreement. As used
herein, "IMMEDIATE FAMILY" shall mean spouse, lineal descendant or
antecedent, brother or sister.
7.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal
shall terminate as to any Shares upon the first sale of common
stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the
SEC (other than a registration statement solely covering an
employee benefit plan or corporate reorganization).
8. COMPLIANCE WITH STATE SECURITIES LAWS. THE SALE OF THE SECURITIES THAT
ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH
QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH
SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE
RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING
AVAILABLE.
<PAGE>
9. COMPANY'S REPURCHASE OPTION. The Company, and/or its assignees, shall
have the option to repurchase no less than all of the Shares that are
"Vested Shares" (as defined below) and/or no less than all of the Shares
that are "Unvested Shares" (as defined below) on the terms and conditions
set forth in this Section (the "REPURCHASE OPTION") if Optionee should
cease to be employed by the Company for any reason, or no reason,
including, without limitation, Optionee's death, disability, voluntary
resignation or termination by the Company with or without cause.
9.1 RIGHT OF TERMINATION UNAFFECTED. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any
manner whatsoever the right or power of the Company to terminate
Optionee's employment at any time, for any reason or no reason,
with or without cause. For purposes of this Exercise Agreement,
Optionee shall be considered to be "providing services to the
Company" if Optionee is an officer, director or full-time employee
of the Company or any Parent, Subsidiary or Affiliate of the
Company or if the Committee determines that Optionee is rendering
substantial services as a part-time employee, consultant,
contractor or adviser to the Company or any Parent, Subsidiary or
Affiliate of the Company. The Committee shall have discretion to
determine whether Optionee has ceased to provide services to the
Company or any Parent, Subsidiary or Affiliate of the Company and
determine the Termination Date.
9.2 UNVESTED AND VESTED SHARES. "UNVESTED SHARES" are Shares which
are subject to repurchase by the Company upon Optionee's
Termination at the original Purchase Price Per Share "VESTED
SHARES" are Shares which are subject to repurchase by the Company
upon Optionee's Termination at the higher of the Fair Market Value
of such Vested Shares on the Optionee's Termination Date or the
Optionee's original Purchase Price Per Share. On the Date of
Grant all of the Shares will be Unvested Shares. If Optionee has
continuously provided services to the Company or to any
Subsidiary, Parent or Affiliate of the Company at all times from
the Date of Grant until _____________________ (the "FIRST VESTING
DATE"), then on the First Vesting Date twenty-five percent (25%)
of the total number of Shares subject to the Grant (or such lesser
total number of shares that have been purchased upon exercise of
the Grant) will be deemed Vested Shares. Thereafter, for so long
(and only for so long) as Optionee continuously provides services
to the Company, any Subsidiary, Parent or Affiliate of the Company
at all times after the First Vesting Date, an additional six and
one quarter percent (6.25%) of the total number of Shares subject
to the Grant (or such lesser total number of shares that have been
purchased upon exercise of the Grant) will be deemed Vested Shares
on the date that is the same as the First Vesting Date each
calendar quarter thereafter; PROVIDED that the
<PAGE>
Shares will vest at least as rapidly as the rate of 20% for each
of five (5) full years following the Date of Grant. No Shares
will become Vested Shares after the Termination Date. The number
of Shares that are Vested Shares or Unvested Shares will be
proportionally adjusted to reflect any stock dividend, stock
split, reverse stock split or recapitalization of the Common Stock
of the Company occurring after the Date of Grant.
9.3 EXERCISE OF REPURCHASE OPTION. At any time within ninety (90)
after the later of the Termination Date or the date the Optionee
purchased the Shares, the Company, or its assignee(s), may elect
to repurchase all of the Vested Shares and/or all of the Unvested
Shares by giving Optionee written notice of exercise of the
Repurchase Option.
9.4 CALCULATION OF REPURCHASE PRICE. The Company or its assignee(s)
shall have the option to repurchase from Optionee (or from
Optionee's personal representative as the case may be) all of the
Unvested Shares at the Optionee's original Purchase Price Per
Share (as adjusted to reflect any stock dividend, stock split,
reverse stock split or recapitalization of the Common Stock of the
Company occurring after the Date of Grant) and/or all of the
Vested Shares at the higher of the Fair Market Value of such
Vested Shares on the Termination Date or the Optionee's original
Purchase Price Per Share.
9.5 PAYMENT OF REPURCHASE PRICE. The repurchase price shall be
payable, at the option of the Company or its assignees, by check
or by cancellation of all or a portion of any outstanding
indebtedness of Optionee to the Company, or such assignee, or by
any combination thereof. The repurchase price shall be paid
without interest within thirty (30) days after exercise of the
Repurchase Option.
9.6 RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement shall
be construed to limit or otherwise affect in any manner whatsoever
the right or power of the Company (or any Parent, Subsidiary or
Affiliate of the Company) to terminate Optionee's employment or
other relationship with the Company (or any Parent, Subsidiary or
Affiliate of the Company) at any time for any reason or no reason,
with or without cause.
9.7 TERMINATION OF REPURCHASE OPTION. The Repurchase Option shall
terminate as to any Vested Shares upon the first sale of common
stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the
SEC (other than a registration statement solely covering an
employee benefit plan or corporate reorganization).
<PAGE>
10. ESCROW. As security for the faithful performance of this Exercise
Agreement, Optionee agrees, immediately upon receipt of the
certificate(s) evidencing the Shares, to deliver such certificate(s),
together with a stock power in the form of ATTACHMENT 2 attached hereto,
executed by Optionee and by Optionee's spouse, if any (with the date and
number of Shares left blank), to the Secretary of the Company or its
designee ("ESCROW HOLDER"), who is hereby appointed to hold such
certificate(s) and stock power in escrow and to take all such actions and
to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Exercise Agreement. Optionee and the
Company agree that Escrow Holder shall not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions
unless Escrow Holder is grossly negligent relative thereto. The Escrow
Holder may rely upon any letter, notice or other document executed by any
signature purported to be genuine and may rely on advice of counsel and
obey any order of any court with respect to the transactions contemplated
herein. The Shares shall be released from escrow upon termination of
both the Repurchase Option and the Right of First Refusal; provided,
however, that such release shall not affect the rights of the Company
with respect to any pledge of Shares to the Company.
11. LEGENDS. Optionee understands and agrees that the Shares are subject to
a Right of First Refusal and a Repurchase Option held by the Company (or
its assignee) as set forth herein and that the certificate(s)
representing the Shares will bear legends in substantially the following
forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE AND TRANSFER AND RIGHT OF FIRST
REFUSAL AND REPURCHASE OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AND MAY NOT BE TRANSFERRED EXCEPT AS SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL
AND REPURCHASE ARE BINDING ON TRANSFEREES OF THESE SHARES."
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMP-
<PAGE>
TION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS."
The California Commissioner of Corporations may require that the following
legend also be placed upon the share certificate(s) evidencing ownership of the
Shares:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S RULES."
If the foregoing legend is required, Optionee acknowledges receipt of a copy of
Section 260.141.11 of the Rules of the California Corporations Commissioner,
attached as ATTACHMENT 1.
12. STOP-TRANSFER NOTICES. Optionee understands and agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent,
if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
13. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT REPLYING ON THE
COMPANY FOR ANY TAX ADVICE. IN PARTICULAR, IF THE SHARES ARE SUBJECT TO
REPURCHASE BY THE COMPANY OR IF OPTIONEE IS AN INSIDER SUBJECT TO SECTION
16(b) OF THE EXCHANGE ACT, OPTIONEE REPRESENTS THAT OPTIONEE HAS
CONSULTED WITH OPTIONEE'S TAX ADVISERS CONCERNING THE ADVISABILITY OF
FILING AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE. Optionee
hereby acknowledges that Optionee has been informed that, unless an
election is filed by the Optionee with the Internal Revenue Service (and,
if necessary the proper state taxing authorities), WITHIN 30 DAYS of the
purchase of the Shares, electing pursuant to Section 83(b) of the
Internal Revenue Code (and similar state tax provisions, if
<PAGE>
applicable) to be taxed currently on any difference between the Purchase
Price of the Shares and their Fair Market Value on the date of purchase,
there will be a recognition of taxable income to the Optionee, measured
by the excess, if any, of the Fair Market Value of the Vested Shares, at
the time they cease to be Unvested Shares, over the Purchase Price for
such Shares. Optionee represents that Optionee has consulted any tax
advisers Optionee deems advisable in connection with Optionee's purchase
of the Shares and the filing of the election under Section 83(b) and
similar tax provisions. A form of Election under Section 83(b) is
attached hereto as ATTACHMENT 3 for reference. OPTIONEE HEREBY ASSUMES
ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FROM FAILURE TO FILE THE ELECTION AND
PAYING TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON
THE UNVESTED SHARES.
<PAGE>
14. ENTIRE AGREEMENT. The Plan and Grant are incorporated herein by
reference. This Exercise Agreement, the Plan and the Grant constitute
the entire agreement of the parties and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and is governed by California law
except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE WORLDTALK CORPORATION
By: By:
-------------------------------- -----------------------------------
(signature)
Its: Its:
------------------------------- ----------------------------------
Dated: Dated:
----------------------------- --------------------------------
<PAGE>
ATTACHMENT 1
RULE 260.141.11 RESTRICTION ON TRANSFER
(a) The issuer of any security upon which a restriction on transfer has been
imposed pursuant to Sections 260.102.6, 260.141 or 260.534 shall cause a copy of
this section to be delivered to each issuee or transferee of such security at
the time the certificate evidencing the security is delivered to the issuee or
transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any
securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security
for which the Commissioner's writer consent is obtained or under
this rule not required;
<PAGE>
(10) by way of a sale qualified under Section 25111, 25112, 25113, or
25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or Subdivision (a) of Section
25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 251112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another
state;
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to
potential purchases at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy
of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities subject to
the qualification requirement of Section 25110 of the Code by
virtue of Section 260.011 of these rules, but exempt from that
qualification requirement by Subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the
legend required by this section,
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF
<PAGE>
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE>
ATTACHMENT 2
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise Agreement
dated as of _____________________, 19__, the undersigned hereby sells, assigns
and transfers unto __________________, ________________ shares of the common
stock of Worldtalk Corporation, a California corporation, standing in the
undersigned's name on the books of said corporation represented by Certificate
No. _____ delivered herewith, and does hereby irrevocably constitute the
Secretary of said corporation as attorney-in-fact, with full power of
substitution, to transfer said stock on the books of said corporation.
Dated:
--------------------------------
--------------------------------------
(Signature)
--------------------------------------
(Please Print Name)
--------------------------------------
(Spouse's Signature, if any)
--------------------------------------
(Please Print Spouse's Name)
<PAGE>
Attachment 3
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in gross income for the Taxpayer's current
taxable year the excess, if any, of the fair market value of the property
described below at the time of transfer over the amount paid for such property,
as compensation for services.
1. TAXPAYER'S NAME: ____________________________________________
TAXPAYER'S ADDRESS: ____________________________________________
____________________________________________
SOCIAL SECURITY NUMBER: ____________________________________________
2. The property with respect to which the election is made is described as
follows: __________________ shares of Common Stock of Worldtalk
Corporation, a California corporation (the "COMPANY"), which is
Taxpayer's employer or the corporation for whom the Taxpayer performs
services.
3. The date on which the shares were transferred was _______________ and
this election is made for calendar year ____________.
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the share (without regard to restrictions other
than restrictions which by their terms will never lapse) was $___________
per share at the time of transfer.
6. The amount paid for such shares was $_________ per share.
7. The Taxpayer has submitted a copy of this statement of the Company.
<PAGE>
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITH
THE CONSENT OF THE IRS.
Dated:
----------------------------- --------------------------------------
(Signature)
